HATTIE: Welcome to the second season of SMALL BUSINESS TODAY. You might be interested to know that our first series of programs reached 70 million households on more than 140 public television stations. And that's just in the US. You're probably familiar with the Voice of America. It's produced and broadcast by the US Information Agency. Well, the USIA is now broadcasting us via its Worldnet global satellite. That means vital information about American small business is available around the world in a number of languages. In addition, PBS Adult Learning Satellite Service has broadcast the first series to its 5,000 colleges and universities.

Our second season is different. Because of viewer feedback, we've added a new feature called Smart Practice. It's directed to professionals like psychologists, dentists, CPAs. In other words, anyone who bills by time or by service. Also each week, we'll include an in-depth look at a Business Basic, such as how to write a business plan, how to raise money, or how to hire the right people. And back by popular demand, our LawTalk with John Patrick Dolan, and Streetfighter Marketing with Jeff Slutsky.

First, as you know, we open each week with an in-depth profile of a small business, or one that started small, and how they beat the odds. We go to Providence, Rhode Island to visit with Jon Zucchi and Linda Brunini.

HATTIE: Jon Zucchi and Linda Brunini have operated a successful business for 11 years, but now they want more. Not in a greedy way, they want more satisfaction from their work. They know how to make money, but with the new venture, they have set out to make happiness.

(Voiceover) In the tiny state of Rhode Island there is a big costume jewelry industry. Hundreds of small businesses are involved in every aspect of jewelry manufacturing. International Etching in Providence, started by Jon Zucchi in 1983, is a manufacturer of metal products for the giftware, jewelry and accessories industries. It primarily sells to other manufacturers who, in turn, put their names on the products and resell them to the retailing sector.

LINDA: It's very bland-looking. You know, she's adding just that little touch that makes...

HATTIE: (Voiceover) With 200 customers all over the country, about 18 employees and a good-looking balance sheet, John and Linda can be proud.

JON ZUCCHI (International Etching): I was working for a company that the parent company went Chapter 7. I was offered the company by the bank that held the, you know, the debt, and they put a great package together for me. Obviously, it was easy to get financing because they wanted to be out from under the debt themselves. So I got my first SBA loan, which was a $25,000 loan to purchase the company, give me a little bit of working capital to purchase a car that we needed, to purchase some film and, you know, inventory and materials, and we started the business up, and it was doing very well, and sales were increasing, but I kind of, like, hit, like, a ceiling.

LINDA: I had been a free-lance artist in New York for oh, maybe eight years or so. When I told John that I was, you know, I was bagging business, I was going to go out on my own, he said to me, `You're kidding.' He said, `Well, would you come to work for me?' And I kind of laughed at him. I said, `I don't think that, you know, you can afford me.' And I said--but I said, `You know, I have an idea,' and he came back to me--this was really brave to do--he offered me a portion of the business, but not all the business, and I said, `No.' And I said, `Fifty percent of the business,' I said, `or nothing. But,' I said, `here's the deal. I'll come in on a minimal salary, and,' I said, `and I'll bring in X amount of dollars in sales. And when I achieve that goal in a year,' I said, `then I get to buy in, and we'll set a figure on what the buy-in for 50 percent. What do you think?' He went back and came back to me with a deal, OK? And we...

JON: And I like to say that Linda beat the time limit by 50 percent, brought the sales up to like 30 percent more than what we had projected, and we did it in half the time.

LINDA: And Jon was very kind and also let me buy in for half of the amount that he had already, you know--so I got to buy in very cheaply.

HATTIE: Do you think your spouses have any jealousy about the partnership?

LINDA: No question. It happens. It has to be there. We have a closeness. We have a bonding that a business creates, no different than a marriage with children. This is our creation. These are our children. We had lots of arguments, and we had lots of knock-down-drag-outs to get to where we are.

HATTIE: Tell me how you argue. How do you argue?

LINDA: Scream and holler. No--initially...

JON: It has something to do with our nationalities...

HATTIE: Because you're both Italian.

JON: That's right.

