Business Talk

[kadee79]

wxyz, yes, we patronize that store! They are great & most times have EXACTLY what I want or can get it within a week. They are one of the few places that carry pressure canning parts!

You are right about their "charge account" too....just sign your name & they send the statement...no backing.

[The Virginian]

I see Lowes is closing 20 stores and laying off 1900 people. But out of 1700 Stores that's not bad.

[The Virginian]

Okay we were down a whopping 40% for the month of October.
A couple of factors - We had more competition this year with a Warren Buffet Spirit Halloween store. Thanks Warren - I hope you rot in H***! The other factor was the economy. I got reports from Sales Reps and Manufacturers that Hallween sales were way down this year for most.

I'm trying to start a campaign to permanely move Halloween to the last Saturday in October each year. Traditionally Halloween sales are better on Saturdays and it would be beneficial to most parents not having to deal with their child's school and balancing Halloween in there. Anyone who cares please drop a note to your Congressional Representative!

For November we had a 8% increase in sales over last year so that helps. Of course Halloween representated about 1/4th of our yearly sales so we are still hurting. We are down 21% for total sales for the year. We can still make it but if 2012 drops down more we will have to consider calling it quits. No sense working and not making an income!

[Aman A.K.A. Ahamburger]

That sucks Mr.V.. I'm glad to see that things were turning in Nov for ya. It's a great point about Halloween, me and the Mrs where honestly just talking about that this year.

I read this a while back, I almost forgot about it, you might find it interesting, we have had a couple conversations about it.

Walmart, Kmart, Sears and eBay Offering 'Real' Online Shopping
www.dailyfinance.com/rtn/pr/walmart-kmart-sears-and-ebay-offering-real-online-shopping/rfid505441305/?channel=pf

[The Virginian]

I read this a while back, I almost forgot about it, you might find it interesting, we have had a couple conversations about it.

Interesting - I have been telling people for some time now Retail is about to enter a revolutionary change - I'm not sure if "Web Stores in Malls are the answer but my prediction is in 20 years there will hardly be any retail stores in most categories like electronics, and non-essential goods. It will only be available online. Retail Space along with insurance, Business licenses, Utilities and everything else has just become too expensive for most stores to make a profit. Add in the competition from Walmart and the other on line stores it's a killer. Why carry a huge inventory to cater to just one area when you can cater to a whole world with the same inventory?

Yes, wxyz, I have devoted countless hours to this business, 7 days a week 12 hours a day and if I'm not making a profit it will be time to cash out and pursue other interests. My lease ends in about 14 months so if things don't improve I will probably plan on liquidating my inventory, hopefully in manner that helps recoup some of my investment. I wouldn't recommend anyone going into the retail business, it's just too difficult to make a go of it, especially during difficult economic times like these.

[Aman A.K.A. Ahamburger]

I have been telling people for some time now Retail is about to enter a revolutionary change

That's exactly is Mr. V... This is what I was talking about with the option of having it so that people could order things online in your store, and have it shipped to their homes. You could increase your options 10 fold and not increase your overhead. They are already paying for shipping, and as you pointed out, it's the way that people are already going. Now big stores are looking like they might occupy smaller retail spaces with just a bunch of impulse items and top sellers, and have everything else online. JMO

[The Virginian]

I am in need of help. I'm starting a new Tech business soon and I want to set it up as a Stock Corporation. What I am having trouble with is the number of stocks I should issue and dividing them up.

My goals are to retain 51% ownership in the company and make sure my wife and children ( one wife - two kids ;D) have stock in the company.

I also would like to attract some partners into the company by offering them a percentage of the company in stock. I have three main positions to fill - Tech, Marketing and Financial Officer.

I also need to reserve enough stock to issue to any key employees that we may need and if all goes well to do a public offering ( I know - a big dream but I really do believe in this idea)

Most states charge by how many shares are issued so I need to keep it to a reasonable amount of shares.

Any thoughts on how to go about this? What would reasonable offers to perspective partners be?

[The Virginian]

Well it's Official - We closed out the Month of December down 21st YOY and the year was down also by 21% YOY.

Not a good year by any measure!

[Aman A.K.A. Ahamburger]

That sucks Mr.V. Best wishes for 2012!

