The Truth About LLCs

Many entrepreneurs, when first launching a company, will form an LLC. That is, a Limited Liability Company.

In theory, if a limited liability company goes out of business, then landlords and other creditors cannot come after the owners' personal assets. They can collect only from the assets of the actual company.

While this is a great protection, be careful because there are some ways to screw this up. For instance, if you sign as a personal guarantee with a landlord or creditor - then you are personally responsible for money owed, even if your company fails.

Liability protection also would not be available to you if you intentionally committed fraud or failed to deposit taxes withheld from employee wages.

According to BusinessWeek.com:

In general, having an LLC operating agreement, maintaining a separate business bank accounts, obtaining a federal employer identification number, and properly funding the LLC can all help to protect individual owners from liability. It is also always smart to have business insurance in place to protect business owners in cases like yours.

I strongly recommend that you talk with a lawyer and/or your accountant to make sure that your personal assets are protected if something ever happened.

For more information about LLCs, visit:
http://www.irs.gov/businesses/small/article/0,,id=98277,00.html

Recession Confession: "I Take The Train"

I have to admit that since the economy went sour, I've taken quite a few measures to minimize my business expenses.

For instance, when I'm out of town for business - I try as much as possible to avoid paying for expensive cab fares. Many times I will either walk, or take the local metro train.

Because I travel quite a bit, $40 - $70 cab rides can add up to a couple hundred dollars very quickly.

Fortunately, in most cities that I travel to - like New York, Newark, Atlanta, and DC - you can take the metro from the airport right in to downtown.

In other cities like LA or Miami though, the metro doesn't run to the airport. In those cases, you have to take a cab - but when traveling from your hotel to your meeting or conference, you can take the metro.

Of course, not all cities even have a metro system. In such cases, I just end up walking. I've found that a 1 or 2 mile walk isn't that bad at all.

I haven't resorted to taking the bus yet, but I'm thinking about it. Laugh all you want, but I know I've saved at least a thousand dollars this year already.

I'm not proud to ride the bus. Well, maybe a little.

What is your recession confession?

2009 Black MBA Association Business Grant Competition

The National Black MBA Association (NBMBAA) and Wells Fargo have joined together to recognize and empower the visionaries that are a vital component of the Black community.

You can nominate an entrepreneur or business that demonstrates the vision, leadership, innovation and perseverance necessary to be called a 2009 NBMBAA/Wells Fargo Entrepreneur Excellence Award winner.

The two winning entrepreneurs will each receive a commemorative award, a $5,000 grant, and be honored at the 2009 National Black MBA Association Conference in New Orleans.

You can not nominate yourself, but you can get someone else to nominate you.

Here are the eligibility qualifications:

* Must be African American
* Must be at least 18 years of age
* Must have been a business owner for at least 3 years
* Must be an active principal with at 51% interest
* Must be a legal resident of the United States.

The deadline is July 3, 2009.

For more details, visit:
www.nbmbaa.org/docs/AABS_Awards_NBMBAA_Application_2009_hi-resolution_20090619.pdf

Interest-Free Loans For Small Businesses?

It may sound too good to be true, but it's actually very creditable via the U.S. Small Business Administration. The federal government is, in fact, offering interest-free loans of up to $35,000 to try to keep smaller companies from going out of business.

For businesses that need a lending hand, the SBA is offering the loans with no required payment for 18 months and no interest for more than six years.

They are called ARC loans as part of the federal stimulus package. ARC is an acronym for America's Recovery Capital. There are only 10,000 ARC loans available around the country. That breaks down to only 200 loans per state, making the process extremely competitive.

The loans are also only available to companies that made a profit at least one of the last two years - not start-ups.

The SBA says that businesses interested in the loans should act fast.

For more details, visit: www.sba.gov/recovery/arcloanprogram/index.html or www.arc-loans.com

"If You Lose Your Job, We'll Make Your Payments For You."

This is what auto companies are telling people nowadays in order to get them to buy new cars. Hyundai started it, and now Ford and GM have announced their own variations.

While Hyundai's walkaway program offers to absorb car payments for three months and will accept a returned car without any additional payment, Ford is offering to pay $700 a month up to one year and GM is offering to cover up to nine payments of $500 each.

This sounds like an interesting marketing strategy, and it may work somewhat to increase new car sales. However, it doesn't address one thing: It's still a better deal to buy a used car vs. a new car. That's the route that many people are taking, and therefore used car dealers are faring much better in this bad economy.

