Accepting Deferred Compensation

Question:

Is it possible to hire Mahar Enterprises, Inc. Consultants on an “Equity Participation” or “Deferred Compensation” basis?

ANSWER:

Yes (but we are very selective)

QUESTION:  I am a consultant, contractor or artist who is considering a deferred compensation / partnership / equity deal.  Can you help me?
ANSWER: Yes  (read on, these are our benchmarks for consideration - if you are negotiating an equity deal or deferred compensation package, feel free to give me a call – “documentation” is the key to getting paid and I can certainly help).

I and my team have the ability to multiply your effort, business potential and budget in ways that nobody else can.  That’s a fact.  If you’d like to qualify for startup or  launch support under more a negotiated “we’re in this together” manner, we will entertain it.  There are some things you should think about before contacting us:

1. Equity Participation is not FREE help, it is a schedule of discounted and deferred expenses (or a portion of ownership) because we believe in your project or business.

2. Our deferred fee means “extremely low direct expenses” for a defined window of time (while your business is positioning itself or an idea;  and it is only intended for the startup or growth phase).  Limiting your overhead can be critical to the success of a launch/startup.  That does not mean “no budget”.  We don’t typically invest anything other than our time (all other expenses must be covered).   There are always extremely rare exceptions to any rule.   On qualified projects our deferrals have been anywhere from $20k-2M in equity participation.

3. Our fees can be deferred as much as 90% for the right project.  Regardless, our labor rate is never less than “minimum wage, plus expenses” .  Your business needs to demonstrate that it can sustain a bare bones structure (and comply with employment laws).   A token wage also serves as interest on a loan (a loan that we only collect on if we are successful).  To be clear, in order for a project to qualify for support at “minimum wage” it has to be pretty damn cool, profitable and ready for the push that we are equipped to provide.

4. If you don’t know what the “other expenses” are, you can contact me for a free initial consultation.  If you aren’t prepared to pay at least minimum wage for the support of an extremely talented and experienced consultant/team OR release some management control OR release profits (or some combination of all of those things), please note that our consulting rates are $130/hour for all personnel.

5. The benefit of deferring expenses and engaging with a talented team is that your startup costs are lowered significantly (immediately reducing your need for fundraising on challenging projects).

6. Do what you are good at and be prepared to put down the rest.  You have a “big idea” but you you can’t do everything yourself.  At some point you will need a support team and employees.  Sales, Accounting, Strategy, Technology, Production, Purchasing, Negotiations, Licensing, Legal, etc…please give some thought to where you are most valuable in your business and be prepared to explain what you need in order to keep doing THAT (remain valuable).  You don’t have to “trust” people (you don’t even have to trust us)…but you can’t do it all by yourself.  

7. Be prepared to communicate strengths, weaknesses and concerns (we need to know all of them if we are going to work together on YOUR project).

8.  If you seek my review and/or endorsement of your concept/business, I don’t charge to review and submit my formal opinion (if I think you’ve got a great idea you can quote me all you want).  On the other hand, if you need help or want to attach my resume formally, it requires a written agreement (including compensation).

In all cases: Risk = Reward

If you ask us to share your risk, please be prepared to entice our interest with the appropriate rewards.

You are considering a financial arrangement for support (with rewards later) because you need help or talent or money or all three…and you need those things right now.  Please be prepared to explain why you need it and why it deserves our attention.

We’ve helped countless businesses achieve their goals.  We want to help you.  I want to help you.  I won’t waste your time and I will assume that you don’t want to waste mine until it is proved otherwise.

(some projects or launches are so exciting and “neat” that we want to be involved just for that reason –  we may lower our rates to demonstrate our support for “neat things” just because we can and want to, but any rate modification is done after we fully understand the project)

With us or anyone else: Being prepared for the conversation is important.

We inspire and enforce confidence.   Creativity and a little common sense goes a long way and we’ve built a business around it.

What’s your business?

Very best & thanks,
Mark Mahar

Motion Matters (get moving)

What gets you off your chair and compels you to act?

Everybody has certain things which feed their enthusiasm and enforces a sense of relevance or passionate action.

I’ve found that when I’m in that state of mind (fire in my belly – a sense of purpose), I really don’t care about things which bother or distract most people…because I’m on a path to greatness – a journey towards an echelon of life rather than a validation of financial worth.  One could also argue that financial greatness is an inevitable reward for such a journey (to say nothing of the ra more important fruits resulting from a simple willingness to travel that distance). 

Maybe I’m insulated (false sense of peace on account of existing in a creative bubble of “ideas”) – in any case the result is “motion”.

Mapping a mission or idea (and proving it is within reach) makes me high. 

Putting tools, maps, message, amplification and resources within the reach of creative and motivated people is probably the greatest thrill I get out of my work.

People who have this trait become Motivational Speakers, Priests, CEO’s, Inventors, Advocates, Politicians, Consultants, Campaign Managers, etc…the only difference is the “Map” they use and how they use it as a foundation for communication (bible, industry, law, science, history, marketing strategy, etc…), but at their core these people are simply dedicated students of a “map”…with their specific knowledge compelling them (almost involuntarily) in a direction of action.

It is uniquely human to MAP THINGS and to FOLLOW MAPS.

I don’t ever need to have the public “prestige” that comes with any of the job titles I mentioned above (which drives some people but not me) because I am content being a reliable resource for those people.  Whether people know I’m involved or not, when my work becomes capable of “compelling people” and “eliminating obstacles”, I know I have achieved my purpose in life/business.  If I continue to do it anonymously I still get to enjoy the result privately.  That is contentment that I’ve known, in great abundance, and will continue to enjoy (privately).

Confidentiality is important in the world of art & innovation.

