Business Blog

A Cash Cow Business

2012-02-27T05:40:18+00:00

Venture capital investments are great. It allows people to focus on the business instead of day to day cash flow issues. For some businesses, venture capital is the way to go. There is no way Steve Jobs would have had a consulting practice on the side to help grow Apple. He needed all in complete focus to succeed. However, one mistake I think many entrepreneurs make is they think they need outside investment to grow their business. They get so focused on raising money they forget to look outside the box. One approach I have used for years to fund businesses is what I call a cash cow business. This is nothing more than one business funding the growth of another more important business.

Some businesses generate profits from day one - consulting business for example. Another example would be some sort of retail or service business. You mow someone’s lawn and they pay you. Profit on day one. Why not start one of these simple profit-at-day-one businesses to fund your dream business? I can illustrate this with two examples from my life.

Example #1.
When I was running my real estate development and investment business in the early 2000s I needed capital to fund my construction projects. Upon buying property we would build new or do a massive remodel, which cost money. In order to be successful I needed to build a team, which cost money. To solve these problems and cover these costs, I started a wholesale distribution company called OverstockMe (I know, crappy name). I was more or less a drug dealer. I would buy big pallets of high demand products, break them up into smaller batches, and sell to ebay sellers and other retailer types. It was a pretty simple model. I would setup a deal and often only hold the inventory for a small period of time. This business would have been very hard to scale into something big - in addition to that, I was not overly passionate about it. I knew the business would expire at some point, but still, with very little effort it kicked off enough free cash flow to help fund my investment business.

Example #2.
As many of you know Cloudmanic Labs, is my primary focus these days. We are building some pretty amazing software-as-a-service products for small business. Building and maintaining these products is pretty expensive and it takes a long time to really see any great profits. These products have a pretty high up-front cost. To help fund our growth, we have a consulting business. We leverage the skills we use day in and day out for our own products by offering consulting services - which, as I mentioned above, profit from day one.

You can even consider your day job as your cash cow business. Use your W2 paycheck to fund your dream business. There is some truth to the saying “Don’t quit your day job”. Yes I know I just bastardized the saying , but it fits this concept like a glove.

In a way Warren Buffet has stolen my model . Use the free cash flow from boring yet stable businesses to fund the core.

Yes, of course there is a drawback of not being able to truly focus on the core business. This is tough. However, I would also suggest that focusing energy on raising investor capital, and answering to a board of directors is also very distracting. I just think people should think outside the box and not get so focused on one single solution for raising the required capital to fund their dream business.

Why Amazon Is Amazing To Me

2012-02-11T19:08:46+00:00

I love Amazon.com. I buy almost everything I can from them. Retail, hosting, media, and more. I even own stock in Amazon. I am a very happy consumer and investor. However, what I find so interesting about Amazon is not my consumer joy or my nice gains as a shareholder; it is their business model. In so many ways they have re-engineered traditional business models. The single most fascinating aspect of Amazon to me is their way of monetizing business bi-products.

As an Internet retailer Amazon has to make major investments in data centers. Trust me: Amazon runs on more than just a Linux computer under Jeff Bezos’ bed. They have built data centers all over the world. Normally, this would be a cost of doing business. In order to sell products online they have to build data centers. Using the bi-product of having to build data centers Amazon built a billion dollar hosting business, Amazon Web Services. Amazon leverages their infrastructure and rents the use of this space to web sites all over the world. This is like Best Buy starting a construction company because they are building big box retail locations. Amazon turned what traditionally would be a fixed expense into a most likely very profitable business unit.

Another great example is Fulfillment By Amazon. Amazon has something like 60 different warehouses. They receive massive discounts on shipping. They hire tons of people that do nothing but take inventory off the shelve, package it up, and ship it. In fact shipping inventory is something Amazon does really well. Once again, this would be just an expected expense for an online retailer. With Fulfillment By Amazon merchants ship their inventory to Amazon and they store it until the inventory is sold. Amazon then packages up this inventory and ships it out for the merchant - for a fee of course - and this is valid for inventory sold on Amazon (Amazon Marketplace) or via the merchant’s own website. Amazon is allowing other merchants to sub-contract their warehousing, and shipping infrastructure to Amazon.

Some people might say there is a lack of focus here. How can you have all these different business units and maintain focus? Sort of a “Jack of all trades but a master of none”. In order for Amazon to stay on top in Internet retailing, they sort of have to be best in class in all of these areas. They are just opening up some typically private aspects of their business and providing a service. Running the best warehouses and data centers is something they have to do day in and day out anyway. Why not profit from the activity?

Amazon has a number of these examples. Of course online retailing is growing, but at the same time margins are decreasing. On the side lines, Amazon is building some very high margin businesses. This is why Amazon will continue to be an engine of growth for many years to come. As these high margin bi-product businesses grow they will out perform their retail peers. And I find that amazing.

Why Don’t People Think In Terms Of ROI?

2011-12-02T17:18:24+00:00

Something that bugs me is entrepreneurs who are starting a company or making an investment but do not think in terms of return on investment, or ROI. Simply put, ROI is an estimate: if you invest a dollar how much will that dollar grow to? Typically you calculate your ROI as a percentage. Lets say I invest a dollar today and 5 years from now that dollar is worth $1.20. That means you got a 20% return over 5 years (or 3.71% per year).

Also, for the record this rant is not in relationship to the Mark Zuckerbergs, Bill Gates, or Steve Jobs of the world. These guys all started companies when they had no financial worries. The only risk was failing and going back to college. I am speaking the commoners, those who already have jobs. Those who already have a family. Those who already have a mortgage and a car payment. I am speaking to the people who buy rental properties, start web companies at night, or quit their job to go all in on a ice cream shop -not kids in dorm rooms (many of us missed that boat)Something that bugs me is entrepreneurs who are starting a company or making an investment but do not think in terms of return on investment, or ROI. Simply put, ROI is an estimate: if you invest a dollar how much will that dollar grow to? Typically you calculate your ROI as a percentage. Lets say I invest a dollar today and 5 years from now that dollar is worth $1.20. That means you got a 20% return over 5 years (or 3.71% per year).

