Agave Mountain

First, let me prefix what you are about to read by informing you that all of my retirement accounts have been 100% cash since the beginning of the year.  My business carries no debt.  I am also renter.  As a result, I haven't lost a single penny in the recent market fluctuations. 

However, others aren't doing so well.  If I had to sum up the atmosphere with one word it would be: fear. 

Immediate Outlook

From the unscientific poll I conducted and rumor mongering -- most freelancers/contractors are reporting little to no slow down in finding work, just that smaller businesses are hesitant to pay up right away (is that really any different?).

Conversely, on Wednesday, Sequoia Capital (a well know VC firm) warned silicon valley firms that a downturn was coming, and it would be a more protracted downturn than most CEO's expect.  The advice Ron Conway gives is exactly what he said in 2000 -- lower your burn rate and preemptively fire employees right now in preparation.  Cut costs to weather the downturn which could last years.

Cash is King

Alexander Muse has discovered that, at least in Dallas,some banks are freezing small business credit lines: 

"You might be surprised, but more than 75% of all IT service providers utilize revolving lines of credit to finance their companies (Architel does not).  The average $5,000,000 IT service provider has $200,000 to $500,000 in a revolving credit facility.  Earlier this week the banks who provide these credit facilities, like Bank of America, have contacted their clients and let them know that they may not be able to draw down on the these lines [...]  We have witnessed two well known IT companies in Dallas miss payroll this week."  SOURCE.

Yes, you read that correctly.  He goes on to predict mass business failures, of under capitalized businesses.  On the political front, Senator Schumer floated the idea of making billions of dollars in loans through the Small Business Administration.

The Sky Isn't Falling

I think this is a great time to start a business, provided you are capitalized, flexible and willing to take some calculated risks.  In fact, it can be argued that small businesses are being handed a comparative advantage over overleveraged  businesses.

And finally, some advice that is as valuable today as it was in the 30's:

1. Pay With CASH; Negotiate a cash discount

2. Spend Less Than You Make

3 - Make the Money BEFORE Spending It

4 - Set Aside Some Money for Emergencies and Living Expenses

Labels: Business, Personal Finance, Startup

Posted by Joe Turner at 9:55 PM | Permalink | Comments

Today I received a letter from Dun and Bradstreet, alerting me that activity has been noted on my business credit profile.  The "activity" was that my business had an incomplete credit profile.  I rolled my eyes as I tossed the letter into the trash can. 

I don't think it was an accident I got an email pitching the "free" 30-day trial of their self-monitoring service ($449 per year), followed by a letter than inferred that I have negative information on my profile that needed to be corrected.  I think it is a carefully engineered sales process designed to hook gullible business owners into forking over cash for a useless service. 

Confused about the perceived negative, you pick up the phone and a commissioned sales reps crows, "that's why you NEED self monitoring for your business.. it's free for 30 days..." 

Apparently, these tactics are wildly successful in extracting cash out of confused business owners.  In most cases, when I see blog or forum postings about D&B it will go something like: "I'm not sure what it does, but I forked over $600 for their service."  I am surprised that otherwise sane and rational business people pay for a service they are supposed to get for free.  Amazing.

I guess it isn't surprising because most of the Google-indexed articles on business credit are either generated by nefarious credit repair agencies, or link bait for advertising.

D&B Practices

You should know that D&B support is comprised of commissioned sales representatives.  Not surprisingly, the sales representatives can spin a yarn or two in pursuit of a rent check.  So far they have outright lied to me on several occasions.  One went so far as to tell me that I wouldn't be able to purchase a computer at DELL without a PAYDEX score.  Another told me that the government wouldn't do business with me unless I paid for verification.  Absurd.

Last year, I got a cold call from a D&B representative telling me that there was some negative activity on my credit profile.  He launched into a credit builder sells pitch.  I cut him off and asked which trade line had reported negative information, because I pay my bills on time as a receive them.  He continue to try to sell me a variety of products.  After some pointed questions he finally admitted that the negative information was that I didn't have a PAYDEX score.

Amazingly, in spite of never purchasing a D&B product (and not having a PAYDEX score) I have had no problem getting 3 business credit cards, an OfficeMax corporate card, and approval for a bank loan.  Go figure. 

So lets dispel some myths about D&B:

• FREE D-U-N-S™ Number. You CAN get a DUNS number for free.  The process will take 30 days, or you can pay for expedited processing -- $49 for 5 days.  If you are applying for government grants, you can get a free DUNS number within 24 or 48 hours.  This will open up a profile which will be "inactive."  Once a creditor reports it will be activated.
• When you choose to have your DUNS number created for free, you will be contacted by D&B in order to convince you to pay for  your profile.  Don't.  Most likely, you will be outright lied to-- something like you won't have an active profile unless you pay for the $399 credit builder package.  This is simply not true.
• If the rep states (as the did to me) that the government will not do business with you unless you have an active credit profile and tells you that you must purchase the credit builder service... this is not true.  You do not need to purchase any services from D&B to do business with the government. The government only requires a DUNS number.
• If you talk to D&B, you will be told that the DUNS number is a non-rated identification, that cannot be used to build corporate credit.  You will be told that if you want a rated number, you must go through the validation process (Credit Builder or Credit Builder Plus) at a cost anywhere between $300 and $800.  This is simply not true.  Simply give the DUNS number to your trade references and reporting organizations, and your credit profile will automatically get "activated" for free.  Further, you will become rated and get a free PAYDEX score when you have enough reporting trade references.
• You might be told that a free DUNS number is not a complete registration and isn't eligible for predictive credit scores or credit ratings.  Not true, it will just take a little longer. 
• The credit builder service -- they simply take your information and ask you for trade references.  That is all.  If you are a new business and don't have trade credit yet, you will be paying $399 for your own credit report.  On the flip side, you get to write whatever you want into your credit profile.

Do you need Dun and Bradstreet?  No.  Register for the free DUNS number and submit that information to the creditors as you apply for trade credit.

Labels: Business, Small Business Scams, Startup

Posted by Joe Turner at 10:48 AM | Permalink | Comments

Right now, I don't respond to RFPs (Request for Proposals).  My future plans are to only respond to government or NGO RFPs, if they come close to matching my future product offerings.

A RFP (Request For Proposal) is a an invitation to potential suppliers to submit a proposal for a specific commodity or service.  RFPs can be simple or incredibly complex.  Here is a well written example of  RFP from the University of Hawaii to purchase computers.

Generating a proposal in response to an RFP is sometimes a very time consuming and laborious process, and it is often a smaller part of a more time consuming sales process.  It is common for RFPs to ask for corporate information, financial information, qualifications, description of your products or services, project stages, milestones, cost and pricing.  For web design jobs they may or may not include detailed specifications.

The most common complaint I hear about RFPs (from freelancers) goes something like, "... after putting together a brilliant proposal complete with screen shots and mock ups, we didn't get the job because we were too expensive.  But six months they rolled out their new web site -- just as we proposed right down the fonts and colors!  The stole our specification and outsourced it to India!"

I am acutely aware that many times RFPs (Request For Proposal) can be used as tools to get inexperienced web designers to write detailed specifications for free.  However, Alexander Muse (Texas Startup Blog) highlighted a recent experience with RFPs (Avoid Undue Diligence like the Plague) which not only wasted his time but may have damaged his business:

Due diligence is the verification of information given to an investor by a startup in contemplation of a potential investment. Undue diligence, the solicitation of information for competitive reasons, is perhaps the most unsavory you can commit against a startup. Not only are you wasting the company’s time, you are getting their hopes up and potentially altering their behavior toward REAL investors.

Real investors, i.e. ones that you have heard of, rarely conduct undue diligence or if they do they have someone else do it for them.  You are more likely to fall victim to the services of a competitive intelligence expert like Dan Sklaire from Systems Research Corporation in New York City.  Experts like Dan are hired guns engaged by your competitors to learn about your a) business model, b) pricing model, c) service offerings, d) your competitive advantages and e) anything else he can uncover.

Basically, Dan Sklaire will send you a big RFP and/or pretend to be a large customer.  You think you are about to score a big sale and work to In reality, he is simply trying to get as much information as possible from you to give to your competitor:

The most common way a competitive intelligence professional like Dan Sklaire begins to understand your business is through the creation of an RFP (request for proposal).  Of course if you respond to RFPs and you are not in a commodity business you deserve a little undue diligence.  One of our companies recently responded to one of Dan’s RFPs with detailed responses and specific pricing.  I saw the deal in a weekly funnel report and asked about it.  The salesperson indicated that he had NEVER met Dan, but that he ran a marketing company that was relocating to Dallas and would need a new IT solution.  I couldn’t believe we responded to his RFP, but the salesperson insisted that we were looking good.  He had a meeting with Dan in a couple of weeks and hoped to close the deal at that time.  Needless to say we didn’t get the deal.  In fact, our salesperson allowed Dan to record their conversation where we went into great detail answering questions Dan and his client had about our proposal.  When the salesperson got back to the office I asked for the name of the client and his contact and I did a little research.  It took me five minutes to figure out that we were being played.

Labels: Business, Consulting, Startup

Posted by Joe Turner at 11:22 PM | Permalink | Comments

I'm in the process of setting up and testing a 1U server that will become my corporate application/web server.  This 1U server will soon be shipped to a colocation facility next week, after I finish stress testing.

After I made the decision that colocation would be best for my business, I sat down and started to research the requirements for a web server.  I quickly found that there is a vast range of choices for 1U servers, with extreme differences in pricing.  1U servers (with desktop motherboards) can be purchased for as little as $395 new.  Used 1U servers can be had for a song on eBay, where you can simply swap the drives and away you go.  Additionally, on the more expensive side, Dell, HP, Sun, and IBM each have a mix of 1U servers at various price points and configurations. 