I know that even some of my closest friends have wondered “Seriously, what the hell does Mark really do for a living – he’s all over the ‘MAP’?”

Blueprints, Designs, Schematics, Architecture, Music, Marketing, Strategy, Contracts, Curriculum, Policies, Procedures, Video, Film, Poetry, Advertising, etc - all just part of a “legend” that makes ideas, emotions and resources more “contagious or possible”…from a specific point of reference (the starting point of my clients…and their intended destination).

I’m a MAP MAKER.  I am “almost involuntarily” compelled to map ideas, communicate them, and see someone arrive at a conclusion or destination.  My life is best spent as the “person behind a leader” (despite how many times I’m forced to lead, how willing I am to lead, or how talented I am at doing other things). 

So, from your “all over the map” perpetual servant, here’s the legend/key:

• Motivation IS Motion.  Motion is EVERYTHING.  Motion is the beginning of a journey.
• Journies are best executed with a MAP.

MAPS GET PEOPLE MOVING.  I like to be moving:

• If you don’t have a map, make one (you know where you are and where you want to be - chart it). 
• If you don’t have a destination, define one (unless you can afford to journey aimlessly, in which case, enjoy your ride). 
• If you don’t know where you are right now, there’s a name for that (it is called “lost”).  If you are lost you need to talk to someone (anyone you can trust) and get your bearings.  EVERYONE (no matter how highly regarded) has been LOST at one time or another.  DO NOT pick a destination if you don’t know where you are (that’s like saying you want to go to the Bahamas before realizing that you’re closer to Hawaii).

I cycle through all three things constantly.  Where am I?  Where do I want to be?  How do I want to get there?  When I am working, following or delivering a “MAP”, that’s when the world gets out of my way. 

We never stop being students, but there is no greater thrill than applying the knowledge you have acquired:

What gets the world out of your way?

“It’s Map time.” (for me anyway)

Art & Innovation – Learn, Teach, Love (honestly)

Early Retirement Pitfalls

So you won your independence (kind of) – now what?

Independence day is approaching.  As I do every year, I try to examine the concept of independence on a personal level.  If this isn’t your first visit to my BLOG, you already know that I place an extremely high personal value on my own independence and those who earned it for our entire nation.  My own independence isn’t on my mind this year, however.  Presently, I’m watching my parents machinate over the strategy of collecting on a retirement promise without being penalized for their remaining work ambitions…all while jockeying between being an emotional support system for their four adult children (with grandchildren)…and dealing with the their own aging parents (90 & 92).  Someone you care about is in the same boat (maybe it’s even you).

Being 62 years old doesn’t mean what it did in the late 1940′s or 1960′s.  People in their early 60′s are much more active, spry and alert – contributors to society, the economy, the political world, their community and their families - far more than the ”dependent” tone of past 20th Century Retirees.  For those Baby Boomers considering early retirement, there is an almost tragic environment which (through a handful of circumstances and regulations) makes it challenging to have a “survivable income”.  Achieving personal or financial independence continues to be a hard-fought battle (despite, and sometimes in spite of, social programs). 

Baby Boomers still have plenty of gas in the tank (along with higher car payments and more drive) than the retirees of old…but electing to access Social Security Benefits basically requires them to hand over the keys in exchange for a “benefit” (park their car in exchange for a bus pass…and subscribe to “public” transportation…while still making their car payment).

Nothing in this world is entirely absent of humor, and I personally think SS is fodder for great jokes…but let’s be serious for a second:  Claiming Social Security benefits at age 62 means you can’t earn more than $14,000/year without having to give 30% of it back to social security (in addition to being taxed on every dollar in the first place).  If you have positioned yourself at 62 to sustain your still active lifestyle with about $1,200/month in benefits and about $1,200/month (cap) in part-time earnings you’re way ahead of the game.  That’s $28,800 before taxes and all I can say is “congratulations!”. 

For those who don’t feel congratulations are in order, read on.  For those who have disposable income, read on.  I’ve had countless conversations in recent months with every retiree I know.  This is a generational issue and it isn’t going away.

There is no “one size fits all” solution to conquer the puzzle of “financial ambition after 62″, but below are some creative solutions to discuss with your accountant and associates (I’ll divide them into three categories – “self-employed”, ”business owners” and “general”):

NOTE: I’m making the assumption here that you can’t just afford to “cash out and walk into retirement” (or I would have titled this, “Retirement Success”).

Self-Employed:
(you own or operate a business as a Sole Proprietor or entirely as a 1099 contractor)

• Partner with a younger spouse and compensate them for any net earnings in excess of $14,000/year. 
  • Rationale: They don’t have a cap on how much they can earn because they aren’t claiming their SS benefits yet (sure they still have to pay taxes on earnings, but at least they don’t also have to pay $1/3 to social security). 
  • Result: 30% net income improvement…and the earnings stay in your household.
• Surrender to the keys to your own car and take a part-time job or engage in a different partnership. 
  • Rationale: Less effort spent contributing to someone else’s business than perpetuating your own at half-speed (W2; preferrably someone whose success you really care about, like a family member or close associate).  
  • Result: Wages plus some negotiated incentives on the growth impact your maturity, notoriety, experience, credentials, licenses and fundraising efforts will have on their business (deferred compensation – in an IRA or profit-share), means you can cap out your $14k while still building something you can collect on after you turn 65).