Also, for the record this rant is not in relationship to the Mark Zuckerbergs, Bill Gates, or Steve Jobs of the world. These guys all started companies when they had no financial worries. The only risk was failing and going back to college. I am speaking the commoners, those who already have jobs. Those who already have a family. Those who already have a mortgage and a car payment. I am speaking to the people who buy rental properties, start web companies at night, or quit their job to go all in on a ice cream shop -not kids in dorm rooms (many of us missed that boat)

Why does this bother me so much? Most people start businesses or make investments to get richer. I realize by default we tend to gravitate towards businesses we are passionate about or investments that make sense to us. This, however, is not always the best investment. If the goal is to maximize wealth why not think in terms of ROI?

The example I love is real estate vs. the stock market. So many people love real estate. They say it is “their thing”. If you compare the ROI of a stock market (or even a REIT) investment to buying a rental property a lot of times you will find a higher ROI in the stock market. The way I see it, therefore, learning about all possible investments and using ROI as a major metric in your decision is the smarter way to go.

Another example. Being in the web world I have friends starting web companies almost every day. Some are trying to build a non-ventured backed company for the “long run”. Some have or are trying to raise venture capital so they can sell their company in the future. One model has a payout via dividends and the other has the payout at the end when the company sells. I think in many cases the ROI for these different models is almost the same (of course it depends on the numbers you hit). When I compare companies such as 37signals, Mailchimp, Freshbooks, and so on to companies like Mint, Outright, and inDinero I think the ROI over 10 years is much higher for the former group of companies than the ladder.

Of course ROI is not the only decision making metric. Still, I think it is pretty darn stupid if that is not a top metric when deciding on investment or businesses.

Why I Don’t Blog About Investing

2011-07-25T22:20:22+00:00

I don’t blog much about investing in the the stock market. Which is odd because if you meet me in person I will talk your ear off about where I think the market is going or where I think the best investments are. The digital world might not know what an equities nut I am. I don’t blog much because unlike so many other topics I talk about I don’t see investing as a black or white type of thing. I am never 100% sure I know what I am doing. There are just so many data points. I never know if the data points that are important to me are the correct data points to look at. That is what makes a market, right? If we all were looking at the same data points and we all had the same point of view there would not be someone willing to be on the other side of my trades.

With that said I do not want to be another “talking head” telling the world why I am right and why they are wrong about an investment. More importantly I don’t want to get caught up in the rat hole of defending my thesis. There are already tons of “talking heads”; the world does not need me.

One of the things I hate about people who blog about particular investments is very often you do not know when they make the investment (if at all) and at what price. I love reading about what people are investing in as an idea generator, or as a rough sentiment measurement. Without a time frame, such postings are not really great guidance to what I should buy or sell. I don’t blog much about investing in the the stock market. Which is odd because if you meet me in person I will talk your ear off about where I think the market is going or where I think the best investments are. The digital world might not know what an equities nut I am. I don’t blog much because unlike so many other topics I talk about I don’t see investing as a black or white type of thing. I am never 100% sure I know what I am doing. There are just so many data points. I never know if the data points that are important to me are the correct data points to look at. That is what makes a market, right? If we all were looking at the same data points and we all had the same point of view there would not be someone willing to be on the other side of my trades.

With that said I do not want to be another “talking head” telling the world why I am right and why they are wrong about an investment. More importantly I don’t want to get caught up in the rat hole of defending my thesis. There are already tons of “talking heads”; the world does not need me.

One of the things I hate about people who blog about particular investments is very often you do not know when they make the investment (if at all) and at what price. I love reading about what people are investing in as an idea generator, or as a rough sentiment measurement. Without a time frame, such postings are not really great guidance to what I should buy or sell.

On that note, I want to start writing more about strategy. Not, buy Apple at X and sell at Y. I want to engage conversations about types of investments, hedging, value, growth, and so on. Nothing new but I think the blogging world does not strategize enough. Lets talk about buying leap options instead of common stock. Lets talk about capital allocation. Lets talk about how to build good investment thesis. Lets talk about stuff that will educate us to be better investors.

I like reading the blogs of venture capitalist. They often don’t write about “buy Groupon now”. They discuss the nuts and bolts of venture capital. “How do you build a good board of directors”, “How do you raise money”, “How do you get a meeting with a VC” and so on. When a VC blogs about these more strategy type topics it opens up the conversation. It is not about agreeing or disagreeing it is about adding to the conversation “Great strategy! Have you thought about XYZ? It worked for me”. I think the stock bloggers could take some lessons from VC bloggers.

The Internet is littered with “talking heads” giving stock picks. These postings have very little value and expire pretty quickly. I hope in the future we can have more quality content around strategy, which have long term value, spark smarter conversation, and expire at a much slower rate. In the coming months I plan to blog more about what is on my mind in terms of strategy to help re-engage my public voice on stock market investing.

Restaurants Telling Me To F-Off

2011-06-30T18:32:10+00:00

Sure, strong title. Yeah, maybe I am over dramatic, but let me paint a picture for you. I walk into a mid-grade restaurant. You know the type. The type of restaurant you go for a quick snack, or maybe a few beers with your buddies. Not a night club were there is a high chance of people getting drunk and making poor decisions. You might sit around the bar or outside on a patio. Then after being all friendly with the server and placing your order for your first round of drinks the server says “could I get a card to hold”? The server wants to hold on to your credit card to make sure you do not run out without paying the bill. I am never mad at the server I am sure it is a restaurant policy. By doing that, the restaurant management is telling me: “We don’t trust you to pay your bill, we need insurance”. I translate that to the restaurant telling me to “F-off”.

