Business Archives - Florida Strategic Consulting

Ban on Internships a Bad Idea

Posted on May 7, 2010May 9, 2010 by Alex M. Hochberger, MBA

Many professionals start their career as interns, learning the business while working for little or no money, and possibly with our without college credit for the experience. At Feratech, we always maintained an active internship program, taking advantage of our Boston location to always have young students with fresh insights working for our company. The interns learned the business, developed valuable skills, and provided useful man power to our growing business.

The administrations has decided to crack down on this practice, which will drastically affect the career prospects of current college students. By eliminating this practice, firms will dramatically decrease the numbers of positions that they offer, which will result in more college graduates leaving school with a pile of student loans and no work experience. The administration feels that internships are volunteers, and only the government and non-profits can have volunteers. The affect of this on the media is the subject of this rant by John Stossel, which illustrates part of the problem.

Given the high unemployment rate, teenagers and students are struggling to find summer employment, because they are competing with out of work people that can work year round without restrictions. This leaves internships as one of the prime sources for job experience for students, a position being targeted by the administration. We already know that graduating in a recession hurts your income for ten years compared to graduating in good times. A 22 college graduate without an internship on their resume is not only competing against those that were able to get a paying internship, but against the 23 year old that graduated the previous year, has the internship, and a year of experience.

My resume coming out of college was filled with internships from high school and college, albeit paid because computer internships were normally paid in the dot-com era, without those experiences, I would have had tremendous difficulty my first years out of school, a decision being laid upon today’s college students. Given that the administration received two-thirds the votes of the 18-30 crowd, I do not understand why they are taking a position that will have a huge negative affect on those young professionals starting their careers.

Time to Invest In Startups

Posted on April 27, 2010April 27, 2010 by Alex M. Hochberger, MBA

So with the planned increases in personal tax rates (which hit small businesses that report via K-1, i.e. S-corporation and LLCs election S-Corporation status), combined with the collapse in small business credit, there is a concern about declining business investment. Since large established businesses tend to lose jobs over time, job growth is dependent on small business growth. There is a proposal floating on capital hill to create a capital gains tax-free investment opportunity for small businesses.

The basic idea, to qualify, the company must be structured as a C-corporation (a taxable entity), and not in certain segments of the economy, but for those businesses, a qualified investor would be able to realize their capital gains tax free. The qualifications: direct investment in the company (not buying via broker), an asset cap on the business, and the tax status of the entity, and the investment will be exempted from capital gains AND AMT taxes… the later is important because qualified angel investors often fall in the AMT window, which eliminates the preferential treatment of capital gains because the AMT tax recaptures it.

This presents an interesting opportunity. The problem with the capital gains rate and start-ups is that most start-ups fail, so angel groups pool money and invest so they make money on the 1-in-10 successes. The opportunity for entrepreneurs is developing a business concept that would rapidly deploy capital raised under this exemption, in a way to safely purchase assets that will appreciate and create most of the gains in the form of capital gains rather than profits that would be double taxed because of the corporate structure.

The stated goal is high tech and construction companies that tend to create high wage jobs, but those ventures are inherently risky and the requirement of an original investment would prevent pooling. The pool of investors able to make 10 angel investments individually is pretty small, and most groups aggregate themselves through a pass-through entity like an LLC organized for taxes as a partnership, which conceivably would be prevented from taking advantage of this new status.

The question is, what “high tech” business, for tax purposes, could be “low tech” enough to be a safe investment, providing a market or greater return that would be tax free. Highly speculative investments wouldn’t be relevant, and the long term gain needs to be through capital gains, not profits, or the tax advantages would be wiped out and you’d be better off using an LLC using a partnership return. With capital gains rates scheduled to return to 20%, plus a 3% health care levy, and some in the administration talking about raising them higher, it’s time to focus on tax sheltered investment vehicles. The low tax environment has discouraged tax shelters allowing people to focus on the underlying investment, but the coming years of tax increases brings back the importance of sheltering income for high net worth opportunities, and creates an opportunity for smart entrepreneurs.

