Investor Junkie » Entrepreneurship

Most Personal Finance Blogs Suck!

Larry Ludwig — Tue, 10 Apr 2012 13:50:45 +0000

Let met first state no offense to other personal finance bloggers out there, but there are only so many ways to talk about debt. Unlike most Americans, I admire you’ve taken action, and decided to document the process to get out of debt. Though you can only talk about Dave Ramsey’s “debt snowball” in so many ways, or how to cut corners with your budget.

The whole purpose of Investor Junkie was to discuss topics no one else was discussing. To zag when everyone was zigging. There is a classic metaphor that I believe in: if you do what everyone does, you’ll get what everyone has. No truer words have been spoken when applying the metaphor to personal finance. Getting out of consumer debt is easy. You spend less than you earn, and pay off your debt with the difference. To discuss investing, while not technically difficult, is typically beyond the grasp of many Americans. It’s not an instant gratification, and takes a lot of time to see results.

Ironically, most personal finance blogs mimic what we see in society: lots of debt and very little investing.

The “getting out of debt” personal finance blogophere is a crowded niche. There are many blogs that discuss this topic, and typically the demographic who also reads the articles has no money. It’s like trying to draw blood from a stone. So while I believe it’s important topic to discuss, don’t expect business income miracles if you target this niche.

I also prefer to discuss more positive topics and investing is one of them. To me, consumer debt is a very negative topic and emotion. Incurred debt is because of something you did in the past. I would rather discuss my future and my children’s future, which investing is all about. Investing is about growing, and assumes the future is better than the present; that you’ll have more money in the future than now. The universe is ever expanding, and so should your finances!

A few personal finance bloggers state if you focus on writing great articles, your blog will become successful. Nothing can be further from the truth! If that were the case my friend from college, who wanted to be the next Steven King, would have been wealthy years ago. He’s a great writer, but lacks business skills. Writing is just one aspect of a successful blog.

Are You A Business, or Hobby?

If you want your online venture to be a serious business, you must treat it as such. Otherwise your blog is a hobby. There is nothing wrong with a hobby. Just understand it isn’t a business and you won’t generate much income from it. So while you still need to write compelling articles, it’s much more than just that. This is no different than a business that just focuses on the technical aspects, without the sales, marketing and customer service. The business will fail miserably, and the same applies to a blog.

My point in writing this post isn’t to boast how great my blog is, or why others fail miserably. My point is if you want to get where you want to go to, you must focus on it, massively. Know the true purpose of your business, and make sure you are climbing the right ladder.

What Is Your Purpose?

For example, this blog isn’t about me. It’s about educating others about various business and investment topics. While I may get something from writing and researching articles, it’s not the primary purpose. The primary purpose is to empower others to make better investment decisions.

In addition, just focusing on debt reduction will reduce the debt. There is no question about it. Which is fine up to a point, but it will not make you financially independent. I assume this is the real outcome everyone wants to achieve, but in reality people rarely achieve it. The sad fact in our society, many consider the lotto as a form of “investing”.

Statistics show most people by 65 years old are either dead broke or dead! Most will run out of money before they run out of life, which is a very scary thought.

I suspect many who write these personal finance blogs are in the 20′s and 30′s. It’s best now to start focusing on saving and investing, even if you still are in debt. Learn as much as you can now, even if you have little or no money to invest. Because if you really want to achieve your goal, you’ll need to learn how to invest.

If you are a personal finance blogger, step up and know your true purpose. Be more than just a writer.

5 Helpful Business Networking Tips

Miranda Marquit — Thu, 08 Mar 2012 19:37:16 +0000

As a small business owner, it can help to network. Whether you are trying to raise awareness for your brand, look for clients, or forge partnerships, networking can provide you with a number of opportunities. The basic rules of networking are the same, whether you are online or offline.

Here are five business networking tips that can help you wherever you go:

1. Be Yourself — and Be Consistent

One of the most important keys to successful networking is to be genuine. Be yourself, and make sure you are the same person online and offline. When building an online profile, you need it to reflect who you really are. When someone meets you offline, you want him or her to be able to recognize you as the online contact he or she already “knows.” As you make connections, be consistent, and always be yourself.

2. Share Your Own Knowledge

Become a resource that others can use. One of the best ways to network is to share what you know with others. While you don’t want to give out proprietary secrets, and while you don’t want to devalue your time, you can still help others. Act as a mentor, and let it be known that you are someone who is willing to give back — and to pay it forward.

3. Articulate What You Need

Whether you are connecting online, or whether you are interacting with others in person, it’s important to articulate what you need. Know your needs, and how others can help you. Conversely, you should also know what you can offer others. Be able to articulate what you do, and how it can benefit others, as well as coherently describe how others can work with you more effectively.

4. Go Where the Networking Opportunities Are

Once you know what you need, and what you can offer, you need to go to where others are. Online, this might mean signing up on LinkedIn, or setting up a profile on a social bookmarking site that focuses on your industry or niche. Offline, this means attending conferences and trade shows. It can also include community events in your locality, attending meetups, and being a part of a club or organization. Volunteer opportunities can also connect you with like-minded people.

5. Follow Up in a Timely Manner

When you meet someone, it’s a good idea to follow up in a timely manner. If you meet someone at a conference, send a quick email when you return home reiterating how much you enjoyed the connection. If you talked about a partnership with someone, follow up with more details, or with the desire to set a solid a meeting time to discuss the project. If you have promised to provide information, or offered to send something, fulfill that promise as soon as possible. Following up in a timely manner reminds those you have met of your meeting, and establishes your credibility. Even when you “meet” someone on social media, it can help to send a quick message, just to say “hi” or even to offer your help.

Networking can be a great way to establish relationships with clients or potential partners — or even just to connect with a new friend to bounce ideas around with. Carefully consider the way you network, and improve your interactions to boost your business.

Domain Name Parking – Income Update

Larry Ludwig — Thu, 23 Feb 2012 15:34:20 +0000

In November 2010 I mentioned about generating some passive income by using a domain name parking service. I figured I would give an update to my progress, since it’s been awhile I’ve mentioned this. The basic premise was this: I had a decent amount of domain names I wasn’t doing anything with, and why not put them to use by trying to generate some income from them. From my research, and the fact I already had a Google Adsense account, I decided to use Google’s Adsense for Domains.

Google AdSense For Domains

According to Google’s reports I generated.. wait for it.. $97.28 since November 2010. Not great, much lower than my expectations, but enough to cover the annual domain name registration fees for some of the domains I own.

From my experience I wasn’t crazy about some of the limitations of Google’s service. I had an issue with a domain name they wouldn’t host, and the customer service was non-existent (surprise!). Google’s policy is they will not host brand names or questionable domain names (i.e. porn). From the name I could not surmise how we violated their policies, and figured it was some stupid algorithm check. The other issue I didn’t like was you had no control over the layout, nor could you put any custom content on the web page. Lastly, your Google PageRank and the domain is delisted from Google’s search results.

So the only way to generate income from Google’s service was from:

Typing the domain name in directly
Mistyping another domain name (which I don’t think any of my domains were related)
Back links from other web sites

I believe with all of these factors was the reason why my income was pretty dismal.

Google announced yesterday they are dropping this service from AdSense, so I am in need of finding another provider and in the process try to increase the income generated.

DomainApps

Since September 2011 I’ve also tried out DomainApps with a few domain names I owned. Since then, I’ve generated $45.07. It was mostly from one domain name that was active previously.

The advantage to DomainApps, unlike Google’s Adsense is the flexibility. Once you move a site to Google your PageRank, and entries within Google disappear. This is not so with DomainApps. To Google, and other search engines, it appears to look like a regular site (which for the most part it is) and will index your content. DomainApps also has many pre made apps you can use to keep the web site content fresh. The base plan is free to use, and allows for an unlimited amount of domain names.

The nice thing also about DomainApps is the ability to create your own content. This includes custom copy, or even affiliate links. So since Google is terminating their service, I am moving all domain names to DomainApps, and will report in a year the results of the change.

In addition, I can cultivate the web site content to maybe generate some additional income. Who knows maybe I’ll turn some of them into real web sites. DomainApps appears to be a good stopgap between a parked domain, and a fully working site which requires a lot of effort and money to implement. In the meantime they are generating a reputation within the search engines.

Example Web Site

For those curious what a site looks like, you can visit one of the domains I own:

http://10for10.com/

It’s not going to win any design awards, and is something I quickly created. The domain name was previously used for a web hosting brand I acquired from another company. So it’s relevancy and back links are for the web hosting industry. In this case figured I would also promote affiliate links from other web hosting companies.

Yes I do realize I offer web hosting myself, but the purpose is to promote services from other hosting companies. Believe it or not, in some cases I can earn more in the short term from affilate fees, than from the fees to maintain a customer internally. An affiliate fee is pure arbitrage, whereas bringing the customer within my company isn’t necessarily bad for business.

The issue is the market this domain was targeting (the very low end), it wasn’t necessarily the type of customer I wanted for my business. Lower end customers seem to switch providers constantly, and actually can be some of the most difficult customers to deal with. So instead of developing this brand to cater to this audience, I decided to refer them to other web hosting companies. My web hosting brands cater to higher price points, than the lower end which is super competitive, and profit margins are small.

Readers: What do you think about my decision use the 10for10 brand to sell other web hosting services than my own?

What Is Human Capital?

Miranda Marquit — Thu, 09 Feb 2012 13:28:02 +0000

One of the concepts that has been receiving a lot of attention lately is the idea of “human capital.” Human capital represents the knowledge, expertise and skills that someone has as related to an ability to contribute economic value.

Human capital is not a particularly new concept. Indeed, the immortal Adam Smith recognized the importance of developing skills, and the impact that a person’s skills could have on his or her ability to produce. In the second book of his Wealth of Nations work, Smith pointed this out about the development of skills:

Those talents, as they make a part of his fortune, so do they likewise that of the society to which he belongs. The improved dexterity of a workman may be considered in the same light as a machine or instrument of trade which facilitates and abridges labor, and which, though it costs a certain expense, repays that expense with a profit.

Human capital is an important part of any organization, and it is an important part of your own skills development. The point of recognizing human capital is to make use of the expertise, skills and talents of a workforce in a way that maximizes profits. With the right human capital at your disposal, you can run your business more efficiently.

Paying Attention to Human Capital in Your Business

Pay attention to the people you hire for your business. Indeed, the wise entrepreneur knows how to match needs with talents. Figure out what skill sets you need to add to your business in order to increase efficiency and quality. When you focus on hiring the right people with the right skills, you will realize net profits.

In some cases, this means that you have to pay a little extra or offer better benefits for better employees. Your extra investment in human capital can pay off when your employees accomplish great things — and lead to better economic results for you. Hiring an expert means that you don’t have to spend as much training someone. Hiring someone proficient in a skill means that he or she can perform the work more efficiently, saving time and money.

