Tuesday, May 29, 2012

Get Me Bodied: The Middle-Aged Adventures of Sasha Fat (Thanks Beyonce and David P.)

Today is my 49th birthday, and for reasons you'll understand later, I'd like to dedicate it to Beyonce and my friend David P.

Forty-nine is supposedly the last hurrah before the official onset of middle age. But time and its ravages don't pay attention to the calendar any more than the seasons wait for the solstices to announce their arrival. I'm already middle-aged and I didn't need a birthday or a calendar to tell me that.

But aging isn't about numbers.  It's about vitality, or the loss thereof.  I fervently believe that I've lost a great deal of vitality not due solely to age, but due to a sedentary lifestyle and bad diet.  Sure, we all slow down with age, we are more prone to injury with age, but we don't have to race the calendar to our own mortality and be miserable in the process.  My feeling of middle age is not due solely to the calendar; it's due to lifestyle choices that have helped result in a loss of vitality.  Those lifestyle choices, in turn, arise out of complacency and a lack of gratitude for what I have.  If I were as grateful as I should be for what I have and what I'm about to have, I'd do more to make sure that I'm healthy enough and feeling good enough to enjoy it all.

I've always taken it as a given that I would predecease my husband.  So many of my aunts, uncles and other elders, including my mom, died of cancer, heart disease or Alzheimer's in their 60's and 70's that I just assumed that my relatively early demise was a foregone conclusion.  What's the point of living a croissant-free life if you're going to die, anyway?

Vitality, that's the point.  I want to have the energy and good health to enjoy whatever time I have for as long as I can.  It's even arrogant of me to assume my early demise.  No one knows the hour but God, and I guess as far as He's concerned, the time of my demise is none of my business because He sure hasn't seen fit to give me a target date.

Getting older doesn't necessarily have to mean getting fat and sedentary or having greatly diminished mental capacity.  You only need look at Jane Fonda on the red carpet at Cannes to see that.    Dr. Gary Small, director of UCLA's Longevity Center, argues that it is possible to stave off Alzheimer's, even though we don't have the proof from longitudinal studies to  prove him right. In the January 2012 issue of O Magazine, Small was asked if he had to pick one tip as the most important thing to do to prevent Alzheimer's, what it would be. He said physical exercise, like a daily brisk walk.

Not Pilates, not Hot Yoga; a brisk walk.  Who can't do that?

The bigger point is that you have to accept that your body is changing and change accordingly.  Even one small healthy change -- like walking or eating more vegetables -- can set in order other healthy changes.  They talked about this on NPR this morning, calling it a "domino effect."  I had already started making some small healthy changes, like making sure to eat fish at least once a week (not an easy feat for me -- I've hated fish almost all my life), cutting down on the red meat (although I'm a sucker for a barbecued hamburger with Memphis Minnie's rib rub mixed in), increasing my water intake by simply remembering to grab a glass of water every time I have a hot flash (that would be several times a day), and having mixed berry and pomegranate juice smoothies as recommend by Dr. Oz as an "antioxidant cocktail" (very easy -- frozen mixed berries, pomegranate juice -- I used 20% juice cocktail because I couldn't find pure pomegranate juice at the Winco -- ice, some Truvia if you need it sweeter, throw in blender, done).

After I dropped my great-nephew off at school this morning, I decided to go for a walk with a spirit of gratitude for what I have -- relatively good health, a great husband, great family, great friends, great kids to come, great career changes on the horizon.  Call it a victory lap for middle age.  I cued up what used to be my exercise playlist --mostly songs by Beyonce -- and when "Get Me Bodied" came on, something happened that hasn't happened in a long, long time.

I ran.

No, I wasn't being chased.  The beat and the melody of that song are so infectious, it just makes you want to move.  So instead of dancing on the sidewalk and looking like an idiot, I ran.  I ran for the sheer joy of feeling my heart race, the joy of moving to music, the joy of working up a sweat.

I was, for a brief moment in time, Sasha Fat, with all 180 pounds and 47.5% fat on my 5' 6" frame barreling down the walking paths near my house.  I wasn't running to reach a particular point or to last a particular amount of time.  I ran until I couldn't run any more.  Mind you, it didn't last long, but it was more than I'd done in a long, long time, simply because a catchy female empowerment/dance tune came on my iPhone.  You know what they say about the journey of a thousand miles. . . .

Thanks, Beyonce, for making the music that made me move.

