Aug

26

I Think Therefore I Inc.

August 26, 2008 | Leave a Comment

By no means the title of the article means that those that don’t Inc don’t Think. It refers at how easy is to start your own business in a country founded by capitalist principles and values (even when we may be losing them in recent years).

Many people ask the same thing: How do I set up a company? The same amount of people say things like: “One of these days I will start a company”. For sure, there is a framework of laws just to handle ad-hoc Sole Proprietor companies. For just a few pennies more and a handful of paperwork, these can be easily converted into LLC or S/C Corporations. Most of these paperwork details can be done in a few days, often over the internet. However, more often than not these people miss the point of starting your own business.

The main purpose is to deliver goods and/or services in exchange for compensation: doing Business! The Business part is more important than the paperwork part. With enough business you can have a lawyer and an accountant charge your for the paperwork that you could have filed by yourself — who does that paperwork is almost irrelevant. Without Business you have no Business at all.

Build it and they will come: Mention it and they will also come: Another thing I have learned is that part of doing the business it making its goods and/or services available. Often by just mentioning that you are willing and capable of offering (a good track record helps a lot, of course, and compensation will vary depending on it).  The most important part of this is the “willing and capable” part — you must convince people you have the time, resources and know-how (which often means you must not have a full time job or should be willing to abandon the one you have).

No help wanted: yet. Some other people think that building a business is about hiring people. People are hired when you know you have steady business. Contractors are secured when you do not have steady business and need temporary help. The greatness of the company is not in how many employees it has, but on how much Business it generates. (Business creates needs for employees, and in the end produces more employment than the other way around).

No investors needed: yet. Starting a business is not about securing angel or venture capital either. While your grandma may be willing to pay you to start a business, she is not paying you because she trusts you but because she loves you. The average investor will probably want to see some track record (be it in your own career or in a business that you have already started) before dispensing any money. And with money comes the loss of control and the loss of a big share of the earnings: thus the idea of owning a Business starts to slip away. A million dollars of venture capital money doesn’t mean a million dollars in your pocket: it just means you lost a million dollar’s worth of your company into somebody else’s hands. Start the Business first, and then seek investors, if needed — you will retain more control and money that way.

Remember, the main purpose of a Business is not the employees, not the investors, not the paperwork:

The main purpose is to deliver goods and/or services in exchange for compensation!

Aug

9

Monopoly of a Union

August 9, 2008 | Leave a Comment

A monopoly exists when a specific individual or enterprise has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it. — wikipedia at Aug 09, 2008 - See also oligopoly, and U.S. Anti Trust Laws.

Our society has created laws against the traditional monopolies where an industry or a group of industries take control of the supply and force high prices or inadequate conditions upon their customers.

A Union, interestingly enough, is a group of individuals (an enterprise) that takes control of the supply (skilled / trained labor) and force, or tries to force, higher compensation and benefits.

It seems to me that a Union is some kind of monopoly. 

I do not find Monopolies, nor Unions bad, inmoral, or unfair.  I just think they exist.  However, those who find Monopolies bad, inmoral or unfair should also find Unions equally harmfull. 

Just some food for thought.

Aug

4

Airline Miles Depreciation - Fuel Surcharge

August 4, 2008 | Leave a Comment

At the end of June, Delta Airlines informed me that:

Escalating fuel prices continue to impact our world economy, everyday life and the airline industry. Due to continued, unprecedented fuel costs, we will add the following fuel surcharge to Award Tickets originating from the U.S. and Canada, effective August 15, 2008:

  • $25 for Award Travel between the 50 states and Canada
  • $50 for Award Travel between the 50 states/Canada and all international destinations

This just depreciates the value of the miles I may have accumulated on Delta.  Free is no longer free.  Free already had some taxes and security fees imposed onto it, and now it has a fuel surcharge.  Now, when figuring out the value of a mile I will have to take the expected ticket price minus the taxes and fuel surcharges and divide them up over the miles / points required.

Old formula:  (cost of ticket) / (miles required)

New formula: [ (cost of ticket) - (taxes and security fee) - (fuel surcharge) ] / [ (miles required) ]

There is some consolation, however. Tickets have been steadily increasing in price — because of the surcharges and because of the base price. Assuming you can actually get an award seat on a plane (which are scarcer now that there are fewer flights), you may land a good deal on the use of those miles.