Business Owners:
(you own or operate a business but your income is W2 or Stock)

• Step 1 – Change your W2 to the $14k cap (and/or pay someone in your household on W2)
• Assets – Use any available business capital to buy things that enhance your business today but can be SOLD when you turn 65.  Your balance sheet drives your stated income.*  (this could include real estate, vehicles, purchasing a competitor, mergers, etc…)
• Tax Credits – Our tax code is complicated and you really need a professional to do things right, but if your business qualifies for tax credits, now is the time to use them (Solar, Film, Vehicles and Organic Farms are creative ways that businesses and individuals reduce their liability.  These are most exploitable when “growth” or “marketing” is of genuine interest…but they are still useful as an excuse to acquire something, without tax liability, which you can profit from later [when you liquidate it as an asset]).

* A note about “Balance Sheets” as a rolling strategy.  Banks and Public Companies utilize this strategy and our economy essentially revolves around it.  In fact, it is partially the reason why some banks are taking their time foreclosing on so many properties which are currently in default - it isn’t that they lack the device to execute foreclose – they haven’t quite figured out how to get those bad assets off their balance sheets once they take them back from the borrower.  Simply put (from a mortgage company perspective), “missing money” is less ugly on a balance sheet than a “bad asset”.  If you are creative enough to present a balance sheet solution to mortgage companies, you’re the next overnight millionair (my apologies if you’re on SS…you’ll be taxed twice on the earnings).

GENERAL:
(more generic ideas)

• IRA – Utilize your Individual Retirement Account fund to invest in something that has a 3year maturation (there are plenty of non-stock, unconventional places you can utilize those funds and still have it remain outside tax liability until you have to rely on it for income).
• Start a Business – find a dozen like-minded associates and start a busines (30% x 10 people = 300%).  Surely there is an investment (like say, real estate, backing an inventor or young entrepreneur) that can have a 3 year delay on a capital return.  In three years you’ll be 65 and there won’t be such a penalty to enjoying the fruits of your risk as “income”.
• Concede for Health reasons – Changing your income (regardless of your business/employee status), while not being eligible for MediCare yet can create opportunities for “low income” eligibility of other health care coverage (Massachusett’s comes to mind).  Accept the caps on income in exchange for savings on your healthcare expenses.  You’re not dying, but maybe COBRA or your former employer’s/business healthcare plan is the thing preventing you from surviving on your anticipated income.  Go back to work part-time or reinstate your self-employment activities after you turn 65.
• Become a Consultant – 1099 income allows certain expenses to off-set your income as a “self-employed” person.  Hell, we could use you at Mahar Enterprises, Inc.   We are a creative solutions company with creative compensation plans – we could use a talented person that still has gas in their tank (and believes in the independent entrepreneurial spirit of America).

NOTE – I’ll fall on my sword, if I’m wrong, but:  Major economists, strategists, authors and commentators say that one of two things will happen in this economy.

1.) Hyper Inflation or 2.) Depression

I am predicting that it isn’t one or the other, but rather half of BOTH.  Inflation will be first. History tells us everything we need to know about how nations find themselves in these situations (and how they respond to it).  It will happen within 18 months.   Strangely, a flailing economy can be a good thing if you have your house in order (and more reliance on “non-cash” support systems).  Get a plan and stick to it.  If I’m wrong, early retirees still have a problem to cure for their own life (the three year gap between health coverage and earning caps).

Okay – that’s enough for now.  Call or write or comment if you like.  Send me a note if you’d like to become a consultant or partner in one of the many projects our team consults on.  I worked all evening on a contract last night so I’m gonna go watch an afternoon On-Demand movie with my dad (he makes awesome popcorn!).

Happy Independence (it isn’t just about a single day of the year).

Mark

Career Clock (wage earners)

Understanding where you are in the arc of your career or project is important to determining your aptitude for risk or earnings (two different things):

1. Your value as an employee

2. Your preparedness for risk as a business owner

I developed this illustration as an answer to frequent clients that are starting their first business. 

I work with many career employees who are making their first risk in business (inventors, artists, startups, technology, etc…).  After years of working for someone else they are ready to strike out on their own.  Many, however, don’t truly appreciate how insulated their life has been as an employee.  Employee positions do not involve any personal risk (one is simply trading time, talent and responsibility for a given wage).   It may be worth discussion, but if you are considering self-employment or business ownership it is a good place to start. 

If you are already an owner (or self-employed…and there is a difference), this illustration may turn your wheels a little about where your value is in a business (and what other talent you may need to surround yourself with, in order to be most profitable).  This is titled “Wage Earner’s Career Clock” for a reason (owners don’t typically derive their income from a wage; earnings and wages being two distinct things).

In this illustration, MONEY exists outside the circle.  Getting to the money requires four things:

• Time
• Talent
• Responsibility
• Risk

MEINC_CareerClock1 (printable PDF)

“Wing Theory” for Business

…so I was sitting around the other night, thinking about how business navigates the marketplace…and how the market may or may not actually respond as much like a fluid as many market professionals would like to believe.  If it were a fluid…[insert idea].

It occurred to me that Bernoulli’s principle is simply a scientific statement of how fluid reacts (pressure, speed, distance)…and that science is applied with great success for many innovations (not the least of which is an airplane wing).  There you have it:

WING THEORY for Business (TM) – utilizing Bernoulli’s principle as a creative basis to determine strategic modeling for business, where the market is a fluid.  Designing to gain altitude/distance or less pressure in business as a result of an efficient design.

I decided to diagram my thoughts as it relates to “altitude” in business.  A wing is for flight, right?  Let’s give your business wings.

I’ve attached a PDF for the curious and included preview images.

Bernoulli For Business (“Wing Theory” pdf)

In short – the innovative element of modeling a business in this manner is that it places a hierachy on management, while also labeling (and illustrating) the most important component of a busines (the “high spot”).  That “most important thing” is different in EVERY company (something that conventional business modeling doesn’t allow for as efficiently in visual depictions).