And thanks to my friend David P.  I rarely name folks by name in my blog, but it was at a dinner a while back that David warned me that my high cholesterol was no joke and that I needed to do something about it -- exercise, statins, whatever.  I've been pussyfooting around for a long time about it, and my penchant for soy raspberry mochas and almond croissants at Peet's hasn't been helping.  But I'm making changes.  Although consistency isn't my strong suit, getting back up on the horse, so to speak, is.  I can't guarantee that I'll run every day or that I won't ever have another almond croissant, but what I can guarantee is that I'll keep trying because I'm not in this for longevity; I'm in this for vitality.

Thanks, David.

With that, let's move. 

Affectionately,

BWB  (AKA "Sasha Fat")





Monday, May 21, 2012

Godspeed, Donna Summer and Robin Gibb: How Do You Mend a Middle-Aged Broken Heart?

I feel like the remnants of my adolescence are slowly dying away.

You see, I was a teenager during the '70's.  I never thought disco sucked.  I loved disco, so much so that I threw a tantrum in my junior high school orchestra class demanding that we be allowed to play disco instead of Beethoven.  Why not?  Disco was heavy on strings.  We were string players.  Heck, Barry White had an entire freakin' orchestra to himself!  My junior high school orchestra teacher, Mr. Douglas, rolled his eyes at my insouciance and told me I had a lot more of the basics to learn before I'd be prepared to play disco or anything else written for strings for that matter.  He did make sure that I auditioned for all-city orchestra, though. 

So you can imagine that I was saddened by the loss of Donna Summer and Robin Gibb, within a week, no less.  My introduction to Donna Summer was, like most folks, the seventeen minute track, "Love to Love You, Baby."  It was also my first introduction to sex.  Sure, I knew about the birds and the bees, but I didn't know what they sounded like.  All I could think was that whatever Donna had been doing the studio, it must have felt pretty darn good to sound like that.  It would not surprise me if Donna Summer had been responsible for her own little baby boom just because of that song.

My introduction to Robin Gibb and the Bee Gees was, like most folks, the soundtrack to the movie "Saturday Night Fever."  Oh, the angst of Tony Manero, and the joy of the music that lifted him out of it -- "You Should Be Dancing," "Night Fever," "How Deep is Your Love."  Tony Manero was my generation's Holden Caulfield, or at least we thought he was, but without the mental illness.  I was in junior high school when "Saturday Night Fever" came out, and after that, my girlfriends and I were not only hooked on the Bee Gees, but on Andy Gibb as well.  We started backtracking through the Bee Gee's '60's catalog looking for meaning as deep as what we perceived to have been captured in the "Saturday Night Fever" soundtrack.  To this day, my favorite Bee Gees song isn't anything from the "Saturday Night Fever" soundtrack; it's "How Do You Mend a Broken Heart."  Deep meaning, indeed.  The Brothers Gibb were gifted songwriters, a gift that I would suppose sustained them long after disco died.

To me, Donna Summer was the queen of disco only because we never allowed her to be more.  My favorite Donna Summer song isn't a disco song at all; it's her performance of "O, Holy Night," that she gave on a television special long ago.  It's my favorite Christmas carol because of her performance of it, and because of her performance alone.  She sang it with so much feeling.  It wasn't until later that I realized why -- she had grown up singing in the church, as many of our Black singing divas have (Whitney Houston, for example.)  She probably really did feel it.  I also loved her song, "State of Independence."  And boy, did I ever feel like a "Bad Girl" when I chanted the chorus, "Toot Toot! . . . Hey ... Beep Beep!"  Even my mom was a fan, identifying with the song, "She Works Hard for The Money," as did most working women at the time.

With the loss of Donna Summer and Robin Gibb goes a part of my adolescence, a part of my life when the music that made me want to dance also made me feel good, something that a lot of today's music doesn't do for me on either count.  I am thankful for having walked the planet at the same time as Donna Summer and Robin Gibb, and for having shared in the experience of their talent.  But I'm still saddened by their loss.

So . . . how do you mend a middle-aged broken heart?

Thursday, May 3, 2012

My Family's Revolution: Embracing Entrepreneurialism -- and Eddiebucks

Dear Gentle Readers,

Last month's "Something to Think About" family meeting was a hoot and a blast!  Our topic was multiple streams of income, in particular, entrepreneurialism.  The fun part?  We pitched business ideas to each other.  In our business pitch game, "Swimming with the Killer Whales" (because I'm a bit too big to be a shark), I gave every member of the family $1000 in "Eddiebucks" - named for my late father-in-law -- and each of us who has a business or wants one had to pitch our business ideas.  If others liked the idea, they "invested" with their Eddiebucks.  The person with the most Eddiebucks at the end of the night won -- in this case, my nephew.  We had some really good ideas pitched. In fact, they were so good, I won't even repeat them because I don't want anyone to steal them.

