TIME Small Business

Recycle, Reuse, Reproft: Startups Try to Make Money Selling Your Stuff

Phones, clothes and even food get a second life on these sites

In a bustling San Francisco warehouse, a buyer for a startup called Twice is inspecting a pair of used jeans. She checks the buttonholes and zipper for snags, the legs and cuffs for wear. If the pants pass inspection, the old owner gets paid and the pants are cataloged, steamed and photographed before being listed on Twice’s website–at a fraction of their original cost (perhaps $19 for Levi’s). When someone else buys them, they become a pound or two of the 400 tons of clothing that Twice will resell this year. “It’s environmental,” says co-founder Noah Ready-Campbell of Twice’s mission. “It’s about reusing clothing and avoiding manufacturing more.”

Twice is one of many startups attempting to make the environmentally sound choice preferable and easy for consumers while making a profit in the process. The statistics driving these efforts are shocking: In the U.S., 90% of mobile devices are thrown away rather than recycled. Up to 40% of the food produced gets trashed. Americans junk some 12 million tons of textiles each year. “There’s no way we can continue to produce waste at the level that we are and survive on this planet,” says Adam Werbach, a co-founder of Yerdle, a site where people trade things they might otherwise throw out. “It really is much easier to click a button than it is to knock on your neighbor’s door.” And that is the convenience gap these enviro-preneurs hope to close.

Consider the steps involved in listing a used iPhone on eBay: take a picture, set a fair price, outline the specs, connect your bank, pay fees, wait a week for bids to come in and then hope it actually sells. These are inefficiencies that Silicon Valley types seek out like bloodhounds. “People actually feel guilt that they’re holding onto these items,” says Ryan Mickle, founder of the electronics auction site FOBO, where bidding lasts only 97 minutes and the company suggests starting prices for you. But in surveys with potential users, he found that ignoring old stuff still causes less angst than confronting what can be the messy process of getting it to someone else.

Many items cluttering closets and garages are less desirable than gadgets: DVDs, picture frames, bird books, an old wine carafe. These are items companies like Listia and Yerdle want on their sites, where by giving things away, people earn credits that they can spend on other users’ property. The sites aim to replace the rush that accompanies buying something new with the fun of bartering and the satisfaction that comes from giving away something you don’t need. “People are seeking out human connection in our day-to-day economic transactions,” says Arun Sundararajan, a business professor at New York University who studies these budding economies. “There is a noneconomic value that comes from giving your stuff to other people.”

Sundararajan says that if a company like Yerdle achieves its aim of displacing 25% of new sales, that’s good for the economy because it decreases waste. On the flip side, there is a possibility of job losses among people who make those new items. But he believes that other jobs in newer sectors would replace them, as happened when technological innovation put farmers out of work. “Efficiency is the name of the game in all of consumption,” says Ready-Campbell of Twice, “and in the whole economy, really.”

MONEY Small Business

The 4 Essential Traits You Need to Build Your Own Business

It's not enough to want to be your own boss. The founder of an advertising company explains the key qualities that go into being a successful entrepreneur.

Many people aspire to become entrepreneurs, but it’s not something that just anyone can do. To actually succeed you need more than a desire to make money or be your own boss. You need certain qualities.

Soon after I started my own business, Fortune Cookie Advertising, I began to identify crucial qualities that were fundamental if I wanted to succeed. While I had all of these four traits to some degree at the outset, I also had to consciously develop them over time.

1. A Clear Vision

This is the foundation of your business. Your vision may be based on a product, a service, or simply the desire to solve a problem for your customers. This is the “why” of your endeavor, and it must be relevant to the people you will be serving.

That’s why it’s not enough to want to be independent—your customers or clients don’t care about this. They care about your vision, which could be anything from wanting to build the most advanced computer operating system to wanting to find a fast way to deliver flowers around the globe.

Your vision may change, expand, or narrow over time, but you need to have one when you start. In my business, I started with the vision of being able to provide advertisers with an innovative way to get their message out.

2. The Ability to (Quickly) Pitch Your Business

If your business is straightforward, like selling books or changing the oil in people’s cars, it’s easy to explain. But some products and services are more technical or abstract. No matter what kind of business you decide to run, however, you should be able to describe it to prospective customers, investors, or even friends and family members in a few short sentences.

If this isn’t your strong suit, you might want to study the art of the pitch in terms of the movies. A screenwriter must be able to sell his or her idea to a busy and skeptical producer in a few minutes. Any new business owner should have the same ability. It shows that you not only know your business well, but can convince others of its value in language they can easily understand.