Imagine you walk into some sort of shopping store and someone greeted you and said “Let me see your wallet, I want to make sure you can really buy something here”. I would call that pretty insulting. Restaurants are doing the same thing. They are insulting you.

I know the restaurant takes the risk of serving you food before you pay. I am asking the restaurant to take all the risk here. Yes, I am sure people dine and dash every year at almost every restaurant. However, I am rather certain that the percentage of people that pay vs. those who try to steal is very inbalanced. I would think I would go as far as estimating that less then 1% of the customers try to steal from the restaurant. A restaurant is telling us ‘we would rather say “we don’t trust you”’ to 99% of their customers instead of just taking the loss on less than 1%. Sounds like greed and not caring about the customer.

I write this rant because in recent weeks I have been studying companies that take a real focus on the customer (or, in the Internet world, on the user), companies with a number one core value of always pleasing the customer. I want to learn as much as I can from these companies. The companies I study which put customers / users above everything else always win. They out perform their peers consistently. These are companies that really strive to have every customer experience with the company be as wonderful as possible.Take Apple, Google, Zappos, Lowes, 37signals, Umpqua Bank, and more as examples. Most of these companies even put making their employees happy above profits too.

I realize focusing on the negative is seldom productive. In an odd way, however, I think highlighting the flaws of companies or industries that have piss-poor, not thought out policies with a negative effect on customers is a good thing. Hopefully we all can learn and not make the same mistakes.

Happy customers often lead to happy profits!

All Categories Of Business

2011-03-21T18:23:05+00:00

I have spent my entire professional life at the decision making level with early stage companies. Some companies I founded and some companies I was invited to join. I have been part of a failing team nearly as many times as I have a winning team. These are not all just web start-ups, many traditional businesses as well. This past year I have been reflecting and seeking conclusions to what sets a company up for success and what sends a company to failure. I realize there are no right or wrong answers, but from time to time I am going to start logging my thoughts on my blog. I am hoping to start a conversation with others around these thoughts to help strengthen these ideas.

The Different Aspects Of Business

Particularly in the web start-ups, a company starts with a thesis; “The product we are going to build will change the world because we are going to solve XYZ problem”. Founders get so focused on building this product they do not define the other categories relevant to their business and they give these categories no attention. What do I mean by “categories”? I mean all the other relevant aspects of your business unrelated to building your product: sales, marketing, pr, business development, market research, hiring, branding, fund raising, paper work, and so on. So many founding teams just think they will deal with these things once “the product” is done.

Grow Your Categories Of Business

The successful companies I have been part of have defined the relevant categories and measured month-over-month growth of these categories. Thus, my suggestion to new businesses is: define these categories of business from day one. Determine who is in charge of each category, and measure progress every month. When a founding team is building their product they are often measuring month-over-month progress of the product development.

The rule of thumb that I have seen succeed more often than not is ensuring each category grows in some fashion every month. It does not matter how much. Each category has to make more progress in the coming months than in the past months. If on month one you have an introduction meeting with a possible business partner, on month two you should have one more meeting and maybe sign a letter of intent with the meeting from the previous month.I have spent my entire professional life at the decision making level with early stage companies. Some companies I founded and some companies I was invited to join. I have been part of a failing team nearly as many times as I have a winning team. These are not all just web start-ups, many traditional businesses as well. This past year I have been reflecting and seeking conclusions to what sets a company up for success and what sends a company to failure. I realize there are no right or wrong answers, but from time to time I am going to start logging my thoughts on my blog. I am hoping to start a conversation with others around these thoughts to help strengthen these ideas.

The Different Aspects Of Business

Grow Your Categories Of Business

The successful companies I have been part of have defined the relevant categories and measured month-over-month growth of these categories. Thus, my suggestion to new businesses is: define these categories of business from day one. Determine who is in charge of each category, and measure progress every month. When a founding team is building their product they are often measuring month-over-month progress of the product development.

The rule of thumb that I have seen succeed more often than not is ensuring each category grows in some fashion every month. It does not matter how much. Each category has to make more progress in the coming months than in the past months. If on month one you have an introduction meeting with a possible business partner, on month two you should have one more meeting and maybe sign a letter of intent with the meeting from the previous month.

In a lot of ways all the time saved building a product in a rapid pace goes to waste when a company has to slow down at the end to catch up on the other business categories,

I have never seen, however, a start-up company fail if every category of business grows in progress month over month.

The New Age Business Man / Woman

2010-06-10T02:56:04+00:00

Something that has been on my mind for a while now is; What does the new age business person looks like? As more and more consumer dollars are being spend online and less and less spent in person on the streets, how does this affect the first time entrepreneur? Really great companies have been built by people with simple resumes. I see in many ways it is becoming harder and harder for a first time entrepreneur to break ground on their dream because they have to do business on the web.

It use to just take someone that was willing to work long hard hours and maybe some start up capital to build a truly profitable business. Whatever business the entrepreneur was going to go into they did not have to have 20 years of experience working in the industry, however in many cases that helped. I have a close friend who went to college and graduated with a business degree. Other than odd college jobs this friend did not have much of a resume. He knew one thing; he did not want to work for "the man", and he was willing to work his butt of to make it happen. After much research he raised a small amount of capital and went into the fast food business. Today he has grown the business rather successfully. All this friend had was a passion and a good head on his shoulders.

The New Skill Set Needed

The above example is getting harder and harder with the move to the web. To launch even a basic business you often have to surround yourself with domain experts in all sorts of different niches. If you want to compete on the web. You need to hire a designer, web programmer, mobile programmer, sysadmin, web marketer, experts on understanding your market, and more. You can not just sit on a busy street count the people going by to understand your market. You can not just lease a space and open your doors. You have to surround yourself with domain experts that often are not cheap. So a good head on your shoulders and some start up capital turns into a bunch of people with good heads on their shoulders and tons of capital.

How Do We Solve The Problem?

