Ups and Downs

Let's start with the good news - it appears as though it was the IRS who screwed up and that everything is filed correctly from a tax standpoint. My lawyer even pointed out exactly what tax form needed to be filled out...hopefully the accountant will agree.

The bad news - though bad is probably too strong a word - is that the whole merchant account is not as easy as I had hoped. The two biggest problems I've run into is 1. not having the right billing address for the credit card (as I have their shipping address but not their billing address) which causes the card to be declined and 2. everyone wants to pay by American Express which I don't currently have set up. At this point I'm thinking I'm going to set up the AMEX account, run it for a month so that I can get these transactions processed and from here on out tell folks that we don't accept AMEX.

Speaking of that - I think my new terms are going to be that retailers' credit cards are charged when merchandise is shipped at least until I develop a relationship with them. After that I'm happy to let them have terms but it has just been like pulling teeth to get the money that's owed the company.

On a totally different note, does anyone know if it's possible to set up a subsidiary company within an existing LLC structure? Basically I have an idea for another product line but it can't have the same brand name and is a different enough product that I'd prefer to use a different company name completely. I'd ideally like to simply create a subsidiary that has all the protections of the existing LLC without actually having to go through the hoopla or setting up an entirely new company. Something to research in the new year but if anyone has any thoughts one way or another I'd love some direction.

Lastly - Happy New Year! May the upcoming year bring you incredible success, especially if you are an entrepreneur, or bring you one year closer to realizing your entrepreneurial dreams. Best wishes!

Credit Card Hurrah!

Santa brought me an early Christmas gift. After more than a month of working on it, I finally received a merchant account today which means I can process credit cards. This is increasingly important to my business from a cash flow standpoint as I'm realizing that many retailers don't want to pay by check and it's simply easier for them to keep everything on their credit card. I haven't yet actually processed any orders via the merchant account but I do have three orders from October (yikes!) that need to be processed ASAP!

For any retailers out there, I'd be interested in learning what terms are typical for merchandise. This past year I've been offering Net 30 terms but have been astounded by the number of people who simply forget/are too busy to send a check in on time. That being said, I realize that retailers have 101 other things going on but right now it's taking me on average of 45 days to collect on accounts which is far too long. With this new merchant account, I'd ideally like to charge retailers' cards after I receive confirmation from UPS or USPS that they've received the product. But is this the way it's typically done or do other terms normally apply when it comes to credit card orders?

True Benefits of Being On Your Own

As a follow-up to my earlier post regarding health insurance and in reference to Mikie8's comment about the benefits of running your own business, I pulled together a list of what I've found to be the true benefits of being on your own. This is just from my personal limited experience so anyone else out there who wants to add to other ideas please jump on in!

• Flexible time - most people like to think that entrepreneurs have free time but that's not quite right. From speaking with other entrepreneurs it seems like most are working more hours then they would have in a corporate environment but now there's no clock to punch. There are definitely deadlines that have to be met but aside from those, if I want to work on my 2007 Growth Model at 2pm or 2am that's really up to me. This is probably one of the top ten reasons I wanted to go into business for myself since I came from an incredibly stifling corporate job right before business school (I joke that "The Office" tv show is based on my old company - sad thing is, it's not that far from the truth). I love being able to, for the most part, set my own schedule.
• Risk-Reward Tradeoff - a great thing about entrepreneurship is that if the business takes off then you will see the rewards of your work. Granted, there's also the opposite scenario that if things don't pan out...but let's stay positive for the moment. there's something incredibly exciting about working hard with the knowledge that success will benefit you directly versus simply picking up the same standard paycheck week after week. This is also something that was very importat to me because at my "Office" job, if the company met its sales goals then the sales folks would be handsomely rewarded but the rest of us, who had been developing and/or marketing the product that the sales guys were selling, would get nothing other than a less-than-cost-of-living salary increase. At a certain point you had to wonder why, other than simple job security and the personal desire to do good work, you were working so hard. I'll let you guess how morale was among the non-salespeople.
• Watching Something Grow - I get a charge from starting something from scratch and working fervently to help it take off. Right now I am working on next year's groth goals and there's something incredibly exciting about looking at different channels and playing with new product ideas to try and figure out the best growth strategy for the business. It will take a lot of work to make it all happen, but the possibilities really are endless.
• Never a Dull Moment - No two days are alike. One day I'm working on product, one day I'm working on packaging and new product ideas, the next day I'm trying to decipher state guidelines, and the next I'm playing with QuickBooks and setting up a merchant account. Every single day brings its own unique set of challenges and that keeps it interesting and keeps me learning which is especially important for someone like me who quickly bores from day-in/day-out routine.

Tax Headaches

Just when I was thinking that I was spending more time musing then writing about actual day-to-day business issues (mainly because things are slow for the holidays) along comes today. It's been one of those days where I've played everything from marketer, production manager, bookkeeper (and I still need to do more!), and finance and nothing is going quite according to plan. Plus since I'm wearing so many hats today I feel like I'm being pulled in 100 different directions and not actually getting any substantial done.

But the biggest issue of today comes in the form of taxes. Yep, business taxes are due around January 31st so I finally got the time to contact a business accountant about doing the taxes (which can't be that hard, we're not profitable). Well I'm right with regards to the actual taxes themselves won't be too hard or timeconsuming (aka - won't necessarily cost me an arm and a leg) but apparently it's looking like there was some sort of administrative screwup when I filed the business entity earlier this year. It's unknown at this point whether it was my screwup - though in my defense I did have a lawyer look everything over before it was submitted - or the state's...but in reality let's guess who'll take the fall for this one.

