what you don't know about your payroll company could hurt you. these los angeles-based small businesses put their trust in an outside payroll company, only to discover their depose its and tax payments were gone, along with the owner. how can you prevent this from happening to your small business? find out next on "your business." small businesses are revitalizing the economy, and american express open is here to help. that's why we are proud to present "your business" on msnbc.

hi there, everyone. i'm j.j. ramberg, and welcome to "your business." the national payroll association says that at least one-third of the private american workforce is paid not directly by their employer, but through independent payroll services. these services can seem like a godsend for small business owners who have plenty on their plate already. but for this kind of service to work, it means that you trust them with large amounts of your money. something that shouldn't be a problem if there are mechanisms in place to protect you from fraud. but as we found out in some cases, there's almost no protection at all. >> we had over $53,000 stolen

from us. >> i lost $20,000. >> i lost between $80,000 and $90,000. >> robert meltzer and his wife melissa are the owners of a my gym children's fitness center franchise in los angeles. this is a dentist with his own practice located in beverly hills. and zack gray is the owner of urban pets, selling healthy pet supplies at three store locations around los angeles. >> the payroll company is provided with access to our bank account. and they take our money, pay our employees, and withdraw the necessary funds to pay taxes. >> all four reported to the police that they were swindled by their payroll service. located here, in this building near west hollywood on wilshire boulevard. >> we were receiving our salaries on a timely manner. we thought everything was okay. >> and then suddenly, last december, everything was not okay.

>> it was actually christmas eve, and i got a call from my agent at l.a. payroll, and at first i didn't understand what she was saying. >> i received this letter. is this a typo, is this a mistake? >> are you saying that all my deposits from july to present have disappeared? and she said, yes. >> and my first thought was, this can't be. >> but this is not a mistake, this is bigger than a mistake. and we think something bad has been in process. >> today the l.a. payroll offices are vacant. the owner is missing. and former employees did not return our phone calls and e-mails. >> by the time the irs notified us, we had almost lost a half a year's worth of payroll tax. >> according to these, and other former clients we contacted for this story, there were about 150 small businesses in the los angeles area who to the had a total of about $3 million to $4 million missing from their payroll accounts. stolen, they believe, by the owner of the company who is

rumored to have fled to russia, according to what these clients were told by the remaining staff. >> we found out the owner of the l.a. payroll company had taken off and his employees hadn't seen him in i guess by two weeks as of then. >> the person who did this knew exactly what he was doing. because he knew how long it would take for the irs to catch up and figure out the moneys weren't in. by then, he was gone. >> once they suspected they'd been swindled, the first thing they did was contact the los angeles police. >> i contacted my accountant, and then from there i filed a police report. >> the police officer was very polite, and very cordial. but, it seemed to me at the time that he was trying to ask me questions to get information so that i wouldn't make the report at that station. >> they said you know what, if you -- if you're in immediate danger, if somebody is taking money from your office right now, we can, you know, send people over to your office. but a case like this, this is an

embezzlement, and we don't get involved with these things. it's not -- it's too big for us. >> i got a letter from a detective in the commercial crimes division. >> the lapd responded to these complaints with a letter. >> due to the number of victims and the complexities of the investigation involving federal and state tax issues, as well as the issues involving the movement of money out of state, and/or out of the country, lapd would not be able to properly and fully investigate the payroll. so these people tells me to go to these people. these people tell me to go to fbi. but fbi's not willing to talk to us. >> we contacted the lapd, the los angeles's d.a.'s office, the california state employment development department, the fbi, the irs, and even homeland security. but each of these agencies told us the same thing, they do not comment about ongoing investigations, or whether investigations are even taking place.