The problem I want to solve; Is how do we move the world to the web but keep the "all you need is a dollar and a dream" way of business alive? I know there is not a simple answer and as the Facebook generation morphs into business people they will already be hitting the streets with a leg up on my generation and older generations, but I would like to find better ways to bridge the gap.
Something that has been on my mind for a while now is; What does the new age business person looks like? As more and more consumer dollars are being spend online and less and less spent in person on the streets, how does this affect the first time entrepreneur? Really great companies have been built by people with simple resumes. I see in many ways it is becoming harder and harder for a first time entrepreneur to break ground on their dream because they have to do business on the web.

It use to just take someone that was willing to work long hard hours and maybe some start up capital to build a truly profitable business. Whatever business the entrepreneur was going to go into they did not have to have 20 years of experience working in the industry, however in many cases that helped. I have a close friend who went to college and graduated with a business degree. Other than odd college jobs this friend did not have much of a resume. He knew one thing; he did not want to work for "the man", and he was willing to work his butt of to make it happen. After much research he raised a small amount of capital and went into the fast food business. Today he has grown the business rather successfully. All this friend had was a passion and a good head on his shoulders.

The New Skill Set Needed

How Do We Solve The Problem?

Real Estate Vs. Da Stock Market – Part #3

2010-03-09T05:27:15+00:00

Overview

The point I am going to make in this post is you can use the different markets outside of Real Estate to help with timing your Real Estate transactions. Great timing can do wonders for your bottom line. I have to setup my point so read all the way through. I will put it all together at the end.

To continue my argument, (see past posts), that I believe that at the very least if you are a Real Estate investor you should have an eye on different markets outside of the Real Estate world I am going to highlight Mortgage Back Securities and what it means for the common Real Estate investor.

First lets define what a Mortgage Back Security is, or MBS. More or less a MBS is a bond sold on wall street from the big government backed firms Fannie Mae and Freddie Mac. These loans are originated by banks we all know and love. Then the banks sell these loans off to Fannie Mae, and Freddie Mac in big pools (collections of mortgages). For example (and to keep things simple), lets say Bank of America lent out 100 thousand dollars to 10 people (total of 1 million dollars). Bank of America collected a bunch of fees for putting the loan together (from the borrower), also mostly likely will get to continue to service the loan (charge more fees for the service of collecting loan payments).

Now, BofA will sell this pool of loans to Fannie Mae or Freddie Mac. So the amount of loans BofA is willing to make each week/month/year is almost a factor of how willing Freddie and Fannie are willing to buy the loans.

Once the pool of loans are sold and out of the bank's hands, Fannie and Freddie then bundle the loans up into bigger pools and sells them off on Wall Street as bonds. So when you make your home mortgage payment you send the money to your bank, then the bank send your payment to Fannie and Freddie, and then Fannie an Freddie sends your payment to the owner of the bond. You can learn way more about this process at Wikipedia.

Why should you understand all this?

It is one big chain of influencers; The seller, the buyer (borrower), the bank, Fannie/Freddie, and the bond holder. Each phase of this chain relays on entity below it. So lets look at each phase.

Overview

The point I am going to make in this post is you can use the different markets outside of Real Estate to help with timing your Real Estate transactions. Great timing can do wonders for your bottom line. I have to setup my point so read all the way through. I will put it all together at the end.

To continue my argument that I believe that at the very least if you are a Real Estate investor you should have an eye on different markets outside of the Real Estate world I am going to highlight Mortgage Back Securities and what it means for the common Real Estate investor.

First lets define what a Mortgage Back Security is, or MBS. More or less a MBS is a bond sold on wall street from the big government backed firms Fannie Mae and Freddie Mac. These loans are originated by banks we all know and love. Then the banks sell these loans off to Fannie Mae, and Freddie Mac in big pools (collections of mortgages). For example (and to keep things simple), lets say Bank of America lent out 100 thousand dollars to 10 people (total of 1 million dollars). Bank of America collected a bunch of fees for putting the loan together (from the borrower), also mostly likely will get to continue to service the loan (charge more fees for the service of collecting loan payments).

Now, BofA will sell this pool of loans to Fannie Mae or Freddie Mac. So the amount of loans BofA is willing to make each week/month/year is almost a factor of how willing Freddie and Fannie are willing to buy the loans.

Once the pool of loans are sold and out of the bank's hands, Fannie and Freddie then bundle the loans up into bigger pools and sells them off on Wall Street as bonds. So when you make your home mortgage payment you send the money to your bank, then the bank send your payment to Fannie and Freddie, and then Fannie an Freddie sends your payment to the owner of the bond. You can learn way more about this process at Wikipedia.

Why should you understand all this?

It is one big chain of influencers; The seller, the buyer (borrower), the bank, Fannie/Freddie, and the bond holder. Each phase of this chain relays on entity below it. So lets look at each phase.

Bond holder
- The bond holder, often a big time money manager, has the job of gaining the biggest profit he can based on the investing principals of the fund. So there are times when MBS' really are an attractive investment relative to other options. If some other area with the same risk profile is starting to heat up and return more profit than MBS then the money manager is going to purchase this other asset. Lets say the dividends of stable blue chip companies are starting to increase then a money manager might buy stock in those companies instead of a MBS.

Fannie Mae / Freddie Mac
- These guys are in the business of selling MBS to the money managers on wall street. If the money managers are in big demand for MBS they are selling tons of these things. If the money managers are interested in other asset classes these guys are not selling as many MBS.

Banks
- Since banks sell many of their loans to Fannie and Freddie they can only lend out as many loans as Fannie and Freddie are willing to buy.

Home Seller (you)
- You have two things you are worrying about, finding a buyer and finding that buyer at your price.

Home Buyer
- All you care about is purchasing the home you want and being able to get the loan for that home.

