we come to you from the annual inc. 5050 conference in washington, d.c., and we speak with congress secretary lock about a big announcement he made here at the conference. that's all coming up on "your business."

hi everyone. i'm j.j. ramberg. welcome to "your business," where we give tips and advice to help your business grow. we're coming to you from the gaylord convention center outside washington, d.c. this is the site of this year's inc. 500 conference. inc. magazine has gathered together small business leaders and experts from all across the country, here to discuss a variety of topics ranging from health care reform to sales to innovation. ♪ secretary of commerce gary lock came to the conference to show the obama administration's support for small business. he is here with us to tell us a little bit about his announcement. secretary lock, thanks so much for coming on the program. >> thank you. it's my pleasure. >> tell me a little bit about this big announcement, you're opening an office of innovation

and entrepreneur ship. >> we help to believe entrepreneurs in this country who for the last 25 years were responsible for virtually all the net new jobs in america. companies less than five years old in the last 25 years responsible for virtually all of the net new jobs in america. we need to really help them lead this economic recovery. that's why it's really important that we have an office reporting directly to me with also an advisory counsel of entrepreneurs, angel investors, venture capitalists and others to really help drive policies, devise policies and what we can do to really unleash the entrepreneurial spirit in america. >> we have questions coming in, people coming on the show all the time. what they say is i can't get money. so what will this office do to help people get funding? >> we'll be looking at that very issue. we'll be working closely with the small business administration to see what type of greater flexibility we have. just in the last several months under president obama and the recovery act, the volume of

loans through sba has increased by 60%. the guaranteed loans have now gone up from 75% to 90% guaranteed loans. we still know a lot of the banks are still not providing that credit. >> unfortunately we're starting from a lower base than we would have wished. >> we'll be looking at all the access to capital, whether there are partnerships to help with the venture capital community. >> one of the things you said in your announcement is you want to connect great idea-makers with great company builders. how will this office facilitate that? >> a lot of the r andd incurs in federal labs and colleges an universities. there seems to be a low rate of move. from those great ideas, whether from laboratories, universities or even ideas among individuals in commercialization. we'll be looking at some of the policies we can change to

facilitate that free flow of great ideas and great service sgls what do you say to small business owners or entrepreneurs who have been frustrated over the past couple years saying, we already talked about the money issue. but i've lost my customers. i feel like i shouldn't give up the job i have now even though i have a great idea. how do you get the optimism back? >> obviously has fueled our economy is the courageousness and the attitude and the spirit of entrepreneurs. in fact, entrepreneurs right now, small businesses account for some 40% of all jobs. and 40% of the jobs are with companies that didn't even exist prior to 1980. so we've got to provide them the insinnives, the encouragement. and one of the things we can really do is look at the whole notion of mentor ship education programs, looking at the access to capital issue, trying to provide a free exchange of ideas that come out of all the research and almost like an ebay of ideas, to make all of these ideas coming out of federal

research available to all potential entrepreneurs. >> is this the kind of thing that you might launch, an ebay of ideas? >> we need to figure out how we spread all the knowledge and ideas and creativity coming out of labs and out of universities so it's available for anybody and everybody to move forward. we know a lot of the great ideas are stuck and aren't -- and don't get moved forward. for instance, solar cells really developed by u.s. technology and u.s. research. who is it that really brought it to commercialization? the japanese? who really occupies the space and dominates the market? the chinese. >> you'll create a way to make sure an american idea gets the idea and can commercial lies it? >> for instance, looking at some of the inhib biggses and restrictions surrounding universities and the commercialization of ideas that were created in the universities. is there a better way of getting those ideas out to any and all entrepreneurs who have the wherewithal, the guts and the

drive to bring it to commercialization. >> secretary locke, thank you so much for coming on the program. >> my pleasure. one controversial topic up for discussion here is open book management. this is a management technique that encourages opening your books to your entire staff. now some entrepreneurs frown upon this. but the owners of one architectural firm here in the d.c. area found that implementing open book management completely changed their business for the better. >> as far as gross profit -- >> if you think you're eavesdropping on a closed door board meeting, this is a regular tuesday staff meeting led by mark vandeweg, the general manager at a company specializing in home remodeling. >> that's where the staircase is going right here. remember, this was all rot iron rales. >> anthony wilder design build company regularly opens its

