Starting a New Business

Motivational Video - Jordon

2010-02-28T10:00:00.000-08:00

Whenever I am getting down I watch this video. Keeps me going!

If you have never failed, you have never lived!

2010-02-21T10:00:00.000-08:00

Can we believe what people tell us

2010-02-18T10:00:00.000-08:00

Long video but, Malcolm Gladwell has written multiple books. In this video, he talks about various highly successful products, that initially received very poor reviews. The main example is the Herman Miller Aeron Chair, but also talks about Coke, Pepsi and All in the Family. Be careful about being discouraged by people telling you they don't like your product. Don't let it stop you from bringing it to market, because sometimes, people won't know why they like, or dislike a product. Interesting video.

Watch Malcolm Gladwell (2004) Pop!Tech Pop!Cast - video in Educational View More Free Videos Online at Veoh.com

Legal docs for your website

2010-02-15T10:00:00.001-08:00

As I get closer to bringing my product to business, I am starting to figure out what needs to be on my website. The three things in particular you need to work on, is a privacy policy, terms and conditions, and returns. Believe it or not, these are not extremely difficult to do, and most major web stores have all three for you to review.

So far I have my privacy policy complete, and am working on Terms and Conditions and Return policies. Upon completion, I will have my lawyer review and make changes. In this way you can save yourself several thousand dollars of legal fees, and use the legal work of some of the top attorney's in the nation.

I try and keep these policies pretty broad, as most people don't actually read them, they give you more flexibility and if there is a an issue, courts have recognized that having an easy to find policy on your website constitutes people agreeing to them, even if they do not read them, or "agree" to them.

Privacy tells people what and how you are tracking information on them. It talks about cookies, what the i nformation is used for, and how it is shared, whether with outside parties including law enforcement.

Terms of use talk about the terms and conditions of use of the site, including ordering policies, and the most popular, indemnity and hold harmless. You can have a return policy integrated into your terms of conditions and use and I am unsure if I will have mine seperate.

Finally, have a qualified lawyer review all your policies. Believe it or not, changing small words can make distict differences in how people and courts review it.

Going from 2 to 50 Million - Gary Vaynerchuck

2010-02-13T10:00:00.000-08:00

For those of you who do not know Gary V, he took his parents business and made it explode. On the west coast he is a cultural icon and hosts his own vidcast on wine.

Learning Points when dealing with a contract manufacturer

2010-02-11T10:00:00.000-08:00

I have received an initial 25 pieces of my product from the factory in China, and to my dismay, its wrong. It's one thing that was done incorrectly and it makes the entire product feel cheap. Now I have to argue with the contract manufacturer to redo the product with no cost to me. I am unsure how that conversation is going to go.

LEARNING POINT!

When you go to order your product, find out from your contract manufacturer, how to deal with mistakes in manufacturing, and in particular, labor the point, that you will not pay for product that is manufacturered incorrectly. I have a call with them tomorrow to discuss how to solve this issue.

Photographs and bartering

2010-01-18T10:00:00.000-08:00

I picked up the proofs and CD of my images last week. They look wonderful in my opinion. The photographs I had taken include:

Photo's to show the functionality of the product
Photo's to show scale - I did this in relation to another product
Photo's to show the quality of the product up close
Mix of photo's showing in use and not in use.

When I have my site up and finished, I will be able to have thumbnails for everyone to check out as well as if I want to sell on third party sites.

My payments to him were to cover the cost of studio time, proof sheet and CD of images. As we looked at the photographs more, I realized, there was going to need to be some slight touch ups. Instead of paying him another 50 to 100 dollars, he agreed to do the touchups for one of my products. Given that I am thinking of a retail price of $25, that is a significant savings on this work.

Don't overlook bartering to make payments as well. Certain of your partners may have clients that are your target market. It is well worth exploring!

Photographs

2010-01-12T10:00:00.000-08:00

Once you have your product in production, I highly suggest getting professional photographs taken. I recently found a local photographer that was willing to do two hours of studio time for a very reasonable price. He has experience doing commercial work. I did find a photographer that has worked with national clients but to be honest, he was much more expensive. For the distribution channel, this is the best result for me. In addition, he was willing to do all the photoshopping and clean up for one of my products. Barter at its best. It gives me a lot of confidence that people are willing to do 1-2 hours of work for what for me is a nominal price. I am picking up the CD and proofs tomorrow.

When you do get photographs done, make sure you are getting full copyrights on the photographs. I have had some want to provide a "license" and maintain the copyright. This is a big mistake and be careful when you look at the contract your are signing. I had one photographer that was out of the running right away as he wanted to license the photo's of my own photographs to me. When I read the contract I was appalled.

Essentially I was accepting a license to use print and digital for "marketing" purposes and was not allowed to transfer the license without written permission from the copyright holder. You don't want to lose control of your product so be very careful and make sure when you get a bid for photo's that you specifically state you will maintain all copyrights on the product.

2010-01-11T10:00:00.000-08:00

There is a wonderful interview at San Jose Mercury news with Max Levchin. If you do not know who he is I am sure you know the companies he has started incuding Paypal, slide and Yelp. What is interesting is all the various iterations his companies have gone through to be he companies they are. Link is here:

http://www.mercurynews.com/business/ci_14128572

Samples and production

2009-12-26T10:00:00.000-08:00

As I had talked about earlier, I had found a contract manufacturer I was working with to create my product. Since I have posted, I have had two samples created. The first one, done from drawings I had created. After receiving the initial sample I made changes and had a second sample created.

Needless to say I was blown away with the quality. Of course with that quality comes a higher price per unit, plus import duties and shipping. I have put in my first order of 1000 units, which will take 30 days production time and 30 days on the water.

Realize that you, as the small guy, will get less "love" from the contract manufacturer then their established clients. You need to push and push to get them to get back to you. Its a test in the way, as until you order something, you are a cost center.

Keep persevearing and you will get your product made. As I get closer to launch, I will let you know how it goes.

Long time, no chat

2009-12-24T13:34:00.000-08:00

I know it has been a while since I posted on this blog. I have been very busy with the business and will catch up with multiple updates. Needless to say I am almost at the point of the product launch.

Intellectual Property

2009-10-06T10:00:00.000-07:00

You have a great idea. You want to bring it to market. How do you protect your intellectual property from imitation, copying and outright theft? In the US, and other countries, ideas such as trademark, patent and copywrite are used to protect intellectual property.

Patent

"A grant made by a government that confers upon the creator of an invention the sole right to make, use, and sell that invention for a set period of time."

Patents are best known in the pharmaceutical industry. They invent a drug and get exclusive right to that invention for X number of years. Same thing with Intel and their chips. What many don't realize is under patent law is something called Trade Dress that protects others from copying the visual appearance or use of your product. This is one thing I am exploring right now.

Trademark

"A distinctive characteristic by which a person or thing comes to be known"

Trademarks include Logos, product names and sayings that are used to identify your product or company. Best known trademarks would include Coca Cola, Disney, Intel and Nike. Anyone can apply for a trademark, but understanding the strength of that trademark is difficult. Trademarks can be looked at in four different ways:

Descriptive

Describes the goods or service offered, such as Computerland for computers, or Park and Fly for airport parking. These tend to be the most difficult to trademark.

Suggestive

Indirectly refers to quality or use of a product. Examples might be, 7-11, for stores open from 7 AM to 11 PM, or mustang for a fast car.

Arbitrary

Similar to fanciful, arbitrary trademarks include names that have nothing to with the product. Arbitraty might be Apple, for computers and MP3 players, or Sun for servers. These along with Fanciful tend to be the strongest.

Fanciful

Fanciful trademarks are the easiest to register, and describe a term that has been coined and
had no meaning before the trademark. Examples would include Verizon, Starbucks or Yahoo!.

Primary versus Secondary

Your trademark might not be distictive enough for a primary trademark registration. That doesn't mean you can try and get a listing on a secondary trademark registration. While not as strong as primary, over time, that secondary trademark can move up into the primary zone.

The best example of a secondary trademark is the shape of coke bottles. Coke bottles have a distictive shape and if you look at Pepsi or Dr, Pepper, their bottle shapes are quite distinct. This is where a competent trademark attorney can help you.

Copyright

Copyright gives the author exclusive right to their published work for a set period of time. As of right now, life plus 50 years I believe. Copyright law states unless you specifically exclude it, all your work is copyrighted. But to enforce it, it has to be registered with the copyright office.

Most people think of music and movies being protected by copyright, but in reality, the content of this blog, or the content of your web page.

Disclaimer

I am not a lawyer and if you have any questions about protecting your intellectual property, you really should consult a competant IP attorney. A lot of companies are out there to help you file applications and do IP searches. You are better off doing your filings early, versus having to deal with the legal fees associated with infringing on someones intellectual property, even if accidental.

Legal Counsel

2009-10-05T10:00:00.000-07:00

As my business moves along, and I try and bootstrap it from the ground up, trying to minimize or eliminate fees is key, as it will be for your small business. But at the same time, I am trying to avoid being pennywise and pound foolish. From the get go I have questioned whether I can get any patent protection for my product. At the very least, I was going to trademark it.

Unfortunately, these are dollars that should be spent to at least get adequate counsel. I am glad I did. I met last week with a law firm on an initial consultation. The information I received was invaluable before I paid a dime in legal fees.

First, how did I find this law firm? Truth be told I looked up a few of the local legal firms, that are known for their corporate law practices, and sent introductory email messages to them, explaining who I was, why I was emailing and what I needed. In particular I wanted to talk with an associate that specialized in IP, as well as general corporate law questions, and if possible sales and use tax attorneys.

First law firm came back to me and said, sure we can meet with you, we charge an initial consultation fee of $150. I was prepared to pay it if I needed to until I reached out to the second law firm. They set up an appointment with one of the senior partners, where he listened to what I was doing, and what I was trying to accomplish. He then put me in touch with a younger associate that specialized in trademark.

I talked with the trademark attorney, and set up an appointment to meet with him. Before we even met he gave me some things to look up on a google search so I could understand what I was looking for. All of this at no charge. We met and talked about where I could run into problems, and what else I was looking for. All of this before I got charged a dime. We agreed to let him do some work, maximum two hours at $175 an hour. In addition, he was going to put me in touch with a colleague at another firm to talk patent.

These are the type of lawyers you want. Those that are interested in learning about your business. They make it up in more legal work in the future. Right now I am quite happy I met with them, and will continue to use them in the future. Because they are in a less urban area, their per hour fees are quite a bit less then what I would be charged in Silicon Valley. I figured I just got $10k in education on trademark for nothing.

My advice, do not pay an initial consultation fee. If this law firm wants to build a business with you, they will take a little time to meet with you and understand your business. At the same time, don't waste their time. Come prepared with your prototype, copies of your logos and names, so that the meeting goes smooth and fast. Remember, in the future, $175 per hour billed in 10 minute increments starts to add up over time.

5 Minute Business Lesson

2009-09-26T10:00:00.000-07:00

Bob Parson, the founder of GoDaddy.com gives you a five minute business lesson.

Hurry up and wait

2009-09-25T10:00:00.000-07:00

So as you noticed I haven't written in a while. I had the contract manufacturer look at the drawings and prototype, answered their questions and they have sent off to the factory in China for initial pricing. I am still waiting! Ughh! How frusterating.

One thing to remember is when you find a qualified factory to do your work, you will also be the smallest customer they have. I know they have not received one dime of revenue from me yet, but have also indicated how serious I am at the moment.

My advice, is don't get steamed up. I have to calm myself down as I am trying to maintain a schedule. Take the time to work on other things. Meet with your attorneys and understand your obligation for sales and use tax, for filing your trademarks or tweaking your corporate structure.

