I’m not a fan of coupons so Groupon did not attract my attention until I heard that Google had made a 6 billion dollar offer for the company. My serious attention was raised when I heard that Andrew Mason, Groupon’s 27 year old founder had turned down the offer.

My surprise expanded when I realized that Yahoo had made a previous offer of several billion which had been turned down As I expanded my consideration of the Groupon business model, new realizations dawned . The American business community was being taken over by people with serious symptoms of derangement.

Groupon and it’s imitators are obviously destined for a Hula Hoop existence. Every one will do a Groupon and the excitement will diminish as business participants realize that the benefits are at best minimal and absolutely destructive to many business start ups.

This is not a complicated analysis. It is obvious to anyone who has surveyed a reasonable number of small business Groupon participants.(as I have done) Groupon’s sales in February have fallen by about 27 million from the previous month.

My admittedly limited research has uncovered a whole new range of business insanity that has infected the Internet related community.

Example #1
If you are 27 years old ( as is Andrew Mason-Groupon’s creator) had a good idea for a business- Raised some money, 2 years later were having success and were offered 6 billion dollars: The sane reaction would be to gather the keys to the front door and ask where to drop them off and pick up the money. Groupon’s rejection of 6 Billion is a clear indication that psychiatric or some other kind of help might be needed by the controlling interests of the company

Example 2
Read tomorrows Buck Says Post. Who really Owns Groupon and Has Google Lost it’s GPS

If you have venture capital of millions of dollars for your start up you really don’t need this post to help you. Most new businesses haven’t attracted the attention of venture capital firms. The venture capital used to start many new businesses often needs a stretch to move into the 5 figure range. The venture capital is provided by small savings and mother , father , brother, sister and some close friends scraping together the money to get your dream into operation.

Once the startup funds are in hand and operations have started a line of credit is the next step on your sometimes rocky road to riches. Banks these days do not have their “new business” radar guns focused on small business start ups, so work needs to be done to establish a credit worthy status.

When I was structuring my first project years ago I had the opportunity to talk to the president of a small bank about how they determined to make a loan. His answer then will not find a place for insertion in your credit query in any bank today.

He said “we evaluate experience, the projected use of the funds and try to envision the profit potential of the project we are considering. The most important judgment is whether the responsible individual has character and determination to repay even if adverse conditions arise.”

Today’s system doesn’t rate character and determination. Your social security number is punched into a computer and a heartless evaluation is produced by a software program that the bank uses. Banks seem to be looking for ways to turn down small business loans. Risk avoidance has always been part of a banks operating philosophy but in today’s financial structure a new small business doesn’t often show up in the “yes” column.

What to do. As early as possible obtain a credit card for your business. You will need to be responsible since the new business without significant start up financing will not qualify for significant credit. There are cards that will help get your computer produced rating in a favorable light.

Applied Bank is currently advertising a card that they call a micro loan card. It supposedly is for new small businesses. The available limits are low but the important issue is to establish a line that is recognized as a positive note in your credit history.

Discover Card is somewhat more insistent on a longer record of credit history but is
worth a try. They currently have an offer that will provided a no interest transfer of funds opportunity that could be very useful to your new business.

These first steps in establishing credit are basically an extension of your personal credit. They are important in providing the evaluation software the type of repayment indication that will help increase the limits available to you in those early days of your start up business.
Do not use the cards beyond your ability to promptly pay. Slow pay is not a help in the area of credit establishment

Several weeks ago I wrote about my uneasy feeling about the Groupon model, Especially for a start up business. My warnings are proving to be accurate concerning establishing a discounted price for quality products. If you have a start up restaurant operation where a quality product is your selling point, my advice is to avoid Groupon, Living Social and the others like the plague.

I have read the theoretical approaches by various marketing geniuses and decided to hit the streets to visit restaurants that have tried the Groupon or Living Social. program. I have yet to find a restaurant that is bubbling with enthusiasm over the program

One pizza shop featuring quality organic product with a savvy owner and competent staff recognized problems immediately. The crowd in the shop was a test but the ovens were hot, the staff ready and trained to smile and welcome the coupon wavers as valued guests.
Every one understood that repeat business was what was being sought.