The U.S. government and automakers have to find a stronger incentive to get people to buy new vehicles. Perhaps, a drastic decrease in pricing, a "buy one get one" free special, a huge tax break, or even free mechanical services for a year.

Consumers are much smarter these days and much more economical than ever before. Put simple: Buying a new car at nearly double the cost but with free "job insurance", is not a better deal than paying half the price for a used car with no "job insurance".

10 Million Cars Sold Is Not Enough

When I heard that automakers were expected to sell 10 million new cars and trucks in the U.S. this year, I thought that was a good thing. I said to myself: "The recession is finally coming to an end."

But as I continued to read the USA Today article, I learned that that figure makes 2009 one of the worst years the auto industry has seen in the past three decades.

Apparently, before the auto collapse last year, car companies routinely sold more than 16 million new cars and trucks annually in the U.S.

While 10 million may sound like a lot, it's simply not enough to make these car companies profitable. Chrysler's already in Chapter 11 bankruptcy reorganization, and General Motors will likely do the same on June 1st. Even normally healthy automakers such as Toyota and Nissan are losing money.

Many people don't understand this part of business. They think that when money is being exchanged, it means that companies are profiting. That's not necessarily true.

All companies have debts and expenses that have to be paid for first before a profit can be declared. It's very common to have most of your revenue allocated to paying bills and taxes, and not having much left over after that.

To prevent this, entrepreneurs should always be thinking of ways to lower their overhead. In fact, this should be heavily considered before you even pursue a business idea.

Overhead kills a lot of companies before they even launch. Others die off in a bad economy. I'm willing to bet that the companies that are still afloat right now are the ones that have figured out how to minimize their expenses.

New Program Offers Micro-Loans To Minority and Women Business Owners

An organization called the Minority Business Loan Project is helping minority and women entrepreneurs (African Americans, Hispanics, Asian Americans, Native Americans, and women of all ethnicities) get access to micro loans to help fund their existing or newly started businesses.

Essentially the organization is a network of responsible lenders that specialize in helping entrepreneurs get short term loans and cash advances of up to $1,000 to sustain their cash flow.

Applicants must be over the age of 18, must have an income of at least $1,200 a month for the past 6 months or more, and must be willing to provide valid banking information, so they can verify that you have a checking account. Those who qualify include: aspiring entrepreneurs, existing entrepreneurs, home business owners, network marketers, etc.

According to the U.S. Small Business Administration, in 2002, minorities owned approximately 18 percent of the 23 million U.S. firms. That's nearly 4.2 million minority-owned businesses. Of that number, 1.2 million are Black-owned firms and 1.6 million are Hispanic-owned firms.

Despite these figures, it's been reported that minority firms generate a lot a less in annual revenue and are more likely to go out of business in their first 5 years of existence, than their white counterparts. Additional research reveals that minority firms are also less likely to be approved for business loans, business credit cards, and business lines of credit.

The Minority Business Loan project aims to offset those disadvantages. The micro-loans are made to those qualify, and can typically be approved within 24 hours.

For more details, visit:
www.MinorityBizLoans.com

George Foreman Sells 100 Million Grills; Hulk Hogan Wants In On It Too

Believe it or not, but celebrity endorsed products can be very, very successful. That's why endorsement deals are so lucrative, especially for athletes.

Since its introduction in 1994, over 100 million George Foreman Grills have been sold worldwide - making him hundreds of million dollars in revenue - substantially more than he earned as a boxer. Since then, he has launched all types of cookware including broilers, fryers, griddles, and more.

In 2007, world-renowned wrestler Hulk Hogan who claims he was originally offered the deal instead of Foreman but was too slow off the mark, decided to hit back. He launched what is now called Hulk Hogan Grills (www.hulkhogangrills.com).

I couldn't find any stats on how many units Hogan has sold, but he claims that his grills do 15-20 things that George's grill can't do. Supposedly, they cook the meat more evenly, drain the grease better, and even turn into ovens allowing you to make pizzas and cookies.

These claims may be true, but it seems like Hogan has a lot of catching up to do to compete with Foreman. 100 million grills sold - that's enough grills for every household in the United States to have one.

$20,000 In Capital For Startups?

I discovered this by clicking on an ad on Facebook, so I don't know if its 100% valid. However, it does look very interesting and may be worth taking a look at.

It's called Capital Factory, and they are a seed stage mentoring program for startups that provides a small amount of seed capital and weekly mentoring sessions by entrepreneurs who have founded successful companies.