Developing Your Own Abilities

You can also enhance your own “worth” in terms of human capital. Developing a marketable skill can make you a valuable commodity. The sum of your knowledge, abilities, talents, and expertise all contribute to how much human capital you have to offer.

Capital is something that a business or individual starts with. It is put to work and hopefully earns a return beyond the original value. That is the hope with human capital. Your abilities should make you useful in providing a return for your knowledge and skills. What you are able to do should translate into economic value for a business — especially your own business. Take what you already have and build on it. If your skills can provide value, and a return on investment, then you have high human capital.

Make an effort to develop your abilities so that you have high human capital. That way, others will be more willing to take a chance on you. When others are willing to use the human capital you provide, you are more likely to earn more money for yourself as well as contribute to the economy.

Wealth is Much More than About Money

Larry Ludwig — Mon, 06 Feb 2012 14:03:08 +0000

Wealth is a state of mind. Hear me out before you think I’m a nut job for making this statement. I know this sounds a little weird and metaphysical, but from my experience it’s true. The psychology related to money and wealth is important to understand, much more than the physical process. The mechanics of investing and growing a business are important to act upon, but easy to grasp. A simple way is to find out how others achieved the results you want, and copy it.

On the other hand the psychology of money and wealth is hard. Too many people have self limiting beliefs when it comes to money and wealth, and at times I myself is included.

Often times people do irrational things when being rational is a much better solution. When it comes to money people get downright nuts. Benjamin Graham’s Mr. Market comes to mind. It’s been said people like to talk less about money than sex. Yet money affects us in our daily lives. At least when I went to school, we didn’t learn anything about money, not even in home economics. So if it’s not discussed in school, friends don’t want to talk about it, and if your parents weren’t good with it, how can one become an expert in money? Instead we get ideas about wealth and money piecemealed together at various times in our life.

Money Is Just A Tool

It’s been said money is the root of all evil, but is that really true? I had a college friend that always spewed that mantra whenever he could. So it’s no surprise today he’s the head of a local teachers union pushing for teachers rights so they are paid fairly (but I thought teaching was for the kids?).

My friend’s parents lacked money, and he held my other friend’s dad in contempt because he had a lot of money. My friend’s belief that money was evil (among many other things) lead him down a specific path in life. Where are your beliefs about money and wealth taking you? Most don’t consciously think about money.

I believe the lack of money is the root of all evil. Over the centuries, countries have gone to war, and people have been driven to do desperate things just to put food on the table. Individuals have resorted to acts of violence, stealing, lying and cheating all for the sake of surviving.

Money is inert. Money is just a means to store effort (otherwise known as human capital) and exchange that effort with others. Money is neither good or bad. It knows no hatred, no pity, success or failure. Money is only “good” or “bad” based upon how it’s used. Just like a gun, money is just a tool. It’s nothing more or less, but maybe the most complex tool we know least about. Doesn’t it make sense to become an expert in a tool you use so often? In today’s world understanding how to use a computer is critical. It’s important if you want a well paying job, and to interact with friends and family online. Yet many in the population will know more about Snooki, than how to balance their checkbook.

My focus has always been how to effectively use money. How can I earn more money with less effort. Let me give you an example. Sure you can dig a ditch with your own hands, but how effective is it? A shovel will get the work done in half the time, and with less effort. With this blog, I hope I’m helping my readers put their money to more effective use, or at least remove limiting beliefs so they can increase their income. I know this sounds a little cliché but my goal is to make money work for you, rather than you working for money.

The Psychology Of Being Poor

I also find fascinating what others think of money, and how it plays out in their decisions. Starting with the financial crisis in 2008, to recently the Occupy Wall Street movement, the zeitgeist of the country has definitely changed. In my opinion, the change is not for the better. Instead of once looking up to others who’ve achieved financial success, society is now looking at them in contempt. In some cases blaming groups in society for our ills, instead of blaming the individual (ie. “Bankers add no value to society, and where the cause of the financial crisis. Wall Street was bailed out, but Main Street was not.”). In reality, many groups where involved in the financial crisis, and not one single group can be blamed: the homeowners, the real estate agents, home appraisers, politicians, investment bankers, etc. It’s easy to find a scapegoat when you don’t blame yourself for your actions.

In my opinion, most of the time when someone is poor it’s from bad decisions they’ve made in their life. The decision to pick a college major because it was “easy” and party instead. The decision to ignore changes in the marketplace. The decision to not constantly learn new skills. The decision to have a child out of wedlock. The decision to not work hard or take a “cushy” job.

I don’t look down on someone who’s made these decisions. Who am I do judge someone else when I haven’t walked in their shoes, and it’s their life not mine. Though no one should judge me for decisions I’ve made in my life, if it’s put me in a better position financially.

Why do some people, who don’t have any money, have angst against others that do? Could it be as simple as envy? There’s no dastardly plot by Dr. Evil to target poor people, and suck them dry of their money. Rich people don’t think of ways to stick it to others; instead focus on how they can add value to others.

Many act as if people with money must have done something evil, and wronged others to attain it. Nothing can be further from the truth. Most who create wealth do so by the rules setup by society, and created their wealth ethically. Yes of course there are exceptions: some get a lucky break, some do it unethically or by illegal means. Most achieve wealth by hard work, and taking risks. They are then rewarded for their effort. You don’t get something for nothing, and you don’t stay wealthy by luck alone. Know the difference from being “lottery lucky” from an overnight success that was ten years in the making.

Money is a Means to an End

My pursuit of money and wealth has always been much more than about the money itself. It’s always been means to an end, than an end in itself. To me gaining money has been about taking care of my family, being self sufficient and not relying on the government for aid, and the occasional material splurge. I hope my family can get to the point where we can donate a decent percentage of our money to charity. Money is just a means to make you feel good.

Only until recently have I not cared what others think of me when I start discussing money. I rather speak from my heart, and do the right thing than worry what others might think of me. Even if this means someone might mistake me for being materialistic, or that I must not care about the poor. I really don’t care what other’s think of me anymore. Again money is just a means to my end. We do have some materialist things, and in perspective it’s not much. I’ll have no issue if our material things were gone. Money to me is just a means to keep score. Ironically it’s not with others, but my own personal goals in life.

You Are Already Wealthy!

Wealth without question is a state of mind. You can be well off, yet still feel poor. I know because I’ve felt this way. I have some friends who are really struggling financially, yet I complain about the issues I have in my life. There’s no comparison, and should feel grateful for what I have.

Getting to some financial goal does not then mean you’ll never have to worry about money again. If anything, to quote Notorious B.I.G., Mo Money Mo Problems. Just realize having more money does not solve all your problems. If anything, it amplifies your character flaws and weaknesses.

We live in one of the wealthiest times in history, even after the financial crisis. People even in the lower income brackets have things that our ancestors didn’t have 100 years ago. Almost everyone has running water, a roof over their head, clothing, and enough food to eat. Even today, there are parts of the world that can’t say this.

Money Is Flowing All Around You

Instead of coming from the idea that money is scarce, we should hold the belief that money is available all around you. As simple as this sounds, this belief is much more empowering than believing money is scarce. All you need to do is figure out how to capture it.

My imaginary lack has caused great stress in my life. Even though my wife and I make a very good income, it’s always something that’s been a concern for me. We have a lot of obligations, and it’s no longer just me. A wife, and raising three children adds to my daily worry. My fear, as silly as it sounds, is I won’t be able to support them. I have high standards, and I’m concerned I won’t be able to meet them.

I recently changed my metaphor, and it really helped me. All I have to do is figure out how to capture money by adding value to others. By just changing this thought process, it has relieved a decent amount of stress in my life. So just be thankful you are alive. You get to live another day, and get one step closer to achieving your goals and role in life.

Improve Your Psychology Towards Money

I recently listened to an Anthony Robbins program about wealth. Yes the big teeth informercial guy. I’ll admit I’ve been a fan of his work for years, and like most of his work. I’m excited because in March will be attending his Unleash the Power Within day seminar in New York (see my review). In case you are wondering – yes I’ll be doing the infamous firewalk.

While searching the web, I discovered the whole program I listened to is available online for free. You can check it out at:

http://www.tonyrobbins.com/financial-freedom/index.php

I suggest listening to the program soon, and I’m not sure how long this URL will be kept up. It appears to be an open URL you would only gain access to after taking some survey. The details in Tony’s program is simple, but still worth listening to so you can improve your psychology towards money.

Readers: What limiting beliefs do you have about money and wealth? What path is your belief about money and wealth taking you towards?

How to Hire the Right Accountant for You

Miranda Marquit — Wed, 28 Dec 2011 23:34:31 +0000

A few years ago, when my husband and I went to buy a house, we were required to have an income audit. Since I am the primary breadwinner and, at the time, my home business was only a couple of years old, the lender wanted to make sure that our income would be sufficient for the mortgage payments.
We were told an income audit was the ticket to qualifying for a mortgage with the best possible interest rate, so we began looking for an accountant to perform the audit. We enjoyed working with the accountant so much that we have continued to use him to help us prepare our taxes and work with us on other financial issues, especially those relating to the home business. Here are some ideas to help you hire the right accountant for you:

1. Ask Around

The first thing we did was to ask for referrals. We asked other people in town which accountants they used, and got some ideas of who might be a good fit for us. Then we called those accountants to have a brief chat.

2. Forming an Impression over the Phone

When you call to set up an appointment, pay attention to how the conversation goes. I actually had to leave a message at nearly all the CPA offices I called. Only three of them called back, so that narrowed things considerably. Two called back quickly; the third didn’t call back until after I’d made a decision.

I paid attention to the questions asked over the phone. One CPA just said that he’d do the income audit, while the other asked questions about my business, and told me what he needed from me beforehand to speed up the process. You can probably guess which man is still my accountant.

Later, as you move further in the process, determine how comfortable you are with the accountant in person. If you are uncomfortable, or if it doesn’t feel like it’s a good fit, don’t be afraid to look elsewhere for a CPA.

3. Check Credentials and References

Most states have boards, departments or offices that handle professional licensing, or that might even be specifically involved with CPA licensing. Check with the appropriate office to ensure that your accountant is up-to-date in his or her licenses, and that he or she has received the proper training.

You might also want to check references. You are making a hire; it’s a good idea to find out what others are saying. We didn’t check references for our CPA, though, since he had come highly recommended from some we trusted. But we did double check the credentials.

4. Choose Someone Who Fits Your Needs

Our CPA prepares a large number of tax returns for small businesses, as well as for individuals. He is experienced in preparing returns for home business owners. So, he takes care of the return for the LLC, and our individual return, each year. He is also well-versed in the issues that affect home business owners, and suggests tax strategies and accounting strategies that work for us.

I don’t think someone who mainly prepares individual tax returns, or someone who concentrated mostly on the returns for some of the bigger businesses in town, would be as “tuned in” to my needs as a home business owner. Look for someone who has experience working with your type of business.

