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Advice for Franchisees Saving for their Kid’s College; Education Bubble

Are you a franchisee thinking about how to best fund college for your children? Your research will quickly lead you to 529 plans, and in my opinion and experience as a purchaser it is probably the best option for college savings. You will also hear about Coverdale Education Savings Accounts but for tax complications and low investment levels it is probably more trouble than it is worth. 529 Plans are sponsored by states and enable USA-citizens to save after-tax money in an investment account that will accumulate earnings tax free and withdrawals are tax free if used to pay defined educational expenses. Some states offer small income tax breaks for investing in a 529 plan. For example, in Illinois: Individuals subject to Illinois state income tax can deduct from their taxable income up to a maximum of $10,000 per year for contributions made toward the purchase of any College Illinois! Prepaid Tuition Program contract.* Married couples filing jointly can deduct up to $20,000 per year.** This state tax deduction reduces the individuals’ adjusted gross income (AGI) by the amount contributed up to $10,000 (or $20,000 for those filing jointly). Contribution Limits Contributions are included in the annual $13,000 exclusion from federal gift taxes for gifts made to any one person. But, unique to 529 plans, a contributor can give up to five times that amount ($65,000) in one year and treat that contribution as if it were made over five years for gift-tax purposes. Fees; NY direct sold @ .17% is lowest in USA You’ll have to do the math to see if the tax savings in the long run outweighs the higher fees of your state’s 529 plan. A benchmark to use is New York’s direct sold 529 plan which imposes a combined annual fee of .17% starting …

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21 Essential Lessons to Growing a Business

I loved this list. One of the United Kingdom’s most successful entrepreneurs, Luke Johnson, shares 21 lessons he’s learned in business: 1. The world is in love with the romance of start-ups. But all other things being equal, I believe it can sometimes be better to buy a business than start one. 2. Never demand a certainty: if you wait for that, you will be on the sidelines for ever. 3. Leave behind the notion of the big idea and just do what most successful entrepreneurs do: copy and improve. Imitate first, and then devote yourself to constant incremental improvement. 4. Whenever you can, make sure a name has some underlying meaning. Don’t copy the example of Diageo; one of the world’s biggest drinks manufacturers. “Diageo” means nothing. It’s not even easy to spell, or to Google. For everything that’s bad about high-concept names, look no further than Diageo’s own toe-curling explanation: “The word Diageo comes from the Latin for day (dia) and the Greek for world (geo). We take this to mean every day, everywhere, people celebrate with our brands.” I wonder if Diageo’s management realize that having to listen to that sort of rot could well make its staff want to quit and start their own business. 5. Today is a better time to start a business than tomorrow, no matter how today looks. 6. Achievement changes people. Once someone attains status and wealth, their attitude towards sharing the spoils and the glory alters. It slowly dawns on them that actually all the clever moves and breakthroughs were their idea and, in fact, they are the only one who really does any work. 7. When I interview managers, I ask them about their customers and competitors. The high achievers will know them intimately, and can talk for …

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Last Minute Gift for 19-35 year olds – the book BALLSY

If you are in a bind and need a quick gift for someone in the late teens to 30s, I recommend the book BALLSY: 99 Ways to Grow a Bigger Pair and Score Extreme Business Success by Karen Salmansoh.   It is in-your-face, real world advice and inspiration for your career, whatever field you’re in.  It’s the opposite of academic, and gives the advice a wise old CEO would give after a few gin and tonics.  It’s not a long book, it only has a few sentences on each page with pictures, but it focuses on the importance of marketing yourself and your talents, dealing with people, and getting yourself into positions that will eventually lead to more opportunity and “luck”.  I’ve found a lot of it to be true after being in the workforce for 20 years, and would have benefited from this type of advice early in my career. Here’s a some of my favorite samples: Tip #1&2 /  More important than talent, have balls. Sure, talent matters, but if you don’t have balls, your talent won’t matter – because nobody will ever find out about all your swell stuff. Fact: If you’re seeking extreme success, you cannot be afraid to go against the crown, make mistakes, look dumb. If you want ot reach extreme heights in your career, get over your fear of fail.  You must become confident in your abilities to deal with any crisis or obstacle if you plan to pursue your passions with cockiness, vigor and sense of playful adventure need to snag ’em. Tip #3 /  There are no wishy-washy rock stars, no wishy-washy astronauts, no wishy-washy CEOs, no wishy-washy nobel price winners. Be like a cockroach, survive everything nature and man can throw at you for millions of years.  If you …

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Forums Down Temporarily

The forums are temporarily down due to technical issues with the web hosting company.  I’ll get them back up shortly.  Thanks for your patience!  Update Feb 9, 2010: We’re back in business, all is fixed. 

