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ross perot

Where have you gone, Ross Perot?

Where have you gone, Ross Perot?

I miss Ross Perot.

I realize he was a wacky billionaire (we have one of those) with big ears (does big hair count?).  But he was driven by integrity and passion for his primary motivation of balancing our budget and improving the finances of the country so his grandchildren did not have to pay for the excesses of his and following generations.  His focus on this issue was the catalyst for allowing our budget to be balanced at the close of the 20th century.  

Returning to the present day, the fundamental irresponsibility of the Democrat and Republican Parties is that they have no regard for future generations.  Plus they have no regard for the primary drivers of growth to fund their irresponsibility.  

Where does economic growth come from?  Primarily from people who have an inspiration to apply innovative technologies and processes into new industries.  

As an Active Investor, there is not a current political party that supports our interests so don’t allow yourself to be taken in by their “Pro-Business” Siren songs.

The Democrats and Republicans have been funneling our money to large publicly traded companies.  The financial companies that received the bulk of this support ($1.4 trillion directly plus a monumental $13 trillion in guarantees) have been improving their fee income, shoring up their balance sheets and, to the extent that they actually lend money, they lent money to other publicly traded companies who dutifully used the low interest loans to manipulate their share prices through stock repurchases.

Why are we wondering why we are in a low or no growth environment?  We have provided funding to the most financially irresponsible businesses in the history of the earth.  What they did not keep for themselves, they lent to the corporate communists who run the large publicly traded companies.  Now that we tried that plan and know it does not work, we need another plan.

The general consensus is that small businesses provide most of the job growth in this country.  The more accurate statement is that newly formed small businesses account for most of the job growth in this country.

What do you need to start a newly formed small business?

First, you need some optimism – optimism that better results can be achieved in the future

Second, you need innovative technologies and processes.

Third, you need people with energy and drive.

Fourth, you need the government to support newly formed businesses (and Active Investors in them) plus protect them from existing businesses and onerous regulations

Fifth, you need financial and human capital that is comfortable taking on potentially risky ventures.

I am sure there are more but these are a good start to identifying the environment we need to support a growth economy fueled by Active Investors.

What else do you think we need?

In future posts, I will explore some of the specific policies that will support Active Investors driving us into the 21st century.

construction workers hanging out

Death of the 20th Century

What is going on in our country?

As a member of neither of the two popular political parties, I generally steer clear of offering opinions on policy and politics.  Regardless of the outcome of the election, each party will be rallying around certain wacky ideas which have no relevance to our modern life.  With this in mind, I am putting forth some policy ideas to free you up from the current political maelstrom so you can focus your brain on more productive thoughts for you and your business.

My brother Greg has pointed out to me on numerous occasions that we are not experiencing an ideological battle between Democrats and Republicans or left and right wing or conservative and liberal or Bare Bellied Sneetches and Sneetches with Stars upon Thars but a battle to the death between the 20th Century and the 21st Century.

We have one candidate who wants to relive the glory days of the 1990’s and another who wants to turn back the clock to the 1950’s.  Most of the policy ideas being discussed by the parties are throwbacks to the 20th century with little relevance to the current world we live in.  What’s on offer are half-baked ideas with a side of economic pandering.  We have intellectual chaos because we have a lack of leadership from those in the public eye.

Our political angst is usually attributed to our economic angst.  For the past 15 years, our politicians have aggressively pursued policies to funnel money from the many (us) to their favored industries and big companies (them).  The results of these policies have been a low or no growth economy which is projected to continue for the foreseeable future.  We have crumbling infrastructure.  The service level of many government services would embarrass many third world countries.  We have institutions which have received extreme largesse from the government who are committing fraud on their customers and then being indignant that people are upset about it.

Over the next 20 years, we need a growing economy to address the financial overhang of our policies up to this date.  According to the www.usdebtclock.org, for 2016 the US Government is projected to collect $3.3 trillion from all sources on a GDP of $18.5 trillion (17.8%).  $910 billion is paid out for Social Security, $272 billion for federal pensions and $592 billion for Medicare.  $520 billion is paid for Medicaid and $303 billion is paid for welfare programs.  The Department of Defense runs about $580 billion.  Interest on our debt of $19.5 trillion runs about $242 billion per year at current interest rates.  These expenses run about $100 billion over what the government collects.

What’s missing here is the $500 billion or so required to actually run the government.  This gets added on to our debt each year.  Just to make the point clearer, we could close every agency of government (excluding the DoD and IRS because we need them to collect taxes) and we would still be running a deficit each year and growing our debt.  The Budget outlays total $3.8 trillion which represents 20.5% of GDP.  For the current tax system to pay for our budget we would need our economy to grow to at least $21.7 trillion this year – a 16% increase – which is not anticipated in the next 5 years never mind the next year.