>> it's galling to me that $4 million, which is approximately the total of what was taken from all of the clients, could be stolen and there wasn't more of a response. for all i know they could be investigating this like crazy, but we're not being informed if they are. >> next, they discovered they were themselves in deep trouble with the irs, and the state of california. for tax obligations never fulfilled. >> this is the notice i received from the irs. you now have an outstanding balance on your account of $30,776.03. that was quite a shocking notice to receive. >> here is the $31,000. you get the form from irs. it says zero. >> the big problem for these business owners is that while the tax money they owed was removed from their bank accounts. it was never sent to the

government. now they not only owe the past due taxes but they owe penalties and late fees, as well. money they say they don't have, and insurance may not cover. >> we definitely did not have this kind of cash laying around. you know, to pay these taxes a second time. which is basically what we're having to do. >> we did let one employee go that, you know, we just had to really sort of tighten our belt. >> we were looking forward to opening up a new location and then this hit us, you know, blindsided us. >> with thousands of payroll providers around the country, serving an estimated 40% of the private workforce, you'd think there would be direct regulations in place to prevent this kind of thing. >> there's no fdic, there's no governmental agency that regulates this system. and it definitely needs some regulation. >> if your company uses a payroll provider, it's highly unlikely that you will run into this kind of trouble. however, this swindle is far

from the only example of its kind. according to a 2012 congressional report, over a period of five years, at least 24 payroll service providers nationwide have collected and not paid more than $300 million in employment taxes, using similar schemes. last year, that was enough to get the attention of maryland senator barbara mikulski. that's when she held hearings to find out how to protect small business owners who've been victimized by companies like l.a. payroll. >> they disappeared, and the money that these businesses, like the brewery and others, paid in, thinking that they had paid their taxes, also disappeared. >> until congress figures things out, what can you do to protect yourself? >> well, if you're using a payroll company, definitely find out if they're bonded. >> you may also want to find out if the company you're working with is shoorned.

insured. find out how they deliver your payments to the government, and how you can verify those payments have been received. and if you do get scammed you might take a lesson from babak who immediately set up a facebook account. >> by having this facebook page it brought us to the. >> he used this to find and contact other victims like himself, share information about what's happening, organize group action, and get the media attention to support their cause. but according to robert, preventing this kind of fraud in the first place will take much more than just a page on facebook. >> for the people who are always yelling about, we want less government involvement and get less government regulation, i say, you know, in a situation like this, somebody should be overseeing what a payroll company is doing to make sure that small businesses aren't being victimized. >> as small business owners, this is a scary story to watch

and we should take it as a cautionary tale. allowing a third party or an outsource company to take such an important and integral role in your company can absolutely be risky. so how do we protect yourselves? harry sverdlove is chief technology officer at cybersecurity firm bit9. harry, it is great to see you. that's a hard story to listen to. >> yeah, it certainly is j.j. it's good to speak with you today. >> i want to just get to the solutions. and in the piece we talked about making sure the company you work with is bonded. can you explain a little bit more about what that means. >> sure. so there's a confusion, and there is a little bit of a difference. people think that bonded and insured mean the same thing. insured really is something that's for the vendor, or for that third party's benefit. if they do damage in the course of business, if something happens to them, that's where their insurance comes in and their insurer will pay them for those types of damages. bonded is for your protection. if you're doing business with them. so when you're in a -- when a company is bonded it's really a three-party contract. so the surety bond, those that

issue the bond, really have vetted the company. so that already gives you some validation that this company, you know, at least does business well, is in good standing, and if their services, if something goes wrong in their services with you, that's where the bonding comes in, that you can seek damages or seek recompense for that. >> you know a lot of companies outsource things. small business owners are up to their ears with things they have to think about so if they can just move payroll to someone else it is a great relief. how can you make sure the money is going to where it needs to go? how could they have gotten in touch with the irs and said, are my taxes being paid? obviously their employees were being paid. >> right. well this is one of the big challenges. and today, it really is, there are so many aspects whether it's credit card processing, or payroll, where you really do have to rely on third parties. because as small businesses you can't afford to do all of those different services yourself. and so, one of the first things you have to do is you have to ask the right questions. in the case of payroll, for example, there is actually an

electronic federal tax payment system, or efts -- tps, excuse me, where you can go online and check to see that your taxes are, in fact, being paid. if you're outsourcing, for example, your federal payroll, you should ask that question. is that service? are they using the system? and then you have yourself access to it and you should be checking in regularly. >> and you know, this isn't just about outsourcing, either. you could have an accountant or somebody working in your company who is in essence doing the same thing, if you're not double-checking. >> absolutely. so it could be an employee, could be a contractor that you hire part-time to do work. with anything when you're a small business and you have to outsource or just contract out important critical information, you always have to be careful. you should be asking the right questions. and you should be following up, making sure that you can follow up on a quarterly, weekly, in some cases daily basis to look at your statements to see that the money, or the data that's personal information is exactly where it's supposed to be. >> a lot of the companies that

