Ladies Who Launch

Question: How Do You Tell Your Boss About Your Side Business?

One of our incubator members posed this question:

My company does not have a policy about preventing employees from holding other jobs, so I'm not technically doing anything wrong. Obviously, starting a cake business isn't exactly how I'm going to get a corner office either.... but I feel I will need to let work know about my business as I start to get local press. I'm not really ready to quit or leave my day job, but I feel the need to be honest about what I'm doing.  I just want my manager to hear it from me, not someone else. Anyway, any connections you can send my way on this or advice you have for how I should approach this tough topic, please share!!

Multitasker's Downfall

New York Incubator member Ann Marie Segaric is a career coach and she gives advice to multitaskers in Monday's amNY article, "Multitaskers’ Downfall".  Here is Ann Marie's advice:  

"I never hear the word 'multitasking' until someone is overwhelmed," said Annemarie Segaric, a career coach at Segaric.com.

"Multitasking is a buzz word that no one seems to do particularly well, because going back and forth between unrelated projects just consumes more mental energy, is never an efficient use of time and just creates a chaotic mind-set."

A stray text message or phone call can be a welcome diversion. However, a continuous back-and-forth between current projects and communication devices has the potential for project mix-ups, failed deadlines and drained energy.

"It's best to carve out different times in your schedule to answer the bulk of your messages. It keeps you focused," Segaric said. "The night before or [at] the beginning of your workday ... map out your priorities, determine how long each will take and what time would be best to carry them out."

Also, make sure your multitasking isn't a mask for procrastination. Segaric advises "putting the energy you would have wasted on avoidance tactics on how good you'll feel once the project is finished."

Keeping Nickels: End Of The Year Checklist

The end of the year is upon us, and it is time to get organized with your accounting records. If you talk to your CPA, he/she would highly recommend getting on a robust accounting system for your business. Leave the Excel spreadsheets alone!

This is not an exhaustive list, but an outline of what you need to prepare for the end of the year

Enter final transactions for the year   

• Review tax form (1040-Schedule C) from prior year and compare to this year's expenses
• Enter ALL cash receipts for business expenses (taxis, business meals,subway, train)
• Reconcile all your accounts and enter any missing transactions
• Work on reducing receivables (Follow up with clients/customers to get paid)
• Write-off bad debt if necessary, but work on getting paid first
• Make SEP IRA  or 401K contributions and donations to charity to reduce taxable income
• Make all asset depreciation entries (only applicable for equipment that you had put on a depreciation schedule)

Organize: Make Life Easier on Your CPA and Understand What Happened During The Year

• Organize receipts and statements for expenses that will be itemized on your Schedule C/1040
• Review your budget and compare actual to budget which will help develop 2008 budget
• Inquire from your CPA as to what reports and documentation is needed for tax preparation
• Ask if year-end reports should be on a cash basis or accrual basis
• Print out a copy of general ledger
• Back up the Quickbooks file in case of any data loss
• Send a copy of your Income Statement and Balance Sheet to your accountant at the end year to get an idea what your taxes will be in March 15 (quarterly tax payment) and/or April (personal income tax deadline

Employee/Independent Contractors

• Order 1099-MISC forms (Independent Contractors)  and W-2 forms (Payroll Employees) early. The forms are much cheaper if buy at Staples then via Quickbooks.
• Get Independent Contractors and Employees current mailing address, SSN and the total payments made to them for the year.

Nichelle Stephens writes about Bookkeeping and Small Business tips on Keeping Nickels.

 

RI, NJ and NY Ranked Worst for Small Businesses

From the New York Post:

New York's punishing taxes give it the third worst business climate of any state, a new report says...

"What I see is that New York has an overly complicated tax system," report co-author Curtis Dubay told The Post...

The only states that fared worse, according to the report, are Rhode Island, which ranked dead last, and New Jersey, which came in at 49th of the 50 states.

For the complete story, click here.

Congress Still Considering Internet Taxes

From the Austin Business Journal:

Congress must decide soon whether to extend the moratorium on Internet access taxes, but eBay is more concerned about legislation that would force Web merchants to collect sales taxes on out-of-state purchases.

The moratorium, which prohibits states and localities from taxing Internet access, expires Nov. 1. It went into effect in 1998. Many business groups are lobbying Congress to make the moratorium permanent, but the National Governors Association favors a four-year extension, so that Congress can revisit the issue and "review any unintended consequences for consumers, industry or the states"...

Under current law, sales taxes are charged only if the Internet retailer has a physical presence in the purchaser's state...

"Brick-and-mortar retailers are currently required to collect sales taxes while many online and catalog retailers are not," the federation wrote Congress. "This is not only fundamentally unfair to Main Street retailers, but it is costing states and localities billions in lost revenue."

Ted Cohen, an eBay vice president who led the company's lobbying day on Capitol Hill, says small brick-and-mortar stores are being hurt by big-box retailers, not Internet sellers.