I have been thinking about your new business. What we just did for a small frack tank company is we raised the money through a bond, and we attached warrants to the bonds that allowed the investor to invest in the company at a set share price if they wanted to. This would allow you to raise capital, and have a set amount of shares that you would be willing to part with.

[IPAfan]

Well I know I run a services business and most of the people who post on this thread are pursuing retail type business opportunities. Figured I'd post an update. Started the business in January 2010. In 2011 the business finally took off..sales were up 182% YoY, net income is up somewhere in the neighborhood of 163% YoY.

These numbers probably seem much better than they really are due to the fact that my business was not very profitable at all in the first full year. It's high unlikely that I'll post growth numbers anything like I saw in 2011.

However I'm still cautiously optimistic that 2012 will bring more sales and earnings growth, albeit at a slower rate. My wild ass guess/estimate of 2012 would be sales growth of 18.5% with earnings growth of 23%. Basically this would involve integrating a new contract, trying to exit my non-core markets, and focus on my core market. It's going to be more and more difficult to continue growing at this rate.

I've got some big decisions to make this year. I could basically try to keep my overhead flat while hopefully growing sales by 15-20%, or I could try to reinvest in the business by growing overhead and hopefully growing sales at a faster pace. I'm at the point where I can manage without an employee, but hiring an employee might be the next step to growing the business further (but it's risky...the whole idea is to pay $30,000 in additional overhead hoping that I can make an extra $45,000+ in sales) I suspect that I'll hit the wall somewhere in the neighborhood of $150,000 gross sales without hiring any help. Long term, once I hire help, I think I could leverage my existing business to add additional practice areas. For instance once I have a full time secretary I could probably start adding personal injury cases to my practice. Personal injury is actually sort of the ideal "strap on" addition for my practice because most of the additional work could be done by a paralegal (and overseen by myself) while the personal injury business would require basically no additional fixed expenses (like rent or basic overhead).

Anyway, I'm not really sure if it makes sense to start trying to branch into a second practice area NOW, or if I should continue to grow within my primary practice area until I find it difficult to continue growing earnings at a fast rate. I could see possibly doubling my revenue, and having income go up by a tad bit more than that, within my current practice area. At that point further growth is going to require either regional expansion or additional practice areas.

[Aman A.K.A. Ahamburger]

Great to hear IPAfan! IMO, if you can still grow on your own, why not for one more year? Then, if your still feeling like your ready to expand, go for it. Hiring smart people is always going to be a benefit.

An interesting story on partners.

Kevin O’Leary, capitalist Dragon (and proud of it)
www.vancouversun.com/business/Kevin+Leary+capitalist+Dragon+proud/5619061/story.html

[The Virginian]

Any Down side to using Legal Zoom for Incorporating a company?
Anyone ever use their services?

[IPAfan]

Ahamburger -

Thanks for the kind words. I can grow my business while using other attorneys as contractors. I'm basically looking at a deal where I'd be fee splitting with other attorneys rather than actually taking them on as employees.

The problem is that if I end up going the route I want with bringing on a couple attorneys to fee split, I'd need to increase my overhead by hiring a full time receptionist (which would help my practice a LOT too), doing some more advertising, and possibly adding some extra office space.

The real goal would be to hire 1 full time receptionist, add a little more cheap office space, and then get 2 or 3 attorneys that are just starting out to cover different counties for me. I'd do the same direct mail advertising I've been doing now, and work on developing a big list of happy clients to solicit future referrals from.

[Aman A.K.A. Ahamburger]

NP IPAfan.. I'm happy that you are able to grow your business while others are finding it difficult. When you pointed that out on your post in the long term thread, it immediately jumped out. You are uniting to a point, and the one thing that I would always consider is that you are finding work for them. Never underestimate how big that is.

IMO, you are essentially interviewing them for future positions in your Law Firm. Most Firms are partnerships and I have found in business once you find someone you can work with, it becomes more beneficial to just expand as a team.

As you pointed out in the long term thread the receptionist, space, and advertising is all a write off. Especially because you will find these people cases that they will win.

[The Virginian]

The real goal would be to hire 1 full time receptionist, add a little more cheap office space, and then get 2 or 3 attorneys that are just starting out to cover different counties for me.

