The Serial Entrepreneur: Insight for Small Business Owners

Choosing the Best Credit Cards for your Small Business

You may ask "Why do I even need a business credit card? After all, I can just use my personal cards and keep track of the receipts (which I have to do anyway)." This is true, but the fact is there are a lot of advantages to having dedicated cards for your business, most at little to no cost to you. I should point out here that, with few if any exceptions, it will be your personal credit backing up your "business" cards. Which may lead you to repeat your first question, with a slightly different twist. Fair enough, but read on and make the decision for yourself.

One big advantage to having separate cards is that it just makes it easier to keep your personal expenses separate from your business expenses. From the moment you pull a card out of your wallet (or type a card number into a website) to pay for something, having physically separate cards for personal and business expenses just makes things easier all the way down the line. A few examples: It's easier to categorize your expenses when you aren't also trying to pick out your grocery and dry-cleaning items from your business lunches. If you use an accountant or CPA for your business, it's easier to give them only your business card statements (or in many cases, give them limited access to your statements on-line). If you have an assistant that buys office supplies, books travel, etc., it's cleaner (and somewhat safer) to issue extra cards for them from a business account than from your personal card. And the year-end summary and/or on-line reporting that comes with most business cards today becomes a lot more useful as a management and analysis tool (since it's just about useless if your personal expenses are mixed in).

Side note: A bit of advice on giving "company cards" (remember, in just about all cases, they are just an extension of you and you are still responsible for the charges) to partners or employees. Don't do it, except in the specific case of a designated employee (or two) that has specific purchasing responsibilities (like office supplies/services, travel for you, purchasing items for resale, etc.), and then make it clear that the card with their name(s) on it is to be used exclusively for those purposes (then enforce this rule). Everyone else, like salespeople that are expected to have some T&E expenses, should use their own personal credit cards (that they are responsible for) and turn in a monthly (or more frequent, if necessary) expense report. It not only encourages them to keep better records and be more mindful of what they spend money on, it keeps you from being liable for the $20,000 in questionable T&E that your west coast sales manager racked up the month before you fired him (for questionable T&E). I've been personally burned by this--once--don't let it happen to you.

Another advantage to "business cards" is that many of the features they come with (and you'll need to choose those features that make sense for you and your business buying habits) are focused on the needs of small businesses. For example, many business cards provide automatic discounts or rebates on things like overnight shipping or office supplies--things that businesses typically use that individuals don't (and so individual cards don't carry those features). When looking for a card, see what features are available that would make sense for you. For example, if you rarely travel, a card that offers discounts on travel is probably not your best choice.

Like many personal cards, a lot of business cards provide various perks: airline miles, reward points, cash back, etc. The choice here is also very personal. If you already have a lot invested in a particular airline's frequent flyer program, and you can make use of those miles, it probably makes sense to look at business cards that earn miles in that program. Regarding cash back programs, if you are using credit cards as a way to extend payments over time, these are probably not the best choice, as some only pay you the rebate if you pay within the grace period, whereas others pay you the rebate but often at the consequence of a higher interest rate. Here again, look around and see what cards offer perks that are meaningful to you and aligned with your business buying habits.

You may also consider having more than one business card. Something I've done many times over involves a total of three or four separate card accounts (not to be confused with additional cards on an account, as discussed above):

1. An American Express Business Gold or Platinum card (not a credit card, so you pay it off entirely each month): This is your "primary" card, to be used for all purchases except those specifically slated for the other accounts. Amex cards have great discounts on common business expenses, rich on-line account access, and one of the best all-around rewards programs. If you travel a lot, go for the Platinum card--it gets you into most of the major airlines' airport clubs at no cost--well worth the annual cost of this card. If you don't travel, stick with the Gold card.
2. A second American Express card or a Visa/MasterCard dedicated exclusively to recurring purchases (i.e., monthly charges--like Internet or wireless service and on-line subscriptions--that various service providers can bill directly to your credit card rather than send you a bill): Here again, try to find a card with "good perks", a good rewards program, and/or a rebate program. The interest rate on this account matters little, because you will always (or almost always) pay this one off each month (for obvious reasons: the key phrase being "recurring charges").
3. A Visa/MasterCard with the lowest possible interest rate you can find: This is the one you'll use to make bigger purchases and extend payments over time; and you'll usually have to give up rewards/perks in favor of low interest.
4. An optional Visa/MasterCard used for on-demand purchases with vendors that don't take American Express: Yes, they are still out there. Of course, you could use one of your other Visa/MasterCard accounts, but having a separate card for this purpose works well for a lot of reasons, including making sure you don't inadvertently go over your credit limit on your recurring card and/or you don't keep adding new charges to your "extended payments" card (which will increase your total interest paid). Look for a no annual fee card in lieu of perks or rewards (if necessary), as this card won't get a lot of use under normal circumstances.