Only Sun has a program (that I could find) which targeted startups (See Adam Kalsey's Sun Startup Essentials Pricing).  The program is called Sun Startup Essentials, which offers startup companies discounts, training, and support.  Those I found who joined had nothing but glowing things to say about Sun, especially in the storage area.

I wanted maximum uptime, and stability, and was willing to pay a reasonable premium for it.  Because the server will be located in another city, it would take me a full day to get to the server if there was a problem.  More than likely, because of the airline schedules, it would be minimum of 2 days (but given the recent changes in the airline industry there is no guarantee that I would get there in a timely manner).     

Hardware Requirements

Below are the "must haves" that I chose when picking out which server to purchase.  

• Intel dual core or quad core CPU.  The easiest way to be able to compare servers between vendors is to lock in on a single CPU -- dual or quad.  Ultimately, I chose the quad Xeon.  That made comparing price/features a little easier, otherwise I got into paralysis through analysis mode.  Note: While I have been more than happy with AMD products in the past, I've simply lost touch of the power/performance of their products (and I've heard some very disparaging things about their newest multi-core product), so I decided to go Intel only this time around.      
• Hot plug disk drives.  Should a drive go bad, I want to simply be able to mail the colocation facility a new disk drive and have them swap the drives without powering the system down (or cracking open the case).
• Hardware RAID-1.  I decided I wanted two drives, in a RAID-1 set.  More importantly, I wanted the ability to pull a drive, replace it, and see the hardware rebuild the array without powering down the server -- without any effect on the system.  That is, to state it another way: I can pull out one of the drives and the system will keep functioning without any issues.  When I place a new drive in the system, it should automatically rebuild the raid array. 
• Automatic power on.  The server must boot automatically when power is on.  Should the power go of at a colocation facility, the server must automatically boot when power is restored, without having requiring someone to press the "power" button.
• Remote control/virtual presence.   I want to have complete control as if I was in front of servers in the colocation facility or remote site.  IBM, DELL, and HP sell hardware that redirect the mouse, keyboard, and video over the network so you can control the box from power up, change BIOS settings, etc.,.  This is a worse case scenario to rebuild a system. 

Ship it!

After looking at the various vendors and applying back-of-the-napkin calculations to the various servers, Apple and Sun were the most expensive.  I also looked for a 1u server on eBay, but in most cases, the servers are way overpriced or simply to old (and too expensive).

In the end, I chose the HP DL 320 G5/Quad Core Xeon with a Smart Array E200, 2GB RAM, 2 x 160 hot plug drives.  After shipping the system clocked in at $1700.  This was way more than I wanted to spend, yet much less that I could have spent.  Spending the cash now will keep me from having to spend time and money later.

Quite frankly, this is more machine than I could probably use in the near future.  I rationalized the system would be "good enough" for 10 years, and would easily handle 1,000 concurrent users.  I figure if I max out this system, then it would be a good problem to have. 

Labels: Business, Consulting, Startup, Web development

Posted by Joe Turner at 11:53 PM | Permalink | Comments

Rich Dad Advisor's Series: Own Your Own Corporation: Why the Rich Own Their Own Companies and Everyone Else Works for Them (Rich Dad's Advisors) by Garrett Sutton, Robert T. Kiyosaki, Ann Blackman Read more about this book...

When you start a business you are faced with a flood of decisions, some of which will have long lasting ramifications.  Will your business be a sole proprietorship, partnership, corporation, or limited liability company?  Which one is best?  S Corp or C Corp? 

First of all, this book validates the old adage that you just can't judge a book by its cover for two reasons: 1) it doesn't only just cover corporations and 2) it is a book with Kiyosaki's name branded on the cover that actually contains good solid advice inside.  I'm serious-- this is the only Kiyosaki book that I would actually recommend (but only to a very small audience). 

This book is a perfect primer on legal entities for entrepreneurs. 

Once you disregard Kiyosaki's ramblings about childish fantasies, treasure hunting and ships, you get a book written primarily by Garrett Sutton, wherein he carefully presents a high level overview of the various legal entities, and their pros and cons.  Sutton carefully steps through the intricacies of each of the legal entities (S and C Corp, LLC, Limited Partnership, General Partnership, sole proprietorship, and more).  Salted in the chapters are fictional examples that illustrate the disastrous consequences of choosing poorly (or acting on bad advice) and common problems.

Perhaps most surprisingly, is that this book even touches on some tax issues like what happens when consultants opt for C corporations (hint: they become deemed Personal Service Corporation and you get slammed with a 35% tax rate).  Personal Holding Corporations (PHC) are also touched on and perhaps most surprisingly of all, Sutton delves in to the legalities and hurdles with offering securities, SEC registration, angel investors, and more. 

My distaste for Kiyosaki's writing aside, I'm happy to recommend this book, because I rarely come across a book on the nuts and bolts of business entities that is readable. 

Labels: Business, Personal Finance, Reviews, Startup

Posted by Joe Turner at 10:34 PM | Permalink | Comments

Hi,

first of all, sorry if I'm not emailing the correct person. But reading your reply to this topic, I think you can counsel me a little bit.

