My germinating business will be an internet endeavor, so I can't afford to ignore social media. But even "brick-n-mortar" organizations probably should be paying attention. Here are couple of articles of interest I got from David Cracknell, Director of Big Tent Communications. (David is following my tweets, for reasons I cannot begin to guess. If it was to get me to read his stuff, it's working--and I'm grateful):
10 Ways to Ensure Social Media Success
10 Twitter tips from The Dog Whisperer (kind of)
Monday, March 23, 2009
Thursday, March 19, 2009
Author, Publish Thyself!
One aspect of my business I've been researching lately is publishing. Sooner or later I'm going to need to publish a book or two. Fortunately I didn't fall for the myriad of "vanity publishers" out there and instead found www.selfpublishing.com. I downloaded a copy of their book "Publishing Basics" and was offered a free hard copy as well. Bonus!
I much prefer hard copies to electronic copies. I did my MBA program with ebooks for texts, and if it weren't for a kind employer who let me print them out at work for free I'd have gone blind.
Anyway, I digress. My copy came in the mail this week. The book is short, but packed with information. Yes, it's also a marketing tool for their services, but it's an effective one. They also do a good job of convincing you that publishing is both difficult and possible. They're not building false hope, but they make it clear that there are rewards if you can pull it off.
Almost they convinceth me to become a publisher. But this is, as most things, a case of "you have to spend money to make money" and at this point in time I don't have the money to spend. So publishing will have to come later on in the business plan. But I'm pretty sure it will come.
I much prefer hard copies to electronic copies. I did my MBA program with ebooks for texts, and if it weren't for a kind employer who let me print them out at work for free I'd have gone blind.
Anyway, I digress. My copy came in the mail this week. The book is short, but packed with information. Yes, it's also a marketing tool for their services, but it's an effective one. They also do a good job of convincing you that publishing is both difficult and possible. They're not building false hope, but they make it clear that there are rewards if you can pull it off.
Almost they convinceth me to become a publisher. But this is, as most things, a case of "you have to spend money to make money" and at this point in time I don't have the money to spend. So publishing will have to come later on in the business plan. But I'm pretty sure it will come.
Friday, March 13, 2009
Side Tripped
Sometimes life and necessity take a hand and change your plans. I'm still working toward The Business, but I've spent much of this week getting another business up and running. Circumstances have pushed me toward becoming a consultant, or at least offering myself as one. It's not my first choice of employment, but at this point it would be a welcome alternative to unemployment.
I'm also brancing out into writing. More on that later, perhaps.
With the economy the way it is, I think I need to have as many lines in the pond as I can. The more options I have the more likely something will pay off. And so for the moment my business plans are not necessarily on hold, but not the main priority, either.
I'm also brancing out into writing. More on that later, perhaps.
With the economy the way it is, I think I need to have as many lines in the pond as I can. The more options I have the more likely something will pay off. And so for the moment my business plans are not necessarily on hold, but not the main priority, either.
Wednesday, March 4, 2009
Higher Taxes May Discourage Entrepreneurship
James Manzi in City Journal discusses how the new administration's proposed taxes increases may actually discourage the growth of small businesses. (Hat Tip Instapundit)
That's the current picture. Bleak enough as is, right? So how to Obama's proposed tax increases impact the picture?
So there you go. Our young entrepreneur works long and hard for not much money on the hopes of a big payout at the end, and while the payout is still there, it's not nearly as big as it once would have been. The question is now whether or not the smaller payoff is worth the sacrifice to get there.
The bottom line:
I don't think this will discourage everyone from trying, mind you. This scenario is just one of the many ways in which entrepreneurs can make money. It is possible to start a company with the goal of simply drawing a regular paycheck, albeit from yourself, and a larger one than you were getting before. For those people, if they can keep their income below Obama's suggested threshold of $250,000, may not encounter the high taxes.
On the other hand, who goes into business hoping to make less than $250,000 per year? I'd dare say most people would like to think they could make more than that. The question is whether they're willing to give up more in taxes for the priviledge.
I think Manzi is correct that this will discourage entrepreneurship at least a little. But even a little can be a lot.
