Chapter 10 – Legal and Tax issues

Chapter 10 discusses one of the most important decisions that we had to make when we started Eminent Designz and Solutions in 2009, how would we structure our company.  After attending a couple of seminars on company structure and taxes we narrowed our decision down to either a Limited Liability Company (LLC) or a Corporation.  Eventually we chose to establish a Corporation and later filed for and received S (subchapter/small business) status.  Using the scenario of two co-workers turned entrepreneurs; the book gives tax advantages and disadvantages regarding several decisions that must be made as they determine the structure of their company.  What becomes apparent while reading this chapter is the gravity of the decisions that should be made early in the development of a company.  Fortunately for us there were four members which all had vested interest in the formation of our company so the burden of many decisions was shared.

Another point which at first may seem trivial but is very important is the entity’s chosen name.  To avoid infringement law suits and consumer confusion and frustration, care should be taken when choosing the name of a company.  Another tidbit of information that the book does not mention, however, is the Googleability (no I did not make the word up) of you r company.  Having a name or slogan that is easily remembered or catchy can help curb consumer confusion and frustration when they are searching for you online.  Something else that we learned from our visits to the Renaissance Business Center is that questionable infringement claims often come down to operation and incorporation dates.  Meaning that if such disputes make it to court, judgment will go to which ever company began operating under the business name first.  A quick Google and GoDaddy search of the proposed business name should tell you if there is already a company operating in the cyber domain with the same or similar name.  A more extensive search can be done with the Internal Revenue Service during the time of establishment.

Chapter 9 – External Assistance for Start-ups and Small Businesses

We had the privilege of working closely with a small business for about 9 months and the most valuable lessons that we learned were:  1. there is a plethora of resources, aid, and advice at the disposal of small business and start-up entrepreneurs who are will to invest the time to locate it. 2. Always be prepared to take advantage of the resources, aid, and advice -the only thing worse than wasting your own time is wasting other people’s time.  The Memphis Public Library in conjunction with TSBDC (Tennessee Small Business Development Center) hosts weekly open start-up assistance seminars on specific business topics such Company Structuring, Financing and Funding, Developing a Business Plan, etc.  This is how we met Mr. Mark Taylor with the Renaissance Business Center and was ultimately able to receive free counseling before incorporating in 2009.  Chapter 9 in our book conveniently provides a centralized location where we can reference many of SBA tidbits such as mailing information, sponsored programs, and eligibility requirements.  The company that I worked with for those 9 months was owned and operated by an African American woman.  As such, she was able to receive assistance from the SBA since her company qualified as both a woman-owned and minority-owned business.  Learning where to go, who to talk to, and what steps to take to receive assistance will hopefully pay off for us in the long run.

Chapter 8 - Debt and Other Forms of Financing

Debt and Finance: two terms that both have negative connotative meanings in my book.  However, as an aspiring entrepreneur I’ve conferred with family members (who’ve mildly succeeded) and learned that a successful company requires both in order to sustain relevant growth.  Chapter 8 does a good job at explaining the importance of balancing debt with equity in order to achieve manageable growth.  The keyword here is manageable.  When I asked recent guest speaker and budding entrepreneur, Jennifer Kiesewetter, what obstacle presented the biggest challenge along the way to starting her own Firm, Kiesewetter Law Firm, PLLC, she quickly chimed “the unexpected fast growth”.  For EDS, financing and debt are currently minor problems since we are in our pilot stage.  I suspect that will quickly change as we, the president and I, are in the process of changing the model and subsequently our business plan.  Like Ms. Kiesewetter, our only line of credit is with Hewlett Packard (hers’ was actually with Dell Computers) so there hasn’t been a lot time vested financial planning and debt management –as bad as that may sound its true.  I have, however, dog-eared several chapters in this book; including this one, because if things go well for us it will definitely need to be re-ingested.

Chapter 7 - Equity Financing

During a recent discussion on the inner trappings of my business with a co-worker, the topic of financing came up.  "You do know the best way to secure financing, right?" my co-worker rhetorically asked.  Although it may sound crazy, I really hadn't given it that much thought.  And as I ponder, it truly is laughable –albeit completely honest.  My co-worker goes on explaining how angel investors are a start-ups dream.  I haven’t the faintest idea what he is talking about but I node agreeingly for the sake of ego. 

Chapter seven covers equity financing extensively and does a very good job at detailing the differences between various types of investors and investments.  Ironically, I have been hearing the term “Angel Investors” a lot lately meant to do a little research simply for personal edification.  While my company (so far) runs off personal investment, the notion of angels looking for a cause to invest is very motivating.  With a better understanding of valuation, venture capital, and informal investments I think I am better poised to make enlightened decisions concerning our company’s financial future.  While I don’t think we are ready to start polling resources from friends and family quite yet, at least we’ll know how to go about procuring investments when the time comes.

