Sales Tax on Web Purchases - YOU VOTE!

Every consumer will be paying more, a lot more, for every purchase made via the internet if the State governments have their way.

Where's the Consumer in this fight?

As State governments look in very nook-and-cranny for revenue to fund, in most cases, overspending on pork projects and bureaucratic bloat the notion of taxing every single online sale is extremely tempting.

Under the guise of  'protecting the brick-and-mortar' businesses within their State - local governments are hell-bent on collecting sales tax on online transactions. Now, everyone knows that internet retail sales have risen dramatically over the last decade, but they still represent only a fraction of all retail sales, and in-store sales have risen as well over the same period.

Last Tuesday, the Supreme Court struggled to decide on the matter as to whether internet retailers should have to collect sales taxes in states where they have no physical presence.The States argued that they are losing tens of billions of dollars under a 1992 Supreme Court ruling that helped spur the rise of internet shopping.

At the end of the day, however, it was not clear whether there were five votes to overrule the '92 decision - which bars States from collecting sales taxes from companies "that do not have a substantial connection to the State."

Several of the Justices expressed concerns about imposing crushing burdens on small businesses that sell goods on the internet and about making them pay BACK taxes. Justice Sotomayor stated the the case "raised a host of questions and a whole new set of difficulties", and "that the Congress and not the Supreme Court was the right forum in which to settle the matter."

Both Justices Roberts and Kagan noted that as Congress has so far chosen not to act was itself a telling indication that it was satisfied with the current system. There was a lot of banter between the attorneys representing both sides; however, I believe the Justices are looking at the wrong side of the issue.

It is not a question of how much of a burden would be put on the retailers to collect the taxes but the huge monetary burden that would be put on the consumer and once allowed, as we are all fully aware, the sales tax would continue to rise. In many States, the sales tax is 8% and higher.  That's 8% more for, pretty much, everything purchased - from clothing to restaurant meals.

The burden is completely shifted to the consumer from the retailer, as the cost of collection of the tax will be added to the price of the product. If a retailer is in such desperate shape that a sales tax will make or break them, they should probably be out of business anyway! Why is it always the consumer that has to carry the burden?

I would like to ask you to give me your vote on this issue. Yes, if you are in favor of taxing all internet purchases. No,  if you are against it.

Again, the issue in question isn't about the burden on the retailers to collect the tax , BUT THE FINANCIAL BURDEN ON ALL OF US - THE CONSUMERS! 

Fund-House

Additionally, there is the issue of paying taxes to a State in which you have no say (vote) as to how the tax dollars are being spent - you know, taxation-without-representation. Isn't that in the Constitution?

Please vote,
Jim Lavorato

Storytelling: The Best Marketing Tool

Delivering a really great customer experience is a sure-fire way to get others to tell your Brand narrative (story).  Because when others are doing your storytelling it makes your story that much more credible and engaging.

Companies should share other people's stories as this demonstrates your authentic engagement with others. The best thing to do to endear your Brand to consumers is to share stories about the topics they care about. Putting stories together builds what's referred to as a 'brand's meta-narrative', which inspires, not only customers, but employees so they think and behave 'on-brand'.

Nelson Farris, a Nike senior executive, has the title of  'Chief Storyteller', and he and all the other Nike senior executives spend a good deal of their time relaying stories to employees. This is to remind all of Nike's staff of the brand's pillars that the company rests upon.

You need storytelling and story-doing to ensure you are building your brand authentically through actions and not just words - known as story-sharing. So, all three: storytelling, story-doing, and story-sharing need to be aligned and unified with story-building to make your brand's meta-narrative.

For example, last year, REI, the upscale sporting good store, closed all if its retail outlets on Black Friday (the busiest shopping day of the year) and encouraged its employees and customers to do something "outside" instead. This was very smart brand building as it not only generated lots of buzz for being so contrasting to the norm but it allowed REI to tell the 'story of its values' and how it supports the greater outdoors.

Storytelling is crucial to brand development and it should be used whenever possible.

Stay in touch,
Jim Lavorato

Corporate Hexing: Using Voodoo on Abusive Boss

One of the main reasons given by entrepreneurs for striking-out on their own is job frustration. However, before reaching the "I'm gone" point, venting your frustration by using voodoo is on the rise for appeasing workplace stress.

Sticking It To The Boss

The use of voodoo dolls, it seems, can provide employees a sense of justice without confronting an overbearing boss - even if preformed on an on-line doll.  Two separate studies, recently released by Canadian Universities, found that even a symbolic gesture against an abusive supervisor restores a sense of justice.

Respondents were asked to recall a personal less-than-pleasant workplace interaction. Some of the participants were instructed to stick pins on an on-line voodoo doll (which was labeled with the offending boss's initials).  Those that used the doll, universally, reported feeling a sense of justice vs. those that were not given the voodoo doll option. The dolls were a symbolic retaliation against their supervisors. It seems employees care about justice and consider it a fundamental human need. A secondary outcome of using the dolls accrued to the benefit of the organization, as it reduces workplace stress and improves the work environment.