Over half the money collected by the US Government goes to retirees who are not exactly drivers of growth.  Another 25% of what is collected goes to social safety net programs.

You have to remember that the budget is the dog that wags the tax tail.  Presumably, the budget reflects what our bipartisan lawmakers believe we need to establish a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare and provide the blessings of liberty to ourselves and our posterity.

The only purpose of the tax code is to provide the funding for the budget.  There is a lot of anger directed at the IRS regarding the collection of taxes but your anger should be more appropriately focused on your lawmakers in Congress.

The two political parties and other political thought leaders have many new tax ideas that generally fall into the “Heads I Win, Tails You Lose” intellectual school.  When evaluating any of these tax ideas, keep in mind that in order to lower the tax rate, we need to expand the pool of funds eligible to be taxed to raise the same amount of money.  This pool can be expanded by allowing more things to be taxed (e.g. addressing the definition of taxable income) and/or growing the economy to provide more taxable funds.

When politicians or pundits start talking about changing tax rates and providing tax credits, they are usually totally unaccountable to the budget figure they need to raise.  They are just saying stuff to make them look smart and make people feel that they might be better off chasing this shiny object.  This is the equivalent of every high school president promising better lunches, more free time and less homework.  Remember every tax break for someone, raises taxes for everyone else because the government still has to raise the money to support the budget.

I know they want us to think the budget and taxes are complex, but it’s just math.  I realize that every tax acts as a disincentive and every credit or deduction provides an incentive for certain behavior but the reality is they need to figure out how much a program’s going to cost and how is money going to be raised to support that budget item.  Budget items are supported by current tax revenues or by promises to pay out future tax revenue (plus interest) in the form of bonds.  For every budget item that is not funded by current tax revenue, we will need to raise even more taxes in the future to cover the original cost plus interest.  Somewhere in our $19.5 trillion of debt, we are still paying off those $500 toilet seats from the 1980’s.

Assuming the current orthodoxy that payments to the old and needy, the DoD and interest payments are untouchable, just about every other policy of the US Government is funded by future tax payments (plus interest).

Paying to Be the Boss

Paying the Cost to Be the Boss – Like Bruce Springsteen

Paying the Cost to be “The Boss”

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”  – John Maynard Keynes

Fans of Bruce Springsteen know that one of his nicknames is “The Boss”.  Legend has it that Bruce got the nickname because he loved playing Monopoly backstage while waiting to play at his gigs.  Bruce was always the banker and because he knew the rules of the game so well he generally won and earned his nickname – the Boss.

In order to be the Boss of your own Active Investing businesses, you need to take the time to learn the rules of the game.  For your retirement businesses, your largest potential expense is taxes.  In Plan to Not Pay Taxes, I lay out the basic rules for you to live up to half of your adult life on a tax free basis.

Your first step in implementing your Plan to Not Pay Taxes is positioning your money in a tax free circumstance.  Some people have already done this.  Some can do it in a few days.  Others may need several years before being able to implement their Plan to Not Pay Taxes.  Patience will definitely be rewarded in this circumstance.

Once your money is positioned in a tax free circumstance you will need to establish a company that your tax free money can invest in.  Then you need to select which type of businesses make the most sense for you to generate tax free income in retirement:

  1. Cash Flow Businesses
  2. Real Estate Businesses
  3. Licensing Businesses
  4. Angel Investing Businesses
  5. Financial Trading Businesses

I know this will be disappointing to some but to successfully implement these strategies, you will need the skill to run these businesses as an Active Investor throughout your retirement.  That’s why we participate in the Active Investor Group on Linkedin.  At the appropriate time, you can then convert these strategies to passive strategies so you can sit back and sip on pina coladas at a beach of your choice.

Brexit Opportunities

Brexit Opportunities

Brexit Opportunities

Great Britain voting in favor of the Brexit from the European Union took a lot of people by surprise. Much of the discussion in the aftermath of the Brexit vote has been experts saying that Brexit is bad and they have no idea what is going to happen. While this is normal in the case of any market dislocation, as Active Investors, we want to figure out where is the best place for us to look for opportunities.

In 2012 or so, London surpassed New York City as the Global Financial Capital. This is why Great Britain opting to remove themselves from the Global Financial system, will have continued impact on the markets for the near term as well as over the next several years. Being that Global Finance is based on trust, the Brexit vote basically violated the trust of all who had been relying on Great Britain as the Global Financial Capital.

Even as there is talk of alternative outcomes, the Brexit vote will freeze transactions and will definitely remove London as the Global Financial Capital. While normally the fall of number 1 is good for number 2, New York has such strong ties with London linked with the impending US Presidential election I think there will be a reluctance to rush into New York for Global Financial transactions. Hong Kong (#3) and Singapore (#4) look well positioned to take over much of London’s lost Global Financial business. Also look for less established cities like Dubai and others to assert themselves as Global players in financial services supported by technology and growth in the Pacific Rim.