"It's not eBay that put them out of business," Cohen says.

The push to require Internet sales tax collections is "about large retailers who want to crush small business," he says...

In short, share your views on Internet taxes with your Congressional representatives.  After all, they are supposed to represent YOU.

Crocs Patent--The Stuff Legends Are Made Of

From Mommy Millionaire, Kim Lavine:

Just what exactly is a patent worth? How Crocs shoes anticipated competition and created a strategy to head it off, is the stuff that legends are made of! I explain how in response to a question today from one of my readers Michelle, who asks: 

“Many companies like Crocs Shoes come up with an idea and put it on the market like you did, well what about the Crocs knockoffs? My question is how can a company that does the Crocs knockoffs get away with it? Do they have to pay the founding company? I would be one of those people who would be afraid of being sued. I could go on and on comparing items that we use everyday and that can be a long list.” 

I remember when I was just starting out, perhaps the scariest moments for me involved putting my ideas out there in the marketplace, worrying about somebody knocking them off. Since then I’ve learned that the idea is only 5% of a product’s success—and this may include the patent! The other 95% is sales and marketing. You can find a whole section in my book MOMMY MILLIONAIRE on patents, and I would suggest everyone read it to find out the absolute basics for going forward, including when to pay and attorney, and when not to.

When it comes to patents, some of the best advice I’ve ever been given was that “Martha Stewart doesn’t own the patent on sheets and towels,” which is evidence that trademarks and brands, in my experience, can be more valuable than patents. In theory, a patent is only as valuable as your capacity to defend it in the marketplace, which usually means a lot of money spent paying lawyers. Unfortunately, you don’t usually have the revenues to support paying an attorney to defend your patent when you’re starting out, so it’s always been my advice to take your idea to the marketplace as hard and as fast as possible, so you can generate the revenues necessary to defend your patent. The United States Patent and Trademark Office anticipated this problem, allowing inventors to sue patent infringers for triple damages, which goes a long way to keep people from wanting to steal your idea, if they have to pay three times the money they make off of it to you in damages.

http://www.USPTO.gov. Despite this, patents typically defend a narrow technical parameter, which a lot of competitors usually manage to find a way to get around. 

Crocs journey began in 2002 in a Canadian plastics company, when a Crocs founder discovered a version of the funny-looking shoes being used in day spas. In 2003, the founders of Crocs, after seeing initial success selling their unique and admittedly ugly shoes at boat shows—and after being rejected by venture capitalists in their attempts to raise start-up capital to take their idea big time—raised $5.2 million dollars from friends to fund their company! The first thing they did with that money was to buy up its suppliers and manufacturers of the unique resin that Croc shoes are made of, called Croslite. This same supplier also owned the design patent on the resin. Crocs began selling first to small shoe stores, then went into national distribution at Nordstrom and Dillards. To meet the need, Crocs founders employed contract manufacturers in China, Italy and Romania. In 2006, Crocs expanded overseas from Singapore to Austria. 

The people who founded Crocs had serious business backgrounds, including a President at a national branding company, an exec at a national sandwich chain, a hardware sales executive and a President of an electronics manufacturer. With a motto of “Think Huge,” and after selling only 1,000’s of pairs in 2002, they pooled extraordinary management talents to write a business plan that raised them $5 million for launch from friends and business associates alone. In Feb of 2006, Crocs raised an additional $239 million in the largest footwear IPO (Initial Public Offering) ever, valuing their market share at $1.09 billion. Yes, there are competitors nipping on their heals now, no doubt with some slightly different resin formulation for their shoes on which their patent is based, but they are the innovators with all of the market share and they have the resources to keep their competitors at a permanent disadvantage. 

There are a couple of lessons here:

Why aren’t women’s companies getting this kind of money to fund start ups?

Why do only a tiny percentage of women-owned companies generate revenues of a million dollars or more annually?

Why, though there is $20 Billion in Angel Capital every year for start-up businesses, does only 4% of it go to women-owned businesses, when 40% of all businesses in the US are owned by women? 

Is it just a lack of confidence that keeps us from formulating five million dollar business plans? Is it because there is still a attitude of male chauvinism in the business world that won’t see beyond our sexuality? Or is it that we haven’t given ourselves the permission to dream this big, and the tools to go after it? As a very inspiring woman I met this week told me, Molly McDonald of The Pink Fund, http://www.thepinkfund.org which provides financial aid to those suffering with breast cancer: “We don’t need brass balls, we need brass boobs.”

New Retirement Plan Available for Solo Practitioners

From OSI Business Services:

If your business is essentially a one-person operation, there's a relatively new option to help you save more money for retirement: The Solo 401(k) plan.

Ordinarily, traditional defined contribution retirement plans allow annual contributions of either 25 percent of salary if you're employed by your own S or C corporation or 20 percent

of self-employment income if you operate as a sole proprietor or single member LLC. But traditional profit sharing plans, Keoghs or SEP plans are subject to a $45,000 cap for 2007 (up from $44,000 in 2006).