Bottom Line

Your accountant has access to very sensitive information about you. You need to develop a bond with him or her, and you need to be able to trust your CPA. Choose carefully. Don’t be afraid to ask for references and check credentials. And look for someone who asks about your business and is willing to evaluate your individual situation and make strategy suggestions that fit you.

Starting a Business: Monetize What You Know

Miranda Marquit — Sat, 03 Dec 2011 14:02:54 +0000

Starting a side hustle is a dream for many. However, it’s easier to start a business based on something you know. You don’t always need specific knowledge to be successful with a business, but it can smooth the way. If you are expert in an area, there are ways to build a business around what you know.

Could Your Knowledge be Useful to Someone Else?

The first step is to consider what you know, and determine if it could be useful to someone else. There are those willing to pay for what you know. What are you good at? Is there a need for your knowledge? For some businesses, it’s relatively easy to determine what skills and knowledge you can sell. Freelance-type work, including graphic design, Web development, writing, and programming, is fairly easy to sell.

However, you might be able to build a business around your ability to teach others to use computers, or to use social media to their advantage, or even your ability to garden. It’s possible to act as a consultant in your area of expertise. Find out whether there is demand for your skill or knowledge, and offer classes to teach others.

Share Your Knowledge with the World

Another option is to monetize what you know online. If you know a great deal about a subject, you can share what you know through a blog. It takes time to build up a Web site, and earn money from it, but there are ways to make money through advertising and affiliate programs. Those who truly understand their subject matter can build a following — and an online business — around what they know.

You can turn your hobby or your specialized knowledge into a blog that could eventually bring in supplemental income, or even replace your primary income some day.

Spreading the Word

In any case, monetizing what you know requires that you spread the word about your abilities. Whether you are trying to drive traffic to your Web site, or looking for clients for your consulting business, it’s important to market yourself in some way. Some of your options include:

Social Media: Use the power of social media to help you reach more people. Focus on niche sites, submitting to social sites frequented by your audience or potential clients.
Show Your Expertise: It’s important to “prove” you are an expert in your field. This can be done through your blog, allowing you to establish your authority, and it can also be helped when you create guest posts for other blogs.
Networking: Let people in your social network, online and offline, that you are looking for clients, or that you have a new blog. You don’t have to push the information on others, but you can let them know. Also, attend local networking events and meet others who operate in a similar field.

Any type of business is going to require hard work. Patience is required as you search for success. If you concentrate on using what you know to make money, you have a greater chance of seeing it through, avoiding burn-out, weathering tough economic times, and setting yourself up as a credible expert.

Could Your Business Handle Another Recession?

Miranda Marquit — Tue, 15 Nov 2011 19:40:45 +0000

Every other week, it seems, someone is predicting that another recession is right around the corner. So far, the economy has managed to hang on, but there are dire predictions about what could be next, what with the European debt situation spiraling out of control, China slowing down, and the U.S. stagnating.

In truth, it doesn’t hurt to be ready for the next economic setback. It’s always a good idea to shore up your business finances, and be prepared for whatever might come your way. So, as you try to avoid falling into panic, here are some things to consider:

Pay Down High Interest Debt and Borrow Smart

Now is a good time to pay down high interest debt, or refinance it to a lower rate. If you can reduce your liabilities without endangering your business, do so. The fewer liabilities and obligations you have during a recession, the better off you’ll be.

However, as you know, chances are that you need to borrow to some degree. You should borrow smart, though. In the current environment, you should be able to get access to low cost loans. Figure out your needs, and only borrow what you need. Going in to a possible recession is no time to borrow extravagantly.

Work on Your Business Credit

A credit crunch usually goes along with a recession. How does your business credit look? You can register your business with one of the reporting agencies (like Dun & Bradstreet) that specialize in business credit. Then, ask the people you do business with to report your behaviors. Get a business credit card. Build up your business credit, and you will be more likely to weather a credit crunch, able to access the capital you need.

Understand Your Priorities

Take some time to understand your business priorities. During a recession, hard choices have to be made. If you know your priorities, though, you can make those choices a little easier. Figure out which products, and which relationships, are most important. Know that the marketing budget needs to remain constant — or even increase — during a recession. Do a review, and figure out which (less important) costs could be cut. Start cutting now, and you’ll be in an even better position when a recession rolls around.

Keep Your Key People

During a recession (and any other time) you want talented people working with you in your business. Evaluate your employees, and decide which are likely to help you through the recession. Then figure out what you can do to keep them. It isn’t always about salary, either. Find out what motivates your talented employees, and what perks they would prefer. Do your best to make the work environment desirable so that your talented employees will stick with you and help you keep your business going.

Develop Good Customer Relationships

You want strong customer relationships and loyalty even in good times, but it’s especially important to be able to rely on repeat customers during a recession. Work now to improve your customer service and enhance your customer experience. Then, when you are faced with a recession, you are more likely to retain those customers.

Technology is Great, Unless It Doesn’t Work

Larry Ludwig — Thu, 03 Nov 2011 15:34:01 +0000

I love technology. Some may say I’m a computer geek, but that’s ok I revel in that comment. I’ve always been much more than the geek factor when using technology. I’ve never been about using technology for technology sake. I’ve always held the belief that technology should serve man, and better the world because of it. One of my core missions of my business (and my life), is to make technology improve the life of my fellow man. The problem is while technology can be enlightening, it can also be outright frustrating to use. While technology can advance, it can also take things two steps backwards in the process. Let me recant two recent examples in my life.

Google Panda Update

Google recently updated their search algorithm, which affected this web site. The engineers at Google tested their update before releasing it into the wild. They suggested it was to help improve search results and relevancy, while also removing spam. From the tests I’ve seen it did neither of them. It downgraded sites like mine, while black hat SEO sites are still ranked high.

In my opinion Google’s objectives were not met, and if anything made things worse. I understand Google’s search engine algorithm is complex, but that’s not the point. Sometimes previously used technology was better. That “new and improved” isn’t always better, and in fact sometimes can be worse that what was previously used.

XM Radio Activation

As previously mentioned I own a 2010 Hyundai Genesis. Overall a very good car for the money, and a great value. The user interface to manage most functions is pretty easy, and I think better than the cumbersome BMW iDrive (you crazy) system. My problem is not with Hyundai’s navigation system, but with the XM radio. Satellite radio is supposed to be better and clearer than traditional terrestrial radio. You know that old 19th century technology that Marconi developed. At least with FM and AM radio I can turn it on and go. No so with the “beyond AM and FM – XM Radio”. It’s a much more complex process, and as I’ve seen problematic.

For those not familiar with the procedure to activate XM radio, let me summarize. To activate the radio you must first contact XM-Sirius radio, and they then will send out a signal from their satellite to activate your radio. At least with the other car I own, my Honda Odyssey, it was an easy process. Not so with the Hyundai Genesis.

Who was the idiot that developed this procedure? After numerous calls to them, and the dealership replacing my radio I still cannot activate my radio. Sirius-XM states it’s my radio is broken, and Hyundai says I must contact XM. Either way I have an inactive radio, which I’m still paying for in hopes to get this working.

Why should activating a radio be so complex? What XM radio should have done is made it a process in which they give you a code to activate your radio. No waiting in the car for a clear signal, and guessing if it will work. Instead after the Hyundai dealership supposedly replaced my radio (though I’m minus 6 audio DVDs which is a whole other story), I still cannot get this to work. I’ve spent at least six hours waiting on the phone with XM, and visiting my local dealership to try to get this fixed. Neither vendor has a solution. So Sirius XM Radio will more than likely lose a subscriber because the process is way too complex, and is prone to issues like I have. In any business you make the signup process complex, you’ll lose customers in the process.

Summary

A lot of the faults of poorly designed technology is the engineering itself. I don’t know how many times I’ve used a device and wonder did the engineer actually use the product? Some of it is simple stuff that a minor tweak could make all the difference. In your business and personal life don’t get sucked into using technology because it’s the latest and greatest. Sometimes the latest isn’t so great. Always be on the look out on newer technology that will help improve your business, but always be skeptical. In your business make sure using your product or service brain dead simple, and actually better than what you previously offered.

Steve Jobs Creating Jobs

Larry Ludwig — Sun, 09 Oct 2011 17:23:44 +0000

What odd times we are living in. Steve Jobs, the founder of Apple (AAPL), died on Wednesday at the ripe young age of 56 years old. He ranks up there with the likes of: Henry Ford, Thomas Edison, and Walt Disney. Yet the same day Steve dies, a disjointed group of individuals from Occupy Wall Street were out in full force. At a time we should be celebrating capitalism and one of best (if not the best) entrepreneurs of our era, we instead have people protesting against capitalism and how it doesn’t work. They want their fair share from the 1%ers, nevermind they fact they aren’t entitled to someone else’s labor.

Last Thursday I personally went down to the park where Occupy Wall Street is squatting, to see what it was about. I mostly saw what could be described as a disjoint group of individuals with many different ideas some completely juxtapose to each other. It could be best described as a bunch of “hippies”. I saw signs praising socialism, communism, and beefs against capitalism. The best one was: Sally Mae student loans should be forgiven. Ironically the group is protesting against Wall Street bailouts, but I guess it’s ok if the bailout is directed to their cause. The blogger Thousandaire has pointed this out best, Wall Street isn’t the group they should be protesting against. It wasn’t Wall Street that gave them the money, it was our own government. Many of these banks and Wall Street firms would have collapsed, if it weren’t for our government bailing them out.

A Job Is A Right. Right! Sure it is.

Yes I sure sympathise with this group and their anger, and in that way is similar to the Tea Party movement. But at least with the Tea Party movement it was organized and focused from the beginning. The Tea Party’s mantra could be summarized in an elevator pitch: government is too big, needs to decrease in size, and in the process increase one’s liberty. All I see with Occupy Wall Street is a mob, basically mad the world, and venting their frustations to an amorphous blob of fat cat bankers and 1% earners. As if everyone in that group is evil, and does not deserve the income they generate. It’s presumed if you earn a lot of money, you must have taken advantage of others or done something imoral.

What is the end game with Occupy Wall Street? Damned if I know, and they don’t seem to have a clue either. It’s certainly not an “American Fall” that I’ve seen some articles compare to the Arab Spring. The Arab Spring was against oppression, and tyrant governments limiting freedom. Is this group for more individual freedom? I think not, with the welcoming of unions and other traditional extreme leftist ideas.

The movement appears to be is very anti-corporate. I saw a bastardized American flag with corporate logos to replace the stars. Yet it’s been reported that many use the local McDonalds restroom. Capitalism can’t be all that bad, when nature is calling.

Steve Jobs was part of the 1%ers they state are so evil. Is it then companies that create must needed goods and services (i.e. oil and medical) for a profit are considered evil, yet for other companies that aren’t a must need it’s ok? Can someone legitimately explain the difference to me?