Startup companies apply to participate in their 10 week summer program intended to get a startup pointed in the right direction with a clear path to profitability and growth. This year the program runs from May 22nd to August 7th. At the end of the program, they'll host Demo Day and stream it live over the Internet.

Each company receives up to $20,000 in cash, and they provide you with all of the basic infrastructure that you're not spending that money on office space or legal fees. That's meant to be enough to cover your living expenses, hire an employee or contractor, and do some test marketing.

The deadline to apply is April 3, 2009.

For more details, visit:
www.capitalfactory.com

Despite Previous Growth, Rate of Stock Ownership Among Blacks Drops

According to a recent study conducted at Ohio State University, less and less African Americans are investing in the stock market.

A recent Black Enterprise article reports:

Though black investment rates have historically trailed whites, the rate of stock ownership by blacks increased to 34% in 2001, up more than 17% from 1992. Those gains have since diminished 12% between 2001 and 2004, according to the study, which looks at individual stocks and those within a 401(k) and IRA.

"It may be that white investors are more experienced with the stock market, so they are prepared for the inevitable drops," says Hanna Sherman, a financial planning professor at Ohio State University, referring to the 2001 recession, which scared off many black investors.

The rate of stock ownership among white households increased from 1992 to 2001, topping off at 57.5%. Unlike minority investors, their investment rate dropped less than a percentage point between 2001 and 2004. What’s more, even after equaling out traditionally higher income levels of whites to that of blacks, whites still invest more than African-Americans.

Click here for the full article.

Sesame Street Layoffs

The recession has gone from Wall Street to Main Street to...well, Sesame Street. According to Bloomberg, Sesame Workshop, the nonprofit organization that produces the hit show "Sesame Street," is cutting 20 percent of its workforce.

"After careful review, we have concluded that we will have to operate with fewer resources in order to achieve our strategic priorities," New York-based Sesame Workshop said today in an e-mailed statement. The company said it eliminated 67 of 355 staff positions.

"Sesame Street," featuring characters such as Big Bird and Oscar the Grouch, has been on the air since 1969 and is the most widely viewed children’s TV show in the world, according to the producers. Three months ago, Sesame Workshop Chief Executive Officer Gary Knell told Bloomberg Radio that while the company was "able to withstand" recessions, it was not "immune."

Sesame Workshop receives income from product licensing and the sale of "Sesame Street" and other programs to the Public Broadcasting Service and overseas syndication. The company is also funded by government agencies, foundations and corporations including Astra Zeneca LLP and McDonald’s Corp., according to its Web site.

Revenue at the company increased 12 percent to $145 million in 2008, while operating expenses rose 14 percent to $141 million, according to the Web site. Program expenses at Sesame Workshop, which include content distribution and product licensing, totaled $116.4 million last year, up from $100 million the year before.

$145 million in revenue? $141 million in expenses? That's a profit of only $4 million. You would think that the world's #1 most watched children's TV show would be worth billions!

Online Shopping By Black Consumers is Up 50%

Target Market News reports:

Online shopping by African-Americans, Asians, Hispanics and other minorities has increased dramatically during the past five years, according to a new report from The Media Audit.

"The 88 markets surveyed for this report have an aggregate adult population of approximately 145 million and 58 million of those adults are members of a minority," says Bob Jordan, president of International Demographics, Inc. "As a result of their numbers, their increasing tendency to shop online is very significant to most marketers," adds Jordan. International Demographics, Inc. is a 37-year-old market research firm which produces The Media Audit.

Among African-Americans, 40.6 percent now shop online, compared to 27.1 percent five years ago. More than 20 percent now make five or more purchases in a year and 10.9 percent make more than twelve purchases. The total adult African-American population in the 88 markets surveyed is approximately 17.6 million.

Among all minority adults surveyed, 55.8 percent now shop online, compared to 44.1 percent in 2002. In addition, 35.7 percent made five or more purchases and 19.8 percent made 12 or more purchases.

The Data Source The Media Audit, a syndicated media ratings service currently covering more than 80 metropolitan markets, provides qualitative data for media websites as well as for traditional media. Traditional media -- print, broadcast and outdoor -- have used The Media Audit data in sales, marketing and management for more than 37 years. In 1998, the survey started providing data on local media websites. The surveys now contain more than 400 fields of qualitative information in addition to quantitative measurements of local web audiences.