3. Persistence

Many of the most successful entrepreneurs in history failed at their first (and in some cases second, third, or more) businesses. Notable examples include Harland Sanders, founder of Kentucky Fried Chicken, Richard Branson of Virgin Atlantic, and even Bill Gates.

But perhaps the most famous example in history is Thomas Edison and his many attempts to design the light bulb. The quote “I have not failed. I’ve just found 10,000 ways that won’t work” is often attributed to him. Hopefully, you won’t have to be quite as persistent as Edison, but the principle is the same. Many new ventures fail or experience setbacks, but you cannot let this stop you from trying over and over again until you devise the formula that works—you won’t get paid if you don’t.

At one point in our business, a computer failure resulted in the loss of hundreds of names of contacts, including customers and prospects. This data, of course, should have been backed up, but I had not gotten around to doing this. So my team and I had to manually rebuild the entire list. It was a painstaking process, but we recovered everything, and I learned a valuable lesson: Always back up!

4. Focus

This last quality is one that entrepreneurs need in abundant supply. You need to be able to see a project from inception to completion while overcoming distractions. You must be able to prioritize, set your own schedule, and meet your own deadlines. For people accustomed to having their tasks assigned to them by employers, parents, drill sergeants, or professors, this is a big change.

When I first started my business, it took me a few months to understand this. At first, I made elaborate schedules and to-do lists to keep myself on track. I still do that to some extent, but now it’s more internalized as I’ve gotten comfortable in the role of entrepreneur.

Almost everyone like the idea of being independent—in theory. The freedom to be one’s own boss is one of the most desirable things about starting a business. But only you can decide if you are focused enough to do it.

Shawn Porat is the CEO of Fortune Cookie Advertising, a media placement company selling advertising space within fortune cookies at Chinese restaurants throughout the United States.

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

More from the YEC:

MONEY Raises

Why You Might Get a Raise Soon

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iStock

Good news for workers: Employers think the future is bright

If you’re looking for a raise — or a job — some good fortune might be coming your way. In the second quarter of this year, more employers reported rising wages and expanding payrolls, according to a new survey from the National Association for Business Economics. And businesses expect the economy will keep growing. A quarter of survey respondents now predict that real GDP will go up more than 3% next year.

For its quarterly business conditions survey, the NABE polls its members, which include business leaders, consultants and economists in a range of industries. They say they’re feeling more confident about the state of the economy — and that’s good news for workers.

Ken Simonson, chief economist for the Associated General Contractors of America, says as sales have gone up, businesses have finally needed to hire more employees to keep up with demand. Plus, now that Congress has averted a series of fiscal crises, employers think the economy will continue to grow, so they’ve started making investments again.

That includes investments in labor: This quarter, 43% of NABE’s respondents said their firms offered raises. That’s up from this time last year, when only 19% of respondents saw higher pay. A third of the respondents expect their businesses will raise salaries going forward. Also, 36% of respondents said their firms hired more people this quarter, and 37% expect their businesses to increase payrolls over the next three months.

“Employment has been rising, the unemployment rate has been coming down pretty sharply, so there’s no longer that deep bench of experienced workers,” Simonson says. “Increasingly, companies are having to pay a premium in order to have the best workers, to get anybody who has gone off to a competitor.”

The bad news? Overall demand for workers is still pretty low. Only 22% of respondents said they have a shortage of skilled workers. Compare that to before the recession: In January 2006, 44% of respondents needed more skilled workers.

But while the labor market remains slack, Simonson thinks the trends are positive.

“We’ve been hearing for the past year about companies having trouble finding workers,” Simonson says. “I do expect that at some point this year, we’ll see an acceleration in wage increases.”

MONEY

Should I Invest in a Marijuana Shop?

Have you ever wanted to be a personal-finance advice columnist? Well, here's your chance.

In MONEY’s “Readers to the Rescue” department, we publish questions from readers seeking help with sticky financial situations, along with advice from other readers on how to solve those problems. Here’s our latest reader question:

I have an opportunity to invest in a store in Washington that will sell marijuana for recreational use. The returns are expected to be significant. But there is an ethical question for me: Should I invest in something that may hurt some people’s lives?

What advice would you give? Fill out the form below and tell us about it. We’ll publish selected reader advice in an upcoming issue. (Your answer may be edited for length and clarity.)

Thank you!