Thoughts?

Despite Recession, Online Advertising Increases in 2009, projected higher in 2010

Posted on December 4, 2009 by Alex M. Hochberger, MBA

Every year, more and more of retail takes place online. The recession is pushing toward more direct response advertising, causing an uptick in online advertising between 3% and 5% in an otherwise down year. Search is expected to perform similarly, and 2010 is predicting an increase in online advertising dollars between 10% and 15%. For online publishers and advertisers, this means that despite sluggish growth overall, the Internet continues to grow at several times the overall economy. Although search engine consolidation has caused bid prices to increases, the prevalence of content networks and alternative search networks creates new opportunities for online advertisers to reach customers in a cost effective manner.

Social Media appears to be one of the interesting potential story, as a source of advertising dollars and business, search continues to grow, display ads are relatively stagnant, and alternative campaigns in new medias inches upward. Despite it’s status as media darling, Twitter remains a small niche play, with popular Facebook game FarmVille having more users than Twitter. Email newsletters remain big business, but the movement from getting content pushed into your inbox toward networks and feeds continues, creating new opportunities for online advertisement. 2009 looks to have finished as a slight positive in a down economy, and 2010 looks quite promising.

Launch a business with Social Media and SEO in 5 Steps

Posted on September 10, 2009September 10, 2009 by Alex M. Hochberger, MBA

So I routinely get asked by friends for advice on how to get a web business launched with no money. As I politely steer them away from the idea that I should do it for them, I thought that I should work on a basic guide for getting started.

Step 1: Pick a Good Domain Name

A domain name is your address, what you will hand out, and what you will advertise. Your goals are short, easy to spell, nothing to trip people up, and keyword friendly. If you are dealing with cars in Florida, and your name is Jake, then CarsByJake.com would be friendly, start with your keyword, and be easy to spell. FloridaCarsByJake.com would also be good, but JakesFloridaCars.com gets tricky because without the appostrophy, it sounds like your name is Jakes. Avoid double consonants (two words, one that ends in a letter and the next work begins with it), and definitely do no “merge” it being clever, people will get confused. I find dot-com extensions better than alternatives, but it may depend on your industry. It’s been over 10 years since dot-net was the premium TLD and dot-com a negative one, but dot-net still has cachet in technology sectors.

Step 2: Register with Twitter, Facebook, and LinkedIn

You don’t get to play if you aren’t there. Twitter is important for the ability to move information out there. Facebook has a tremendous number of users and viral power, and LinkedIn is where the professionals hang out. While you may not use all these mediums terribly effectively on Day 1, the sooner you open an account, the sooner you are ready to use it. If you aren’t going to optimize for all platforms, also register with Ping.fm or HelloTXT for content syndication, that will let you move your messages to all platforms at once. I would recommend picking a URL shortener for social media (I use Bit.ly) and creating an account with stats, this way you can keep your collection of short links and start to see what drives traffic. For Facebook, you should also setup a Page for your business so people that like your business can Fan your Page, even if they don’t know you personally.

Step 3: Setup the Website and add Content

If you aren’t ready for a serious commitment, using a free CMS system like WordPress.com, or other environment that let’s you publish and bring your own domain name is important. Make certain that you can export content later if you move. Despite my historically building my own CMS platforms for SEO reasons, I’ve been finding WordPress.com a great platform for self-publishing, and I can always export to a WordPress.org (self hosted) system later and work from there into whatever I want. Good content is key to success. Learning to write 5+ blog posts a week plus updating the core of the site (Pages in WordPress speak, the static content part of any CMS) of information, adding images, etc., is time consuming.

