The Vest Pocket Consultant:

It’s nice to see Obama spending some political capital on small business. On Saturday, the president used his weekly radio address to promote small-business tax credits and his proposal to take $30 billion from the Troubled Asset Relief Program and give it to community banks to loan to small businesses to help create jobs.

While I’m still skeptical as to whether the president’s plan will move the needle (after all, why would a business staff up if there’s no work for those new employees to do?), it’s clear that the government needs to do something to help small businesses stay afloat.

That’s why I decided to reach out to Scott Shane, a professor of entrepreneurial studies at Case Western Reserve and one of the leading authorities on why small businesses succeed or fail, to ask him what the government should be doing.

Here’s what professor Shane told me:

RR: In your book, The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live By, you make a persuasive case that most small businesses do not create jobs and that the government would be better off backing high-flying tech startups that could one day become the next Microsoft, Yahoo! or Google. Should the government get rid of the SBA and give money to VCs instead?

SS: That’s too extreme. While most small businesses are non-employer businesses and don’t create jobs, there are still many job-creating small businesses out there. VC-backed companies create more jobs per company by a long shot, but there aren’t enough of them to provide all of the jobs we need created. By helping effective small businesses get better (through access to financing, for instance), the SBA serves a useful role.

I think we are better off reallocating resources toward helping entrepreneurs who have managed to get something good going to get better than use our resources just to get more companies. With three-quarters of all startups resulting in non-employer businesses, only 30 percent of people beginning the startup process getting a business up and running and 40 percent of entrepreneurs reporting that their businesses have no competitive advantage, encouraging more startups is a really inefficient way to get good ones.

It would be better to focus on businesses that made it through a set of hurdles. I’d reallocate resources toward helping businesses that have managed to get external investors or that have revenue and need bank loans rather than on helping people get businesses started. So it would be more of a reallocation of resources within the SBA than eliminating the SBA.

RR: Also in your book, you point out that the entrepreneurs who take the biggest risks are the ones most likely to fail. Should the government discourage risky practices among entrepreneurs (starting a business from scratch, starting without a business plan, selling to consumers rather than businesses, etc.)? If so, how?

SS: We have to recognize that most people who try to start businesses are not good entrepreneurs. Most of them don’t even manage to get their businesses started. Those that get started tend not to employ anyone. The majority fail in a few years, and financial performance isn’t great among most of the survivors.

There are two issues here. First, we spend too many resources on getting the unsuccessful entrepreneurs to get started. So we don’t need to discourage these entrepreneurs from starting so much as we need to stop encouraging them. Second, we need to take a serious look at why most entrepreneurs are not successful. People tend to blame others for bad outcomes. So entrepreneurs typically say that it was a lack of financing or something else external that doomed their effort. Some of that is probably true. But most isn’t. Way too many people start businesses where there is no customer need. They disproportionately start in unfavorable industries. They don’t write business plans. They don’t have competitive advantages.

If we looked carefully at the situation, we would find that some of the poor outcomes result from a shortage of capital and some result from poor decision-making by the entrepreneurs. But most of it comes from businesses that should never have been started. Pouring capital in or training people who start businesses won’t solve the problem. Bad ideas for businesses are just too prevalent. We need to be honest and say the reason that no one financed that business and it failed is not because the entrepreneur couldn’t work QuickBooks or didn’t know the four P’s of marketing. It failed because the entrepreneur shouldn’t have started it.

RR: What are three things that the government can do for small businesses that would help more businesses succeed (tax policy, loan guarantees, education, etc.)?

SS: Here are three policies that would guarantee small-business success:

1. The government commits to being the customer of any company that can’t find any of its own and offers to increase purchasing by X percent every year to increase small business revenue.
2. The government subsidizes all purchases of inputs (labor, raw materials) so that every business’s costs are lower than its revenue.
3. The government provides all of the capital startups need and pays entrepreneurs the opportunity cost of their time (say, their previous salary and benefits).

If we did this, every entrepreneur would have an infinite return on capital, have no opportunity cost to starting and have guaranteed profits. The question shouldn’t be what can the government do to help businesses succeed. It should be what’s the best use of our limited resources. If we guaranteed the success of all small businesses but needed to stop paying for public education to get the resources to do it, would that be a wise choice? What about guaranteeing small business success but have no Social Security?

