Sunday, March 21, 2010

For Tax Season...

Most start up companies will fail, its just a fact. Unfortunately for some, that means lost cash. Even for those companies that don't fail, there is going to be a period of negative cash flow and thus, forfeited capital. While its never a good thing to lose money, I would encourage people to remember that the U.S. Government wants you to start businesses and thus, has a made some tax advantages for those that do so.
I wont go into too much detail because I don't pretend to be a tax expert, but I will offer the overarching idea. Basically, if you start a business and it goes south then the business losses can be used to offset your tax bill for the year. For example, lets say you make $100k a year at your day job (nice job right) and you owe $40k for taxes. If you started a business and lost 10k then some of that loss can be taken against your taxes and you will owe the government $30k. Now its not that simple and the numbers don't work out quite so cleanly, but the basic point is that the huge fear of loosing money in a business may be mitigated for some, to some extent, due to tax advantages.
Also, there is the added benefit that you can write off many deductions for your business as the money your spending are "business expenses". Just a thought. Google this stuff and talk to a tax person, but don't be as scared of loosing money, because there are some tools in place to help you out.

Saturday, March 13, 2010

Making it Happen

Ok so lets go to a second to the topic this blog is actually supposed to be about, trying to create some businesses / cash. So to catch you up I've been working with some guys to start a business in my home town. Its a simple business that allows for an absentee owner and isn't hard to pull off. The three cons are 1. We don't have industry experience 2. There are some capital hurdles 3. the revenue is capped (but locked in).
To combat the first problem we talked to someone who has 20+ years of business experience and helped us get the numbers around our model and helped prove out the plan. For the second problem one of my partners parents let us borrow some equipment that we intend to sell and use as capital to start our business. For the final problem we're still looking at variables but we're ok with the capped earnings because it's stable income.
Ok so we've found a space with great views of downtown and have been talking to the owner. Last weekend we even had a face to face meeting and it went pretty well. He thought the numbers looked good, solid plan, wanted us to flesh it out more but that's understandable since we knew we had work to do. Now here's the problem. The plan was hitched on us selling the equipment to fund our business, but we're starting to think that equipment wont sell. This means we're stuck with equipment we didn't plan on using that we still need to pay for (expenses without revenues = bad). So to fix this problem we're getting ready for a Plan B.
Plan B is this: use the equipment for its intended purpose and start that business. We actually starting looking at that business and it seems like it might be a better model all together (lower operating cost). Anyway, the point is that we learned not to rely on things outside our control, yet on the bright side we're going to make the most of what we have and make it happen. For now the equipment is still for sale (we're giving it a month) while we're simultaneously looking for a new space to start out new business (we want a lower rent space). I'll keep you posted on how it goes...


So I haven't posted in a while which is my bad. Let's just go ahead and get back into it. First I want to do a post on some highlights from Linchpin. It's a new book from Seth Godin that looks at work / entrepreneurship in different ways and ultimately encourages the reader to become indispensable to an organization / the world. The point he really gets to (to me) is that you have to be a unique person that "gives genuine gifts" to those around you in order to achieve this status. Anyway its a really good book and I encourage you to read it (shout out to Kenji for the recommendation). Below are some of the parts of one chapter I found really good and my take on them.

You become a winner because you're good at losing
This is a great line to me. Many times I feel like people are afraid of trying things because they won't work, yet I feel like once you actually start trying them, whether they work or not, its a learning experience. I am facing this right now with my own ventures and its just now coming to me that it's not always going to work, yet just in taking steps towards my goals I am doing something positive. Remember, Thomas Edison failed countless times before he made the light bulb, its bound to happen (especially if your a serial entrepreneur) however, it only takes one to work for you to make it big.

Going out of your way to find uncomfortable situations isn't natural, but its essential
The worst thing you can do in life is become comfortable. Your comfort zone is a dangerous thing, it keeps you from becoming extraordinary in whatever facet of life or taking the chances that make life interesting and exciting. For me, what this means is that we have to become comfortable being uncomfortable, meaning that we have to get used to putting ourselves out there and taking those chances. It means learning to speak with investors / partners, learning to be comfortable talking about ideas and most importantly learning to get out there and make things happen (the most uncomfortable thing at all).

Finding good ideas is surprising easy once you deal with the problem of finding bad ideas
Creativity is not a simple thing. It doesn't come naturally to most yet its so critical to success. Think about it. Great companies thrive on originality (Apple) as do great musicians and artist. The point is emphasized in Linchpin because you cant win at being average. The low cost strategy doesn't cut it anymore because global behemoth like Wal-mart will always beat you on low cost. The same is true for some white collar jobs as well. Thus, the only thing left is truly original work that actually touches people. That's why musicians, sports star, actors etc have value - because their work cant be outsourced.
This goes back to the quote because ideas are the precursor for creativity and originality yet many people give up and say things like "I don't have any good ideas" when really they should be saying "what ideas can I come up with at all". Even if your ideas or horrible they still get you thinking and get you closer to whats right. Once we all figure out that brainstorming bad ideas is the key to getting a few good one's we'll be on the right track.

I'm going to write more about highlights but for now I'll leave you with one that is taken from a zen book that I think is quite good and makes daunting task easier in a practical way.

Attempt to create only one significant work a year. Break that into smaller projects and everyday find three task to accomplish that will help you complete a project