Putting all this into context

Through the chain explained above the Real Estate demand is a factor of how willing a money manager is to buy a MBS. The more demand for MBS the more loans banks are willing to give. Further more the more standards the banks are going to have to be flexible on to keep selling loans to meet the money manager's demand. So the price I can sell my house for is in an odd sort of way determined by money managers on wall street.

Why is it important for me to follow all this? Lets use an example to explain. I purchased a house and am renting it out. Some day I want to kick the tenants out and remodel it and then sell it for a profit. The remodel is going to take 6 months. If I look at the wall street markets as a whole and see some hot sector starting to get everyone's attention (ie, the tech boom in the 90's) I might guess the demand for MBS' will go down because these money managers will be investing in what is hot. So from look at other markets I notice this and I realize that maybe home prices might not grow as fast in the near future (or even worst go down) because MBS' might not be in demand in 6 months. Meaning there will be less buyers able to get loans when I am done with the remodel and ready to sell.

Lets give another example. Lets say I notice blue chip stock prices are starting to raise, (make dividend decrease in yield). That is a sign, (I am only giving example not sure or not), that maybe new money entering the market might be more interested in MBS's because relative to blue chip stocks MBS' are more attractive. I might decide it is time to do the remodel and get my house on the market because there is going to be more buyers with more money to spend making real estate go up.

I believe you have to pay attention to this stuff to help with your timing of Real Estate transactions. Timing does have a big affect on bottom lines when it comes to Real Estate.

Elevation Fitness In Private Beta

2010-03-06T23:07:57+00:00

I can not express how excited I am about Elevation Fitness. A product designed for personal trainers to keep track of their clients. I have been working on this project with an amazing team of people for over 2 years, and I am happy to say we went into private beta this week.

Elevation attempts to do away with paper and pencil for personal trainers and move their client management to the Cloud, where all software should be. If you are interested please signup for the private beta and let me know what you think.

I can not express how excited I am about Elevation Fitness. A product designed for personal trainers to keep track of their clients. I have been working on this project with an amazing team of people for over 2 years, and I am happy to say we went into private beta this week.

Elevation attempts to do away with paper and pencil for personal trainers and move their client management to the Cloud, where all software should be. If you are interested please signup for the private beta and let me know what you think.

For those friends that have asked me over the last few years what I have been working on, this is it. Now that we are in private beta I am looking forward to engaging our users and learning more about how I/We can make this an even better product.

Also, a special thanks to everyone that has supported me/us along the way on this project.

Stealing Is Ok! Might Even Make You Rich

2010-03-03T06:35:03+00:00

Paul Wagner, (CEO of Forkfly), sent me this YouTube video today of Steve Jobs talking about how they build products. He outright says he looks around at what others are doing and shamelessly steals them. Apple then takes the stolen ideas and puts their own twist on the product often makes it much much better.

Through my past client work, and now through my work with startups I am constantly running into people that want to reinvent the wheel. They want to start from the ground up as if there are no great ideas out there to steal. In the web world I am very very confident that if you are trying to build something there is an idea you can steal and make better. I think every project should start with finding an example to build from. I don't believe in just trying to build something without a stolen idea as the foundation.Paul Wagner, (CEO of Forkfly), sent me this YouTube video today of Steve Jobs talking about how they build products. He outright says he looks around at what others are doing and shamelessly steals them. Apple then takes the stolen ideas and puts their own twist on the product often makes it much much better.

Through my past client work, and now through my work with startups I am constantly running into people that want to reinvent the wheel. They want to start from the ground up as if there are no great ideas out there to steal. In the web world I am very very confident that if you are trying to build something there is an idea you can steal and make better. I think every project should start with finding an example to build from. I don't believe in just trying to build something without a stolen idea as the foundation.

Also, this video reminds me of something else from my client work days. I had many clients approach me with a level of urgency, "If we do not get this product live in 30 days we have lost our window and someone will beat us to the market". Apple, has beaten no one to market. In fact they are always the last ones to come to market. They sit back and wait and learn from everyone else then come to market with something better than everyone else.

Real Estate Vs. Da Stock Market - Part #2

2010-02-23T21:09:36+00:00

From my first post (Real Estate Vs. Da Stock Market - Part #1) many people contacted me and told me that they disagreed with me. The stock market and the Real Estate market were not the same. Many people expressed that they liked Real Estate, (and made it their "thing"), because they had far more control over the investment. You can pick your tenants, you can pick your lender, you can remodel, and so on. While in the stock market you have no control unless you have the capital to be a major share holder. All you have is the ability to cast your vote in a share holder meeting. While this is true, in fact you do not have much control over the direction of the company you own stock in, you have control over if you own the asset or not. In terms of personal wealth, this is way more powerful than than the direct control you have with Real Estate. Having the ability to liquidate your ownership in an asset within seconds is very powerful. When managing your assets their is two parts; growing your assets, and protecting your assets.

Wise investors can spot a downturn coming, such as the one in late 2007. No one really knows how bad a downturn is really going to be, but a wise investor should know when to shift from capital appreciation mode to capital protection mode. Below are the things you can do to protect your stock and real estate assets in a downturn.From my first post (Real Estate Vs. Da Stock Market - Part #1) many people contacted me and told me that they disagreed with me. The stock market and the Real Estate market were not the same. Many people expressed that they liked Real Estate, (and made it their "thing"), because they had far more control over the investment. You can pick your tenants, you can pick your lender, you can remodel, and so on. While in the stock market you have no control unless you have the capital to be a major share holder. All you have is the ability to cast your vote in a share holder meeting. While this is true, in fact you do not have much control over the direction of the company you own stock in, you have control over if you own the asset or not. In terms of personal wealth, this is way more powerful than than the direct control you have with Real Estate. Having the ability to liquidate your ownership in an asset within seconds is very powerful. When managing your assets their is two parts; growing your assets, and protecting your assets.