LINDA: Yeah. We're both sitting on our hands right now, so we can talk. No, no--let me say...

JON: But when we have our successes. we really enjoy our successes in such a flagrant way also, because that's...

LINDA: Everything.

HATTIE: But what you're telling me is it's OK to disagree.

JON: Absolutely. You have to disagree.

LINDA: You have to disagree. That's the only way that you learn that there's another perspective or a viewpoint. It's so interesting. We're very fortunate. When we developed Two Hands--it has a philosophy, it has a strong mission statement: `We make a living by what we get, we make a life by what we give,' Norman McEwen statement. We wanted a mission statement that, everybody could, you know, wrap themselves around and believe in.

JON: We are different than a lot of manufacturing companies, especially in the jewelry industry. We have very expensive equipment, and it's expensive in the fact that it has to be made out of special metals, titanium. The equipment, the safety devices, the temperature control devices all--it's a--very, very expensive lines.

LINDA: And the environmental control...

JON: And then on top of that...

LINDA: ...devices.

JON: ...once you fire them up, it generates vapors and things of that nature. So we have to bring in and put in scrubbing devices and all kinds of ductwork to maintain a quality of air level that when we go out back in to that area, that I'll let my two-year-old walk back there and watch the pieces come out of the machine. And if it's good enough for him, it's good enough for everybody else. If you have a good environment, and a great place--workplace to work in, you can get really wonderful people.

LINDA: We don't have to advertise for high-quality personnel anymore.

HATTIE: Then what's the next big idea?

LINDA: Well, we felt that we weren't taking charge of our lives as much as we should. We manufacture a product for another manufacturer to put his name on, and then sell to a retailer who sells it to the consumer. We wanted to get a little closer to the consumer, and that meant our margins would increase. We'd also be controlling our designs, and the feeling of flavor of our marketing and the way we'd like to do business.

HATTIE: (Voiceover) Basically, Linda and Jon were tired of working just to make money, and they were also tired of just writing checks to charities. They wanted to tie their work to their contribution to the community. With $100,000 of their own money, taken from International Etching's profits, they started Two Hands.

LINDA: Why not put the future into the future, and that's the kids. But I wanted to put it into kids that are going to be young adults, that maybe don't have the same advantages as all of us. And we wanted to talk about advantages, not disadvantages, you know, and abilities, not disabilities, and heroes, not victims.

HATTIE: (Voiceover) The relationship between Two Hands and the Meeting Street Center is very time-intensive. The teachers at the school, along with Linda and her art director, David Campbell, start with a theme, such as `Spring Has Sprung.'

DAVID CAMPBELL (Art Director): Paul, what do the flowers need?

HATTIE: (Voiceover) The teachers integrate art into a learning program around the theme.

DAVID: Does it land on the flowers?

HATTIE: (Voiceover) Here the students are potting plants.

Unidentified Woman #2: Are you going to use your hand?

HATTIE: (Voiceover) Then David talks with them about images they have of spring.

DAVID: Do you know what the water's doing?

PAUL: What?

DAVID: The plant's going to drink it.

LINDA: Yes?

DAVID: It's going to have a little drink.

LINDA: And we were sitting around and we were jamming and we're saying, `What are we going to do for the name of this company?'

JON: And the momentum at that point...

LINDA: And David's looking at me and David goes--now what? What does that mean? Two. Two. Two hands. Two hands. Oh, my God. It was perfect. Two Hands, Inc.

HATTIE: (Voiceover) The students draw, if they can...

DAVID: What color do I want to make the flowers?

HATTIE: (Voiceover) ...or simply describe to David what they see in their mind's eye.

DAVID: Which color? Which color?

Unidentified Woman #3: Good choice.

DAVID: Blue?

HATTIE: (Voiceover) These images are then turned into jewelry by the Two Hands designers.

Unidentified Child: Yeah. Oh, yeah.

Unidentified Woman #4: OK.

HATTIE: (Voiceover) The students also visit the factory to see their work turned into a product.

Unidentified Woman #5: Here's another one. Want to make colors?