Maybe look into Regus office space if they are affordable and in your area. They come with a Receptionist so you could save that expense? Worth looking into if you haven't already.

www.regus.com/

[IPAfan]

I just requested a quote to see if regus is in my area. I don't think they are unfortunately, but this might make my business model more likely to actually work out. The cost of starting an office is prohibitive for someone right out of law school with debt, no income, and no cash.

[The Virginian]

There's a couple of others also:

www.intelligentoffice.com/default.aspx

virtualoffice.com/locations.php

Also found this when searching about Regus:
answers.onstartups.com/questions/19084/what-should-i-watch-out-for-when-leasing-from-regus

I'd say with anything now a days you have to do home work and take it slowly to make sure you are getting what you originally wanted. Overall it looks to be a cheaper alternative to signing a lease and hiring full time staff.

[IPAfan]

I so far have managed to avoid hiring any staff at all. I've had my eye on one or two candidates, but of course this is going to add an extra ~ $30,000 to my annual budget. I really want to set up a system where I can take an equity interest in other attorney's work. With this business idea I could possibly grow the business to the point where a larger percentage of my income is semi-passive.

My long term goal is to build a business that generates a decent level of profitability even without my constant personal supervision. Since my business is pretty "asset light" I think that a successful law practice would sell for a substantial multiple to invested capital. I really want to grow this business and sell it 7-10 years from now.

Regus is not available in my market. They are available in a closeby market that I'm looking at expanding into with a new attorney. I'm going to look into my available options, but I might rather just get the extra office space myself. I now have 2 offices. One of them I use while doing work, but don't meet clients. I could probably give up one office, and pick up a satellite office in Sacramento.

[Deleted]

Jan 11, 2012 16:44:36 GMT -5 IPAfan said:

I so far have managed to avoid hiring any staff at all. I've had my eye on one or two candidates, but of course this is going to add an extra ~ $30,000 to my annual budget. I really want to set up a system where I can take an equity interest in other attorney's work. With this business idea I could possibly grow the business to the point where a larger percentage of my income is semi-passive.

My long term goal is to build a business that generates a decent level of profitability even without my constant personal supervision. Since my business is pretty "asset light" I think that a successful law practice would sell for a substantial multiple to invested capital. I really want to grow this business and sell it 7-10 years from now.

Regus is not available in my market. They are available in a closeby market that I'm looking at expanding into with a new attorney. I'm going to look into my available options, but I might rather just get the extra office space myself. I now have 2 offices. One of them I use while doing work, but don't meet clients. I could probably give up one office, and pick up a satellite office in Sacramento.

What are you selling when you sell the business? A name and a client list?

[Aman A.K.A. Ahamburger]

What's stopping you from taking that position in their business IPA? JMO, if you have the serves to sell them you should be able to set it up. However, I think you know this and this is where the dilemma is. Risk=Reward my friend. "If you build it, they will come"... LOL.. Honestly using Mr V.s idea of going into business and setting up permanent retainers for cheap like a "lawyers insurance" would be a great way to build a business and make it so that you could take equity. Appear bigger than you are and you will make them think they need you. again JMOs.

[IPAfan]

Jan 11, 2012 17:01:45 GMT -5 ArchietheDragon said:

Jan 11, 2012 16:44:36 GMT -5 IPAfan said:

I so far have managed to avoid hiring any staff at all. I've had my eye on one or two candidates, but of course this is going to add an extra ~ $30,000 to my annual budget. I really want to set up a system where I can take an equity interest in other attorney's work. With this business idea I could possibly grow the business to the point where a larger percentage of my income is semi-passive.

My long term goal is to build a business that generates a decent level of profitability even without my constant personal supervision. Since my business is pretty "asset light" I think that a successful law practice would sell for a substantial multiple to invested capital. I really want to grow this business and sell it 7-10 years from now.

Regus is not available in my market. They are available in a closeby market that I'm looking at expanding into with a new attorney. I'm going to look into my available options, but I might rather just get the extra office space myself. I now have 2 offices. One of them I use while doing work, but don't meet clients. I could probably give up one office, and pick up a satellite office in Sacramento.

What are you selling when you sell the business? A name and a client list?

Almost Archie. That's what I love about this business...you could have a million dollar law practice that has $50,000 in assets. This is mostly an intellectual property type of business.