RR: Do you think that entrepreneurship has a future in this country? If so, what will the face of entrepreneurship look like 10 years from now?

SS: Of course entrepreneurship still has a future. Entrepreneurship exists in places that are doing far worse than we are. There’s still entrepreneurship in Haiti after the earthquake.

Last Wednesday night when I was watching the State of the Union address with my daughter, I was gratified to hear President Obama trumpet small business and entrepreneurship as the engine of job growth and economic recovery. Give small business owners a $5,000 tax credit for each net new job they create this year, Obama told Congress, and double-digit unemployment will soon be a thing of the past.

Unfortunately, it’s not that simple–and the Washington bureaucrats who cooked up this idea would know that if they had ever left the Beltway to start their own business. Unlike handing out tax credits to encourage consumers to buy houses and cars, tax credits that try to incentivize small businesses to add staff will fail unless there’s some work for these new employees to do. The last thing a business owner wants is to put someone on the payroll, get him up to speed and then have to lay him off six months from now because business is still slow.

Lisa Skriloff, president of Multicultural Marketing Resources, a three-employee New York City firm that helps companies market to specific consumer groups, told The Wall Street Journal last week that she wouldn’t hire any new employees–tax credit or no tax credit–until her business picks up.

“First, I’d look to see substantial growth in the number of clients that need servicing,” Skriloff said. “We already have a desk and computer for an extra position that keeps coming and going over [the] years. Right now, interns are sitting there.” If an extra project does come in the door, she calls a freelancer.

Ouch!

What’s the answer? Well, for starters, I’d like to see the government take some of the $33 billion that Obama wants to spend on small-business tax credits and give it to the Fortune 1000 instead. For every $5,000 in products or services that a big company purchases from a small web design firm, general contractor, parts supplier or other small business, that corporation would receive a $5,000 tax credit. While we’re at it, let’s expand that program to the big banks as well. For every $5,000 that Chase, Bank of America or any other major lender loans to a small business borrower, that bank would get a $5,000 tax credit, too.

The bottom line: Before small businesses can start hiring again, their customers need to start spending–and that will happen a lot faster if the government primes the pump. For now, I’m glad to hear Obama talking the talk (he mentioned small business and entrepreneurship 15 times in his speech, The New York Times reported). Maybe this time Congress will listen.

Last week, I got a call from a client of mine I hadn’t heard from in a while. Turns out, when he and his partner couldn’t raise money from investors to launch their business last year, they did what many intrepid entrepreneurs do. They went back to corporate America and got jobs, and used their own money to build the prototype they needed to prove that their concept was more than just a business plan and a dream.

Now that they’ve launched their product, signed up their first pilot customer and started generating revenue, is it time to start pitching venture capital firms again, they want to know. After all the bad news they’d read about VC funding last year, did the VC industry still have a pulse?

According to the quarterly MoneyTree report released last week by PricewaterhouseCoopers and the National Venture Capital Association, the answer may be “yes”–and not just for later-stage companies but for startups and early-stage ventures, too.

First, the bad news: Venture capital investment in 2009 declined to its lowest levels in more than in a decade, the report found. Last year, venture capitalists put $17.7 billion in 2,795 deals nationwide, the lowest level of dollar investment since 1997. This marked a 37 percent decline in dollars and a 30 percent decrease in deal volume from 2008.

Now, the good news: In the fourth quarter of 2009, VCs put $5 billion to work in 794 deals. But while funding declined 2 percent from the third quarter of 2009, the number of deals actually grew by 15 percent. The report also had good news for startups: While first-time financings fell to the lowest dollar and deal level since the report began tracking VC investing in 1995, the Q4 numbers showed increases in the number of first-time and early-stage deals completed.

Does this mean the ice is finally thawing?

“The venture capital industry had no choice but to slow the investment pace in 2009,” Mark Heesen, president of the National Venture Capital Association, said in a statement. “The weak exit environment resulting from an unstable public market combined with a challenged limited-partner base sent a strong message to the venture community to pull back the reins–and the VC’s listened. Now that the economy has begun to show signs of improvement, we expect to see dollars flow more freely back into those sectors that offered the most promise before the recession began–clean technology, life sciences and IT.”

With bank financing still tight for small businesses, the VC turnaround couldn’t come at a better time for cash-starved startups and early-stage companies. Seed-stage companies attracted 9 percent of dollars and 11 percent of deals in 2009 compared with 6 percent of dollars and 12 percent of deals in 2008, the report found. Early-stage investments saw double-digit increases in the fourth quarter, with $1.6 billion going into 277 deals, a 32 percent increase in dollars and 26 percent increase in deals from Q3.

