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

Importance of Vacations

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!

The Benefits of First Class

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

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.

Out of pocket - three weeks

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!

Cigarettes and self employment

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

Happy Mistakes

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

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.

Costs to date

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!

Kick out the Ladder

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.

Importance of a website

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

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!

Procrastination takes its toll - mentally

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.

Business Slush Fund

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.

Teaching an old dog new tricks

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?

Who are the largest credit card issuers

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

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

Derivatives - A bad word

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

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

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