LINDA: Tommy, you went to the circus.

HATTIE: (Voiceover) The Meeting School Center receives a check each year based upon one percent of the net sales. Linda explains that making this contribution on net sales is high-risk, but they are committed to this plan.

LINDA: On a million-dollar business, for instance, if you can yield, on your net income, $200,000, big deal. You have 2 percent of $200,000. You already know what your profitability is, so you use it against charity. So it's basically--that's where the cynicism comes in. We try to pull all of that anyone-could-do cynicism out. Plus we put that into our incorporation of our minutes, legally and through the IRS and every other way. We are bound to give that 1 percent, profitability or not. And you can believe in the first year and second year of a business you're not profitable.

JON: You're committed.

LINDA: But I was pointing to Jon's one plus one equals three. That's synergy. So it's you and I, and then it's you alone as a separate person, my energy alone, but put us together, and we add up to more than two. We add up to new energy, which is that three, and that's the synergy of a partnership, the synergy of a relationship between a business and its bank, a business and the SBA, you know...

JON: A business and its community.

LINDA: That's right, and its community. And we've got it. We've really got it at Two Hands. And it's a wonderful place.

HATTIE: (Voiceover) Here's what I learned from Jon and Linda: A partnership can be the perfect way to build a business. Creating a stimulating work environment will attract all of the employees you could possibly need; and when you set out to do good, good comes back to you.

"Choosing the business that's right for you is the most important business decision you will make.' -- Steven C. Bursten The Bootstrap Entrepreneur

HOST: Sexual harassment is a hot topic in Hollywood, whether it's a man or woman behind the big desk. Well, our legal expert, John Patrick Dolan says it's also a hot topic in business, and that the small-business owner should pay attention. Here's this week's LawTalk.

JOHN PATRICK DOLAN (Legal Consultant): It's viewed in two different ways, and the case law sort of supports this. The first way is what they call `quid pro quo' sexual harassment, and that is where somebody in a authoritative position in a business environment requires certain conduct of somebody else in the environment over whom they have authority, including sexual conduct, in order to get a promotion, to get new training, to get a job transfer, etc. That is viewed as actionable on its face.

The second kind of sexual harassment is what they call hostile environment sexual harassment, and this is where there's an environment created in the workplace of hostility or intimidation, where people can't get their work done because of this overriding environmental concern. When this kind of sexual harassment is found, normally it's evaluated on the basis of how serious, severe is the environment, how frequent are the comments such as dirty jokes or sort of rotten-looking sexually explicit posters, etc., but this kind of sexual harassment is the kind where most litigation is being developed, presently speaking.

HOST: What exactly do we need to do?

JOHN: Well, there's four things we can do. The first thing is to have a new conscious sensitivity of what's going on in the workplace, to watch what's going on as owners or managers in a workplace, and keep an eye on the kinds of jokes and the kinds of things that are taking place.

The second thing is to have a written policy. Every organization in this country and in the world should have a written sexual harassment policy.

The third is really important: to follow the policy that you set up, because many organizations have the policy, but they don't follow the policy, and that can create a serious liability for an organization.

And then finally, immediate remedial action. If you find somebody is really causing difficulties in your workplace, you have to reprimand them, and then possibly terminate them to avoid the liability that many organizations are seeing in sexual harassment.

HATTIE: As a small-business owner, I want to do what I do best and that is not sitting in front of a computer surfing the Internet. On the other hand, we need to start paying attention to this new business tool. Meet Web master Dan Schulman in this week's You're Wired.

HATTIE: All right, Dan, it's all over the newspapers, it's all over the magazines. Explain to me, clarify, what is the Internet?

DAN SCHULMAN (Computer Consultant): Basically what the Internet is today is about four million different computers that use the same protocol to talk to each other, that are hooked up together. Million of computers out there provide a vast amount of information to about many more millions o fusers across the world.

HATTIE: As a small-business owner, why should I care?

DAN: The Internet for electronic commerce is going to completely redefine the way that small business operates today.

HATTIE: Give me an example.