Below are the agenda and handouts from the meeting.  The handouts crib heavily from Robert Kiyosaki's "Cash Flow Quadrant"  and Richard Harroch's, "Small Business Kit for Dummies," so at the risk of copyright infringement, here goes.  Robert and Richard, please do me the favor of just posting your "cease and desist" letter in the comments section.

Here's to my family's revolution -- and yours.

BWB

P.S.  The California Department of Industrial Relations has created an online Small Business Portal that serves as a one-stop shop for small business owners:

http://www.dir.ca.gov/SmallBusiness/index.htm


SOMETHING TO THINK ABOUT
A Series of Family Talks 
AGENDA
Saturday, April 14, 2012
5:00 pm to 7:00 pm



I.                    Prayer, Call to Order, and Dinner

II.                 Purpose of “Something to Think About”
·         Knowledge:  Share What We Know (mistakes and all), Learn What We Don’t
·         Encouragement:  Helping Each Other Reach Our Goals
·         Action: Holding Each Other Accountable for Taking Positive Steps Toward Our Goals

III.               Family Sou-Sou Drawing

IV.              Five Goals for The Family
·         Financial Literacy
·         Home Ownership
·         Having a Career
·         Educating Our Kids to Prepare Them for College or a Vocation
·         Multiple Streams of Income

V.                 Topics to be Covered Today – Multiple Streams of Income:  Entrepreneurship and Small Business Ownership

·         First Things First:  Why Do I Need Multiple Streams of Income
·         Entrepreneurship/Small Business Ownership – Is It For You?
·         Questions to Ask Yourself Before Starting a Business
·         Starting a Business:  Steps and Resources to Consider 

VI.              The Department of Gentle Nudges:  Encouragement from Each Other to Achieve Our Goals

VII.            Adjourn; Next Meeting:  Saturday, May 5, 2012  (Topic:  Home Ownership)




Something to Think About
A series of family meetings
Multiple Streams of Income

Module 1:  Entrepreneurship/Small Business Ownership


I.                    First Things First:  Why do I need multiple streams of income?

·         So you don’t put all your income eggs in one basket – you job.  If your job is your only source of income and your employer loses a major contract, downsizes and lays off employees, or furloughs employees, if you have multiple streams of income in addition to your job, you will have another source of income to help make up the loss of income from your job.

·         To save for things your job income doesn’t cover.  Having a second source of income, whether it’s a business or investments (See Something to Think About, Financial Literacy, Module 3 – Investing), can help fund financial goals that your employment income may not cover, such as vacations, college or private school tuition, retirement, or medical bills not covered by insurance.  Having a separate business can allow you to set up a separate tax-deferred retirement savings vehicle, such as a SEP-IRA (Simplified Employee Pension-Individual Retirement Account), which allows you to contribute 20 to 25 percent of the profit from your business per year, up to a maximum of $49,000, which is higher than with a regular 401(k).

·         To reduce your tax rate.  Investment profits are taxed as capital gains, which means they are taxed at a lower rate than wage income.  This is why Mitt Romney and Warren Buffett are taxed at a lower rate than Warren Buffett’s secretary – they derive their income from investments, not from wages, like Warren Buffett’s secretary.

·         Most important, to become financially free.  At some point, you may not want to work, or you may want to do a kind of work that rewards you spiritually but not monetarily. Having multiple streams of income may allow you to not have to work at all or do work that is spiritually rewarding without lowering your standard of living.


II.                Entrepreneurship/Small Business Ownership:  Is It For You?

A.     Entrepreneurship Versus Small Business Ownership

I have used the terms “entrepreneur” and “small business owner” interchangeably.  Some people define entrepreneurship as different from being a small business owner.  The website QuickMBA.com defines entrepreneurial ventures as being different from small businesses in these ways:

1.       Amount of wealth creation:  Rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars. 

2.      Speed of wealth creation:  While a successful small business can generate several million dollars of profit over a lifetime, an entrepreneurial wealth creation is often rapid; for example, within 5 years.

3.      Risk:  The risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs would be pursing the idea and the opportunity no longer would exist.

4.      Innovation:  Entrepreneurship often involves substantial innovation beyond what a small business might exhibit.  This innovation gives the venture the competitive advantage that results in wealth creation.  The innovation may be in the product or service itself, or in the business processes used to deliver it.

