Wednesday, April 30, 2008

Partnerships and Company Structure

Another critical learning experience that I've had is the realization that all businesses for profit need to be organized and structured properly. A common problem with partnerships is the fact that duties always overlap and efficiency is not maximized by the owners. When there are not actual job titles and duties, people are not accountable for anything. A proper chain of command is very necessary to conduct proper business on a day to day basis. If you run your business like a multi million dollar operation , you can expect the same results as a multi million dollar operation. A proper chain of command will look something like this...

1. Board of Directors- The owners or investors of a company (in big corps. these people are chosen to speak for the shareholders) that give direction to the officers.

2. CEO - Chief Executive Officer - The person that will make final decisions about the company and reports to the Board of Directors.

3. CFO , COO, CIO - Chief Financial Officer, Chief Operations Officer, and Chief Information Officer - They all control thier respective divisions of the company and report to the CEO.

4. Division Managers or Employees - Report to the Chief Officers of every division and directly control Operations and employees.

This looks like something that Microsoft, Coca-Cola , or General Motors might have , but not something for the everyday business... wrong... This structure must take place in every business to experience success. The difference in smaller companies is that the same person may need to wear several different hats. In partnerships, the problem that I've experienced is that every partner is the board and the CEO, CFO, COO, and CIO. Each partner has an equal say and equal responsibility for different divisions. A better way of running the business would be to have a CEO (preferably a third party) running the business and all the partners would be the board of directors. Even if the CEO was not a third party, it could still be one of the partners, the point being that there NEEDS to be one person in control and one person giving orders. It wouldn't even take more work for the CEO, it would just be that one person that would give out the orders and report to the other partners or board of directors. The benefit of having one Ceo instead of several is that authority is never undermined, orders to staff can never be miscontrued, accountability and responsibility can never be deferred, and more order will be brought to the business. This was probably one of my top 3 learning experiences to date and has been very costly for my business.

Thursday, April 24, 2008

Always underpromise and over deliver!

One of the most valuable lessons I've learned in the nightclub industry is that 99% of the people I meet and do business with always overpromise and under deliver. An example would be an event promoter telling me they have an event that will bring 300 people and a ton of money, and it sounds so great and believable that I buy into it. This scenario happens all too often and when it comes down to it , there is usually 100 people and a not so great event. People will often go so far as to lie, misrepresent themselves, and even slander someone else to improve their own position. I can honestly say that the staff and partnerships that I have today are still there because of the simple fact that they don't participate in this low level behavior. I have also learned that I am always impressed with those that can deliver without lying or giving a sales pitch. Having been in the nightclub industry for almost 2 years now, I have met more than enough of these characters. Now when I meet people, I usually don't even listen because I have heard the same song and dance over and over before. My rule of thumb when someone is giving their sales pitch is to take what they say and divide it by two.

Thursday, April 17, 2008

A Residential Real Estate Mogul !

A few years ago my life was changed by a man who taught me about buying and selling residential real estate. He is an investor and owner of a real estate education company called ICG (International Capital Group). There are many lessons to be learned from this man about real estate, so check out his site for more info (ICG), but I will comment on the main lessons that I have learned from him.

1. The main lesson that I learned was that in residential real estate you get the absolute best loans. You can put 10% down for a house and finance the other 90% on a 30 year fixed mortgage at a low rate. His teachings highlight this fact because of inflation alone, over 30 years , you will make money on your home. This is why most families have the most amount of equity in their homes. For example, your $1,000 monthly payment will still be $1,000 a month , 30 years from now. However, if you are renting this property out for $1,000 a month, in 30 years, that same house could be renting for $5,000 per month. For more info on this concept , click here!

2. The second reason residential real estate is great is because of the tax breaks. The government actually lets you depreciate your rental property because it is property. This means that even if your property increases in value (which most properties do) you still get to write off up to $25,000 in tax depreciation expense. This means if you made $25,000 of income at your job and your property has a depreciation of $25,000 , you actually owe zero taxes. *Of course see your accountant for professional advice as I am not a professional.

3. The third reason residential real estate is great is because you have the biggest market of buyers, sellers, and renters. When entering or exiting a real estate market, you will always have a market to buy or sell from. Every American family either wants to buy or rent a home , and I don't see this trend changing in the near future. Also, almost always, the price of the property will rise over time, because of the population growth and families wanting to buy homes in good areas (He stresses to buy in good areas with good schools).

I have witnessed this man who was a millionaire when I met him in 1998 , turn in to a multi-multi millionaire! I can estimate that he owns more than 500 homes in the US and has diversified into commercial projects as well. If you get a chance you should read his book because he breaks real estate down to a level where anyone can understand it. He started with almost nothing, and turned a few rental properties into $100 plus million of real estate. His current idea about real estate is to buy in the midwest and south because of the baby boom population retiring and moving to warmer climates. He projected that property in the bay area would stay the same but that property in surrounding areas would decrease, and he was right. He also predicted the real estate boom that happend in Las Vegas and Arizona from 2000-2005, and made millions off of buying and selling homes in those areas.