I am trying to meet with a trademark attorney next week, a sales and use tax attorney and a couple CPA's to do my sales and use tax filings. I will let you know my experience with that and my cost when it is said and done.

I am trying to have a working prototype by the time I leave for a wedding in Napa a the end of October. It is important to have prototypes as I will have a working session to get everyones take on the product and changes.

GoDaddy.com - Rules for Success

2009-09-09T10:00:00.000-07:00

A new video by Bob Parsons, the founder of GoDaddy.com on the rules for success in entrepeneurship and business.

Contract Manufacturer - Update

2009-09-07T10:00:00.000-07:00

As you reach out to contract manufacturer's, there will be up days and there will be down days. Frankly, my conversations with the first two contract manufacturers, left me disheartened about this project.

The first company I talked to said, go find a designer to make a prototype then we will see if we can make it for you. And oh ya, budget $5,000 for tools, dies and forms. Hmm, if I am gonna go out and have my own prototype built, then I will bid the business to the lowest bidder. At best this was a, if you run through all these obsticles, maybe we can do business with you.

The second company, I had more hope for. This is a product they are supposed to specialize in. Their website was beautiful. I provided drawings, and they came back 3 days later and said, sorry, we are not going to bid this project. To complicated. At this point you start to second guess your idea. Stop! This is normal, but will admit, I was at a low point.

Finally, I found a local company, in all places a state manufacturing directory. It is close to where I live too. Sent an informational request, and set up a time to go in and see the sales manager. Already I got good vibes.

The sent me a copy of their Non Disclosure Agreement that was surpringly in my favor. I made some slight changes, and prepared for my meeting. I created cardboard prototypes and sent an agenda for the meeting.

I sit in the meeting, we each sign the NDA, and frankly, it was a breath of fresh air. The salesperson knew what I wanted, we talked about minor changes, material selection, and marketing strategy. We discussed the pro's and con's of various materials, and even better, I got him excited about the product as well.

It doesn't stop there. As we discussed more, he mentioned since it will be a virtual business (no storefront), they can warehouse the product for me at a nominal charge, and even handle mail fullfillment. This is great as I had planned to fullfill myself until I had enough volume to talk to a fullfillment company.

Even better, he offered to put me in front of third party retailers that order through them already, with the hope of getting a spike in sales volume early. They mentioned bringing the product to trade fairs they participate in. They do this to show their manufacturing abilities, but it is also free marketing.

At this point I am completely stoked. I couldn't ask more from a partner. Right now, he is having their designer take a look at my crude prototype and drawings, to figure out pricing. Once that is determined, it should cost me a few hundred dollars to make a few production prototypes and then it is off to the factory for production.

Meeting in person allowed him to see my passion and seriousness. It allowed us to talk about the design philosophy, target customer, and for him to see I did my homework. Go into the meeting, with a crude mock-up. The salesman told me, people seldom come to meetings with them, and it is very helpful at determining intent. It also shows you are serious.

While production costs are important, find a good partner, and try not to nickel and dime them. Be honest and upfront as they may be able to help you more then you think. As for payment, he mentioned a deposit up front. I agreed we had not progressed enough to look at trade terms, my only request is to pay by credit cards to get my points.

As it is, I should hear in a week about initial production cost estimates. We can then tweak design or materials to lower costs. Once we have agreed, they will build a shell prototype, and send material samples. I will then decide on material, and have a production sample created. I expect this to take a month so will update you as things change.

Charge ahead and conquer!

Rules for success - GoDaddy.com

2009-09-02T10:00:00.000-07:00

Those of you who follow the technology scene, or have your own websites and blogs, know about godaddy.com. For those of you who don't godaddy.com is a site/company where you can purchase domain names. If you want to purchase yourcompany.com you can go to godaddy, search for availability and purchase it. Godaddy.com is actually Bob Parson's third company he has started. Watch his video where he lays out the keys to success.

Contract Manufacturers - Update

2009-09-01T10:00:00.001-07:00

I have now talked with three contract manufacturers. Of those three, one essentially will not be able to do it, but was good enough to put me in touch with their independent design person if I wanted to pay them to design a prototype. One is currently having their product engineer take a look at the idea and figure out how and how much it would cost to produce. The third one I am meeting in person at their design center this week.

The one mistake I did make with the first two, is not getting a Non-Disclosure Agreement in place. It is quite easy and you can either 1) find one online or 2) alot of companies have general ones in place that they will sign with you. This is particularly important for companies that produce product overseas.

The biggest thing I underestimated was tooling and die costs. One company quoted me close to $5,000 just for tools and set up which surprised me. I will see what the other companies have to say. I will keep you informed.

It all started with an Idea

2009-08-30T10:00:00.000-07:00

I was fortunate enough to come accross a story about entrepeneurship, and the pull back of angel investors. This is little concern for me at the moment since I have no need for angel investors. Either way, they talked about one entrepeneur that was able to connect for his novel, interesting and frankly brilliant idea.

http://www.zipzshoes.com/home.html

It all came from talking with family at a neighborhood party, and the idea became a spark, the spark became the passion, and the passion became the business. All it takes is a spark.

Ben Franklin

2009-08-27T10:00:00.000-07:00

How much do you really know about Ben Franklin? He signed both the Decleration of Independence and the Constitution. He was ambassador to France. All of this without a formal education.

What is fascinating to me is more about his life as a businessman. Franklin retired at the age of 42 before he ever started doing inventions and entering politics. Some of the inventions that are important and used to this day include:

Bi-Focals
Lighting Rods
Electric Lightbulb

He continually invented products, explored and most important, challenged the status quo. That is what we have to do every day, challenge what is expected or known. That is how innovation happens. Below is a link to a great article in the NY Times about Franklin.

http://kalman.blogs.nytimes.com/2009/07/30/can-do/

Contract Manufacturers

2009-08-26T10:00:00.000-07:00

After much explorations I made my first outreach to contract manufacturers. While I found several on the web, it was old fashion paper that helped me out the most. I went to the local library and found a manufacturing directory. Don't discount your local library's reference section. This was in a local township library that I found it, not a huge big city library.

I proceeded to look up the companies and see if they have the ability to create my product. I have a lot of faith in one as on their website they have link directly to OEM/ODM services. You have all heard about OEM's, Original Equipment Manufacturers, think companies like Dell and Apple that make a product. What most people don't realize, is many times behind that OEM is an ODM.

ODM stands for Original Design Manufactuer. Ever notice that a lot of your electronic products look very very similar? That is because they are all made by the same "Original Design Manufacturer" in China. Foxconn makes a majority of the cell phones as well as the ipods and iphone. Quanta makes a majority of the Laptops for companies such as Apple, Dell and Acer.

ODM's are different than a contract manufacturer, because the ODM will actually take your drawings or concept and design your product for you. A contract manufacturer will just build to particular specifications. ODM's are key for those of us starting out early in business.

I will be calling the manufacturers over the next couple of days to ascertain whether they can build my product and for how much. Currently I have asked the question of:

Do they provide contract manufacturing services?
Can they build and develop protoypes off drawings?
What is the cost per prototype development?
Material costs?
Manufacturer value added if not included? (MVA is a fancy term for labor and B & C components like wired and solder.)
Set up and tooling costs and whether existing tools can be adapted? (If they can adapt your tooling and set up costs should be less.)
Minimum lot sizes
Pricing on small and large lots?
Acceptance of payment through the use of credit card? (Important since they would not provide trade terms for a "new company". Might as well get the points.)
Shipping (Understand how they will ship your product and when you take risk of loss. Especially important if shipping internationally.)

Other questions I will ask is whether tooling and set up can be amortized over a particular production run. I will let you know what I find out so you can ask the same questions of your contract manufacturers. Wish me luck!

Frontera Foods

2009-08-19T10:00:00.000-07:00

Another example of someone finding their passion, and bringing it to the market. If anyone has spent any time in Chicago, you have heard of, or eaten at Frontera Grill or Topolobamba, two of Rick Bayless' restaurant. Rick has taken his passion and knowledge of authentic Mexican food and brought it to people outside the Chicago market, with his Frontera Foods.

Stages of Entrepeurship

2009-08-14T10:00:00.000-07:00

A great article on the Amex Open Forum on the various stages of being an Entrepeneur. I relate to these right now and its amazing how spot on it is. Take a read and let me know what you think.

https://www.openforum.com/idea-hub/topics/the-world/article/you-arent-crazy-youre-just-an-entrepreneur-pamela-slim

Tom's Shoes

2009-08-13T10:00:00.000-07:00

I am sure we have all seen the AT&T commercials for Tom's Shoes. It is a fascinating study in capitalism with a cause. Here is an interesting clip about the start of Tom's Shoes.

Importance of Vacations

2009-08-12T10:00:00.000-07:00

Are you a work-a-holic? I know I am. As I get older, it is something I am trying to get further away from. Not only do I not have the stamina, I don't have the desire to work 70 hours a week for someone else. Either way, until I win the lottery, or some deep pocket decides to buy out my business, I will be working either for myself, or for someone else.

I can't stress enough, how important vacations are to your well being. I went to Hawaii for 18 days. In that time, I didn't post on here (set them up before I left), I barely thought about my business, and outside of having a nice lunch with the former CEO of a fortune 500 company, had nothing to do with my business. Heck, I only called my family twice.

I came back from Hawaii, but refreshed and motivated. Refreshed, because I didn't deal with business in that time, but motivated to keep this moving, and moving forward. I have a girlfriend in Hawaii. I know its wierd but we are both comfortable with something long distance. But I would love to get this business up, so I could live there a couple months a year. Talk about motivation.

What is vacation? That means several things, and many people have a hard time taking a vacation. It means, no WORK email. No WORK phone calls. In fact, if you can disconnect from technology, even better.

I have always told bosses, that when they go on vacation, I will not call them, period. And I expect the same treatment when I go on vacations. In fact, I worked for one boss who insisted on being in touch during my vacation. I told him I was going to a place with no electricity and that if he needed to get in touch with me that bad, one, the company was going under, and I wouldn't have a job anyway, so don't call me, or two, I screwed up so bad, that I was fired anyway, so don't call me.

It is also why I use Verizon, they have poor coverage outside the USA with the CDMA technology. Being that connected is not a godsend but a nightmare to me. I can't stress enough, take a vacation. You earned it!

How to have real email

2009-08-11T10:00:00.000-07:00

Your company structure is set up and you are ready to reach out to manufacturers and to various other vendors. But being a small business, you want to be take seriously. I am sure getting an email from xyzbusiness@hotmail.com is going to put your request at the bottom of the list. If only you could have professional looking email. Well you can.

After I set up my legal structure, I went to godaddy (or any registrar of your choice) and bought a domain that matches my LLC name. I do not have a server, nor do I want to deal with setting up email through a hosting service, nor would I like to pay for it at this time, given I am trying to bootstrap this business. That is where google comes in.

Google will host your email service, provide typical gmail size mail box, as well as a calendar and google docs (poor but free substitute for office) and do it all at no cost to you. You can now have an email address of myemail@mycompany.com without the hassles of hosting and setting up. You can host up to 50 email addresses with their free service which means you can even set up dummy mail boxes like sales@mycompany.com, HR@mycompany.com, and others. What better way look like a real company.

If your company gets even further, for 50 dollars per user/per year you can get a whopping 25GB mail box size. What I also like about gmail, is it has POP and IMAP support if you want to use outlook. The system walks you through setting it up and I have been quite please so far. Just search for google aps, and look for the standard version.

SO far it has worked well for me. If I find a substitute I will let you know but the ease of this just can't be beat. Anyone else had experience with this?