Regardless of whether you aspire to be an entrepreneur or a small business owner, if you are working for someone else at this point, you’re going to have to change how you think about how you make your money.  This is where Robert Kiyosaki’s Cashflow Quadrant™ comes in.
 

B.      Robert Kiyosaki’s Cashflow Quadrant™:  Moving from the Left Side to the Right Side

1.       What Is The Cashflow Quadrant™?

In his book “The Cashflow Quadrant,” ™ Robert Kiyosaki defines the four quadrants from which people derive their income, or cash flow, in a diagram that looks like this:



                              E       |      B

                              S       |       I



            “E” stands for “Employee” – someone who earns his income by working for someone else.

            “S” stands for Self-Employed – someone who earns his income by working for himself.  S’s are usually professionals, such as doctors, lawyers and accountants, who charge by the hour or the project.

            “B” stands for Business Owner – someone who earns his income from a business that he owns in which other people work for him.

            “I” stands for “Investor,” someone who earns money from his investments, e.g., stocks, real estate.

            Kiyosaki states that you can become wealthy from any one of the four quadrants, but the easiest wealth will come from the quadrants on the right side of the diagram, not the left, because you are using the work of others to make you rich instead of trading your own time for wealth.  When you work for someone else or are self-employed (which Kiyosaki defines as basically “owning your own job”), your wealth depends on you putting time into your job or your business to earn your wages or increase profits.  Since there are only so many hours in a day, there’s only so much money you can make.  That’s why Kiyosaki recommends moving from the left side of the quadrant (working for your money) to the right side (having other people or things working for your money), because the road to financial freedom is more easily reached by earning from the right side of the quadrant than the left.  And since earnings from the right side are usually capital gains, not wages, they are taxed at a lower rate.



2.       Don’t Confuse Being Rich with Being Wealthy; Wealth is Financial Freedom

            Kiyosaki defines wealth as “the number of days you can go without physically working without lowering your standard of living.  Kiyosaki measures wealth in terms of time, not the amount of money you have or earn.  When your income comes from investments and not from working, you are more likely to be wealthy because you don’t have to physically work for your income.  Being wealthy doesn’t necessarily mean that you are rich; it means that, whatever your standard of living is ($50,000 a year, $90,000 a year, or whatever), you can maintain it without physically working.  You are, in other words, financially free.

            Kiyosaki notes that the left side of the quadrant is seen as more secure.  E’s are seen as the most secure, since they have no capital at risk and need only perform to earn money, but, as Kiyosaki puts it, your boss will never make you wealthy.  S’s are less secure but more in control, since they work for no one but have capital at risk.  Still, S’s are limited in how much they can earn because they have to show up to earn their money.  B’s and I’s can stay in bed and the money still comes.


3.       The Difference Between an “S” and a “B” and the Path to Financial Freedom

Many self-employed people think they are business owners.  Kiyosaki would beg to differ.  He defines a true business owner as someone who could leave her business for a year and come back to the business still running more profitably than when she left.  In other words, if you became ill, would your business die?  If so, you’re not a true business owner in Kiyosaki’s eyes.

Kiyosaki says that an “S” owns a job, while a “B” owns a system and then hires people to operate that system.  For “S’s” to evolve into “B’s”, they need the following to become successful:

a.        Ownership or control of systems; and

b.      The ability to lead people.

The example Kiyosaki gives of a system is McDonald’s.  While many people can make a better hamburger than McDonald’s, few have a better business system than McDonald’s.  Think about it. 



·         McDonald’s is a franchise.  People pay the McDonald’s corporation to operate one.

·         McDonald’s has a standard manner of operating – a certain time in which customers are to be served, certain ingredients, and a certain manner in which the food is to be prepared – which it teaches all its franchisees to make sure the brand is consistent no matter where a McDonald’s is, i.e., the fries taste the same no matter where you buy them.

·         McDonald’s controls who gets a franchise and where they are so that they are profitable, i.e., not too many franchises within a short distance of each other

·         If McDonald’s loans franchisees the money to pay the franchise fee, they make money twice – once on the loan, a second time on the royalties paid by franchisees

In other words, McDonald’s doesn’t make money because they make a better burger; they make money because they have a better system of selling burgers.