we interviewed said that they ended up going with l.a. payroll because they wanted special attention, right? and l.a. payroll was a small business. they'd get more attention than they would with a large payroll service that works with big customers. is that a bad decision in cases like this? where you're giving up so much sensitive information? and so much money? >> it's really hard to say. obviously if you deal with a larger entity, a larger third party payroll processing for example you're more likely to have checks and balances and controls in place. but i get it. as a small business you want to work with somebody that's more personal. you want to have that face-to-face time. it just means that if you're going to do that, you need to be more cautious. you need to ask more questions. in the case for example of l.a. payroll, they changed ownership a couple years back. did they notify, did everybody who was using their services, were they notified? and if not, and i was a small business, and i was dealing with a company, because i wanted that personal attention, and their ownership changed, i would be surprised. because that's the kind of personal touch i would be

looking for. >> harry, thank you so much for coming on. you said it many times, i think it's worth mentioning again, you just have to ask the right questions to find out the answers. thanks a lot for joining us. since we are on the topic of protecting your company let's take a look at how you can make sure your private team communications stay private. our app of the week does just that. tigertext is an app that give users full control of all the texts they send. you can send secure encrypted text messages in files that permanently disappear from phone company servers and devices. users can set a time limit for how long content stays in the system, and restrictions keep recipients from forwarding or storing texts sent to them. if you're doing it right, every e-mail you send out is an opportunity to connect with your customers. in case you are not doing it right, here are five simple but essential elements you should have in all of your future e-mails, courtesy of small business computing dotcom. one a legitimate "from" label.

this is the first thing people see when they scan their inboxes. so make sure it matches your company, and is easily identifiable. two, add a preheader. some e-mail programs like gmail give you the option to show the pre-header right after the subject line, so take advantage of this second opportunity to grab people's attention. three, relevant content. any e-mail you send out should provide value to your subscriber. maybe sure you vary the kind of content you send each time so that your readers stay engaged. four, creative images. pictures will catch someone's eye, and give your readers an idea of what a new product looks like, or how they can use it into their lives. and five, social media buttons. be sure to include links that allow social sharing. this will help expand the reach of your message, and help to bring new customers to your door. when we come back, our experts will answer your small business questions about using online advertising.

marketing master john jantsch has three things you need to know about getting sales leads. he says look no further than your current clients. and an inspiring father's day story about a dad who started a car wash business to help his son and others affected by autism. if i can impart one lesson to a new business owner, it would be one thing i've learned is my philosophy is real simple american express open forum is an on-line community, that helps our members connect and share ideas to make smart business decisions. if you mess up, fess up. be your partners best partner. we built it for our members, but it's open for everyone. there's not one way to do something. no details too small. american express open forum. this is what membership is. this is what membership does.

i have a slogan called screw it, just do it. if you're stloen in the deep end, if you're thrown into a swimming pool as long as you've got your parents watching you, chances are you'll end up swimming. the best way of learning to run a business is just to try. and by getting out there and trying things, you will disprove, you know, struggling and trying. you can become an entrepreneur. and i think -- i think that applies to most people. and if they fall flat on their face they'll try again and the next time round i suspect they'll be successful. >> people start companies for all kinds of reasons. they have a passion for the product. they simply need a job. or they're struck by some idea and they can't help but follow through. for one father, the motivation to start his company came from his son. nbc's harry smith has this inspiring story from florida. >> word is spreading around parkland, florida, that they do a really nice job at the rising

tide car wash. thorough. attention to detail. and polite. >> nice to meet you, harry. >> when he dreamed up this place, most everyone told john derry he was nuts. >> there's definitely insanity here. it's really just lines, commitment from a standpoint of i don't care, i'm doing it, and i know it will work. >> john's crazy idea. build a business with the primary mission of employing people with autism. he's got 35 guys working here who fall somewhere on the autism spectrum. >> by having an entire crew in the spectrum you don't see any guys on cell phones trying to get out of work right now because, because, because. >> the key to rising tide success is day-to-day the job doesn't change all that much. and for many on the autism spectrum, like vilon, matt, and john's son andrew, that's kind of perfect. >> it's the best part of it. >> doing tire shines on the customer's car. >> going through a car wash two years ago, john thought, andrew could do this.