Naturally, your mileage may vary. This is a "card strategy" that I have found to work well for several of the small businesses I have started. If an American Express card doesn't work well for you (I happen to like them), then you can omit account #1 and instead go heavy on the perks/rewards on account #4 and use it as your primary on-demand purchase card (that you pay off every month). Note also that I didn't mention DiscoverCard. I have no particular issues with Discover, and that may be a viable option for one or more of these accounts, but like Amex, there are some companies that don't accept Discover, so I don't recommend this as your only option.

Two good places to start when looking for cards are BankRate.com and CreditCards.com (click on Business Credit Cards on their homepage). They have various search tools to help you find the particular set of features that you're looking for, as well as a comprehensive list of cards from all the usual suspects (Citi, Chase, CapitalOne) as well as some really great cards from lesser known banks that are certainly worth a look (disclaimer: when looking at a bank that isn't a "household word" to you, do your research first, but you'll often find that just because they are not well known to you or in your part of the country does not make them any more risky or less viable).

Success through Chunking

Yes, in every entrepreneur's life, there will be times when you'll want to chuck something across the room in anger (or at least in frustration). But in my experience, that won't get you very far, and is certainly not a path to success (unless your business somehow involves thrown projectiles). Luckily, the "chunking" I'm referring to here is a path to success, and one that I have found to be more powerful than the simple concept of chunking would suggest.

I was first introduced to the "formal process" of chunking several years ago as part of a larger Stagen Institute Transformational Leadership course (highly recommended). My objective is not to cover chunking in its entirety here--just to hit the high points based on my personal use and application of the principles.

I have seen chunking manifested in many ways, often disguised as time management or goal setting. By itself, it is neither of these, but is instead a framework for both. In simple terms, chunking is a structured process that lets you focus on the things you have determined to be important, in manageable "chunks" (thus the name), at appropriate intervals, and with the minimum amount of "overhead" (i.e., time). It is an effective tool that can be used on an individual basis as well as with a group or team. I have personally found that for entrepreneurs, business owners, and any other "top" position that lacks the structure and management of highly-defined tactical objectives, chunking lets you cut through the clutter of your infinite to-do list and tend to those things that will move you closer to success. As an added bonus, it also helps to put into perspective the relative importance of those things that really are critical versus those that are just urgent.

Effective chunking does not require any particular software or template; it can be done with pen and paper in a notebook (although I favor using a spreadsheet, as this keeps me from having to do a lot of re-writing). There is also no "one correct way" for everyone, so I will let you determine the best way to actually keep track of your chunks, and instead focus on the concept.

It starts with a set of clearly defined objectives--typically bigger, longer-term objectives that are a year (or slightly longer) in duration. How you determine those objectives is another topic entirely, but in general, these are the major goals or outcomes that you determine to be your key success criteria. In a year's time (or so), there shouldn't typically be more than six to eight of these objectives, and in some cases, there may be only a few. They are the kind of things that would come from your annual planning meeting, or if you are a sole proprietor, your own personal annual planning meeting (where you take some time by yourself, or possibly with trusted friends or advisers, to focus on where you want your business to go and what needs to happen for it to get there). Once you have defined those big, key objectives, you are then ready to apply the process of chunking.

While there is no requirement that chunking be matched to natural calendar intervals, unless there is something unique in your industry (like the 13-month calendar often found in retail) that would suggest otherwise, the natural intervals of year, quarter, month, and week are typically used. With that said, the simple idea of chunking is to break your big yearly objectives into progressively smaller chunks (namely quarterly, monthly, and weekly)--and this is very important--with each smaller chunk requiring progressively less of your time to think about. Let me expand on that point: If it took several days (or maybe longer) to define your objectives at the yearly level, it should take perhaps a day or several hours at the quarterly level, only a few hours at the monthly level, and less than an hour on the weekly level (it is taught that the weekly review should only take fifteen minutes, but I have never been able to get it done that quickly). This is one of the key values to chunking. By breaking down large objectives into progressively smaller chunks, each requiring less time to review, you are allowing yourself to spend an appropriate amount of time at the appropriate intervals to ensure that your big objectives are met. In other words, yearly objectives are broken down into four quarterly chunks, each broken down into three monthly chunks (that only relate to that quarter's chunk), each broken down into weekly chunks. I know this must sound deceptively simple, but it works.

You probably noticed that the chunks don't go down to the daily level. This is because chunking is not designed to be a scheduling system. Instead, when you review your weekly objectives (once a week), you schedule those specific things that need to happen that week in order to achieve them; ranging from time you schedule for yourself (very important) to meetings you schedule with others to items you delegate. You do this using whatever scheduling or time management software or system you like, independent of your chunking system. This actual task/meeting/delegation scheduling step, done on a weekly basis, is critical to the process--among other things, it helps keep the "crisis of the moment" at bay, in favor of blocking out the time and/or resources you need to achieve your big, key objectives.