Kiyosaki recommends Network Marketing as a low-cost way of owning a franchise.  Examples of network marketing companies include:



·         Avon
·         Primerica
·         Amway
·         Mary Kay Cosmetics
·         Organo Gold Coffee
·         Melaleuca
·         Pampered Chef
·         Cookie Lee Jewelry
·         Tupperware

Kiyosaki says that the average wealthy person earns 70% of his income from the right side of the quadrant and 30% from the left, and most people feel comfortable earning their income from both sides, but the truth path to financial freedom is to get to the “I” quadrant.  The path he recommends is going from being an “E” and an “S” to becoming a “B,” and then eventually an “I”.  As Kiyosaki says, most people say that the keys to wealth are OPT and OPM:

OPT = Other People’s Time

OPM = Other People’s Money

III.             Before You Start Your Business -  Question to Ask Yourself



Here are some questions you may want to consider before you take the step from being an “E”
to an “S”:

·         What are you going to sell?

o   Product?  How are you going to develop your product?
o   Service? How is your service going to be different or better than what’s already out there?

·         Who’s going to buy what you’re selling?

o   Can your proposed customers afford to buy what you’re selling?
§  You don’t want the “orphan drug” problem:  Creating a product that fills a need but is too expensive for potential customers to buy

o   Are your proposed customers willing to buy what you’re selling? Just because people say you have a good idea doesn’t mean they’re willing to pay for it. 

·         Who is your competition?  Can you beat them?

o   Is the field so crowded that you can’t make a profit?
o   How can you distinguish yourself from your competitors?
o   Is your service or product easily replicable by your competitors? (E.g., Groupon being replicated by Living Social and Amazon.com; MySpace being replicated and improved by Facebook).

·         Can you sell what you’re selling at a profit?

·         Do you have the time to devote to a business? 

o   According to Robert Kiyosaki, his “rich dad” said the difference between the wealthy and those who are not is how they spend their free time.

·         See Harvey Mackay’s “Checklist for Starting Your Own Business,” Sacramento Business Journal, July 22, 2010.
 

IV.              Starting Your Business – Some Things to Think About and Resources to Consider



A.     Steps (from “The Small Business Kit for Dummies” by Richard D. Harroch)
 

a.       Choosing a Business Entity

                                                  i.      Sole Proprietorship – If all you have is a business license, you’re a sole proprietorship.  Sole proprietorships have no legal separation between the assets of the person running the business and the business itself.  If a sole proprietorship is sued, the sole proprietor’s assets may be at risk to satisfy any judgment, e.g., your house, your car, your bank account.


                                                ii.      Partnerships – Partnerships are created through legal agreements by which two or more people agree to own a business.

·         General Partnership – Not the best option. 

·         Like a sole proprietorship, partners in a general partnership can be personally liable for the partnership’s debts and obligations. 

·         You need a detailed Partnership Agreement to state the rights and obligations of the partners to determine how profits and losses are split, whether the partners have equal control over the business, and whether interests can be transferred.    Don’t try to draft a Partnership Agreement yourself; get a good attorney.

·         Partnership income is taxed to the partners, not the partnership (called “pass-through taxation”), so partnership earnings are not double taxed like corporation income.


·         Limited Partnership – Limited partnerships consist of one or more general partners and one or more limited partners.  General partners tend to make all the business decisions, and limited partners are typically passive investors or participants.

·         General partners have unlimited liability for the partnership’s debts and obligations; the general partner should not be an individual but a corporation or an LLC.  Limited partners have no personal liability for the partnership’s debts and obligations, but they may lose their investment.

·         The partnership agreement states the partners’ rights to profits and losses, and transfer of ownership typically requires the general partner’s approval.

·         The partners are taxed on partnership income just like a general partnership.


·         Limited Liability Partnership (LLP) – Typically general partnerships that are restricted to professionals, i.e., accountants and lawyers, in order to shield them from being personally liable for negligence or malpractice in the practice of their professions.


                                              iii.      Corporations
 
·         C Corp – A C corporation is your normal corporation.  Unlike partnerships, corporations of any kind require you to observe certain formalities, especially in forming them in compliance with state laws. 


·         Shareholders, who are the owners of the corporation, officers and directors are not personally liable for the debts and obligations of a corporation.


·         Corporations typically, but not always, pay dividends, or profits, to shareholders, and whether a shareholder receives dividends depends on the type of stock they own.   Some corporations never or rarely pay dividends (Apple, Microsoft, Google).  However, common stock shareholders split dividends pro rata based on the number of shares owned (e.g., a shareholder who owns seven shares of stock will receive seven times the amount of dividends as a shareholder who owns one share of stock.)