Step 4: Get in the Social Media World and Blogosphere

You need to participate to get involved. For Facebook, setup the appropriate privacy policies and participate in comments, Wall Posts and pictures. Wish people well on their birthday, tell them when they put up cute pictures of children/grandchildren, be friends with your friends. For Twitter, grab TweetDeck, start finding the appropriate Hashtags for your discussions and start sharing information. With your blog, find bloggers posting questions that you can answer, and either leave a comment (if short), or answer with a link to their entry with software that will ping them with the answer. Like any form of networking, participate. Retweet good posts, share your expertise, and build up an online reputation.

Step 5: Using Content and Social Media, Promote your Site which Promotes your Business

This final step is how you pull it all together. Write good content for your site on the blog, promote it through your new Social Media channels. The better the content, the more likely you are to get Retweeted or linked to from other blogs. The more links you get to your site, the better you will do in search engines. The more you get Retweeted in Twitter, the more likely you are to get Followers. The more you get mentions and links on Facebook on news feed, the more likely you are to reconnect with friends or come to the attention of customers. SEO = keywords + good content + links… the more advanced part of SEO, you can get to that later, when you get traction. If you need to hire an SEO expert, you will already have new customers from your web site plus a great starting point for the SEO who can see your keyword success to get started. As you add content and social connections, your traffic will build and build, and if your site’s core information is good, you will successfully launch your business.

This is my first draft of this 5 Step Process. I expect to come back and revise over time. Comments, suggestions, etc. are all appreciated. Feel free to Follow me on Twitter and Tweet this Post!

Government Matching Inventors with Manufacturers

Posted on September 10, 2009September 10, 2009 by Alex M. Hochberger, MBA

Three cheers for some smart governmental policy. Markets do well where there is perfect, or near perfect, information, and limited barriers to entry. Markets do poorly where there are barriers to entry, particularly if they are information based. Technology, IT in particularly, has helped shrink businesses by eliminating layers of management because you no longer need a 6:1 reporting ratio because of paper limitation. Further, Just In Time EVERYTHING, manufacturing, wholesaling, inventory, etc., helps keeps companies lean, just buying things as needed in an open marketplace.

One area where the market failed to make connections was in the manufacturing of products. Contract manufacturing seemed popular with large companies, but there didn’t ever seem to be options for small businesses. Strangely, every entrepreneur I know who made a product made it in China, not because of the cost differential (shipping and monitoring eats it up on small lines) but just because they could get it done.

Department of Commerce’s Manufacturing Extension Partnership helped launch Planet Eureka!, the innovation marketplace. Maybe we’ll be able to get one of my wife’s ideas to market this time around. Thanks to CNN Money for pointing me in this direction, you can read the artile that I read, “What’s your idea worth?”

Retro Small Business Financing – Customer Funding

Posted on September 9, 2009 by Alex M. Hochberger, MBA

In a world of complicated finance, the idea of building a business without capital, raising money from your customers seemed expensive and retro. Although mentioned as an example in every business text book, in reality, entrepreneurs have focused on debt financing or outside investors rather than looking to their customers.

With the credit crunch and housing collapse eliminating many small business loans and home equity loans as a source of business capital, many entrepreneurs are returning to the historic source of capital, their customers. Money magazine shares the anecdotes of several business owners, owners who have sold stock, pre-sold gift certificates, and otherwise took action to raise capital from their current or potential customers, both raising capital cheaply and increasing customer loyalty.

In some ways, however, this capital is cheap, and in other ways it is very expensive. The capital is cheap in that it lacks personal guarantees, protecting the downside, and may not have the warrants and other “teeth” that angels and VCs may want. However, selling $1,500 in gift certificates for $1,000 to raise money is a 50% rate of return and will likely be redeemed within 3 months, potentially charging you a 200% rate of interest. If that customer would have spent $1,500 with you anyway, that’s real cost in opportunity cost. To the restaurant owner, if they run at 50% margins, that $1,500 costs them $750, so from a cash flow point of view, the money is cheap. As most small business owners will remind you, cash is king, and cash flow matters a lot more than the traditional finance metrics, because cash means survival. The Fortune 500 finance guy is worried about NPV (Net Present Value), but the local coffee shop needs to pay the rent and cover payroll.