Getting started with chunking is a change of habit. Frankly, it was different than how I had operated in the past and was therefore difficult for me to "get into it". It also took some "tweaking" to get the process working well and a fair amount of trial-and-error in defining the scope and context of objectives and their corresponding chunks. But once I got a system in place that worked for me and forced it to become habit, I have found it to be one of the simplest, yet most powerful concepts that I have ever adopted. I know others that use it as well, and they would agree. Try it out and let me know if you don't find yourself getting more done of what you want to do, with less stress, and with more deterministic results.

Remote Online Backup

It probably goes without saying, but most businesses today rely on computers. Even if you don't consider your business to be a "high tech" business, technology basics like email, contacts, word processing, spreadsheets, and so on have become critical elements of even the lowest-tech businesses. And if you are a higher-tech business, your dependency on computers obviously runs even deeper. But really, it's not so much the computers themselves that make up your "digital assets", it's the data they store. After all, a failed (or stolen) computer can be replaced fairly easily, but your contact list, business plan, accounting data, and so on--that's another story.

So--and we've all heard it before--back up your data! Historically (and still pretty much today) that meant using some sort of backup software to make a periodic copy of your data onto a tape of some kind, or more recently, maybe onto a CD or DVD. Nothing magical about that, in fact Windows comes with simple but effective backup software built in, and if you wanted something more elaborate, a long list of software vendors was ready to step in and help, ranging from pretty good freeware/shareware solutions to more expensive enterprise backup software. That's all well and good, but the issue has never been a failure of the technology--frankly, it's the failure of the human. I've seen various statistics quoted here and there, but the sad truth is that relatively few people have the discipline to run backups on a regular, consistent basis.

But that's not you right? You are religious about backup, making incremental copies of your laptops (and/or servers) on a nightly basis, full backups weekly and monthly, rotating those tapes in a typical multi-generational rotation plan, and storing the two copies (yes, two) of each tape in separate physical locations. (That's a quick overview of a "good" backup plan, but one that few small businesses follow). But let's say you do follow a backup plan, albeit a "lesser" one, that affords you some level of protection. It's a lot of work, and frankly falls into that category of "administrivia" that takes your attention off running your business. Beyond that, "lesser" plans are just that--the reason for the more elaborate plans, the rotation scheme, the two copies of each tape, the off-site storage, and so on is because the technology itself is not perfect. I've heard more than one story of critical business data being lost forever due to a faulty, damaged, lost, or stolen tape.

So what's the good news? Remote Online Backup. This is a service that's been coming for a long time (I want to say I remember announcements on this topic over ten years ago), but now it's mainstream. Why now? Two technology trends have converged to make this simple idea viable: cheap storage and cheap Internet bandwidth. Storage costs have plummeted over the years (almost exactly 20 years ago, I remember buying what was then the largest hard disk available in the world; it stored 500 megabytes, weighed over 100 pounds, and cost just over $20,000--today, even at retail, you can buy a 500 gigabyte hard disk that fits in the palm of your hand for well under $500). Other storage technologies, like tape, have also experienced similar cost-down/capacity-up trends. This is what has made it viable for companies to offer remote online backup at a price-point that makes sense to individuals and small businesses. And of course, cheap high-bandwidth Internet connections make it possible to actually transmit the data from your computers to the service provider's facility (not so practical on a 28.8kbps dial-up connection).

There are a number of providers out there today that offer remote online backup services, including Mozy, Carbonite, eSureIT, and others. As you'd expect, each offers their own twist on the basic concept--different service levels, the ability to easily interface to different kinds of computers (and even specific software, like Exchange or SQL Server), and such. What they all do is back up the data on your computers (from laptops to servers) automatically over your Internet connection to their remote secure data facilities. Once you install their downloadable software on the computers you want to back up, there's nothing else to do. The service provider takes care of all the "dirty work" and presents to you a web-based administrative interface for retrieving backed-up data in case you loose something. My personal favorite is Mozy (and the fact that they were recently acquired by EMC--a large and well-established data storage company--makes me feel even more secure with them). For basic backup of a Windows laptop or file server, Mozy is hard to beat, and their Mozy Pro version has a long list of advanced features for "power users". But it's not necessarily the best solution for everyone, so take the time to explore the options and find what works best for you and your environment.

I won't try to go into all the features or benefits of remote online backup here (I'm not selling it), but I will mention a few of the key points below that apply to all or most of the providers. Bottom line, unless you have or are planning to have a fairly well-staffed IT department, remote online backup is hard to beat (and even then, it should still be considered). I highly recommend it--the peace of mind that comes with this solution is well worth the very reasonable monthly service charges.