Consider a hypothetical aspiring entrepreneur: an engineer, say, with an idea for a new company. First she has to invest a lot of her own time just to develop her idea to the point that it could win funding from a venture capitalist or angel investor. The odds of going from idea to funding are, say, ten to one against. But let’s assume that after working nights and weekends for a year to produce a working prototype, write a business plan, and recruit a team, she finally gets funded by a professional venture capitalist. Having cleared this hurdle, she gets to quit her job and work much longer hours for much lower wages for about a decade. All the while, our engineer knows that she has only a 20 percent chance of steering the company to a successful exit that makes her a lot of money.
That's the current picture. Bleak enough as is, right? So how to Obama's proposed tax increases impact the picture?
Tax increases influence this calculation directly by reducing the size of the payout. The capital-gains tax that hits her when she sells her company is just the first thing for her to consider. Second and more important are increasing tax rates on dividends, interest income, and (again) capital gains—since she will invest the proceeds she gets from selling her company in a portfolio of stocks, bonds, and so forth, and rising taxes will reduce the present value of the after-tax consumption that the portfolio will generate in perpetuity. In the low-odds scenario of success, she will be in a very high-income category, and all of the taxes on the rich that Obama is proposing or implying will apply to her.
So there you go. Our young entrepreneur works long and hard for not much money on the hopes of a big payout at the end, and while the payout is still there, it's not nearly as big as it once would have been. The question is now whether or not the smaller payoff is worth the sacrifice to get there.
The bottom line:
By my figuring, if you use Obama’s campaign proposals for long-run capital-gains, income, and FICA tax rates as a (probably conservative) guide to where rates may go, the prospective entrepreneur would have to increase her estimated odds of success at the moment of funding from 20 percent today to about 30 percent under the new tax regime in order to have the same financial incentive to start the company. That’s a huge difference; in fact, it’s about the same as the margin of difference between the odds of success for a new venture-backed company started by a first-time entrepreneur and the odds of success for a new venture-backed company started by a founder who has already done at least one successful start-up. Any venture capitalist can tell you how much likelier the second guy is to get funded than the first.
I don't think this will discourage everyone from trying, mind you. This scenario is just one of the many ways in which entrepreneurs can make money. It is possible to start a company with the goal of simply drawing a regular paycheck, albeit from yourself, and a larger one than you were getting before. For those people, if they can keep their income below Obama's suggested threshold of $250,000, may not encounter the high taxes.
On the other hand, who goes into business hoping to make less than $250,000 per year? I'd dare say most people would like to think they could make more than that. The question is whether they're willing to give up more in taxes for the priviledge.
I think Manzi is correct that this will discourage entrepreneurship at least a little. But even a little can be a lot.
Tuesday, February 24, 2009
Choosing a Business Entity Type
One aspect of forming a business has been weighing on my mind, and that's what type of business entity to form. I'm rather wary of government and want to make sure everything I do is by the rules so I don't regret it later. But even the most friendly of state governments do not make it easy to find out what you should do.
The first step is to decide what type of business entity you want to form. A few resources I've found are fairly good at spelling out the difference between the various options:
http://www.expertlaw.com/library/business/business_form.html
http://www.medlawplus.com/library/legal/businessentitychoice.htm
and, of course, the IRS...
http://www.irs.gov/businesses/small/article/0,,id=98359,00.html
The easiest to get into is the Sole Proprietorship, of course. Very little is needed to start such a business. In my state you file a $25 "Doing Business As" form and you're on your way. My main concern is that the business does not automatically pass to my wife if I die. The other is that if someone sues me successfully they can take everything I own, whether it's related to the business or not. There isn't much protection under the law.
A Limited Liability Company would be the next, most obvious choice. But that gets a bit more expensive and complicated. In my state it's $100 to file, plus I have to draft an Operating Agreement, which could easily mean a trip to the lawyer. On the up side, my family and I would be shielded from liability, it's easier to transfer membership and control, and taxes would still not be too complicated.
But it does sound complicated. I'm sure I could draft a decent Operating Agreement if I had someone else's to use as a model. But by the time I'm done, depending on how much I value my time, I may be better off just using MyNewCompany.com. They do all of that for you, if you're willing to pay. The most basic package is $180, and gets the job done. It may very well be worth it. Does anyone out there have experience with them?
So I guess the bottom line is this: Do I feel lucky? Chances are a sole proprietorship is all I'd really need. After all, you have to make money to pay taxes, right? But I'm big on risk management, and in a recent class I took they pointed out that one risk that should always be addressed is "What happens if I succeed beyond my wildest dreams?" Could I convert a sole proprietorship to an LLC or other business entity?