Monday, April 14, 2008

Life is Precious ... don't take it for granted

Two weeks ago there were two double homicides in San Francisco right around 2am. Unfortunately, I didn't know the victims, but people that are close to me did know them. One of the murders happend at a pizza parlor in a good neighborhood in SF. The victim was a friend of one of my employees and had actually came to my place of business two weeks before. The man had 3 kids and was just getting pizza after taking his co-workers out for a drink when the assailants started an argument with him over who was buying a pizza. The assailants friend came in to the parlor and shot the victim and his co worker killing both of them. To read more, click here... To donate money to his family, click here...

On the other side of the city, my friends' brothers friend was sitting in a car with two other men when a random shooter drove up and shot two of the men in the car, killing them both. The police think it was some sort of gang initiation and that the victims were totally innocent. Again, one of the victims had visisted my place of business not but a month before. click here for more info.

These incidents have definitely touched me since I know people connected to each victim. The world we live in today is very crazy and unpredictable. Both of these victims were not in gangs or into drugs, they were normal people. It also shows just how precious life is and that we should try to live life to the fullest at every moment because we never know how many moments are promised to us.

Friday, April 11, 2008

Nobody Cares !!!!

One of the biggest lessons I have learned in the last 3 years is that nobody cares about your well being, only you can helf yourself! Its hard to tell who is your friend and who is your acquaintance because when you are doing good , dozens of people surround you. Its when you are not doing so good, when you learn who your friends are. I have had so many personal and business experiences to date that I feel that I am a master at differentiating the two. Once you realize this important lesson, you won't waste time with random people that don't mean much to you. You will begin to focus on improving your important relationships with your true friends and family. After learning this lesson, it opened up the world for opportunity because I realized that nobody cares. Nobody cares if you fail, nobody cares if you make a million dollars, nobody cares if you go bankrupt! Nobody cares, except the people that are your true friends and family. In times of need for me, certain people have came to the forefront to offer their helping hand , whether it was money or services or just support. Just remember that in the end it is you and your close circle only that will feel the effects of your decisions. Don't drop your life savings into some record company that sounds good and is exciting but that you know nothing about. In the end, when you lose your money , nobody will care. This cannot go without saying that if you do your research, have a strong plan, be willing to take risks. When you make a million dollars, no one will care, so it's okay!

Monday, April 7, 2008


Since my blog explores the specific aspects of success and business, I felt the need to stress that attaining success is very simple (not easy). The Secret to Success is the law of attraction. Just like the law of gravity; what goes up must come down, the law of attraction is what you think about, you attract. This can be demonstrated simply by thinking about your life today. You are exactly where you expected to be 1 , 2, or even 3 years ago. Given, once in awhile , there can be an anomoly like winning the lotto, but for the most part you are a sum total of your thoughts! Five years ago in 2003 , I was just graduating college , owned pretty much nothing, but had a lot of motivation and positive thinking. I knew exactly what I wanted to do... own real estate and own businesses. My mind back then was constantly filled with thoughts of owning a business and owning several homes or apartment buildings. Today, I do own 2 businesses , and several homes , but it's nothing crazy for me because it's what I expect. The trick now is trying to expand my thoughts to expect bigger things. Can you think on a $1million level, or how about $10 million, or $1 billion? For me, my mind can think on a $1million level. I can smell it , taste it, and imagine exactly what it is to have $1million. Now if I changed that figure to $100 million, my mind can't think on that level yet.

Thursday, April 3, 2008

Buying a Business

Buying a business is a lot like buying real estate. This post will take you through the steps of buying a business and all the options you have as the buyer. In previous posts I explained the difference between a owner absentee business and an owner operated business and which business I prefer. When looking at different businesses you should take a lot of things into consideration:

1. The type of lease in place (how many years, what rate per sq ft.)

- Can it be assgined , sublease options?

2. The location value ( where is it located - good neighborhood, good visibility? )

3. The Value of the business - net income, cashflow, balance sheet, and assets.

4. The assets - certain employees, machinery, inventory, improvements, intangibles (ie .website, emails, licenses, etc).

When considering the price of the business , the main things to look at are the lease, the net income, and how the business is run (absenteee or operated). When you make an offer or deliver your letter of intent, you should never offer the price that you want to pay, always offer less. In the negotiating process you may be able to get certain things out of the seller like a credits, or even a seller carryback loan. The best case for you as the buyer will be for you to buy a $100,000 business with $20,000 or less, and have the seller give you a carryback loan for the other $80,000. The terms of the $80k will have to be negoatiated properly, but you have a lot of power as the buyer, knowing that the seller wants to sell their business. There are no rules to buying businesses so pretty much anything goes if you and the seller can come to an agreement. What I have given you is an outline of how most business transactions work. My ultimate business purchase would be an owner absentee business , with $10,000 or 10% down, a 90% carry back loan at 5% over 10 years, with a net income of $50,000 / year. You might say , this would never happen, but I can tell you it happens everyday! Stay tuned for some actual stories of business owners.

Tuesday, April 1, 2008

March blog income report

My blog has been alive for almost two months now and has grown a tremendous amount . I know some people are waiting to see how much my blog has earned and if there is any improvement from February's $0.69 earnings. Well, here it is copied directly from my google adsense account, if I could copy the actual page I would.

AdSense for Content
Page impressions 461
Clicks 7
Page CTR 1.52%
Page eCPM [?] $11.16
Earnings $5.14

AdSense for Search
queries 9
clicks 3
page CTR 33.33%
page ecpm $86.70
earnings $0.78

Total Earnings (in March)