The researchers noted that there must be a way for employees to restore their sense of justice without sabotaging the supervisor. While employers must ascertain the reason for the employee frustration and ensure that everyone is treated fairly.

Well, if it works ... do it. I could be that a little hexing goes a long way.

Stay in touch,

Jim Lavorato

Brand Marketing Goes Loopy With GIFs

Graphics Interchange Format, aka GIF, is an image format that is no more then 6 seconds in duration and repeated over and over in an endless loop. Brand marketers have taken to creating GIFs to help consumers express themselves through these looping videos that, in many cases, are more effective than regular social ads.

 Six second ads, which have become ubiquitous on social platforms, is now being opted for the GIF. This is because GIFs can express a mood or emotion that is easily shareable and easier to produce than a six second ad.  Many times GIFs are humorous - they made us laugh and that reaction very shareable, making for great brand engagement.

The GIF, if created properly, turns advertising into content and the message is so seamless and unoffensive that the viewer doesn't consider it as watching an ad. Additionally, GIFs are more cost-effective to produce than ads and are shareable!

GIFs are the new future of social advertising. They are easier to produce, cost less, and are much more engaging than regular social ads, and are very shareable.  Use them.

Keep in touch,

Jim Lavorato

What Do Crowdfunders Look For

Although crowdfunding can potentially be a competitor to Fund-House, in many cases, we recommend to clients that they use crowdfunding for seed money to kick-start their business.

Crowdfunding has been increasing. According to data from Pew Research, in 2015, total funds generated through crowdfunding campaigns totaled over $34 billion - and its grown from there. However, with this growth, it has become more difficult to make sure that your campaign stands-out among the thousands of others vying for funds. To ensure success, or at least, improve your chances, here are several things to do:

PLEDGING

The average pledge amount is approx. $403. What this says is that people are willing to back that amount if they find your 'pitch' has value. So, if possible, center your pledge rewards in the $200-450 range. This will afford you a higher chance of exceeding your funding goal.

Pew Research also found that although large donations are not uncommon, with 21% of funders contributing $51-100 and another giving $101-500 to a single campaign, the vast majority, roughly 49%, contributed a lower amount, $11-50.

The key is to show your value proposition. You must get creative with your reward tiers. Finding the dollar amount that hits the right price point.

HITTING THE RIGHT DEMOGRAPHIC

Male funders far exceeds female backers - about 85% to 15%. Therefore skewing your campaign to men greatly improves your odds of getting the funding you desire. This doesn't mean that the product or service you are pitching must be for men only as a female oriented product will do well if it is viable and compelling. What is does tell you is that in the community of crowdfunding male funders dominate.

Additionally, Pew found that 30% of funders are in the 18-29 age group, with another 27% in the 30-49 group.

RECAP

Getting it right the first time is requisite in crowdfunding. Make sure you are hitting the right demographic, are pledging for the right amounts, and are addressing a male audience - and don't forget about the shipping logistics.

Stay in touch
Jim Lavoarot

Landing Pages - Getting Them Right!

Landing Page: A standalone web page created specifically for marketing or promotion upon which a visitor 'lands' when they have clicked on an online advertisement or similar notice (referred to as a call-to-action - CTA).

A landing page correctly constructed has to convey information, encourage a CTA, and reflect your brand - if it doesn't do this it won't provide the experience or engagement your customer expects. Therefore, designing an effective landing page takes planning and great design.

HAVE A CONCISE PURPOSE

Answer this question. What do you want users to do when they get to the landing? 
Watch a video? Enter information? Purchase something? Click a link? Interact?
BE SPECIFIC! Everything on the landing should be guide users to an end goal.

WHO IS THE AUDIENCE?

Landings MUST BE  AUDIENCE - CENTRIC! Therefore you need to have a very clear understanding of who your target market is. Gender? Age? Location?  The landing's design
must appeal to the audience targeted and engage them.

STRONG IMAGERY !

The landing MUST HAVE VERY ENGAGING GRAPHICS, VIDEOS, OR IMAGES  An element of mystery or  surprise goes a long way in engaging users.

A COMPELLING STORY!

All landing pages have various levels of copy. Each word of the narrative must be carefully scripted to move the users to the CTA.

Headline: a few powerful words that instantly grab attention. 


Body Text: the 'message', which must be concise, direct, and engaging.

CTA: A button or link that directs the user - it's the next step. Must be easy to see and execute.

Footer: The 'touch base' stuff - contact into., social links, blog direction, etc.

NAVIGATION THRU KEYWORDS

Think of navigation elements as KEYWORDS that provide user information and direction.  These navigation cues assist users in understanding of what you offer.

THE CTA


Every single user must know exactly what to do when they hit your landing. Clear CTAs are requisite. CTAs can be buttons, forms to fill, instructions, images, animations, graphics.

CUSTOMIZE

Landing should be specific, engaging, and important. They need to be focused and therefore CUSTOMIZED  and not look like an extension of your website. Take to time and effort to be unique and not have a 'me too' look.  Always be conscious of  your demographic.