DAN: Probably the most easily reachable example and the most easily understood example is on the Internet today are millions of subscribers and millions of potential customers for your service. It's growing. So at the end of this year, there will be many millions more people surfing the Internet looking for information, looking for services to purchase. And imagine the reach for a small business that has a limited amount of dollars that normally could maybe go to their geographic area that's surrounding them. Now you advertise or give a service on the Internet, and millions of people have access to that information across the globe.

HOST: For more than 25 years, Jim and Naomi Rhode have specialized in helping professionals build their practices. Thousands of dentists and other health-care professionals make more money today because of their advice. Jim and Naomi make a great team, both as business partners, and as husband and wife. Well, being in business together can be tough on relationships. Here's Naomi with ideas on building a Smart Practice together.

NAOMI RHODE (Consultant): We found that about a third of spouses work well together. About a third work very well together. That's good news.

HOST: Yeah.

NAOMI: And about a third shouldn't work together at all. And I guess that because we have worked very well together for 38 years building a marriage first, and then a family, and then a company, and then a speaking professional career together, we have observed other people trying to do that.

HOST: What do you thing the secret is to working together?

NAOMI: Well, I think the secret is a mutual respect for the other person's talents and gifts, really believing that they have as much or more to bring to the cooperative effort than you do, really seeing it as a cooperation, a molding together, a melding together of your self-esteems rather than a competition. We talked a little bit earlier, you and I, HOST, about the difference between a co-dependent and interdependent. Having yes, your independence as a person, knowing what your skills and your gifts and your talents are and bringing them to the business opportunity, but also recognizing that the other person's are very important in this business association that you have.

HATTIE: Most of the customers you lose through the life of your business will leave because they feel neglected. How do you make the customer feel close to you? You stay in touch. It's not that hard, but it does require some basics. Start with your customer list. Oh, it's a mess? Here's one way to get it straightened out, as we hear how to Deliver Your Message.

PAT IRONS (Northern Virginia Business Center): If you keep a mailing list, and you're concerned with the accuracy of the information that you have on there, we provide a one-time free service for your list, where we standardize your address, and the way we do that is to match it against the 130-odd million addresses in our national database.

HATTIE: A hundred and thirty million?

PAT: Yes. For example, 2300 9th Street. We could not get a bar code for this, because it would not match. So a conversion process would append a directional.

HATTIE: So if I brought you my diskette and my customer--I had typed in my customer's address as 9th Street, you're saying there's no such thing as 9th Street. It has to be 9th Street South.

PAT: Yes.

HATTIE: Great.

PAT: This is Upper Winwood Court, and it was entered as W-I-N. And, in fact, the correct spelling is W-Y-N-N-E, and it will change that.

HATTIE: A hundred and thirty million addresses. I can't believe it.

"You can do it. Colonel Sanders was collecting Social Security when he started his fried chicken empire. H.L. Hunt was a bankrupt cotton farmer before becoming a billionaire in the oil business." -- Greg Straughn & Charles Chickadel Building a Profitable Business

HOST: Of the 21,000 phone calls we got last year, many people wanted to know, `How do I get started?' Well, right now we'll look at how: how to start a business from scratch, or buy one that already exists. OK? Where do you begin?

HOST: (Voiceover) We've met a number of entrepreneurs who created a business out of their imaginations. Donald Cassel loved skateboarding, but his business didn't take off until he invented a simple bolt that helped skateboarders do certain tricks. He found that a simple idea is the best idea.

Ken Ryan saw a problem and moved in to solve it. While working in the air cargo business, he discovered goods sitting around when they should have been moving. So he came up with a unique way to move air freight on the ground

KEN RYAN (AirMax): We did it with a lot of small companies that were dedicated to delivering freight on time between airport cities, and specializing only in air freight, and it just blossomed out.

HOST: The key to succeeding and starting from scratch is dreaming up a great idea for a product or service that other people will want. And the idea doesn't even have to be original. It can be an improvement on an existing product or service. To be successful, though, there's one person who must be completely sold on the idea: you. You've got to believe in it enough to lose money before you make it. And you've got to believe in it enough to do what the guys at id Software did: work hundreds of hours, hoping someone would buy their computer game.