• Once installed, it just works (although most solutions let you choose between fully automatic and various scheduled backup strategies); so unless you want to, you don't have to think about it. Even for laptops, as long as you connected to the Internet every once in a while, all the changes you've made since your last connection will be backed up.
• Unlike most simple in-house solutions, the backup is near-real-time (assuming you're connected to the Internet when making changes), so all those updates you made to your new marketing plan this morning won't get lost if your hard disk crashes before your traditional nightly backup. Many of the services also provide you with "snapshot" backup, where you can go back and retrieve (via their website) the version of that presentation you were working on three weeks ago, after you've made dozens of revisions, saving over the original file on your local hard disk each time.
• After the initial "sync" (where all the relevant data on your hard disk is backed up in its entirety), the Internet bandwidth needed for incremental changes is relatively low, so as long as you have typical DSL or cable modem Internet service, there's no need to increase your bandwidth.
• Your data is encrypted before it leaves your computer, so it can't be intercepted or compromised in any way while it's en route to or stored at the remote backup provider's facilities. This ensures that your data will remain safe and let's you comply with HIPAA, PCI, and/or other privacy/security requirements.

A DUNS Number: What it is and why you need one

Along with all the federal, state, and local government filings on the "starting a new business" checklist, don't forget to apply for a DUNS number. What's a DUNS number you ask? DUNS, or more accurately "D-U-N-S", stands for "Data Universal Numbering System". It's a unique nine-digit number assigned by Dun and Bradstreet, Inc. ("D&B") that identifies your business in their database. It has nothing to do with any government entity and is not required to start a business, but if you ever plan to open trade credit accounts with major vendors or suppliers, it will serve as the linchpin of that effort.

Who's Dun and Bradstreet ("D&B")? To quote D&B's Website: "Dun & Bradstreet maintains the world's largest business database containing information on more than 100 million businesses worldwide including 38 million in the United States. D&B is, by far, the leading provider of business information for credit, marketing, and purchasing decisions worldwide. Today, more than 150,000 companies of all sizes rely on Dun & Bradstreet to provide the insight they need to build profitable business relationships with their customers, suppliers and business partners."

What does that mean to you? As it relates to opening trade credit accounts, applying for certain kinds of business financing (like equipment leases), and just simply opening certain kinds of accounts, even ones that don't come with credit terms (some wireless carriers ask for your DUNS number when you open a business wireless account), these suppliers will use your DUNS number both to evaluate the creditworthiness of your business as well as to report payment experiences they have with you. In that sense, D&B acts like a clearinghouse of business credit reporting, similar to how the three big consumer credit reporting agencies compile and report on your personal credit. D&B provides other useful services to small businesses as well--more on those later...

Applying for a DUNS number, in and of itself, does nothing for your business credit. It simply establishes the "key" you'll need to start building a credit file with D&B. There are two ways to start building that credit file, both as you might expect, based on reports about your payment habits from existing suppliers: 1) almost any large company that you have an account with will automatically report on a monthly basis to D&B, and 2) you can specifically request that D&B contact your smaller non-reporting suppliers and query them on your payment history (D&B charges a small fee for the second option).

By the way, if you don't explicitly apply for a DUNS number, one will eventually be created for you whether you like it or not (unless you do business under a rock), but it's better to go ahead and apply for one to get the ball rolling.

So...you may have detected a chicken-before-the-egg problem above. If suppliers report on you when you have a trade account with them, but also use your D&B credit file in order to grant you a trade account, how does one ever get a trade account to begin with? Excellent question. The fact is, when you start a new business, you have absolutely no credit history at all, and your D&B file will reflect this. As such, it is absolutely worthless as a means for a supplier to evaluate your business creditworthiness. But there is no harm in having an "empty" D&B file (meaning an established DUNS number with the basis business information in it); in fact, even an empty file can help you establish certain kinds of accounts. But for your D&B file to really start helping you, it will take some time--time for the file to collect data (some that you can provide and some that your suppliers will provide, whether or not you have a trade credit account with them). This is just another reason to apply for your DUNS number as part of the startup checklist--the sooner you get the file started, the sooner it has the potential to start helping you.

Fair warning: If you don't have good payment habits or end up with tax or other liens, your D&B file will reflect this, which will hurt you (no difference here than what happens to your personal credit score if you consistently make late payments on your credit cards). But like I mentioned, your business will get a DUNS number assigned to it sooner or later anyway, so there's really no place to hide.

How do you apply for your DUNS number? Simple. Go to the D&B Small Business Website and click on the "Apply for a D-U-N-S Number" link. There is no charge to apply (although D&B will offer you a couple of options that do carry a fee: my recommendation is to go with the free application for now). Note: It's important that you have already completed your federal and state filings before you apply for your DUNS number--D&B will ask for some of that information and I'm pretty sure they also verify your filing status with your state. After you apply, it usually takes a few days, and D&B will respond with your newly assigned DUNS number. At that point, there is nothing else you need to do (except always supply your DUNS number on any commercial account application that asks for it, even if you are not applying for credit or are personally guaranteeing the credit line).