·         Corporate income is taxed twice.  First, the earnings of the corporation are taxed to the corporation.  If the corporation then decides to pay out some of its profits to shareholders in the form of dividends, shareholders pay capital gains taxes on dividends.



·         S Corp – An S corp has some significant differences from a C corp.


·         Like a C corp, an S corp limits liability for debts and obligations to the corporation itself, not the shareholders, directors or offices.


·         Unlike a C corp, an S corp limits the number of shareholders you can have to 75.  There can be only one class of stock, unlike with a C corp.


·         Unlike a C corp, an S corp’s income is taxed to the shareholders, whether or not it has been distributed to the shareholders, and its losses can be passed through to shareholders to offset other income, with some restrictions.


                                              iv.      Limited Liability Company (LLC) – Is very similar to an S corp, except you don’t have a limitation on the number of members. 

·         Members of an LLC are generally not liable for the LLC’s debts and obligations.

·         There’s no limit on the number of members an LLC may have, and the LLC agreement can decide how profits and losses are allocated in its membership agreement.

·         LLC’s can choose to have pass-through taxation (like a partnership) or be taxed as a separate entity, like a regular corporation.

b.      Business Plan

                                                              i.       I’m A Small Business Owner – Why Bother With a Business Plan?



Three reasons, according to Richard Harroch:

·         To have a planning tool for the growth of the business
·         To attract investors
·         To measure and monitor your company’s performance over time.



                                                            ii.      What’s In a Business Plan?



Business plans vary, but Harroch states the following as the key sections of a business plan:
 

·         Cover page:  Contains contact information and a confidentiality blurb

·         Table of contents:  Enables your readers to quickly find the exact information they’re looking for

·         Executive summary: Explains briefly your business’s prospects, needs, and situation

·         Company description:  Contains a historical account of the company as well as its future prospect

·         The product or service:  Explains what is unique about the products or service that the business will deliver.

·         The market:  Creates a picture of the market in which your business competes

·         Marketing:  Informs your reader of how you plan to capture your business’s potential market (packaging, distribution, advertising, and so on)

·         Management/ownership:  Introduces the people holding leadership positions in the business

·         Competition:  Focuses on your competitor’s strengths and weaknesses

·         Financial statement and projections:  Includes lots of numbers like your balance sheet, income statement, cash flow statement, and financial forecasts

·         Appendices:  Contains resumes of key personnel, an organizational chart with positions and responsibilities, extended market information, and other data to back up the claims in your business plan.



                                                          iii.       Who Can Help Me Write My Business Plan (For free or cheap)?

·         SCORE (Service Corps of Retired Executives) (score.org).  SCORE is supported by the U.S. Small Business Administration and has over 13,000 volunteers nationwide to provide services at no charge or at low cost.  SCORE can provide you

o   Volunteer mentors from over 62 industries

o   Free business tools, templates, and tips online

o   Free, confidential business counseling in person or via email

o   Inexpensive or free local business workshops and webinars


·         Business students.  Some MBA programs and college business departments have their students act as consultants to provide free services to small businesses.  Check your local community college business faculty or university MBA program.

·         Your local Chamber of Commerce.  Your local chamber of commerce might have resources to help you write a business plan or find someone to write one for you.


c.       Organizing Your Corporation (if you choose to become one)


Should you choose to organize your business as a corporation or an LLC, there are very specific legal requirements that you need to satisfy as well.  Consult “The Small Business Kit for Dummies” for more information.

d.      Raising Capital

                                                  i.      Loans

·         Promissory Notes – Promissory notes are essentially IOU’s formalized on paper. There are specific terms they must have in order to be legally enforceable.

·         Formal Business Loans

·         The SBA has a loan and grants finder on its website at   http://www.sba.gov/content/search-business-loans-grants-and-financing .They also have information on what your business loan application should contain and what your SBA loan application should look like at http://www.sba.gov/content/sba-loans

·         Microlenders – There are non-profit microlenders that make very small loans to small businesses.  They include:

·         Kiva (http://www.kiva.org)

·         Accion USA (http://www.accionusa.org)

·         Communities At Work Fund (http://www.communitiesatworkfund.org)

·         For more information, Google “microlender” or check the Frugal Entrepreneur site blog entry, “20 Sites to Help You Get a Microloan for Your Small Business or Startup” http://frugalentrepreneur.com/2011/01/14-sites-to-help-you-microfinance-your-business-or-startup/ 

·         Crowd Funding -- These are online organizations by which large groups of people decide to pool their money to make loans to small businesses.  They include sites such as Kickstarter  http://www.kickstarter.com)

·         Commercial Peer-to-Peer Lending – Business organizations that loan to other businesses.  You typically need a credit score of 660 or above to participate.
 