The Benefits of First Class

2009-08-07T11:00:00.000-07:00

If you are an investment banker or consultant, most likely you are flying first class to your various destinations. Many people look at this as both a luxury or a frivolous waste of money. In fact most companies have policies associated with what class of flight you can purchase, whether you can upgrade and when you are allowed to fly business class. Unfortunately I think this is one of the more penny wise and pound foolish decisions a company can make.

I had the benefit of flying first class round trip on my three week trip to Hawaii. I made the most of it when I could. In fact, it was worth every penny I can see right now, and if I was in business development, even more.

Forget the fact that you can both work more efficiently in a first class seat, but arrive at your destination more rested, but just the people that you meet is in itself, the very reason to fly first class. On my four legs, there were three people I met that stand out from both a personal development as well as interesting people that a business may want to have an in with.

I met, a television producer. This gentleman was quite interesting, and I even knew one of his productions, the documentary, Carrier on PBS.

http://www.pbs.org/weta/carrier/

I met a professional photographer whose main business is going to motor sports and taking pictures of vehicles that drive on Bridgestone tires.

Both of those gentleman were interesting and may know others that can help you in the long run, but the one gentleman that was most interesting to me, was a former diplomat and ambassador to an asian nation. He is now an EVP for a asian conglomerate and has his PHD from Harvard. Interesting guy and am glad to have met him. But can you imagine the possibilities for your company?

Here is the head of business development for a major multi-national. He talked to me about the companies expansion in Russia and in asia. You have got a high level executive, without a gatekeeper in front, and you have a captive audience for a 4 hour flight. That is even better than a golf course.

I was putting him in touch with a couple colleagues, with the hope they could develope something from the relationship. Asian companies are all relationship based and you never know what could happen.

This is why investment bankers and consultants sit in first class. Not because it is posh, but because it is lucrative. First class gets you decision makers in an organization as not every executive flies on a private jet, and in fact most companies have policies around executives being on the same plane.

Next time you are in a first class seat, talk up your neighbor, you might be surprised at who they are and who they know.

The Big Idea - Penagain

2009-07-29T10:00:00.000-07:00

Aloha, I am still in Hawaii but thought I would post this great video about the inventor of Penagain. His product is sold in 25,000 stores worldwide. Like me, he thought about this product for years and years till he had enough guts to start it. It is a great 6 minute video that gives you tons of ideas of how to get your first sale.

" src="http://ad.linksynergy.com/fs-bin/show?id=0VUQc1F99sE&bids=174585.10000665&subid=0&type=4&gridnum=13">

The Big Idea

2009-07-22T10:00:00.000-07:00

As you know, I like to post videos of small business start ups and owners. I found this one recently, for the "Big Idea with Donnie Deutsch". Listen to what the entrepeneur says. I did it on my own. I learned from the ground up. Everyone told me I couldn't do it. And bye the way, she is only 25 (at the filming of this video). I gotta be candid, I am curious to try this product as I am a prodigeous snoozer. Aloha!

Out of pocket - three weeks

2009-07-18T10:00:00.000-07:00

I am at the airport right now waiting to board my flight. As you have noticed I have been a little sporadic with my postings lately as I help out friends and family. I needed a little break and a change of scenery, so my flight boards shortly to Hawaii.

As you work on your dream, there will be times when you are feeling not so confident about where you are going. Keep your mind clear and realize that with perseverence you will succeed. I have been feeling that way and just need a break right now.

Why did I decide to go to Hawaii now? Several reasons. First, like I said, I need a break and change of scenery. Second, I am doing it on the cheap. How you may ask? While I bought a coach ticket, my friend gave me a systemwide upgrade to first class. Not bad for a 10 hour flight.

Second, my girl has her apartment in downtown Honolulu, but also, because she is consulting on the Big Island, she has a condo by Kona that is paid for through the end of August. Needless to say, I am only paying for a hotel and car for the three days I am staying in Maui (and my girl has already paid for those).

What money I have left will pay for meals, since she has picked up the cost of most of our activities. I imagine this whole trip will cost me less then $2,500 and that is pushing it. The plans so far include:

Typical Oahu tour including Pearl Harbor
Spa and massage day - couples massage
Jet Skiing
Kayaking
Hot Springs
Coffee tasting - Kona
Horse back riding
Helicopter Tour
Swimming with Manta Rays

This is just a smattering what we are doing. I am trying to figure out if I can write off part of this trip. I met my girl since my last company had a subsidiary in Hawaii, and I used to work with her on the administration. I am also going to meet with some of the Insurance brokers there and do some networking. Finally, my girl is a power user of Quickbooks and will set me up with it on my laptop I am bringing.

Either way, I will try and post if and when I can but don't expect much for the next three weeks. Aloha!

More research on merchant services

2009-07-17T10:00:00.000-07:00

I am researching a few more merchant service providers before I make a decision. The downtime on Authorize.net is really pushing me towards the Yahoo hosted ecommerce solution. They have their own gateway for you to use. I have checked out Bank of America and will check out Chase Paymentech and will need to look further into First Data. I am also considering PayPal as it is really inexpensive to sign up.

As I look more at the Yahoo solution I think I may need to go with First Data as that is who their main partner is. Nice thing about First Data, I can use just about any bank I want. Luckily I have time to look at it since I have not reached out to contract manufacturers (life has slowed me down on some things). In addition, they can interface with outsourcers too.

I will update my costing study as I look further at the various options and give you an update.

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Cigarettes and self employment

2009-07-16T13:00:00.000-07:00

I was reading a blog entry on a guy having trouble quitting smoking. I understand his difficulty as I used to have that nasty habit as well. But is also made me think about one of the difficulties of starting your own business. I am trying to start this entity with less then $2,500.

I figured $5 dollars for a pack of smokes. One pack a day for 365 days is $1,800, or almost 75% of your cost of starting your business. Add on that lower health insurance costs you will need to buy and not smelling for your prospective buyers, it makes sense to quit now.

Take a look at his blog if you want, interesting what we do to our bodies and how are bodies and minds work.

http://www.singleguymoney.com/2009/07/quitting-smoking-update.html

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Authorize.net down

2009-07-08T12:03:00.000-07:00

Why am I commenting about authorize.net and why do you care? If you are going to sell products online, you have to have a way of interfacing with your merchant account. Authorize.net is the big player, and is who several banks use for internet transactions. A fire in a data center, brought down their servers, which did not allow transactions go through. This is disheartening to say the least. Redundancy is at the core of internet transactions, and the fact that they were not able to fail over, have enough back up or none at all concerns me.

Because of this I will be checking out PayPal closer, as well as First Data and Chase Paymenttech for my merchant solutions. I think the silver lining is if you use a Yahoo ecommerce account you do not need the payment gateway, just not sure. Anyone else have experience with Chase or First Data?

Happy Mistakes

2009-07-07T10:00:00.000-07:00

A great video on perseverance. This gentleman, from the UK (I admit I don't know who is he) talks about a mistake/misunderstanding turned out in his favor. Don't let the fear of a mistake stop you. It worked out great for Gerald Ratner.

Mediocrity is the result of fear

2009-06-30T10:00:00.000-07:00

Michael Eisner, the former CEO of Disney talks about failure as part of success. The part that sticks out, is his comment about what fear can result in, which is mediocrity. Most large companies are intolerant of failure, but failure can sometimes result in spectaculer success.

The Innovators Dillema

2009-06-27T10:00:00.000-07:00

Clayton Christensen is a Harvard Business School professor who is considered an expert in Strategy and Innovation. Some of his teachings are a must for entrepeneurs, as he makes you think of your product in different ways. Not only does he have a a PHD from Harvard, but was a Rhodes Scholar as well, and is an entrepeneur in his own right, starting two companies. One thing that really sticks out in this short video, is this idea of a consumer, hiring your product to do a job. What job is your product supposed to do?

For a longer MP3 of a talk he has given, I suggest, Capturing the Upside that he gave at the open source business conference. It can be found here:

http://itc.conversationsnetwork.org/shows/detail135.html

Michael Jordon Commercial

2009-06-25T10:00:00.000-07:00

Fear of failure. It is the biggest impediment to an entrepeneur. Whether he/she is starting out, designing a new product, or even figuring out if they want to be an entrepeneur. Learning from failure is how we are able to be successful...

Fear of failure drove Michael Jordon. Can anyone doubt his success?

Merchant Services - Holy Cats!

2009-06-24T10:00:00.001-07:00

I stopped at the bank today and at least I got an assistant manager. He was a little more knowledgeable then a traditional personal banker but not by a huge amount. One thing I did check out was their merchant services and holy cow its not cheap to start.

Set up: $95
Monthly: $11.95 a month
Transaction Fee: 2.12% + 20 cents

I hate set up fees. What a kick in the teeth to your customers. Hi, we not only want your business but we are even gonna charge you for the pleasure of doing business with us. Normally this would not be so bad but it does not include the Gateway.

The merchant is who actually processes the money. A Gateway is who provides the application to actually accept payments online. Think of your bank as the merchant, and that little terminal you slide your card through as the gateway.

The Gateway everyone seems to use is authorize.net. Their costs look like this:

Set up: $150
Monthly: $19.95
Per Transaction: 30 cents

So if I use a merchant processor, plus a gateway, I am looking at a set up of $245, a monthly fee of $31.90, plus transactions of 2.12% plus 5o cents. Holy cow this just doesn't seem cheap.

The other options I am looking at include:

Yahoo Merchant Solution

Yahoo hosts the site and acts as the gateway. All you need is a merchant account.

Set Up: $0
Monthly: $39.95 ($25.97 for first 3 promotional)
Per Transaction: 1.5%

So with a merchant account I am looking at $95 to set up, $51.90 a month and a transaction fee of 3.62% plus 20 cents. At first glance it seems high, that does include hosting with 99% uptime. Less I have to worry about and it allows you to take paypal as well I believe.

Webstore by Amazon

Amazon hosts the site and takes the payment for you. No merchant account needed and no gateway needed.

Set up: $0
Monthly: $59.99
Per transaction: 7%

What I like about this, no merchant account needed. It includes hosting and processing of the payment. Also you can interface it with Amazon's fullfillment system too.

Shopify

I found this one too and depending on the number of transactions and monthly fee I thought it would be competative with Yahoo. Unfortunately I think you need a gateway here as well. I will display just the cheapest option.

Set up: $0
Per Month: $24
Per Transaction: 2%

So with merchant services we are looking at a $290 set up fee, $55.90 a month and 4.12% + 40 cents per transaction. They also host the site for you but it seems a tad pricey.

PayPal

Paypal is appealing in many respects. I do worry about the hold on accounts that they are notorious for but they are also competitively priced, and act as the gateway too.

Set up: $0
Per Month: $30
Per transaction: 2.9% plus 30 cents (as volume goes up, price goes down)

Of course if I wanted buyers to go to a PayPal hosted website I could avoid the$30 fee but I just think it looks more professional if it is done on your own site. If you have a merchant account you can use their gateway which seems to price about the same but does allow you to offer paypal.

First Data

While First Data has solutions, I can't speak to their pricing right now.

Best Option

I had a gut feel what would be the best way to go but to be sure I ran the numbers based on what I think my product will cost. To be candid, I was frankly suprised at the results.

If you take out the upfront costs (since they are sunk), hosting yourself is always cheaper with a traditional merchant account. Of course there is more work and development costs upfront too. I thought PayPal would be cheaper but it is not. Now if you amortize those costs over 12 months, PayPal looks cheaper but over several years, PayPal does not come out ahead. This frankly suprised me.

If you want to go with a hosted solution, Yahoo seems to be the way to go, up through, in my case, around 300-400 transactions a month. After that, it is cheaper to go the Shopify route. I knew Amazon would be a little more expensive but was frankly suprised at how much more expensive. On low volume sites they are competative but at a certain point your costs almost double.