The tallest column in the structure of a wing determines both the radius of the wing and the potential for “lift”.  It illustrates a requirement for all the supporting/surrounding elements – what relevance they play in giving a business the shape necessary for strategic “lift”.  Weaknesses in a business model are more visually identifiable as well. 

There is way more to it than that, but this 4 page illustration very clearly communicates the broad strokes of adapting conventional business designs, while treating the 21st century marketplace as it should be interpreted (a fluid that can be navigated with the right design).

It isn’t science as much as it is a really just a clever/visual analogy.  In any case, this depiction allows for the most simplistic illustration of three simultaneous components (all of which are sometimes difficult to communicate on their own, let alone together):

1. linear hierarchy (business processes)
2. business philosophy (brand & market focus)
3. management strategy (strengths are strengths)

Enjoy,

Mark

Off-Shore Companies

Why are larger U.S. Corporations moving off-shore?

Simple – the COST:  Migrating off-shore results in a ”Net Tax & Maintenance” cost of 20-22% Net Income Burden…as opposed to the highest corporate tax rate in the world (35% U.S).  As not all corporations qualify for government handouts (in the the form of tax incentives) and many lack the administrative infrastructure to lobby or apply for these subsidies, the simple alternative is to level the cost of doing business with one simple word, “geography”.

Are you considering establishing an off-shore enterprise?

At a 22% Net Burden, this still may not be the most favorable solution for some small companies (because the federal tax code may have more favorable advantages if you “qualify” for the ever-growing list of things that Congress sees fit to exempt from the tax code).   Congress has what some would call a bad habit of attempting to “steer” business towards their intended centralized design for a consumer economy and your cost of eligibility may be less than the cost of migrating. 

Another consideration to keep in mind is that once income is abroad it typically must stay abroad (for tax compliance).  Measuring compliance against an Owner’s compensation plan/exit strategy, there may be additional considerations to increase Owner’s W2/Personal taxable income (adding personal tax liability or averting that new liability with added personal retirement infrastructure).  There is an inherent cost of establishing or protecting income reported through W2 as opposed to Scheduled earnings.  That is a good conversation for your tax professional. 

SERVING THE RIGHT MASTER:

I am personally an advocate for a 15% Corporate U.S. Tax and removal of all federal tax loophole/subsidies through a simplified tax code (the two must happen in tandem or there will continue to be losers on both sides of the job creation argument).   There is a third argument of solvency but, candidly, “government spending” (more aptly, “restraint from spending”) is a discipline that can’t be cured by the tax code – that is a whole other topic.  For the topic at hand, it is my personal opinion that legislators should not punish enterprise or pick who is and isn’t relevant in a free economy.  Until such time as Federal Legislators enforce an environment that is friendly to job creators and doesn’t reward select companies for a central solution agenda, Mahar Enterprises, Inc. is happy to help less agile small companies legally move their corporate presence off-shore (or any other strategic alternative).

A simplified tax code would change corporate burdens (requiring the services of fewer accountants and lawyers) while increasing tax revenue to the Federal Government.  I want to see it happen and I remain hopeful that all previously migrated corporations will return to their domestic roots.  Until then, I have an obligation to my clients (and other countries have more realistic tax rates for relatively low cost of migration).

ASSET MIGRATION:

Some might aspouse the virtual fluidity with which “holding companies” can transfer their assets in this technological and patent-driven market (given that many holding companies are a “paper change”, rather than a physical operational relocation).  I would point out, however, that the U.S. Patent and Trademark system is an important infrastructure to intellectual property holders, which provides a laundry list of protections (along with an abundance of practically “institional” legal precedent for domestic properties and rights-holders)…all of which may pose a higher migration risk to ”intellectual property holding companies” (Mahar Enterprises, Inc. included).  We would be happy to do a cost/risk assessment in conjunction with your legal and accounting team to assess any impact that migration may have on your intellectual property, but the point here is not to sell ourselves – the point is “we highly recommend an indepth evaluation of your intellectual property” (even if you hire someone else, please do it before even entertaining an off-shore decision)…and to weigh those considerations against the alternative.

COMPLIANCE:

Depending on your resident state, off-shore corporate compliance requires a “real” office with human beings, duplicate equipment, a board room, payroll infrastructure (sometimes all payroll processed through the foreign entity) and in some cases “on-site executives” (legally empowered executive level management; CEO, VP and/or COO to be resident to the foreign corporate headquarters rather than the domestic market area). 

Off-shore income reporting does not mean “hidden income”.  Sheltering a corporation on foreign soil should only be entertained for legitimate enterprise, in order to achieve a lower (and compliant) liability than the alternative.  If your intentions are to avoid reporting income, you won’t be in compliance with U.S. or State Law anyway.  Two jurisdictions already monitor your compliance for fraud and liability (State & Federal), with a dizzying tax code and redundant regulations.  Why compound this scrutiny and penalty by adding the jurisdiction of a third government entity?   If you are breaking U.S. Law, it doesn’t matter where your company is “based”.  Don’t be an idiot.   If you are, however, seeking a legitimate option it may very well be the best option.  Consult an accountant…then a lawyer.  At that point you’ll be equipped to budget for a migration support system (like ours) or consider the alternatives with a keen eye on risk assessment and life-cycle.

CONSIDER THE ALTERNATIVE:

There are tax incentives that may exist outside your industry (as a simple line-item deduction).  Some of these things simply require you to think “outside of the box”.

Example:  Did you know that if you produce a documentary about your company or leadership (or industry), with the intent of packaging it for retail or distribution (as a “Movie” or “Production”) that you qualify for a tax credit in many states (in addition to Federal Tax Credits)?  Do you have to advertise?  What is your advertising budget?