I mentioned that D&B provides other services. Some of these may be useful to your business, both short and long term. Among other things, they provide a slew of marketing and business research services, which you can read about on the D&B website. There are two services that I do specifically want to point out. Depending on how you buy them, D&B offers packages that combine the two in various ways.

The first lets you query D&B's database to check on the creditworthiness of your potential customers. Of course, that may or may not be relevant to your business (if you're operating a retail business, your customer's creditworthiness isn't really relevant--unless you plan to offer payment terms, and even then, if your customers are consumers, D&B won't "know" them), but if your business deals with other businesses, even if you don't offer terms, but especially if you deal in large-dollar transactions, having a quick way to check out a prospective customer's past payment habits and other pertinent details is worthwhile. Tip: If your customer is a public company, I wouldn't bother with their D&B file--you get plenty of information from looking up their ticker symbols on Yahoo! Finance, Google Finance, and similar sites that compile information on public companies. The same is probably true for well-known private companies that you yourself are comfortable doing business with (but if in doubt, look 'em up).

The second service lets you keep an eye on your own D&B file, complete with email notifications when changes show up. Just like you may already do this for your personal credit file, knowing what's in your business file and making sure it's accurate and complete is well worth doing. Again, this feature is made available "on-demand" (less the email notifications) for a per-query fee or as part of a subscription. I'm fond of their subscription service, which can be had for under $100 a month; it includes a small package of "eValuator" reports (checking out other company's D&B profiles) and unlimited access to your D&B profile. Again, see D&B's website for details and current package and pricing information. Tip: D&B can also be a way to get "intelligence" on your competitors.

So back to the chicken and the egg. How do you build up your credit file in the first place? Frankly, your first several trade accounts probably won't have terms (other than COD), but even those will help you in time. Naturally, suppliers that you have prior relationships with and/or smaller suppliers that you can build a closer personal relationship with will likely be the first ones to give you terms, maybe starting you off on Net10 or Net15 until you prove yourself and ultimately moving to Net30. Bottom line, you have to "work it". Start off new supplier relationships paying with cash/check or credit card (but do open an account either way--even without credit terms and even if the supplier doesn't require it for "cash and carry" purchases). Then work hard to establish a personal relationship with your primary contacts at your suppliers, especially your "key" suppliers. Your goal is to let them see that they can trust you, and by extension, trust your company. When the time is right, ask them for credit terms, but don't be unrealistic with regard to timing or the credit limit you request--here you have to take it in small steps as you build credibility. Finally, I mentioned that D&B will (for a small fee) contact your non-reporting suppliers and add their feedback to your file. This is well worth the investment, but only after you have built relationships with at least three to five of these suppliers--doing this too soon is just a waste of time and money.

Get Rich Quick Scams

I've been spending a lot of time lately doing on-line research for one of my new startups--a lot of Google searches and the like, plus often following interesting links I find serendipitously. One thing I've found a lot of is blatant and obvious scams, promising to "generate fast, easy money with little or no effort".

What is it in human nature that allows people to fall for this kind of crap? Seriously? To me, the saddest thing about these scams is that somebody must be buying into them, or the people behind the scams would eventually give up and crawl back under their rock. But the exact opposite seems to be true: there are too many of these sites to count and new ones being added every day.

Has everyone forgotten this simple saying? "If it's too good to be true, it probably isn't".

Consider this: If someone can sell you a piece of software (or a web-based service) for $199 that guarantees that you'll start making $3,750 per week after only 15 minutes of work, why don't they just do themselves whatever their software or service does--do the math...one person working a comfortable eight-hour day could be bringing in $600,000 per week after just one week of "work" (compared with having to sell over 3,000 copies of their software every week from here on out). Wow! Sign me up! (By the way, I changed a few of the details, but I found several examples of "deals" just like this).

Another example: Lots of companies offer to "share" with you some sort of "secret" that will open the floodgates to untold riches that you can collect by doing absolutely nothing...once you know the "secret". Some of these sites don't even charge you for the "secret"; they just want your name and email address. Let's see here... Since I was able to find the site offering the "secret" (and many other similar sites, presumably each with their own special secrets), I have to assume that my ability to use Google is not significantly better than the other billion people that use Google every day, so that means this "secret" is likely to be "shared" with more than a few people in short order. If so, and more than a few people start using the "secret" to create their zero-effort income stream, my guess is that whatever the secret is won't work as expected for very long. OK, that was about as much sarcasm as I could cram into the last couple of sentences. Again, who is falling for this? I do believe that there are various "secrets" that a relatively few people are benefiting from (for example, I've personally seen very elaborate currency trading "systems" that generate a profit 9 out of 10 times), but the only reason these things work is because very few people know about them, and inevitably, they always run out of steam over time. But let's review: If you knew one of these secrets, why would share it with anyone, rather than just use it yourself? But for a moment, let's assume that out of the goodness of your heart (or some other unknown motivation), you decided to share the secret globally (by buying paid search terms to really get the word out, no less). Since the presumption is that any such "secret" takes advantage of some sort of flaw or loophole in some system that lets those who know the secret exploit that system, you must also assume that the system in question (the stock market, Google search, etc.) does not want to be exploited. But through the amazing reach of the Internet, many thousands or hundreds of thousands of people now know the "secret". Assuming there ever really was a secret in the first place, how long would it last with that kind of onslaught? Which brings me back to the first problem with this kind of scam: namely that anyone who knows a "real secret" would never disclose it in the first place (their personal greed getting in the way, you know).