[/contact-form]

 

MONEY Small Business

How to Fire Your Boss and Break Free of the Corporate Grind

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When you're the boss, you have a lot of responsibility—but also a lot of freedom. Kali Nine LLC—Getty Images

Want to start a business? Do these four things first, advises entrepreneur Adam Root.

Imagine spending your whole life building a golden tower for someone else to live in. You sew the drapes, build the furniture, and put the feast on the table. And then, when you’re 62, you check out entirely and go live in your humble little house.

Guess what? That’s what you’re doing at your current job.

Each day you go to work, you contribute your time and effort to building someone else’s dream, not your own. The only way out is entrepreneurship.

Of course, the demands and sacrifices of entrepreneurship aren’t for everyone. You’ll likely end up with maxed-out credit cards and sleepless nights spent in front of a computer. Meanwhile, working for others does come with some plusses—like the fact that each time payday rolls around, you know the paycheck will clear, and you’ll be able to pay your mortgage on time.

That sort of certainty is nice, but it’s a luxury that’s costing you your independence.

Since launching my own business last March, I’ve experienced a few “entrepreneurs’ highs” that reinforce the decision to work for myself. For example, when I closed enough business to hire my first employee, I was able to bring on a college friend as an engineer. Sharing the vision of the company in its infancy was incredibly rewarding. Plus, writing my first paycheck validated the business, and made me think, “I can really do this.” It was totally liberating.

If you’re thinking of giving up the security of your current job in exchange for freedom, there are a few steps you should take beforehand:

1. Write your life plan

Yes, it’s cheesy, but putting your life plan on paper gives you a daily reminder of why you want to jump ship and start your own business. A life plan is a set of instructions on how to go from working for a company to creating one.

But rather than the numbers of a business plan, you’re going to write about what’s important to you and what will make you happy as an entrepreneur. Think back to the jobs you’ve had. What parts of the work did you enjoy doing? What were you good at? What did you like or not like about the workplace and culture? Did you prefer flexibility or routine? Would you rather collaborate or work alone?

The purpose of your life plan is to find the sweet spot where your passions, skills, and preferred environment intersect.

If you’re lucky enough to do what you love in an environment you like with a boss who values your skills, that’s great. If not, it may be time to ditch your 9-to-5 and strike out on your own.

2. Write a basic business plan

A business plan isn’t, unfortunately, that valuable to investors these days. They want to see traction and paying customers. However, a business plan helps you do essential things like recruit employees and provide guidance to your team—think of it as a Constitution for your company.

Writing a business plan was the hardest thing for me to do. It was tedious and it didn’t generate revenue. But I needed it. I spent two years trying to figure my business out; and once I had a plan, it brought clarity to everyone involved and gave the business focus. Do it early to spare yourself wasted time.

You don’t need to go into too much detail, but you should at least be able to answer the following questions:

·What does your business do?

·What problem does it solve?

·How will you market your business?

·What advantage will you have over the competition?

·How will you make money?

Also, write down how many customers you plan to have month-by-month. Then, cut those numbers in half and triple your estimated expenses to get a better idea of your financial outlook starting out.

3. Determine your core values

Your business plan may change. Your collaborators may change. You might even shift industries entirely. But with a solid set of core values, you will create a culture that will attract top talent to help you solve these problems as your company evolves. Take the time now—while you’re most passionate—to define what type of company you’re going to be.

Here are a few of our core values:

1) Collaborate, don’t compete.

2) Champion ownership.

3) Commend risk-taking.

4) Communicate transparently.

After we closed a second round of funding, we hired a lot of new people, and it was hard to maintain our culture. We missed quotas and deadlines, and people started pointing fingers. By realigning the company with these core values, we held each other accountable.

4. Set a timeline

Pick a date on your calendar when you plan to leave your job. I recommend saving at least six months’ worth of personal expenses before taking the plunge. After you leave, remember to keep ties with the companies you’ve worked for. Burning bridges always does more harm than good and can come back to hurt your business later.

I jumped in headfirst, risk taker that I am. I paid for it—I didn’t have savings and had to beg my parents and in-laws for money. It was painful and embarrassing, and it can be avoided by saving in advance.

Taking these four steps will set you up for success, but entrepreneurship is still going to be tough at first. You’ll work for years for hardly any money while your friends with six-figure salaries and golden handcuffs tell you that you’re crazy.

But one day, the scales will start to tip in your favor, and that money will buy you freedom. And even though you’ll work harder than you ever have in your life, you’ll be working for you.