Now, don’t get me wrong. Startups and early-stage companies face long odds when it comes to raising venture capital–even in good times. Still, it’s exciting to see the river of VC money starting to flow again. It may be winter in the financial markets now, but you don’t need to be an economist to see that spring is right around the corner.

if you’ve been thinking about selling your business, it may be time to dust off your financials and call your business broker.

Last week, BizBuySell, the internet’s leading marketplace for buyers and sellers of small businesses, reported that, while business-for-sale transactions fell 28 percent in 2009, a turnaround is under way. While the market is still weak, the median price of a closed transaction rose 1.4 percent year-over-year in the fourth quarter of 2009 after declining steadily during the first three quarters of last year.

“Many business owners delayed plans to exit their businesses and retire in 2009,” says Mike Handelsman, general manager of BizBuySell.com. “In the latter part of 2009, we started to see clear signs of recovery, and 2010 is now shaping up to be a much more productive year for selling and buying businesses.”

The winners: Restaurants and service businesses that can operate on a shoestring. The losers: Manufacturers and retail stores that require lots of inventory, overhead and capital.

Of course, even in the best of times, selling a small business isn’t easy. That’s why I asked Sally Anne Hughes, a partner at the New York City business brokerage Hughes Klaiber LLC, to share a couple of pointers for small-business owners looking to cash out this year.

Here’s what she told me:

1. In today’s economy, it’s more important than ever to prepare detailed, professional marketing materials that describe your business and that show prospective acquirers how they might be able to expand it. No one buys a business thinking they’ll keep revenue flat.
2. Recognize that you’re going to have to knock on a lot of doors. “For some businesses, we have spoken with more than 100 prospective buyers in order to get one reasonable offer,” Hughes says.
3. Make sure your financials are in order. Because today’s business buyers are extremely risk-averse, things that buyers may have overlooked in the past can now become deal breakers. Prepare for due diligence by making sure that all your business records–financial statements, tax returns, invoices, payroll records, contracts and other important documents–are accurate, up-to-date and organized.
4. Finally, be prepared to finance part of the deal yourself. With bank credit still tight, it’s likely that you’ll need to provide seller-side financing in order to close the deal. According to Hughes, it may be smarter to accept a lower offer with a higher percentage of upfront cash than to take the risk that you’ll be able to pocket an income stream from the buyer over time.

After 30 years in practice, you’d think my dentist would know the drill.

But when it comes to extracting money from his bank these days, he’s finding it tougher than pulling teeth.

Last week, after my quarterly cleaning, my dentist came into the room and we started talking.

The good news: After a 15 percent revenue drop in 2009, his practice is starting to pick up again. Seems that some of the patients who’d put off dental work last year are now coming in for crowns and fillings.

The bad news: The lender he’s been banking with for three decades just turned him down for a credit line. Even though his 2009 revenue was higher than his revenue in 2007, it’s down from 2008. And that makes his bankers nervous. This is the same big national bank that, two years ago, offered him a credit line at Prime.

The bottom line: He found a smaller local bank to give him the line at 2 points above Prime, and he’s going to take it. And he’s so steamed at his current bank that he’s threatening to yank his deposits and give his business to its competitor.

Clearly, my dentist isn’t the only small business that’s hurting. According to The Wall Street Journal, the SBA approved fewer than 45,000 loans for the 12 months ended Sept. 30, down 36 percent from a year earlier. Total volume for its flagship 7(a) loan was $9.3 billion, off year-ago levels by $3.4 billion.

“Whether it’s an SBA loan or a conventional loan, you really have to be perceived as the ‘cream,’ ” Bob Coleman, publisher of The Coleman Report, a La Canada, Calif., trade publication for SBA lenders, told the Journal. Startups in particular will have to show that they’ve put their own money into the pot and produce solid cash-flow projections, he says.

Where does that leave my dentist? Well, he’s a good dentist with a loyal practice, and I’m sure he’ll do just fine. After all, when you need a root canal, there’s only so long you can wait until you whip out your checkbook to stop the pain. And I’m sure that, in many cases, smaller regional banks will step in to fund credit-worthy small businesses when the big national banks that have been burned by the housing crisis turn them down.

