Posts Tagged ‘planning’
Business Formation: A Little Planning Saves You Money
Thursday, April 19th, 2012Starting a new business venture is an exciting time full of hope and dreams. Unfortunately, the formation of a new business entity is also filled with complicated, bureaucratic formalities that can confuse and frustrate even the most experienced entrepreneur and add unneeded additional startup expenses.
When to Incorporate? One major expense that often arises when starting a new business are the legal fees associated with incorporating. One primary question that many entrepreneurs do not ask themselves or their partners prior to forming a corporation is, “Do we really need to incorporate?” Without any doubt, forming a corporation has many advantages, but is it a vital expense that is necessary when starting a new business?
The beginning of a new business venture is an experience filled with thoughts and emotions that it will grow into the next Apple or McDonald’s, but until that happens, do you have the money to spend on incorporating? More importantly, will your organization financially benefit enough to offset the formation expenses? Apple was in business for almost a year and McDonald’s was in business for over fifteen before they were formally incorporated.
Where to Incorporate? In addition to the normal expense for forming an entity, incorporating in the wrong state can also have a significant impact on your business. Different states have different tax benefits for incorporating in that state. Just because your business is physically in Minnesota does not mean you can’t incorporate in Delaware of Nevada where there are benefits may be more advantageous.
When to File for Incorporation? Another commonly overlooked detail is when to form an entity. Incorporating just before or on December 31 can be costly. For example, some states, California being one of them, requires all entities to pay an $800.00 yearly fee. I have seen clients come in December 30 wanting to setup an LLC before the December 31 and then after it was formed, they could not understand why they had to pay the state $800.00 when they were only in existence for 2 days. Furthermore, the company will have to go to the expense of filing tax returns for an entire year even though they were only in existence for two days. Remember, closing an entity is more complicated than opening one so it’s important to get it right the first time.
Compliance. Compliance of Federal, State, and local laws can also financially burden a business. If not found and resolved quickly, business and corporate compliance issues can be very costly to any organization regardless of size. Professionals, such as lawyers and accountants, who usually bill their time by the hour, derive a significant portion of their income from answering questions and fixing mistakes or “messes” made by their clients. Many of these mistakes can cost a client hundreds if not thousands of dollars. What makes matters worse is that so many of these costly errors could have been avoided with some forethought.
For example, many of us drive our cars for business purposes and deduct the gasoline, maintenance, etc. for the car. However, if the vehicle is not properly titled in the name of the business, the tax deductions could be disallowed. Your CPA or tax attorney will spend a time reviewing the latest case law or IRS regulations looking for a strategy to get the deduction. All the time expended by your attorney or CPA is usually billed by the hour and could have been avoided had the vehicle been properly place in the name of the business from the outset. Most attorneys and CPAs will tell their clients that it costs a lot less to prevent problems than it does to fix them.
Other legal and tax expenses that can be avoided are:
Annual Minutes: Not preparing these can be a real issue as annual minutes are reviewed by other parties for business loans and other activities. No minutes? No loan.
Loan Documents: One benefit to owning a corporation is the concept of loaning money to a shareholder as a tax strategy. This is a perfectly legitimate corporate benefit, but if the corporate documents to do not accurately reflect the loan, the IRS could disallow the loan and convert that money into taxable income.
Timely Filing of All Documents: Failure to file everything from taxes to various Federal and State government reports can be very costly and you may also incur penalties for late filing. Again, this is east to avoid.
Summary
The formation of an entity is a process that can be confusing, arduous, and costly if not handled properly. Don’t rush into it lightly or recklessly. Using the services of a company like Legalzoom or other companies may only impede your decision and cost you more in the long run. Do your own due diligence and seek the guidance of a licensed attorney and CPA before you form any entity. The money you invest in their time should save you needless headaches and let you focus on the future and not wasting time cleaning up the past.
[NOTE: Thanks to Michael S. Duell for this guest author contribution. Mr. Duell is the Director of Business Operations at Ruyle & Ruyle, a firm that includes small business corporate law as one of its specialities. If you are looking for a good boutique law firm that caters to small businesses and startups, consider Ruyle & Ruyle.]