Perhaps if I'm that successful it wouldn't matter.
The first step is to decide what type of business entity you want to form. A few resources I've found are fairly good at spelling out the difference between the various options:
http://www.expertlaw.com/library/business/business_form.html
http://www.medlawplus.com/library/legal/businessentitychoice.htm
and, of course, the IRS...
http://www.irs.gov/businesses/small/article/0,,id=98359,00.html
The easiest to get into is the Sole Proprietorship, of course. Very little is needed to start such a business. In my state you file a $25 "Doing Business As" form and you're on your way. My main concern is that the business does not automatically pass to my wife if I die. The other is that if someone sues me successfully they can take everything I own, whether it's related to the business or not. There isn't much protection under the law.
A Limited Liability Company would be the next, most obvious choice. But that gets a bit more expensive and complicated. In my state it's $100 to file, plus I have to draft an Operating Agreement, which could easily mean a trip to the lawyer. On the up side, my family and I would be shielded from liability, it's easier to transfer membership and control, and taxes would still not be too complicated.
But it does sound complicated. I'm sure I could draft a decent Operating Agreement if I had someone else's to use as a model. But by the time I'm done, depending on how much I value my time, I may be better off just using MyNewCompany.com. They do all of that for you, if you're willing to pay. The most basic package is $180, and gets the job done. It may very well be worth it. Does anyone out there have experience with them?
So I guess the bottom line is this: Do I feel lucky? Chances are a sole proprietorship is all I'd really need. After all, you have to make money to pay taxes, right? But I'm big on risk management, and in a recent class I took they pointed out that one risk that should always be addressed is "What happens if I succeed beyond my wildest dreams?" Could I convert a sole proprietorship to an LLC or other business entity?
Perhaps if I'm that successful it wouldn't matter.
Friday, February 20, 2009
Staying Focused on the Goal
One of the reasons I'm starting a business is because my job has been marked for elimination in two months. While I don't think this idea will provide enough income soon enough to help with that immediate crisis, I do think it's worth getting started now.
The problem is staying focused. My wife and I both have engaged in a significant amount of "thrash" this week as we shift from task to task and try to figure out where we can best make a difference in our current situation. It's a bit easier for me, as I still have a 9-to-5 job I need to finish. But my wife is finding it a bit more difficult.
So what do you do when you have more options than you have time? Here's my advice: Crate, Evaluate, Delegate, Regenerate, and Coordinate.
Crate (a verb, meaning "get it all together in one place": Sit down with your business partner. In my case it's my wife. Brainstorm what needs to be done, both in getting the business going and in maintaining all the other essentials of life. Write it down! If it's not written down it will be all to easily pushed out by the next concern that comes along. If a specific task is not clear enough, break it down into smaller tasks until you feel each task is clear and manageable.
Evaluate: Prioritize the list based on how critical each item is to the over-all goal. Some will be obvious, but other will require careful thought to separate the "good" things from the "great" things. It may involve trying to do some cost-benefit analysis.
For example, my wife is a skilled quilter. A local gift shop is interested in selling her quilts, but charge "space rent" and a percentage commission. On the surface it sounds great, but when we ran the numbers we realized that my wife could make more money per hour working at McDonalds, and with less risk.
Less simple to analyze is whether we would be better off devoting more attention to our family garden this year or to helping her build up an inventory of craft goods to sell if more favorable terms can be found. Both are good goals. Both have both short term and long term benefits. Both require some money up front. Choosing which is better is nearly impossible without some sort of psychic ability. We ended up taking our best guess based on what we expect to have happen.
Delegate: Divide up the more important tasks. Clearly decide who is responsible for what. Don't try to tackle the entire list, however. Start with the most important items and pick those you believe you can accomplish within the block of time before your next "business meeting", which shouldn't be more than one week.
Be open and honest with each other about what you can reasonably expect to accomplish during that period. Don't take on too much just to feel like you're doing your fair share. If you've got other concerns to address or just can't work at the same pace as your partner, that's okay. Just so long as you communicate that. Setting realistic expectations will save lots of headache and guilt later on.
You may also discuss the next few items beyond that time frame just in case you end up accomplishing more than you expected, but even if that happens you can always quickly pick up the list, let your partner know you're selecting an additional task, and just go with it. You've got the list, so you know what the next most beneficial task is.