>> busy for a monday? >> an answer, perhaps, to the question every parent with a child with special needs worries about. what happens when they grow up. >> what does this give your son? >> this gives him a life. and that is john's vision from the beginning. but, now we all see it. >> do a good job on this one you can go on break. >> including andrew's brother tom who chose not to work on wall street in order to help start this family business. >> i work alongside him every day. we wash cars right next to each other sometimes. >> with tips and not a penny in government subsidies the men here average about $11 an hour. and while a few have quit, john hasn't fired anyone. and he wants to build two more car washes to see if the business model is viable. >> we're setting people up for success. not for failure. i don't want to throw a lifeline and have to pull it back. >> dignity, independence, a paycheck. frankly, it's what every parent dreams of for their child.

harry smith, nbc news, parkland, florida. >> time now to answer some of your business questions. let's get our board of directors in here to help. larry broughton is a serial entrepreneur who is best known as the founder and ceo of broughton hotels, a boutique hotel group with locations around california and in chicago. he is also author of the book flash points for achievers, inspiring messages that bring significant results, a daily journal. and rieva lesonsky is the founder of grow biz media, a custom content media company that helps national marketers reach small business owners and helps entrepreneurs start and grow their companies. so great to see both of you guys. >> good to see you. >> let's dive right in. the first question is about ways to expand your marketing. >> we've never done advertising. we've been successful about it. but we want to take our business to the next level.

>> the first thing she of mouth word of mouth actual word of mouth or is she using social media for word of mouth. that's the best way to start when you're going online. it's free, it's cheap in terms of -- except for time. you have to invest some time in it and then you have to look at do you want to do -- is it paper clipped, what are you trying to do. are you just trying to reach a lot of people in terms of impressions or trying to hone in on a specific audience. you really have to create a marketing plan that really targets what your budget is, define your budget and how you're going to best do it. i think niche site its, if you broadcast large you're going to pay for people who have no interest in what you're doing. >> if we narrow it down to where you advertise, you can do seo, go on facebook, target people that way, you can have some sort of content deal. >> absolutely. you know, i think one of the things people need to remember in any marketing, we need to know who's our customer and really drill down.

if we've done our ideal client avatar and go where our customers are hanging out online, go to forums, what magazines are they reading. we need to go right to them. i've seen so many small businesses waste money that they can't afford to lose by doing this shotgun approach so we really need to niche this thing down. next up we have a question about competing against the big guys. >> how do you compete with a much larger company, even though you're a small company and you can do it better? >> that's a great question, right? oftentimes you can do it better but people just don't know that they can trust you yet. the big company has been around, they have a reputation, they have friends who have used it. >> the key here is to build value with your clients. the good thing is you're right, small companies sometimes can do it better. we're always looking to cheer for the underdog. we cheer for david, not goliath. so the key is you need a great team around you.

you can't do it by yourself. so if we are all subscribed to the same vision of providing value and excellence to our customers, then we can do that. but you've got to build that emotional connection with your guests and your clients. >> i think once you do it, right, then you have the trust and word of mouth and people will spread the word. in the beginning when you don't have that yet and you're trying to get someone to hire you instead of an established company. >> i think if you go in, because you can relate to that person, they're a small business, you're a small business, if you underscore that, we understand what you're going through and we're going to give you better, more personalized service. you're not just a cipher to us, you're a real person, a real business and we're going to help you and do what he said, create that emotional attachment so it's more than sort of an unemotional business transaction and you're almost saying, hey, we're going to take care of you, nurturing. >> also somehow you need to mitigate the risk for them, right? maybe it's not the boss who's making the decision. i know if i tell my boss i'm

working with these guys, nobody is going to ask me any questions. if i tell them i'm working with some small unknown company, if it falils, it's on me. >> any relationship needs to be a collaborative effort. if we go in and say let's co-create what the end goal is here, let's do this together, how much big companies do that. say let's do this together. usually here's my product, here's my service. but if you co-create the end result, don't we all want that in life? >> and use the power of testimonials. if you have happy customers, make sure that you connect them because nothing is going to be as valuable as someone who says, yeah, i've used them, they have helped me, i would use them again. >> larry and reva, thank you guys so much for letting us pick your brains on the set for a little while. really appreciate it. and if any of you out there have a question for our experts, we answer them here every week on the show, so just go to our