In some cases, this single “line-item deduction” (no schedule) essentially becomes an advertisement (one that people could foreseeably PAY to view or that a Network pays you to air) can off-set your tax liability for less effort/expense than migrating your company off-shore.  Not only does it feel more patriotic, but you have to advertise anyway.  Why not turn your tax credit into a potential piece of intellectual property? (with a potential revenue after it serves it’s initial dual purpose of advertising and tax exemption)

Packaging affordable alternatives is what we do…and that one example obviously creates four tiers at which there exists potential recoupment of investment (Tax Exemption, Marketing Savings, Licensing, Retail – to say nothing of the proper presentation resulting in branding from a social responsibility standpoint).  No smoke and mirrors.  These and countless other creative domestic solutions are available right now, through Mahar Enterprises, Inc. as part of our proprietary “passive marketing strategy” and we would be pleased to offer you an assessment.

Regardless – Through any alternatives you might consider, there should be a sequence of qualifiers – Compliance, Cost, Savings, Life Cycle.  Humbly, I would submit to you that the life cycle of foreign profits is “tax light” (foreign wealth accumulation – for tomorrow), whereas the life cycle of strategically executed profit is “tax neutral” (domestic economic agility – for today).  You don’t have to be a uniquely qualified, lobby-backed or administratively savvy corporation to exert your inherent agility…you just have to be proactive and compliant (domestically or abroad – whichever the case may be). 

“How” you use an asset or resource can be just as beneficial in reducing your liability as “where” you do business. 

Simply put: Geography isn’t everything (it is just one thing).

CONSIDER THE SOURCE:

We do not offer legal or accounting advice.  As either a partner in your migration effort or as a partner in your domestic strategic solution (passive marketing strategy or other proposed alternative), our role is to provide you with a compliant model – identifying any obstacles to achieving ”integrity” for your intended life-cycle (as advised by your legal and accounting team, in conjunction with our resources).  Please seek legal and accounting advice prior to engaging our services. 

We also have a “horse in the race”, as they say – we want your business.  Our opinions on this topic are inherently biased.  I personally believe that there is nothing immoral or unpatriotic about averting the blatantly selective tax grab that has been perpetrated by congress (and at the hands of lobbyists).  If congress didn’t convolute the marketplace, dilute the natural order of supply and demand, attempt to buttress failing industries (and their failing leadership) or incentivize failure, U.S. Corporations would have no reason to pursue a more clear and predictable alternative.  I’m a capitalist (just as my clients are).  We are here to earn your business and we have a perspective.

Business is conducted aggressively when it can be forecast with even the smallest certainty (there will always be risk-takers who see a straight line through even the most dynamic conditions).  Congress, however, has effectively fogged the eyeglass of many otherwise savvy and risk-willing corporate leaders…removing all sense of depth-perception from the marketplace.  The maxim that “perception is reality” is only true for business in the sense that perception as view of the market is what drives business decisions (and business brings ideas into reality).  Sometimes the importance of sequence (linear concept) gets lost with politicians (politics is inherently philosophical – consisting within a theoretical sphere of implications…not a mostly linear science as business is).  Congress would have citizens believe that a social consciousness is what creates perception/reality.  I would argue that social consiousness only impacts demand, whereas “supply” is a device of the business community.  As congress pushes on one, the business community will continue to find ways to AFFORD the risk required to pull on the other (supplying an idea with it’s birth into reality by leveraging resources – leveraging risk).

As I type this, the Federal Government is half-way into the fiscal year without an approved budget, while adding to a record deficit and essentially debating the constitutionality of financial insolvency as the debt ceiling caps for a fourth time in as many years (if that doesn’t demonstrate an abandonment of linear thinking, sequence, and consequence, I don’t know what else to tell you).  This is the hobgoblin of philosophy…just as the quest for agility is the hobgoblin of enterprise.

Corporate Migrations are a device of congress and a pragmatic risk assessment to many corporations.  Politicians set the game.  Corporations follow the rules.  At Mahar Enterprises, Inc. we only work with clients who are interested in following the rule of law (and I personally still think this is the greatest nation in which to launch a business).  It is because of our patriotic domestic interests that our focus on risk assessment and a life-cycle are weighted in ”domestic agility” …and drives the bias of our recommended services (it keeps JOBS and REVENUE domestic…while migration does have benefits for some, but not all, corporations).

Our/my perspective should not be the only perspective you seek in a consideration to “spend your way out of tax liability” (and I would point out that this statement feels counter-intuitive for a reason – listen to the little voice in your head).

Be proactive -  exit strategy, life-cycle and domestic agility are far more important than lowering your tax burden (and you can design to achieve all of them with the appropriate strategy).

This is one opinion from one source.   Thanks for visiting.

Mark Mahar,
President

Valuing a “service”

One constantly shifting factor in a service business is finding that magic “happy medium” between the divergent concepts of “cost” and “worth” (what it costs your business to be useful to a client and what you think your clients are willing to pay for something useful).

In today’s economy, keeping a steady workload can sometimes force you to abandon both of those considerations in favor of approaching the problem from a more survivalist approach: “How cheaply can I afford to offer my services?”

Before you undervalue your services for survival (or undermine the market your competitors have established FOR YOU), let’s take a look at the cost of doing business.  In this example I’ll break down a Owner/Operator service business (Self-Employed “wage earner” as opposed to “business owner” who employs many).

There is a dramatic difference between earning a wage and owning a business – I’ll discuss that in another article.