Little did the protesters know they were secretly celebrating capitalism, while marching on Wall Street. I mostly saw Apple computers (probably bought by their parents), and other Apple products used on the park grounds. Ironically, the are tweeting, posting messages to Facebook and on YouTube to get the message out. All capitalistic inventions from our least regulated industry – technology. It’s no accident that the technology industry has taken off in over thirty years since Apple has been founded. Does anyone really think heavy regulations, a Technology Czar and Unions would have made things better?? We would have wound up with technology similar to the East German auto manufacturer Tarbant.

Steve Jobs also came from that 60′s era when hippies first appeared. Many considered Steve a hippie: his trek to India, his religious Buddhism beliefs, his love for the Beatles and Bob Dylan, and strict vegetarian diet. But this is where the similarities to Steve, and the protesters of Wall Street end.

Steve was perhaps one of the most driven individuals. He was pretty much is a role model of what a capitalist and entrepreneur would be like. If the protesters had 1/10 of the drive that Steve Jobs had, perhaps they too could create something insanely great. Perhaps Steve can be a roll model to the protesters to think different, and apply yourself instead of blaming others for your personal ills.

This is an unreleased 1997 commercial with Steve Jobs doing the narration instead of Richard Dreyfuss. Perhaps what is said has much more meaning now that he is gone. Knowing Steve, and his attention to details, it’s almost guaranteed had direct involvement with creating this commercial.

Apple was founded during the last malaise our country saw in the 1970′s. Yet I’m seeing articles, similar to the 70′s, again stating the decline of America. Now because of one man is gone, America will go to hell in a handbasket? Perhaps someone should have told Steve Jobs before he cofounded Apple. How different would have our society and culture been without Steve Jobs, Pixar and Apple?

Yes it’s true Apple only employees around 50,000 people. The ecosystem around Apple products, directly or indirectly created, (or saved as our government likes to state) hundreds of thousands if not millions of jobs. You want a real job stimulus? Make it easy for the entrepreneurs of our country to become the next Steve Jobs. Not having to deal with over regulated red tape, and high taxes punishing success.

We will see a new wave of entrepreneurs, dare I say maybe someone even better than Steve Jobs, arise from the ashes of our current economic troubles.

The protestors on Wall Street are lumping individuals like Steve Jobs in with the legitimately corrupt, but that is just a small minority of 1%ers. Steve Jobs created more jobs and wealth than anyone could have imagined from his adopted childhood. The angry mob is targeting the wrong street. The group should be occupying Pennsylvania Avenue, not Wall Street. For the failed economy policies, and not letting the true leaders lead us out of this economic crisis.

The Best Self Help Books

Larry Ludwig — Tue, 13 Sep 2011 14:44:46 +0000

Similar to my best finance books list, I’ve been an avid reader of self help books for many years. One might be wondering what does self help have to do with investing and business? Everything! You must constantly feed the mind.

Especially when owning a business, the buck literally stops with you. You are the weakest link within your company. If you aren’t up to the task, then your company will also perform poorly.

If you lack self confidence, you lack the ability to produce. Some days as an entrepreneur you need to get pumped, and feel excited when the rest of the world has you down.

Readers: What are some of your personal favorites? Please add it to the comments below.

Awaken the Giant Within

Anthony Robbins

One of my favorite books on the list. Anthony Robbins goes over every aspect of life so you can excel in human achievement.

The 7 Habits of Highly Effective People

Stephen R. Covey

A classic book with timeless habits. A balanced approached to handling life’s daily problems, and long term goals.

The 4 Hour Work Week

Timothy Ferris

Not the best book in the list, and some other books on this list in my opinion explain some of Tim’s topics better. Though the book is a good summary, makes you think about business in a different way, and motivates you to take action.

Think and Grow Rich

Napoleon Hill

Think and Grow Rich by Napoleon Hill is the classic book that in my opinion started the self help craze. A book written over 70 years ago, its principles still apply today.

Getting Things Done

David Allen

Getting Things Done or GTD is a popular book in the tech crowd I hang out with. If you are looking for a way to improve your productivity, this is the book for you.

Influence: The Psychology of Persuasion

Robert B. Cialdini

A great book! Explains how you can be influenced by the media, and your surroundings. On the flip side , can also help persuade (sell) others. A MUST for any salesperson.

The Best Business Ideas Are The Simplest

Larry Ludwig — Tue, 16 Aug 2011 14:40:08 +0000

When I first started my own business, I thought my ideas had to be complex. I thought the road to entrepreneurial success was a complex business plan. Maybe because I come from an engineering/scientific background this is why I thought this way. I thought the harder the idea was to execute, the harder for others to enter that same business. This barrier of entry would make my business more profitable.

Little did I realize it makes it harder for me to execute that same idea within my business. Complex business ideas equal complex businesses. Complex businesses have more moving parts, which makes them harder to manage. When they are harder to manage it makes a business more likely to fail. I’ve learned over the years, sometimes the simplest business ideas are the best. What matters isn’t the idea, or how unique it is, but how well you execute it.

Some of the startups I’ve worked for were very well funded VC startups, and had some of the best and the brightest talent. Yet they failed anyways. One startup I worked for sold a very expensive B2B solution, with a 8 – 12 month sales cycle. Yes the payout could be huge, but if it didn’t sell a lot of human capital, money and time was wasted. Then, on top of that, the product required many months of customization and integration within the company’s business process. So from the beginning of the sales process to completion was about two years in the making. The company was doing very well, until 2001 when the market collapsed. Their sales cycle slowed down to nothing, and eventually went out of business two years later.

I’ve learned in business, the KISS (Keep It Simple Stupid) principle applies.
It’s not how great the business idea is, but it’s how well its executed.

Take the Drudge Report for example. The web page design is circa 1995. Nothing is special about this site right? Love or hate the site, most people think it can’t be generating much income right? You would be very wrong. 24/7 Wall Street estimates the site to be worth $48 Million.

From a technical standpoint, saying the site is unremarkable is putting it nicely. The web site is a simple static one page, no dynamically generated web pages, and is designed very poorly. The site design doesn’t try to optimize for search engines, or user optimization to get people to click on links. There’s no above the fold site design, or site navigation.

The great thing about the Drudge Report – most of the content isn’t written by them. It just summarizes the news from other web sites, with a slight slant. The Drudge Report is selling one thing. It’s selling a viewpoint that is missed by most of the mainstream media. By focusing on this angle and niche that other news outlets have missed, Matt Drudge has made out like a bandit.

A recent study found that the Drudge Report drives more traffic to a web site, than Twitter or Facebook combined! I would believe that stat based upon my experience in dealing with referring Drudge Report traffic. This is simply profound for a little web site with no real social media strategy.

There are a total of three people that manage the web site, if you include Matt Drudge. In 2003, Business 2.0 magazine estimated the web site generated $3,500 daily. It is pretty safe to assume the web site makes at least double that today, if not more. So for a business that generates over $1 Million in annual profit, with very little overhead, I’ll take that business any day.

It’s Time For the Unproductive To Become Productive

Larry Ludwig — Thu, 30 Jun 2011 16:15:08 +0000

President Obama has consistently bashed the productive. Obama states the rich aren’t giving in their fair share in taxes, and contributing to society as a whole. Hogwash! Many wealthy people are job creators, and contribute to society directly and indirectly. Yes it is true there are wealthy people in society who gained their money via ruthless means, but they are a very small minority. Most rich individuals from my experience are hard working and ethical individuals. Obama would rather make the classic political rhetoric that rich people are ‘evil’. Divider in Chief why all the hate?

Most wealthy US citizens gained their wealth through legal, and ethical means. The most common method that people gain wealth is from owning a business. From a business owner perpective, the only way they were able gain wealth was giving more to their customers than what they received. That’s it! No form of tricky was involved. No gun is held at a customer stating they must buy their product.

You don’t get something for nothing (unless it’s from the government). No business lasts too long if they are ripping off their customers, or providing a shoddy service. In the age of the Internet time, bad press gets out fast, and there is more than likely another competitor available with just a mouse click. Yet the concept of free markets seems foreign to the current President, by the statements he constantly makes.

Yes there are “trust fund babies” who never have to work again, but yet over 80% of millionaires today are first generation. Meaning they became wealthy within their lifetime starting from very little or nothing. This means they became wealthy by savings, investing and/or starting a business. Things that typically rings true to the American work ethic, and what most individuals know to be an accepted fact.

Instead of bashing the productive, why not help elevate the unproductive instead? The saying “Give a man a fish and they can eat for a day. Teach a man how to fish, and they can eat for a lifetime” couldn’t be more truer words. We are giving people fish, and not teaching them how to be self-sufficient.

As Obama bashes the wealthy, I could just as easily bash poor for causing their own circumstances. Yes their are truly people in need of assistance but, similar to the amount of corrupt wealthy, they are in the fringe minority. Most getting some sort of government assistance aren’t on it temporarily but, like drug addition, on government welfare permanently. Most are physically and/or mentally able to be independent, but either purposely chose to, or don’t know how to. It’s much easier to get something for nothing, than to have to work hard for it, even if the amount received is small. To be fair, I have heard Obama state that retraining is part of their job strategy in helping the unemployed, but that seems to be a very minor part of his message.

Reagan once said “If you want less of something you tax it, if you want more of something you subsidize it”. All I see in this administration are means to want to increase taxes, increase rules and regulations, and increase the government handouts. The only way we are going to get out of this slow economy, is help the unproductive become productive again. Gosh darn it, maybe some of them will become those rich folk that Obama vilifies so much. If we don’t change our path, we will continue with the slow to no growth trajectory in our economy.

You’re Always Working For “The Man”

Larry Ludwig — Wed, 11 May 2011 18:30:58 +0000

I love it when I have salaried friends look at me, and state they too want to own their own business. They tell me in more or less terms they no longer want a boss. They want to work for themselves. They no longer want to work for “the man”. I laugh when I hear this because they absolutely have no idea what they are talking about. This is on similar terms of wanting to own a business that requires little to no work. Even when owning a business you are still working for “the man”, but it is possible to make it less painful. Keep reading to find out how.

Yes you do have more freedom when owning your own business, but you still have “the man” watching over you. As an employee it’s obvious it’s your boss. When owning a business it’s: your customers, your investors, the government, and in some cases can be your vendors. You always need to rely on others when owning a business. You need to collaborate with others, otherwise you don’t have a business. You are interdependent on others, and I consider this a good healthy relationship.

What I think is more important about working for someone, or owning your own business is the quality of the relationship. Is the customer or boss domineering? I’ve worked for bosses, and also had clients, who were like this. The relationship isn’t healthy. It’s makes you dread the interactions, it doesn’t make work fun, is an emotional drain, and can be a financial drain as well. In the case of working for a boss like that, I quit and found another job. Over the years, I have ‘fired’ quite a few of my customers as well. When owning a business you have many little bosses. If you don’t think the business relationship is working, you can ask the customer to move on.

