Ramblings of an Entrepreneur

To some, good ideas come quickly and easily.  To others, there is a strong desire to run your own business, but don’t have any idea of what to do.  That’s where franchises come in.

There are many great reasons why a franchise may be right for you.  You have the advantage of knowing the history of the company and its past success.  You have the power of a brand name behind you and a support system.  These are very important issues if you don’t have a lot of experience running a business; and even if you do have experience, they are still beneficial.  franchise opportunities are lower risk than new businesses, often have an established customer base, and can provide marketing support for the business.

There are franchises out there for everyone.  Some major franchises will require a strong background, significant liquidity and net worth, but there are also a ton of low cost franchise opportunities available.   Other than cost, there are business opportunities available for almost any industry.  From food service to cleaning to lawn care to automotive, there is sure to be something that interests you.

Before you jump into the deep end with franchises, you need to do your homework.  Spend time researching a large variety of franchises.  Check otu resources such as Inc. and Entrepreneur Magazine.  The magazines publish franchise information and rankings all the time.  You could also find information at the About page here.  Or check out this list of the Top 50 Franchises.  Finally, in your research, be sure to check out the International Franchise Association, which provides a lot of valuable information.

I was just sent an article on making the jump from a full-time job to starting your own business.  It is written by a founder of a new startup called Nutshell Mail.  Very good article, suggested reading for all of you contemplating the same things.  I have pasted it below in its entirety.

A Check List: Considering Leaving Your Day Job?

If you are considering leaving your day job to start your own business, there are some serious questions you must ask yourself. I did not erratically jump ship when I got bit by the entrepreneur bug. Before leaving my 9-5 (or rather my 8am-1am finance gig), I made sure that I assessed the risks and weighed the benefits.

If you think coming up with the idea is the hard part, you are mistaken. Certainly good ideas don’t come along everyday, but I can promise you that conceiving the idea is actually the easiest part. The process for determining if you should go off on your own is long, hard, and involves some serious introspective examination.

In general, investors look at three types of risks: 1) Market Risk, 2) Technology Risk, and 3) Execution Risk. When determining if you should go into business for yourself, you should weigh the same questions.

The first two are obvious. To quantify market risk, you need to ask “Is my concept/idea/product marketable?” “Does it solve a real problem?” “Will people pay for it or can I find a way to monetize it?” Most importantly, “Is this something that I need?” , “Will I use it?” To address the technology risk considerations you need to ask “Can this be done?” “Can I build it or find people to build it?” Both require extensive due diligence, and I personally spent a long time researching and writing everything down into a draft business plan before even considering leaving my job. Writing a business plan is a painful but critical step. (More on that to come later)

However, the third type of risk: Execution Risk can not be quantified by typical research. It involves serious self examination, understanding your personal limitations, financial situation and relationships with family and friends. To help you determine if you are ready to go off on your own, I have created a check list of questions I asked myself before submitting my letter of resignation:

1) Do I have an entrepreneur’s personality?

An entrepreneur is a person who thrives under pressure, enjoys challenges and is self-motivated. You must be a high-energy person who is not afraid of hard work and long hours. Passion is a must. If you are not passionate about your business, you will find it hard to wake up every morning.

2) Am I willing to make sacrifices?

Becoming an entrepreneur can flip your life upside down and usually involves sacrificing customary ways of life and creature comforts. It is about more than cutting back on luxuries and discretionary expenses. For some, it even means moving in with Mom and Dad. The strain can affect relationships; girlfriends, boyfriends, wives, husbands, and best friends can be lost. When you become committed to realizing your dream, you may find yourself alienated from those who are central to your life. Balancing work and life becomes much more difficult and you have to be prepared to accept that.

3) Do I have the proper support system?

Not every entrepreneur is fortunate enough to have a strong family, supportive spouse, or rich aunt. But every entrepreneur must be aware of the role the people in their lives will play and how their startup will affect those individuals. You must consider your family and loved ones when starting your own business as it will most certainly affect their lives as well.