In either case “time is money” as they say – so I’ll start with wages (and some assumptions):

• Assumption 1: Let’s say you’re a billable independent service provider w/$15k in supporting equipment and/or software (musician, photographer, videographer, graphic designer, web designer, writer, analyst, etc…).
• Assumption 2: You don’t have any employees and your business operates with the least amount of overhead possible.  Whenever something gets out of your area of expertise you hire other subcontractors to help you pick up the slack.

TIME: For this example I’ll use a $50,000/year salary as a baseline (rough national average).

For a W2 employee earning $50k/year it would cost the employer about $65,000 per year (taxes, benefits, insurance, etc…).  Sole Proprietors are not W2 employees but they do still have liabilities on their earnings and a responsibility to their retirement planning, all of which will likely make their costs about the same.  That means if you want to earn $50k/year you have to bill $65k/year (that is the base pay multiplied x 1.3).  Want $100k a year? Use $130k for the math.

MATH:

• $65k/52weeks = $1250/week
• $1250/36hours = $35/hour

Why 36 hours?  Even if you work a 50 or 60hour work-week it isn’t all billable to a client – you own your business and you don’t charge your customers by the hour to do your own books, deal with your accountant, plan your marketing and advertising, pay your bills and bid jobs, etc…  It is reasonable to assume you will burn at least 10hours a week that you aren’t paid for.

Using the above math we have established that your survival as a “wage earner” (not a business owner) requires you to bill for your time at a minimum of $35/hour and for a minimum of 36hours/week (assuming all client expenses are reimbursed at exactly what it costs you).  That’s the cheapest you can work (before factoring in anything like additional equipment, job materials, insurance liability on subcontractors, etc…).   It doesn’t matter if you work in your business (or on your business) for 60 hours each week – you still have to bill at least $35/hour for 36 hours (or $1250/week).

OVERHEAD / SUBCONTRACTORS:

To determine whether you are charging the appropriate markup on subcontractors/vendors, you simply need to determine three things:

1. Does the difference between what you pay your vendor and what you bill your client equal your minimum rate after factoring in the amount of time it takes to manage/communicate with that vendor? ($200 in markup in a situation that takes you 10 hours to coordinate the work of your vendor only equals $20/hour).
2. Can your subcontractors/vendors provide services at lower rates than you presently charge your client? (if there isn’t any built-in margin you will want to either raise your rates to create a natural margin or value a quote using #1 to calculate the margin)
3. Is the perceived value of what you can provide by using a vendor or subcontractor worth the “perception” it has on your rates? (if you charge a customer $35/hour but your graphic person is charging $100/hour what is the perception of your talents to your client?  This is how you determine whether you quote a “project” or an “hourly rate” because the perceived value of a project may be completely different than the perceived value of your time).

ASK YOURSELF (do these assumptions match your business):

1. Can I bill 36hours/week in my field? (If not, you need to divide your weekly target by however many hours you can actually bill to a client).
2. Can the clients that I have access to afford my rates?
3. Can I deliver my service reliably at this rate? (and have client successes result in more work)
4. Is my rate too affordable (this is a perception…and is mostly based on the market you work in – sometimes pricing yourself too low can actually hurt your ability to be taken seriously)
5. Am I valuing the cost of my education?
6. Do I have more than $15k in equipment?
7. Are you above or below “average”?

In Short (this example):  The least you can charge is $35/hour.  The most you can bill is 36 hours.  Is that a value for a useful service?  Is that enough to survive in your world?

PERSONAL TAKE:

At Mahar Enterprises, Inc. our base rate is $65/hour (which is based on my personal baseline for all consultants).
The only time we charge more is when we can’t handle a scope of work with our existing pool of talent (or when travel is required).  Travel changes everything – if only because most of the expense of my business is the equipment, software and technology which all live in my office (it isn’t as mobile as I am personally, people still need it in my absence and it has to be “duplicated” at a cost that is always applied to the job at hand for my clients).  We have established a few services which are budgeted lower because we have made them more efficient (and in some cases they even replace “advertising”  – a cost we would otherwise incur, so we can afford to apply the savings to that service).

Our competitors charge $250/hour for some of the services we provide.  We have chosen to undercut the market so aggressively because the concern of “perceived worth” is less important to me personally than is actually “delivering something that any client can afford” (and doing it better than someone who charges so much more).

Because our core services are either “Delivery” or “Management”, we can remain focused on the simple cost of “our time in delivering the service” (and not worry about the perceived value of what we are delivering).  Vendors worry about that, not us.

Each business is different.  I value services based on my ideology of “removing handcuffs” from business owners.  Everything has a cost.  We operate on the most basic “Cost +” mentality rather than the value method our competitors and clients use (their method being more of a salespitch or rationalization which says, “this saves you $X so it is worth $X”).

Let’s be honest: If it doesn’t save you money or make you money it’s not worth doing.  The perceived value and the cost are two different things.  I couldn’t care less what someone says a service is “worth”…all I care about is that my clients can afford the “cost” (and that the cost is worth incurring).  In answer to that question we’re always the most affordable and creative solution so I don’t have to defend the perception of “value”.

TO BE CLEAR: We don’t always recommend the “Cost +” approach for our clients in THEIR BUSINESS because the reality is that successful business revenue models rely on exploiting “perceived value” (in my business, however, I’ve reserved perceived valuations for PRODUCTS…not SERVICES).  For the purposes of Mahar Enterprises, Inc. we’ve simply shaped our perceived value as “the most affordable solution for a truly necessary service” (rather than demonstrating “return on investment” in order to emotionally provoke clients to choose us over our competition).  I personally find it easier to clearly say to business owners “once you decide something is necessary to your business, we are without question the most affordable place to get it done properly”.   That approach may or may not work in your business but it works for mine (but I am also a business “owner” instead of just a “wage earner” – as mentioned, I’ll discuss the distinction in another article).