Is Your Business UPS or USPS?
Wednesday, February 29th, 2012The business world is a sea of constant change. To survive, entrepreneurs and businesses have to be proactive and adaptable to the changes.
Recently, there was a debate on Capitol Hill regarding another bailout for the United States Postal System - an entity that has repeatedly refused to adapt its strategies to accommodate the current market.
I won’t debate if the post office should be granted further subsidies with our tax dollars. Nonetheless, the recent request from the USPS did stir some thoughts on their continual failure to remain both competitive and profitable. This led to a recent discussion I had with a colleague regarding how much more effective private companies are doing the same work than an organization funded with tax dollars does.
A prime example is United Parcel Post. UPS is a massive organization in the package delivery business. Similarly to post office, UPS has longstanding ties in this country; both have labor unions to negotiate with, and other similar operating costs. While UPS and USPS have many similarities, only one, UPS, has been profitable. In 2010, UPS posted a net profit of almost 3.5 billion dollars while USPS reported losses of over $300 million. This amount is even more remarkable when you consider that despite billions of dollars in Federal bailouts, the post office can’t seem to make a profit. On the contrary, UPS has made steady profits for decades in spite of growing competition from Federal Express and other carriers – including the Post Office. This is a prime example of the private sector working more efficiently than a publicly funded entity and that, in this instance, bailouts have not worked.
But how does UPS succeed where the Post Office doesn’t?
I would argue that innovation is fundamental for entrepreneurs to to survive greater competition. Innovation forces even large companies like UPS to continually usher in change to its corporate infrastructure. When was the last time you heard the post office inventing something as oppose to always playing catch up with everyone else? 
So how can a small business, or startup, or any private company be innovative with new businesses techniques and avoid the trap of catching up? There are many answers but I routinely utilize the following:
- Think outside the box. Looking at a situation or problem from all sides and taking it apart can lead to new breakthroughs and answers to questions or problems.
- Hire people that question the organization rather than simply saying “yes sir.” The best employees I have ever had argue and challenge me. It also demonstrates to me they care about the company enough to take on “the boss” and not just blindly comply for the sake of a paycheck.
- Look at what your competitors are doing. You don’t have to be the one who created the mousetrap to be successful – just make it better. Apple never invented the mouse for the computer.
Looking at the history of UPS, I am sure you will find many instances where creative thinking, a staff that questions the status quo, and inventing better products and services has made them far more successful than the Post Office.
At your next team meeting, ask the staff, “Are we UPS or USPS?” and see what kind of response you get.
[NOTE: Thanks to Michael S. Duell for this guest author contribution. Mr. Duell is the Director of Business Operations at Ruyle & Ruyle, a firm that includes small business corporate law as one of its specialities. If you are looking for a good boutique law firm that caters to small businesses and startups, consider Ruyle & Ruyle.]
Marketing That Works
Monday, November 28th, 2011
This is one of our favorite marketing reference books for entrepreneurs and startups.
Make sure this book is in your own entrepreneurial library.
This book explains how the good steak can sizzle without leaving you with just an aroma. “Marketing that Works” was written by some of the best minds in startup marketing who have held prominent positions in blockbuster startups, idealab!, Wharton and venture capital: Howard Morgan of First Round Capital, Leonard Lodish of Wharton and Shellye Archambeau, former president of Blockbuster’s e-commerce division.
This book includes practical approaches (not just theoretical!) to developing business ideas, pricing, market validation, distribution and channel strategies, product launches and more.
To buy a paper copy or download a Kindle version from our bookstore partner, Amazon.com, click here.
TEC – How One ActSeed Entrepreneur Group Member is Sparking the Economy
Friday, November 11th, 2011
Sometimes, an ActSeed Entrepreneur Group member not only has a promising business, but is also an ally in ActSeed’s mission to assist people in building exceptional companies of all types. The TEC Center is one such partner that has the potential to make a positive impact on our economy.
There are a lot of folks hurting for work and wanting an opportunity to leap out-and-up from their current economic situation. As many big companies sit on the sideline for hiring, a growing number of disenfranchised people aspire to take control of their future and create their own job by starting a business or joining a startup. The trouble is: where do they turn? Where can they acquire the knowledge to be a business owner, a business partner, an entrepreneur?