Knowing that Great Britain is the number one foreign investor in US based companies and real estate, anticipate that some of these British investors will be feeling a cash crunch and need to liquidate their US based holdings just to pay the bills back home. As Active Investors, research US based companies with investors from Great Britain and start evaluating potential acquisition targets. Also identify US based real estate that is owned by British investors which may be attractive investments for you.

Great Britain has served as a conduit for US manufacturers to export into the European Union. As the companies that support this will effectively be shut out, you may want to look to establish your own import-export business into the European Union. Estonia provides virtual residency for companies that want access to the European Union so may be a good business opportunity now that established relationships will be broken with British companies.

Another outcome of the Brexit vote is that the dollar is strengthening as investors flee from the British Pound and Euro. As your US Dollars strengthen over the next 3 to 6 months, you will have opportunities to buy distressed companies, real estate and currencies. This provides you with opportunities to convert your dollars into assets denominated in other currencies which provide a hedge in the event the US dollar reasserts its macro-trend and weakens as it has for much of the 21st century.

Due to the Brexit vote, there will be great opportunities for Active Investors to invest in companies, real estate and currencies over the next several months. What opportunities are you most excited about as an Active Investor?

Business for themselves

Everyone is in Business for Themselves

After Michael Corleone survived the attack on his home in The Godfather Part II movie, he explained to Tom that everyone in their business was an independent business person looking out for their own self interest which was why no one could be trusted at that moment.

The same discussion occurred when Tessio betrayed Michael instead of Clemenza – betrayal was perceived as the smart business move to outsiders who did not understand the preparation and planning that had been done to ensure strategic success for the Godfather.

In your business, you need to provide enough opportunity for your team so they are not distracted by looking for better opportunities elsewhere or by maneuvering to take your opportunities.  Your energy and focus on your strategic direction will give your team the confidence that investing time with you will provide them with long term pride and success.  People love to be part of a winner.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Click Here to Buy The Book

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Why the Business Godfather

Small business is the life-blood of America. Often times, they offer an avenue to a more secure financial future because they allow their owners to be active investors in their future. However, businesses are complex endeavors that require a great deal of work, persistence, and the ability to make forward-thinking, objective decisions. The Business Godfather is here to help you through the tumultuous times that arise while running and growing your business. I will help you cut through the nonsense, tell you what you need to hear, and at times give you “the Godfather Treatment”.

Welcome_to_the_BusinessGodfather

Welcome to the Business Godfather

Business is hard. That’s why you need a Business Godfather. This is a saying you’ll hear me use a lot. Because it’s at the core of what the Business Godfather is all about. I love working with businesses. As a successful entrepreneur, I know first hand how difficult growing businesses can be. Which is why I love working with and consulting businesses from start-ups to large corporations in how to become more valuable. Subscribe to my newsletter, blog, and video series to hear more information and I hope you’ll take the next step and join the conversation.

Live Podcast with Melanie Coburn

Melanie Coburn, while marketing for the Washington Redskins for over a decade, has built a very diverse network of clients, partners and friends, and have focused on building these relationships over time. Along with her husband, Derek, she has built a great networking community called Cadre. Attend the live podcast to hear Melanie and Chris discuss community-building in today’s social media centric environment.

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4 Problems with Business Models

Many businesses struggle not because of a lack of hard work. They are run by smart and determined entrepreneurs. But often, their business model is flawed. No matter how hard you work, if your business model isn’t sound, success will perpetually elude you. In this video I’ll break down the different types of problems with business models I encounter when evaluating businesses.

Name Your Number

As a business owner, we care about one number: the value of our business. If someone were to ask you to name your number for your business, what would your number be? Would it be something realistic?

This is an important question business owners need to ask themselves because it forces the owner to find where the value in their company resides. If they are solely responsible for the profit in their business, they need to shift to being an active investor rather than an employee in their own business.

I have created a crude tool to help business owners determine a rough value of their business. Use the Business Value Calculator to determine the value of your business.

Launch the Calculator

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‘The Godfather Treatment’

Chris Koomey, The Business Godfather, is committed to helping business owners make their businesses more valuable. And to do that, sometimes business owners need to give themselves ‘The Godfather Treatment’.

The Godfather Treatment is when you shake yourself by the lapels and give yourself a slap across the face to force yourself to wake up to what you really need to do to create a more valuable businesses. Often times, people confuse effort with results. It may seem like you are working on hard on your business but you could be wasting your effort on tasks with little return.