Visit: www.FundHouse.us

BRAND RELEVANCE

Make sure the landing is relevant to your Brand by including visual cues that connect it to your overall business message - stay 'on brand'.  Include your logo and use the same font as is used in your website's header - users, are smart, they will know the landing is special and content different but they will also know they are still interacting with your Brand.

THE FLOW

A well constructed landing makes usability obvious (where to go and what to do). The landing page must FLOW.  Add in levels of imagery, branding/logo, pictures, developing a tiered approach so users will know instantly how to engage with the page.

A landing page is NOT your homepage. Landings are fast becoming the first stop for website visitors. Designing the BEST landing pages will make your business shine in the vast and murky expanse of the web.

Stay in touch,

Jim Lavorato

Millennials' Changing Consumption Habits

Millennials are fast becoming society's changing demographic with regards to their spending. 

They are more likely to share a car than own one, rent a home vs buy, and invest in experiences over material goods. Millennials don't like to commit, particularly when it comes to money and investments. Don't forget, the average Millennial is strapped with $30,000 in student debt and witnessed the economy tanking the during the Great Recession of 2018.

But circumstances change and as the 'Y generation' is gets older and matures their spending habits are beginning to change - ergo there are four sectors of the economy that stand to benefit.

1. Housing: in 2016 Millennials were the largest group of U.S. home-buyers, indicating their need to switch from renting to purchasing homes. In fact, affordable housing inventories are falling pushing prices higher throughout the country. Look for  developers, builders, construction,              businesses benefitting greatly from this trend.

2. Household Durable Goods: In 2017, a study found that over 75% of Millennials would rather            spend their money on experiences vs. material goods - this is changing. The home buying                    trend will increase Millennial spending on home furnishings, appliances, and all sorts 
    of home goods from lawnmowers to garage openers.

Fund-House Ventures : www.FundHouse.us

3. Retail: Although purchases via the internet have grown exponentically it still only accounts for  about 10% of  all retail sales. The Millennials are going to push retail purchases much higher, and the businesses that will benefit most are those with operations in both the physical and virtual worlds. This is already manifesting itself. Walmart redoubled its online operations. Amazon, on the other hand, is going for brick and mortar with its purchase of 400 Whole Foods stores and building its own 'dash' shopping food stores.

Millennials spending habits are changing

4. Autos: Many Millennials rely of Uber and Lyft for transportation. As they start families, however, owning cars, SUVs, trucks, and minivans becomes a necessity. We are already witnessing the auto industry aligning with Millennials'  by manufacturing energy efficient vehicles that provide lots of safety features.

Despite their penchant for sharing, experience related activities, and online everything Millennials are moving into another stage in their lives which necessitates them changing their purchasing habits. That said, Millennials will continue to drive the on-going revolution in consumer spending. 

Stay in touch,

Jim Lavorato

The Net Neutrality Prize - A Follow-Up Post

As a follow-up to my recent post on the Net Neutrality battle being waged between the ISPs and the edge providers it appears that the recent neutrality rule rollback by the Federal Communications Commission has spawned  discussions on the internet of everything.

Both sides came to Capitol Hill in a discussion hosted by the Congressional Internet Caucus, to discuss possible approaches to agreement. But, try they might the conversation proved  to be as much about what still separates the parties than it was about agreement on the issues.

Both sides do agree on rules preventing blocking and throttling of content, even restoring them to the FCC.  However, lobbyists for the edge providers are  pushing for a Congressional Review Act resolution to nullify the FCC's December rollback of the rules. Pro ruling advocates are also backing  State efforts to reverse the FCC decision through their own neutrality bills or executive orders mandating neutrality in ISP contracts.

The pro-rule activists want the FCC to be able to regulate broadband rates if said rates are a barrier to deployment.  While the ISPs say the FCC should not be in the business of regulating broadband rates, - which should be market driven.

So, as it now stands both sides are at logger-heads and the debate remains unsettled.

Keep in touch,

Jim Lavorato

What Legal Structure To Choose For Your Business

How should I legally structure my business?

I get this question almost every time when coaching a start-up. Needless to say, it is an important question and one which requires some thought about how you want to manage your new business.

There are a number of business structures each with pros and cons and centering, mainly, around the issue of liability with the secondary considerations regarding financial and tax reporting.  The types of business structures and their definitions are:

1. Sole Proprietorship 
2. General Partnership
3. Limited Partnership
4. Limited Liability Partnership
5. Limited Liability Company (LLC)
6. Sub-chapter S Corporation 
7. C Corporation

- A Sole Proprietorship consists of one individual or married couple. The most simple to form, the SP is the most common form of business structure. It is easy to manage and not burdened with legal controls or tax requirements and reporting.

Their principal problem is that the owners are personally liable for all debts and legal actions held against the business.

- A General Partnership consists of two or more individuals who agree, in a written contract, to manage the business and share in its profits or losses. Like a Sole Proprietorship, under a General Partnership, each partner is personally and legally liable for debts and legal actions against the business.

- A Limited Partnership (LP) is comprised of two or more general partners and one or more limited partners.  The general partners manage the business and share fully in all profits and losses. The limited partners share in the profits but are limited in the losses to the extent of their investment and are normally not involved with the management of the company.