4) Do I have the financial resources to quit my job?

Many experts say you must have a least one year of salary saved up before even considering going off on your own. If you have significant financial obligations, dependents, or responsibilities you can not give up, you better make sure you can meet those commitments in the absence of steady income.

5) Do I interact well with others?

An entrepreneur is someone who can find answers to difficult answers. To find those answers you must be able to interact well with others, convince them to help you, and if you are good, make them want to help you. This is also crucial for building your team, attracting investors, and most importantly acquiring and retaining customers.

6) Can I trust others?

An entrepreneur must wear many hats, but you can not do everything. Those who try, typically fail. Those who are able to find the right people and delegate task have a much better chance to succeed. To be successful you must not only delegate but also inspire. This often means letting go of the reins, trusting in others, and making sure everyone’s mission and interests are aligned.

7) Am I confident in my abilities?

There is a fine line between confidence and cockiness; and, optimism and stupidity. You will experience ups and downs, successes and failures. To succeed, however, you must be resilient and, in general, positive. You can learn many things on the fly, a key trait of most successful business people. But you must also have a core skill set that you can use as a base. Experience in the industry you enter, is not a must, but it is a huge positive. The most important aspect, however, is trusting in your abilities, knowing when to ask for help, and believing that you can actually do it.

There are tons of online resources that can help you make this very important decision. However, two of my favorite reads include Founders At Work: Stories of Startup’s Early Days - a compilation of interviews from successful entrepreneurs in the tech and Web2.0 world (a must-read for any internetrepreneur) and Change the Way You See Everything: Through Asset-Based Thinking - one of my favorite inspirational books.

Here are my thoughts on a select group of companies that pay dividends.  Please note, these are only my recommendations.  I own some of these, some I don’t.  Invest at your own risk after doing your own research.

Annaly (NLY) - To start with, this is one of my favorite investments at the moment.  Annaly is a REIT with a dividend yielf of 10.90% at present.  They invest primarily in mortgage backed securities and related assets.  They have been doing surprisingly well and had great returns over the last few quarterts with great growth.  They recently raised capital through stock issuance to buy mortgage backed securities from large banks.  Some analysts looked down on the issuance saying Annaly shouldn’t have to raise this capital for the investment, but the market has reacted favorably.  If the mortgage market rebounds a little bit, this holding could do wonders.  Regardless, they have a great history!

iShares Lehman Aggregate Bond (AGG) - This is an ETF that holds mostly investment grade bonds.    This will stay well clear of the subprime mess and although it is susceptible to bond defaults, they shouldn’t be significant.  Current yield is 4.81%

BP Prudhoe Bay Royalty Trust (BPT) - This is an oil trust that pays you a royalty for oil taken out of the ground.  They don’t actually do anything but simply own the oil reserves.  So the key for holdings like this is to look at the proven reserves they control.  This holding is strongly correlated with the price of oil as you can imagine, so the stock price is extremely high at the moment, but it also has a current yield of 11.20%.  There are several other oil trusts that are also good buys, but they could be risky.

Consolidated Edison (ED) - New Yorkers know this one well, the regulated utility company.  A solid company with an amazing yield of 5.7%.

Templeton Emerging Markets Income (TEI) - Diversifying into emerging markets has been and should continue to be a wise choice.  This holding contains bonds in countries with a much better economy than the U.S. right now.  And with a yield of 6.6%, it may not be a bad deal.

General Electric (GE) - You either love them or you hate them… I love them.  You can’t argue their history and although Immelt has taken heat in the last quarter, the stock may be undervalued.  I’m looking for a rise and even taking out call options over the next year.  Regardless, the current yield is 4.00%, not too shabby and I don’t think GE is going bankrupt anytime soon.

Important Note: As I described in my previous posting, dividends change all the time.  The yields I listed above are current as of today, but they may change each quarter.  In general, you should look at its history of dividends.  They are starting to decline as prices rebounds in many industries.

