How Angels Evaluate Investment Opportunities

“Courtesy of Drakeview, [via this post from new dog old trick] here’s a good summary of what one well known Southern California angel investor looks for in evaluating a prospective investment.”

How to Start an eBay Business

“Step 1: Register your business…
Step 2: Find stuff to sell…
Step 3: Manage the auction process…
Step 4: Provide great customer service…
Step 5: Build a brand on eBay…

Legal and tax tips for eBay sellers

When you sell on eBay, you’re subject to most all federal and state laws, taxes and rules that apply to retail businesses generally. Here are some tips to help you stay out of trouble on eBay:

1. Set yourself up as a legal business. Get federal and state tax ID numbers for your business, as well as any licenses and permits your state requires for you to sell your merchandise. If you’re using a trade name, register it with your city, town or county clerk’s office as your state law requires.

2. Register for your state’s sales taxes. If the winning bidder is a resident of your state, you’ll have to pay sales tax on the bid amount. Put the following statement on all eBay auction pages: “Residents of State X [your state] must add ___% sales tax to their winning bid.”

3. Sell only legitimate merchandise…

4. Resist the temptation to “shill.” If you (or a friend or relative) are ever tempted to bid against legitimate bidders in an attempt to drive up the price of your products (an illegal practice called “shilling”), think twice. Not only will eBay’s fraud department shut you down permanently if they catch you, but many state attorneys general are bringing criminal charges against flagrant offenders, with eBay’s cooperation.”

Read more in this msn.com article found via this Small Business Brief post.

Business Recordkeeping Primer

“Recordkeeping is one of those things that most beginning entrepreneurs don’t even think about. As the need for recordkeeping dawns — usually as the result of harping by the entrepreneur’s accountant, banker, attorney — a recordkeeping system gradually evolves — albeit reluctantly…

Good recordkeeping does require time and effort — but it’s also necessary. How much time and effort it requires depends on how you approach it. The fundamental axiom of Quality applies as much to recordkeeping as to every other business process — it’s always easier to do things right the first time.

If you let your recordkeeping evolve haphazardly — “fixing” it only as “problems” result — you will find that, over time, you will have put much more time and effort into the process than if you had simply done it “right” at the start.”

This series of articles by Ed Zimmer provides some insight into what constitutes “right”.

Robert’s Rules of…Survival

1. Get and stay out of your comfort zone. I believe that not much happens of any significance when we’re in our comfort zone. I hear people say, “But I’m concerned about security.” My response to that is simple: “Security is for cadavers.”

2. Never give up. Almost nothing works the first time it’s attempted. Just because what you’re doing does not seem to be working, doesn’t mean it won’t work. It just means that it might not work the way you’re doing it. If it was easy, everyone would be doing it, and you wouldn’t have an opportunity.

3. When you’re ready to quit, you’re closer than you think. There’s an old Chinese saying that I just love, and I believe it is so true. It goes like this: “The temptation to quit will be greatest just before you are about to succeed.”

4. With regard to whatever worries you, not only accept the worst thing that could happen, but make it a point to quantify what the worst thing could be. Very seldom will the worst consequence be anywhere near as bad as a cloud of “undefined consequences.” My father would tell me early on, when I was struggling and losing my shirt trying to get Parsons Technology going, “Well, Robert, if it doesn’t work, they can’t eat you.”

5. Focus on what you want to have happen. Remember that old saying, “As you think, so shall you be.”

6. Take things a day at a time. No matter how difficult your situation is, you can get through it if you don’t look too far into the future, and focus on the present moment. You can get through anything one day at a time.

7. Always be moving forward. Never stop investing. Never stop improving. Never stop doing something new. The moment you stop improving your organization, it starts to die. Make it your goal to be better each and every day, in some small way. Remember the Japanese concept of Kaizen. Small daily improvements eventually result in huge advantages.

8. Be quick to decide. Remember what the Union Civil War general, Tecumseh Sherman said: “A good plan violently executed today is far and away better than a perfect plan tomorrow.”