I'm an international student (I have been here for 1 year) and I have a relative, not yet a US resident, but one who said he can help me create a uISV. He somehow owns his how company, but not a uISV. It's not like I don't trust him, but I don't want to be taken advantage of. I'm a proficient programmer but I know nothing in this matters.

My idea is to re-buy the company from him when I will be capable of doing so. 

Do you think it's possible (he lives in Nebraska)? Should I be careful? I mean I don't even know anybody to talk to about this. So I will greatly appreciate your help.

Thanks a lot.

Sorry for the delay in answering your questions.  My e-mail tends to stack up until I scratch out enough time in my schedule to respond.  Besides, your question was interesting enough I actually starting researching H1Bs, F1s, 1099s, etc.,  Here is a summary:

Keep in mind, I am not an attorney or CPA, and the standard disclaimer should apply -- you should seek qualified legal opinions (mine isn't). Unfortunately, you might have trouble locating an attorney to help because this isn't a run-of-the-mill immigration issue.

There aren't any easy, common ways to for a person on a non-immigrant visa to start a company in the US.  Your relative seems to be violating the terms of his non-immigrant visa, but likely the government will never pursue revoking your relative's visa.   

Ok, lets keep going.  I will cover three separate topics:

1. What the law says (in layman's terms)
2. What H1-Bs and F-1s do in reality
3. What I would do

What the Law Says

You say you are an international student, so I will make the assumption that you are currently attending a school in the U.S, on F-1 visa.  You probably already know:

• Self-employment on F-1 or H1-B  is not allowed.
• You cannot start an S-Corporation; All shareholders have to be U.S. citizens or Permanent Residents (green card holders).
• You can invest passively in U.S. enterprises or securities. 
• You can start a company such as an LLC (Limited Liability Company), but you can not work for it -- your involvement has to be passive.  Ownership of an LLC or any other business presumptively suggests that you have management responsibilities...is working for the company which will put your visa in jeopardy.  
• From the standpoint of tax law, there is nothing that prohibits a non-immigrant from operating a sole proprietorship.  However, a sole proprietorship operated by an F-1 (or H1-B) visa holder is a gray area, which constitutes unauthorized employment and provide grounds for revocation of F-1 (or H1-B) status.  However, in practice, CIS seems to be uninterested in this issue.

You probably already figured this out, which is why you are looking at a relative to help.  But if he or she isn't on an immigrant visa (green card holder), they may not be in a better legal position to start the company.  More importantly, your relative seems to be openly violating the conditions of his visa. 

Interestingly enough, you might be able to work around the situation with a creative lawyer:

... Often the issue is resolved by having a straw person own the shares, or be the member of the LLC, and the alien visa holder having an option to buy.  LLCs are so flexible, however, that it may be that a creative attorney can resolve this for you quite easily.  (source).

I think this is what your relative is hinting at. 

What H1Bs and F1s Really Do

While most people on non-immigrant visas follow the letter of the law, I could not find one case where an F-1 (or H1-B) visa was revoked because of working outside the conditions of their visa.  Quite the contrary, I found many postings on the Internet relating to filing tax returns and dealing with W2 and 1099s received from consulting (most were small amounts of income). 

Of course, you have to be cautious here.  Most of the advice is given out by CPAs (accountants) who have studied tax law, not immigration law.  The IRS is only concerned that you file and pay your taxes.  They will not report you to the immigration authorities (which is one of the reasons why so many illegal aliens are able to overstay their visas and work for so long without any adverse problems).  

Keep in mind, that this would most likely come to haunt you when you applied for residency or H1-B -- and you really, really need to talk to a qualified immigration attorney. 

What I Would Do (If I Were in Your Shoes...)

First let me digress for a moment. 

You want to start a mISV.  I would give you the same advice I would give anyone who wanted to start an mISV -- don't waste the time and effort trying to register a legal entity until you have a product.  Work on creating a working product first.

How long is it going to take you to write the software?  Six months?  A year?  Why pay $300-$500 for registering your business up front, having to maintain a bank account, filing tax returns, state tax returns, and don't forget telemarketers who sift through government databases... 

Secondly, most mISVs don't make lots of money when they first start to sell a product.  When adjusted for the time spent producing, supporting and marketing the product, most mISVs make income that is usually less that minimum wage.    

My advice:

If I were you, I would work on the product idea.  Get it up to a saleable point and then just sell it directly through a payment service.  They will send you a 1099 at the end of the year. 

Then, if it looked like the product was going to make a significant amount of money, I would suggest that you then form an LLC with at least one member (U.S. citizen or permanent resident) in addition to yourself and designate the other member as managing member ( so you will simply be a passive investor ).  Then you can elect to pay taxes as a partnership and have partnership's profits and losses flow to you.

On the other hand, if you do decide to partner with your relative, I would definitely seek legal advice.  I would only proceed if the the contracts were iron-clad and addressed who has ownership of the product, source code, etc.,

In any event, good luck with your venture. 