- A Limited Liability Partnership (LLP) is like a General Partnership but the partners do not have personal liability for the negligence of the other partners. This structure is favored by doctors, lawyers, CPAs, and other professional businesses.

Fund-House Business Coaching @ www.fundhouse.us

- A Limited Liability Company (LLC) is a common structure used by one or more individuals (or entities) through a written agreement. This agreement details the business's provisions for the management and distribution of profits and losses. LLCs can engage in any type of business except banking and insurance and the owners are limited as to their liability.

- Corporations - The law views a corporation as an entity separate from its owners. It has its own legal rights, independent of its owners, which are shareholders in the organization. They are more complex and costly to establish and require extensive financial and tax reporting vs. other structures.

S- Corporations, provides for very limited liability on the owners who are shareholders.  These shareholders share in the profits and losses based upon the number of shares held by each and are reported on each shareholders personal tax return each year. The S-Corporation provides for more liability protection than an LLC or Partnership.

C - Corporations are large organizations whose ownership shares are normally publicly traded on an exchange. Owned by shareholders C Corporations are taxed as separate entities and can retain earnings which an S - Corporation can not.

Most start-ups structure as LLCs or Sub S Corps. which provide for limited liability on the part of the owners - with the Sub S providing an additional level of liability protection.

Best,

Jim Lavorato

Disruptive Technology & The Brand Marketer

Disruption use to be a dirty word. Now, disruption is relevant, creative, and forward-thinking.

Amazon entering the super-market and shortly the drug prescription business. Uber in the taxi business, Airbnb in the rental property business, Netflix in content distribution, crypto-currencies and so on - disruptive technology is upending all aspects of life.

This is a challenge for brand marketers as unlike traditional marketers, who earned their keep by stroking  our anxieties, the new marketing mantra is to fashion real-world solutions that deliver value propositions that measure-up to our hopes and dreams.

New technologies require adjustments and compromises; however, there is no doubting that the advance of technology has directly caused the life of the average person to be richer, freer, healthier, and happier.

Fund-House Ventures - The Source For Innovative Thought

Apple, Amazon, Google, Intel, and others are tech powerhouses because we like what they sell. They have won are loyalty. There is plenty of evidence of  technology has-beens which are grim reminders that success is only as secure as the ability to stay nimble and responsive to evolving consumer preferences. Competition is very fierce. Anything we don't like about one product will be exploited quickly by another.

Many things affect what consumers need and want. Brand marketers must constantly respond and bring new solutions to the marketplace. Demand is shifting as growing numbers of consumers look for a better balance of time-on and time-off.

Social engagement is on the increase as there is growing desire to make personal connections. Referred  to as the Kinship Economy this is a big and growing opportunity for brand marketers to build on brand-to-consumer interaction and be disruptive.

Keep in touch,

Jim Lavorato

An Angel's 10 Commandments

Rumor has it God gave Moses 15 Commandments but he dropped a tablet on his way down Mt. Sinai.  For Angel Investors there are only 10. They should be used wisely and often by Angels and Investees alike. 

1. If it doesn't feel RIGHT - PASS.

2. Dealflow: There is NO SHORTAGE of DEALS

3. INVESTING takes TIME to LEARN - be PATIENT

4. VALUATION matters - for EVERYTHING

5. BACK $0 Companies.  FOCUS on the 100-1000x RETURN POTENTIALS

6. JUDGMENT is OVER-RATED. FIND the BEST PEOPLE in each MARKET 

7. Invest ONLY is Your Spheres of INTEREST

8. HARBOR NO OPINIONS. Listen and USE INTUITION

9. DEVELOP Your INSTINCTS

10. Look at a LOT - Invest in a FEW

Internet Free-for-All

As a follow-up to my 12/12/17 post regarding Net Neutrality and the prediction that the FCC would rollback regulations against the ISPs - the internet is now in a retooling phase.

Elections have consequences and one is a move to deregulated internet access. What this means is that the ISPs (the cable and telco internet providers) will now be trying out paid prioritization business models in the not to distant future.

The FCC and Justice Department will be watching closely as this saga unfolds. There is a sense that this move by the FCC levels the playing field in terms of regulation as it relates to net neutrality and the growing attention on social media and search platforms and off of the ISPs (which have shouldered the heavy gatekeeper regulations).  All this, while the internet mavens (called edge providers) like Google, Facebook, Twitter, Netflix, et. al. remained the innovative upstarts, even as their annual revenues rivaled that of most countries GDP.

My feeling is that this new deregulation is good for the internet overall; however, look for scrutiny to continue on both the ISPs and edge providers by not only the FCC and DOJ but Congress as well. 

Keep in touch,
Jim Lavorato

FUND-HOUSE'S 2018 TREND FORECAST

As 2018 unfolds I thought it would valuable to provide our viewers with a peek into the future, so here goes:

Software: the major disruptor to doing business in the traditional way. Think, Uber, they  own no cars yet are the largest taxi company on the planet.  Airbnb is now the biggest hotel company in the world, yet they don't own any real estate or hospitality properties - it's all about software.

