Certified Entrepreneurial Advisor

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27

Jan'17

Will a LLC Protect Me From Liability?

Here’s the long and the short of it: a LLC will protect you from some liabilities, but not all liabilities. Here is a non-lawyer’s  business person’s response ( always consult a lawyer for specifics.) If you are doing business as a LLC, you are still participating in the LLC and you are personally liable for any tort liability that you cause or are responsible for allowing to be caused. If I am to simplify this further, let’s just say that there is an “illusion” of protection, which may help you in limited circumstances. If you get into a battle, the attorney on the other side will sue your company, you, and your dog. Will they be able to pierce the LLC protection? It all depends, and it could be a function of how good your attorney is, the attitude of the judge on that particular day, and what the phase of the moon is. Do not, repeat, do not ever assume that an LLC will completely shield you from responsibility. We live in a litigious society. You have to protect yourself, and here are the best ways: Vet your customers. Don’t do business with jerks. Know your customers. Never, ever …

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26

Jan'17

What are the Psychological Implications of Starting a Business?

Question: I am working on a startup. I want to know how to be psychologically ready for the challenge. Response:  There are a variety of things that hit you: There’s a rush, excitement when you start out. Watch out, the bubble will burst, and you can’t predict when. Then there’s the overwhelming impact of the zillion things that have to be accomplished simultaneously now. Getting used to it is difficult for those who have been linear thinkers in a corporate environment. There’s the anxiety associated with every decision, the wait time, the gestation period from inception to survival, and finally, what comes next. There’s a strong chance that you may experience bipolar like euphoria and depression, sometimes almost simultaneously There’s the constant worry about cash flow, metrics, sales, cash flow, personnel, production, cash flow, marketing, cash flow There’s an exhaustion that sets in somewhere between 6 months and a year when you realize that you really are on a treadmill, and that you better run faster and better than all the other fools out there who are competing with you. Then there is the family. The spouse has been reading Inc Magazine and /or Entrepreneur, or has a friend who …

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26

Jan'17

What Company Should I Use to Form a LLC?

Question:  I see lots of companies offering to form a LLC or corporation on line. Which is best? Answer: So, we’ve decided we need a LLC, and we want to know who to have it done. My suggestion is that you stop and consider that you could do it all yourself, painlessly on the  Secretary of State website. That would be easy. Would it be best? Maybe not. There’s a lot more to a LLC than just getting a charter from the state. Most of the services you will see on line do little more than what you could do at the Sec of State website. Before you set up a legal entity, doesn’t it make sense to get some legal advice? Of course it does! LLC’s can be formed for many different purposes, and it if you don’t have the right legal paperwork such as an operating agreement, you could be wasting your time. Getting a charter from the state is the last step, not the first step in forming a LLC.  Even though you want to do it yourself, it makes a lot of sense to consult with a lawyer, and at least have them help you with …

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26

Jan'17

Employee or Independent Contractor

Question:  A gig I had last year was assumed to be under the table. The company now (Jan.) requested my tax info. What percent will I owe and is this legal? “Assumed to be under the table?” Under the table is illegal, and if you know it. What you have proved is that there is no honor amongst thieves. The company had a “come to reality” session with its accountant, and now they are trying to make it all pretty. So, what can you do? Precious little, other than provide the information to them. However, instead of sending them a W-9 form, which they probably requested, I would send them a W-4 form, all nicely filled in. Why? Well, if we are going to make pretty, let’s do it the right way. The chances are you technically should have been engaged as an employee, not an independent contractor. W-4’s are for employees. Be sure you keep a copy of the form. Now, they will probably send you a 1099 anyway. So what you do is file a form SS-8, and ask the IRS, was I an employee or an independent contractor? Chances are pretty good IRS will say “Employee!” This …

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02

Jan'17

Should I pursue a business idea that already exists?

“That which has been is that which will be, And that which has been done is that which will be done. So there is nothing new under the sun”  Ecclesiastes 1:9 So, your comment is stating what has been observed by mankind for centuries. Yet there are so many new things! Indeed, and they are all built upon small changes to things that already existed. A mighty oak tree is but a collection of small, un-noteworthy cells that combine in such a fashion as to create a beautiful monument to nature. So how about that idea of yours? How can it be different, better, What is your USP ( unique selling proposition)? It’s a good thing that there are already some competitors. That shows you that a market exists, that there is a demand out there for your idea. Now, how will you address that market that will bring customers to you? What will you do that will incrementally make your product/service better than what exists? Don’t be discouraged by competition. Be energized by it. Seek to be the better alternative for your target market. Figure out a way to communicate your USP and provide a better experience for your clients/customers. …

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02

Jan'17

Is a Delaware C-corp right for our start up? How many shares of stock should we issue and at what value? How many for co-founders?