Still, it shouldn’t be like pulling teeth for a small business to get a credit line. I hope that, someday soon, the big banks start to fill the big cavity they left behind.

Last year around this time, I did something pretty bold.

I told Oprah Winfrey to stop beating herself up about her weight–she had just published a cover story describing how she’d fallen off the wagon and was tipping the scales at 200 pounds again–and give herself a hug. After all, I admitted to my readers, I was 5′6″, 195 pounds myself.

Back then, I had a ready-made excuse for all those extra pounds. We were both stressed-out women business owners. We needed our carbs.

“Oprah, you and I both know that if we ate less and exercised more, we’d both be healthier and trimmer,” I wrote last January. “But we also know that our businesses often come first–and that, when a crisis hits, we’ve got to jump off that treadmill and put out that fire ASAP. And now that we’re smack in the middle of the worst economic downturn since the Great Depression, we’ve got to keep our eyes on the prize.”

So I made Oprah a bet. If the two of us could each slim down to 180 pounds by Dec. 31, 2009, I’d treat her to a 10,000-calorie dinner at Per Se, Thomas Keller’s sinfully delicious restaurant in the Time Warner Center at Columbus Circle. If we missed the mark, I’d spring for pizza at Patsy’s, a great little pizzeria around the corner from my apartment in Greenwich Village.

Sadly, the Queen of the Networks did not respond to my challenge. I don’t know if she’s any thinner than she was a year ago. Last I heard, she was pulling the plug on her show and going to cable instead.

The truth about weight loss, as all of us dieters know, is that you can run but you can’t hide. And the more you run and the less you eat, the more weight you’ll lose and the better you’ll feel both inside and out.

Which is why, after a lifetime of making excuses, I embarked on my homemade Eat and Run Diet plan last May and quickly shed 15 pounds the old-fashioned way–by walking three miles a day, joining a gym and getting rid of Coke, Milky Way bars and all those other false friends I thought I needed to get me through the day.

Now that the holiday feasting is over, it’s back to the treadmill for me. Oprah, the next meal’s on you!

Looking back on 2009, it’s hard to find much to cheer about for startups and small businesses. Investors slashed funding, consumers stopped spending, and getting a loan from a bank became as difficult as landing a date with George Clooney on Oscar night. (I’m a real estate investor–I should know.)

But I’m an optimist and, just like the rest of you entrepreneurs out there, I find it hard to imagine that 2010 could be any worse than the 12 months we’ve just put behind us. So, with a fresh year just around the corner, let’s whip out our BlackBerries and make some predictions before another year speeds by us.

Here are three predictions that I hope will put a smile on your face and some confidence back in your business plan:

1. Banks will start lending again.

With the economy starting to recover and Treasury yields moving up again, banks will have to stop sitting on their assets if they want to make money. Of course, that doesn’t mean that the big banks will go back to lending like it’s 2007. Under pressure from the White House, Chase announced it would boost small business loans by $4 billion in 2010. CIT Group publicly committed $500 million in new small-business loans and waived $1,000 “packaging fees” on some products. But startups without revenue or profits will still face an uphill battle getting bank financing and will probably have better luck raising money at the dinner table than down at the branch.

2. VCs will open up their checkbooks.

This just in from the The Wall Street Journal: After a dismal 2009, venture capitalists are preparing to ramp up their investments, injecting much-needed cash into startups. Venture capitalists invested $14.6 billion into startups during the first three quarters of 2009, down from more than $25 billion in the same period in 2008, according to VentureSource. Over the past few weeks, VCs pumped $52 million into RockYou Inc., the social networking advertising and software company, and $57 million in online textbook-rental service Chegg Inc., the Journal reported. In addition, VCs are reportedly huddling with investment bankers to take several tech startups public next year.

3. Customers will start spending again.

But they’ll be shopping for bargains, not baubles. With housing prices and unemployment hanging over the economy like a wet blanket, consumer spending will creep along at a modest 1.8 percent pace in 2010, predicts IHS Global Insight. Even as the economy recovers, gun-shy consumers will continue to hunt for sales and bargains, using coupons more and credit cards less. Savvy businesses that can deliver real value to their customers will thrive next year. Not so for companies with products that consumers see as luxuries.

Here’s to a happy, healthy and cash-flow-positive 2010!

After a year like the one we’ve had, it’s tempting to close the books and call it a day.