Labels: Business, mISV, Startup

Posted by Joe Turner at 8:15 PM | Permalink | Comments

Howdy,

Some questions about billing in a scenario where the customer has hired the contractor for full-time work (37.5 / 40 hours per week).

If the customer requires you to use their systems (e.g. laptop, software) and you have to setup appropriate development environment, do you bill for that time?

There are some initial hiccups in the first days of contracting on the customer's premises such as getting authorization for physical / network access, licenses for software (again, the customer wants the contractor to use their systems), etc. Do you bill the customer for the idle hours (e.g. waiting for authorizations to be approved)?

Do you bill the customer if nothing can be done due to their fault (e.g. network downtime) while you're at their premises or if you leave their premises (i.e. go home)?

Say, you work the 37.7 or 40 or similar amount of hours per week on the customer's premises. How much are you billing on average?

Any other things I should be aware of?

If the client requires you to be there for 37+ hours a week, you are a contractor, not a consultant.  In essence, you are supplemental staff and will usually be required to fill out a time sheet.  

For a customer that requires me to be onsite full time, I bill for time I am at the office (available to do work).  The clock starts ticking when I arrive in the morning, and doesn't stop until I leave for the evening.  I subtract time taken for lunch and/or breaks.  On Monday, I submit a timecard for the previous week for customer signature.

This is pretty much standard across the industry.   Some recruiters have asked me to bill for lunch as well, but I don't.  I feel that is just crossing the line.  I usually put down a minimum of 30 minutes for lunch even when I scarf down a sandwich at my desk.

Meetings, reading specifications, writing documentation, coding, talking to people -- all of this is billable.  If the network is down, or you are setting up your own development environment -- it is billable. 

When I telecommute (or work small side projects), I only bill for actual time worked on post it notes.  Prep time, research, coding,  and phone time are billed in 15 minute increments.

When it is time to generate the invoices, I sweep the post it notes together and generate the invoices.  So far this system works pretty well.

Labels: Business, Consulting, Startup

Posted by Joe Turner at 5:29 PM | Permalink | Comments

Intuit has released software that will allow you to access QuickBooks Online Edition from your iPhone, by pointing your browser at a special address.

I was able to get it to work on my iPod Touch (via wireless LAN) and it is basically a business dashboard with additional features: accounts receivable and payable; vendor, customer, and employee lists; Bank account and credit card balances; Balance Sheet and Profit & Loss reports.

If you are using an iPhone, your contact information is tied into the iPhone, allowing you to call, email or lookup addresses using Google Maps.

To use the free portal, you simply point your iPhone/iPod Touch browser to https://accounting.quickbooks.com/m.

Labels: Business, iPhone SDK, Startup

Posted by Joe Turner at 12:19 AM | Permalink | Comments

Labels: Business, Hardware, Startup

Posted by Joe Turner at 3:19 PM | Permalink | Comments

The biggest mistake a lot of first time entrepreneurs make is that they spent too much money and concentrate on playing CEO superstar.  They rent office or retail space, pay big bucks for incorporation, buy equipment, fancy stationary, and nice business cards before they have even earned their first dollar.  The elation and entrepreneurial swagger vaporize as the cash burns up...

For freelancers, it is possible to start a business without a dime, with zero risk:

• Get an EIN at the IRS website for free.  Even if you are a sole proprietor, it is a good idea to get one and open some separate checking accounts.  If you keep your business separated from you personal accounts it will make life easier and cheaper if you opt to have an accountant or tax professional handle your tax return.  Click HERE to apply online.
• Get a free business checking account.  Call around to the banks and find one that has a free checking for small business, give them the EIN you received from the IRS website.  Get a debit card which is tied to your checking account, and if possible -- sign up for free Internet access to your account and free bill pay.
• Once you have your account information, setup a PayPal account and link to your business account, so you can accept payments.  Verification will take several days.

Provided that you singed up for the Bank's online (free) bill pay, that combined with the debit card will cover 99.99% of your expensed transactions.  You can wait to purchase checks until you actually need them.  The whole process should take about a week.

Next, concentrate of securing clients and/or generating revenue.  Such is the bootstrapping philosophy.

Labels: Business, Startup

Posted by Joe Turner at 12:04 AM | Permalink | Comments

In 2007, I decided to start a uISV/Consultancy.  My goal was (and still is) very simple: generate income from contracting/consulting which will be used to sustain my uISV development efforts.

I would work on the day for clients, and at night I would frantically pound out code.  Six months have gone by.  How well have I done?