So I am going to throw cold water on this whole idea. Why would you want to have a C-Corp for a start up? ( I know the answer you are all thinking: to get funding, the VC’s want a C Corp so they can take it public). STOP. So you are going to run your life by the Inc. Magazine playbook? Let’s reiterate what that “playbook” looks like: young energetic entrepreneurs start a company, they incorporate in Delaware, get VC funding, then take their company public and everybody rides into the sunset in their Teslas with megabucks. That is a stylized cartoon view of reality. It is promoted by the media and Inc Magazine in particular. It’s not what really happens in real life to most entrepreneurs. The narrative is a fairy tale. Consultants, lawyers and the like buy into this stylized narrative because it means they can fleece their clients for big bucks now and keep them dazzled by the golden rainbow ahead of them. STOP. First off, you need to think about taxes. A C-Corp is the worst structure for that. It locks up all the early losses in the Corp, with no flow through to the …

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25

Dec'16

How do I find a Good Sales Person?

Whoa! What all of us business / marketing types crave: a craftsman who loves to make things. OK. but you all be careful, y’all hear me? There are a lot of great builders who get burned big time. Ask anyone who was on the Windows development team, or the original Mac development team. If you are the engineer / builder, you must protect your skills and contributions. So, if you like building, and you are the one who is the driving force, then you are the owner. Now, you want to get some marketing talent. The problem is that marketing folks love to sell, and the first person they sell is you. For 50% of the firm, they will sell the hell out of it. STOP. First off, let me say I’ve started over a dozen businesses, taken two companies public, worked for many years as a CPA and adviser to many businesses, start up to middle market, to large public ( Aetna, Union Oil, etc type companies) My approach to management may be a bit German, but that’s my heritage, so it’s in the genes. There has to be a boss, and there have to be troops. Who is …

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23

Dec'16

How Can I get Someone to Invest in My Startup Idea?

Who or what company will invest in your idea for a start-up? Let’s be brutally honest here: at this point, only you. No one is going to invest hard earned, after tax dollars in something that is just an idea. You’ve got a lot of work to do before you can even think of getting someone to invest. You have to have “proof of concept.” You must demonstrate that your idea is practical, achievable, and economic. The first thing you need to do is develop a good business plan. Not one of those packaged deals you see advertised. You need a real business plan. See ceanow.org, where we have a couple of courses on how to develop a viable business plan. If it looks good, then shop it around to attorneys and CPAs and have them pick it apart. Revise, re-do. Take it to someone in a related industry, and have them criticize it. Prove you’re right. Once you’ve invested the time, energy and resources in developing a business plan, you can look for an angel. Friends, family, etc. You’ll only get a small amount from them. You will have to look to angel funding to get more. The problem is, …

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16

Dec'16

How do you get your idea from concept to a business?

This is the proverbial chicken before the egg question. How do I know my idea will work? Let’s skip to the bottom line: you won’t and can’t know for certain until you jump in the pool and do it. Anything else is just speculation. What you can do is test your idea. You don’t need to incorporate your company or do any fancy stuff to test your idea. Several ways come to mind: You can test market the idea. So you start really small, make up a few prototypes and see if you can sell them. If your idea is a service, start it in a test market and try it out. See if it catches on. You can “focus group” test the idea, by polling people about whether they are interested in it or would purchase it. Sorry to say, but this is very unreliable. It does give you some “negative assurance” because if your focus group hates the idea and no interest is shown, well, you probably have a dud. You can begin the market the idea taking orders for future delivery. In the software business, this is known as selling vaporware. You have the idea, but the …

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05

Dec'16

Calculating Cash Flow for a Start-Up

How do you calculate the cash flow for a start up company? It’s a guess. What you hope is that you can make an educated and reasonable guess. The best you can hope to do is figure out a reasonable model for what the cash flow should be.This involves understanding your market, how suspects are transformed to prospects and then into customers, and finally how the business converts sales into cash flow. You’ll need to come up with a detailed model which describes how you will identify suspects. Where are they, how many of them are there, and how will you communicate to them? How many of them are likely prospects? How will they be sold? How will you approach and sell them? What percentage of those you originally contact will end up being customers? What is the cost of customer acquisition? You’ll have to use comparable existing businesses to validate your numbers. You’ll have to do extensive research into the industry to understand this process. Just choosing some percentage off the wall won’t hack it. You must have a reasonable, logical progression from ground zero to warm bodies handing over cash. ( I had a client once who wanted …

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