books, line by line for everyone's contribution and comment. >> what do your employees know? what information do you share with employees? >> everything. we do hold salaries private. but aside from salaries, everything is shared with the employees. >> liz wilder co-owns the company with her husband anthony. she was the powerhouse behind implementing the company's management style of open book accounting. >> everybody cares about the net profit which is the performance of the company which is tied to their compensation. then everybody is going to be interested in the good of the whole, rather than criticizing. >> to many many it's a radical idea to let the employees, everyone in the truck drivers to the top designers, know the details of profit and loss. most business owners consider these details to be highly confidential. >> why does the driver of your company need to understand all the financials of your company? how does that impact his job. >> the driver needs to know the importance of him delivering the material on time.

>> the wilders say sharing financial information has improved the bottom line and employees like carry ewalt have nknow tissed the difference, to? >> everyone is caring more and taking responsibility. >> the arch itself looks like it's not more oblong, not consistently a radius. >> not easy to implement this form of manage, especially when the staff is made up mostly of artists, designers and manual labor, people with little experience deciphering accounting ledgers. >> it wasn't like we started open book management and everybody got it right away. we did take time to teach people about the financials, we taught them the p avnd l, the importance of the balance sheet, all the financial information. it did take a long time. >> just because they've learned it, doesn't mean they love it. >> i do wish i didn't have to deal with it, but it's part of the whole process and part of the team effort.

>> this awareness of how each individual's efforts affects the bottom line proves to be a particular advantage when the recession hit the construction industry. >> we had seen a fall-off in the architectural revenue and we had also seen a falloff in our marketing numbers which are also something we share. >> the company was forced to announce salary cuts. wilder said the staff truly understood why it was necessary. >> when we made the announcement that we were going to cut deep and one time, it was well received and i think made us more efficient, made us more productive. i think everybody pulled together and said let's make it through this together. >> do you think the fact that the books are open and you were very familiar with the company's finances made you understand the salary cut better? did you have a different attitude? >> yes, i think so. absolutely. otherwise you would have just figured the owner was just trying to save themselves. but because we knew exactly what was going on, where all the

expenses are. i think it makes a big difference. >> for anthony wilder who founded the company 19 years ago, the most important difference might be the pride he takes in the team spirit fostered by this style of management. >> it has opened my wife and i up as partners in this business to not feeling like we're the sled dog ins the company. we don't have to drag around all these problems. we have a sense of accomplishment that that individual can actually show up and do his part of the job and the team gets the win. everyone gets the win. >> so is open book management right for your business? let's turn to this week's board of directors to ask them. somewhere a special guest today, jack stack is known as the father of open book management. he wrote the book "the great game of business," the ceo and founder of sfrksrc holdings, also been talking about open book management here at the inc.

conference. we have norm as well, norm brodsky who joins us again. he is the author of the book "the in that case." of "the knack." >> i know you talk about this to companies all across the country. is it right for everyone? >> let me tell you this. i think open book management is played at every company. it's to what extent it goes through the organization. >> body is opening the books. somebody is working the books. somebody is looking at the books. the idea is to use the books to get everybody on the same song sheet and be able to come up with the same results. it's sad we have two different systems there, some people who use those books for power and design a new system to manage, whereas they try to manage the people to get what's inside of those books. the question is why don't they just open the books and have everybody working on the same page. >> hold it. hold it. hold it. jack, i've known you for about 20 years.

so i was a skeptic at first. i thought it was the silliest idea i ever heard. but it's great. and to use parts of it. parts of the system is good for everybody. i don't open our financial books. but we do lots of other things that are included in open book management. it really has enhanced our thing, it's a why of life. >> let's go to the skepticism about opening your financial books. what's your problem with that? >> my problem with opening the financial books is -- what jack does is teach financial literacy to the company. what we do is teach people how important their job is and how it contributes to the bottom line. >> i'm assuming what you would say is through financial literacy, they'll understand how important it is. >> i don't think we could have had the growth rate had we not opened the books and taught people the metrics to create a great company. those metrics turned out to be