Looking Back

Last year (2007):

• I formed a corporation (Agave Mountain, Inc) in the State of Delaware.  While I believe that most uISVs and consultancies are formed as sole-proprietorships and LLC's, I wanted a corporation and was prepared for the additional headaches (annual franchise tax return in DE, plus a corporate tax return). 
• I also registered my corporation as a foreign corporation in the state of Minnesota (where I am now).  Your corporation can only be incorporated in one state, and it must qualify to do business (register) in each state it has operations. 
• I did the above primarily for the following reasons:
  • Most accountants will recommend that you incorporate in the state where you reside.  This is essentially the best advice.  However, I have moved frequently in the past several years for contracting, and within the past several years I have up and moved to/from Texas, Connecticut, Georgia, and most recently Minnesota. 
  • I decided it was easier for me to keep a corporation in Delaware, and just register to do business in a state and withdraw it if I no longer do business there.
  • If I don't do any business I can "put the corporation on the shelf."  I pay the annual franchise tax ($56) per year in DE and the corporation gets older.  A corporation's age is factored into credit decisions.  Additionally, I will be able to jump on business opportunities in the future much quicker and with less  hassle.
• $24,500+ in trade lines.  Most surprisingly, I now have an Office Max net-30 credit account, and 3 major credit cards, entirely in my corporation's name.  Go figure.
• My corporation has signed up its first major client.
• Established a website and blog (this one).
• I have very little workable code written, only prototypes and unit test code.  I have some simple specs.
• I've investigated several web frameworks, toolkits, etc., and here is a summary:
  • I eliminated the following platforms/toolkits:
    • Ruby on Rails might have a following, but it has some serious design/installation issues (no shared hosting) and other issues pointed out by Zed's public meltdown.
    • Java is out because I simply don't like it, and never took the time to learn anything more than a cursory look.  If I decide to part out some of the work, Java guys are among the most expensive.
    • Python has some installation issues for a saleable product.  
  • That leaves:
    • ASP.NET/C#/.NET
    • PHP
    • C/C++/FastCGI/WT/Qt
    • a mishmash of Perl, C, PHP, etc.

Goals for 2008

This year:

• By the end of the year I want to have my product concept designed, constructed, tested, and deployed.  January 1, 2009, I want to be actively selling the product and generating revenue. 
• My main client will take preference, but every other waking hour is going to be focused on getting a product up and out the door.  Ambitious, but possible.

Labels: Business, Consulting, mISV, Startup

Posted by Joe Turner at 12:12 PM | Permalink | Comments

I rationalized that since I sit in front of a computer all day, I might as well splurge on a decent LCD monitor.  But after I looked at the prices for high end, very large monitors, I decided it was better to go the cheaper multiple monitor route.

Last week I took advantage of some sales and picked up not one, but two 22" wide screen LCD monitors.  I now have a 3 monitor desktop which stretches the entire length of my desk. 

I'm glad that I did.  I can honestly say that I wouldn't want to go back to my single LCD screen/KVM/Synergy setup.  

Productivity Increases Related to Coding

Various studies have stated that adding additional screen real estate can increase a worker's productivity from 9-50%.  Most of the studies fall into the 20-30% range for dual monitors. 

Darrell Norton concisely captures what everyone says: 1) people who get multiple monitors don't want to go back; 2) productivity improves.

After multiple monitors were introduced:

• Productivity in lines of code per day increased 10%.
• Defect levels decreased by 26%.

Also as part of my work I created a basic survey to measure some of the qualitative benefits of multiple monitors.  The survey used a Likert scale (answer 1 to 5 for each statement, with 1 being disagree strongly, 3 neutral, and 5 agree strongly) to measure respondents on 8 questions.  The most important results were:

• On average, people would much rather have 2 smaller monitors than 1 larger monitor.  Nobody answered that they preferred 1 monitor over 2 even a little bit.
• Multiple monitors were most useful when the application had palettes or when 2 or 3 windows needed to be open, such as for programming/debugging.

Source: Darrell Norton's Blog.  "Seeing Double: An Unbiased View on the Benefits of Multiple Monitors."

Simply stated, for $200 plus a video card and you can have an enormous bump in productivity.  It is one of the cheapest productivity enhancements available to small businesses.

References:

1. "Seeing Double: An Unbiased View on the Benefits of Multiple Monitors"  Darrell Norton.

2. "Two Screens are Better Than One"  Suzan Ross.  Microsoft Research.

Labels: Business, Startup

Posted by Joe Turner at 12:40 PM | Permalink | Comments

"I make $x per hour.  How much should I charge for freelancing on a 1099 or corp-to-corp basis?"

This is a common question that I see repeated over and over on various message boards.  Answers will often range from a pithy 2 or 3 times your current rate, to "figure it out yourself."  Additionally, you will get rambling replies about penalties, taxes, health care costs, and much more.  

Assuming that you are currently in (or considering) a consulting/hourly relationship with NO BENIFITS, lets run some rudimentary calculations so you know the MINIMUM hourly rate that is equivalent in corp-to-corp terms.  

Note: this assumes no vacation, EIC, no medical insurance, no retirement (and we don't factor in general liability insurance, per diem, or the credit risk of getting paid); we just calculate what rate will be necessary to cover the bare metal additional employer taxes. 

So lets get out a pencil and start scratching numbers, so we can figure out how much it costs to hire an employee at $x per hour.