9. Measure everything of significance. I swear this is true. Anything that is measured and watched, improves.

10. Anything that is not managed will deteriorate. If you want to uncover problems you don’t know about, take a few moments and look closely at the areas you haven’t examined for a while. I guarantee you problems will be there.

11. Pay attention to your competitors, but pay more attention to what you’re doing. When you look at your competitors, remember that everything looks perfect at a distance. Even the planet Earth, if you get far enough into space, looks like a peaceful place.

12. Never let anybody push you around. In our society, with our laws and even playing field, you have just as much right to what you’re doing as anyone else, provided that what you’re doing is legal.

13. Never expect life to be fair. Life isn’t fair. You make your own breaks. You’ll be doing good if the only meaning fair has to you, is something that you pay when you get on a bus (i.e., fare).

14. Solve your own problems. You’ll find that by coming up with your own solutions, you’ll develop a competitive edge. Masura Ibuka, the co-founder of SONY, said it best: “You never succeed in technology, business, or anything by following the others.” There’s also an old Asian saying that I remind myself of frequently. It goes like this: “A wise man keeps his own counsel.”

15. Don’t take yourself too seriously. Lighten up. Often, at least half of what we accomplish is due to luck. None of us are in control as much as we like to think we are.

16. There’s always a reason to smile. Find it. After all, you’re really lucky just to be alive. Life is short. More and more, I agree with my little brother. He always reminds me: “We’re not here for a long time; we’re here for a good time.”

The above is included with the permission of Bob Parsons, founder of GoDaddy, (http://www.bobparsons.com) and is Copyright 2005 by Bob Parsons. All rights reserved. The full text of the post is availableHhere.

Making Your Threats Credible

‘This is the dilemma confronting negotiators who make threats: Your threat will be credible only if the other side believes it’s in your best interest to follow through—yet you probably made the threat at a point when the other side doubted your resolve. After all, if it were obvious that you were ready to walk away, you wouldn’t have had to threaten at all!

As this paradox highlights, the credibility of threats is always in question. What follows are six ways to make your threats more credible in negotiation.

1. Increase your costs of not following through on your threat…
2. Visibly restrict your options…
3. Visibly incur sunk costs…
4. Delegate authority to someone who will follow through on the threat…
5. Create and leverage a reputation for making credible threats…
6. Leverage the shadow of the future…

As many of the strategies suggest, sometimes the best way to make your threat credible is to act in a way that would normally be considered irrational. Restricting your options, sinking money into a potentially useless enterprise, and surrendering authority are the types of behaviors that smart negotiators usually try to avoid. It is critical to understand, however, that these tactics don’t work because they make you seem irrational or unpredictable but because they fundamentally alter your strategic options and those of your counterpart.

Read more in this HBS Working Knowledge article.

US, Canada, Mexico Agree on Common E-Commerce Framework

The US, Canada and Mexico have agreed on a Framework of Common Principles for Electronic Commerce

“The framework includes a plan to establish a formal process for consultation on issues related to the protection of personal information and trans-border data flows.”

Via this Information Policy post.

Recent Changes to HSR Premerger Notification Rules

Stoel Rives LLP recently issued this client alert bulletin:

“Under the Hart-Scott-Rodino Act, parties to mergers and acquisitions of a certain size must provide advance notification to the U.S. Department of Justice and the Federal Trade Commission before the transaction can close. Failure to provide the required notices and await the termination of the 30-day statutory waiting period can result in significant penalties.

The FTC recently announced two sets of changes that affect what types of transactions need to be reported.

First, the jurisdictional thresholds were increased to reflect inflation-based adjustments in the levels established under the Act. The new thresholds, which became effective March 2, are as follows:

-Transactions having a value of $53.1 million or more are reportable if one party to the transaction has assets or revenues of at least $106.2 and the other party has assets or revenues of at least $10.7 million

-All transactions valued at $212.3 million or more are reportable

Second, the FTC announced a new approach to transactions involving noncorporate entities such as partnerships and limited liability companies. Under prior rules, the formation of a partnership was not reportable under the Act, whereas the formation of an LLC was reportable if the size of the transaction and size of person tests were met. Acquisitions of partnership interests and LLC interests generally were not reportable unless they resulted in the acquiring party holding 100 percent of the interests. Under the new rules, assuming jurisdictional thresholds are met:

-The formation of an LLC or partnership is reportable if one person controls the entity upon its formation.