Regenerate: You are not a machine. You have to leave time for yourself. Make sure you have time do something different, something enjoyable, something that rejuvinates you. Take time away from the project so you can get some perspective and attack it fresh later. Far too often I find myself too close to my work to notice that I'm actually heading in the wrong direction--or at least missing out on a better direction.
Coordinate: Meet regularly and go through the process again. Make sure your list of tasks is complete. Add to, change, or remove from your list. Discuss successes and challenges alike. Celebrate progress. Delegate and go at it again.
I can't stress enough the importance of meeting regularly with your partner. Especially if your partner is your wife. There are two blocks of time we have designated as "sacred time" each week. The first is Date Night. We spend time together every week. It may not be much more than watching a video and having snacks, but it's a shared experience nonetheless. It gives us something to discuss, and shared "movie quotes" we can pull out in conversations throughout the week.
It's not always the same night, but I will cancel my own fun with my friends before I'll cancel my date with my wife.
The other is "Family Council". Every Sunday night we get together and plan the week. Then we set aside time to discuss issues that may be on our minds. Sometimes it's straight-forward "what are we going to do about..." type stuff, but sometimes there are deeply personal issues that need to be examined and worked through. Our Sunday night meetings are not always fun, but they've really strengthened our marriage.
I wouldn't go so far as to equate a business partnership as a marriage, but it can be close. And if your partner is your spouse, it's all the more critical. Staying in touch and staying focused will mean all the difference.
The problem is staying focused. My wife and I both have engaged in a significant amount of "thrash" this week as we shift from task to task and try to figure out where we can best make a difference in our current situation. It's a bit easier for me, as I still have a 9-to-5 job I need to finish. But my wife is finding it a bit more difficult.
So what do you do when you have more options than you have time? Here's my advice: Crate, Evaluate, Delegate, Regenerate, and Coordinate.
Crate (a verb, meaning "get it all together in one place": Sit down with your business partner. In my case it's my wife. Brainstorm what needs to be done, both in getting the business going and in maintaining all the other essentials of life. Write it down! If it's not written down it will be all to easily pushed out by the next concern that comes along. If a specific task is not clear enough, break it down into smaller tasks until you feel each task is clear and manageable.
Evaluate: Prioritize the list based on how critical each item is to the over-all goal. Some will be obvious, but other will require careful thought to separate the "good" things from the "great" things. It may involve trying to do some cost-benefit analysis.
For example, my wife is a skilled quilter. A local gift shop is interested in selling her quilts, but charge "space rent" and a percentage commission. On the surface it sounds great, but when we ran the numbers we realized that my wife could make more money per hour working at McDonalds, and with less risk.
Less simple to analyze is whether we would be better off devoting more attention to our family garden this year or to helping her build up an inventory of craft goods to sell if more favorable terms can be found. Both are good goals. Both have both short term and long term benefits. Both require some money up front. Choosing which is better is nearly impossible without some sort of psychic ability. We ended up taking our best guess based on what we expect to have happen.
Delegate: Divide up the more important tasks. Clearly decide who is responsible for what. Don't try to tackle the entire list, however. Start with the most important items and pick those you believe you can accomplish within the block of time before your next "business meeting", which shouldn't be more than one week.
Be open and honest with each other about what you can reasonably expect to accomplish during that period. Don't take on too much just to feel like you're doing your fair share. If you've got other concerns to address or just can't work at the same pace as your partner, that's okay. Just so long as you communicate that. Setting realistic expectations will save lots of headache and guilt later on.
You may also discuss the next few items beyond that time frame just in case you end up accomplishing more than you expected, but even if that happens you can always quickly pick up the list, let your partner know you're selecting an additional task, and just go with it. You've got the list, so you know what the next most beneficial task is.
Regenerate: You are not a machine. You have to leave time for yourself. Make sure you have time do something different, something enjoyable, something that rejuvinates you. Take time away from the project so you can get some perspective and attack it fresh later. Far too often I find myself too close to my work to notice that I'm actually heading in the wrong direction--or at least missing out on a better direction.
Coordinate: Meet regularly and go through the process again. Make sure your list of tasks is complete. Add to, change, or remove from your list. Discuss successes and challenges alike. Celebrate progress. Delegate and go at it again.