But it's more than that. First of all, my goal is to get to the point where I have this practice down to a T. I need a handful of attorneys working for me in different locations, I need the appropriate leases, I need a well trained receptionist (who can probably be located anywhere), and the huge thing is to create a system of advertising for clients and marketing to the current client base.

If I could build a practice that handles 400-500 DUI cases a year with 4-5 attorneys working for me on a fee splitting arrangement, then I think the business could generate $150,000-$200,000 of income. This sort of practice might be valuable to a strategic buyer.

At this point it's a pipe dream, but certainly possible. What I like about the idea of growing the business and selling it is again that it's such an asset light business. So if successful it might be possible to sell a law practice for far more than the actual value of its assets.

[The Virginian]

At this point it's a pipe dream

Nothing starts without a dream - The hard part is the implementation!

[IPAfan]

wxyz -

Turnover WILL be a killer, but honestly this is something I've been thinking a lot about. Keep in mind, this plan is starting to take place, but is certainly in progress. What I'd like to do is create a compensation structure where each attorney would work as an independent contractor to my professional corporation. Fees would be paid to the corporation, but the contractors would get paid a % of the gross fee. I like the idea of doing a regressing % of the gross fee. So for instance, someone might pay the corporation 50% of the first $100,000 of legal fees, but only 35% of the next $50,000, and 20% of the next $50k, down to maybe 5-10% on anything above and beyond $200,000 a year. These are just rough numbers, but the idea would be that an attorney earning more money (and more likely to look at going on their own) would be paying less and less of each dollar of revenue they bring in, making it more attractive to stick around.

SECOND...I want to incorporate this business and own 100% of the stock....to begin with. I'd like to give each attorney an option to purchase shares at a predetermined multiple of earnings or revenue. This would serve a few purposes: 1) it would align my interests with the contractors, 2) it would raise capital for the corporation at a premium to book value, 3) it gives each contractor an opportunity to become an owner and would provide less incentive to start their own practices, and 4) it gives me each attorney a BUILT IN EXIT PLAN.

The easiest way to sell the investment in shares I think would be to grow a business to the point where there were several stakeholders. Presumably the corporation or other shareholders could negotiate to buyback shares from any individual investor at an agreed upon price. Business profits, and proceeds used by selling shares, could be used to grow, pay dividends, or buyback shares.

There might even be tax advantages to this structure. If the business doesn't require much capital to run it could pay out most excess cash as dividends. If we set up as an S-corp then the owners would pay taxes on the pass through income. Assume for the sake of argument that an S-corp has $50,000 in capital, and makes $100,000 a year pass through profit on $500,000 a year of revenue. The company's book value is only $50,000, but assume that the company is valued at 1X revenue, or $500,000. If the company sold a 10% stake it would raise $50,000. The company can now distribute $150,000 to the shareholders instead of $100,000 with no additional tax liability (I don't think).

Again, I'm still working on this, but just trying to think long term about how to create a business with an exit plan.

[Aman A.K.A. Ahamburger]

I have done some thinking IPA. The fact is that you know exactly what you are doing, and WXYZ knows what he is talking about. The reason I liked Mr.V's(second gen Biz. man) idea is you then have businesses under contract with you. This allows you something to leverage they lawyers into a contract with.

So, instead of looking for a way to lock them in with your plan, embrace the fact they will want to break off. Become more of a hub to get newbies going. Contact the schools and funnel new "students" in whenever you need a spot filled.

Then the people you train, HELP(charge) them set up their own business.(cash for you ;D) If you branch out a bit and get some experience in all areas, while training people in specific ones; when they branch out, they will have you as a consultant to help them start out.(cash for you ;D)

It will be a lot of work training all the time, but I think you know you're looking at that anyway. After 10 years, you will have the schools calling you, ect, ect.. Then you should be able to sell it to one of your students, and stay on as a consultant.(cash for you ;D)

BTW. I love your advertising approach and, God bless the USA.

[IPAfan]

I really REALLY like that idea Ahamburger. I think it might work better than trying to convince people to sign up for my somewhat convoluted scheme. It's totally true that they're going to want to break off, so I think you're right that my business plan should embrace the inevitable.