Federal Unemployment Tax (FUTA)

Even though you are no longer qualified to take unemployment as a small business owner, you will be required to pay Federal and state Unemployment Taxes.  Generally, the FUTA tax ends up being 0.8% of the first $7,000 per year of each employee’s wages or salary. That means the employer’s maximum cost for FUTA per year per employee is $56 ($7,000 x 0.008).

State Unemployment Tax (SUI)

Next lookup your state's unemployment tax rate.  Since you are starting out, you will need to find the "new employer rate."  In Minnesota it is 2.13%.

Social Security

As of 2007, the employer must withhold 6.2% of an employee's wages and pay a matching amount in social security taxes until the employee reaches the wage base for the year. The total is 12.4% for the employee and the employer. The wage base for social security tax in 2007 is $97,500 (only the first $97,500 is taxed at 12.4%).

Medicare

As of 2007, the employer must withhold 1.45% of an employee's wages and pay a matching amount for Medicare tax. The total is 2.9% for the employee and the employer. Unlike the Social security tax, there is no maximum wage base for the Medicare portion of the FICA tax. Both the employer and the employee continue to incur and pay Medicare tax on each additional amount of gross compensation, with no limit on the amount of gross compensation on which the tax is imposed.

State/Local Income Taxes

Next, you will need to know what the income tax rate is.  In Minnesota, there are three state income tax brackets (Married filing jointly):

Putting it All Together

Now, for convenience we just add the numbers together and ignore the base limits:

Next, take your rate and multiply it by 11.64%:

absolute minimum break even = x + (x * .1164)

This rate is the absolute minimum equivalent rate (your costs will likely be hirer than this because you will most likely be required to have general liability and workers comp insurance).  The real cost will be more than this. 

This is just a quick calculation that can serve as a "line in the sand."  

Labels: Business, Consulting, Startup

Posted by Joe Turner at 3:46 PM | Permalink | Comments

Until now, my implementation approach can be summed up succinctly as: "scan forward."  I picked a date out of the air and started scanning (or throwing away) any piece of paper my hands come in contact with.

Today, I started the second phase of my paperless office implementation.  I installed Subversion on a server and started getting serious about scanning in my existing records: tax returns, invoices, notes, corporate filings, corporate minutes, and assorted detritus cast off by a small business.  Since this morning, I have filled up a 50 gallon trash can with shredded documents; I'm still working on filling up another one.

I can honestly say that the process of emptying out a 5 foot tall metal filing cabinet is very cathartic. 

The work flow is pretty simple:

First, try to cull the documents before you scan.  First go through your documents and try to discard as much as you can.  Just ask yourself, questions like "will I need this in an audit?  Will I ever need to retrieve this?  Why am I saving this?"  Sure, disk space is cheap, but looking back a year from now, will you really need a magazine clipping or old electricity bill? 

Next, scan the documents, and rename them if they are important enough.  The scanning software will automatically create a generic file name with an incremented number appended.  For things like bills and statements from previous years, I just take them as they are, and drag them to the appropriate filing cabinet folder.

The question is, how should you organize your virtual filing cabinet?  The choice is yours, but I settled on a scheme that organizes files by category, year, and subcategory.  For example, a receipt for a $20 item would be placed in the receipts folder in the following directory hierarchy:

Biz --> FilingCabinet --> Accounting --> 2007 --> receipts

This is convenient primarily because my business uses the calendar year for accounting purposes.  Should I get audited (or if my accountant has questions), I could just copy everything from 2007 downwards and give it to the auditor on a USB drive or CDR. 

Next, of the documents you scan, decide what to through out, what to file away, and what to shred.  Any personal information should go into the shredder, while any contracts or leases should go back into the filing cabinet.  The rest should just be tossed or recycled.

Lastly, for each batch I will add the files and commit the changes to my subversion repository.

Here are my recommendations/observations/tips:

• Shredding takes up the most time.  My SnapScan S510 will blast through a stack of documents, while hand feeding documents into my noisy shredder takes forever.  As a result, I scan documents in batches, dumping the scanned documents into a box for later shredding. 
• I also append dates to files in the format of YYYYMMDD.  For example, a bill from OfficeMax, with a billing date of January 1, 2007, becomes: OfficeMax_20070101.PDF.  When you pull up the directory listing, the files will be automatically sorted, and you can tell what you are looking at without opening it.
• For records like bank statements that have a low probability of being necessary (but required for record keeping), I just scan an entire year's worth into a single PDF.  It simply isn't worth my time to scan each month independently and rename them. 
• When you reconcile your "online" statements (everyone still reconciles monthly, right?), download the PDF and put them into your repository.  At least twice I have lost access to historical statements online.

Labels: Startup, Tech

Posted by Joe Turner at 6:02 PM | Permalink | Comments

Requirements

Given my previous embedded systems development I should be able to build up a system with a minimum linux install that is capable of saturating a 100MB ethernet connection. 

Labels: C++, Startup, Web development

Posted by Joe Turner at 1:02 PM | Permalink | Comments

Labels: Business, Startup, VOIP

Posted by Joe Turner at 2:55 PM | Permalink | Comments

The easiest way to begin a paperless office is to implement a "scan forward" approach.  The idea is simple: purchase a scanner, and then pick a cut-off date, after which all new documents will be electronic.

