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.
Sunday, March 21, 2010
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...
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...
Linchpin
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
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
Saturday, February 20, 2010
Good Lessons: The Art of the Start
I love this post here: http://www.changethis.com/1.ArtOfTheStart Its a link to the manifesto for Guy Kawasaki's book "The Art of the Start". It puts it in plain English, basically get an idea, find a meaning in you work, and start. Don't go putting down a business plan, just start. I believe this and have heard it before. The idea of kicking things off is something I'm working on now but I've realized I have two big road blocks. The first is that sometimes I try and start things without even knowing if it will work. To this end I just ordered this book: The New Business Road Test: What Entrepreneurs and Executives Should do Before Writing a Business Plan. Of course, I inherently disagree with the subtitle because I'm not writing business plans, but the purpose of the book is to find a way to test ideas before you do them to see if they'll work. To me, this is the real gem and the thing I need to figure out.
The second thing I realize I'm missing is the fact that I run out of ideas sometimes or cant come up with any that I think are really good. To remedy this I read a lot, travel and pay attention as I'm going around. I'm supposed to be carrying a moleskin to write stuff down but I don't. Anyway, my thought is that while going through life I'll see something that I can work off of and implement it. For instance, I was trying to find a candle for my apartment and couldn't and realized that lots of men probably couldn't either. So for about a week I went on a rant to make candles for men. However, after calling manufactures there seemed to be a lot of capital needed to do a run of candles and I realized I might be in over my head in a market I didn't know or understand. So I pulled off, but I'm going to read my new book and see if I should revisit it and a bunch of other plans I've had.
The second thing I realize I'm missing is the fact that I run out of ideas sometimes or cant come up with any that I think are really good. To remedy this I read a lot, travel and pay attention as I'm going around. I'm supposed to be carrying a moleskin to write stuff down but I don't. Anyway, my thought is that while going through life I'll see something that I can work off of and implement it. For instance, I was trying to find a candle for my apartment and couldn't and realized that lots of men probably couldn't either. So for about a week I went on a rant to make candles for men. However, after calling manufactures there seemed to be a lot of capital needed to do a run of candles and I realized I might be in over my head in a market I didn't know or understand. So I pulled off, but I'm going to read my new book and see if I should revisit it and a bunch of other plans I've had.
Good Lessons: 10,000 Hours
In his book, "Outliers", Malcom Gladwell introduces the idea that it takes 10,000 hours for someone to become proficient at something. He goes on to say that these 10,000 hours must be comprised of really focused, perfectly practice hours with constant improvement in weak areas and good coaching. This helps explain why pro athletes are so good. They spend countless hours practicing from child hood with coaching that gets better and better all focused on improving their game.
For a lot of people (and me for a while) the 10,000 hour idea seemed like a far reaching thing that I would never be able to manage. However, if you break it down you can see something a little brighter.
A normal work week is 40 hours in a normal work year of 50 weeks, so 2000 hours a year meaning it would take 5 years for your to be good at that job or aspiration. If you think about it this way it explains why your boss or mid level managers (if they're smart) are so good at what they do.
But who really works 40 hours a week, no one I know. So lets use 60 hours a week which gets you to 3000 hours a year meaning it only takes 3 years and 4 months to become proficient.
To me, 3.3 years does not seem like that long of a time and shows that you can become proficient at many things over your career / lifetime. The scary thing I think about is what exactly is it that I need to become proficient at to be successful. I mean, there is no way to "practice" business, your either doing it or your not. Also, for someone like me who doesn't know what they want to do exactly, does it mean that I've already made missteps in picking up skills I'll need? To that question, I'll have to say negative since I think that my first job has definitely been a valuable training ground. Also, the side projects I'm working on will surely help me fill out my more entrepreneurial skill set as well as my next job, hopefully.
So, I say all of that to say to people two things: 1. Don't be put off by 10,000 hours. It's a long time, but its not impossible and you didn't have to start when you were 5 like the pros. 2. However, don't underestimate the fact that to get to the 10,000 you have to constantly be working and improving. Yet, once you start honing in on what your passion is that shouldn't be too hard and you'll be an expert in no time.
For a lot of people (and me for a while) the 10,000 hour idea seemed like a far reaching thing that I would never be able to manage. However, if you break it down you can see something a little brighter.
A normal work week is 40 hours in a normal work year of 50 weeks, so 2000 hours a year meaning it would take 5 years for your to be good at that job or aspiration. If you think about it this way it explains why your boss or mid level managers (if they're smart) are so good at what they do.
But who really works 40 hours a week, no one I know. So lets use 60 hours a week which gets you to 3000 hours a year meaning it only takes 3 years and 4 months to become proficient.
To me, 3.3 years does not seem like that long of a time and shows that you can become proficient at many things over your career / lifetime. The scary thing I think about is what exactly is it that I need to become proficient at to be successful. I mean, there is no way to "practice" business, your either doing it or your not. Also, for someone like me who doesn't know what they want to do exactly, does it mean that I've already made missteps in picking up skills I'll need? To that question, I'll have to say negative since I think that my first job has definitely been a valuable training ground. Also, the side projects I'm working on will surely help me fill out my more entrepreneurial skill set as well as my next job, hopefully.
So, I say all of that to say to people two things: 1. Don't be put off by 10,000 hours. It's a long time, but its not impossible and you didn't have to start when you were 5 like the pros. 2. However, don't underestimate the fact that to get to the 10,000 you have to constantly be working and improving. Yet, once you start honing in on what your passion is that shouldn't be too hard and you'll be an expert in no time.