__________

Adam Root, co-founder and CTO of Hiplogiq, has managed teams in interactive design and development for Fortune 500 companies, midsize agencies, and startups.

Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program.

MONEY Love and Money

3 Questions You’d Better Answer Before Starting a Business with Your Spouse

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Defining your business roles early on can prevent fights down the road. Getty Images

Make sure you and your partner are in alignment on money, vision and business roles, says entrepreneur Allie Sarto.

When people find out that I’ve been running a company with my husband since I was 24, the reactions are always a mix of shock and wonder. “How does that work out?!” they ask us.

I’ll be honest: While it’s been a lot of fun, there have definitely been bumps along the road. We jumped in head first back in 2009 with no clear vision for what we wanted to get out of the company. We were both just along for the ride.

Now, five years in, I think I’m able to offer some advice to others who are thinking about doing something they feel passionately about with someone they feel passionately about. I’d suggest making sure you’re in alignment on these three areas before getting started:

1) How will you pay for expenses—your own and the business’s? This is arguably the most important aspect to be in agreement on from the get-go. Studies have shown a negative correlation between consumer debt and marriage quality; add in the stress of business expenses and a lack of steady household income because you’re both involved in the business, and you’re likely setting yourself up for trouble.

For every tale of an entrepreneur who makes it big after going deep into the hole with credit cards, there are dozens of other stories about entrepreneurs who are still struggling to pay off their plastic many years later.

What worked for us: We built up a six-month emergency fund before we ever left our jobs to start the new business. This absolutely saved us in the early days, since it took more than three months of hard work to earn a single penny for the new business.

Other couples I’ve talked to have had one partner stay in a full-time job while the other partner goes all in during the early days. This diversifies the risk and allows the couple to focus on building the company together without the stress of wondering how the bills will get paid. Once the company is to a point where business is consistent and the couple has been able to establish a safety net of emergency cash, both partners can commit to the business full time.

2) What is your vision for the company? A second point to be in alignment on before starting your business: your visions for your company’s future. How big do you want your company to become, and what types of sacrifices—typically time put into the business—are you willing to make to get there?

This vision will inevitably change over the years, so don’t discuss it once and consider yourself set for life. During the course of our business, we’ve had to make new decisions about whether to sell the business (we decided not to) and whether to slow down after having our first child (we decided this was the right choice).

3) What role will each of you play in the business? This may sound silly at first, but it’s important to set clear expectations of who will do what.

After meeting many other couples who run businesses together, I’ve found that in the most successful pairs, the spouses complement each other’s skill sets. For example, one is very business minded, while the other is the creative force behind the business. One might be great at managing the business behind the scenes, while the other is very good at managing client relationships.

I’d suggest making a list of roles that will need to be covered within the business, and then divvying these items out; that way, no one steps on anyone’s toes.

I’m not saying that answering these questions will prevent you from ever squabbling with your spouse about the business (if only!). But having the conversations early on can help you set the foundation for success—and prevent major disagreements from damaging your business or your marriage.

Allie Siarto is the co-founder of Fare Oak, an online women’s clothing company.

Young Entrepreneur Council (YEC) is an invite-only organization comprised of promising young entrepreneurs.

MONEY Small Business

The 5-to-9 Startup: How to Launch a Business Without Quitting Your Day Job

Startup Coach Antonio Neves offers advice on how to make the most of moonlighting.

These days, entrepreneurship is all the rage. And you want in. Well, just not all in.

Maybe you already have a 9-to-5 (or more like an 8-to-6); maybe you even love this job. Or perhaps you aren’t out to disrupt an entire industry or create the next Facebook; you just have an idea and want to see if it will work.

Does this sound like you?

If so, I have good news. Having a job doesn’t mean you can’t take a dip in the entrepreneurial pool. (Doesn’t that sound refreshing?)

Instead of diving all in, you can build a “5-to-9,” or a company you can start to run in your after-hours. This lets you test the waters and bring out your inner entrepreneur on your own terms. As an added bonus, building your 5-to-9 may make you better at your 9-to-5.

Here’s how to do it right:

1. Pick Your Project

Odds are, you have an idea of what you’d like to work on. Maybe it’s something that’s been languishing on your hard drive or in a journal for years. Whether you’re looking to launch a web-based business, self-publish an e-book, or offer consulting services, the key is to choose just one project to focus on—this is critical. You have limited time after your regular work day ends, and the more you cram into it, the less likely you will be to succeed.