To be candid, I was leaning towards Amazon given the easy check out and good fraud protection but after seeing the numbers I am leaning towards the Yahoo route. While it would be cheaper to host it myself, I worry about my technical aptitude. Now if you have multiple sites you want to host, the numbers would need to be rerun as Amazon lets you host an unlimited number of sites with your hosting account. Since I am just running one, it is not competative for me.

I created an excel sheet comparing merchant costs if anyone wants to share. Just leave a message and I will send it along. Not very sophisticated but then again, I am not an excel guru. What have your experiences been?

The Last Lecture

2009-06-24T10:00:00.000-07:00

“Experience is what you get when you don’t get what you wanted.”

This quote is from Randy Pausch, a professor at Carnegie Mellon who passed away in 2008 from liver cancer. He is well known for his lecture, Last Lecture: Achieving your Childhood Dreams. Randy is the consummate teacher. As someone who at the time of the lecture, had 6 months to live, shared his experiences, dreams and accomplishments.

To often, our lack of knowledge keeps us from starting something we know nothing about. That is what I am trying to do, share my successes and my failures so that we can learn from it. In some respects I wish I had a high powered VC to walk me through starting a business. In other respects, how would I ever learn if I didn’t do it myself.

Even if I never do this again, the depth of experience gives you insights no one else has. It helps us know the right questions to ask, whether in a normal 9-5 job, or if we outsource our next business. If you ever have anything to share, please feel free to post a comment, as I think everyone can learn from those comments.

Advice to banks searching for business customers

2009-06-23T10:00:00.001-07:00

Some of you may know, my "professional" career consists of corporate treasury and corporate risk management. What this means, in simple terms, I manage the insurance programs and banking programs for large fortune 500 companies. I know about cash flow forecasting and position, positive pay and lockboxes, foreign exchange and investments, and having knowledgeable bankers and subject matter experts at my beck and call. I am used to being taken to lunch and dinner to maintain the relationship.

I am also used to quality customer service on the personal level. I maintain enough balances in my non-interest bearing checking account, never over draft and have a bank credit card to make me a profitable banking customer.

If I go to a banking center one more time looking for a small banking specialist, and they put me with a personal banker I am gonna blow up. The needs of a small business owner and a personal account are completely different. Don't tell me you can get a merchant specialist on the phone, I know how to pick up the phone. Don't try and figure out what I need for banking when you do not specialize in it.

Very simple, if you have a roving small business banker, let the person know it. Set up an appointment. Direct them to a branch that does. I want to sit down with this person. I want him to listen to my cash flows and explain the best options for me. Guess what, if you are able to do that, the small business owner won't leave you to chase the best deal down the street. In fact, if they are quite happy with you, they will actually move their personal business to your bank.

I know one serial entrepeneur who sets up his bank accounts with Union Bank of California for one reason. When he was a small business person, Union Bank was the only one who sat down, listened, and helped him set up his bank accounts. Guess where his personal accounts are too?

I know that Wells Fargo has gotten quite good at courting small business but they do not have presence in Illinois outside of their mortgage operation. I am talking with Bank of America this week to see what they can offer.

Banking Services Defined

2009-06-22T10:00:00.001-07:00

When you start a small business, it is important to set up a separate bank account to separate your personal and business funds as much as possible. In fact if you have established a LLC or corporation of some type, you will need to establish a bank account for that entity. If not you could very well lose the benefits of the liability protection.

Business and personal banking services are quite different in pricing and capabilities and needs. We are all familiar with personal banking services, but what distinguished business banking services from personal?
Personal

Most of us have personal bank accounts, normally in multiple forms. We have our checking accounts that we pay our bills with, savings accounts, CD’s and normally a credit and debit card. The fees associated for maintaining those bank accounts are normally non-existent or waived for direct deposit or minimum balances.

Corporate

Corporate banking is what I dealt with at several companies. Corporate banking is actually what makes banking in the USA, so much better than just about any other countries banking system. Connectivity and infrastructure that personal accounts use were originally built for corporate transactions.
The thing to distinguish the two is charges. There is nothing free in corporate banking. I joke that just thinking about your account, the bank charges you. But of course the number of services you receive is much more extensive.

Small Business Banking

Small business banking is normally a combination of the two. It has many of the features of a corporate account, such as multiple names associated with it, but normally do not charge you if you stay under particular transaction numbers or maintain particular deposits.

What do I need right now?

I just need a simple bank account to collect payments, make a few purchases and file tax information. I do not need, at this time, positive pay given the small amount of checks I would write. I don’t need lockbox services yet. Would be great if I did. I do need some type of merchant account, whether through a bank or PayPal. I would like a debit card with reward points if possible. I think given the small amount of transactions, the costs should be minimal for an initial account.

I am going to see a couple banks this week and figure out what they can offer me if anything. I will let you know how it goes.

Costs to date

2009-06-21T10:00:00.000-07:00

As we all worry about the cost of starting a business I thought I would give you a quick update on my costs so far to my business. This does not include gas and mileage, phone charges and other incidentals but outright costs that went on the credit card and that I have kept receipts for. This includes entity set up, website and prototype build.

As of right now, my total out of pocket has been $1,059.52. $667 of that had to do with entity set up and filing fees. The rest has been fairly inexpensive including domain names and hosting and a "business" mail box for 210 that lasts for 15 months.

If you really wanted to do it on a bootstrap, home address, sole proprieter, then in reality you are looking at so far no more then $500. Don't let cost stop you from doing what you need!

Out getting documents signed

2009-06-17T10:00:00.000-07:00

As you read this I will be on the train heading into the city to get some business completed. I have to get signatures on the LLC from my 2% partner. Unless she flakes on me, I will spend a few hours trying to get a friend to help me with a logo and some type of catch phrase if possible. The nice thing is I have my wireless broadband card so I can use the internet on the train but its not always the easiest to concentrate on creating comments on here. I also have to spend some time reviewing the documents again so I can explain them to my partner. After that I head back that night and back to routine.

Kick out the Ladder

2009-06-16T22:00:00.000-07:00

This is another video from the folks at Honda. While not a direct correlation, it fits the entrepeneur well. The premise being, remove the safety net, as that is when the engineers succeed. Entrepeneurs most time work without that safety net. Honda at least has, I would imagine, several hundred million in the bank to back up that lack of safety net. What we do as successful entrepeneurs many times, is create a product, or a better product then what others can get already. We are the what drive this country. Remember, all large companies started out as a single person at one point...

Enjoy.

Designing on a Bootstrap

2009-06-15T10:00:00.000-07:00

Remember how I said starting a business does not have to be an expensive proposition? One of the ideas I had was to look for college students that can do freelance work for you. Not only are you helping establish someone with portfolio materials, their overhead is much less than a large organization, mainly because their office consists of their dorm room. It seems that college students think the same way as their is a great article here about preparing to be a freelancer in college.

http://www.freelanceswitch.com/freelancing-essentials/5-tips-for-college-freelancers/

Documents arrived

2009-06-13T10:00:00.000-07:00

I got my documents from MyLLC today in the mail. I have to get the member to sign which I am doing next week and fill out some paperwork that needs a wet signature. So there is a one time $125 fee for listing the members. There is also $100 dollar for out of state business licence.

I need to change some small materials in the operating agreement that will essentially give me tighter control. The one thing that bugs me is they tell me its a sample operating agreement. I thought the purpose of hiring someone is to have someone create a document that complies with the state laws.

edit: MyLLC is changing the cover page on the operating agreement since it is a usable and robust operating agreement.

I also have to set up a business banking account next week and capitalize the business. I will probably start with $1,000 dollars and if I have to input more I will. I might try and create loans to the business till it is up and running. I haven't decided yet. MyLLC has done quite well so far and will keep you informed.

If you need to set up an LLC here is a link. Yes I get a referral fee but I am trying to be as honest with my experience as possible.

http://www.MyLLC.com/default.aspx?referredbyaccountid=52909

LLC Update

2009-06-12T10:00:00.000-07:00

I got a call from MyLLC and they have notified me that they got the paper work back from the Secretary of State and are fedexing the paperwork to me. I also received my EIN already. Great great great work so far. Super fast!

http://www.MyLLC.com/default.aspx?referredbyaccountid=52909

If you want to set up an entity with them you can click above.

Company Logo

2009-06-11T10:00:00.000-07:00

As I move along with my business idea, I started thinking of a company logo and/or trademark. Back in high school I used to be creative and artsy but when I look back I had a passionate art teacher that would nudge me in the right direction. Now a ton of art is done on computers and I have zero experience in designing logos.

I have looked around and there are services that will design the logo for you. They have different price points with the cheapest being a single design with three variants of the design for something like 300 dollars. Two designs with 3 variants each (6 logos) is, as you probably guessed, 600 dollars.

I think these companies would probably be great when you have an idea of what you want your logo to be like. Where these fall through is when you have no idea. I have no clue what to have for a company logo. The product is sound, but its not one that lends itself easily to a logo.

How do you do it on a shoestring then? You have local colleges that have design students? They are all looking to build out their portfolios for job interviews. You might be able to get it done for free, or for significantly less then a "professional". My friend is in design school. I told her I rather pay her to do it but she won't take cash, so I will take her to dinner then.

The great thing about it, is you have a young, ambitious person looking to fill out their portfolio. You can get them excited about your product and they invest their emotion into it as well.

"Give me guys that are poor, smart, hungry - and no feelings." Gordon Gekko, Wall Street

Importance of a website

2009-06-10T10:00:00.000-07:00

The blog freelance switch has a great article on the importance of having a website and the five steps to go through. What it really made me do is think about how important having a website is regardless of your business.

Article here:

http://www.freelanceswitch.com/finding/how-to-make-the-web-work-for-your-business-in-5-steps/

Even if you do not sell a product online, like if you are a retail store or consultant, having a website gives you a legitimacy regardless of how big or small your business is. The best example I have is even restaurants, that do not sell online, have websites to look at their menus or what the inside looks like. How many times has a friend told you about a place, you go to look it up online, don't find a website and forget about it?

He created a website for his friend and while he tries to be modest, in reality he did a very good page for his friend. Looks like he used wordpress which is what I have started using as well on other sites. A simple non ecommerce website can be created quite easy. If you have all your logos, what you want to talk about it, I bet you could go to the local college and have them do it for you.

The only difficulty is, how do you find a good website designer for ecommerce sites?

Advice of a billionaire

2009-06-09T19:00:00.000-07:00

Whether or not you believe what I write as motivation, we all look for motivation from our "successful" peers. I just read a blog posting by Mark Cuban, the owner of the Mavericks, who sold his business, Broadcast.com to Yahoo. If anyone can be considered a success, its Mark. I am not saying I like everything he says, but many times he has a sense of wisdom in business.

http://blogmaverick.com/2009/06/09/success-motivation-2009/

For those of you who read from frugality websites, to those that read from entrepreneurial websites, this read validates my thoughts, about now being the time to try something different. Take a chance, think differently, succeed!

Failure: The Secret to Success

2009-06-09T10:00:00.000-07:00

Honda has put out an absolutely fabulous video, explaining the upside of failure. Fear of failure is what often holds many of us back from starting our business. What if I fail, what can happen? Failure in itself can be good sometimes. We learn from everything we do. We become smarter, better and faster. Most people look at a company like Honda, a company that is known for high quality products that sell well and think they have never failed. They have, multiple times, and spectacularly. It is ok to fail, just make sure you learn from the failure.

I am inspired.