Who are they kidding? Maybe I'm being overly harsh here, but it seems to me that anyone with two brain cells to rub together would see right through these scams in a split second. I imagine that most people reading this post would agree. But the proliferation of scams like these (and they are not limited to the Internet alone) demonstrate that in at least some fraction of the population there is a seed of hope that lets them believe that great rewards can be had with little or no effort. Short of winning the lottery (and I'm not putting any eggs in that basket), it just isn't so.

Some relevant quotes:

"There are no secrets to success--don't waste time looking for them. Success is the result of perfection, hard work, learning from failure, loyalty to those for whom you work, and persistence."
--Colin Powell

"Nothing ever comes to one that is worth having, except as a result of hard work."
--Booker T. Washington

"Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent."
--Calvin Coolidge

"Opportunity is missed by most people because it is dressed in overalls and looks like work."
--Thomas A. Edison

Your Business Address

Naturally, if you are starting a retail business or otherwise need office or warehouse space, your mailing address will likely be the same as your physical location. I'll talk more about that in another post (and there are lots of options to consider when choosing a physical location), so this post is mainly intended for "virtual companies" that don't have or require physical space. But even if you aren't virtual, unless you already have that space under lease, read on...

There are lots of examples these days of virtual companies. Most on-line/web-based businesses fall into this category, as do--almost by definition--all home-based businesses: independent consultants, service providers (think accountants, computer repair, electricians, and so on), and small groups of people working together from their respective homes (this is what many people think of as the "true definition of a virtual company").

As you will quickly discover as you go through the various steps in starting up your business, almost everything you do will require a mailing address (legal filings, securing a domain name, setting up a bank account, etc.), so getting one will be one of your first steps. There are really three primary options: 1) use your home address; 2) get a PO box at your local post office; or 3) get a box at a private mail receiving service. Note: As I alluded to above, if you need physical space and you already have that space under lease (or otherwise secured), that is certainly your fourth option.

Using your home address as your business address: My recommendation is to not do this, unless it is only temporary in the early stages of the startup process and you plan to secure a physical location. The list of reasons to not use your home address includes such things as security (you don't want customers showing up at your door at 3:00am on morning), external perception (home addresses often reflect negatively on the business), and just plain "separation" between your business and personal mail.

Using a PO box: This is an often-used solution to a business address and solves many of the issues inherent in using your home address, but it has some downsides. There is still a perception problem (yes, I know that lots of large companies use PO boxes, but they are already large companies, while you're trying to build up an image) and as a US Postal Service box, they can only send and receive US Postal mail. In other words, overnight shipping companies like FedEx and UPS won't deliver a package or overnight envelope to a PO box. To me, this reason alone takes this option off the table for most companies.

Using a private mail receiving service: These are similar to a PO box, but with a couple of distinct advantages. Available at locations across the country (many of them small local or regional companies),the two largest national providers of private mail services are UPS and MBE (which is also owned by UPS). Regardless of whether you choose a local, regional, or national provider, the benefits are virtually identical, as are the things to look for: a good address (with a little digging you can often find a convenient location that will let you use a "short" suite number at a business street address, instead of the typical "Suite 123-456" format, which is OK but not preferred), longevity (even the national brands are mostly franchises--find out how long the location you're considering has been there and how long the owners have been in business), and costs (with few exceptions I've seen, costs for a private mailbox is pretty consistent between providers and generally comparable with US Postal Service PO boxes). What the private providers offer that the post office can't is the ability to receive packages and overnight envelopes from any shipping company (and provide you with a convenient place to send mail as well as overnight shipments while you're there to pick up your mail). Also, depending on the location, the level of customer service is often a step up from what you can expect from the postal service, with such "fringe benefits" as being able to call in and see if a package has arrived. Bottom line, highly recommended!

There is an other "variant" of these private mailbox services that will receive and forward your mail to you (presumably at your home address). One such example is NYmail (and there are many others). They offer the same advantages as the retail outlets, often with a "prestigious" address, at similar monthly costs. Nothing wrong with this approach, but two negatives to consider: there is additional cost (because you pay for the postage/shipping to get the mail/packages from them to you) and it is somewhat less convenient (you have to wait for the "second leg" of the shipping or pay overnight shipping charges, rather than just stop by the local store to pick up your mail).