From my experience Pareto principle (80/20 rule) definitely applies when working with customers. It always seems 20% of the customers generate 80% of my revenue. In the same notion, the bottom 20% of my customers take 80% of my time. From customer service, to billing collections, to just in general pain in the ass factor. These customers can be outright difficult to work with. On an annual basis I mentally take note of these customers. At some point I determine should we continue the relationship with them.

I’ve never understood the lip service mantra “the customer is always right”. While I understand my business would not exist if it weren’t for my customers, I also think the relationship is a two way street. The relationship should not be one sided as the mantra states.

Over the years “firing” some of the lower tier customers has worked out very well. It’s freed up time for me, and others within my company. Maybe by going to my competitors it’s helped make them less profitable in the process . I know it has improved our bottom line. Since I’ve done this, it’s become less painful working for “the man”.

Readers: What do you think about my method in retaining the good customers and getting rid of the bad ones?

Why are Friends and Family Always Asking For Free Service?

Larry Ludwig — Thu, 31 Mar 2011 01:03:54 +0000

I’ve owned a business for over ten years now. It’s interesting how many of my relatives, and friends immediately assume that I’ll not only give them a great deal, but I can give out my services for free. That somehow Investor Junkie became a charity organization. I don’t know about you, but I have an issue with this. Let me explain in more detail.

Now don’t take what I’m saying as I’m a heartless bastard that doesn’t help anyone. Since I’ve been in my teens, it seems like I was the computer wiz kid that everyone went to for help. I’ve always been the “Geek Squad” within the Investor Junkie family.

I’m always helping my mother, sister-in-law, and the outlaws (otherwise known as in-laws) with their computer problems. Friends commonly call me asking all sorts of computer questions. If you have a technical problem, I am your goto man. I have no issue with helping others if it’s based upon:

The work involved is only a few hours maximum.
There is no costs I must outlay myself. It’s only my time.
That I know eventually in return, someday, somehow I’ll be able to get a return favor from them. I have an issue if it’s very one sided.
My personal free time is valuable. After working 80+ hour work week, I don’t seem to have a lot of it, and would like some time away from what I do in business

Lately it seems though I feel like I’ve been taken advantage of, feel like the reciprocation is very one sided, and not being appreciated for the work I do pro bono. Let me give you two examples.

My Brother

As I mentioned, I’ve not had a good relationship because of many reasons. He recently mentioned to me he was starting a new business, and needed some of my services to help him online.

Now mind you he wasn’t asking for a little 1-3 hour project. The project at minimum would take 40 hours, and probably wind up taking 80 hours. It also happens to be related to what I do with my business online. He wanted me to do the work for free. My brother initially didn’t understand the time involved to do the work. I explained to him the work required, and how I’m behind on other paying projects. So I don’t have the time in my work, and personal schedule to do this.

I told him straight up, even if we had a great relationship, I still wouldn’t be able to help him for free. He still was annoyed at me, and stated how he would do anything for me in return. That fell on my very def ears. The relationship has always been very one sided. It seems like my brother (and parents convincing me to help him) always needed something from me. Based upon helping his wife and daughter last round, I believe he owes me a lot.

My Friend

My friend, and I go a long time back. We both went to the same college together, and were roommates. About 4-5 years ago, he contacted me for free service through my company. At that time I said no. He proceeded to bitch at me, and should do it for free since he was my friend. I never agreed to his terms, and we each went on our separate ways.

Fast forward to last year, he also needed some help, and wanted to use our services again. He again asked if I could give him a deal. I said yes this time, and marked off 60% off our normal list price for that service. He signed up, but required a lot of hand-holding to get his service going. The ironic thing is friends, and family are usually much more demanding than paying clients. Why is that?

My friend needed much more assistance to get going on our service. Much more assistance than I myself would normally do (in many cases someone else within my company would help him). Unfortunately he has something my clients do not – a direct line to my cell phone. I only give out my cell phone to friends and family. I prefer customers going though various other channels, than contacting me directly via my cell phone. I’ve learned over the years, I do not want to available 24/7. I need downtime. I also may not be on duty, or be able to assist them with their issue. To make a long story short, I would normally give this type of hand holding to our higher paying customers.

So one year later his contract is up with our services. He contacts me that his business isn’t really making much money, it’s a non-profit organization, and if we could donate our service. I initially grumbled, but in a somewhat hesitant fashion agreed for at least the next year.

Well I then had this idea. Why ask him to reciprocate in return? You know “scratch my back”. He after all graduated from our college majoring in English, and is a writer. I figured since I lack some of the grammar and punctuation skills (if you haven’t noticed) on this very here blog, why not ask him to proofread my work?

Here was his response:

I honestly doubt I’d have the time to regularly copy-edit, plus i hate it! As a return favor, I don’t mind every now and then, but honestly, copy editors get between $25-35/hour at a bare minimum, which hardly correlates to the equivalent of a $110 service.

Now mind you he forgot about how much I decreased the pricing last year, and the time I helped him get setup. I’m also giving him the service for free this year. I also understand copy editing this blog could be a lot of work. If he put a cap based upon say six hours of work that would have helped me tremendously.

I’m a reasonable person, and either would have agreed to a cap limit, or paid him the going rate for the additional work needed. I instead decided not to respond. It’s obvious he doesn’t want to do the work because he “hates it”. I just find it ironic that my work is minimized, while to him the proofreading is a lot of work.

What Would You Do?

I guess what I’m trying to say is I think I would rather donate my time and money to organizations than to friends and family. I don’t think they appreciate as much, and it comes with no strings attached.

Readers: What do you think? How would you handle these situations? Do you think I’m wrong in my way of handling them?

In Business It’s All About Focus

Larry Ludwig — Wed, 09 Feb 2011 15:40:24 +0000

I was talking to one of my friends the other day, he also is a business owner. He was referring one of his customers to me and asked if I still did web design. I told him that I do but only if the project is large enough. He didn’t understand why I wouldn’t be interested in this type of work anymore. His attitude was “you can make a few hundred dollars from the work”. Yes I could generate some income, but at what cost and effort?

You see I started way back in 1994 doing just this. I was hired by a NYC ad agency as a web developer to create web sites for Fortune 500 companies. I really had a great time working with companies like IBM, Minolta, ING Bank, and Chase Manhattan Bank. The cost of theses projects were six figures. Years later, when I started my own firm, I started doing the same thing, but with much smaller companies. The problem was their budgets were much smaller, yet had similar expectations. In addition, many didn’t either understand or appreciate the work involved to develop the site. Keep in mind at the time, no great open source applications like WordPress existed. We had to create much of the web site from scratch, and tools were still somewhat primitive.

I also saw an increase in just out of college students, who no experience in effective web site design. They worked at a much cheaper rate. There were quite a few times we were undercut by the owner’s college aged nephew. Yes they might have been able to create a site, but was it effective? Did it help create an effective online brand and increase sales? It turned out to be a lot of work for little pay. Clients were given specific details in what was included in our fixed price, but would constantly want additional features yet not want to pay for them.

Eventually I decided to focus on other opportunities in the online world. In the end they were more profitable and had less stress. In business it’s not only about what you focus on, but what clients and type of work you don’t do. Opportunity cost is an important factor when owning a business. It’s not only what is your business, but what you aren’t. This is something my business friend still doesn’t understand. You can’t be a jack of all trades, and please everyone.

It is not uncommon for him to do a sub $700 web site project, yet his primary focus is break/fix PC repair for individuals and small businesses. If I desperately needed money, and wasn’t busy, I would consider a project like this. But only if I weren’t busy. Mind you he complains he’s working like a dog every day so this isn’t his reason. He looks at it that he is making money with the project. In my opinion, I think a better fit for him is getting into Macintosh support. From at least what I’ve researched, small businesses are using Macintoshes more in their office, yet Apple primarily neglects this market. It’s a smaller market than with Microsoft Windows products, but there is also more competition with other technicians in his existing market.

Hiring Employees – Why You Shouldn’t Do This!

Larry Ludwig — Mon, 13 Dec 2010 20:29:01 +0000

When I started my first business, I had business partners. My partners original company was a computer hardware maintenance company. Otherwise known a “break-fix” company in the industry. They believed you had to have a strong business presence with an office, and many full-time employees. This would make you appear successful to the client when they came to visit. We also had the whole nine yards – an office, and employees. With all of this came a huge overhead. Before starting my own business I use to daydream of what it would be like. I always thought that the more employees I had, the more successful I would be. In order to deem myself successful, I had to employ 20+ people. Over the years I have come to the conclusion that this is the exact opposite of what you want to do.

Over the years one statement has always rung true to me:

It’s not how much you make, it’s how much you keep!

Originally, I took this on to mean about the tax man. It meant to me, that if my net income was $100,000 and had to pay $50,000 in taxes, it was the same if I had a net income of $60,000 but only paid $10,000 in income. I quickly realized the same applies to my business expenses. I would much rather have low overhead, and keep expenses down, than having to hire many employees. Whatever business you run, I’ll assume in most cases today it’s service based or close to it. Ideally, you want a business that has low overhead, and more importantly requires little human capital. With my existing business, I’ve used existing technologies, developed our own in-house technologies, used outside services, and documented procedures to automate my company as much as possible. I’ve discussed with other business owners in my field, and they all state that there should be at least 2-3 full time employees. We are able to do with 3 people part time. The net result: we generate same amount of income as a company that requires 3 employees, but have a higher operating profit margin.

With the pass of Obamacare, and before that many other laws in the United States, it’s making it more obvious employees are not assets, they are liabilities! Fortunately the United States isn’t as bad as France… yet. In France because of all of their labor laws, it’s easy to hire, but nearly impossible to fire someone. Mind you, I’m not saying as an entrepreneur you should be doing it all yourself. You most certainly cannot be an expert on everything. On the contrary, you just want to keep the amount of full time staff to a minimum. It’s much more cost effective to hire outside firms, consultants, and virtual assistants to do work for you. In fact there are books, like the Timothy Ferriss’s “4-Hour Work Week” that suggest exactly this. Let’s be honest, hiring, keeping and firing employees is an expensive process. In fact, it is usually your biggest expense. It is typical that an employee who makes $44,000/year costs the company $74,000/year total. This is total outlays: taxes, health insurance and retirement benefits. All other expenses I’ve had over the years, while they had upfront significant costs (i.e. computer equipment) they were relatively small compared to hiring one employee full-time.

Based upon my controversial opinion I’m sure some reader, who has never owned a business, will make comment. They will say something to the effect of how greedy I am, and this is why government is trying to tax the rich. That rich people aren’t creating the jobs, they are only exporting them overseas. You see, I am still creating work for others; it’s just not within my company. The net effect is I’m creating something out of nothing, and I’m adding value to society. In most cases the people I hire are within the United States, but in some cases it’s not. I don’t base my decision on who to hire if they are based within the U.S.A. I base it upon the quality of their work, and the cost. The best value for the money, and no different than most in their consumer purchases. On the flip side, my business helps save companies tens of thousands of dollars annually than themselves hiring full-time employees to do the work.