The Business Godfather helps you cut through the noise of all the things going on and keeps you on track to adding significant value to your business. Find partnerships, decrease costs, find your replacement that allows you more time to generate more value for your business. These are things that can really impact your bottom line and help you become more valuable to potential purchasers that allow you to realize the value you’ve added to your business.

Joint the Business Godfather Family today by subscribing to the weekly newsletter, following on Twitter, and connecting on LinkedIn. Get access to your Business Godfather today to put you on the path towards a more valuable business today.

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Build a More Valuable Business

The Business Godfather is here to help you build a more valuable business. So I ask you to look at your business and identify if you are an owner-operator in your business or an active-investor. Be honest. The value of your company rides on your answer.

For a quick calculation, use the Business Godfather Business Value Calculator to give you a rough estimate of what your business is worth. If you’d like to increase your number, shoot me an email.

Business is hard. That’s why you need a Business Godfather.

tax_strategies

Tax Strategies for Serial Entrepreneurs

People that have bought and sold companies before rely on old structures that worked the first time and then refer to themselves as Serial Entrepreneurs (or Cereal Entrepreneurs if they ate a lot of corn flakes during the first start up).

If you are truly a Serial Entrepreneur and have some assets or other businesses that can provide you with income until you are 59 ½ you should consider funding your next startup with the Self Directed Roth IRA Strategy

There is a danger that your Tax Free Asset becomes an Asset Free Asset but all startups are calculated risks with the expectation that the upside rewards outweigh the risks substantially.  Repeating the main drawback of the strategy, you would not be able to receive compensation for your effforts in the new company.  This is why you need income from another source.  At the same time, imagine saving the 20-50% tax bite that you could experience on liquidation.  Or being able to leave the rewards of the next great business to future generations.  How cool is that!

If you are not using the Self Directed Roth IRA Strategy in your next startup, another little discussed strategy for Qualified Small Business Stock are Section 1045 Rollovers which allow you to defer the gain on Qualified Small Business Stock you sell to the extent you invest the proceeds in other Qualified Small Business Stock.  This is similar to the better known Section 1031 exchange used in commercial real estate transactions to defer recognition of gains.  Section 1045 Rollovers are basically designed for Serial Entrepreneurs so they can keep investing and building up big ideas.

Not tax free or tax deferred, but a tax reduction strategy is also available for Section 1202 Qualified Small Business Stock which basically cuts your tax bill in half for Qualified Small Business Stock which you have held for at least 5 years.

As a Serial Entrepreneur, I know you love making things but remember its not how much you make, its how much you keep.  Join the Business Godfather LLC Family and we can help your tax strategies so you get more out of your businesses and your life. 

Are you Interested in Building a More Valuable Business?

Are you interested in building a more valuable business? Like most business owners, the answer is obviously yes. However, if you look at the actions of most business owners it would appear they are not trying to make their businesses more valuable.

There is a difference between being an owner-operator in your business and an active investor. An active investor cares about how valuable their business is and an owner-operator cares about how much income they can generate from their business.

Benefits Active Investors

I try and transition Business Godfather family members away from being owner-operators towards being active investors in their business. There are many benefits to doing this.

First, it allows you to plan for your obsolescence. You can build the business in a way that you can still receive value from it while not partaking in daily activities. This allows you to focus on more businesses and build more wealth than had you built the business around you. Businesses that require a single person to succeed aren’t very valuable to outside investors looking to possibly give you money for your business.

Second, it allows you to focus on overarching strategy that will increase your value to possible investors or buyers. If you are constantly dealing with the daily grind common in every business, you might let big opportunities pass by. Active-investors can identify strategies that add value to the business.

Join the Business Godfather Family

The Business Godfather is here to help you build more valuable businesses. So I ask you to look at your business and identify if you are an owner-operator in your business or an active-investor. Be honest. The value of your company rides on your answer.

For a quick calculation, use the Business Godfather Business Value Calculator to give you a rough estimate of what your business is worth. If you’d like to increase your number, shoot me an email.

Business is hard. That’s why you need a Business Godfather.

business worth business value calculator

How Much is Your Business Worth?

Use the Business Value Calculator to Calculate your Business Worth

Don’t worry … dumb looks are STILL FREE!!!

If you are like most business owners you have no idea your business worth.  Even worse you probably have no idea what your business could be worth.

Sometimes business owners have a vague, puffy white cloud idea of what their business might be worth but that is usually based on hopes and dreams rather than on any reality of what someone would actually pay you or finance you for.

This is why I put together the Business Godfather Business Value Calculator to give you a rough estimate of your business worth.  This tool will give you a rough estimate of the value of your business today.  The great thing about the calculator if you love the number it produces you can probably take some of the money to (or from) the bank.  The great thing about the calculator if you don’t like the number, is there is something you can do about it.  In fact, you have more control over the value of your business than just about any other aspect of your business.