our financials. we were all working off balance sheets and cash flow statements. we were able to transpose that intelligence to everybody in the shop, in the offices and all through the organization. >> how do you get somebody who has no background in finance to understand this stuff? >> it's really overly simple. you've got to do an income statement. you've got to do a financial statement for your investment community or for your banks any way. the key to this thing is allowing the associates inside the organization to convert their stories to numbers. numbers are nothing more than the stories. if someone from sales says, i'm going to sell a million dollars, you've got a top line sales number coming from the person that has the ownership of the line. if you go back and recast an income statement, an income statement is nothing more than an accumulation of stories that people are going to do for each other. >> but you're -- >> i agree with jack on one respect of this. you can teach anybody anything as long as you find the right

key to do it. the question is why, and in your company is it good for you. in our company what we do is show the people the value of their job and what they have to do to increase profits. opening up our books to them, we'd never do that. >> there's opening up something. unfortunately we have to wrap this up. thank you so much for joining us, both of you. >> thank you. it's now time to answer some of the questions we've received from small business owners here at the inc. 500 conference. joining us is our good friend rod kurtz, the senior editor at "inc." magazine and ari, the ceo and co-founder of zinger man's community of businesses. you're a speaker at the conference. your businesses include the famous zinger man's deli. >> in this economic downturn when revenue is going down, what are the things we should be looking at for saving money other than overhead when

overhead is already lean sf. >> i'll start with you on this wrun. you've been in business for a long time, through ups and downs. where are place toss save money? >> we opened in 1982. so it was middle of the recession then, 18% interest rates i think is what we paid when we opened. it's not really a new thing for us. where do you save money? everybody looks at the same things. you just go through everything that you're doing and look for inefficiencies and ways to make money. i think the biggest thing to me is that people don't do -- we're open book finance. that means the staff are all involved in running the numbers. and really a lot of the best ideas and the decisions are involving them. and i think there's a tendency for people in leadership roles to retreat to the back office and figure out the right answer when there isn't one and impose it from outside. >> you think that's the answer right there. >> we've had the staff come up with ideas that save thousands of dollars they know about it.

if nobody is asking them, they're not going to tell you. >> i think it's great to enlist the staff. the money has to come from somewhere. you can only cut, cut, cut and eventually hit bone. talking to the staff about where to cut costs about where to cut costs is a good idea, but also talk to them about new revenue streams. >> all right. let's move on to the next question. this comes from darrell bradley from brad corp services. >> as a small business that has just landed a multimillion dollar contract, how would i go about marketing my company to other large companies? >> rod, this is a great problem to have. >> a great problem to have, absolutely. congratulations on the contract. you don't want to count their chickens before they hatch. you don't want to run around saying we've got this deal before they're even happy with you. you want to give it a few months. the first thing i would do is ask if they're happy with your service. give a testimonial. i always say your website is

your storefront these days. >> a press release? >> you can put out a press release. it's not something i would necessarily cover. it's great for you, not relevant to a whole lot of other people. if you have customers out there looking at your website and they see that out there, it's a great signing point. >> you're not signing multimillion dollar contracts. >> not yet. >> how would you market something like this? >> to me, i agree fully with what rod said. it's riley about the substance of what the relationship is. there's an interesting story in the substance behind the superficial story, then there's something for him to write about. that's really -- the fact that you sign a multimillion dollar contract is fantastic for the company, but not that interesting to anyone else. if the point which would be for me, is to talk about what we're doing and how our work is different than other people and how we're going to use that work to build job ins the community, then there's really a story. it's got to come from the heart. >> moving on to the next one, this next question comes from kurt coburn. >> when we're hiring a chief

marketing officer to work for us, how do we know they're a great fit into our company culture? >> you have a strong culture in your company. >> i do. >> you can't always tell that from one interview or ever maybe. >> no. in terms of how you know somebody fits in your culture, the answer is ultimately you don't know until they've been there for a couple years. >> years? >> if it's extremely bad or extremely good, you might know right away. and i don't say that in a bad way. at thend of the day -- i'll tell you our interviewing process quickly for people at that level which is way more than one interview that would help. it's still i think at best 60% odds that you really know. >> ari is too humble to forget. we once proclaimed him the cool left smal company in america. he has a great culture. we've got 1700 entrepreneurs here at the conference and they're like snowflakes. no two are alike.