My bigger concern is getting this remedied ASAP. I have faith that the accountant and her band of roving CPAs will be able to fix the problem, but I am worried about how much this whole process will end up costing me.

I'm chaulking it up to the way of a small business...there are always mistakes along the way that you learn from, but they can be costly learning exercises. Wish me luck!

Added three hours after the initial post: So things are looking up slightly. The tax issue is still there but the fact that I haven't received any forms re: my city business tax is apparently due to the fact that they are late sending them out. Unbelievably, the city answered an email I sent them only a few hours ago - I was shocked. So I am appropriately registered with the city and state, just not the Feds. And, I finally got caught up on all my QuickBooks. What a mess and my own darn fault for letting it go so long. But I finally got it updated and at first glance it's all appearing to balance out...though I will double-check everything again tomorrow.

Business Books & Profitability

I recently had dinner with a friend who also runs a small business and she mentioned that this year, three years after starting up her business, she is finally at breakeven. Notice I didn't say profitable but breakeven. That got me wondering about what the average time is for small businesses to breakeven. Obviously there is a lot of variability given that investment amounts differ for every industry, but I was wondering if three years was the so-called norm or whether that was ahead/behind the curve.

Unfortunately my search (granted, it wasn't an extensive search) of the internet didn't reveal a whole lot other than plenty of books about entrepreneurship. I will continue searching for my answer to the average breakeven number and let you know if/when I find it, but looking through these books got me thinking about my favorite books on entrepreneurship. With the holidays just around the corner, I thought someone may want to add these reads to their holiday list. And if you have any particular favorites please let me know as I'm always interested in reading more about successful entrepreneurs or successful entrepreneurship practices.

Pour Your Heart Into It: Written by Charles Schultz (founder of Starbucks), it not only talks about how he started up the company but how he incorporated his values into the company while also managing to change consumers' minds about what a cup of coffee should be (going from the 5cent cup a'joe to a $3.45 tall skim vanilla latte). I really enjoyed his book and hope that when I start hiring full-time employees I can offer them a range of benefits that suites their needs.

Raising the Bar: Integrity and Passion In Life and Business: by the founder of Cliff Bar, Gary Erickson, an entrepreneur who basically went up against a giant (Power Bar) and last I hear was winning the battle. Erickson is also committed to doing what he can for his community and the environment which I find an inspiring way to look at business as opposed to simply measuring bottom line profits (that being said, I understand that the profits have to be there first).

Steve Jobs Commencement Speech to Stanford: Ok, this one isn't a book but if you haven't yet read it follow this link immediately (http://news-service.stanford.edu/news/2005/june15/jobs-061505.html).
Book mark this speech and then print it out and carry it everywhere with you. His comments are so powerful and just what’s needed on those days when you wonder if you’ve been making the right decisions all along.

For Laughs - Check out your Pro Forma

The dogs have me up early this morning so I’ve been working on my 2007 business models. For kicks, I pulled up the pro forma I created for my business back when I was still in business school. (For those who don’t know, a pro forma is a forward-looking financial statement that takes into account where one thinks the financial future of the business will go. Pro forma’s are helpful tools because once created they can be tweaked to determine how much various factors, such as a rise in raw material costs, will impact the bottom line of the business based on certain growth targets. They're also ideal on days like today when I'm trying to forcast out my conservative, ideal, and dream growth rates as it gives me a sense of how the business will perform in each of those scenarios. For information on how to build a pro forma ask any finance geek you know or let me know and I can point you in the direction of some finance geeks.)

Let’s just say that the proforma I had built for 2006 wasn’t even close - not by a long shot! In all honesty it was kind of fun to take a look at and see how naive I really was (which frightens me because I think I’m still naive). While I still believe in the benefit of building pro forma statements, it’s not easy to build one when you don’t have any data about prior sales, marketing costs, etc. Some would argue that you should take a look at a financial statement from one of the public companies in your industry and base yours off of theirs but let’s be realistic, they have a $gabillion budget so I don’t see that as being very helpful.

So what changes am I currently making for the 2007 pro forma?

• Now that I have sales figures I can take a rough guess at how much I want/expect business to grow and build that in. This is still pretty much simply a guessing game since I don't have a ton of history from which to get these growth figures but I am able to create three pro formas that take into account the above mentioned growth scenarios.
• My marketing budget was horribly - woefully - out of wack. The sad thing is, I was a marketing major at business school known for its marketing program - I should have known better. Now I understand why marketing managers everywhere have to fight so hard for a reasonable budget. Marketing really was and appears will continue to be one of my biggest expeses.
• I do now have a better sense of my other monthly expenses so this does make it easier to forcast for next year as opposed to estimating in my 2006 pro forma.

Those are the big things. There's still a lot of unknown going forward but that's the way of a new business, isn't it?

Our First Piece of Press

When I picked up the mail today I found that in addition to the holiday cards we ordered (with the hopes of actually getting them out before the new year) there was also a package from a small news weekly that did a review of our product. I'm not going to lie that I opened it with a bit of trepidation fearing that the review would be bad or even lukewarm, but the little writeup was very positive!

Interestingly enough, PR has been on my mind lately as I'm working on next year's budget. I tried to do a little PR on my own this year but truthfully this piece of PR more or less fell into my lap without me doing too much and I don't necessarily think that's the best tactic going forward. I'm hoping to get the names of some local PR folks and talk to them about what they think they can do and how much they're going to cost. Hopefully that way we can get a few more positive reviews next year!

I should add - if you know of any good PR folks or are one yourself, I'd love any recommendations. You can either leave a post here or I just created a new email address at entrepreneurrollercoaster dot com. Thanks!