The benefit to this approach is that you only scan existing paper records if they're used.  If documents don't get scanned after a year they can be archived or destroyed.

Choosing a Scanner

For obvious reasons, the scanner is the most important component to a paperless office setup.  Look for a scanner with the following options:

• ADF - Automatic Document Feeder/Automatic Sheet Feeding.  Using a flat bed scanner is tedious since you will have to manually swap out the paper. 
• Duplex - In addition, you want a scanner with duplex -- the ability to read both sides of documents.  Some software packages are smart enough to merge two one sided scans into a single pdf file, but it is way more convenient if your scanner does this automatically.

I can't tell you how nice it is to load up the scanner with a 25 page, double-sided document and walk away.

I could only find two scanners with these features in my budget: the HP N6010 ScanJet (poorly rated on Amazon) and the Fujitsu S500M.

I ended up purchasing the Fujitsu S500M ScanSnap.  It is a duplex, color scanner capable of 18 pages per minute.  So far it works wonderfully, even with credit card receipts. 

Choosing Shredder

I wouldn't waste too much time dickering about which kind of shredder is best.  The following features are pretty much a necessity for me:

• "Confetti" cut.  Smaller pieces are better.  
• The ability to shred credit cards and CDs, and eat staples.  If you can shred a credit card, a few sheets of paper won't bother it.

Also, unless you want to shred as you go, I suggest staged shredding.  I have a plastic file box that I dump papers to be shredded.  When it gets full or enough time goes by, I shred them at one sitting.

How to Begin

Next, start to define and create your own process for dealing with paper.  I would suggest something similar to what I do.

I now open my mail next to a 50 gallon trash can.  I try to throw away as much as possible.  Envelopes, catalogs, flyers, brochures and advertisements are immediately and automatically thrown away.  The application part of the credit card solicitations are separated to be shredded.  Roughly 90% of my mail now ends up immediately in the trash or shredded.

Next take the remaining paper and decide what to do, and then take action.  I view each piece of paper on my desk is something I haven't done yet.  When it is done, it is in the trash or shredded.

1. Scan an pay bills and invoices (I usually scribble the date and check # before scanning);   
2. Bank statements and credit card statements should be scanned and reconciled immediately.
3. For magazines, I will take some time to read them, or set them aside.  I started putting a purge date on the front with permanent marker.  If I don't read them within two weeks they are gone. 

Also, for reciepts:

• The IRS says you don't need receipts for purchases under $75.  B.S.  Scan them in and save them.  One day you may (possibly) thank me. 
• Every business purchase receipt is scanned in and organized after I purchase.
• Other receipts, grocery, gas, restaurant, credit card receipts are thrown away unless it is a major purchase or a reimbursable expense.

Labels: Business, Consulting, mISV, Startup, Time Management

Posted by Joe Turner at 7:39 PM | Permalink | Comments

Labels: Business, Startup

Posted by Joe Turner at 4:08 PM | Permalink | Comments

Labels: Business, Startup, Tech

Posted by Joe Turner at 1:40 PM | Permalink | Comments

Labels: Business, Startup, Tech

Posted by Joe Turner at 6:24 PM | Permalink | Comments

Labels: Business, Startup

Posted by Joe Turner at 3:48 PM | Permalink | Comments

Under a general liability insurance policy (a.k.a., "trip and fall insurance"), the insurer is obligated to pay the legal costs of a business in a covered liability claim or lawsuit. Covered liability claims include bodily injury, property damage, personal injury, and advertising injury (damage from slander or false advertising). The insurance company also covers compensatory and general damages.

While I think the risk in getting sued for tripping over a power cord is negligible, sometimes general liability insurance is a contractual requirement to do business with the government and some large companies. Further, body shops (agencies that place temporary consultants) try to dissuade consultants from requesting 1099/Corp-to-Corp arrangements by throwing a $1M insurance requirement at them.

So having it is a good thing, and can open the doors to potential business a little wider. The question is, how much does it cost and how do I get it?

General liability insurance should cost a web-development/consulting/μISV firm no more than $550 per year for one million dollars in coverage (which is the most often requested amount). Unfortunately, Google searches for general liability insurance turns up hundreds of false hits with verbiage designed to attract search hits and sell insurance advertising. This is very frustrating, especially if you request a quote from a broker that only specializes in construction businesses.

I was referred to the following companies by my peers and ultimately I purchased insurance at different times through them:

• TechInsurance.com. Tech Insurance is a broker that will sell you a policy from Hartford. Most of the online brokers tend to sell policies from Hartford (most enlightened about the web/consulting/tech businesses).
• CCBsure. CCBsure is a online broker that will give you an online quote, instant acceptance, and allow you to request certificates of insurance online.

Labels: Business, Startup

Posted by Joe Turner at 5:33 PM | Permalink | Comments

Labels: Startup

Posted by Joe Turner at 5:46 PM | Permalink | Comments