Source: www.TargetMarketNews.com

The Business of Domestic Violence

It's sad to say, but domestic violence is very profitable these days. Every since news broke about a physical altercation between singers Chris Brown and Rihanna, many companies have taken advantage of the hype to add a few dollars to their pockets.

Believe it or not, but the media generates millions in revenue when such significant events occur. Newspapers and magazines sell more copies, television and radio stations get more viewers/listeners to tune in, and blogs get more visitors and subscribers.

I'm not exactly proud of it but my site, BlackNews.com, has published several online articles about the Chris Brown/Rihanna issue, and I'm thinking we've made at least $500 so far from our advertisers who's ads showed up on those pages. In addition, my BlackPR.com service has generated about $1,000 from clients who have submitted press releases and editorials about it.

But some are making much more than that. Oprah Winfrey, Tyra Banks, and Dr. Phil have all recently dedicated entire episodes to the subject of domestic violence - which no doubt brought in millions of viewers, and thus millions in ad revenue for them.

Others are writing new books, promoting their old books, or just somehow trying to link their books to the subject of domestic violence. For instance, Steve Harvey, who recently authored a book entitled Think Like a Man, Act Like a Lady has released a public statement to Rihanna saying "you are not to blame." This is a typical PR move to somehow make people think that his book addresses domestic violence, when it probably doesn't.

Even more, many are launching domestic violence workshops, seminars, and conferences - all of which come with a fee.

Major online retailers are in on it too. Amazon.com is promoting domestic violence prevention DVDs, and iTunes is selling related e-books and podcasts - available for immediate download.

I guess its true what they say: Money can be made off of just about anything.

The Rise and Fall of Warm Spirit

Warm Spirit was a national health and beauty empire based in Exeter, New Hampshire. Generating nearly $2 million a month in sales, they sold products that "heal, nourish, nurture, and restore balance - to mind, body, and spirit."

The company was one of the only Black-owned network marketing companies out there with more than 30,000 independent sales consultants. They sold more than 200 different products, and had a huge nationally-recognized brand. They received tons of publicity from local and national media, and were even a recent recipient of the 2008 Black Enterprise Emerging Company of the Year award.

Unfortunately, Warm Spirit no longer exists.

Rumors are that founder Nadine Thompson was forced out of her company - the same company she started by herself in her home basement. Things got complicated as she sought after capital to grow the company, and gave her business partner Daniel Wolf majority of the shares.

On her blog at NadineThompson.com, she writes: "It was my fault to believe in friendship and not force the equity to be put in writing. I tried but I was not forceful enough. That was my failing as a CEO. I should never have believed in combining friendship with business. I gambled on friendship and trust and lost 12 years of sweat and sacrifice."

Let this be a lesson for us all to always get things in writing, and always have a contract in place. People are greedy and selfish, and will do anything to destroy you.

Fortunately, Nadine Thompson has moved on and started a new company called Soul Purpose (www.SoulPurpose.com). This company, similar to Warm Spirit, is a network marketing company that sells unique health and personal care products.

According to a recent press release, the company is doing extremely well and has already sold over $1 million dollars in products in less than 12 months.

Congratulations and best wishes Nadine! We all know that you will make a triumphant comeback.

Newspaper Industry Is Officially Dead; Major Convention Canceled

According to the Associated Press, the American Society of Newspaper Editors has canceled their annual convention for the first time since World War II.

Their decision to skip this year's convention coincided with the final edition of the Rocky Mountain News - the largest daily U.S. newspaper to shut down so far during a steep two-year slide in advertising revenue that's draining the life out of the industry.

If it hadn't been canceled, this year's convention — scheduled from April 26-29 in Chicago — probably would have attracted a sparse crowd because so many newspapers are pinching pennies to ease their financial pain.

Newspaper staffs have been gutted, stock dividends have been suspended and, in the most extreme circumstances, bankruptcy petitions have been filed as more readers get their news for free from the Internet and advertisers curtail their spending on the print medium amid the recession.

This is a very clear sign that within the next 3-5 years or less, 90% of all newspapers will be non-existent. I think the only survivors will be major newspapers such as the Washington Post, New York Times, LA Times, etc.

Next year this time, many magazines will likely be going through the same thing.

From Office Space To PO Box

Are you one of the many entrepreneurs being forced to move out of their office spaces and back into their homes? Or have you always worked from home? Doing so almost always requires you to have a PO Box as your mailing address.

Believe it or not, but most entrepreneurs run their companies from home. Even before the recession, it was estimated that more than 50% of all small businesses did not occupy commercial office or retail space.