Take the personal finance blogger Darwin at Darwin’s Money. He’s created a part time business that’s a cad outsourcing company and outsources the work to temporary help. He has no overhead to hire employees. If the contractor doesn’t work out he can quickly get rid of them and find another. There’s no worry about benefits, unemployment insurance, or human resources.

The goal of my company, and every company for that matter, is to enrich the shareholders. In order to maintain competitiveness with my services, and price, I must make sure I keep my expenses low. If I don’t, I am competing against other companies that will outsource, and the net result is that I will be out of business because I can’t compete. We live in a global economy, and compete globally. If anything, the angry reader should be blaming our government. For the anti-free market rules and regulations that makes it more costly for me to hire employees full time. It’s becoming painfully obvious that I’m much better off outsourcing my work to third parties, than hiring people myself.

Readers: What is your experience? If you disagree, tell me why? If what I state is true, how can employees better compete in global workforce environment?

Generate Income from Domain Name Parking?

Larry Ludwig — Mon, 22 Nov 2010 14:49:54 +0000

I own a small amount of domain names. I have about 100 total. Over the years, I’ve registered domain names for some of the business ideas that I have brewing. Some turn into actual sites, but most do not. I don’t have the time to develop these domains into full business ideas. I recently had the idea; why not at least display something for the domain names I already own? It’s a common practice with registered domain names to display a web page. The web page is merely full of ads hopefully relevant to how people found the site. I decided that I would take these dormant domains, and put them to some use. This is a residual income experiment, and I’m curious if I can generate any real income from the domain names I currently own. I figured I might as well do something with the domains. The domain names are just sitting there doing nothing, and if anything are costing me money to own annually. I’m not expecting a lot of income from this. I would be happy if they generated $10/daily. The effort to setup these domains is a one time deal with only a few hours of effort. So it’s a no brainier to do this.

You can also speculate with domain names, which is a whole other topic. Buying domain names with the hope of making money, while not impossible, is much harder in today’s environment. Most of the good generic domain names (names which cannot be trademarked) are already taken. There are ways to analyze expired domain names, and pick them up once they go through their grace period. In most cases you must buy a domain name from someone who already owns one.

There are a few services that allow you to park your domains, and generate income from ad banners.

Google AdSense for Domains

I picked Google since we already have an AdSense account, and from my research they have a decent click through rate. I also selected Google since it’s quick and easy to implement, but may try another company in the future. Google derives from the domain name, and WHOIS info what ad banners to display. You can tweak the ads displayed by the customizing the “keywords” section. If the domain existed previously, and you don’t think Google can derive what ads to display, use keywords to help with the ads displayed.

The average click through rate for ad banners on the web is somewhere between 0.50% – 2%. I suspect with parked domains the click through rate will be lower than the average. With online banner ads it’s a numbers game anyways. The more traffic your domain name generates, the more income you’ll get. The ideal situation was the domain name was once active with content, inbound links, and had a decent amount of web traffic.

So far for the past week I have generated $0.05. I can retire! Seriously though this is an experiment. It didn’t take much time to setup the domain names within Google AdSense, and modify the DNS per Google’s requirements. Subscribe to my blog as I’ll update the outcome 6-12 months from now. From Google AdSense you can generate reports that show how many hits each site gets. Depending upon how things go I may sell, or let expire some of the domain names I own. This experiment will at least tell me if any of the domains I own generate traffic with no previous SEO, SEM or other internet marketing techniques. Stay tuned..

Does Passive Income Really Exist?

Larry Ludwig — Sat, 23 Oct 2010 01:08:32 +0000

One of the things I’ve always wondered is there such a thing as passive income? You know like the perpetual motion machine, set it and forget. The Wikipedia link I referenced gives some examples of passive income, and how the IRS defines passive income. My argument, just like perpetual motion, true passive income does not exist, and is lore of late night infomercials. No investment is set it and forget, so it can’t be passive. Ask the investors of Bernie Madoff how that worked out. I would argue there is residual income – income that continues for a period of time after the initial investment of time and/or money. Residual income will continue for awhile – it could be days, months or years, but eventually it will stop producing income unless you actively maintain it. No product or service has an unlimited life, and therefore eventually needs maintenance or updating.

In reality most investments require a decent amount of research, preparation, and work to get going. Even though the IRS defines it as such, investing in the stock market isn’t passive. How many hours of research was needed before you are invested in your first stock? How many books did you read? Who did you talk to about investing?

Then there is the monitoring and maintenance. Even when investing in stocks you need to keep informed with the company, and read their financial statements. What once was a great business can go sour. A rental property eventually needs repair. As an entrepreneur your goal should be to minimize the effort needed and automate daily operations as much as possible. The best you can strive for is your business generates income while you sleep. That’s the best you can do. Meaning unlike a job or a consulting business when you get paid by the hour, you have a business that can generate income when you aren’t physically there. In the online world this means:

Ad banner based web site (i.e. a blog)
Selling a product or service online

I’ve seen people mention blogging as passive income, and chuckle at the mention. If it’s so passive why does it require a decent amount of time to create articles, maintain the web site, and read/comment on other blogs? While it’s nice to think an article you write will reap riches forever, the reality is:

Technology changes.
Using the reference of a blog, search engines change their algorithm. Back when I first started in the Internet industry the way to the top of a search engine was just repeat the keywords on your web page. Right now links and back links is what’s currently popular with the search engines. I suspect in the future social media will play a much bigger weighting in search engine results. This means your content and SEO strategy would have to change. What got you to the top of the search engine results won’t in the future.
There are competing businesses
Your income generating scheme exists in a somewhat free market. You don’t live in a vacuum. If your product or service develops a decent amount of income, don’t you think others will figure this out and start competing? Competition reduces the profit margin of other businesses in that same industry, which reduces your residual income.
You need others to produce
A business needs people to produce output. The work either needs to be done directly by you, or you pay someone else to do it. Since this investment was supposed to be “passive” you’ll hire others to do the work. This eats away at your net profit.

Unless you are a trust fund baby, you must initially produce earned income before you generate residual income. Any income producing business idea either needs money or effort and usually both. If it’s money you are investing, in some shape or form it was originally earned income. To take this discussion one step further – it can be argued a loan is just stealing from future earned or residual income and using it now. The trick is compounding your earned income multiple times. Let’s use an example: Your earned $100,000 after taxes from your job. You take that earned income, and invest in Lending Club notes. On average Lending Club users generate 9.67% APY, so that means you would earn approximately $9,670 annually. For the sake of simplicity let’s not discuss taxes or fees. You can either take the $9,670 and either reinvest it (into other Lending Club notes or say a new business) or consume it by buying a nice home theater system. If you reinvest it you are compounding your initial earned income. In most cases if you consume it the asset isn’t generating any income.

Bottom line, every investment needs constant effort to monitor and maintain.

Readers: What is your opinion? Do you disagree?

The Secret To Building Wealth

Larry Ludwig — Thu, 14 Oct 2010 13:55:03 +0000

It seems those who don’t have any wealth either want it badly, or on the flip side envious of their neighbor. I can assume if you are reading this blog you either are already wealthy, or want to become wealthy. There is nothing inherently wrong with wanting to be wealthy. If you worked hard for a goal, made sacrifices along the way, was ethical, and did it legally you should be rewarded. Congratulations! Your hard work paid off. Regardless of what this current administration says about being wealthy – it is NOT evil. Similar to a gun, money is just a tool. Like any tool it can be used for good, or evil purposes. Look at the recent pledges by the world’s richest people to donate half of their net worth. If Bill Gates wasn’t the savvy businessperson he was, he wouldn’t be able to do what he’s doing today.

I’m also not referring to the book “The Secret” and it’s metaphysical description – think it and it shall come. I do believe looking at the positives in life will help you achieve them, but you must take action on your ideas. No one is going to drop a million dollars on your lap if you think it. The book is little more than a “pump you up” type of book. What I’m talking about is what I’ve experienced in my life, and from my observations what I think happens with other wealthy people. Build it, and they will come.

Do you want to know the secret?

Take Risk and Lots of It.

It may sound simple, but it’s the truth! That’s not to say go jump out of an airplane, and skydive the first time without someone to guide you. That’s not to say you should bet everything you own on one roulette spin. I’m talking about taking calculated risks. When you spot an opportunity you go after it. Be it with your personal life, investing, your career, or with your business. Think about all of the times in your life if you didn’t go out on a limb? How different would your life be if you didn’t:

Apply to that college?
Go out on that job interview for that hot startup?
Ask your spouse for that first date?
Start saving and bought that investment that increased 200%?
Start that business you now own?

In my case my life would be a world different than it is now. I have grown emotionally so much in the process. Things I would have considered impossible or hard for me ten years ago, I now do on a daily occurrence. If you always take the safe path and not break out of your comfort zone, long term, you most surely will fail. You’ll be a failure to live to your potential, and failure to grow as a person.

Did everything I’ve done in my life worked out as it planed? Of course not. The many risks I’ve taken have also led to some failures. I’ve gotten hurt emotionally, and in some cases lost some big money.

I left a big startup to start my own business. I left hundreds of thousands of dollars on the table after they went public. It was the #1 IPO in 1999 that then later nosedived 4 years later – bankrupt and blew through $1 Billion dollars.
The business partners I started with 10 years ago were a big mistake. They never fully understood, nor invested the time in the business.
My second business partner up and left the business with no prior warning. He literally dumped everything he had for the business at my doorstep.

Not everything I’ve planned in my life worked out the way I anticipated. I just kept moving forward – I realized what’s worked and what hasn’t, and moved on. If you aren’t betting the farm, what’s the worst that can happen? Instead of betting it all, I’m suggesting make small bets, and lots of them. If it’s investing money, maybe no more than 5-10% of your entire net worth. Start that new business idea part-time after hours, and see what happens. Don’t just jump into it full time without tipping your toe in the water first.

Now these aren’t truly bets in the traditional sense of the word. I will assume you plan and research any business opportunity or investment idea before you go out and do it. The old saying, “People don’t plan to fail, but fail to plan” most definitely rings true. Have you ever noticed what someone might consider risky yet someone else doesn’t? Why is that? Well in some cases the person truly is ignorant, and doesn’t understand the complexities of something they are about to do. They don’t fully understand the risks. The end result though it worked out fine for them. They may come out ahead, but they were lucky. On the other hand there are others that did the planning, studied the investment, understood the risks and also in the end came out ahead.

The person who is lucky is rarely successful for the long haul. Over time their luck will run out, and their skills will be the ultimate determination of their success. To put it another way; they revert back to the mean. A person with skill may not initially be successful, but for the long haul will achieve success. Some say in order to be successful requires luck. That statement is only partially true. Success comes out of hard work. The harder I work, the luckier I become. My motto to life and investing: the more times I take risk the luckier I become in the long run.