Monday, February 15, 2010
How To Make It In America - Episode 1
So I dont know if you've heard but HBO is pushing a new series called "How To Make It In America". The show seems like it might be a good fit for us to talk about here on QLA because, as descibed by the shows producers (who also produced "Entourage" btw), the show is about "what it's like being at the bottome of the heap and looking for a way up" http://howtomakeitinamerica.com/.
Anyway, I here's a link to the first episode but I wouldn't get too attached because I'm betting HBO takes it down. Regardless, I'll do my best cause if you know me you know im too cheap to have HBO so I'll be finding links and what not to keep up.
http://www.youtube.com/watch?v=1z8D_K2gFfs
Anyway, I here's a link to the first episode but I wouldn't get too attached because I'm betting HBO takes it down. Regardless, I'll do my best cause if you know me you know im too cheap to have HBO so I'll be finding links and what not to keep up.
http://www.youtube.com/watch?v=1z8D_K2gFfs
Friday, February 12, 2010
Hyperlocal
So, I've been reading a lot the past few days about what's called "hyperlocal" news. The idea is that instead of showing news that happens all across the world, media companies, particularly web start ups, are creating news outlets that show whats going on in a neighborhood; literally. The idea is that people will be more inclined to search the news if its ultra relevant to them (about their kids' schools, the YMCA club, new businesses etc). The main source of revenue (for now) is through advertising. The big catch there being that small business, who normally wouldn't advertise on the internet, can now be players. Estimates are that this is a $100 billion market opportunity.
My thoughts on this? I think its a great idea. Right now the industry seems to be having some trouble (several major newspapers have tried this and failed) due to the fact people cant seem to get the business model right. For instance, some use computer algorithms to pull information from police reports etc., others use volunteer and freelance journalist, while still some, employ editors (my favorite). The trick comes in when it gets down to figuring out the revenues needed to support such an operation since, by nature, the audience being reached is small.
For now, I wont go into my ideas about the industry (definitely will later), but I want to put the business model out there and I want to build on it.
Ok, so lets go to my offices a few days ago. (its about to get vague cause its a deal, but go with me). We're looking at investing in a franchise. Our franchise plays in big cities and takes a high number of customers to break even. A competitor plays in small towns and requires very, very few customers to breakeven. So what does this tell me. First the example reminds me of hyperlocal and got me thinking that there is definitely something to this idea of getting really intimate with a small group of customers (remember 1000 true fans...). At first I always thought of trying to create some sort of lifestyle, more premium thing that would attract customers, but lets explore the hyperlocal, small town/rural concept some.
The small town is a real factor in America and many people live in small towns still. I would argue that these are "hick towns" like you might be thinking because its 2010 and people have iPhone and stuff so they have the internet etc. Also, I don't think these towns are broke because in some cases they're locations where people who work in big cities live. I do think the rent for these places is probably pretty cheap for a commercial business.
Now all that being said the real question is "What business would do well in a small rural town". In my opinion, it has to meet a few requirements:
1. Can't take up a large space (rent would get too high)
2. Has to rely on a small number of transactions (so cant be dirt cheap stuff i.e, beat wal-mart)
3. Has to be franchise-able (to make real money anyway)
I use point 3 because if you / I create a franchise concept then we can make tons of money off franchise fees / agreements, overhead etc. plus it creates a business that is quickly scalable. The other issue this deals with is getting to all of those small towns which would have been a problem.
As an aside, one I think there is real money / value to be made in the white space of 1. small towns and 2. sub segments of large cities by ethnicity so applying the concept to urban, black neighborhoods could also be an idea. For now this is just something to ponder on and think about, but it might be the way to go...
My thoughts on this? I think its a great idea. Right now the industry seems to be having some trouble (several major newspapers have tried this and failed) due to the fact people cant seem to get the business model right. For instance, some use computer algorithms to pull information from police reports etc., others use volunteer and freelance journalist, while still some, employ editors (my favorite). The trick comes in when it gets down to figuring out the revenues needed to support such an operation since, by nature, the audience being reached is small.
For now, I wont go into my ideas about the industry (definitely will later), but I want to put the business model out there and I want to build on it.
Ok, so lets go to my offices a few days ago. (its about to get vague cause its a deal, but go with me). We're looking at investing in a franchise. Our franchise plays in big cities and takes a high number of customers to break even. A competitor plays in small towns and requires very, very few customers to breakeven. So what does this tell me. First the example reminds me of hyperlocal and got me thinking that there is definitely something to this idea of getting really intimate with a small group of customers (remember 1000 true fans...). At first I always thought of trying to create some sort of lifestyle, more premium thing that would attract customers, but lets explore the hyperlocal, small town/rural concept some.
The small town is a real factor in America and many people live in small towns still. I would argue that these are "hick towns" like you might be thinking because its 2010 and people have iPhone and stuff so they have the internet etc. Also, I don't think these towns are broke because in some cases they're locations where people who work in big cities live. I do think the rent for these places is probably pretty cheap for a commercial business.
Now all that being said the real question is "What business would do well in a small rural town". In my opinion, it has to meet a few requirements:
1. Can't take up a large space (rent would get too high)
2. Has to rely on a small number of transactions (so cant be dirt cheap stuff i.e, beat wal-mart)
3. Has to be franchise-able (to make real money anyway)
I use point 3 because if you / I create a franchise concept then we can make tons of money off franchise fees / agreements, overhead etc. plus it creates a business that is quickly scalable. The other issue this deals with is getting to all of those small towns which would have been a problem.
As an aside, one I think there is real money / value to be made in the white space of 1. small towns and 2. sub segments of large cities by ethnicity so applying the concept to urban, black neighborhoods could also be an idea. For now this is just something to ponder on and think about, but it might be the way to go...
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