Wise investors can spot a downturn coming, such as the one in late 2007. No one really knows how bad a downturn is really going to be, but a wise investor should know when to shift from capital appreciation mode to capital protection mode. Below are the things you can do to protect your stock and real estate assets in a downturn.

Protecting Your Stock Portfolio

Sell your stock: If you think we are going to have a down turn, sell your stock holdings and return to cash until there is more clarity about what is happening in the economy.

Hedge you portfolio: Add some short positions to protect against declines.

Buy options: Unlike Real Estate it is very easy to purchase an insurance policy against a decline in your stock value. This is called a put option. For a small fee you can purchase a put option that will protect against a decline in your stock holdings.

Protecting Your Real Estate

Sell: First thing you can do is put your property on the market. You have to make sure you have enough equity to pay the selling costs and you have to make sure you can find a buyer. If you are scared enough to sell your property there most likely are not many buyers out there.

Lock In Your Tenants: Get rid of the risky tenants, and replace them with good tenants, (the ones with good stable jobs), on longer term leases.

Start Building A Reserve Fund: When owning Real Estate you need to be doing this anyway but you should start adding more to the reserves to help cover longer periods of loss rent.

When a downturn is coming, within seconds I can protect my stock assets, and within weeks (and maybe not at all) I can protect my Real Estate assets. One thing I am not mentioning here is a down turn in the stock market can be hard and fast, while a down turn in a real estate market will be slower giving you more time. What I am saying here, is use the different strengths to protect your net worth to the fullest.

I will close this posting off with a personal example. In late January 2007, I realized (through indicators in the stock market, not the Real Estate market), that the world was about ready to slow right down. I quickly moved my stock holdings to cash, and began some hedging. I also put much of my Real Estate on the market. Within seconds I protected my stock asset class, and began the process of protecting my Real Estate assets. The bad news was I was unable to sell my Real Estate. After sometime, my properties dropped in value below my loan amounts which meant I could not sell the property, without doing a short sale (where the bank agrees to take less to settle your loan). You might say you had tenants so who cares, and the tenants were paying the mortgage. While this was true in some cases but what really happened was it became increasingly harder to find tenants. My vacancy rates were raising and rents began to drop. Within 8 months of the economy going upside down, I was left with Real Estate I could not sell because the value dropped below my loan value, and they were not cash flow positive because rents had gone down and vacancy rates increased.

In this real example lets look at the positions my assets were in at the end of 2008. I had a Real Estate portfolio that had more debt than value, and it was cash flow negative (which means I was keeping the Real Estate bills paid with other income). Now, lets look at the stock portfolio. Since I sold all my stocks I was sitting on a pile of cash. While this cash did not increase in value throughout this time period it did not go down in value nor did it cost me anything to hold on to it. In my case I used some of the cash to keep my Real Estate afloat. Had I been 100% in Real Estate there would be a good chance I would have had to file bankruptcy because I did not have the cash from the stock sales to subsidize my Real Estate.

By paying attention to the stock market I was able to see early indicators of the economy going upside down, and I was able to protect my overall portfolio of assets far better than if I had been in all Real Estate. While the direct control of Real Estate has it clear advantages, do not discount the power of being able to liquidate your assets on a moments notice. Just having the simple ability to liquidate can outweigh the hands on nature of Real Estate.

Real Estate Vs. Da Stock Market - Part 1

2010-02-11T21:18:09+00:00

One of the things that drives me nuts, is when I hear people say "Real Estate is my thing", or "Real Estate is what I am into". It is not a drug it is an investment! You buy Real Estate, (as an investment), for it to go up in value and maybe collect rent. Hmmm, that sounds just like buying a stock, and the rent would be the dividend (or even a stock buy back). Real Estate, (from an investment standpoint), is not a way of life. It is not something you are into. It is not "your thing". It is 100% an investment. So many people, particularly young people, don't get that. With this post I am kicking off a series of blog postings talking about the importance of understanding all markets not just the one "you are into".

First of all lets clear somethings up. When I say Real Estate investment I am not talking about your home, or a vacation home. Those have personal emotional aspects; you need a home to live in and you love staying at your ski condo on the weekends. I label these assets as personal property, there is a luxury element you may or may not be paying up for. I am talking about the rental property you purchase, to collect rent, or even flip.

Second thing I want to clear up, I am giving general statements and rough numbers in this blog series. With any investment there is always another side, another stat, another point of view. I get that. This is what makes markets if we all thought the same way no one would buy or sell anything. This is just one man's view. I hope you can share you view points in the comments below.

Lastly, I am not talk to the people that do this for a living. If you are a Real Estate Developer, or a hedge fund manager you have built a business around a particular asset class. While I think every point I am going to make applies 100% to you as well you can make a business case against some of my statements and I might agree with you.
One of the things that drives me nuts, is when I hear people say "Real Estate is my thing", or "Real Estate is what I am into". It is not a drug it is an investment! You buy Real Estate, (as an investment), for it to go up in value and maybe collect rent. Hmmm, that sounds just like buying a stock, and the rent would be the dividend (or even a stock buy back). Real Estate, (from an investment standpoint), is not a way of life. It is not something you are into. It is not "your thing". It is 100% an investment. So many people, particularly young people, don't get that. With this post I am kicking off a series of blog postings talking about the importance of understanding all markets not just the one "you are into".

First of all lets clear somethings up. When I say Real Estate investment I am not talking about your home, or a vacation home. Those have personal emotional aspects; you need a home to live in and you love staying at your ski condo on the weekends. I label these assets as personal property, there is a luxury element you may or may not be paying up for. I am talking about the rental property you purchase, to collect rent, or even flip.

Second thing I want to clear up, I am giving general statements and rough numbers in this blog series. With any investment there is always another side, another stat, another point of view. I get that. This is what makes markets if we all thought the same way no one would buy or sell anything. This is just one man's view. I hope you can share you view points in the comments below.