Entrepreneurship is not a reserved for a “ruling class” or exclusive to the highly-educated. At its core, entrepreneurship is about building something of value that others want to purchase and accepting the risks inherent in the process of moving from “idea to implementation”. This includes butchers and bakers, not just iPhone app makers. Just as ActSeed is dedicated to assisting regular people build exceptional businesses, TEC is committed to training regular people to become business partners.
We interviewed Jack Finkelstein, the co-founder and President of TEC – which is as much a movement for positive change as it is a promising young business. We have provided Jack’s contact information at the end of the interview so you can reach him directly and explore how to get involved.
Q. Describe your “Eureka Moment”. What was the market opportunity that drove your decision to form a company around this product/service?
A. The Eureka Moment came when we realized that every one of our graduates will be guaranteed a job. This is a powerful statement to make in the middle of a recession. We also realized that not only are there millions who need our service, but every year an additional 2 million young adults enter our target market zone.
Q. How did you fund the company to its current state?
My partner and I have self-funded the project till now. We have also formed a 501(c)3 not-for-profit corporation, held seminars with Operation Hope in Harlem to test market our program, acquired an office at 590 Madison Avenue in New York City, and started some of the businesses that our graduates will participate in.
Q. ActSeed champions the need for solid planning and preparation from the very beginning. How important is planning and prep to your company’s success? Can you share an example or two?
A. Planning and preparation is important to the success of any new corporation. The seminars we held at Operation Hope and some of the high schools resulted in the following: Young adults in the inner cities with a high school degree or GED degree desperately want and need the TEC Center Program. Not only will they be guaranteed jobs but they will also become partners in the business that they will work in. Our target market currently has an unemployment rate of close to 20%. The TEC Center Program is a valuable program that can provide them with the type of success they may otherwise only dream about.
Q. How long did it take to get your idea into the market from initial concept to first customer?
A. This has been a 3 year labor of love that not only is about a great business venture – but also a “movement.” From understanding the inner city individual to determining which businesses can be formed and remain successful in the inner city has taken up the majority of our time. The last 6 months have been spent in looking for the right nationally accredited school with the proper accreditation, and Title IV abilities that we require for our program.
Q. What influence have the internet and new media had on the way you are marketing, selling and supporting your products/services?
A. An advantage we have is that we know how to reach our target market. Every high school graduating class, every GED class, and even the colleges represent potential students for our program. It is not a surprise that these individuals all have email addresses and a cell phone. We also utilize the internet as a research tool to teach entrepreneurialism to our students.
Q. Describe the challenges you faced as you built your customer base, including defining the customer target, establishing the right price and pricing strategy and of course, closing the first few deals. Any wisdom to share with other entrepreneurs on this subject?
A. Defining and reaching our customer base is perhaps our easiest task. We decided primarily on young adults in the inner cities because they can utilize our services more than college grads. The cost of tuition is covered through Title IV Federal Student Loan Program. Students pay back the loan after they graduate and begin working. Since all students will be working for one of our company-sponsored startups, we do not anticipate any issues in paying back the loan.
Q. What techniques have you used to establish credibility in the eyes of customers, investors, partners, personnel and the general public?
A. The TEC Center Program speaks for itself. Guaranteed government funding for every one of our students (each student gets pre-qualified for the funding). Guaranteed jobs for all graduates. The government spends approximately $100 Billion dollars every year on education and we anticipate that this will continue for a long time. This is virtually a no-risk, low cost business to enter. A classroom of 32 students can be turned around 3 times a day (each class is 3 ½ hours long). This represents enough revenue to support full operations and the company-initiated small businesses. Direct overhead is approximately 20%. Investors salivate over these statistics.
Q. Have government, University, or other community / economic development programs been useful? If so, how?
A. We believe that educators are good at educating but do not make the best entrepreneurs. Most have never owned or operated a successful business. While high schools mostly concentrate on math and science to prepare students for college, we concentrate on entrepreneurship and prepare our students to become partners in a business – a business that they will enter as a partner, without being required to apply any of their own savings. Most inner city economic development offices attempt to convince large businesses to move into their district in order to create jobs (mostly low level jobs). The TEC Center Program provides the tools, entrepreneurial education, training and a myriad of jobs and businesses that students can choose from.