When the economy is struggling, the Fed lowers interest rates to encourage investment.  There are two major downsides to this for consumers.

1.  Inflation increases.  As we have seen, the price of many goods has increased.  Economics 101- As inflation increases, your purchasing power decreases, meaning you could now buy less with the same amount of money.

2.  Lower interest rates encourage investment.  If you are looking to borrow money, this is a great time to do so.  The flip side is that if you’re lending, you are getting a lower interest rate.  And when you put money in your savings account you are doing just that, lending money to the bank.

Savings accounts almost always pay very low interest rates.  For the average person, expect tenths of a percentage point from major banks.  You could do a lot better from specialty banks such as ING or Emigrant Direct.  Even these banks have significantly lowered there rates, ING is only offering 1.75% now for accounts up to $50,000.  If you have more money, you can do a little better with these or money market accounts.  But the fact remains, with low interest rates and high inflation, you aren’t in a good position.

In comes the stock market.  For newbies out there, dividends are cashflows paid to equity investors (shareholders) in the company.  Established, profitable companies often pay dividends to investors in return for their equity investments.  New, high-growth or unprofitable companies tend not to pay dividends.

While I always suggest investing in a diversified portfolio of investments for the long-term, investing in high paying dividend stocks and funds can also be a great way to save, for the short or medium term.  One thing to note, dividends are taxed, either as income or as a qualified dividend (based on holding period), so when considering the cashflow include the discount for the taxes you will pay on it.  There are tons of great stocks and funds that offer great dividends.  Some basic info you should know:

- Preferred Stocks: have first rights over assets of the company after debtors and are more like bonds - some pay decent dividends.
- Stocks: As I said earlier, some pay nothing at all, some pay great dividends.  Just because a stock pays high dividends, doesn’t mean its a great company, the stock price could still decline.  (Watch out Pfizer!!!)
- REITs: Real Estate Investment Trusts are vehicles used to invest in, you guessed it, real estate.  By law, REIT’s must pay out at least 90% of their profits in dividends, making them especially appealing.  However, they have tanked in recent years with the real estate bubble.  Watch for these making a comeback now though.
- ETF’s: Exchange Traded Funds are a collection of stocks, similiar to a mutual fund.  It is a great way to diversify holdings if you don’t have a lot of money to invest.  There are also some good ETF’s that pay decent dividends.
- Dividends and Dividend Yield: Dividends are specified in dollars per share.  So a divident of $1 will pay $1 for every share you own.  The lower the stock price the more shares you could buy obviously, so an important measure is the dividend yield.  This specifies the dividend paid divided by the stock price.  When comparing stocks, the dividend yield will directly show you which paid a higher dividend compared to its stock price.
- Dividends are paid to shareholders of record on a certain date.  This date is called the Ex-Dividend date.  It is not the same as the date the dividends will be paid.  And… companies are NOT required to pay dividends.  They can change their dividend at any time or simply not pay it.  Although this will have reprecussions on their stock price.

Hopefully, now you can see why dividends can be a good investment strategy for saving.  If you are looking to save as part of a long-term strategy, I would strongly advise you reinvest dividends.  This means you aren’t paid the dividends in cash, but instead get them in stock.  This additional stock compounds and leads to higher dividends and more stock ownership over time.  Right now is a good time to look at dividends that can make you more than a savings account.  There are endless options of investments with yields from 3% to 15% that may be good buys.

Tomorrow I’ll provide my own specific recommendations.

Gmail Labs is supposed to open to the public tonight, actually a few hours ago, but I don’t see it yet.  Gmail Labs is an attempt to open up development of email apps, by allowing Google developers to use the general public as beta testers.  You will be able to play around and provide feedback on which ones you like and ultimately Google will decide which ones to implement.  Be on the lookout, should be coming to a Gmail screen near you very soon!