A closing note on "executive office space": I'll discuss executive offices in another post, but under the heading of "your business address", this is certainly an option to consider. If you're not familiar with these, they are usually nicely-appointed, full-service (i.e., voice mail, copy machines, receptionist, coffee service, conference room, etc.) offices where you rent a single office instead of a whole office suite, typically (at least, that's the idea) for much less than it would cost you to do all this on your own. Frankly, it's a great solution for an otherwise virtual company that needs to have a professional office environment to meet with clients (assuming that you wouldn't normally meet at the client's office); but make no mistake, you won't be fooling anyone into thinking the whole office is yours. In any case, if this arrangement is appealing to you, there's no reason you can't use that physical location as your mailing address (and a good example of using your home address for the bare minimum startup requirements, since you'll generally need to have your business filings and possibly a bank account in place before you can sign the executive office space lease), but also consider this: The cost of a private mailbox is very low; if you decide to change executive offices (most offer short lease options) or you decide the executive office ultimately isn't necessary, your business mailing address won't have to change.

Starting a New Company: Opening a Business Bank Account

Back in the day, it was typical to open a bank account at the same local bank where you had your personal accounts, and thus, a history and at least a passing relationship with (or the ability to form a relationship with) the bank President or owner. These days, that's more of a rarity. With all the bank consolidations in recent years, even banks that used to be "locally owned" have been merged into the various national brands, the highest ranking official in the branch is the branch manager (who often gets replaced at an unnerving rate), and you and your accounts have been reduced to little more than computer data. Sad to say, but banking has gotten very impersonal. Beyond that, much of the "relationship" aspect that used to mean something in a "banking relationship" doesn't mean that much any more, with decisions being based on credit scores and software algorithms as opposed to personal relationships.

If I sound cynical, it's because I have become so over the last 20+ years. My experience is that the bigger the bank, the more "like an account number" you will be treated. It's a case of the brochures and commercials looking nice (talking about their focus on small business, their excellent customer service, etc.), but the reality being very different. Dirty little secret: Relationship banking is still alive and well if you are a "major account"; but since most small business startups will be far from "major", we can safely assume that you aren't on that list.

Having said that, if you can find it, a small local bank (where it's still possible to speak with the people that own the bank--or at least to their direct reports) is your best bet in most cases (see some caveats below). I'd say the smaller the town you live in, the more luck you'll have. To that point, I know of many people that have intentionally opened accounts at "small town" banks where they grew up, even though their business is many miles away in a "big city".

If you can't find it (and again, taking into account the points below), just about any bank will do. Most banks these days offer some variation of free checking for businesses, so do your research on-line to compare offerings from various banks that have branches conveniently located to you. Look for things like free ATM transactions, a free Visa Debit Card, low or no minimum balance requirements, etc. What you're looking for here is a safe place to keep your money, that costs you little or nothing to so do, and let's you conduct the most basic of banking functions--making deposits and writing checks. Note: You'll find that business checking accounts that offer interest are rare (maybe impossible) to find for anything other than sole proprietorships.

Some other considerations for choosing a bank (in no particular order):

• Compatibility with Quicken or QuickBooks
• Web-based access to your accounts (even better with check imaging)
• Free e-check service (via Quicken/QuickBooks and/or web)
• Overdraft protection (although rare on business checking accounts)
• Secure night deposit if your business deals with a lot of cash

What about SBA loans? That's a subject for another post, but let me note here that if you plan to apply for a SBA loan, you will specifically want to look for a bank that's a SBA Certified Lender, or better yet, a SBA Preferred Lender. You can search on the SBA website for a list of banks that fall into these categories.

What about "conventional" loans? Again, a subject for another post, but here it all boils down to collateral. With the exception of small "signature loans" (that amount to credit card accounts without a card), banks only loan against collateral, and further, against collateral that they understand (i.e., if you want to borrow money for farm equipment, talk to a banker that understands farm equipment). As a general rule, the big banks are great for "signature loans" (of course, this is your personal debt based on your personal credit history, not the company's), while the small banks are better for "specialized" loans (keeping in mind that these essentially depend on the bank clearly understanding how to quickly liquidate your collateral if you default on the loan).

What about wires? The fact is that any bank can send and receive wires (electronic transfer of funds from one bank to another), but if you expect to do a lot of wires--and especially if timing of "funds availability" is important--you'll want to avoid a bank that relies on another bank for their wires. I've never personally had an account at such a bank, but I have encountered them on the other end of the wire. None of the big banks have this problem, but a lot of small banks, especially those in smaller towns, often rely on a bigger bank to facilitate the wire. This can cause confusion and delays in the wire process. Also, again if you expect a lot of wires, look for a bank that let's you initiate and monitor wires on-line.

What about foreign currency transactions? Definitely a topic for another post, but as it relates to choosing a bank, if you expect a lot of foreign currency transactions, you'll want a bank that is well versed on this. As you might expect, this often means going with a larger bank, as small local banks often think only in local currency.