However, my point of the story remains: Use the miles the soonest you can. Don’t accumulate them for the dream vacation (accumulate money for that).  Use them for special trips, especially international, but don’t wait years before cashing them in.  They may depreciate in some way.

Aug

1

The 80 Hour Work Week Myth

August 1, 2008 | Leave a Comment

I have heard so many people say they are hard-workers that do 60, 70, and even 80 hour weeks. Given the fact that weeks have 168 hours, and humans normally need around 50 to sleep, 20 to eat, and probably 20 more to do necessities like bathe, clothe, and go to the bathroom, an 80 hour work week should leave someone with around negative two (-2) hours to spare assuming a zero (0) time commute. Quite an accomplishment!

Maybe the phrase should be changed from “Working 80 Hours” to “Being at Work 80 Hours”.

Efficiencies Gained:
We all know that with the arrival of computers and cell phones we can do many tasks that would have required us to walk or drive to an establishment before. We can bill pay, shop, have fun, run errands and even talk to friends and family on the company dime without even leaving our desks: something that was a bit more difficult in the past. To top it off companies are providing smoking areas, food, gymnasiums, play rooms, child care and other amenities that allow people to spend more of their “spare time” in the office and get back to work faster. We have certainly gained some efficiencies. It has also allowed to intermix personal life with business life – at least to realize tasks for both on the same environment. Soon people will be able to say: “I Worked 80 Hours” and ALSO “Had Personal/Fun Time for 80 Hours”.

The Blackberry / Laptop Myth:
I have had many friends who count time answering e-mails while drinking at the bar or sunbathing at the pool as working hours. First off, I sometimes question the value/worthiness of emails that do not contribute to advance closure on a task – which could eliminate some percentage of those off-hour e-mails. Secondly, unless you have a constant stream of e-mail you probably take breaks to sip some more of that drink, talk to your friends, or just relax in some other way. You are probably not paying constant and undivided attention to that blackberry, or you would have stayed at the office where you can work more efficiently. Then there is the laptop VPN method I have seen so often: someone logs into the company Virtual Private Network from home and start counting the hours. I have seen these people cook dinner, watch TV and feed the kids while the VPN timer keeps ticking and their time cards keep accounting for that time (fraud, by most standards).

The Travel Taxi-Meter:
I have also heard people say they work 80 hour work-weeks because they are traveling. I do not know if they count the time while sleeping. But they certainly keep score of the amount of time they spend dining and drinking with workmates and colleagues: which could be a great deal amount of effort sometimes. Yet, for some reason I can’t say that you “Work” while dozing on a plane or reading on a plane. And while I have prepared presentations for the next day during red-eye flights to other countries, I do not think all of the time spent on the road is actually performing work: although it may be time you are giving up to your company.

Real Work Hours:
I think that if we counted only the hours that we really perform a task (discounting the personal tasks we do), we may come up with a lower estimate. I would guess most people perform real, good quality work for about 4 hours of their day. I know I did for a while: I have been an employee like everybody else at some point in their lives. Whoever tells me they perform good quality work for more than 10 hours a day in a consistent way, I have further advice for them – keep reading.

Fake Motivations:

I have been at a company that promote people staying late at work. I have been in situations where the company provides food at 7pm and doesn’t promote people who do not frequent nightly dinner meetings. I also saw how fun it was when some employees decided to create a “Bagel Club” to also make a roll call at 7am. Needless to say, since almost nobody could prove they had been in office hours for more than 12 hours straight, both the dinners and the breakfasts ended soon thereafter.

If You Really Enjoy It, Do It For Yourself!
Said that, there is a chance you can and do enjoy working 10 or 12 hours work shifts performing a particular task. You should remember that for as much as your workmates are pretending to be working the same amount of hours, they are not: they are probably working something like 4 hours. Even when you work two, three, or four times the amount of time they work, you will not be paid twice the salary. However, if you turned your skills into a marketable trade or service you could be making more money than you do right now. Consider going independent!

If you really, truly work 80 hours a week, I want to hire you!!! But be careful, I will be expecting 4 times the work of the average employee.

Jul

31

Do I Need Extra Insurance On My LLC?

July 31, 2008 | Leave a Comment

 You insure what you can’t afford to loose.  I believe that some insurance is fairly standard:

  • Health and Disability Insurance - Above all, you can’t loose yourself. 