AI: will transform whole industries. For example, law school graduates will find it hard to get jobs because IBM's Watson can provide legal advice in seconds with a 90% accuracy compared with 70% accuracy by humans. If you are planning a career in law,  think twice - only legal specialists will remain.

Facebook: has developed pattern recognition software that can recognize faces better than humans.

Autonomous Cars: Time to do other things in your commute

Autonomous Cars: huge disruption. Over time there will be on reason for many people to own a car. They will just call for a car, it will show up, and drive you to your destination. No need to park. Only pay for driven distance. Work or do other things while on trip. Drivers licenses will become obsolete as will car ownership. No need for parking garages. Safer with less traffic fatalities. Auto insurance will not be required and if needed will be much cheaper - the auto insurance business with be transformed.

Healthcare: Tricorder X will shortly appear on the scene. A Tricorder is a medical device that works with your cell phone. You will be able to perform retina scans, take  blood samples, and breath tests.  It will use these to identify over 50 diseases. Eventually, everyone will have access to world class medical analysis - at very low cost.

 www.fundhouse.us

3D Printing: The cost of a 3D printer has gone from over $18,000 to $400 in 10 years  Many manufacturers use 3D printing for a variety of products.  For example every shoe manufacturer uses it to produce custom shoes for each customer.  Airplane spare parts, as well as, parts production can be made on-site to accommodate remote areas where service is required.

Food:. The first Petri dish veal has been produced and it is cheaper than calf produced veal.  30% of all agricultural land is devoted to cattle - imagine if cattle were no-longer required.

Longevity: Currently the average life span increases 3 months per year. But the increase is itself increasing so that by 2036 there will be a one year increase per each year. Shortly, the average age will be over 100. This will have massive impact on society.

In a nut shell, every business should be asking "can what we are producing now be used in the future? If the answer is NO its time to change your company's focus and markets.

Just saying,
Jim Lavorato

Fund-House's Branding Services

Brand development and management are cornerstones of  the Fund-House's consulting offerings.

FUND - HOUSE

A foundational business component and one of the most difficult challenges for every business is the design and implementation of a unique brand that addresses customer needs. Brand-building is not communicating a message it's about internally developing and managing your business around your brand.

We view every engagement with a fresh perspective and design an approach that is specific to each client's target market and customer base, with the goal of closing the gap between your brand vision and operational realities - this is your brand's DNA.

Fund-House addresses every Brand consulting project as a challenge and, more importantly, an opportunity to demonstrate our capabilities:

- Conducting Diagnostic Evaluations - The Brand's Compass / Guide
- Developing the Brand Platform - The Brand's Identity and Competitive Positioning
- Brand Architecture - Concept Design and Logo Creation
- Touch-point Wheel Analysis - How The Brand Mates With The Business's Vision
- Engagement Design - Conceiving and Creating The Brand Narrative

Our start point is conducting a Brand Development Survey.  This is where we find out what the Brand means to the management team and how it will be embedded into all facets of the business.  From there we develop a Brand Compass which guides the way to all of the other touch-points in the process of creating a Brand management policy.

Contact us for a complimentary consult on creating a Brand or for taking a good Brand and making it a great Brand.

Fund-House Ventures

jlavorato@fundhouse.us
www.fundhouse.us

Should The Government Regulate The INTERNET ?

Bar none, Government regulation of the internet is the single most important issue of our time. The regulation of the internet will impact everyone and very profoundly. 

ISPs and Edge Providers Need to Keep It Open

Network Neutrality is the cornerstone of the government's involvement and yet few individuals fully understand what it means. Lets simplify it.

Advocates for net neutrality, principally led by social media providers (Facebook, Google, Twitter, etc.) and their advocacy groups are in favor of  rules needed to prevent internet service providers (ISPs) (telecoms and cable companies that provide internet service) from restricting or controlling web access - while those favoring deregulation argue that rules are not required to control the ISPs.

What the government is attempting to do is decide on how to approach a transformative technology that reaches into every corner of our lives and to do so based on rules that were originally written in the days of the telegraph!

This Thursday (12/14/17) the FCC will be voting to deregulate the ISPs. This action will prompt massive lawsuits and a huge ad campaign by the so-called "Edge Providers" - websites such as Google, Facebook, Twitter, or  Netflix, which need the ISPs to reach their customers.

What I believe is that the internet has become so central to everyone's life that it should not be the victim of a battle between ISPs and the Edge Providers forcing the government to intervene (which will only bring confusion, disarray, and dreaded over-reach in regulation).

It would be very difficult for the government to apply rules against the ISPs while letting Google and Facebook continue to operate with relatively little oversight or restriction. For that reason, many believe the FCC ruling on Thursday will deregulate the ISPs, placing them on the same regulatory basis as the Edge Providers. They may have started in garages or dormitories but the market capitalization of the Edge Providers dwarfs that of the ISPs. If you look at who makes the most money from the internet ecosystem, it is obviously the Edge Providers.