Q. What is the most important thing people never tell you about joining or founding an early-stage company?
A. Most people do not know enough to give sound advice about founding an early-stage company. Entrepreneurs and optimists tell you to “go for it.” Non-entrepreneurs and pessimists tell you that “most new businesses fail.” The real key to success is to keep your expenses down, understand your target market and product (or service) better than anyone else, don’t hesitate to continually challenge all of your assumptions, and have plenty of contingency plans if things do not go as expected.
Q. Is there anything else you’d like to share that we didn’t ask you in the questions above?
A. In addition to an expected healthy financial return to our investors TEC is a shining example of a social value enterprise: a profitable venture that address a major public need and gives back to the community. The success of the TEC Center Program will also help reduce the dramatic high school drop-out rate, especially in the inner cities. Nationally, the high school drop-out rate is 25% to 50%, over 50% in the inner cities. In addition, 50% of college students drop out of college – 30% the first year alone. This dropout rate is called “The Silent Epidemic” because few people are talking about it. These individuals can now learn how to become entrepreneurs and partners in a business. TEC will be instrumental in training the unemployed, single parent families, returning G.I. veterans, and individuals who have been released from a correctional institution as long as they have a high school or GED degree. Something has to be done now. The TEC Center Program takes a major step forward in solving this very serious situation. Having just 1,000 students in each state represents a major contribution to job creation and the economic growth in each stage. We are not in a high-tech business; we are in a high-value business.
Our thoughts about ActSeed: “ActSeed is very professional and I strongly believe that its CEO, Bill Attinger, truly cares about our program. ActSeed has been involved in every aspect of the processes that are required to present the TEC Center Program as good as possible. You can’t go wrong by giving ActSeed the opportunity of matching your program to possible investors.”
For more information about The TEC Center, please contact Jack Finkelstein, founder and President, at jack@theteccenter.com or visit their web site at http://www.tecmembers.com.
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Impact Your Business
Saturday, June 11th, 2011Many entrepreneurs are “allergic to the numbers side of the business”. Part of the high failure rate of small businesses is due to avoiding and ignoring basic financial principals.
Ken Kaufman’s book explains the essentials of small business finance and how to easily apply them through the use of allegory. In other words, he uses “good ol’ fashioned story-telling” to make even the most finance-phobic business owner learn and appreciate the need for quantitative, financial management.
This is not just a story about Steve, a man struggling as a small business owner, a husband and a dad. It is a guide penned in a way we can all identify with. It goes beyond merely being clever about teaching financials.
For example, in Chapter 23, the protagonist (Steve) starts to see, from his own experiences, how anxiety and clarity are negatively correlated. This is a non-financial lesson we all must learn and respect. This book is full of well-articulated insights that we all face as business owners.
The first time you read it, Kaufman’s book is an enjoyable story that “hits home”. Then, it becomes a very useful reference guide for the next hundred times you’ll take it off your bookshelf.
You can get your copy of “Impact Your Business” here.
The Realities of Being an Entrepreneur in One Book
Friday, May 6th, 2011“Most people start businesses simply because they just don’t like working for someone else.”
If this quote resonates with you, or even if you have another motive for becoming an entrepreneur, you should read this book.
Scott Shane packs this book with statistics and information that really helps you understand the realities of building a business. If you are a true entrepreneur, this book should sober your expectations and then bolster your resolve. If you aren’t quite there yet as an entrepreneur, this book will properly discourage you from burning too much of your own time and money (not to mention the time and money of others) until you are truly ready to “do it the right way.”
In this book, Shane shares statistics and data about where funding comes from for new business creation, what impact VC and angels have on new business creation, which industries receive most of their funds and who may likely be the best source of funds for your own business. He shares data about how long it usually takes to “turn the corner” with a new business and the demographics of entrepreneurship, too.