website. the address is openforum.com/yourbusiness and hit the ask the show link to submit a question for our panel. if it's easier just send an e-mail to yourbusiness@msnbc.com. our next guest says taking a look at your current customers is a great way to figure out who to target to be new customers. joining us now is john jantz, best known for creating the duck tape marketing system. his new book is "duck tape selling." hi, john. >> hi. >> this is a great topic because this is how you gain revenue by getting new sales leads. talk to me about how you can use your current customers to get new customers. >> one of the traps is that people want any leads, any business, any customers. what my contention is and has been for years, what you really want are ideal customers. you want those customers that

have the attributes that you're uniquely suited to serve. and the way you do that is, i think, is that you do some studying of your existing customers to really understand who they are. and again, i'm saying your best customers. so i like to actually tell you -- i have my clients create a spread sheet of all of their customers and say, okay, let's rank them by profitability. as sad as it is to say, we all have 20% to 25% of our customers who weren't the right fit so they weren't that profitable. >> so it helps you figure out who you should be targeting. next you say now that you're looking at all your clients anyhow, look at which ones can refer you business and then ask them? >> no, no, actually what i like to do is look at the ones that are already referring you business because now what we're going to do is get an even narrower subset of that profitable client. the reason i say that is because people refer for two reasons really, because they got what you promised. you did what you said you were going to do. but also they love the experience.

they loved your people, they loved the way that you delivered value. so if you can really narrow in and focus on understanding all the characteristics of your most profitable clients who already refer business, that is who you want to go after and that's who you really want to build your business and all your communications around attracting. >> so this is great. this is all about sort of mining your current clients to figure out who your next clients should be. and finally, this is in the same vein, look for common behavior? >> yeah. what i mean by that sometimes is there's a lot of times you can spot an attribute like, for example, i know that in my marketing consulting world that if i'm talking to a small business owner who is very involved in their association, they're very into continuing their education, maybe they serve on a board of their chamber or something, i know that those are people that are really going to value our approach. we've learned that behavior is a great marker for identifying them, because sometimes you can't really identify all the characteristics that you'd like to identify.

so if you can find some of those behaviors that are really good signals, that's another great way to start identifying who you should be going after. >> i love this, john, because this isn't stuff you have to go out and research. you have all this data, they're your clients. you just have to take a minute to look through it. >> and you also have to be brave enough to say here's who we don't want to attract and i think that's the catch sometimes. >> les mccune says you have to fire the bottom quarter of your clients once a year. >> probably some truth to it. >> john, thanks for coming on the show. congratulations on the upcoming book that you have. great to see you. >> thanks so much. thank you so much for joining us today. if you missed anything, just head on over to our website. it's openforum.com/yourbusiness. we've posted all of today's segments, plus some web extras. you can also follow us on twitter. it's @msnbcyourbiz and we are on facebook and instagram too. next week we meet a veteran

who's made it his mission to help out men and women who are returning from service. >> i always like to ask people why not? why not hire someone who's giving us, americans, the opportunity to do what we do every day. why not? the skills that we have are skills that we learn while serving. >> we'll tell you why the owner of this contracting company says hiring our country's finest means you're getting employees that are dedicated to the mission and the team. till then, i'm j.j. ramberg, and remember, we make your business our business. if i can impart one lesson to a new business owner, it would be one thing i've learned is my philosophy is real simple american express open forum is an on-line community, that helps our members connect and share ideas to make smart business decisions. if you mess up, fess up. be your partners best partner. we built it for our members, but it's open for everyone.

there's not one way to do something. no details too small. american express open forum. this is what membership is. this is what membership does. the u.s. military gets in position for possible air strikes in iraq. good morning and happy father's day. thanks for getting up with us today. at this our a u.s. aircraft carrier is on its way to the persian gulf, giving the pentagon the option of launching air strikes as president obama considers possible military intervention in iraq. defense secretary chuck hagel announced yesterday that he has ordered the uss george h.w. bush to escort ships to move from the arabian sea into the gulf. ships carry tomahawk missiles and fighter jets, both with the