On the flip side, no consumer pays a monthly subscription to Facebook. Facebook also only has a window on a user's online activity, while an ISP has a window into all of a subscriber's apps and services.

My thought, let the ISPs experiment with new business models and development products that benefit them and their internet users, in the meantime, the Edge Providers are and will continue to do the same - all under the watchful eye of the FCC, FTC, and Dept. of Justice.

Just saying,

Jim Lavorato

Fund-House Case Study #1 - THE ANSWER

Well, have you got the answer?  What does American Wealth have to do to extricate itself from Banco del Rio's very shrew proposition? 

Answer: Bring another party into the deal. The only way for American Wealth to get out of its dilemma was to bring in another investor who would be willing to take half of American Wealth's investment in Banco del Rio. 

In this case, the new investor was a Middle Easterner with large oil interests, lets call him Sheik Bin Real.  The proposal to Bin Real was that American Wealth would invest an additional $100 million in Banco del Rio, then, in a tandem transaction, sell one-half on its 25% position in Rio to Bin Real for $100 million. Ergo, there would be no dilutive impact and American would not have to write-down its investment.  And yes, as you've already guessed, American Wealth lent the $100 million to Bin Real. A win, win, win. 

Many times situations may seen, on their face, to be insurmountable but examining every angle and brainstorming will often spawn a solution to the problem.

Stay in touch,
Jim Lavorato

Fund - House Case Study #1 - An Investment Conundrum

Every so-often I will be presenting a management problem taken from a real-life situation I was personally involved with. This first F-H Case Study, entitled "An Investment Conundrum", centers around an investment problem that on its face appears to have no easy, if any, solution.

Rio

The Background:

Banco del Rio is a Brazilian Merchant Bank that is managed by Rinaldo Bosa, who is CEO and Chairman and who also owns 25% of the Bank.  BR is capitalized at $400 million with each of three other partners owning 25% of BR. These investors consist of a large U.S. multinational bank (American Wealth), a Japanese merchant bank (Edo Trust), and a Swiss investment company (Geneve Partners). 

Banco del Rio is five years old. Since inception it has made little profit and the return on investment has been negligible. However, Bosa believes that if BR were capitalized at a higher level he would be able to fund better and more lucrative projects in both Rio and Sao Paulo.  To this end, Bosa contacted the three other owners of BR requesting that each invest an additional $100 million; thereby, capitalizing BR at $800 million.

Bosa further stated that he was putting up a building located in the financial district of Rio, and appraised at $100 million, as his share of the additional capitalization. Each of the partners were told they had 60 days in which to decide if they were going to make their additional $100 million  investment. Any shortfalls through non-participation would be offered to the remaining investors.

The Conundrum:

Within 30 days, both Edo Trust and Geneve Partners had notified all parties that they were going to participate and would be investing an additional $100 million each in Banco del Rio.  American Wealth, had decided that an additional $100 million investment in Banco del Rio was not prudent and would not be made. 

The team working on this project at American Wealth consisted of the EVP and Head of the International Department, the SVP of Latin American Banking, and myself, VP of International Finance and Operations. Our consensus was that the primary reason for American Wealth's initial investment in BR was to gain more access to Brazilian corporations by using BR as a networking conduit for our Rio-based business development and lending staff - which it did. However, given BR's lackluster performance ponying-up another $100 million was not going to happen. 

The conundrum was that if American Wealth did not make the investment its original $100 million would now be diluted - as the original 25% ownership would now be only 12.5% which would trigger a 50% or $50 million write-down of the International Department's earnings - and time was running out! 

What To Do? 

Obviously, the Head of American Wealth's International Department, was not going to accept a $50 million hit and so it was necessary to come up with a solution to this problem and fast. 

Tomorrow I will present the outcome of this case. In the meantime think about the issues presented and try to come to a conclusion.  Did in fact American take the $50 million write-down? And make up for it by making more loans. Did American pony-up the additional $100 million investment? And justify it by increasing business in Latin America generally. Was there no viable solution which would satisfy all parties concerned?

EAT Or Be EATEN

For Disney - It's EAT or be EATEN

There has been a take-no-prisoners war raging between content providers and distribution providers for over ten years.  The battles being pitched between Hollywood and digital domain stalwarts.

The Hollywood studios have, by and large, been the victims - being gobbled-up by the likes of Comcast (Universal), Sony (Columbia), Fox (20th Century Fox), Paramount (Viacom), Time Warner (Warner Bros. cum Viacom).  Only Disney and MGM (privately owned) remain old-school studios. On the other side, Amazon and Netflix have won the digital streaming battle - not only distributing Hollywood's content but producing their own high-quality content.

Given this, Disney's only play was to eat or be eaten and it decided to 'eat', and what it wants to consume is a big hunk of Fox.  Rumor has it that Disney is going to offer Fox $74 billion for the 20th Century Fox film and TV studio, the FX Networks, National Geographic Channels, and 22 regional sports networks.  Fox, if seems, wants out and views its media assets as at their peak value. Disney is willing to bet big that becoming significantly larger will, one: prevent itself from being purchased, and two: become a much larger player in the content production and distribution areas  -  the buzz word being 'scale', which would give it the muscle to battle the social media behemoths going forward.