Christmas parties? Bah, humbug! Holiday gifts and bonuses? Fuggetaboutit!

According to a recent report from American Express OPEN Small Business Monitor, 42 percent of businesses surveyed said they are planning on giving out fewer or less expensive gifts to their employees and customers this year. Twenty-eight percent are using their own products or reward points to avoid spending cash on gifts, and 23 percent polled said they’ve jettisoned customer gifts entirely.

And that makes sense–for this year. Why raid your bank account when your company needs that cash to survive?

But what about 2010? With the economy beginning to recover, the holiday gifts and bonuses that you give out this year can be a great way to tell your customers, vendors and staffers that your company has weathered the storm and is here to stay. The key is to use those gifts and bonuses strategically to build loyalty and reward performance to ensure that the people you count on to run your business will be there for many years to come.

Here are some of the people who made my company’s gift list this year:

1. My business plan writers (of course!)
2. My top customers for 2009
3. Clients I hope to do more business with in 2010
4. My attorney
5. My accountant
6. My bankers

And some of the people who didn’t:

• Clients from 2008 who didn’t spend money with us in 2009
• Professional services firms I’m no longer using
• Networking buddies who didn’t send us any business

The bottom line: When you look at holiday gifts and bonuses as marketing tools, it’s easy to justify the expense.

Here’s to a happy, healthy and profitable 2010!

Back when I started my freelance writing business 20 years ago, it was me, myself and I.

Not only was I was the CEO and sole employee, I was also the sales rep, the bookkeeper, the tech support person, the receptionist and the girl who made the coffee and took out the trash.

Today, after two decades as an entrepreneur and real estate investor, I’ve got a team of people to help me. That’s why, when I moved from my apartment on Lower Fifth Avenue to my townhouse in the West Village last week, I wasn’t the only one lugging heavy boxes. In addition to the movers, I had my assistant, my housekeeper and my housekeeper’s daughters packing up the old place while my handyman and his helper painted the new place and sanded the floors. I even found two guys willing to go around the house and hang up my pictures and artwork.

Now don’t get me wrong. I worked side by side with the team to coordinate and execute the move, and I’ve still got plenty of boxes to unpack. (I gave my tired team the weekend off and brought in my mom from Philadelphia.) But at least I was able to run my companies and keep on top of my many projects these last two weeks without being overwhelmed by chaos like I was when I moved to my brownstone in Brooklyn in 1995.

Lessons learned:

1. It’s not enough to have good individual players. Whether your team members have been with you for years (like my housekeeper) or you brought them on two weeks ago (like my assistant), everybody’s got to learn to play together if you want your team to win. As coach, shrink and manager, it’s up to you to pull the team together.

2. Roll up your sleeves and work. The best way to lead is by example. If your team sees you working right along with them, they’ll work even harder. While nobody likes a micro-manager looking over her shoulder, team members want to see that you’re doing your part to make the project a success.

3. Be lavish with your praise. It’s easy to get so caught up in what you’re doing that you forget to thank the people who do the heavy lifting that makes your success possible. It only takes a minute to praise them for their work and congratulate them on a job well done.

4. Pay them on time, every time. There’s nothing more demotivating to the people who work for you than making them wait for their money. Make sure to have that cash, check or credit card ready so that they can walk away with a smile on their face and some dollars in their pocket.

5. Let them know that there’s a next time. Whether the people who work for you are movers, contractors or business plan writers (like our team at Axxess), let them know before they go that you’re looking forward to working with them again. Now that’s the start of a beautiful relationship.

Last week, Richard and I sat down with a group of clients to see how they were doing on the capital-raising front. With the recession slowly winding to a close and the economy beginning to recover, we asked them if they thought the investor picture was getting any brighter.

Some of the news that we heard was encouraging, some of it downright bad. One of our clients–a publishing startup that spans books, music and the web–had raised more than $1 million since we last met, though the investors’ terms were stiff and the company’s burn rate was still pretty high. A client in the food-service business told us that she hadn’t raised a dollar since last year but that she was keeping her business afloat the old-fashioned way–by making sales. Anther client–a mobile technology startup–had stopped trying to shake the money tree and was growing her business organically, one customer at a time.

But while each client had a different approach to bringing money in the door, all our clients agreed on one thing. The strategies and business plans that we had helped them craft just a year or two before were woefully out of date for today’s market.