Despite this, small businesses collectively generate billions of dollars in annual revenue and are the driving force of the U.S. economy.

So, don't feel bad if you are forced to run your business from home and list your company address as a PO Box. It's perfectly normal, you're saving tons of money, and it may very well make good sense in a economy like this one.

The only complication is when you have a staff. But this too can be addressed by either downsizing into a smaller cheaper office space, or allowing your employees to work at home.

Whatever happens, just know that you can run a profitable business from home. It's not something that you want to broadcast to your clients, however. Keep it to yourself. When they ask for your mailing address to mail a check, just tell them that you accept all mail through your PO Box. You don't have to mention that you don't have office space. You could even invest in a service that allows you to accept credit cards and checks over the phone.

Either way, you'll be fine. I've found that most clients could care less about whether or not you have office space. They're much more interested in whether or not you're providing good quality services.

The Business of Selling Hip Hop Clothing

Hip Hop clothing companies have been making millions for years. Some of the early companies were Karl Kani, FUBU, Pelle Pelle, and Cross Colours. In more recent years, we've seen Rocawear, Sean Jean, Avirex, Phat Farm, and others dominate in sales.

Back in November 2008, I wrote a blog about how such companies are thriving despite a bad economy. Not only are they doing well, but retailers who sell their products are doing well.

One great example is Dr. Jays - a popular storefront in New York City and a popular web site (www.DrJays.com) that sells over 50 different brands of hip hop clothing. This includes jeans, shirts, hoodies, underwear, footwear, and accessories.

I was recently on their web site and was amazed at how extensive their catalog is. After conducting some research, I was further amazed to find that their web site is visited by 500,000 different people every month.

These visitors are obviously actual shoppers because Spoke.com reports that their annual revenue is between $1 and $10 million. I'm guessing, closer to $10 million.

Entrepreneurs and business owners should take a close look at how people spend money during a recession. Women are known to continue to spend money on hair and makeup. Men will spend money on music and video games. And apparently, young people (both men and women) will spend their money on fashion.

The Future of Sirius XM Radio

Commercial-free satellite radio may be coming to an end. The New York Times is reporting that Sirius XM Radio is preparing for a possible Chapter 11 bankruptcy.

That would make the company one of the largest casualties of the credit squeeze. With over $5 billion in assets, it would be the second-largest Chapter 11 filing so far this year, according to Capital IQ.

Sirius XM, which never turned a profit when both companies were independent, is laden with $3.25 billion in debt. In the month of February alone, they owe $175 million in debt payments that they are unlikely to be able to pay.

What's to blame for this? Apparently, satellite radio is failing to win over many younger listeners, and competition from other sources (such as Internet radio stations and iPod/iPhone radio stations) have slowed their subscriber growth.

In my opinion, Sirius XM offers a service that is too easy to duplicate and provide for free. Nowadays, anyone can launch a radio show. Even worse, I think they overestimated how many people would pay a monthly fee to not hear commercials. It never bothered me all that bad.

Would You Turn Down Bailout Money?

Many entrepreneurs would love to be contacted by the federal government and hear the following words: "We have bailout money for you." This could potentially rescue them from the very real and threatening effects of a down economy.

Some, however, are getting that call - and are turning it down. Why?

Well, accepting bailout money from the federal government is almost like accepting grant money: There are certain conditions you have to follow. You don't just get the money, and do as you please. The government regulates your activity.

According to Business Week, about 50 small banks are saying "no thanks" to bailout money because the government wants to "dictate how they structure dividends, compensate managers, or make acquisitions." They even want to tell them who and who not to lend money too.

I can just imagine the government giving bailout money to a soul food restaurant, and regulating by telling them they need to cut back on the chicken and waffles.

Or even giving money to a bakery and telling them to ease up on the icing for cakes.

That's crazy. I'm not sure I'm interested in getting bailout money anymore, but at the same time - I don't think I'll ever get that call anyways.

More Business Woes: Boeing and Starbucks Make More Cuts

With demand for commercial jets losing altitude, Boeing has reported a $56 million net loss for the fourth quarter of 2008. This forces them to increase their recent estimate of 4,500 jobs to cut to an astounding 10,000.

In addition, Starbucks who just closed 600+ stores last year, has to close another 300 stores and cut nearly 7,000 workers as it continues to stagger from overexpansion and a sharp sales slowdown.

Drinking coffee on airplanes may soon be a thing of the past. In the words of Captain Scully: "Brace for impact."