-The acquisition of an interest in an LLC or partnership is reportable if a person acquires control of the entity through the acquisition.

-Under both rules, a person will generally control an entity if the person has the right to 50% of more of the entity’s profits or 50% or more of the entity’s assets upon dissolution.”

These changes became effective on April 7, 2005.

Do Patents Protect Small Companies?

“Patents are just negotiating chits in a Big Company Chess Game. You not only need the patents but you need lots and lots of money to play against the ‘Big Boys’.

If you don’t have the financial resources to support years and years of patent litigation, then your patents have no teeth and therefore your negotiating chit has no credibility in the eyes of your potential licensees (potential licensee = future violators) of your patents…

A small company with a significant patent in an area deemed of strategic importance to the deep pocketed companies is always of interest but as the CEO of the “little guy” you can’t over-play the hand — unless you have deep pocketed backers — meaning industry players — NOT investors…

When a big company comes knocking, that is your opportunity — but also a warning sign of which you’ll only get one — if you rebuff them, you are headed for trouble…”

Read more in post from Christian Mayaud.

If Mere Mortals Can’t Run It, Your Business is Not Scalable

“Only scalable businesses can achieve the high-growth characteristics required to command market multiples attractive to venture investors.

So what is a “scalable” business?…to be truly scalable, a business must satisfy two criteria…incremental costs must be decreasing — ideally approaching zero. This means that the cost of each incremental dollar in revenue must be going down…

Criteria #2 is the real key to understanding “scalability” — but, as with criteria #1, it is also a necessary, but insufficient, criteria. For a business to be scalable — the business must be able to grow — even if you throw mediocre resources at it (both in terms of people and money — i.e., it must be able to flourish with dumb people and dumb money)

The importance to entrepreneurs is this corollary:

If your business requires smart talented hard-driving management or sophisticated investors or customers to grow, it is, by definition, NOT SCALABLE!!!…While VCs always prefer a good management team, it is really a bonus.

If a company’s long-term requirements includes any “super-humans” or “super-heroes” (management, customers, employees, investors, whatever) —– IT IS NOT SCALABLE!

If mere mortals can’t run it — IT DOES NOT SCALE!”

Read more in this Sacred Cow Dung post.

Why Incorporate in Delaware?

“Companies and individuals deciding to establish an entity in the United States often will elect to set up a corporation…in a state such as Delaware that offers certain advantages over many other states. These advantages include:

Ease of establishment…

Flexibility for the owners…

Latitude for directors…

Clear and well developed corporate law…

Tax advantages…Delaware imposes no state corporate income tax on certain types of entity (qualifying holding companies and investment companies) unlike many other U.S. states. For other entities – incorporated but not doing business in Delaware– the sole tax imposed is an annual franchise tax. In the case of companies with a small number of authorized shares the annual tax payable is minimal.

Delaware Intellectual Property Holding Companies…Because qualifying holding companies are not subject to any Delaware income tax, many businesses have taken advantage of this to achieve savings from other state income taxes. Typically, one or more operating companies will transfer their intellectual property (patents, trademarks trade names, copyrights, etc) to a Delaware IP holding company subsidiary. The subsidiary will then license the rights to the IP back to the operating group in exchange for an ongoing royalty payment. The operating company(s) will deduct the expense of these royalty payments against state income taxes owing.

A number of these arrangements have come under challenge in other states in recent years especially where the IP holding company is used solely to hold and license back the IP (and not for any other business purpose such as third party licensing, IP monitoring or IP enforcement). While not all state challenges have been successful, in a number of cases courts have negated the intended tax savings. (One type of state challenge has been to seek to subject the IP holding company’s income to tax in the state of the operating company; other states have sought to deny the benefit of the expense deduction against the state income tax.)…

These challenges have cast doubt on the use of arrangements designed purely to avoid income tax in other states…”

Read more in this article from the Australian Trade Commission.