Explanation of state filings

2009-06-08T10:00:00.000-07:00

I realized I was talking about a lot of things that I wasn’t sure if my readers understood. Let me walk through some of the filings and the explanation of why I filed what I filed:

LLC

A Limited Liability Company provides shelters your personal assets from those owned or controlled by the business. It also offers some anonymity when you are doing business online. I chose Nevada for its strong privacy, no state income tax and fairly pro-business environment. Besides, my next trip to Vegas, maybe I can write off. In addition I am not running a store front but a virtual business so filing one in my home domicile was not required.

Other structures include the typical Corporation, a Sub-Chapter S corporation, Partnerships and sole proprietors. You will have to do the research yourself on the various reasons you might want one but given that mine is a single product, low overhead that I feel I can run myself, and would never need funding, I think the LLC is a good fit for me.

Registered Agent

A registered agent is a company that will take any type of legal service on your behalf. This included any type of lawsuits or subpoenas, as well as documents from the state, such as filing and tax documents. They also remind you of compliance issues and filing dates. It is important to note, if you do not live in the state you are filing in, you will need a registered agent anyway.

EIN/TIN

This is an employer identification number or also known as a tax identification number. It is like a social security number for your company. You need it to open bank accounts, registered with the local taxing authorities, and if you hire employees to pay excise and employment taxes. Even if I didn’t have an LLC, and was a sole proprietor, I would still get once just to keep my SSN off a bunch of public documents.

DBA

Doing Business As. This is a document you file with the state to identify the name of your business. It is also called a fictitious business name in some states. A DBA has several purposes. Once, it allows you to have multiple businesses under one corporate structure:

· Entity: ABC LLC
· DBA: DEF Sales
· DBA: XYZ Services

It also allows you to receive payment into a single bank account under multiple names. Your bank will most likely require it to open a business banking account. It even allows you to make letter head and business cards.

Operating Agreement

This is filed with your LLC to explain how the company will work. I have not received mine yet but will most likely make a few minor changes if I do not like the indemnification provisions. The operating agreement could even include things like ownership changes, splitting of profits and even little things like, year end.

Certificate of good standing

I know little about these. I just know I didn’t need one. Certain states require it but since mine didn’t. If you have a store front and an LLC in your state, just make sure you don’t need one.
Unfiled

There are more documents I need to file, I am just not sure yet. Some of these will be sales tax documents with the states I will accept sales tax in. Others will be a listing of the members and any tax documents I need to think of. I will update you as I figure out which ones they are.

Disclaimer

I am not a lawyer by any means. I am just a small business person sharing my experience. Part of the reason I used the service was, not only for speed, but to make sure things are filed correctly. My whole filing including all the items I listed above was less than 400 dollars, all in. This included the filings as well as state fees and even shipping (pure profit by the way). Don’t let fear of the unknown hold you back.

Procrastination takes its toll - mentally

2009-06-06T10:00:00.000-07:00

I have written a couple times this week about getting the LLC application filled out and on its way. I had been putting it off, putting it off, until finally I said, I just have to get it done. While it is a small thing, I can't believe how relieved I feel to have that done. I kept thinking and thinking and trying to understand every last nuance of setting one up.

What state?
Single or multi-member
DBA?
What information do I need?
Cost?

In the end it was the easiest thing I ever had to do. I called a service (myllc.com) and they walked me through it. The cost was negligable, they do all the filing, and I didn't even need a majority of the information I thought I would.

http://www.MyLLC.com/default.aspx?referredbyaccountid=52909

I look back now and see the toll the procrastination was taking on me. I was grumpy, snapping at my family, and I felt like a weight had been lifted off my shoulders.

While I am not saying to rush into anything, but by holding back to much, you put an emotional strain on yourself. Procrastination can be healthy when it is used to collect more information, but unhealthy when it wrecks us emotionally.

LLC Update

2009-06-05T10:00:00.000-07:00

Moving right along. Not an hour after my order, I received the filled out form for my approval to go to the Secretary of State. They did a search to make sure the name was available, which it looks like it was, got the signature from the registered agent acting on my behalf and said it would be approved with in a week to ten days. There was one mistake on the application which most likely was my fault when I filled the data in on the online form. So far quite pleased with myllc. If you need to set up yours, go ahead and click below:

http://www.MyLLC.com/default.aspx?referredbyaccountid=52909

Many of you might ask why I need a registered agent. Several reasons, because my business will be virtual, I set it up outside my home state so I need someone to take any type of service. Second, even if it was in my home state, I like the privacy of not having my address listed, and I like knowing there is someone to take service between 9 and 5 as required by law.

Ordered my LLC

2009-06-04T10:00:00.000-07:00

Finally, after dragging my feet, I got the process started for creating my legal entity. I went with a Nevada based LLC. Since it will be a virtual business, i.e. no store front, I decided on Nevada which had strong privacy and no tax liability outside of sales tax. I looked at a lot of different services including legal zoom, incorporatefast.com, intuit and myllc. I chose MyLLC and I can not be happier so far. The woman who started the company also wrote LLC for Dummies, so there is at least some literature pointing towards expertise.

I got onto their live chat and was lucky to connect with Nicole who is their operations manager. She walked me through the entire process, what I needed, what I didn't need and to make it even better, gave me a coupon code at the end that essentially waved the filing fee.

As the process continues I will keep you updated and let you know any snafus. If it does as well as it has so far I will be quite pleased. If any of you need to start an LLC, here is a link:

http://www.MyLLC.com/default.aspx?referredbyaccountid=52909

One day closer!!

Business Slush Fund

2009-06-03T10:00:00.000-07:00

Do you have your business slush fund? This is cash set aside to take advantage of opportunities that come up from time to time. If you had your slush fund you could have bought GE at $8 a share just a few months ago. You could have bought Intel in 2003 at 10 dollars a share. I remember every engineer I knew at Intel was buying stock with all their money when it hit 10 bucks a share in 2003. They knew what was coming down the pipeline.

This slush fund allows you to start those small businesses when they present themselves. Need to set up that LLC? You have the cash! Minimum lot size was a lot higher then expected? You have it in the bank to not miss the opportunity.

Call it a slush fund, a contingency fund, or just all around savings, you should always have cash sitting around to take advantage of those opportunities. Have you ever heard the saying, being at the right place at the right time? Doesn't matter if you are at the right place at the right time if you don't have the resources available.

Website

2009-06-02T10:00:00.000-07:00

I purchased the domain name that I wanted the other day. It was quite easy. I purchased through godaddy.com and actually purchased a couple other domains to play around with. I also bought a general hosting through hostgator. I understand now how programmers can get caught up in programming. I have been playing around with wordpress and trying to figure out how to change the HTML without messing things up to much. So far I have been fairly impressed with what little I have been able to do.

I am thinking about whether I should try and pick up the .ca and other associated domains incase I want to sell to other countries. Right now I am focusing on the US at the moment. What do you think?

Target Market

2009-06-01T10:00:00.000-07:00

Seth Godin had an interesting write up on defining your market and growing your customer base. The article talks about deeper versus wider. One thing I wish he would have addressed though, is when do you go deeper, and when do you go wider. Sometimes its not possible to go wider. Your product is a niche one, so you go deeper in those cases.

Under what circumstances would going deeper actually hurt you? If you have a broad base of customers, going deeper will only alienate a good portion of your established customer base. In this case, wouldn't it make sense to go wider?

I don't profess to get into the whole economics game but it makes me think back to elasticity of demand for your product. Wouldn't a deeper client base entail more inelastic demand, and hence a higher priced product? Of course that higher price should theoretically be offset with a lower cost of supply from being in a niche business.

My point is to be careful before you decide between deeper versus wider. In the race for more customers and more profit you do not want to kill the goose that lays the golden eggs.

The Article is here: http://tiny.cc/Q5Eq6

Doing something amazing

2009-05-31T11:00:00.000-07:00

As I read through other blogs I see great articles from time to time. Over at the Samba Blog they had a great article on "Do Something Amazing".

http://tiny.cc/pbYAj

Again this hits to the heart of what I have always said, but maybe not in the way they were thinking. The crux being, doing something amazing for 2 - 4 hours instead of working on everything else for 8, 9 or 10 hours. Again, starting a business does not need to be an all consuming endevour where you quit your job and risk the house on an idea.

If you can dedicate 2-4 hours a week even, and accomplish alot, you can ease into being the entrepeneur with less risk. It is amazing what you will get done in those 4 hours because it is something you have passion for.

The Founders of Method Brand - As seen at Target

2009-05-28T10:00:00.000-07:00

Great video of the the founders of Method brand cleaning supplies. I have seen these at Target for several years now. Sorry about the horrible sound quality. I could not find a better copy.

Teaching an old dog new tricks

2009-05-27T10:00:00.000-07:00

Do you ever think you are to old to start a business? To old to change? That you don't have the energy? Don't believe it. My mother surprised me today. My father, who passed away last year was the consumate banker, handled all the investments, paying the bills, picking the tax advisor and anything financial. My mother is now 61 and has never had to really do any of it till now. What surprised me today, and pleasantly surprised no less, is the question she asked.

"When we went to the tax guy, how come he didn't tell me to contribute to my IRA?" I was speachless. So I probed and asked if she had been talking to other people about her finances (a no no in our family)? No. Did she see it on TV? Not that she could remember. So someone who never dealt with finances in 40 years of marriage, learned to start asking the right question. She also pays her bills online, learned how to trasnfer stocks and question the bills if they don't look right.

If a woman who barely got through highschool can do all this, how can we ever question our own abilities? I am inspired and when i doubt myself I think about the question, why didn't he have me deposit funds into my IRA?

Fear

2009-05-26T10:00:00.000-07:00

A quick video about fear and how it can affect us when we are starting our business. Many authors discuss fear, and how to over come it. Like in this vid, the author tells us, you are projecting a percieved outcome, not an actual outcome. By doing this you are keeping yourself from working on the here and know. Enjoy the vid.

Trade Shows

2009-05-25T10:00:00.000-07:00

How do you get your idea out there? One idea is going to a trade show. Just about every industry has a trade show that you can go to. The costs can be high or low depending on the type of tradeshow and who will be attending. One tradeshow that goes on ever year is not even billed as a tradeshow. eBay Live! is for eBay buyers, sellers and those selling to those individuals. I found a great vid from The Big Idea talking about trade shows. Take a look.

Who are the largest credit card issuers

2009-05-21T10:02:00.000-07:00

Would you believe that the top 10 credit card issuers control over 80% of the credit card market in the United States? In fact the top 5 control almost 70% of the market in the USA. According to creditcards.com which got its information from Nilsons (an industry rag)the breakout is like this:

JPM 21.22%
BOFA 19.25%
CITI 12.35%
AMEX 10.19%
CAP1 6.95%
DISC 5.75%
WELLS 4.21%
HSBC 3.47%
USBANK 2.14%
USAA 2.02%

You would think this would be a perfect time for another bank to step up and start to squeeze market share, especially the financially strong ones that didn't accept TARP money.

Advice from successful entrepeneurs

2009-05-21T10:00:00.000-07:00

I love finding talks from people that have started companies to explain how they started out. I managed to find this pesentation at a site called Venture Hacks. Quite interested. Take a look.

http://venturehacks.com/articles/lean-startup

Why did you start a business?

2009-05-20T10:00:00.001-07:00

I like hearing why entrepeneurs start their business. I notice a trend, and it is almost never, I did it for the money. I will post vids as I see them and feel they add value. I hope you enjoy.

Derivatives - A bad word

2009-05-20T10:00:00.000-07:00

As I have watched the the financial markets melt down, I started to muse on what is now considered a bad word, Derivatives. As a person who actually worked in that market for a good 7 years, I understand the products that have been blowing up better then most. CDO's are bad, CDS are bad, Mortgage Backed Securities are bad. What is unfortunate about this, is these products in themself are not bad, but were used fraudulently over the last 4 years.