The Illusions of Entrepreneurship pulls data from a multitude of resources, including the Federal Reserve Survey of Small business Finance and the Center for Venture Research in New Hampshire. Essentially, Scott Shane has condensed thousands of pages of research into a single, coherent book.
This book is one of the first ones you should read if you are contemplating the plunge into the world of entrepreneurship.
You can purchase this book from ActSeed’s Amazon store here.
Enjoy!
Resolutions and Realities: Happy 2011!
Friday, December 31st, 2010Resolutions are like business planning. Making them once every year and quickly abandoning them renders them largely useless.
Reassessing and recommitting on a constant basis makes them both invaluable towards growth and improvement for us and our businesses.
ActSeed launched and learned in 2010. We won’t forget what we learned and we won’t stop learning in 2011.
Our commitment to entrepreneurs, investors, work-seekers and all others who contribute to building successful businesses remains the same:
- Provide valuable tools and resources to help you better prepare and avoid the pitfalls and potholes that lead to business failure, and
- Connect you to those who matter and can help you build your vision into a durable, competitive company
ActSeed’s wish for 2011 is that every entrepreneur reap what they sow, and that they carefully cultivate their business to ensure the greatest chance for success.
Here’s to a great coming year!
How to Write an Effective Business Plan in the 21st Century
Tuesday, December 28th, 2010David Ronick has penned a winner.
If you’ve never drafted a business plan (and need to), “Hit the Deck” is a great investment.
The title of Chapter 1 is “You Need a Business Plan. (Yes, This Means You)”. We absolutely agree, so we read further.
We’re glad we did. Ronick really “cuts to the chase” about what a business plan of the 21st century should look like and why it’s important not only for pursuing investors, but even more for the entrepreneur to set a solid foundation to enter the marketplace and complete.
Lots of step-by-step guidance and examples.
If you’re new to investing, it’s a great book for you to read as well; here, you can learn what you should be understanding and what you should be seeing from the entrepreneur pitching you an idea.
The days of a business plan looking like a 48 page master’s thesis are gone. David shows you how to craft a solid plan quickly and with both internal and external impact. Again, it’s a book you should add to your library, a quick read, and won’t set you back more than $15 or so.
You can buy “Hit the Deck” by clicking here.
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LAUNCH! ActSeed Entrepreneur Heidi O’Connor Opens Doors at The Kids Cooking Corner
Wednesday, December 1st, 2010Congratulations to Heidi and her new company, The Kids Cooking Corner, on its grand opening. Heidi exemplifies the spirit of entrepreneurship and the tenacity and planning that is required to get an idea off of the ground. With an overall ActSeed Score above 89 (on the scale from 0 to 100), she certainly expresses an ability to execute her plan.
The Kids Cooking Corner is a woman-owned business located in Vancouver, Washington. Its mission is to teach children, ages 3+, about nutrition and safe, healthy cooking. Heidi’s classroom curriculum includes helping kids apply skills in math, reading, science and etiquette. Heidi’s plans for expansion include extending the food and nutrition experience to gardening classes, so she can cover the experience “from the farm to the table”.
While Heidi has already some fully booked classes and birthday parties, she still wants to secure some working capital to help her promote the business and cover short term operating costs as she builds her customer base and attendance. Impressively, she is one of the many entrepreneurs who invested their own savings and “sweat equity” into launching their dream. She has been incredibly resourceful in partnering with local business to contribute to her startup costs through trade, barter and donation of materials.
Heidi is looking for an investment partner who may share her passion for helping kids establish healthy nutritional awareness in the kitchen and at the table.
If you know of someone who is looking to get involved with a startup like Heidi’s in the area of food services, nutrition or educational services with the possibility of national expansion, please contact Heidi and check out her ActSeed profile at http://www.actseed.com/profile/Kcookingcorner.
Of course, if you don’t have $10k to invest but want to support Heidi, you can simply donate to her cause by clicking here.
Below is a brief Q&A with Heidi about her experience as an entrepreneur and small business owner.
Q. What was your “Eureka Moment” – the market opportunity that drove your decision to form a company around this product/service?
A. My own children! Realizing that they will not have a chance to learn at school like I did. Cooking programs have been eliminated in our schools. I wanted to build a place where every child can learn the art of cooking and gardening! In the future I want to add sewing classes!