I can't stress enough the importance of meeting regularly with your partner. Especially if your partner is your wife. There are two blocks of time we have designated as "sacred time" each week. The first is Date Night. We spend time together every week. It may not be much more than watching a video and having snacks, but it's a shared experience nonetheless. It gives us something to discuss, and shared "movie quotes" we can pull out in conversations throughout the week.
It's not always the same night, but I will cancel my own fun with my friends before I'll cancel my date with my wife.
The other is "Family Council". Every Sunday night we get together and plan the week. Then we set aside time to discuss issues that may be on our minds. Sometimes it's straight-forward "what are we going to do about..." type stuff, but sometimes there are deeply personal issues that need to be examined and worked through. Our Sunday night meetings are not always fun, but they've really strengthened our marriage.
I wouldn't go so far as to equate a business partnership as a marriage, but it can be close. And if your partner is your spouse, it's all the more critical. Staying in touch and staying focused will mean all the difference.
Wednesday, February 18, 2009
Graphics Software on the Cheap
Since my business idea centers around a website, it's important that I get some decent graphics, including a logo. Since I'm doing this on the cheap, I can't afford to hire a graphics designer to do it. And if I could afford Photoshop, I could probably afford to hire a graphics designer. So what's a guy to do?
I started my IT career as a graphical editor for a software company who did things on the cheap. They bought me a copy of JASC software's Paint Shop Pro to use. Since I'm not a graphic designer I have no idea what bells and whistles it may be missing, but it was more than sufficient for what I was doing.
Later on I took on the company's customer newsletter, which required even more photo editing. With Paint Shop Pro I was able to produce credible graphics, my magnum opus being a picture of our company's new headquarters, complete with our sign, a flag on the flagpole, and the landscape looking nice and tidy. The thing is, at that point the building still had the former occupant's sign, the flagpoles were bare, and there were abundant weeds--we hadn't even moved in yet when I took the picture.
I had a blast removing the old sign, crafting a new sign from our company logo, "pulling" weeds, and adding the national and state flags. And I learned that PSP could do practically anything I could think of.
So when I committed to opening this new business I looked forward to getting some graphic editing software. I looked online, but even used, Photoshop was just too much for my budget. So I looked for PSP instead. The company has since been bought by Corel, but I was able to find a used version of PSP 8.10 online for $30. A bargain.
The software came in the mail yesterday, so last night I sat down to install it. Then, since they've changed the interface, I decided I'd tinker with it a bit to see what's changed. Two hours later I'd put together three separate logo options for my wife to consider. Perhaps half an hour of that was learning the interface changes, and the rest was trying a thousand different options.
It was fun. It was cheap! If you're not a good enough graphic designer to appreciate the difference between Paint Shop Pro and Photoshop, I'd say don't bother paying for the more expensive product. Cheap alternatives are easily found on Amazon or eBay.
I started my IT career as a graphical editor for a software company who did things on the cheap. They bought me a copy of JASC software's Paint Shop Pro to use. Since I'm not a graphic designer I have no idea what bells and whistles it may be missing, but it was more than sufficient for what I was doing.
Later on I took on the company's customer newsletter, which required even more photo editing. With Paint Shop Pro I was able to produce credible graphics, my magnum opus being a picture of our company's new headquarters, complete with our sign, a flag on the flagpole, and the landscape looking nice and tidy. The thing is, at that point the building still had the former occupant's sign, the flagpoles were bare, and there were abundant weeds--we hadn't even moved in yet when I took the picture.
I had a blast removing the old sign, crafting a new sign from our company logo, "pulling" weeds, and adding the national and state flags. And I learned that PSP could do practically anything I could think of.
So when I committed to opening this new business I looked forward to getting some graphic editing software. I looked online, but even used, Photoshop was just too much for my budget. So I looked for PSP instead. The company has since been bought by Corel, but I was able to find a used version of PSP 8.10 online for $30. A bargain.
The software came in the mail yesterday, so last night I sat down to install it. Then, since they've changed the interface, I decided I'd tinker with it a bit to see what's changed. Two hours later I'd put together three separate logo options for my wife to consider. Perhaps half an hour of that was learning the interface changes, and the rest was trying a thousand different options.
It was fun. It was cheap! If you're not a good enough graphic designer to appreciate the difference between Paint Shop Pro and Photoshop, I'd say don't bother paying for the more expensive product. Cheap alternatives are easily found on Amazon or eBay.
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