Feel free contact me to schedule a valuation study of YOUR RATES.  We can do it under an hour, in real time and it costs $65.  We conduct our services with complete confidentiality.

Regarding MY VALUE: I look at it this way - if a client doesn’t feel it is worth $65 to formally dissect their rates/business and gain access to some really candid/helpful advice, they might as well stop shopping consulting services in general because my competitors start at $150/hour….and I already gave them free advice (above).

Doing business is easy…but only once you’re valuable and useful…as an enterprise.  That starts with “rates”.

- Mark

UPDATE: 9/24/11

After 11 years of operating with minimal overhead and providing all services exclusively with in-house talent, our workload has required that we add production personnel and programmers (all of whom are $100/hour or more).  As a result, we’ve been forced to modify our rates.

Beginning October 1, 2011 our 2012 rates will go into effect at $130/hour (which is a 30% margin on contractors, and includes use of all production facilities at our disposal [no room rental fees for any production, taping, broadcast or commercial media]).

Fix Your Business in ONE DAY

Tonight, as I often do, I sat in on a webinar for another company (assessing how they are communicating “value” to their customers).  I walked away from the night’s duties and began to prepare my formal notes when it occurred to me – “Here I am again…about to run through the same things I seem to communicate to almost every client”.  Here it is – for you:

If you want to fix your company – FIX IT.

If you want to grow your company – START GROWING.

If you lack relevance in your market – BECOME RELEVANT.

If you lack a competitively priced product or service – CREATE IT.

These aren’t budgetary line-items or optional marketing strategies for contemplation…they are decisions.  You make decisions for a living.  Make a decision.  The only thing capable of changing an object in motion (or at rest) is the outside force.  YOU ARE the outside force.  If it does in fact require investors, a credit line, a supplier or some other business infrastructure that’s fine…but make the decision you are going to do it.  I can’t help anyone who is still measuring whether something needs to be done.  If I’m talking to you…it means something needs to be done – let’s DO IT.  (or do it without my team - but make a decision)

Lots of people call me with great ideas (some really great ideas!).  We talk about their ideas and their market, etc…but ultimately most of my client conversations migrate towards a discussion about the obstacles that are in the way of their success/ideas.  Many obstacles are real, tangible, mechanical, practical, etc…but I would be remiss if I didn’t tell you that the vast majority of my phone conversations end on one note: Motivation (confidence)

Every business owner, sales rep or entrepreneur that I speak with about an obstacle has, at the core of their obstacle, a problem with motivation (they call me about a problem and it is because that problem has depleted their motivation, mojo, ambition, confidence, capital, etc…whatever shakes them enough to realize that they need someone else’s help).  It isn’t that they lack the ability to overcome the problem, but rather that they view certain things as obstacles to their “process”.  Ambition is a “process”.  If you lack a sincere passion for your products and services, why would anyone consider your product (let alone your service) over your competitor’s?  Why would you dig in a little deeper and work a little harder for your own success if you don’t feel like you’ve got the answers (or confidence that you are doing it right)? 

Before you talk to me:  Is there anything that is killing your process?

1. You are good (possibly amazing) at what you do and you believed that once or you wouldn’t be doing it.  What happened?

2. What you sell has value in the marketplace and you believed that enough at one point to entrust your living to it (and to “sell it”).  What has changed?

3. A purchase is a decision.  You need customers to make a purchase.  Your attitude about what you sell is 90% of the obstacle to gaining consumer trust.  Do you have the right attitude and track-record to be trusted?  Do you know if your customers/clients trust you?  Do YOU still trust you?

The only OBSTACLES in business are emotional.  The rest of the problems in business are simply awaiting an outside force (that force doesn’t have to be you, but the upside is “it almost always can be”).  Remove the obstacles and you will change your business – immediately. 

My job is to get it done as swiftly, cheaply, creatively, clearly and contagiously as possible.  It is your business.  The “decision” as to whether or not it needs to be done is yours alone.   I can do some wildly amazing and profitable things for pennies on the dollar but I can’t decide the target for you.  I make the target affordable…I don’t label the target.  Only you know what you “need” from your business.  There isn’t a slick enough marketing strategy or a rich enough backer to bring you to wealth if you don’t KNOW what is in your way.

OBSTACLES:  Every business owner or salesperson knows the things in their business or environment which “tick them off” (or deflate them enough to create obstacles).  What ticks you off about your business?  Don’t lie to yourself – you know EXACTLY what it is.  If your answer is “capital”, start reading from the beginning [if your answer is still "capital" start reading from the beginning].

Business Owners can identify problems…that is what inspired them to go into business in the first place.  You saw a problem and then you saw a solution…and you were inspired! (obstacles be damned, right?)

Maybe you need to talk to me in order to zero in on it?…but, maybe you don’t.  Maybe you just need to remove the obstacles that are preventing you from being excited about your business again.  If you don’t know what those obstacles are I’d be happy to chat with you about it.  If you do know what they are…what are you waiting for?  Fix it…or pay someone to fix it for you.  Problems don’t go away just because you can label them.

The things that weigh us down come in all shapes and sizes but we don’t carry them…we are simply tethered to them.  We tow them along until we give up and ultimately just exist in the radius allowed by our tether (our own little sphere of complacent market posture and cash-flow).  The weight of a business problem can only crush you if try to pick it up and carry it yourself.  Don’t do that…and stop dragging it around too.  It can only keep you stationary if you are unwilling to cut the tether.  Cut the tether and the weight is powerless to hold you back.