  • Car Insurance - The state will probably force you to take it.  And although you can pay for your own car replacement, it is likely you can’t pay for a lawsuit when you crash and injure someone.

  • Home Insurance - You do not want to loose, most probably. 

  • Umbrella Insurance - Because you never know who may want to sue you.  In this country they sue people just for looking at them in the wrong way!

  • Depository Accounts Insurance - The FDIC does it for you, up to a limit.  You do not want to loose your rainy day fund.

  • I just wish there where some insurance for the stocks - I think they call them options - but they may end up doing more harm than good.

Can I afford to loose my business?

Some companies you can’t afford to loose them.  Loosing them would mean loosing intellectual property, patents, goodwill, and assets they may own.  You surely need to insure everything that the business can’t loose including assets and potential liability.

But what about a professional Limited Liability company? (LLC)  Yes, one like mine, without any assets on the company name (they are the member’s assets), and little cash in the bank (the cash is quickly distributed among the members).  Wasn’t that the main reason to form an LLC: so that if the company does something wrong, they can take away the company if they want to, but your assets are protected?

For sure, if you have employees you need Workers Compensation insurance.  Different states have different rules, but you will probably end up paying other types of insurance for employees, including Health Insurance, and the so called Social Security and Unemployment Insurance (neither of which is a real insurance even when the government portrays them as such).  But that is if you have workers, what if you don’t?  What are your  insurance obligations?

There is an interesting word on the title of an LLC: Limited.  For the most part it covers almost everything and yes, the worst that could happen if they sue the company is that they take away the company.  But what if they could find you personally liable for something.  What if you are proven to knowingly do something against your client’s interests: you being personally negligent.  Or what if you cause extreme harm to a company due to Errors and Omissions - the most common cause for concern?

Your umbrella may not cover all of the liabilities you may have while conducting business activities (check with your agent, but chances are it doesn’t cover every business situation).  Maybe that is why The Hartford group quoted me $3,000 for a comprehensive insurance for my LLC.  $2,300 of which went into the Errors and Omissions category and the rest to other insurance categories.  It is fairly expensive, but lawsuits tend to be even more so.

 I think in the end I will have to take an Errors and Omissions insurance like that one.  The risk is not about loosing the company but about loosing personal property if someone finds me personally liable for errors while conducting business operations.  And the issue is not if I do things right or wrong, but if the majority of 12 angry men and women in a jury (not all of them technical) would like the big shot lawyer from the corporation more than the cheap lawyer I would be able to afford without insurance.

There is only one thing that has prevented me from getting insurance for the LLC.  Most of the business I do is through one or two levels of subcontracting with other, bigger companies.  Chances are my personal liability will be diluted along the way while they sue the bigger fish. But as my practice grows, I find myself getting closer to the end customer in business transactions: and that could put a lot of risk on my business.

SC work at home business is getting popular among people in the past few years. make money at home is a dream for several individuals but now financial market offers services that can be used to finance it. One option is to get owner loan or use real estate for this purpose. Mortgage finance can be used to finance a startup home business. mortgage calculator and second mortgage is available to secure better deals for loans. Credit card is also a form of loan that they can get but is very primitive one.

Jul

28

Mortgage Rescue Bill : Mixed Emotions

July 28, 2008 | Leave a Comment

Over the weekend Congress passed a mortgage rescue bill that the President has no choice but to sign (asuming he wants to keep his party afloat just enough to compete on November).  There is a big chance this will not be the last economy rescue package in the near future, and an almost equal chance that it will cost us a lot in the long term.

Yet, I must say I have mixed emotions about it.  I am not happy about the fact that it penalizes responsible people (like me) who didn’t got loans with a Loan to Value of more than 80%, and took 5% fixed loans for 20 years.  People who didn’t took more risk than their financial situation allowed (including the stability and demand for the services they offer in their careers). 

At the same time, I know that in the short term this will stabilize the economy faster.  We will have to work extra hard to recover from it over time and it will promote irresponsible behavoir in the future, but we will get some relief now (exactly what young generations like). 

Just as I told my wife earlier in the year when we found out we where not eligible for the $600/$1200 Uncle Sam giveaways:  we already got ours, it saved a portion of our portfolios.