Stay on touch,
Jim Lavorato

TOP 5 REASONS NEW BUSINESSES FAIL !

Each year thousands of businesses are launched and approximately 80% of them fail in the first year of operation. Why? Why do so many businesses fail. It's certainly not do for lack of effort but there are certain issues that repeat over and over as the reasons for start-up failures.

CASH FLOW (or lack of)

Every start-up should have at least 2-3x operating capital or have access to funding BEFORE starting the business.  This includes all fixed and variable expenses (including salaries).  For example, if you forecast revenue of $50k for the first year of operation and expenses are budgeted for $75k there should be from $150-225k in funding at the ready.

Only in this way can a new venture weather the storm of mis-steps and mis-calculations, that always arise and be able to reassess and redirect the business's vision.

LACK OF DEMAND

So unique. So specialized is the product or service that the market is too small to sustain a thriving business.  A lot of market research needs to go into making sure the product has a demand the drive sales.  Many times proper market research is poorly conceived or lacking as the founders get caught-up in the excitement of their idea.

STAFFING

Proper staffing can be a killer no matter where the company is in its life cycle. Great care must be taken in hiring the right people, developing them, supporting them, listening to them, and incenting them.

NO USP

The business has no Unique Selling Proposition. No differentiation. No uniqueness. For example, every time I attend any networking meetings or socials, at least, 25% of the attendees will be SEO/Web developers.  What sets any of them apart? A business must have a USP and target the right market.

POOR MANAGEMENT

Last, but not least.  The entrepreneur needs to become a manager/leader.  To run a business successfully you need to focus and stay focused on the original vision and build off of that.  And, at all costs, as the manager/leader make certain you are fully informed as to the financial posture of the business.

So, keep these issues in mind:

• Have adequate capital to see you through the first year of operation.
• Delve deep into the market research required.
• Staff properly and diligently.
• Find your USP
• Become a Manager/Leader

Stay in touch,

Jim Lavorato

The TSX-VX: A Great Startup or Emerging Investment Vehicle

Being an Angel/Venture Investment Fund, the Fund-House is always on the look-out for new investment vehicles to assist in acquiring the funding necessary to spur-on promising businesses. This allows Fund-House to evaluate larger dollar opportunities and broaden our investment scope.

One such funding vehicle is the Toronto Stock Exchange's Venture Exchange.  The TSX-VX is a fully regulated public exchange which is used as a stepping stone for junior issuers/corporations through the use of Capital Pool Companies (CPCs).

A CPC is a shell listed on the TSX-VX for the purposes of completing a "Qualifying Transaction" with a business that will become the assets of the public company. A CPC must have, at least, three individuals and a minimum of $100,000 or 5% of total funds raised.

The CPC prepares a prospectus that outlines management's intention to raise between $200,000 and $4,500,000 by selling CPC shares at typically twice the issuance price of the seed shares, and to use the proceeds to identify and evaluate potential acquisitions.

For Fund-House investments (which fall under the Industrial, Technology, or Life Sciences categories) the TSX-VX requirements are as follows:

- Net Tangible Assets of $750,000 or Total Revenue of  $500,000 or Arm's Length Financing of
   $2 million.
- Issuer MUST have significant interest in the business
- Requires a history of operations or validation of business
- If no revenue, than a TWO-YEAR management plan demonstrating reasonable likelihood of               revenue within 24 months.
- MUST have a public float of 500,000 shares, with 20% of Public Shares in the hands of Public
   Shareholders.

For an Angel Investor, such as Fund-House, the opportunity to engage local high-net worth investors is very good for business and reputation. Additionally, finding emerging businesses in the health care and clean-tech industries (which are Fund-House priorities) in the Greater Phoenix will not be difficult.

The TSX-VX is a great alternative vehicle for Fund-House in satisfying established businesses that are growing into larger organizations and require venture funding but through a public forum. 


Stay in touch,
Jim Lavorato
Principal, Fund-House Ventures, LLC 

COLORS: How To Market With Them

We've previously discussed on Fund-House's 'Launch Pad' how colors impact people and how they should be used in logos, names, and imagery for promotion and marketing.

Ad people, graphic designers, and marketers all know full well how certain colors effect consumer behavior and purchasing.  To the extent that color may be the determinant in a purchase - 93% of buyers focus on visual and 85% say color was their primary reason for the purchase.  So, lets look at the various colors and their impact on consumers' purchasing decisions.

RED - Great for sales. An attention getter. Used often in consumer goods packaging or to generate                  interest in a product.

BLUE - Men's preferred color. Associated with peace, water, tranquility, reliability. Provides a sense
              of security. Used by conservative Brands looking for trust - ie. financial institutions.

GREEN - Think healthy, power, nature. Used in stores to relax customers. Stimulates harmony and                     encourages decisiveness. Starbucks only major Brand to use green for it logo.