Fraud is the key word. When ever financial products or ideas get abused and used fraudulently, they blow up and everyone says how bad these products are. In reality, many of these products and structures provide a legitimate business purpose and have real value to consumers.

A perfect example is Enron and the use of off-balance sheet entities. The use of off-balance sheet entities and products is not what blew up Enron, it was the fraudulent use of those products. Accounting rules in themselves have a legitimate business purpose, to provide transparancy to the viability of a business. Again, when a fraudulent set of books is kept, you blame the fraud not the accounting rules.

Derivatives are a perfect example of a fraudulent use of product. Derivates themselves are not bad. They serve a legitimate business purpose. The simplest is to transfer risk. In recent years, it has also allowed companies and individuals to participate in a market or provide lower cost of funds.

You know those stock options you received at your company? Those are derivatives. They allow you to participate in the success of your company. When can options go bad? Where does fraud happen? How about the back dating of options by executives. To me thats fraud. Do you blame the product or do you blame the fraud?

Did you know mortgage backed securities have been around for 30 years? Yep, the first MBS was created in 1979. Sub-prime MBS have been around since the mid 90's. They serve a legitimate purpose, to provide funds for lenders to make more loans. The big dirty word of CDO, guess when the first CDO was created? 1990. Yep, it was a way of securitizing the junk bonds held by the defunt Drexel Burnham Lambert.

So what happened in 2007 and 2008? Can you guess? Fraud. Yep massive fraud. Who committed the fraud? Everyone. Yes everyone. The guy making $30,000 a year getting a $400,000 loan he couldn't afford. The guy who lied on his application about how much he made. The mortgage officer that pushed sub-prime product to the prime customer. The mortgage broker that changed numbers on the application. The investment bank that new the loans were fraud yet sold them anyway? The rating agency that new they were defaulting at new levels yet still rated it high. The administration that wouldn't let the regulators do their jobs or the congress that wouldn't give them funding?

See what happens when massive fraud happens? In this case it can take down an entire country if you are not careful. When I worked on a mortgage backed security desk in the late 90's, the customers who bought this product were very sophisticated. When someone not sophisticated bought it is when you got into trouble.

http://en.wikipedia.org/wiki/Robert_Citron

The investors who bought CDO's in the 90's were l arge insurance companies that drilled the investment advisor running the CDO before they would consider buying the piece of paper. A lot of times they never did.

The salesman who persuaded the municipality to buy a fraudulent piece of paper, guess what he was committing? Can you guess?

My personal finances

2009-05-19T10:00:00.000-07:00

Back in the late 90's I was falling into the trap. You know the trap. The need to have everything right now. The best clothes and the fancy restaurants. Part of this was compensating for a deep seated unhappiness of where I was in life. Trying to be someone I was not because I thought that was what defined success.

In 2000, I graduated from Grad School with an MBA in Finance and Financial Derivatives (<-- I know its a bad word). I was lucky in that, my company paid for most of my MBA so I didn't have any student loans but in my desire to "live the life" I had racked up what was for me, a lot of credit card debt, close to $7,000. Add on to this, my student loans in the range of $12,000 and I was heading into the debt trapt.

I just had gotten a raise and I was now making $40,000 a year. Yes, accountants coming out of school were making more then me just on base salary. Add on top of this I was miserable. I worked for one of the biggest jerks I have ever worked for (hint: never work for someone that went through the salomon brothers training program), I was over weight to the point I had what I describe as a Charlie Brown face (round), and my friends were starting to hate being around me.

The only consolation, was when bonus time came, and after taking the time to detail why I deserved a big bonus, I was told I would receive a bonus of $22,500. Holy cow I was rich! Think of all that I could buy!!! Luckily I had a father that talked some sense into me and to this day I think of fondly (sadly he passed away last year) how his advice has stayed with me.

"Chris, I will make you a deal, since your sister only had $6,000 in student loans, I will cover the the difference between what you owe past $6,000." I had been paying for 5 years so I had a good amount paid off. So I took my bonus, paid down my student loans, paid down my fathers student loans and paid off my credit card. I was now debt free. God it was a great feeling! My bonus was gone, but god it was a great feeling!

In fear of running up credit card debt again, I did what many consider to not be a great idea but I am glad I did. I got an American Express charge card. Unlike a credit card, you are required to pay your bill off every month. I still have it to this day, and I finally got a normal Visa card since many places still don't take Amex and that has all of $400 dollor balance on it.

Come 2001, being miserable still at my job was noticed by my ever pleasant managers and they managed to cut my bonus to $17,000. Still quite good in this day and age but it just made me even more bitter. Finally a month after I received my bonus I cracked and quit the job. It was the best thing I ever did. A giant weight lifted off my back. If it wasn't for paying off all my debt, I never would have been able to do it.

To this day I have grown as a person. I have lived in the DC Metro area, Southern California, Silicon Valley and currently in the midwest as I continue to clean things up in my fathers estate for my mother. I still have no debt, I own a 2005 car with 45k miles on it and no loan. I am ready to buy a house and take debt on for the first time.

On top of that, I am considered a leader in my field, which is not the same field I quit from. I make more base salary (6 figures) then I did in my other endevours. I am happy, and am myself which endears me to my managers even when I mess up. You don't have to be an @sshole to be successful, you just need to be yourself.

It is fear of losing money and going into debt that has held me back in starting this business. I know it is irrational, but when one becomes risk adverse, you can become overly risk adverse. Usually after a while I just spend the money and after its done I say, well jeez that wasn't to hard.

When I look back at this I would not be able to write this if I hadn't made the fateful decision (egged on by my father) to pay off my debts and live debt free. Don't get me wrong, while I am frugal, I am not cheap and live quite nice. I never skimp on food, I never want for a new computer or wear threadbare clothes. In fact, I probably spend more on clothes now then I ever did, but instead of looking at name brands, I look at fit, style and quality.

Someone once told me you should have $10,000 at all times just in case that great opportunity comes along. I believe this whole heartedly. Leverage is great for some but not for me. I encourage you to get your financial house in order to give you those opportunities.

Premium versus Luxury

2009-05-18T11:00:00.000-07:00

Seth Godin has a great article on Luxury versus Premium. I personally want my products to be Premium products. Luxury products can be to much work. Not only do you have to persuade people your products offer value without any compelling difference between yours and another product (besides price), but protecting that luxury moniker is quite time consuming. eBay continually gets sued by luxury good manufacturers trying to protect their distribution channel and prices. Trademark and copywrite infringement is a huge deal. A premium product sells itself.

http://www.typepad.com/services/trackback/6a00d83451b31569e201156f6d03b8970c

Can you offer a rebate?

2009-05-18T10:00:00.000-07:00

Do you know what percentage of people send their rebates in? I have seen numbers of at most, 40% and as low as 2%. Why do you think companies love rebates? It encourages people to buy based on the rebate, but very few actually send them in.

Admit it, you forgot to send the rebate in on your cell phone didn't you? I know I did. That little small print reminds you that you only have 30 days to send it in. Ooops.

Can you offer a rebate on your product to get them to buy? I have not seen the numbers yet but I imagine the smaller the rebate, the smaller the response rate.

Art of the cross sell

2009-05-15T10:00:00.000-07:00

I was looking at a website for a product the other day, and noticed they had a large sign reminding you to ask for your 10 dollars back. As I looked further, I saw it was a coupon service, free for 30 days. I thought, how ingenious.

Most people tend to forget, that companies sometimes make more money cross selling other items then they do selling their products themselfs. The best example is Best Buy and Circuit City (I know CC doesn't really exist anymore).

A business week article stated in 2004, Best Buy can attribute almost half their operating profit to warranty, which has 40-60 percent margins versus the 6-10% gross margins on the sale of a tv or computer. My uncle just spent 160 bucks on two HDMI cables that probably cost the manufacturer no more then 10 bucks to to make, and that I imagine were bought by BestBuy for 40 or 50 bucks.

At those margins, Best Buy can sell the TV at cost. So the question is, can you cross sell something either through affiliate programs with your products? I am trying to figure out what I can cross sell with my product I am working on right now. Anyone have experience with this?

Sexy versus Profitable

2009-05-14T10:00:00.000-07:00

So I have worked in Silicon Valley, Washington DC area and southern California for a variety of companies. Most recently in Silicon Valley, which as well know is the hotbed of the technology sector. It is also the hotbed of sexy and many times money losing technology ideas. Does anyone seriously believe facebook has actually been in the black yet?

In our quest to build the next better mouse trap, I think many times we overlook the profitable for the sexy. Unfortunately, sexy doesn't pay my bills, profitable does. Sexy doesn't pay the dinner bill when I take the sexy girl out (yes that was a play on words and a terrible one at that), profitable does.

Let's compare two products.

The first product is a technology service. It has several million users. It has VC backing, a board of directors, and multiple employees. Their product is the hot product and everyone is jumping on the bandwagon. It is the definition of sexy in the technology world.

The second product is a simple household product . It has a great trademark and everyone has seen their commercial.

Many people would say the first product is what they want. It is sexy, they are in the news and they can brag to everyone how awesome their product is. Me, I want the second product. What are the two products?

www.twitter.com
www.shamwow.com

Twitter has yet to make a profit, is not sure how to monitize its product, has to report to a Board of VC's and continually worry about having enough server capacity to keep up with its service.

The second one, costs (at my estimate) no more then a dollar to produce, is run by a single guy, has great brand recognition and sells for 19.95 plus 7.95 shipping and handling. I imagine, even worst case scenario he is netting a profit of 5 bucks per sale, and has admitedly sold over a million units. He would not continue to be on the air if it wasnt profitable. I would posit he is making more then 5 bucks per sale. I would imagine he is making 5 bucks a unit just on shipping and handling.

What business would you want to own?

Vetting your idea

2009-05-14T09:40:00.001-07:00

Do you have someone you can show your idea to? Someone who can look at your product and tell you if they would buy it? One thing you need to do to get your product to market is take constructive criticism for your product. Take a look at this episode of The Big Idea. These experts gave her some constructive criticm that we hope will allow her to sell more product.

Fear and Motivation

2009-05-13T10:30:00.000-07:00

I had the opportunity to read a great posting by Mark Cuban on his blog. I think it is a must read for anyone trying to start a business, whether side or full time. Like most people, I hav ea lot of fear. Fear of wasting my money, fear of failure, fear of someone stealing my idea. Most of them are irrational. It doesn't stop us from having that fear though.

It is quite motivating when you hear billionaires talk about their own trials and tribulations. If you read about his life after college, you never would think, this man will be a success. But he was. A lot of it came from hard work and bootstrapping his business from nothing to something.

I highly recommend you read it. The link is below:

http://blogmaverick.com/2009/05/13/success-motivation/

S/H or free shipping?

2009-05-13T10:00:00.000-07:00

I am struggling with the idea of providing shipping and handling for free or lowering the price and charging for shipping and handling. Both have appealing aspects.

Free shipping and handling provides a value sell when people know that many times a company makes more off shipping and handling then they do the product themselfs. This is like the warranty the electronics store sells you that has better margins then the product itself.

Lowering the price makes it more palatable to the buyer. Also, with a S/H handling charge, you can at least cover your back end costs. I know the seen as tv products charge quite high shipping and handling.

What are your thoughts? What is the best value proposition?

A real product

2009-05-12T10:00:00.000-07:00

So I read a ton of sites and always search out more for entrepeneurs sharing their experiences starting a business. I think one of the more annoying things I see is what I consider, a real business versus a fake business. I think you know what I mean when you see people talking about, what feels like to me many times, a get quick rich scheme.

Don't get me wrong, I am working on an ebook as we speak, something that would add a lot of value to companies on the insurance side, but I am also working on a physical product. Something that needs to be created and built, where you have to think about its characteristics, how much it will cost and how much it will sell for.