                                                ii.      Grants  -- The Small Business Association (sba.gov) has a loan and grants finder on its website to help you locate grants and loan programs specific to your industry and to you (minority-owned business, woman-owned business) at http://www.sba.gov/content/search-business-loans-grants-and-financing


                                              iii.      Equity – This means selling partial ownership of your company in exchange for stock or stock options and having investors instead of lenders.  Your investors may also want to have a say in the running of your company

·         Stock
·         Types of stock
·   Common  -- Has no priorities or preferences over other classes of stock

·   Preferred – Gives shareholders various benefits over common stock holders, such as a priority on the businesses’ assets upon liquidation, special voting rights, or a priority on dividends.  Many professional investors prefer preferred stock to common stock

·         Types of Equity Investors

·   Angel Investors – Individuals interested in funding start-ups or early stage companies in exchange for equity.  They’re usually not interested in taking an active role in running the company.


·   Venture Capitalists – Professional investment groups that invest primarily in high-growth companies and provide significant amounts of funding, management advice, business strategy, and contacts and introductions to other companies.  Venture capitalists want equity and a significant say or veto power in the running of the business.


·   Strategic partners – A strategic partnership or joint venture with another company can provide financing, resources, technology or information. Strategic partner financings are typically on better terms than venture capital financing.  (Example:  Cingular Cellular started as a joint venture between AT&T and BellSouth).


·   Private placements through private placement agents -- You can hire a placement agent or broker-dealer to help raise money by finding investors to buy into your company for a commission.



e.       Bookkeeping and Accounting

Once you become a business, you’ve got to account for your money.  You’ll have to do at least three main things:  1) Determine your accounting method; 2) Keep records and books; and 3) generate your financial forms.  Quite frankly, I think this is best left to an accountant or bookkeeper or to small business accounting software such as QuickBooks.


                                                              i.      Accounting Method:  Cash or Accrual

An accounting method is a set of rules used to determine when and how to report income and expenses in your business books and on your business income tax returns.  There are two basic accounting methods:

·         Cash – You report income that you receive during the year, and you usually deduct expenses as you pay them.  Service providers and construction companies typically use the cash method.

·         Accrual method – You report income when you earn it (such as when you ship the product or perform the service), even though you may receive payment later. You deduct expenses when you incur them (such as when you receive a product or service), regardless of when you pay them.  Manufacturers and retail stores that maintain inventories typically use the accrual method.


                                                            ii.      Keeping Records and Books – This is done by use of supporting documents, journals, and ledgers

·         Supporting documents are documents that are evidence of business transactions, such as invoices, receipts, deposit slips, and canceled checks.

·         Journals are books in which you record each business transaction shown on your supporting documents.  You  may keep separate journals for transaction that occur frequently.

·         Ledgers are books that contain the totals from all your journals.  Ledgers are organized into different accounts.



                                                          iii.      Financial Forms

The three financial forms you’ll have to generate are:

·         Income Statement:  Your income statement figures net income or the bottom line.  It is calculated by adding up all the revenue from your business and then subtracting all the costs and expenses of operating your business, e.g., Revenue – Costs = Net Income


·         Balance Sheet:  The balance sheet shows the company’s financial condition as of a specific date – what the business owns (assets) and what the business owes (liabilities).  The difference represents the business’s equity (or net worth), e.g., Assets – Liabilities = Equity


·         Cash Flow Statement:  Shows what happens to your cash over a specific period of time.  You can have very good profits and a strong Balance Sheet and still not have money in the bank to pay your bills.  Because cash flow may be critical to a business’s daily operations, you may need to follow it weekly.

For more on financial forms, read “The Small Business Kit for Dummies.”

f.        Taxes

As soon as you open your business, you need a Taxpayer Identification Number.  If you’re a sole proprietorship, it can be your Social Security Number (SSN).  Any other business form – corporation, LLC, LLP – will require an Employer Identification Number (EIN).

                                                              i.       The Five General Taxes You’ll Pay

·         Income tax – Generally, sole proprietors, partners and shareholders of an S corporation make regular estimate tax payments throughout the year.  If you expect to owe taxes, including self-employment tax, you generally have to make estimated tax payments.