Not bad, but with a Solo 401(k) plan, you can probably make substantially larger contributions that lower your tax bill and generate more tax-deferred earnings for retirement.

A Solo 401(k) is made up of two separate parts. Together, the two parts make the plan advantageous:

1. Elective deferral contribution - In 2007, as much as 100 percent of the first $15,500 of your salary or self-employment income can be put into an account (up from $15,000 in 2006). That amount increases to $20,000 if you are 50-years-old or older at year end. 

2. Additional employer contribution - Your employer (your company or you personally) can contribute an additional 25 percent of your salary or 20 percent of your self-employment income.

The sum of the two parts is capped at 100 percent of your annual employee compensation or self-employment income, or $45,000 in 2007 ($44,000 in 2006) whichever is smaller. (However, the cap is higher for people age 50 or older). A Solo 401(k) doesn't force you to contribute more than you can comfortably afford:

Contribution Cap Here is the annual dollar limit on combined elective deferral and employer contributions:   For 2007, the cap is $45,000 or $50,000 if you are age 50 or older (up from $44,000 and $49,000 for 2006, respectively).

The plan lets you rack up major tax savings in good years, by making maximum contributions, but gives you the option of contributing less - or even nothing - in lean years when you need to conserve cash.

Plus, you generally get the benefits of traditional 401(k) plans, such as the ability to borrow from your account.

Establishing and operating any 401(k) plan means some up-front paperwork and ongoing administrative effort. With a solo 401(k), however, the administrative work is simplified since you are the only participant.

There are a couple of caveats:

If you earn a very high income and are younger than 50, the Solo 401(k) may not permit larger contributions than a traditional plan because of the annual $45,000 cap in 2007 ($44,000 in 2006). In general, you should only set one up if it allows significantly larger contributions because a Solo 401(k) costs more to operate.

If you have employees (other than your spouse), you may also have to contribute to their accounts. In this case, you have a regular 401(k) plan that is subject to a bunch of complex rules.

Ask your tax adviser to sort out the complexities of various retirement plans and determine whether a solo 401(k) is right for you.

Businesses Outside of New York Must Cover Workers in the State

Before the 03/13/07 reforms, businesses who operated primarily from regions outside of New York State but had employees in the state could cover the New York employees under a general workers' compensation policy providing coverage for all workers in all states.  Now, these businesses must specifically indicate on their policies that they have New York State coverage for these employees.

Are you affected?
You are affected if you are operating your business from a state other than New York and have employees working in the state.  Call your workers' compensation insurance agent to ensure you have made the proper elections.

Examples of businesses typically affected:
Over-the-road trucking companies, building contractors, internet businesses, New Jersey businesses, Pennsylvania businesses, Connecticut businesses, etc.

What happens if I don't comply?
You may be penalized $1,000.00 every 10 days until you comply.  (The premiums will probably be far less expensive than the penalties!)

Intellectual Property and Trademark Guidance

From Nance Schick, small business attorney and entrepreneur:

To protect yourself and not waste money, make sure you know the differences among the various forms of intellectual property before you apply for protections.  Many agencies, including attorneys, prey on entrepreneurs who do not know the differences.  Trademarks, service marks, copyrights, and patents all describe different types of IP, and each has a unique process for protection.  You may also find that it is a complete waste of money to apply because, for example:

1. Trademark protection is granted to the first to use the mark in interstate commerce, regardless of whether the mark is registered;
2. Patents are rarely granted, are expensive to obtain and are even more expensive to litigate;
3. Ideas cannot be protected;
4. It may be most cost-effective to negotiate with IP owners rather than litigate; and
5. IP alone is unlikely to make you rich, despite what popular culture may lead you to believe.

If you are confused about the different types of IP, I recommend that you read up on them.  You may also want to contact:

            Gerry Fifer, Esq.
            (212) 864-7076
            [email protected]

Gerry is a specialist in trademarks and copyrights, and she has many years of experience.  She writes regularly on the topics and is also a micro-business owner.  Most importantly, she is NOT one of the predators I mentioned above.

Originally posted on the Ladies Who Launch Yahoo! group 11/21/06.

Back To School: Teach This Time

September means back to school for kids and adults. Sometimes to move further in your business, you may need to take a class or two. However, experience is often the best teacher.  There is value in your years of experience and passion, and this fall you may want to teach a class instead of taking a class. It doesn't matter if you are an expert in knitting or networking, there is probably a place where you can teach.

Check online for continuing education programs at community centers, colleges, conferences, writing schools, senior centers, nonprofit agencies and see where can teach.  Ask around or even consider teaching someone in exchange for other business services that you need.

If money is not an issue, consider volunteering you services and sharing your knowledge with others. Teaching is one the best ways to validate your expertise to others.