What I love about that idea (helping other people get set up) is that the opportunities are pretty much endless. Unfortunately, there's not a lot of advantage to incorporating a new law practice, otherwise I could take a page out of the venture capitalist playbook and buy convertible preferred stock and stay on as a business consultant

[Aman A.K.A. Ahamburger]

Nice!! I am happy to hear that IPA fan. I only ask one thing. If it works out well for ya, donate some of that cash to some needy kids, deal? I think my superiors would also be interested to hear how it works out for ya..

Unfortunately, there's not a lot of advantage to incorporating a new law practice, otherwise I could take a page out of the venture capitalist playbook and buy convertible preferred stock and stay on as a business consultant

LOL, but on the bright side, you have less liability this way, and once those consulting fees start flowing, you will be happier that your money is invested in good quality companies and not start ups anyway.

[The Virginian]

So far sales are down 18% YOY - I don't know how these big box stores keep reporting sales increases. I do know we don't sell a thing that people actually need in our store - It's all "Nice to have"

The local paper reported that one third of the Hotels here are in Foreclosure. That's how bad tourism has dropped. We are not a tourist business but we did get some sales from tourists. Now that has dried up.

[ModE98]

If things "are on the mend" as some say, where is it "mending"? Do not see it in our area (Florida) either. Must be just a "mirage" currently. More on food stamps and charity so far this January. Seems recovery is still "pending" somehow.

[Aman A.K.A. Ahamburger]

ModE I would say that areas that were BIG into housing and toursim will be last to get moving. What I found interesting was that there was a report out the other day that said homelessness had dropped during this recession. Due to govt programs. Which goes right into what wxyz is saying.

That the poor are more affluent, a lot of it has to do with govt spending, and this has made it so that the fallout wasn't as bad as it could have been on the street.

I don't know how these big box stores keep reporting sales increases

IMO, brand power and advertising dollars added with the ability to discount.

Again, JMO, but one of the only ways that small business are going to really grow in this economy is if they get out their and create business by working with community groups. Be a party creator. Anything can be a party really...

[IPAfan]

I'm looking at some ways to grow my business, and have posted in the other thread for advice about whether I should turn my focus from stocks back to growing the law practice. I'm going to post more in detail here about the ideas I have about investing in my business operations. The idea here is to increase overhead by ~$20k+ per year and hoping to increase revenues by $30-$40k+ (possibly less or possibly a lot more). I'm getting so busy that I struggle to get to the phones when they're ringing, and am missing out on work because of this.

First, my current overhead is about $2,500 a month with no private assistant. About $1,000 a month of this is direct mail advertising. So far this is really the only type of advertising where I've earned a good return on investment.

Yellow pages advertising is the modus operandi in my field. I've felt like this was a dying form of advertising and horribly overpriced so I've never participated in Yellow Pages in a significant way. However, a full page yellow page add can produce A LOT of call volume which can turn into a lot of profitable cases. I've gotten a REALLY GOOD DEAL on a full page yellow pages ad, so I'm thinking of getting a full page yellow page ad for my MOST PROFITABLE practice area.

The full page ad is going to cost about $6,000 for a year. I also would need help with the additional call volume (and the existing call volume)...so instead of taking the leap to hire a full time assistant I'm thinking of setting up an answering service. The last thing I'd like to do is to restructure my direct mail advertising. About half of my cost is buying the names and addresses that I mail to, so I'd like to cut back on my less attractive leads. Then I'd like to invest in sending a bigger, better, and more attractive mailer. I don't know if I will design this myself or try to have someone else design it. One thing is I just want to send more information in a bigger envelope, and maybe get some color printing on the envelope and/or the letter/brochure.

So I think between these three changes it would probably cost me about $6k for the yellow pages, $5k for the answering service, and an extra $5k for the direct mail advertising. So my target ROI would be 200% which would mean I'd need to take on 24 cases a YEAR at a lower price than the competition. It would take 8 cases to break even. Anything over 11 cases a year extra would almost certainly be more profitable after taxes than investing in stocks.

Anyone have opinions about this proposed expansion (keep in mind this means focusing on my most lucrative types of cases and dropping the advertising I've been doing to less desirable cases)? Ideas about how to be effective, or different ways to invest in growth?