Lastly, I am not talk to the people that do this for a living. If you are a Real Estate Developer, or a hedge fund manager you have built a business around a particular asset class. While I think every point I am going to make applies 100% to you as well you can make a business case against some of my statements and I might agree with you.

Now, that we have that stuff out of the way lets look at what it takes to buy property.

You have to identify an area that you would like to invest in.

You have have to set some bounds, (I can afford X, and it must produce Y in rent....).

You have to start reviewing all the properties in the area. Might even hire a broker to show you around and give you his or her thoughts.

Then you find a property you like and you start diving deep into it. Doing way more homework on this particular property than any other one you reviewed.

If it passes all the tests, you buy it (often with a little help from your bank).

Now, you start working on your thesis. Fix it up, get tenants, collect rent, whatever else.

You keep it up until it is time to sell and take your profits. Investment over.

Now, lets take a look at what goes into a stock investment.

You identify the sector you would like to purchase (tech, banks, retail....).

You set your bounds (how much you want to spend, dividend, PE, and so on....).

You start reviewing all the companies in that sector. Might even hire a broker or pay an analyst to help you.

You pick the stock you think you might want to buy. You then go in and do tons more homework just to make sure.

If your stock passes the test you buy it, (you can even buy on margin like you would with a real estate loan).

Now, you watch your stock. Daily, weekly, monthly; You continue to review it to make sure your reason for buying it still holds true, and you are still collecting the dividend you purchased it for.

When the time comes you sell it and take your profits. Investment over.

Is it just me or are those two processes nearly the same? They both have about the same set of interactions. You really need the same skill sets to purchase either a stock or an investment property. You need to understand the markets, you need to understand financials, you need to understand risk, you need to have continued management over your investment. I am going to make the case in a later blog posting that I believe you are a fool if you purchase an investment property or a stock without fully understanding the other market. I am also going to make a case that you are a fool if you do not have exposure to both asset classes in your portfolio. I don't mean to be calling people fools but I have studied these differences to death and am an active investor in both asset classes and now I am preaching my thoughts . More to come soon!

Eviction: The Other Way To Handle It

2010-02-09T22:06:31+00:00

Everyone thinks being a landlord is all fun and games. You sit back each month and just let the money roll in. I have even talked to some landlords that complain about what a pain it is taking all their rent money to the bank each month. Don't get me wrong, being a land lord can be a very rewarding job, part time or full time, but this week has been particularly hard for me as a landlord. Which reminds me there are times that this job is not very rewarding both emotionally and financially.

I had to evict a tenant this week for being over 30 days past due with rent. These days people are not past due with rent because they are just unwilling to pay rent, they are past due because they truly have no money. This particular tenant truly has no where to go nor the means to go anywhere. The particular labor market this tenant works in is just dry right now. There is no work. So I am left with a very big decision to make; Do I move forward with the eviction, or continue to hold out. Part of me says it is my American duty to help out others in this slow economy, and part of me (the business man) tells me I have to do what is best for my business.

Furthermore, I also have the problem of this tenant might not have anywhere to go. I can post 72 hour notice but the tenant will not leave because they have no where to go. Leaving me with the addition hassle of having to file papers with the local court and have the tenant removed. Normally, this is the best way to go because then you would get a judgement for the amount owed as well, but if the person is not working you will not have any means to collect anyway. So whats the point?Everyone thinks being a landlord is all fun and games. You sit back each month and just let the money roll in. I have even talked to some landlords that complain about what a pain it is taking all their rent money to the bank each month. Don't get me wrong, being a land lord can be a very rewarding job, part time or full time, but this week has been particularly hard for me as a landlord. Which reminds me there are times that this job is not very rewarding both emotionally and financially.

I had to evict a tenant this week for being over 30 days past due with rent. These days people are not past due with rent because they are just unwilling to pay rent, they are past due because they truly have no money. This particular tenant truly has no where to go nor the means to go anywhere. The particular labor market this tenant works in is just dry right now. There is no work. So I am left with a very big decision to make; Do I move forward with the eviction, or continue to hold out. Part of me says it is my American duty to help out others in this slow economy, and part of me (the business man) tells me I have to do what is best for my business.

Furthermore, I also have the problem of this tenant might not have anywhere to go. I can post 72 hour notice but the tenant will not leave because they have no where to go. Leaving me with the addition hassle of having to file papers with the local court and have the tenant removed. Normally, this is the best way to go because then you would get a judgement for the amount owed as well, but if the person is not working you will not have any means to collect anyway. So whats the point?

So, I think I found a middle ground. I have done this before in better markets as well. This option really stinks because it hits my pocket book twice, but it was the best thing to do both personally and business wise. What I did was offered the tenant a settlement to pack up and leave. Hand over the keys by a certain date and time and I will relieve the tenant of all debt and give the tenant a sum of money (cash) for handing over the keys. So not only does the tenant get out of 45 days worth of rent, and fees, this tenant received a cash bonus to get lost. This will allow the tenant to start fresh with no debt (from me), and have a little money to start fresh with. I then can get in the property and quickly get it back on the market. Even in easier markets this is a good way to get a tenant out instead of going through the court system. Don't feel trapped by the court system, it can be overwhelming, there are other ways.

On, a fresher note, we have been making great progress on RentalBooks. We are really excited about finally getting this product to market. We are are shooting for a release in May.

Apple, Why Are You Becoming Microsoft?

2010-02-03T10:00:10+00:00

Apple, I want to love you, I really do. I've even put up with your high prices because your designs are sleek, your user interfaces are nice on the eyes, and you've been on the front-lines of technology advancement on the behalf of users. At least, you were.

I'm not so sure anymore. There's no doubt that the iPhone is one of the most innovative devices of the last decade, but the same cannot be said for the antiquated App Store.

The approval process to get your newly designed app is ridiculous. Apps are not only filtered for content, but in many cases, it takes weeks to get approval for your app to be download by eager customers. And why?