You also have to figure out logistics and distribution. I would love to make millions from affiliate programs, but everyone does the affiliate thing. Give me an innovative product that actually fills the niche. Share your experience working with contract manufacturers, understanding tooling costs and designing your first site.

The Four Hour Work Week by Tim Ferriss does a pretty good job of this, especially in regard to physical products as well as "Virtual Products", but all the entries in his forums are about virtual products, ebooks and other things that in reality, involve less risk.

Does anyone have good sites for people talking about Products they have made? Do you run a site? If so I will put it in my useful links.

Fortune 5,000,000

2009-05-08T10:00:00.000-07:00

I had the opportunity to watch a video of a speaker at "The Startup School". His name was David Heinemeier Hansson. I had never heard of him either, but he is a successful entrepeneur who has created multipe successful (read profitable) tech products. In this presentation he was talking about the concept of the fortune 5,000,000. In a subscription model, he was talking about getting all of 40 customers paying 40 dollars a month for 12 months and you have a million dollar business.

40 customers! Let that sink in. Think of the number of 1, 2, and 3 person shops out there that are not going to be spending millions of dollars on products. Think of the niche's out there you could sell to. This follows on my comments about not having to go all in but starting a business slowly. How about this, what idea can you think of that could help a small business starting up?

All or nothing, or somewhere in the middle...

2009-05-07T10:13:00.000-07:00

Have you noticed that we in American tend to go to the extremes? We are red states or blue states, we wanted the biggest SUV or the smallest fuel efficient cars, and we either work for the man, or quit our jobs and go all in starting a company. But wait, do we always need to?

What about the middle ground? We are a purple country with most people in the middle. We want a fuel efficient car that still does well on the freeway, and we love the idea of owning our own business but enjoy the stability and benefits of a large company or government job.

If you look at most bloggers, they didn't quit their jobs to start blogging full time, they did it nights and weekends, and became successful enough to quit their day jobs. We need to move away from this idea of all or nothing and look somewhere in the middle.

Yes, I love the idea of starting a business but you know what? I am not ready to risk it all at the moment. If I can build enough momentum to do mini-retirements I will be all over it, but until that time comes, its nice to have a job to fund my ideas.

Don't let the all or nothing approach stop you from starting your small business. You do not have to quit your job. You do not have to sell mortgage your house, and max your credit cards on the hope that some idea makes it big. If it is a small idea, start small. Use fullfillment companies, use call centers, sell online or start your first blog. Start out small.

Just do it as Nike we would say. Get out there and try. Make mistakes. Learn from it and make yourself a better person. If your idea gains traction, they enjoy the feeling of walking into work and telling them to take this job and shove it. Don't hold back!

Life Insurance - an off topic post

2009-05-06T10:00:00.000-07:00

So a lot of blogs talk about life insurance. There are a lot of arguments of whether you should purchase term, whole, universal or other types of insurance. I am not going to detail what you should look at to determine whether you are going to buy insurance or what type. There are several personal finance websites out there that can answer those questions. What I am going to try and explain, some of the other things to consider, that I feel never get detailed in these various posts. This will also not cover variable annuities as I don't know a lot about them. Let's start.

Regulation
One of the things I like about insurance, and life insurance in particular, is that it is regulated at the state level. When I start hearing insurance companies pushing for federal regulation to preempt state regulation it starts to scare me. But what about AIG you ask? AIG's state regulated insurance subsidiaries were all financially strong. It was their Federally Regulated subsidiary, AIG Financial Products that blew up the company.

The states do regular inspections and audits of the books and records of their regulated entities. There are limits and regulations on reserves that need to be kept, and what the entities can invest in. A good example is National Union, the property/casualty subsidiary of AIG, was invested a good chunk in municipal bonds. Not real dangerous. I have not looked at their exposure on the life insurance side as I have never bought life insurance (single with no dependents).

Most states have a reserve fund that is designed to cover (at least partially) in the event of an insolvency. This has happened in the past and it is another reason why state regulators are so tough on insurance companies, politically it is never pretty explaining to your taxpayers and voters why your reserve fund is now zero.

Most states have limits on how much surplus can be dividended back to the parent. To explain better, surplus, are essentially accumulated profits in their insurance subsidiary. Pennsylvania for example, will only allow the sub to dividend at most 10% of their surpluses a year back to the parent. The sub wants to retain those surpluses as it not only gives a cushion, but also allows them to grow and sell more insurance.

Ratings
Forget Moody's, S&P and Fitch. These are bond ratings and are only indications as to the efficy of the companies ability to repay their debt. Insurance companies are rated by AM Best. While still a rating agency, AM Best determines the CLAIMS PAYING ability of the insurance subsidiary. Again an example, while AIG is essentially bankrupt, their insurance subsidiaries have A- ratings in their claims paying ability. Most other ratings are at the parent level, AM Best at the subsidiary level.

An am Best rating is a letter and roman numeral that rates the claims paying ability and accumulated surplus. If you stay with in the A range, (A++, A+, A, A-), these are considered excellent. B++ and B+ are still considered good but anything below that AM Best considers, Vulnerable, i.e. stay away. As an example, most companies restrict them selfs to companies of at least A- or higher.

The Roman numeral rates the accumulated surplus held by the company. Again, surplus is the accumulated profits they hold at that entity. While it is different for property casualty companies, most large companies require a size rating of VII to do business with. This means 50 to 100 million in adjusted policy holder surplus.

If you want further information, you can look at AM Best's website which gives a thorough explanation of their rating process. It can be found here. http://www.ambest.com/

Mutual versus Stockholder
Most insurance companies used to be Mutual, but unfortunately that has changed over the years as greedy CEO's saw the money their banking and investment companies colleagues were making over the years. A mutual insurance company is one in which its policy holders are the owners of the company. Yes, you have an insurance policy, then you are an owner and in fact are eligible for dividends if the company does well.

A stock insurance company is, as you guessed, owned by stock holders. This means the stock holders receive the dividends, not you. This also means they participate in stock appreciation, allows CEO's to receive options and incents different behaviours. Again, they are restricted in what they can do by State regulators, but this brings up the whole agency/principal/customer conundrum again.

As you can see, I am a little biased against stock insurance companies. Go figure in my professional life its what I mostly use but again, that is on the P/C side, not so much on the life insurance side. There are several mutual companies still existing. While I do not necessarily recommend any of them, I encourage you to take a look.

Return on Investment
One nice thing about Whole and Universal life is for conservative investors, you can get a nice consistent return on your investment. My brother in law has a whole life policy that he essentially makes a nice 5% to 7% a year including the last two years when most everyone else has been down in equities. Not a bad return when you think about it.

Insurance companies have very sophisticated investment departments that in reality are only surpassed by hedge fund managers. They also have more investment options then many mutual funds. For the longest time, large office buildings were for the most part financed by insurance companies and those insurance companies still invest heavily in real estate. As you can imagine, when you have a 30 - 40 year time horizon like in life insurance, it provides more options.

Hopefully this gives you some things to think about. As I remember more things maybe I will come back and edit this post. Just as a full disclosure, I am not an insurance salesperson. I know insurance because I purchase it for large companies (Risk Manager) as well as selling to insurance companies in former lifes. Take everything I say with a grain of salt but I hope this gives you some thinking points to understand. Good Luck!

My Idea Document

2009-05-05T10:00:00.000-07:00

Do you ever have ideas for businesses, only to see them on TV later and think, I thought about that years ago! I now have a document that I keep to write/type my business ideas. Seriously, I look back at them and think, this is the dumbest idea I ever had, but some I look at and think, wow that still is a good idea.

Too often we have a flash of brilliance that we later forget. Many inventors keep a notebook by their bed so that they can write down ideas when they wake up in the middle of the night. What I have discovered, if I have an idea now, I can't get to sleep unless I log it in my business invention journal.

Sometimes you look back and realize the idea is un-attainable. One example I had, at Christmas time I made a gourmet gift basket for my sister and mother. It included high quality olive and walnut oils, vinegars made from the orleans process, vanilla sugar and others. I thought, maybe I could sell some gift baskets, until I did a google search. I am just not willing to risk that much by competing with a company that is at the top of every single google search at this moment.

Other ideas that I think can work? Well, keep reading as once I get this all set up, I will use the profits (hopefully) to fund other ideas.

Still Here...

2009-05-04T09:52:00.001-07:00

So I know it has been a while since I posted and I wanted to apologize to those who check out the site from time to time. Life intervened and I was not able to work on the business idea. I finally got my drawings back from my friend, and it looks darn good. A lot better then my pencil and pen drawings on blank paper. She did it in illustrator which provided a PDF I can provide to potential manufacturers.

LLC... God am I confused. So much conflicting data right now and trying to figure out where to domicile the entity is driving me nuts. I talked to my sister and brother and law and I will include them as 2% owners so it is not a single entity LLC. This should provide greater liability protection. Also, since they would be the beneficiary of my shares in the event of my death, it makes sense.

Now, where do I domicile it. I originally looked at Nevada for a variety of reasons. I then decided Illinois since that is where I am living at the moment. But there is possibility of moving back to California, this could screw things up of course. I may just break down and to the Nevada LLC, since it is cheaper, and they do not release the name of LLC members, go figure a state started by the Mob...

Either way I am hoping to find out this week if this company will be interviewing me in California, which will further determine how I structure. In all reality I just need to stop fooling around.

Computer issues

2009-03-19T22:03:00.000-07:00

Ok my notebook I use for business, the LCD went out and I am waiting for the tech to come over and replace it. This has delayed some of the things I needed but will keep you infromated as I move along.

My to-do list this week

2009-03-16T11:25:00.000-07:00

This week is a busy one but I am building out my to do list so that I can figure out what needs to be done this week.

Scan and email to my friend my crude drawing so she can build it out for me in Adobe/Quark when I go to manufacturers.

Set up PayPal for the business attached to a seperate credit card. Bank of America offered me a credit card in addition to the one I have with them already so might just need to set it up that way. I am tempted to set it up against a credit union account I have already. Just not sure yet.

Set up phone number in Skype. I need to check and price out so that I have a "Business" phone and voicemail at this time.

Fill out provisional Patent Application and file with Patent Office.

Figure out "company name" to start an LLC. While I didn't want to spend the money initially to have it filed in Illinois, I think that is being penny wise pound foolish. The liability protection is well worth it. I was originally going to do it in Nevada, but since the product will originate in Illinois, I need to make sure I have an Illinois LLC.

This in addition to some interviews and networking opportunities I am supposed to have this week should keep me pretty busy.

Inspiration

2009-03-11T10:00:00.000-07:00

So as we go about our dreams and aspirations, there are people, places, or ideas that inspire us to greatness. The two big inspirations for me have been The Big Idea and Tim Ferriss. Donnie Deutsch hosts "The Big Idea" on CNBC. It is very hit or miss, but the most inspiring is when he has small business owners in to talk about how they got their business off the ground. Indeed, the same thing you hear all the time is, "There has to be a better way." It was the thought process that got me to my point.

The second person, Tim Ferriss is known for his book "The Four Hour Work Week". I bought this book after seeing it for a long time and reading both good and bad reviews. The number of resources he points you to in the book is what gave me the confidence and courage to pursue this idea. On top of that, it showed me that I didn't have to make an all or nothing decision. I didn't have to quit my job and run a business the whole time.

What has been your muse?

New Mail Box

2009-03-10T10:00:00.000-07:00

So finally, after much procrastination, I rented a mail box at the UPS Store today. While I paid more then a PO box, there was a reason. I paid $200 dollars for 15 months of a mail box versus 99 bucks for a PO box at the post office. One nice thing, is its close to the free way when I travel into the city. They also do email notification when you have mail, so you do not have to go and check it all the time. And finally, I have a street and suite number which looks a little more legitimate then a PO box.