The solution? A business plan overhaul. Think about it this way, I told them. A business plan is not carved in stone–it’s a living, breathing document that changes to reflect your strategy, investor interest in your industry and the market conditions for your product or service.

For example, if investors won’t give you the $1 million your plan calls for, then scale back your sales projections so you can hit a less lofty milestone with only $250,000. If you can’t raise money for a physical storefront because investors have soured on retail, then go virtual with an e-commerce site and zero out the line items for rent and utilities. Talking to a strategic partner about a distribution deal? Just add a tab to your financial model and see how your new revenue stream would affect the bottom line.

I think you get my drift. Unlike cars and clothes, a good business plan never goes out of style. With a tweak here and a tab there, there’s no reason your business plan can’t last as long as your company does and provide a blueprint for growing from a startup to a $100 million company and beyond.

It sure beats tearing up your old plan and starting over from scratch!

Memo to Warren Buffett: It’s time to put your money where your mouth is.

Now, don’t get me wrong. As a consultant who helps small businesses raise capital, I’m thrilled that you’ve teamed up with your pals at Goldman Sachs to offer $500 million worth of education, mentoring and access to capital to 10,000 small businesses nationwide. Under your leadership, Goldman will provide $200 million to pay for small-business owners to take business and management courses at local community colleges. The other $300 million will go toward grants and loans provided by Community Development Financial Institutions.

Unfortunately, Warren, most small businesses are just too small to qualify for Goldman’s help. Under the plan, participating businesses must have revenue of $150,000 to $4 million in their most recent fiscal year and at least four full-time employees. They must also have a two-year operating history and a scalable business model.

Now I know that’s small potatoes compared with your company, Berkshire Hathaway. But roughly three quarters of U.S. businesses–close to 20 million companies–are run by self-employed owner/operators and have no payroll at all. According to the Census Bureau’s latest data, most of these micro-enterprises are run by self-employed individuals operating unincorporated service businesses. Of the 11.3 million self-employed individuals who reported earnings, 75 percent earned less than $25,000 a year and 43 percent were in service industries–not exactly the kind of businesses that Goldman is looking to back.

So Warren, if you really want to help small businesses get back on their feet, you’re going to need to do more than serve as the spokesman for Goldman’s latest PR campaign. You’re going to have to give small businesses the cash and credit they need to start growing again. Because we all know they’re not getting much help from the banks. According to a Treasury Department report released last week, the 22 banks that got the most money from the government’s bailout programs cut their small-business loan balances by a total of $10.5 billion over the past six months. Three of those bailed-out banks made no small-business loans at all.

Think about it, Warren. That $5 billion gamble you took on Goldman when the chips were down last year turned out pretty well for you. Don’t you think it’s time you took a flyer on small business as well?

Call me sentimental, but I find it hard to imagine the holidays without company holiday parties.

That’s why I found the latest poll by global outplacement firm Challenger, Gray & Christmas Inc. so troubling. According to the survey, only 62 percent of the companies polled said that they’re planning to throw holiday parties this year, down from 77 percent a year ago and 90 percent in 2007.

Even worse, 10 percent of the companies surveyed held a holiday party last year but decided to cancel their party this year to cut costs. And of the companies that are going ahead with their plans to celebrate, 28.5 percent are planning to spending less–10 percent to 20 percent less on average–than they did a year ago. Many are saving money by dispensing with caterers and going BYOB.

Does this mean that your business should pull the plug on its holiday party this year? Not the way I see it.

To me, holiday parties serve several purposes. One is to give the people who work for you a chance to let down their hair and have a good time on your company’s nickel. Another is to reward your clients, vendors and professional services providers for sticking with you–especially in these very tough times. You don’t need to rent a hotel ballroom or spend big bucks on booze and hors d’oeuvres to say “thank you.”

If a holiday party isn’t in your budget for this year, consider taking your key employees out to a nice lunch or dinner. Gifts baskets are another way to show that you appreciate the people who work hard for you throughout the year. A bowling night or a trip to the movies could also fun. Unlike the bigger companies surveyed by Challenger, Gray, small businesses can afford to be more creative at less cost.

So before you scratch the holiday party off this year’s Christmas list, see if there’s someplace else in the budget you can cut. Because while food, wine and napkins do cost money, the holiday cheer that you spread will pay for itself in good will and fellowship all year ’round.