You can fix your business in ONE DAY if you can be honest with yourself.  Identify the thing that ticks you off…and eliminate it (write the check, cut the cord, suffer the blow to your dignity [if there is one], get your hands dirty again [if you need to] – do what you are the best at doing…whatever the answer is).  Standing still is the surest way to fail.

NOTE: I learned how to develop websites because “not being able to communicate” (what I happen to think are important and valuable business concepts, to deserving and hard-working entrepreneurs) really ticked me off.  I communicate for a living.  A communicator without an audience becomes something else.  I will gladly admit that I was losing my sense of personal relevance and feeling like a broken record…and settling for my tethered little sphere of irrelevance.

I’m here to make life easier for business owners and introduce great ideas to the world (in the form of products, services & art)  - that’s what I’m passionate about.  I saw the problem with my “web world’ and I fixed it, with a decision –  my sales are better for it too. 

Fix it.  Do it.   Obstacles be damned. 

Necessity is the mother of invention.  That is only a useful maxim once something is deemed “necessary” (that is your decision – what is necessary?)

We can work on the solution together…(if you even need me at all).

Best,
Mark

Success & Failure

Anyone who tells me they have tried and failed gets the same response: “Congratulations”

It isn’t that I’m insensitive.  I just happen to see great value in failure (and people who learn from failure).  One doesn’t become an expert marksman or a genius inventor without failing more times than they succeed.  If you can still walk, breathe, eat, crap and clothe yourself after a failure, what have you really lost?  Your failure isn’t going to eat you…it just smacks you around a little.  You’re not dead – you’re smarter. 

I would also like to reassure potential clients that I have never failed for a client (I actually have great track-record).  I have, however, had countless failures as a result of things I took on myself (or with a team that was willing to test the waters with me on an “idea”).  I openly admit it though – The thing I’ve personally invested most in is “failure”.

Some of my greatest ideas and efforts resulted in my most expensive failures.  I simply consider it tuition (paid to “The University of Mark Mahar” – I’ve rung up quite an acumen from that institution).

Those failures - which I funded myself or that our team has tested at our own expense - are precisly what every MEINC client is getting when they hire  us.  Our consultants are chosen for their failures as well as their successes.  Cumulatively, we’ve achieved some wildy incredible things for pennies on the dollar (or that others said simply couldn’t be done at all).  We didn’t get there without failing.  Companies don’t typically admit their failures, but I see no reason to hide behind them.  It is this willingness to punish ourselves (in order to improve the chances of success) that our clients NEVER have to be a “test case”.

For every product, service or licensing deal that feeds me, there were 20 before it which took food off my table.

Similarly, every dollar of exploitable value that our team sees in distressed properties (real estate, planes, businesses, brands, commodoties, etc…), exists because of how the product of failure/adaptation equals success.

As a business owner, inventor, artist, etc…you have probably tried and failed more than you want to admit.  Is there not value in those failures?  You are good at what you do because you can run across the minefield of your industry or craft (at a full sprint – doing in a matter of seconds what would take someone else several intense and fearful hours).  Why is that?

With rare exception, success is just a collection of failures which are put to good use.  Failure is an opportunity to learn. 

I try to learn something every day.  I embrace failure.  Failure is my friend.

Failure is wisdom.  Learn, adapt and succeed.

In business, the easiest manpower recipe for success is to rent someone else’s failures (and rely on them to make it look easy).  That’s why we hire experts.  That’s how we make it look easy.  That’s why our clients hire MEINC.

As an apprentice Carpenter (15 yrs old) I learned a valuable lesson - There is no such thing as flawless work.  The important thing is to achieve a flawless looking result.  It is how well you adapt to your inevitable mistakes that makes you a craftsman.  EVERYONE makes mistakes.  Not everyone knows how to dodge the big ones or salvage the small ones (or hide the irrelevant ones).

The point of all this is that no MEINC client should ever feel shame in communicating a failure.  The fact we’re talking about it means we’re about to resolve it (learn from it and adapt to it…closing in on success).

(Failure+Failure+Failure+Failure)       = Success
(Learn+Communicate+Adapt)

1. Know the difference between an excercise and a mission.

2. Always treat an exercise like a mission or it isn’t worth the exercise.

2. Never treat a mission like an exercise unless you’re prepared to throw a whole lot of resources at it. 

3. Communicate (failure & success – allowing people to learn and adapt).

Either way, congratulations are in order.

-Mark

Thinking sideways

Sometimes the answer is right in front of you, but most of the time the answer is right next to you.

Lateral thinking is an important part of business agility.  While many businesses only think in terms of “forwards and backwards”, the business world is multi-dimensional.  Many business owners only measure along one axis.  The pitfall of operating a business on one axis is that your problem-solving skills are reduced to one axis (your intellect becomes a product of your practice).

Rockets travel a trajectory (and very few businesses are like rockets).  A business can’t travel on a straight mission line.
Business is more like sailing - traveling from one point to another requires a series of course corrections – tacking left, then right, then left again.

Maybe you’re stuck with 1,800 branded racquet balls from a past event because of a quantity typo on the production order?  

Thinking forward and backward makes that error a net loss…by creating “garbage”…all because someone hit the ”zero” key one too many times. 

Thinking sideways provides for creative “recycling”. 

Example: Charge another client a discount rate to add their logo to your overstock and give them away as promotional items (branded stress relievers?)…and use them to market the stress-relieving component of your business (product or service).  You have to advertise anyway, right?

Nothing is garbage until it is completely destroyed. 

Gardeners, for example, appreciate the value of thinking sideways (because recycling is part of their craft) – what one person considers “waste”, a gardner would consider “fertilizer”.

Maybe I should make an illustration of a guy in cover-alls standing under your business with a bucket? 
Nah – I think you get the picture.

Mark