Before starting your business from scratch, you should answer all of these questions with `yes.'

1. Do you need to say, `I started my own business with no help from anyone?'

2. Do you believe that your idea is unique, or do you believe that you have a unique spin on an existing idea?

3. Are you so sold on your idea that you're willing to invest money in it?

4. Are you willing to develop your own systems to market your idea and operate your business?

5. And are you willing to live with uncertainty long enough for the public to recognize a need for your idea?

These are tough questions, but you need to force yourself to answer them. So starting from scratch is risky.

A less risky way to own your own business may be to purchase an existing business. The idea is that you're buying something that's already proven in the marketplace.

(Voiceover) Tim Hennessey bought Ekkwill Waterlife Resources from an older man who was retiring. Now Tim has transformed the company into his own dream. For Tim, buying this existing business was the only way he could afford to get started, and this may be the way for you to go. See, Tim had no money, but the owner was willing to carry the loan.

TIM HENNESSEY (Ekkwill Waterlife Resources): We were able to put together a series of three debt instruments, three notes, that were secured by assets that came along with the farm that we had not purchased yet, so with a stroke of a pen we executed all these debt instruments at the same time and were able to buy the farm with no cash.

CHARLES EDMONDS (Business Broker): Owners are not looking for a big cash settlement in most cases. They're looking for an annuity-type income, so you could sign a note for three or five or as long as seven years to pay for the business and pay out of the profits of the business.

HOST: (Voiceover) Steve Day bought State Line Tack. Like Tim, he has ridden it skillfully to incredible success.

Augie Nieto bought the patent to an exercise bike, has been improving it for 18 years, and is pedaling all the way to the bank.

And if you can't buy out, buy in. Steve DiAntonio bought into an existing business, Color Me Beautiful, keeping the creator as a partner. A business broker like Charles Edmonds may be able to help you find the right business to buy.

CHARLES: If I were buying a business, I would want someone working for me. In a normal situation, the seller lists a business for sale, and everyone in the chain of sale works for the seller because they're paid out of the commission from the seller. But there's such a thing as having a buyer's representative, a buyer's broker, and that's a relatively new idea, but I think its time has come and I would certainly use that. And the reason is, if I were the buyer, I would want someone working for me to find the right business, the best price and the best terms.

HOST: Once again, there are questions to ask yourself.

1. Do you understand why this business is for sale?

2. Do you have ideas to improve the business beyond where it is now?

3. Have you done your homework to determine whether the business will make money with you as the new owner?

4. Can you afford the down payment?

5. Is this business what you really love doing and not just a way to make money?

As you can see, there's more than one way to get started, and only you can decide which way is best for you. But don't decide yet. Be here next week and we'll tell you how to evaluate a franchise, another way of getting started.

HATTIE: Jeff Slutsky always leaves us with a smile, and great advice on sales and marketing. His motto is: Don't outspend your competition, outthink them. Here's this week's tip from the brain behind Streetfighter Marketing.

JEFF SLUTSKY (Marketing Consultant): Grand opening situation: Tom Bramlett in San Francisco owns a scuba store. He worked very hard at customer service, till this big discounter moves two blocks away. They're advertising a fortune for the grand opening, and what's he going to do? He has to compete on price. But here's where they made a mistake. This new competitor advertises in all their advertising, `Look for the big blue balloon,' so to make it easy for their customers to find them. So they had this big blue balloon up there, right? Well, what does Tom do? He goes out and buys a bigger and bluer balloon, flies it above his own store. Half the people going to this other store go to his store by accident, has the most successful promotion he ever ran, cost him practically nothing. That's what I call street fighting.

HATTIE: Next week, we'll meet a first-generation American who's been successful in business. Although you may find it hard to believe when you see her in action, she's legally blind.

And we'll take a look at buying a franchise as a way of starting your business. Remember, this program is about your business and your life.

The Closing of the Show.