2. Establish a Brain Trust

Working on a new business idea and making decisions on your own is challenging. Don’t operate in a vacuum.

Instead, identify three to five people whose business expertise you value and ask them to be on your personal “board of advisors.” These could be co-workers, former classmates, family or friends, who you think would provide you with frank feedback, special subject knowledge, or mentorly guidance. In particular, seek out people you think would be able to help you develop your idea, find hidden opportunities, identify new clients and market your product. If your circle is small, consider hiring a business coach or joining a local Meetup group.

Once you establish a board, stay in regular touch with them. Making a habit of being in contact with these folks will give you a sense of accountability, which you may need to keep you motivated on the second shift of a 16-hour workday.

3. Fill In Your Knowledge Gaps

If your new biz is in a different field than your current gig or it will require skills you haven’t applied before—like product marketing—you’ll want to get yourself educated. But “I’ve got a job,” you say, “and I don’t have time to get an M.B.A. or a certificate in product management.”

There’s a hack or two for that: Online education platforms like Creative Live, General Assembly, and Skillshare offer free and paid courses on a range of topics like coding, photography, marketing, art and design that are easy to work around your schedule. Or, you can also book time with subject matter experts on platforms like Clarity and PopExpert.

4. Set Targets

If you don’t put down some benchmarks, you’re starting a race without knowing where or when it ends. Establishing goals to hit will help you measure progress—and can provide the rush of small victories that you may need to keep going (especially when you’ve had a rough day at your 9 to 5).

To do this, break down your project into small parts and establish dates of completion for each portion. Take some pressure off yourself by breaking big projects down over three 5-to-9 work sessions.

5. Look for Infrastructure Cheats

When it comes to selling your product or collecting money, you don’t necessarily have to reinvent the wheel. Especially for a part-time business, you’ll probably find it more efficient to utilize existing platforms like Elance, Etsy, Gumroad, or Fiverr to sell products and services like Dwolla, PayPal, and Square to process payments. Once you’re more established, you can think about going out on your own.

Antonio Neves is an executive coach to top startup founders, speaker and award-winning business journalist.

Young Entrepreneur Council (YEC) is an invite-only organization comprised of promising young entrepreneurs. YEC recently launched StartupCollective, a free virtual mentorship program.

MONEY Small Business

How To Get Buzz for Your New Biz

Miguel Montaner

Three simple ways to make your startup part of the conversation.

Breaking into a crowded market? “Not only can press put you on the map, it can put you at the head of the class,” says Paul Krupin of Direct Contact PR in Kennewick, Wash.  The scoop on how to get media attention

1. Establish Relationships

Reach out to reporters and bloggers who cover your type of product or service. Start a dia­logue by commenting on an article the person wrote or by tweeting him a question. (If you’re an app creator: “Guesses on the iPhone 6 release date @reporter]?”)

2. Beef Up the Press Release

“Words are boring,” says Krupin. He suggests making a 30-second video on the inspiration for your business or an infographic on an industry trend to send to your new contacts along with the release.

3. Riff off Headlines

When relevant news breaks, tweet about it in real time or write a quick blog post including trending search terms (use Google Analytics to find them). That way you’ll pop up on Google News and in searches, says David Meerman Scott, author of The New Rules of Marketing & PR. You may even be contacted by a reporter to comment.

 

MONEY Small Business

How This Former Techie Gave Her Career a Jolt

Vicky Lewis in her Dripping Springs, Texas coffee shop
Jay B. Sauceda; Wardrobe Styling by Lauren Smith Ford; Hair and Makeup by Lisa Gleeson

Weary of her job, Vicky Lewis decided to take a shot at a completely different venture: opening a coffeehouse.

Vicky Lewis, 49, didn’t just wake up and smell the café one day. Her desire to open a coffeehouse grew over a few years, following her family’s move from Seattle to the far suburbs of Austin in 2005. Tired of “being wet all the time,” she and husband Bruce had given up their jobs to relocate their two kids to an area with affordable housing and abundant sunshine. The only oversight: “We were coffee addicts living in a place without a coffee shop,” says Lewis.

Within a year of arriving, Lewis found a job similar to the one she’d had, as a program manager at a semiconductor firm. But after surviving several rounds of layoffs, she became unhappy: “The more disgruntled I got, the more I thought about the fact that somebody was going to make a killing opening a coffee shop. I began to think maybe I should do it.” While she didn’t have hospitality experience, Lewis knew she’d be able to draw on skills developed over 20 years in the chip industry to perform functions like tracking inventory and schedules: “My strengths are around organizing systems,” she says, “and successful businesses are system-based.”