How To Help Small Businesses

Larry Ludwig — Thu, 05 Aug 2010 21:03:31 +0000

Want to see how unfriendly the current environment is for small businesses? For a microcosm you have to look no further than this article mentioned in the Business Insider, which originally was in the left coast newspaper The Oregonian. A 7-year old wanted to create a lemonade stand at a local art fair. It’s very similar to my lemonade stand story. In her case she got the idea by watching the children’s show “Olivia“. In my opinion, starting a lemonade stand is a great way for a child to learn about entrepreneurship. Well the child got a real world experience, and got much more than she bargained for. Her operation was forced to shutdown because she did not pay for a $120 temporary restaurant license. Unknown to the mother and child they were committing a crime against the food police, even if it was done in front of her house!

I assume nothing else with her lemonade stand was done “legally”. Let’s determine the costs involved to setup her lemonade stand if she were to do it legitimately for the event:

Incorporation Documents and Seal – $139 (from LegalZoom)
Oregon Incorporation Fee – $50 (paid annually)
Temporary Restaurant License – $120
Kool-Aid Drink Mix, Sugar Sweetened Lemonade, 20-Ounce Containers (Pack of 6) – $23.14
5 Bags of Ice – $20 (I’ve seen higher)

I’m sure I’m missing other permits and legal fees, but you get the idea. Lets not forget she’s technically underage and also subject to child labor laws (for this exercise I’ll assume she’s of legal age). So for a one day event (that was only open from 6p till 10p) at maximum would have to outlay $352.14, or assuming she’s already in business $283.14. The price set per drink (according to the photo) was set to $0.50 per drink. To break even with the up-front costs, she would have to sell at least 566 drinks. Worst case she would need to sell 704 drinks. With those numbers, it’s highly unlikely she would sell that many in such a short time frame. She probably would be lucky to sell $50 worth of lemonade. It could be said the complex rules, fees and regulations makes the stand unprofitable. With any entrepreneur one of three things would occur; either the price would need to increase, find a way to increase sales, or not pursue the business at all. So is the license of $120 appropriate for selling lemonade? When was the last news report of someone getting sick from a lemonade stand (fake lemonade no less)?

Now you know why it costs $5.00 for a drink at a state fair. The raw materials to make the drinks cost nowhere near the fees to be in legal compliance. Of course the larger the business the less these costs become relevant. For a child, or an adult for that matter, who is trying to make a few extra dollars this can make or break the deal.

The inspector of course stated, “Our role is to protect the public”. Their argument is it’s important to regulate and monitor the quality and cleanliness of the businesses selling food to the public. Are they really protecting the public in this case? In most cases, it’s common sense when picking a food vendor. After all, you don’t have a food inspector reviewing your home kitchen. Julie’s mom said it best in the article “It’s gotten to the point where they need to be in all of our decisions. They don’t trust us to make good choices on our own.” I’m obviously not stating a completely free “for-all” market. Some regulation is needed but inhibiting commerce, especially things the general public can make a reasonable decision on, should be left alone.

Of course more fees, rules and regulations don’t affect large multi-national businesses as much as small businesses. They are already established and have a large infrastructure to support the weight of these issues. They have a staff of lawyers, accountants and assistants to help manage the legal red tape. Things like the new IRS 1099 requirement in the Obamacare law will do nothing to help small business.

Here are five simple bullet points that the Obama administration could do to help small businesses:

Make it easy to create a business. The process should be quick easy and low cost.
Simplify taxes. Create a flat tax for businesses.
Don’t constantly change rules and regulations. Businesses hate changes because this causes unknowns in their profits. This causes delays in new business ventures.
Stop vilifying “Joe the Plumbers”, and how they must give their “fair share” to others. After all, they must take all of the risk, should they not get rewarded? Taxing the “rich” in most cases is taxing small business owners. Most rich today are first generation wealthy. They did not inherit their wealth from a trust fund.
Offer to assist in job creation. This can include tax cuts, but can be other incentives and deregulation.

Instead, at least from my vantage point, our government is doing the exact opposite of all of these items. Hurting small business growth and creation, does nothing to help with unemployment. So I’m not seeing unemployment lowering anytime soon unless things change. Until then, expect slow, low or no growth in our economy.

Update: Oregon County Apologizes to the 7-Year-Old girl. It appears this issue is not that uncommon because a week ago a similar event similar was reported in San Francisco.

Angel Investors: A Blessing For Start-Up Entrepreneurs!

Guest Author — Wed, 07 Apr 2010 13:57:49 +0000

Gathering funds for starting a business is really tough, when you are a fresh entrepreneur looking out for opportunities to turn your dreams into reality! Nothing is more disappointing than seeing your dreams crumble due to lack of money! That is why the Angel Investors form a great source of aid as well as encouragement for the start-up entrepreneurs.

Who are Angel Investors?

Angel Investors are referred to those businessmen (or companies) who invest money in business projects initiated by brand new entrepreneurs. Funding estimates do vary, but usually range from $150,000 to $1.5 million. Besides, the expertise, experience and contacts of the Angels also come as a great help for the starters.

What do the Angel Investors seek?

Wondering why at all the Angel Investors risk their money in a newly formed company? There are countless answers to that. But the investor’s keenness to gain better profits than that reaped by traditional investments is one of the basic reasons. Some investors ask for securities either as common stock or as preferred stock with certain rights and liquidation preferences. Some also demand a convertible debt, or redeemable preferred stock. Apart from that, often the ‘Angels’ are offered a high position among the company’s board members, especially that of advisers. This is another instrumental factor which drives them to invest in a start-up company. On one hand, it solves the fund crisis of the fresher. While on the other, it assures to the investor Thus, the practice of the Angel Investors benefits both the investor and the start-up entrepreneur alike!

How to geld hold of an Angel Investor?

The ‘angels’ are not hard to find, if you know where to look for them. You may do any of the following to get hold of an angel investor:

Call up the nearest university which offers an entrepreneurship program. Fix an appointment with the person who is in charge of the program, as this person would definitely be able to suggest an angel investor for you.
Contact your nearest business incubator. Most of the business incubators offer formal or informal access to angel investors.
The angel investors often form clubs or associations to organize their activities and boost fresh entrepreneurship. Try to find out such clubs.
Call up your chamber of commerce and ask if any angel investors’ club is affiliated to it or not.
You may also seek information from the nearest Small Business Development Center regarding angel investor groups.
You may also ask your accountant or your lawyer or your banker to guide you in this regard.
Seeking information from a professional venture capitalist regarding angel investor groups might be fruitful.
Contact a regional or state economic development agency and ask whether it is aware of any angel investor group.
You may also get information from the editor of a local business publication. These professionals often form the right source of information.
The executive director of a trade association you belong to, may also help you find an angel investor.

Just keep trying your hand at the above mentioned places, and you will surely find an ‘angel’ by your side!

How to convince an Angel Investor?

To solicit an angel successfully, you need to be very clear about your project. Several critical nooks and corners must be looked into before you place the business proposal before the investor. Following are the two prerequisites for your proposal to get accepted:

Form an advisory board that includes a securities accountant and an attorney. Two important functions of the board are to recommend angels to contact and to work with the management team to develop a business plan to present to the angel.
Have an innovative but feasible proposal. The business plan itself should be the reason enough to draw finances.
Clear out the legal formalities.
If you have piled up any business loans on yourself, or if you have decided to consolidate your debts, consult a legal adviser before you contact angel investors.

So, if you are really keen on making your dream venture happen, take a little initiative and look for the Angel investors. Let your dreams not crush against the monetary limitation! Get hold of an Angel Investor and there would be real guardian angel for your enterprise!

This was a guest post by Priscilla Solomon. Priscilla is a finance blogger and debt adviser at OVLG.

Readers: Have you had any experience with angel investors? If so, what was your experience? IJ has not gone for outside investors and curious what others experience in this area has been.

No related posts.

When Should A Late Customer Get Cut Off?

Larry Ludwig — Sun, 28 Mar 2010 22:55:58 +0000

When owning a business one of the important parts is ensuring you have cash flow. No cash flow equals a dead business. Collections are a critical aspect of your cash flow. You have to make sure customer invoices are paid in a timely fashion. The question with a late paying customer, when should you cut them off? I don’t have to tell anyone times are tough. The economy is still in the dumps, and more than likely will be for quite a long time in the future. I have compassion for my customers that are struggling, but up to a point.

To give some detail about my business, it’s similar to owning a rental property. Customers pay a monthly fee for services rendered. The same time every month, a customer has an invoice due. This is unlike other products and services where you may have payment schedule (initially, during and then after a product/service has been rendered). So with our customers it’s no surprise they have an invoice due and it’s amount. Over the years we’ve found 20/40 day late notification has worked out well for our service. In 20 days, a late fee is incurred, and after 40 days an account is suspended. In general, we’ve found giving customers even longer terms resulted in no different collections. If anything we lost more money by letting customers go to the traditional 90 days. Unlike a rental property though, it’s very easy for a customer leave our service, and without warning. We’ve been burned a few times when a customer did not pay, which is one of the other reasons for a shorter than normal late fee schedule.

Customers have told us all sorts of stories why their bill is late. Believe me, we’ve heard all of them. It’s part of human nature when people get desperate, they will perform desperate measures. Things they would never consider possible, they will do. This includes, lying, stealing and going against their honor. Meaning they will do anything to ensure their own survival. It’s part of your self-preservation instinct. I don’t blame them for it, I just ensure my business and policies have protections to minimize this problem.

I believe in establishing long-term relationships with my employees, consultants, vendors and customers. It makes for good business, and can in fact be a great way to differentiate your business. It gets somewhat troubling when a late customer does not call us back after many Emails, voice mails and faxes. We’ve have an internal policy if a customer does not bother responding to our payments requests, then will keep to our strict 20/40 day policy. After 40 days of no payment you get cut off no exceptions. It shows we mean business and are serious about our terms. This usually sets the late paying customers down the straight path.

If they do respond to our notice, and give us some valid reasons (i.e. the dog did not eat the check), their previous payment history, we may not charge a late fee. Same goes with a partial payment. A payment of any kind shows the customer has committed to keep the relationship working. Another key is making payments easy to make. Accept payments online, and allow for all sorts payment methods such as checks, cash, credit cards and even PayPal. If they can’t pay by check, they might have a credit card with credit to make payment.

Though there is a limit of how late your customer can be before affecting your cash flow. After all, you should care about your own self-preservation. Just like every other business, we have bills, salaries, vendors, and debts to pay back. How much leeway will my vendors give me if I can’t pay them? At what point do you prevent their business demise from affecting your business. It could become a vicious cycle that eventually someone has to pay to ensure commerce will still occur.