one thing i'm a big fan of not multiple interviews, but group interviews. that will give you a window into how their personality fits. with more people -- it's not meant to be a firing squad, just a casual back and forth and see how they're getting along. >> absolutely. i couldn't agree more. we do a very extensive process. for us, it could take two months of interviews. we do trial shifts, to get paid to come in and work for a day at this level, maybe two days. it's one thing to have the theory of it, but another thing to see how they actually relate. in this case it's somebody with marketing. i would want to see how they relate to a front line designer. >> thanks, rod, ari, thank you for taking time out of the conference to come talk to us. have a great time while you're here. >> you, too. if any of you have questions you'd like to get answered by our panel, send us an e-mail, you can send it to yourbusiness@msnbc.com or you can submit your questions to our facebook page. we've heard from our experts.

now survival tips from small business owners here at the ink 500. >> as long as you operate every day with integrity and can go to sleep at night you vice president done anybody wrong, i think you will be successful. >> contemplating cutting, go deeper than you think you have to. you can always rehire people, bring costs back into the business but it's hard to get them out. go deep, once. you'll be happy you did.

there's still more ahead from this year's conference. we'll here from the co-founder of i robot with advice for others entrepreneurs.

a lot of people here at the conference are talking about innovation, and a company that's often cited as one of the most innovative is i-robot. we sat down with collin angle, the co-founder and ceo of i-robot. they manufacture robots that do everything from vacuum the floor to assist soldiers in military operations around the world. collin told us a little bit about how he took an mit thesis project and turned it into a company with more than $300 million in sales last year. >> having a mission would really help you understand what you're doing, when you're winning and when you're losing. it's critically understand because things go wrong. at irobot, it's simple. make cool things. have fun. change the world.

and each one of those elements has allowed us to get to where we are today. throughout the years, we have failed far more often at creating what we set out to create than succeeding and so when such a thing happens, we have to be able to pick ourselves up and keen going and ask ourselves, well, is there another cool thing to build? have we changed the world yet? are we having fun? we entered, explored and then chosen to exit well over 18 different business models. our first business was a private mission to the moon to sell the movie rights and having to exit that business and wept through a number of others before we found and had developed enough expertise for practical robots to vacuum your floor and practical robots to go to iraq and afghanistan and help our soldiers.

what we did was bring one of the business opportunities, created a little pnl around it. so we tracked carefully what money was coming in, what money was going out. what that led to was a company that could explore a lot of things. certainly as we had ever made an all or nothing bet in the first 15 years of existence, the company wouldn't exist today innovation can come from anywhere within the organization and the challenge for an organization to create hurdles high enough that you don't pursue everything but low enough that good ideas are not crushed. the irobot roomba was an employee idea. we were able to grow this idea from just i've got an idea to

something which is a $150 million line of business for the company today. >> nbc universal and american express have joined together to shine a light on america's small businesses. we received thousands of nominations for the most inspirational small business and now it is down to just three finalists. we want you to choose the winner. go to nbc.com/shinealight and there you can read about the final three businesses. then it will be time to cast your vote. the winner will receive $100,000 in grant money and marketing support. the ink 500 list is made up of companies from all over the country but there are some hot spots where businesses are really thriving. here are the five states with the most companies on the list. number five on the list is florida. the sunshine state has a strong presence in the advertising and marketing sectors as well as the insurance business. new york comes in at number

four. many rapidly-growing digital media companies are based in manhattan and the outer boroughs. third on the list is virginia. the state's close proximity to washington, d.c. enabled government services businesses to thrive. texas at number two, the lone star state has always been a leader in the energy industry but it also boasts a rapidly-growing health sector. and it should come as no surprise that california is snum ber one on the list. the state has long been a hot bed for tech and media start-ups. events like the ink 500 conference are great for business owners to get together in tough economic times. for those who couldn't make it here, our website of the week is another option. build a stronger america. the entrepreneurs' movement is a new initiative by the kaufman foundation, providing a voice for small business owners. log on to

buildastrongeramerica.com and join the movement. registered members can find out about upcoming events that may be of interest to them. to learn more about today's show, check out our facebook page, finding all of today's segments and a web exclusive content with more information to help you grow your business. next week, she makes designer clothing out of used materials like umbrellas but her business is experiencing some stormy times. >> every single day's a challenge. you know? sometime you can spend like two, three days, nothing. nothing. i mean, when i say nothing, nothing. no phone call. no e-mail. it's dead. >> our panel of experts do their makeover magic and get this business on its feet. until then, i'm jj ramberg and remember we make your business our business.