By the time she told her boss she was quitting in August 2012, she’d taken a three-day class at Texas Coffee School in Dallas and leased a storefront in down­town Dripping Springs. To write a business plan, she pored over data on population growth and traffic patterns. Plus, she often drove the 50 miles roundtrip to Austin to sit in coffeehouses and analyze custo­mer behavior. Meanwhile, her husband, a real estate broker, helped with the build-out of the space.

Named after a town in the Cascade Mountains where her family used to vacation, Mazama Coffee Company opened its doors in November 2012. With strong ties to the community—the café sells drink local T-shirts and uses a nearby roaster—the shop stirred up sales of $200,000 in its first year. “It’s a little weird being known around town as the ‘coffee lady,’ ” says Lewis. “But I’m thankful; it’s a sign that we are beginning to flourish.”

BY THE NUMBERS

$135,000: Cost to start up the café

The funds came from her 401(k), which contained $150,000. She rolled over the balance into a retirement plan she set up for Mazama, then spent $135,000 of it to buy all the stock of the new C corp., which turned the funds into tax-free startup capital.

5: Number of employees the café has

That doesn’t include Lewis’s three family members, who all pull shifts. Her kids, both in college, put their pay toward tuition. With reduced income and savings, the Lewises are unable to subsidize their children’s education as much as they’d hoped.

66%: Increase in pay Lewis expects this year

While she took home $30,000 last year, she figures she’ll make about $50,000 in 2014, as she now has a license to sell alcohol. With plans to add mobile espresso carts for weddings, Lewis thinks she’ll close in on her previous salary of $121,000 by 2019: “And I know for sure I’ll be happy with what I’m doing.”

MONEY 401(k)s

Working for a Small Business? Your 401(k) Is Probably Small, Too.

At Mom-and-Pop companies, workers may miss out on perks like employer matches. Here's what to do.

You might call it retirement inequality. Over the past couple of decades, 401(k)s have become our national retirement plan, but you are most likely to be offered one if you work for a large- and mid-sized company. Only 24% of small businesses offer a 401(k).

If you’re working at small business that provides a 401(k), congrats—you can make headway in retirement saving. Many small business 401(k)s are doing a decent job, a new Vanguard survey found. The survey covered 1,418 of the fund group’s small business 401(k)s, those with up to $20 million in assets. The average plan had 44 participants and held $2.4 million.

But your savings are likely to lag your counterparts at larger employers. Compared with overall 401(k) balances, small plan accounts are just half the size—an average $55,657 in 2013 vs. $101,650 for 401(k)s overall. Still, small balances rose 10% gain over $50,610 in 2012. Median balances, which better reflect the typical employee, averaged just $11,171, up just 2% from $10,950 in 2012.

One reason for the difference: Small businesses tend to offer lower salaries than large companies, and many have higher turnover, so workers have less time to save. Company matches may also be less generous. Three out of four small businesses offer an employer contribution, compared with 91% of 401(k)s overall, according to Vanguard. Some 44% provided a matching contribution, 10% offered both a match and non-matching contribution, and 21% gave out a non-matching contribution only.

In other ways, small business plans are keeping up with larger 401(k)s. Participation averaged 73%, similar to overall levels. The savings rates were lowest for employees younger than 25—only 46% contributed in 2013. And just 47% of those earning less than $30,000 saved in their plans. For those who did join, the typical savings rate was 7.1% of pay, nearly identical to the overall savings rate.

Mirroring larger plans, the most popular investment was a target-date fund, which gives you an all-in-one asset mix that shifts to become more conservative as you near retirement. Two-third of small business workers had all or part of their portfolio in a target date fund, while 46% held one as their only investment. Another 6% opted for a balanced fund or other model portfolio.

The one 401(k) feature not explored in Vanguard’s small business survey: costs. Of course, Vanguard is famous for its inexpensive fund and ETF offerings. But outside of Vanguard’s orbit, many 401(k)s are saddled with with high fees—and that’s especially true for small plans, which lack economies of scale.

If you’re investing in a small business 401(k) plan, save at least enough to get a full match, if one is offered. And choose low-cost, broad index funds, if they’re available. If your plan charges a lot—more than 1.25%—put any additional money in a Traditional or Roth IRA. Aim to save as much as 15% of pay, both inside and outside your plan. That way, your nest egg will grow bigger, even if the business remains small.

 

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