Jul

15

FDIC 75 years of History

July 15, 2008 | 2 Comments

Bair from the FDIC said:

“No insured depositor has ever lost a penny of insured deposits throughout the FDIC’s 75-year history.”

Perfectly true, but there is something missing in this statement:

  • The FDIC was created after the Great Depression.
  • The FDIC was created, in part, to prevent a Great Depression.

With the Fannie and Freddie falling apart also, I am not sure right now if the institutions that helped us get out of the Great Depression will prevent the next one, or will cause it.

Today is a day of doom and gloom even for me.

Tomorrow, will be another day.

Jul

15

iPhone Economy

July 15, 2008 | 1 Comment

It turns out that the iPhone is sold out in 21 states.  To me, it could only mean one thing:  consumers feel that their ability to pay for the extra communications expenses is still very good.  Where is the gloom and doom everyone is telling about?

Unfortunately, the iPhone is not sold out on Massachusetts yet.  That means two things: 1) I still run the risk of temptation to go and buy one and 2) maybe the Massachusetts economy is worse than the one of those 21 states.

In reality this issue just underscores how Americans like to live beyond their means: on credit.  The same thing that caused this economic mess on which we find ourselves right now.  However, some people say that American Consumerism is what supports the economy, so maybe this iPhone sold out is not a bad thing after all.

I still have not bought mine…  but after testing a colleague’s unit, I may want to get one at the end of this month.  It is one of those few devices that has made me crave for it: and I am not a fan of the latest technological gizmo.  I do not even have a flat screen TV.

Jul

10

Miles and Award Travel Keeps Depreciating

July 10, 2008 | 1 Comment

A promise is a promise until someone decides to break it. That is exactly what could happens and could keep happening with travel loyalty programs (miles and points).

For business travellers like me, hoarding miles may not be such a great choice. Last week Delta decided to charge ‘fuel surcharge’ on award travel. For a long time they have been charging some taxes on the award travel. Some airlines have also increased award travel costs on international travel. And it is almost sure that with the difficult airline situation, they have reduced the amount of available seats for award travel. Miles and points keep depreciating.

Since there is no investment bank for loyalty program points, the only advisable solution to this situation is to use the miles! Splurge on them. Splurge on the vacation you can afford now, not the one you have dreamed all your life – for if you wait, your miles will not be worth enough to get there.

Similar to what happened to us with the American miles. I had been hoarding them to go to Australia (via Qantas). Well, for three years we tried, but Qantas limits the number of available seats so badly that it was impossible to get tickets with miles. In the end we used plain cash. We used the miles to get to Hawaii instead.

I think loyalty programs have an use: they differentiate travellers between those who gets treated like cattle and those who get human treatment. Miles are just gravy: something nice, but not as worthy as you might tend to feel.

Use those miles!

Jul

1

Celebrating 5 Years of 0% Downtime - Rental Properties

July 1, 2008 | 1 Comment

It is amazing that even with all of the issues the economy has had, including a slump in real estate property values and sales, our two townhouses are still rented: and have been rented for every single day since they where initially available for rental.

How has it happened?  I could attribute it to sheer luck.  However, I must say that it is also a good measure of due diligence: advertising it, and advertising it in the right places.

We used a realtor for the first tenant of our first rental property.  Soon we learned that she preferred two methods: word of mouth, and local paper advertisements.  We surely added them to our repertoire.

Advertisement methods that we have tried:

  • Word of Mouth - Give a friend a flyer to post in a local bulletin board (at work).  Has worked well.  It has been a pleasure to do business with friends of friends.  (Although it could be risky, it also brings people with shared values).
  • Local Paper adds - They work - especially if you post them on weekends.  Good thing is you can list property details and it filters a lot of the calls that are just to ask for price and how many bedrooms and bathrooms the property has.
  • Yard Sign - We have one of the townhomes on a Main Street.  For that one we just put a sign on the yard.  People call — and it is free!  So far that has been the most effective method, but I guess it is most effective if the sign is on a main road. 
  • Internet Websites - They have provided leads.  But they have been less effective than we expected.  Good  thing is that you can put pictures and describe it better than on a newspaper classified.  Fairly cheap as well.
  • Postcards Sent to Similar Rental Units - This kind of junkmail has not worked as well.  It has provided a few leads, but not too many.  None of them have signed a lease.  Benefit / Cost is low.

Any other method you care to share?  We want to keep the business with 0% downtime for longer.


 

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