Bottom line, there are lots of pros and cons to weigh when choosing a bank. There is no single right answer or one type of bank that's ideal for any business. I've promised several other posts dealing with various banking and financing related topics, so admittedly, this only brushes the surface. Whatever you do, spend a little time up front to itemize your needs and research the various options before you make a decision. While it's not impossible to change banks in the future (and you almost surely will as your business evolves), that's a nuisance you don't need in the early stages of your new venture.

One final note on the topic of "e-banking" (working with a bank that has no local presence--at least not local to you)--a great example of this is E*Trade Bank (although most of the big national banks provide this as well). They're a great bank (I use them for various personal accounts), but even in today's "Internet age", there are certain times when you'll find it useful and even necessary to have a local physical branch you can walk into and conduct a transaction. This is especially true if your business will get a lot of paper checks or will deal in cash (with cash being a virtual showstopper).

Starting a New Company: Choosing the Legal Structure

In short, a Limited Liability Company or "LLC" is most likely what you want. Just about every attorney I've talked to about this says that LLCs are preferred in almost all cases. There are only two reasons I can think of that you wouldn't want to use this structure (and only one of them is a good reason).

The first (and not so good reason) is that it does cost a bit to set one up, as compared to the negligible cost of setting up a sole proprietorship, which is usually just limited to the DBA filing fee. But, if there's more than one founder (i.e., sole proprietorship is out), or you plan to do business in multiple counties, or you plan to get any sort of outside funding at all (even if it's from "friends and family"--the most likely source for seed capital), you're much better off with an LLC, even considering the cost to form one.

But why not just do a DBA if there's only one owner? One word: Liability. A sole proprietorship, DBA or not, is "you". If things go wrong (which you always need to plan for), creditors will be coming after you personally, as will anyone that files a lawsuit against your DBA. The trivial cost of forming an LLC and the ease of operating one will be worth its weight in gold if you get into such a situation. Oh, and another reason: having an LLC makes it easier to take on partners and/or investors.

The second (and good) reason for not choosing an LLC is if you need a Sub-C Corporation for some reason. Why would you need one? Basically, if you are starting off with venture capital funding (most VC firms prefer or insist on Sub-C-Corp), are planning to go public very soon (if your IPO "event horizon" is more than a few years out, it's better to start off with an LLC and convert it to a C-Corp later), or plan to have a lot of investors early on. Otherwise, the additional paperwork and overhead of a C-Corp just doesn't make sense.

But what about a Sub-C Corporation? With the advent of the LLC, I'm not aware of any real advantage of an S-Corp over an LLC. Both provide the same level of liability protection and neither are taxed as entities (i.e., the profits flow through to the owners/shareholders). As these are the typical reasons for forming a S-Corp, the LLC is preferred. It's cheaper to form and easier (thus cheaper) to operate.

How to form an LLC? There are several web-based services (like LegalZoom.com, CorpAmerica, MyCorporation, and others) that make the process quick and easy at minimal cost. Having said that, if you aren't well-versed at such things, I really recommend having an attorney do the work (not including state filing fees--which you have to pay the on-line providers as well, it should cost around $500). Besides, if you don't have an attorney for your new business, forming your LLC is a great way to start a relationship with a new attorney--a necessary and valuable resource as you as a new business owner. The best way to find an attorney is ask people you know and trust. Short of that, there are a number of referral services on the Internet (like The Attorney Store, Legal Match, The Attorney Referral Network, and others). Above all, don't choose an attorney lightly--they are working for you, so you should interview them in much the same way as you would interview a new employee.

Hello World!

If you're in the software business, you'll instantly recognize "Hello World!" as the output of most developer's first program when they are learning a new programming language. Here, it's the output of my first blog posting.

As a lifelong entrepreneur (I started my first company when I was 8 and my first technology company when I was 15), my idea for this blog is to share my experiences, ideas, and other musings as it relates to all things entrepreneurial--which I've often been quoted as calling it the toughest job you'll ever love! While most of the companies I have founded or co-founded have been in the technology sector, I've put away a lot of "credit hours" in the School of Hard Knocks that apply to all sorts of companies. And on top of that, my wife is also an entrepreneur, and although her first business (back in college) was also high-tech, she has since pursued more traditional ventures; and in any case, her experience and insight should also prove valuable in this little venture.

It probably goes without saying, but all of my posts are my opinions, based on my personal experiences over the last 30+ years. You may not agree with my point of view, and if so, I'd love to get your feedback--one thing I've learned is that there are usually lots of "right" opinions. As many of my posts will include details of actual events, I will (almost always) refrain from using company or individual names. And finally, in the interest of full disclosure, I may recommend products or services that I have found to be useful, and in some cases, I may have a vested interest in the companies mentioned.

So, Hello World! Let the experiment begin...