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Better Business Cards

This is off topic a bit, but nearly all of us has to deal with business cards.  Neil at QuickSprout blog compiled pictures of innovative business card designs.  It’s fun list.  Below are a few of my favorite:

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Investment Alternatives

I’ve written several times that investing your $150,000 nest-egg in the public markets and working a reasonably fun job is an underappreciated alternative to applying it towards a franchise. This article cites a study by Vanguard’s founder John Bogle regarding a 25-year study of a diversified portfolio return that on average has yielded 9.5% annual return. What would you hope your franchise is worth in 10 years? Does $372,000 sound good for a selling price, on top of the wages you earn by holding a typical job? The $372k is the approximately growth of your $150,000 investment in the market compounded at 9.5% annually for 10 years. A great article on the lowest cost (0.15%) diversified publicly traded investment portfolio in the world is here http://etf.seekingalpha.com/article/42883 The decision to invest in and hire yourself to manage a franchise is a personal balancing test of many factors – lifestyle, family needs, risk tolerance, job satisfaction, financial goals, etc.  Satisfaction of an entrepreneurial itch is typically not met by franchise ownership because of the operating requirements and restrictions in the Franchise Agreement and Manual, which also constrains your income potential.  Most entrepreneurs want scheduling flexibility, tax advantages, no boss, net worth growth, ability to adapt business to maximize revenue, etc., which is minimal in single-unit franchising.

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Winner of Coffee Taste Test

You are not going to believe this… Consumer Reports conducted a coffee taste test, and the winner was [drum roll please]….Cuppy’s Coffee!!!…..OK, I kid. The winner was McDonald’s, who beat Dunkin’ Donuts, Burger King and Starbucks (I’m sure Starbucks loves being lumped into that group). McDonald’s coffee “beat the rest,” according to Consumer Reports. It was “decent and moderately strong. Although it lacked the subtle top notes needed to make it rise and shine, it had no flaws.” I agree.  I like the new protruding sipper lids. As for Starbucks, its coffee “was strong, but burnt and bitter enough to make your eyes water instead of open.” I somewhat agree. I’m a big fan of coffee (with cream please). But, a friend of mine ruined my coffee drinking experience with one statement. He said “coffee looks and tastes like muddy water”. Now, when I drink my daily coffee with cream, I look into the cup and damn it, it looks (and sorta tastes) like muddy water! – – – – On a different note, do you want to know what investment bankers and M&A/LBO guys think about when they look at franchisors? They often look at breakup value and leveraging assets (primarily real estate of their company-owned stores) on the balance sheet.

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Investing in Private Placement Offerings (Part 1)

I’ve spent most of past year working full time for a private equity and asset management firm. I thought I knew a lot about the private investment world before I started (I’ve been part of several business that received venture capital funding), but what I learned has been a tremendous eye-opener, particularly in seeing the naivity of investors. My job involves handling and fixing issues (legal, financial, complaints, compliance, etc) that involve hundreds of investors. I often speak to investors when they have concerns or complaints. I have a lot to say on this topic because I slap my head almost daily at the mistakes, misconceptions, and wholly amateur approach investors make when deciding whether to invest in my company’s real estate related investments and funds. This will be a multi-part series of postings that will be equally relevant to those looking at investing in private placement offerings and those looking to be a franchisee. The no-bologne, no excuse due diligence an investor in a private partnership should go through before locking themselves into an investment is nearly the same a potential franchisee should go through before locking themselves into a franchise. Venture capitalist often repeat that they do not invest in “ideas”, but rather they invest in the “people”. I always hear that them say they’d much rather have a “C” idea ran by an “A” team, than an “A” idea ran by a “C” team. Focusing on the “people”, the franchisors or general partners, is indeed key from what I’ve seen. How well do you really know the people and managers you’ll be investing with? Have you done a background check on the managers? Have you asked for audited financials this deal and other deals? If they aren’t audited by a reputable firm, walk away…don’t believe the …

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Best Man Toast

Maybe this will save you time if you are asked to give a best man toast in the future. I know I spent a lot of time trying to think of something to say, time that would have been better spent on business, frankly. I gave a best man toast in a wedding this weekend in Cincinnati. I liked the way it turned out, so here it is: I’ve known Tom now for more than 10 years. We first met at Miami University. We were both rushing the same fraternity. At a fraternity party, Tom, being the gentleman that he is, offerered me a drink…I accepted…and we’ve been friends and brothers ever since. The elements of Tom’s character that make his such a good friend to those of us at this table and in this room are his loyalty, his honesty without exception – he cares enough about you to tell you the truth rather than what you want to here, his quick wit, his charm, his fantastic sense of humor, his magnetic and engaging personality and the list goes on……and on… But most importantly… the list goes on through the eyes of Ashley who looks at Tom and sees the man of her dreams… the man who she wants to spend the rest of her life with. I wish both of you a life together of health, wealth and bliss that you both deserve. Cheers.

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