We recently had to deal with one customer whose account was over 90 days past due. They have been a customer of ours for over 5 years. We are completely understanding that times are tough, and know their business is not doing so well. We had to suspend them after the date we were to receive a check payment from them. After this suspension, we not only got one month’s payment but we got another. This keeps our business commerce flowing.

Readers: If you own a business/rental property how do you deal with late customers? At what point do you cut your losses? What techniques do you use to collect from late customers? For others, what’s the biggest lie you have told to delay payment?

How I Learned Everything About Business By Owning A Lemonade Stand

Larry Ludwig — Tue, 26 Jan 2010 15:00:12 +0000

Long blog post title, but you get the point. Ever since I was a little child I can remember wanting to own a business. In my exit interview from Clemson University they asked me about my long-term career goals. In an almost knee-jerk reaction, I said to own my own business in the computer industry. Today I can say I fulfilled my dream and did just that. Maybe it was my own father constantly pounding into me the statement, “Don’t ever work for someone else. Start your own business!” After all his father owned a jewelry business, and I think my father regretted never following in the same footsteps. I guess from an early age, I knew that if you want to be financially successful, controlling your own destiny was the way to go.

When I was about 9 or 10 years old I probably was watching Little Rascals “Our Gang” episode in which Waldo started his own lemonade stand. A light bulb went off in my head to create my own in the front of my parent’s house. It was a hot summer day, and I was off from school. I no idea what to do, but simple things like this can have some powerful life lessons. At the time all I knew was that I needed a table, some lemonade, and a sign. I hobbled some milk crates together and a piece of plywood as a table. I had my mom whip up some lemonade from frozen concentrate (yeah I know it wasn’t homemade). I then wrote with marker a sign offering lemonade for sale. I believe I sold the drinks for $0.05 each. I was in business!

Fortunately the day was hot. Like vultures circling around the dead, there were other kids on the block and the adult neighbors were nice enough to visit my establishment. After doing this for a few hours I figured why not copy how the “big boys” did it. Being like every other kid with a sugar habit, I frequented the local pusher, er I mean deli, on my bike. I noticed they sold candy, and thought why not sell candy at my “store”. So off I went to the deli, and bought some of their candy to resell at my stand. I brought the candy back home and offered it, initially for the same price! Unfortunately my parents weren’t much help in my first venture. I questioned my mom, “How does a deli make money if they buy, and then sell it at the same price?” Unfortunately she couldn’t answer me. Keep in mind this was before the days of super bulk sized offerings from Costco, Sam’s Club and BJ’s. So I proceeded to add $0.05 to each candy bar I sold. I did earn a few dollars from the experience. I remember I had a blast and it was fun. While in the process I learned some valuable lessons that I could apply today.

Here are some of the lessons I learned from my first business:

Advertising/Marketing/Selling

I needed to make sure people were aware of my business. So I created a simple sign promoting what I was offering. I knocked on a few houses and made them aware of what I was offering. I even came up with the idea that my block didn’t have enough car traffic, and needed a better location. I got the cockamamie idea of moving it down the block to a busy road. My mom immediately rejected the idea as people drove somewhat fast on it.

Lesson Learned: Build it and people will not necessarily come. In order to be successful, you need to advertise, sell and promote your business.

Don’t Eat the Profits

Unfortunately, I literally did just that. After getting home from the deli I would eat some of the candy while waiting for others to buy my stuff. Related to this, the only way to make money is to sell something for more than what it took to acquire it. Since my neighbors didn’t have to make their own lemonade or go to the store for candy, they had the convenience of buying it right in front of my house.

Lesson Learned: Be mindful of your cash flow. Not only what comes in but also what goes out (and into your stomach!).

Upsell Other Products/Services

I didn’t know it at the time, but offering candy with my lemonade was a method of upselling other products to my customers. So while they were buying lemonade, I offered them to buy candy from me.

Lesson Learned: Upselling is an easy way to make additional money with little effort.

Your Competitors Don’t stand still

After creating my lemonade stand, a neighbor down the block liked my idea. He liked the idea so much he setup his own lemonade stand. That bastard! My first competition in business. I can’t say we had a price war or anything like that, but looking back now it’s interesting how it happened.

Lesson Learned: If you are in a profitable business with low barriers to entry, expect competition. You need to constantly improve your products/services, and focus on ways to differentiate yourself from other businesses.

The Purpose Of Owning Business is to make a Profit

Yeah I know another statement made here by Captain Obvious. When I bought that candy and then proceeded to sell it at the same price, I wasn’t going to make any money from the transaction. I quickly learned adding $0.05 would allow me to at least make some money on each transaction. In reality, I should have bought the candy from a wholesaler.

Lesson Learned: After taking the income and deducting the expenses you must have profit, or else your business won’t live to see another day.

How Can This Help Your Children?

Currently I have two boys (a 4 year-old and 1 year-old) and another baby on the way. I’ve made a promise to myself that I want to teach the important lessons I learned about money and business. What better way than having them create a lemonade stand or do something similar. It’s a great way to get them to at least learn how to be an entrepreneur. In the process of making it fun, they also can learn basic money skills.

Readers as a child did you do something like this? If so, what did you learn from your childhood business?

2010 Is Here! Where’s the Monolith?

Larry Ludwig — Thu, 31 Dec 2009 16:37:18 +0000

The year 2009 is slowing winding down and we are now approaching 2010. A few weeks ago, I was watching HDNet and they had on the movie “2010 – The Year We Make Contact“, and was thinking how “2010″ will NOT be like 2010. We don’t have super intelligent HAL computers, we don’t have a manned space flight to Jupiter, there is no monolith hanging out around Jupiter, and most interesting Russia no longer exists — at least how the Soviet Union was depicted when the movie came out. Two things struck me odd as I was re-watching the movie:

As a 13 year-old boy I vividly remember watching that movie thinking my future will be something like this in 2010. Unfortunately fiction sometimes does not match reality.
The movie came out in 1984 (over 25 years ago) and thinking what goals and dreams I’ve had in the past 25 years. What have I achieved and what things I still want to do.

The year 2010 is now really here and it’s time to do some goal setting. My local gym was already beginning to crowd up with people to loose weight. Like every year, come February 1st, the new faces will be gone. If you are going to create a goal, create one that will be long lasting and with small incremental steps.

I like making 10-year goals and reviewing my previous 10 years. Nothing like the change of a decade, a zero at the end of a year, to review these items. Creating these goals gives me something to shoot for and gives me great direction. You see I’m a dreamer, and I think it’s important as an entrepreneur to constantly dream of how things could be. Daydreaming might be fine, but no successful businessperson just didn’t wish things into creation. They took action on their dreams to make them into reality.

My Past Ten Years

Obviously we’ve had many political, technical and economic changes in the past ten years. Things that happened in the past ten years: dot com stock market crash, 9/11, two wars, mortgage meltdown, stock market crash part deux, first African American President, and don’t forget Twitter.

I would rather discuss things on a personal level, as those things seem to affect you more. Since I don’t know what happened to you, I can discuss what happened to me. For me personally, the past ten years have been a doozie. In somewhat time order:

Quit working for a company named Commerce One to start up a business full-time. At the time Commerce One was a very well known start up. It’s IPO was one of the biggest gains in price of all time. I had my boss and people who I worked with say I was crazy to leave. If you look around now, you can see why they were nicknamed Commerce None. At the time, it was one of the toughest decisions I made, but in retrospect is easy to the many more difficult decisions I make today. Anthony Robbins has said making decisions is similar to working out; the more decisions you make the easier it becomes. What was once hard to bench press, becomes much easier if keep pushing yourself.
I started this business with partners who had an already existing business. I thought they would add, and give valuable wisdom to the business. In retrospect, they did neither. Though the experience I gained in other areas was priceless. For future reference, I need to make a mental note that experience in one field does not translate to another industry.
Put a down payment on a rental property on the morning of September 11, 2001. Being this was my first rental property, I was nervous. Coming out of meeting with my lawyer I initially felt good, until I turned on the radio. Gulp! I thought I just made the biggest mistake in history. I still own the property today; so far it has had huge gains capital gains (even after the mortgage meltdown) and has been cash flow positive since I purchased the unit.
After years searching for my soul mate, I found my wife Jeanne. We met, believe it or not, online via Match.com. Since the author being uber-geeky thought this was the best way to find women via the virtual-bar scene.
Got rid of my first round of business partners. Brought in another business partner who had no experience, but had lots of “gusto”. I thought it would be a good fit. Two and half years later he came to my house dumping all of the company assets he had, and told me he quit. In retrospect, this turned out to be a great thing for the business. I was able to streamline operations that my business partner did not want to do.
Jeanne and I married, and we sold her house at the peek of the real estate bubble. We then proceeded buy a house closer to NYC and her work. Our new house so far has since decreased 15% in value, but we don’t plan on moving anytime in the near future.
Bought assets from another company to merge into my existing company. It was a mini MAA (merger and acquisition) because it was only $60k in assets. I was partly sold a bad bill of goods. In reality the owner was either; very disorganized in their operations, flat out lied about who were active customers, or a little bit of both. This business owner later sold their entire business to another company. Hmm…I wonder how that transaction went. From my experience, I was not impressed with their business experience they now promote they have. Either way I have no hard feelings for the person, and wish them the best. I’ve easily recouped the costs, and then some from the purchase. Overall it was a great experience in merging assets from another company.
Jeanne and I had two children. Opened up 529 investments to ensure we can pay for their college education. We are now expecting our unexpected third child.

I can say, for the exception the revolving door of business partners, all of these goals were listed in the late 1990′s. From my direct experience writing your goals down is a very powerful experience. Did I achieve all of my goals I set out to do? Absolutely not. I have modified some in the past 10 years, others I no longer want, and others I have yet to achieve.

My Ten Year Goals

As I’ve mentioned before, I have very long term horizons in my investment goals. I look at investing as at least a 5-10 year process. Along the way I make small incremental steps. Here are my financial goals for the next 10 years:

At least $200,000 yearly passive income via stocks, bonds, real estate and my businesses
Have at least $75,000 in each child’s 529 education plan (as the oldest will be 14 years old)
Have enough in our retirement accounts where we “could” retire.

I say “could” retire as I don’t believe in retirement per se, because in many cases retirement equals death. I believe in enough money invested where you didn’t have to work another day again. You work at only the things you love to do without worrying about money, and what I define as truly being wealthy. For most people that magic number is around $2-3 million in net worth. What matters more though is not net worth, but your cash flow. Personally, we are very much along that way and should reach that goal long before the ten years are up. I should also state the passive income is truly passive; no more than 5 hours per week should be needed to ensure these assets are performing.

I will not bore you with the detailed steps on how I plan on achieve these big goals, but I will say you need to detail out each of your grand goals. There are many great books on the subject of goals setting and suggest you start there.

In Summary

You see, like in my case, a lot can happen in ten years. If you plan it out, you will be able to anticipate things down the road. You’ll be able to seize the opportunity when the time comes. The future will most definitely come; it’s your objective to plan for it.

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