PURPLE - Royalty, wisdom, respect. Stimulates problem solving and creativity. Frequently used to                      promote beauty and anti-aging products.

ORANGE & YELLOW - Cheerful and optimistic. Yellow can made babies cry, while orange                                                         triggers caution. Used to create a sense of anxiety which can be used to                                                draw-in the impulse buyer and store browser.

BLACK - Authority, stability, strength. A symbol of intelligence, but not if used to frequently.

GRAY - Practical, solidarity, oldness. Too much is not good as it can be depressing.

WHITE - Purity, cleanliness, safety. Perceived as unaltered and clean.

HOW BRANDS USE COLOR

McDonald's - High-energy colors of red and yellow. Green would not work for McD's. As stated, Starbucks is the only major brand to use green. Why? To promote a sense of relaxation.

Contrast reduces eye strain and focuses the user's attention. It is best to use a very bright color for background and a dark color for the product and text.

For websites the use of a monochromatic color in various shades is easy to read. For example, using shades of black/gray/white together. Complementary colors, using two colors that are opposite, for example, red and yellow. Triple scheme - using three colors close on the color spectrum, ie red, blue, and purple.

Note: Information for this article was derived from Small Business Trends 'The Psychology of Colors'.

Stay in touch,
Jim Lavorato
                 
                 

The Executive Summary: A Call-to-Action

How To Write An Executive Summary - Think Call-to-Action Button

1-3 pages which summarizes the overall business plan/proposal and the vision of your company. Clear and concise it encapsulates the reasons for being and pre-sells the whole idea of your venture/proposal: this is the Executive Summary.

It's not a summary at all, but a marketing tool to sell you business to the client (investor). It needs to be persuasive, specific, focused.  Not descriptive but purposeful. Having the just right graphics and detailing solutions to problems. It is a Call-to-Action to lure the reader into wanting to delve further into your proposal.

When to Compose? First or Last

Write the Executive Summary first to organize thoughts and use it as a Guide as you and others prepare the plan/proposal. Acts as an idea filter and develops best way to pitch the Summary to client/investor.

Write the Executive Summary last, after you have conceived the entire plan/proposal and pull out the best parts for summation.

There is no right or wrong time to compose the Summary. Some people prefer to compose/compile it before writing the body of the plan/proposal. While others prefer waiting until the plan is completed and then writing the Summary. Either way, it's your choice but just make it good.

How the Executive Summary should be structured:

- Opener: The Why of your vision.
- Need: Talk about the 'what's in it for them'.  Show you understand there perspective and how they       benefit - the positive outcomes.
- Solution: Why your plan/proposal will work. No details, just enough to entice further reading
- Evidence: Why your company. What qualifies you vs. the competition. What differentiates you.
- Call-to-Action: Close the deal. The whole summary is a CTA. Why they want to invest in your             venture and how everyone will share in its success.

Do's and Don'ts 

- Keep it short. No more than three pages.
- Use straight-forward language not buzz-words
- Don't use too much technical jargon/lingo
- Focus on Client/Investor. What do they want to know.  How can you help them.
- Mention the Client's company name several times, if possible.

This is the Executive Summary as Call-to-Action. Follows the advice above and it will work for you.

Stay in touch,
Jim Lavorato

BLOG: A BUSINESS MUST HAVE

Why Have & How To Blog

A Blog is the least expensive and greatest way to advertise and promote your business and brand, all the while increasing your SEO.  From pre-seed to large every business MUST have a blog.

How To Set Up A Blog? It's Really EASY!

- Go to Google blogspot
- Build Your Blog (about 1-2 hours, tops)
- Start To Post
- Your Done!

Why use Google vs. other Blog Host? Simple. Google has 90% of all internet search and they link the blogs they host to their search algorithms. Therefore you increase your search exposure to being on the first page of any search by a potential consumer/customer.

How To Manage Your Blog

- A good Name (Google with register the domain name selected)
- Choose Google as your platform and host
- Link your website to your blog
- Design a blog which enhances and nurtures your Brand
- Publish posts that are relevant, short, and have graphics and/or videos (link to YouTube)
- Post at least 3x per week for starters, more if you can
- Automatically link posts to all of your other social media sites from Facebook to LinkedIn.

All businesses should have a Blog. It is outreach to your current and potential customers. It promotes Brand loyalty and has fan-based sticky-ness. It's much better then email blasts (you should do both) because blog posts can automatically be sent to email addresses while at the same time are available to a worldwide audience.

What You Don't Need To Set Up A BLOG

- Computer programming or coding skills of any sort
- No software of design expense - it's all FREE
- No operating experience required. Just start 'Talking' to your audience

Don't name your blog the same as your Company name. For example, Fund-House's blog domain name is fhventures.blogspot.com the name of the blog is 'Launch Pad'.  However, the Fund-House
logo and name sit proudly at the top of the Blog.

If possible use key words is the name and certainly key words in your posts (Google will pickup on this and enhance your search profile.

So, that's it. Block out about 1-2 hours. Think of a good name. Go to Google blogspot and design and launch your company's blog - and it's all FREE.

Stay in touch,
Jim Lavorato