Q. How did you fund the company to its current state?
A. I did a lot of bartering. Asking for free rent with me doing all the sweat and labor of love. I asked for as many donations as possible for paint, lighting etc. I am now working on trying to get kitchen appliances. Otherwise I have paid out of our savings!
Q. ActSeed champions the need for solid planning and preparation from the very beginning. How important is planning and prep to your company’s success? Can you share an example or two?
A. I first started with a rock solid business plan. I started contacting everyone I knew and trying to get it in the right hands of people that can help me. Every day I promote myself and my idea, contacting magazines, TV stations, city recreation centers etc. I am trying to find sponsors daily that share the same vision I do.
Q. How long did it take to get your idea into the market from initial concept to first customer?
A. 1 month
Q. What influence have the internet and new media had on the way you are marketing, selling and supporting your products/services?
A. I have met quite a few people on twitter and Facebook that have been influential in helping make this dream come true, getting me in contact with people who might be able to help with donations or investment.
Q. Describe the challenges you faced as you built your customer base, including defining the customer target, establishing the right price and pricing strategy and of course, closing the first few deals.
A. Well this is still coming. I am opening Dec 1. I have contacted just about everyone I could think of that would have the same demographics that I have. I’m also targeting family magazines to advertise in.
Q. What techniques have you used to establish credibility in the eyes of customers, investors, partners, personnel and the general public?
A. I am truthful and full of excitement when I am talking about this project! People get excited when they see what I have been working on and can feel my passion come through. Its exciting to know I will have a business that will effect so many young lives in such a positive way where schools may not offer it. The Kids Cooking Corner will be there to offer classes and have fun with the kids!
Q. Have government, University, or other community / economic development programs been useful? If so, how?
A. Not yet! I am in the process of working with the community officers to see if they have any possible connections to help me.
Q. What is the most important thing people never tell you about joining or founding an early-stage company?
A. It is not easy to get financing!
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ActSeed: Lots to Like and $Thousands$ to Give Away
Tuesday, November 30th, 2010GOAL: 10,000 Facebook “Likes” in 2010.
You are an important part of our achieving this milestone, and we’ve organized a fun contest to reward you for your help!
ActSeed’s commitment to helping entrepreneurs and small business owners seems to be resonating.
For this, we are grateful.
ActSeed quickly eclipsed 3,000 “Likes” on Facebook and the ActSeed.com community is benefiting as a result. Browse our Facebook Wall to see how together we are collaboratively sharing information and opportunities. Again, thank you for being part of this energy!
It’s an ambitious goal to reach 10,000 “Likes” before the end of 2010 and we’re ready to reward you for helping us.
FUN CONTEST. SIMPLE RULES.
- ActSeed will send $500 to the person who has the most Facebook Friends who “Like” ActSeed at the end of 2010. The arrow (see image) shows where you click to suggest ActSeed to all of your Facebook Friends. Tell your friends why small business success is critical to all of us. It’s that simple!
- If ActSeed achieves its goal of 10,000 Likes before 2011, another $500 will be given to a randomly selected follower of ActSeed’s Facebook page, so everyone has another chance for $500!
- Additionally, five randomly selected followers of ActSeed’s Facebook page will receive a free ActSeed Entrepreneur Group lifetime membership worth $468 per year.
HOW TO BE CONSIDERED FOR THE “MOST FRIEND LIKES” $500:
- When you visit the ActSeed Facebook page, you should see a box in the left column titled “[#] Friends Like This” (see image for example).
- Capture a screen shot (image) that shows how many of your friends like ActSeed and email it to 10k@actseed.com on or before December 31, 2010. Please include your Facebook link (found on your Facebook Info page) so we can contact you to verify the number of your Friend Likes.
Our focus is to help you establish a solid foundation on which to build your business.
No matter what you are building, you need a solid foundation: people, plan and process.
Big things are on the way throughout the ActSeed community and for you in 2011. We are committed to helping spur the greatest year for entrepreneurship and small business success in every corner of the US and globally and we’re glad you are joining us to be a part of this revolution!
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