From finishing a major business plan over the last week to sitting through a 40 hour ISO 9000 Quality Auditor training class this whole week, I’ve been way too busy.  Add to that I’m in the middle of looking at acquisition candidates for Modzy and spending some free time examining financial statements, while at the same time working on two major business development initiatives at work.  Phewww…  I needed to get that all out.

The good news is, at the end of this week, I’ll be a qualified ISO 9000 lead auditor, which isn’t too significant to my work, but it is interesting to learn and auditing skills can be applied in a wide range of other fields.  Today we discussed the psychology of auditing for a little bit, which was a good refresher on influencing people and basic management skills.

Next week I have a couple more training days, but then play catch up with my real work in addition to finishing a very large market research study I have been leading for a new business initiative.  Our New Business Development Director will also be in from Italy next week, so we’ll be meeting to review some lingering strategic issues and technical questions and get the new service moving, which should be exciting.

So things are very hectic now… but there is light at the end of the tunnel, and I’m excited to get there!

Every business needs good public relations in order to obtain new customers.  Whether you’re a startup or growing small business, getting attention from the media can boost you to the next level.  Having a PR strategy is essneitla to making it to that next level.

I recently read a really good article from Brian Solis, a principal at FutureWorks.  He gives 12 tips to boosting your PR in the new age of public relations.  Read his secrets here.

Modzy.com, an online scrapbooking store, for which I am a part owner, is revamping its website platform.  As part of this massive update the site is going through, there will also be a new affiliate program.

If you have a blog or website with a high viewership of women, you can place a link on your website and earn up to 20% of all sales from visitors you refer to the Modzy.com website.  This is a great way to earn some extra passive income just by sending interested people to a scrapbooking website.  for more information, questions, or to sign up, email me at josh@modzy.com.

As my previous post focues on real estate investing, I thought I would share a little bit about some different types of online trading you may not be aware of.  As part of an investment strategy and portfolio, you should diversify your holdings according to the risk and return you are looking for.  There are many discount brokerages that can offer basic trading and options trading on the major exchanges, but there are also other opportunities abound.

As you’re aware, the price of oil is skyrocketed, up over $130 a barrel.  What is driving these prices?  The speculation on the futures market.  Investors are investing in oil contracts on large margins.  some are becoming quite rich, while only time will tell what happens to the others.  CFD Providers (Contracts for Difference) is a similiar trading methodology.  These offer trading on almost all exchanges, including Forex markets, futures markets, and soft commodities.  If these types of stock trading programs interest you, you may want to check out this online stock market trading broker.  A CFD is essentially a contract between two parties where one party pays the difference in the value of an asset between the current and contract time.  It is a type of derivative where you can take long or short positions without actually owning the equity, but unlike futures CFD’s have no fixed expiration or contract size.

As with any investment, especially ones that rely on high margins, you should be educated on what you’re investing in.  So I suggest learning all you can about futures, CFD’s and other derivatives before jumping in head first.

For years you have heard people talk about investing in real estate.  You had the very successful flippers in the early 2000’s that made off like bandits and you had the amateurs that jumped on the bandwagon that lost a lot of money years later when the homes wouldn’t sell.  Real estate can be a great (and sometimes risky) investment, but like other investments, you need to know what you’re doing.  That’s why you may want to check out Nouveau Riche University.

Portfolio theory suggests diversifying your investments as much as possible, and this should include investing in real estate.  But what kind of investments should you make?  Should you buy residential homes, commercial property, REIT’s, or something else?  And how do you go about learning all you need to know.  One such place to learn is Nouveau Riche, which offers education for adults to learn about real estate and build their wealth.  The courses offered teach you how and where to invest to maximize your return and is taught using proven educational methods.  One of the mosti mportant aspects to real estate is finding the right deals.  As is often said… Location, location, location!  To that end, you may want to check out Nouveau Riche, which includes a network of real estate acquisition specialists.  They help real estate investors be more efficient in building a real estate portfolio.