Musings on Business

2009-03-09T10:00:00.000-07:00

I have to tell you, the one company/entity that I am continually fascinated with, is Bell Labs. In reality, Bell Labs doesn't really exist anymore. At least not in the form that made it great. For those that do not know, back when AT&T was the only phone company in town, Bell Labs was their research subsidiary that invented so many things we now take for granted today.

Think of all of you that do blogs, sell products online, or even use a computer. All of these things can point back to Bell Labs. It is amazing how many things point back to Bell Labs. Here are a list of a few things that you would or would not think of that can point back to Bell Labs.

Operating Systems: Bell created UNIX, which is still used in many mainframes, and is the precursor to Linux, BSD, and Apples OSX.
Programming Languages: Created C, and then C++. Do you know how much is actually written in C++? Everything of importance!
LASIK Eye Surgery: LASIK? Really? Who do you think invented the laser?
Digital Camera: Guess who created the CCD, the thing that captures the electronic image? Yep, Bell Labs.
Silicon Valley: Who do you think created the first Integrated Circuit? yep! Bell Labs. In fact Fairchild Semiconductor was started by several Bell Labs engineers.

Unfortunately, witht he break up of Ma Bell, and Lucent being purchased by Alcatel of France, America's greatest research house is no longer owned by a US company. It is a shame really. If you want to read more about Bell Labs, this site has a ton of great information.

http://www.porticus.org/bell/bell.htm

Contract Manufacturers

2009-03-08T10:00:00.000-07:00

So I did some research and have found several companies that may very well be able to make my product. In particular I found a company that looks like it does small lots. I have to admit, I procrastinated and never set up a PO Box. I am stopping tomorrow at the UPS store to see how much a box is. I don't want to start out with a home address.

I also discovered I need to do a write up and drawings of my specs for some of these companies to get a quote from them. I will try working on that this weekend. One of my friends is in graphic design school so I am tempted to have her do the work so she can use it in her portfolio. I also want to put in the Provisional Patent Application so I don't lose control of my product.

Once I get that done I can reach out to these contract manufacturers.

Provisional Patent Application

2009-03-07T10:00:00.000-08:00

So in order to protect my idea, I think I am going to file a provisional patent application. I am trying to find the forms to fill out and send in. I beleive its $100 to file the provisional which gives you 12 months of "patent pending" protection for your product. Trying to figure out which form to fill out is difficult at best. Also see that I need to have a friend provide drawings for me. If not I supposed I could get out the paper and pen and do it by hand. I have considered using a service like legal zoom to file it for me. Might just be easier but of course increases my out of pocket. Theoretically it will be done right. Has anyone used a service like this?

Here is the forms for provisional patent applications:
http://www.uspto.gov/web/forms/index.html#startforms
PTO/SB/16 is the form you want.

What's holding you back

2009-03-06T10:00:00.000-08:00

Like all of us, fear can inhibit us not to persue that dream, that idea, that business. Don't let fear stop you from trying. Every single new business owner out there has made mistakes. But let those mistakes guide and teach you in the future. What is amazing, is how making those mistakes in your own little business, can help you when you are the mid level manager at the giant faceless corporation.

Taxes? Thats why I hire a tax person. It is his job to know the laws and to guide me.
Fullfillment? Guess how many companies there are that their only job is fullfillment. Guess what, Amazon will do it for you. Who knew?
Business Licence? No one is coming after you because you made 500 bucks a month and didn't set up a sales tax escrow. If they do, pay the fines and move on. Heck, there are companies you can pay 500 bucks to and they will get it all set up for you.
Insurance? Well if you do a sub-chapter S or LLC, your liability is limited, if not there are brokers in most banks now a days that can buy you a $1,000,000 general liability policy for less then $1000 bucks.
Bank accounts? Local credit union or your main bank. They would love to help you get started in your business.

If you let all of those things stop you, you will never get off the ground. Get your idea to the point where its ready to go, and you can worry about it at that point. Why worry about licenses and taxes when you don't even have a product to sell.

Always remember, it is better to ask for forgiveness then it is permission...

Review of my first Prototype

2009-03-05T12:46:00.000-08:00

So I finally got to spend time with a friend and show my initial prototype to him. The response was very heartening since he is my target consumer for this product. What made me happy was that we were essentially on the same page.

As he initially asked me to tell him about my business plan/product idea, I pulled out the prototype. "Oh wow you have one made? Awesome!" I had left one feature out that I wanted to put in, and it was one of two suggestions that he had to make it better. We also discussed a couple features I was thinking of but was hesitant, and he confirmed my hesitation by giving me the reasons to avoid those.

As we talked about production, pricing and distribution, I got him excited about it as well. He has already told me when it is made, he will buy one since it is exactly what he has been looking for for several years.

So now I need to move forward faster. I need to reach out to contract manufacturers and figure out pricing, quantity, set up fees, etc. What I am hoping is, with business down around the world, there might be excess capacity they would love to use. Maybe an advantage of a recession/depression.

Shipping Terms

2009-02-28T10:15:00.000-08:00

So when you get to the point where you have a product built and shipped, you will need to pay attention to the shipping terms. Unlike when you buy your dell computer and the computer comes damaged, and you reject it, on the B2B side that doesn't happen. Most items will be shipped FOB or Free on Board.

FOB is what is called an Incoterm or International Commerce Term. Wikipedia has a great synopsis of the various Incoterms and what they mean.

http://en.wikipedia.org/wiki/Incoterm

It is important to realize that shipping terms and conditions are litterally centuries old. Lloyds of London was originally set up to insure spice shipments. Risk Management departments litterally spend weeks negotiating, shipping terms, conditions, and even the definition of Free on Board. If the crain drops the container and it hits the railing, was it considered "on board"?

Since in all possibility you will not have a cargo insurance program, evaluate the risk of product being lost or stolen in transit. While it is a big money maker for sellers (think Best Buy makes money from selling a TV? Nope just the insurance on it.), it may make sense for you to have them cover the cost of the product.

This becomes a bigger deal on high value items where the truck driver, stops to use the bathroom, and "forgets" to take his keys out of the truck. Oops, the truck is gone. And yes, it does happen! It is sometimes less of a deal when you use a common carrier like Fed Ex or UPS but try and understand the terms you are accepting from your manufacturer.

Contract Manufacturing

2009-02-27T10:05:00.001-08:00

The misnomer many people have, is they have to figure out how to make their product. No such thing, there are firms that specialize in taking your prototypes and making them workable designs. There are multiple places to search for companies to make your product. It all depends on whether you want it built on-shore or off-shore.

http://www.thomasnet.com/ This site was brought to my attention by the 4hww. Great site and it allows you to search for specialty manufacturers.

If you do not mind having product built and manufacturers in china, taiwan and other over seas inexpensive labor areas you want to check out http://www.alibaba.com/ . Alibaba is a public company that is a B2B aggregator.

Right now these are the two best sites I have found to search for your contract manufacturer unless you include google. You would be suprised.

Prototype Update

2009-02-22T19:27:00.000-08:00

So I was supposed to have a friend review my prototype. Go figure he gets sick and our dinner gets cancelled. Well even though I was not able to get his review, I will work on getting in touch with manufacturing companies this week to make my product.

I have been working on a letter to send to various product companies that asks the various questions such as, can they make custom products, minimum lot sizes, any set up fees and how much per piece. I will work out the details further and post this week.

Another Prototype

2009-02-20T08:49:00.001-08:00

Just a quick post. I made a second prototype last night. I am supposed to be meeting my friend for Dinner tonight (if his flight gets in on time). I am hoping to get his input and see what suggestions he would make. This week-end I will provide some of the search resources available to make your product.

Ugly

2009-02-18T09:00:00.000-08:00

Ok, my first prototype is done and let me tell you, its ugly. Your prototype will be ugly too. Prettyness is not the point of this exercise. The point is to create a mockup, so companies that are paid to make products for you can make it pretty. Mine was made up of a combination poster board, tape, tape, tape and tape. Packaging tape became my friend this go around.

My next step is a critique of my product from an actual user I would be targeting. Hopefully I will see him at the end of the week and get his take on my first mock-up. Again the importance of a mock-up was shown when I created it. I changed some design schemes on it to make it easier to use and make things more consistent.

Next I will start doing a search for companies that can create my product. That will be the next post.

Administration

2009-02-17T10:00:00.000-08:00

So a quick post. This seems simplistic, but something we do not think about until its too late. Get a large manilla envelope and put any and all receipts in it for tax time. I do not do my own taxes due to company stock and options that make doing my taxes difficult. But any receipts you can maintain as legitimate business expenses can be used to create deductions. A log of miles you drove in your car included.

So the reciept for my protoype supplies are going in this envelope as a legitimate business expense. The books I bought for website building, again a legitimate business expense. i need to create a driving log as well. My car is paid off so the 54 cents a mile the govt lets you write off is quite useful to me.

Prototype Update

2009-02-16T13:01:00.000-08:00

Ok I have not finished my prototype yet. I am quite disappointed in myself as I wanted it done by now. Other issues came up that allowed me to push it off. Horrible excuse. This is the procrastination bug that gets me in trouble. I need to work on it tonight as I have several appointments (including an interview) this week which will make it difficult for me to finish it if I don't start now.

In addition, one of my friends, who would be the target market for the product agreed that it would be a good idea. I need to pass the protoype by him too so he can tell me what he likes and doesn't like about it. Right now the product he is using is quite a bit more expensive and bulky, hence the value add of my product.

I will keep you updated on my progress.

Should I incorporate?

2009-02-13T19:39:00.000-08:00

Every small business has to decide the best "corporate" structure to provide for their business. You essentially have three choices. Sole proprieter, S Corporation or LLC. Their are advantages to all three and the final decision is yours. Which one works for you.

The main difference between the sole proprietership and the others is liability. Both the LLC (Limited Liability Company) and the S Corp (Sub-chapter S Corporation) limit the liability to the assets of the entity. Many prefer this since they do not need to worry about their house or car being at risk.

I have decided for this first project, the risk is minimal at best, so will not go through the process of seeking liability protection. The cost can be quite high. My next project I will create an LLC, so earning can just flow through to me the individual. Each state is different, and you just want to make sure your state recognizes single member LLC's.

My tax guy advises S-corps, and as I learn more I will let you know what he has told me. Of course everyone situation is different and you have to determine what works best for you. There are several companies out there that will help you set up and establish an entity. I have l inked to one below but I know there are several others.

http://www.incorporatefast.com/

Hopefully those who have incorporated can provide resources in the comments as well.

Mail

2009-02-10T10:47:00.001-08:00

So while you are trying to figure out the final design for your product, that should't stop you from doing other administrative things that need to be done. Whether you run your business out of a home, or out of a 100,000 square foot warehouse, you still need a mailing address. I would recommend not using your home address as the last thing you want is someone showing up at your home.

The simplest solution is to get yourself a Post Office Box. I was looking at the local post office, and its $99 for the year for a 3x5 post office box. You will need this anyway to set up merchant accounts, take delivery of documents, and show an address for other legal matters. I need to go to the post office this week and figure out the logistics. Can they mail forward? Can they take more mail then will actually fit in the box? Can I have an actual street address for Fedex and UPS to deliver to?

Here are the resources I checked out:

http://www.usps.com/receive/businesssolutions/poboxservice.htm

The UPS Store provides boxes as well with a real street address. Might be easier to handle as well.

http://www.theupsstore.com/products/maiandpos.html

You can also check out mail forwarding services. Let me know if you have more ideas.