As a rule, I open my business bank account with the first check from a customer. If I invest in the business, it comes later, but by always opening the account with a customer check, it serves as a reminder that you aren’t in business until you have a paying customer.

Internet Upscale Success – Net a Porter Hits Successful Women

Posted on September 8, 2009 by Alex M. Hochberger, MBA

After spending so much time in sub-prime finance where most of the SEO/Internet Marketing Industry lives, and helping eCommerce businesses in a race to the bottom of price and service, it’s nice to know that the premium industry is surviving and even thriving in this space. Fortune Magazine had a great article on the success of Net a Porter, selling high end clothing to wealthy but time strapped women who was a virtual fashion magazine, think of it as Vogue that delivers the clothing to you. Much of the online fashion buzz has been for companies with rapid fire sales like Rue La La, which lets designers dump excess inventory to those with free time… young professionals who can sit at their office computer waiting for the 15 minute window where the good stuff all goes when a boutique opens.

Net-a-Porter is offering a mobile and web experience, letting a busy professional woman that is on the go have the latest fashions despite an industry that ignores them. The successful women that I know have more disposable income than time, and the boutique industry still targets the trophy wives of the idle rich. A female executive working 80 hour weeks as a dealmaker simply doesn’t have the time that the wife of her male counterpart does to go and be waiting on in a fancy boutique, but there is no reason that she’s can’t be properly dressed.

It’s nice to see that in a race to the bottom, a company focused on service found a profitable niche.

Whole Foods Boycott, Free Speech in Modern America

Posted on September 1, 2009September 1, 2009 by Alex M. Hochberger, MBA

I am really concerned by the movement to boycott Whole Foods because of a political position taken by the CEO in an editorial to the Wall Street Journal. In the editorial, CEO John Mackey expresses his fear of the proposals from Washington, and shares with the readers what Whole Foods has done regarding health care for its employees and urges some common sense reforms to the system, some of which are in the proposal.

Aghast that Whole Foods is a business operation, the upper middle class liberals took to the Internet to punish this company for its CEO being proud of what they did in the company and sharing the experience with the readers of the Wall Street Journal.

Now, Health Care Reform is a pressing issue in America, and has dominated the news and the political cycle for this summer. Mr. Mackey expressed his opinions and experiences. He hasn’t used his position at Whole Foods to affect the political debate, he isn’t having the stores he runs promote his agenda. He, as a private citizen with some knowledge of health care costs as a major employer wrote a well thought out, intelligent editorial, one that some of his customers might disagree with.

As a result, they are calling for his head and a boycott of the firm, putting his livelihood in jeopardy because he disagree with them on a political issue. Now, this isn’t government censorship directly, but given how much of corporate capital is controlled by pension funds for public employees, for example, that could vote their shares to endanger his job, there is just a wee bit of potential government censorship here. More importantly, Americans should all be discussing this issue and debating it, and by attacking Whole Foods for the CEO disagreeing with them, it is simply shutting down debate.

If Whole Foods was endorsing his position and broadcasting it in the stores, fine, you have a cause. But to attack a business because of the CEO’s personal politics, that seems like a way to simple stifle debate in America. If Whole Foods is neutral, but Mr. Mackey takes a position, Whole Foods should be left alone, and Mr. Mackey should be able to express a position without people going after his livelihood.

Blogging on a Regular Basis

Posted on September 1, 2009September 1, 2009 by Alex M. Hochberger, MBA

With Third Solutions moving rapidly toward launch, and Monetize Network getting off the ground, plus my son’s third birthday party, life has been a little hectic. As a long time Internet marketer that is new to running a personal blog, I now appreciate the need to be always on. I haven’t come close to hitting daily updates, but hopefully they will be more forthcoming in the coming weeks.