In today's market of fast-paced and ever-growing e-commerce, being forced to tailor your business model on the requirements of a single channel makes no sense.
Apple, I want to love you, I really do. I've even put up with your high prices because your designs are sleek, your user interfaces are nice on the eyes, and you've been on the front-lines of technology advancement on the behalf of users. At least, you were.

I'm not so sure anymore. There's no doubt that the iPhone is one of the most innovative devices of the last decade, but the same cannot be said for the antiquated App Store.

The approval process to get your newly designed app is ridiculous. Apps are not only filtered for content, but in many cases, it takes weeks to get approval for your app to be download by eager customers. And why?

In today's market of fast-paced and ever-growing e-commerce, being forced to tailor your business model on the requirements of a single channel makes no sense.

Working within The Cloud, the only limitations are the network's capacity to deliver enough bandwidth to users, something they've been able to do as the market for 3G and 4G accounts have explode in the last few years.

If anything, Apple is limiting what you, the consumer and business person, can make and purchase by controlling and focusing so much attention to the App Store. Perhaps it's just another case of absolute power corrupting absolutely.

There are far more advantages to operating inside The Cloud, but there is less revenue in it for Apple. Like Microsoft in the early 1990s, the company seems to be controlling what people can develop so that they can capitalize on being the only game in town. And although there were open-source operating systems like Linux available, if not enough people know about the alternatives, those alternatives do not reach their full potential.

If Apple promoted its hardware and OS as being the most user friendly in The Cloud, they would draw attention away from a revenue stream reportedly worth about $45 million. While that number is substantial, it doesn't seem like it's most cost effective strategy for anyone, including Apple.

Apple claims to have reviewed over 200,000 applications in a year, 20% of which are not approved on their first pass, and only 10% that keep user retention. That hardly seems worth the effort for company whose net worth hovers around $150 billion.

Hopefully Apple will come to its senses soon and focus on the core principles that made it the juggernaught it is today: secure, easy to use, basic programs that allow users to work in a productive environment with the best tools.

If not, as they continue to try and keep total control over every aspect of personal and business computing, they'll find themselves far behind the competition.

Take The Bull By Its Horn

2010-01-17T23:53:50+00:00

Something that has been frustrating me more than anything in the last year. With the slower economy I have been able to spend more time just talking to people; strangers, family, friends, and just about anyone else that has something to say. Being a business person the conversation often heads down the path of success and how to achieve it, but so many people I talk to don't want it bad enough. They would rather talk about it then do it. I am not just talking about building a business. I am talking about getting a job if they are unemployed, upgrading your current job, or starting a business.

When the economy tanked in 2008 I more or less lost my job. Every project I was working on dried up and went away. I like 10% of America right now I did not have the ability to collect unemployment, so I had to make a big shift in how I as going to support my self almost over night. Luckily, I was ready and the shift was something I was able to make quickly. I will get to what helped me in my shift in a second, but first a little rant. I have talked to so many people that are on unemployment and they are doing nothing with their lives. They talk about how they want to use this time to better themselves. They talk about the businesses they are going to build during this time. They talk about the personal brand building they are going to do to help them upgrade their employment when they go back to work, but they spend a great deal of time sitting on their ass playing video games or something.

Just Get Off Your Butt And Start Building

The key to bettering yourself in this context is to just get working on you goal and never quit, and more importantly never discount anything. Every little aspect about what you are doing maters. For example; I tell a lot of people looking for a job or looking to upgrade there job to start building their Internet personal brand. Start a blog, upgrade your Facebook page, start a Linkedin page, heck start tweeting. I hear over and over again; "That stuff does not matter in my industry", "The people looking at my resume don't know what a computer is", "Yeah that would be nice but there are better things for me to do". I am officially calling each one of you out on this. You got 90 year old grandmas on facebook, you are living in a cave if you have never Googled someone, and lastly how does it hurt? This is one little example of something you should be working on late at night to help in your building process. This a way better use of your time then trying to get to the next level on what ever your video game of the week is.

Most importantly, how does it hurt (I will say it again)? If you build an amazing web life and your future employer, investor, customer never reads it how does it hurt? You got a few less hours a week playing video games? Our lives are moving to the web. I promise you in a few years you will be giving urls to future employers instead of paper resumes or emailed pdf copies. Why would I review a one page bulleted list of how cool you are when I can go to your personal sites and find out who you really are; can you write, do you spend more time talking about how drunk you were last night or do you really reflect on the issues of your industry?

Just Get Off Your Butt And Start Building

Don't Discount Anything, Learn/Do It All

Don't discount any aspect of what your goal might be. I talk to so many people about how they want to start investing in Real Estate, and then I start talking to them about the stock market, or banking industry. 9 times out of 10 I get "I do not know anything about that stuff nor do I care I just want to focus on Real Estate". WTF!!!! What the hell do you think Real Estate is? It is an investment and there are so many factors about that investment. The stock market, the banking industry, politics, employment rates, and so all really drive that industry. The people I talk to that realize that Real Estate revolves around these things tend to tell me they can not control it so they just ignore it. Maybe in some cases you really can not control it like you could control the details of a purchase of a new investment property but I believe you should truly understand the external factors so you can make worthwhile decisions and therefore studying these things are important. It just blows my mind that people shut down when they are working towards a goal of building something. Why would you shut anything down. I say you want to work on and absorb all aspects of what you are trying to build.

This posting sort of went all over the place, but the main point is, if you are trying to build a better future for yourself take the bull by its horns. Work night and day towards your goal, even if what ever you are studying or creating seems worthless do it anyway. Anything you do or study you should ask your self one question, "If I do this will it hurt my goal in anyway, or if I study this and learn this will it hurt my goal in anyway". If you answer yes to either question don't do it, but I find it hard to believe there is much out there you would consider that could hurt your goals. Never stop pushing towards your goals and never discount any aspect of your goals, and that is how I continue to keep doors opening for me