Chapter 6 - Building Your Pro Forma Financial Statements

“I’ll hire an account for that”.  My sentiments exactly until I read chapter 6 of The Portable MBA in Entrepreneurship on Building Your Pro Forma Financial Statements.  Admittedly, I have a very weak business background and usually avoid topics on finance, accounting, and/or economics.  In our bi-weekly meetings, my least favorite segment is the review of the financial reports at which point I reflexively tune out.  I do understand that this is a serious handicap and I hope to curb my handicap via my MBA pursuits.

Much like the previous chapter (chapter 5) on Business Planning, chapter 6 breaks down and explain each section of a financial statement in much detail.  In fact, the authors piggyback on the previous chapter by also providing various examples of worksheets (Balance Sheet, Revenue Worksheet, Income Statement, etc.) which I’ll be showing our financial officer (who also has a Computer Science degree) and president.  Aside from the various charts, tables, and worksheets that may come in handy, the section titled Common Mistakes in which the author(s) inquires about the most common mistakes in an entrepreneurs business proposal from several professional equity investors, will hopefully also prove useful as we work towards developing a solid business plan.

Chapter 5 - Business Planning

There is a very nice, very informed man by the name if Mark Taylor who works at the Renaissance Business Center located at 555 Beale St.  The RBC (Renaissance Business Center) is a “one-stop-shop” that provides entrepreneurs and small businesses in Memphis with training, one-on-one counseling, and a host of other resources to assist in their success (I know you are asking what this has to do with chapter 5 – Business Planning… Be patient, I’m getting there).  I first met Mark about 2 years ago at the Main Library during an open-to-the-public business seminar.  One thing I vividly remember is Mr. Taylor telling the crowd of would-be and wanna-be entrepreneurs is that should we decided to come to the RBC seeking help, the first thing we’ll be asked for is our business plan.

Fast-forward about one year, and my team and I decide it’s time to pay Mr. Taylor a visit –without a business plan.  There were just too many questions and he just didn’t see the benefit in starting a business plan with so little knowledge about business in general.  After all, as Mr. Eric Mathews of Launch Memphis (http://www.launchmemphis.com/) expressed in a recent visit to the University of Memphis, we are all developers that tend to build first and ask questions later (not his exact quote but something along those lines).  Needless to say, it was a very candid and rather brutal 5 minutes that I do not regret.  It was an eye-opener that was very much needed.  Thank you Mr. Taylor!

Chapter 5’s topic of Business Planning brought back memories as I read it.  It gave very detailed and, until now, elusive descriptions on the various sections that comprise a business plan.  It basically gives the reader a blueprint on tackling the daunting task of writing a good business plan, emphasis on good.  The chapter should prove a good metric by which we can gauge the business plans that we’ll eventually write for our class (Ventur Bldg Sust Succ Enterp - MGMT 7270).   If writing a business plan is like telling the story of your business as the author says, I guess starting a business with a business plan means you have no story to tell and that makes for very dull conversation.

Chapter 4 - Entrepreneurial Marketing

The main topic in chapter 4 of The Portable MBA in Entrepreneurship is, as the title of this blog suggests is Marketing.  Ali and Seiders expound on the various concepts and principles surrounding Marketing and how the Entrepreneur can benefit from its effective use.  Admittedly, I am not very business savvy as I opted for the pure technical path in both my academic and professional careers.  However, being that I, along with a few friends, have decided to explore our entrepreneurial prowess this chapter addresses several problems that we've encountered along the way.

One of our biggest problems that the book covers in the section titled "Entrepreneurs Face Unique Marketing Challenges" is the lack of financial resources as well as expertise.  We know marketing is a critical component of success but personal capital investments usually results in a passive marketing strategy.  Another problem the authors mention that we've encountered is how marketing decisions can be undermined and/or muddled strong convictions and biases.  I remember one of our first marketing meetings in which my business partners considered investing in trinket marketing: buttons, mugs, pens, etc...; a strategy I emphatically deplored (at least for our business model).  The decision was tabled indefinitely; mainly because I was the Vice President and the Secretary- meaning I recorded and distributed the meeting minutes.

Other topics that I found interesting were sub-sections on Public Relations and Guerrilla Marketing under section "Marketing Communication Strategy".  While we realized PR and Guerilla Marketing (though we called it poor man marketing -remember we're not business savvy) were types of strategies I don't think we truly valued their worth.  We treated it as a last alternative rather than a bona fide approach which may have resulted in passive undertakings.  With the knowledge acquired from reading chapter 4 I believe it would worthwhile to revisit and refine our current marketing techniques.  I will definitely raise my concerns in this weekend's meeting.