·         Self-employment taxes (the combination of Social Security and Medicare tax for individuals who work for themselves.  You generally pay self-employment tax if your annual net earnings from self-employment are $400 or more.  See IRS Publication  533

·         Employment taxes consist of federal income tax withholding, Social Security and Medicare taxes, and federal unemployment taxes for your employees

·         Excise taxes are taxes you pay if you manufacture or sell certain products, operate certain kinds of business, or use various types of equipment, facilities or products.  Most small businesses don’t fall into these categories, which include retail sales of heavy trucks, wagering, guns, and tobacco and alcohol.

·         Sales tax.  If your business sells retail products and your state imposes sales tax on these goods, your business is responsible for collecting and paying that tax.


g.      Hiring Employees . . . Or Not

The people who work for you in your business belong to one of two categories:  Employees or Independent Contractors.  Most small businesses prefer independent contractors.  Why:

·         With employees, you have to

o   Pay them benefits

o   Have consistent employee personnel policies

o   Withhold taxes

o   Hire and train them

o   Be aware of and not violate antidiscrimination laws

o   Carry Worker’s Compensation Insurance

o   Make employer contributions to Social Security and Medicare

o   Pay overtime for hourly employees



You don’t have to do any of these things with independent contractors, BUT you have no control on how an independent contractor.


h.      Legal – Contracts, Compliance, Intellectual Property and Customer Issues

At some point, you will need legal advice or forms for:

·         Contracts
·         Compliance with all applicable laws – securities, licensing, regulatory, employment, antitrust
·         Protection of your intellectual property – patents, formulas, creations, software, brand 

i.        Marketing and Advertising


You can no longer be content to put up a website and call that “marketing.”  In addition to your website, a small company needs to leverage social media and search engines in addition to seeking exposure through mainstream media in order to get the business before the right folks.  You’ll have to get comfortable with Facebook, Twitter and other social media, if for no other reason, to monitor what’s being said about your company.

B.     Resources



The Small Business Administration http://www.sba.gov


Service Corps of Retired Executives (SCORE) http://www.score.org

Inc. Magazine http://www.inc.com

Black Enterprise Magazine http://www.blackenterprise.com

Go Big Network, “How to Raise Money 101” http://www.gobignetwork.com

Richard D. Harroch, “Small Business Kit for Dummies”

Something to Think About
A series of family meetings
Multiple Streams of Income
Business Example of Moving from the Left Side of the Cashflow Quadrant ™ to the Right:
My Niece’s Place, LLC

I wanted to give a real life example of a business that shows the progression from the left side of the Cashflow Quadrant™ to the right:  My Niece’s Place, LLC.
Remember the Cashflow Quadrant™:

E       |      B
                              S       |       I

            “E” stands for “Employee” – someone who earns his income by working for someone else.
            “S” stands for Self-Employed – someone who earns his income by working for himself.  S’s are usually professionals, such as doctors, lawyers and accountants, who charge by the hour or the project.
            “B” stands for Business Owner – someone who earns his income from a business that he owns in which other people work for him.
            “I” stands for “Investor,” someone who earns money from his investments, e.g., stocks, real estate.
E:  My niece worked as an employee with AT&T for 14 years.  She decided she wanted more out of life and goes back to college, finishing her Bachelor’s in Early Childhood Education.
S:   My niece opens My Niece’s Place, LLC, a daycare and preschool for special needs children.  She is the sole owner and operator, yet she opens as an LLC, insulating herself from any personal liability if something happens to the kids. Smart cookie.
What’s Next?
B:  My niece hires employees and opens new locations of My Niece’s Place, LLC.  She develops a curriculum and approach for her daycare/preschool and licenses franchises of My Niece’s Place, LLC, now the premiere provider of daycare and preschool for special needs children.  She is no longer self-employed but a business owner overseeing other people, i.e., getting rich using Other People’s Time and Other People’s Money.
I:  My niece sells the entire company, takes the profits, and invests in other companies, living off her stock dividends.  She’s financially free.

Something to Think About
A series of family meetings
Multiple Streams of Income Module
“Swimming with the Killer Whales” Business Pitch Game
 Instructions:  You will have 5 minutes to pitch your business (either real or make believe) to potential investors and answer their questions.  At the end of your pitch, investors can use their EddieBucks to buy stock in your company.  The business owner with the most EddieBucks at the end of the pitches will win a prize.
 What Your Business Pitch Should Include:
·        The Problem:  What problem will your business solve?
·        The Solution:  What is your solution to the problem?
·        Your Market:  Who’s going to buy what you’re selling?