With a smile every coupon presenter was welcomed and asked where they were from and would they provide an email address to receive a monthly newsletter. Some were willing to give their email contact info but many(almost most) asked if the newsletter contained information on future discounts.

Those that provided information as to location of residence indicated that 50-60% were outside of the shop’s normal delivery area. Many were far beyond the expected market area from which even a quality shop expects to draw.

The additional costs related to the promotion in addition to food costs was unexpected labor costs. The shop was totally depleted of all prepped items each night and the prep personnel were required to come to work several hours early. The dough preparation became a real challenge. This quality shop prepares it’s own dough and sauce and the extra time was needed to maintain their high quality standard and allow time for the dough to proof.

Keeping a supply of fresh product became an additional challenge. The turnover of product required a staff member to be available at all times to be able to drive to suppliers of organic product used, when supplies ran out. Additional refrigeration space needed to be (borrowed) from a nearby market to move through the crises of coupon followers crowding the facility.

In reviewing the information about the customers that were getting the discounted pizzas it was found that many were already regular customers who were now buying their normal purchase at half price.

The shop owner is correctly holding up on final judgment until he sees if his investment finds new customers at the normal price of his product

His advice for a new operation is “do not participate in these programs if you are working with limited resources in skilled, well trained personnel and do not have a bundle of cash to carry you until your (meager)check arrives from Groupon or Living Social to help in the restocking of everything.

My initial conclusion is that without a doubt Groupon and Living Social are making money on the deal. I am continuing to look for a profitable result in a restaurant with quality products.

Start up suggestions for entrepreneurs in their new business are all over the Internet. Some of the sites are actually useful. One thing that is not all over the Internet are sites to tell the entrepreneur what is the next step to take, if the money starts rolling in the door. It does happen. Sometimes forgotten in the hurly burly of getting a new business growing, the hoped for big bucks success dream is forgotten.

When this happens in your business there are some new things to think about.
The first thing to do is to take the management team out for pizza. Not to a French restaurant at $100 a head, make it pizza.

Now that continued fiscal prudence has been demonstrated, it is time to think about what to do with the money. Spending is not the first activity. That glow of success with a growing bank account can sometimes cloud common sense.

I spoke recently with a young entrepreneur who has moved into a significant income range with heavy tax requirements. I asked him what was his next move, now that his hard work was paying off handsomely. His answer was interesting. He said, “I now know how to make serious money. Now I need to learn how to use it wisely”.

He indicated that he was going to dedicate a part of his time studying actions of other successful entrepreneurs, foreign currencies, corporate tax structure in other countries and how to secure his situation against the actions of politicians who seem determined to penalize him for his success.

There followed a small,but thoughtful, rant about attempts to attack a deficit by making him pay, with additional taxes, for excesses which he and other young entrepreneurs had no part in creating.

Politics aside, the lesson demonstrated here is that the entrepreneur building a successful organization does not stop working and learning when success seems to be the story of the day. I’m not sure that the answer is foreign currencies and moving operations to Ireland as Intel and Google have done, but their actions are worth studying. There may be answers for the growing success of a business that is moving beyond the long hour days of starting up.

This might be the moment to supplement (get help for) the accountant who has guided the business in the early days. This help should come from a consultant or company with financial expertise that is experienced with growing wealth. Do this carefully with the thoughts of your key people factored into the decisions made in this new stage of business. Maintain the unity of purpose among your team and move ahead with that unity maintained in this next chapter of the business.

This is an old English expression that is as important to understand in your business today as it was several hundred years ago in England. Substitute the dollar for the English Pound and you have something to think about whenever a financial expenditure in business is being considered

There are some easily understood examples of saving a small amount which later can cost many dollars. Tax time has a prime example of a penny wise decision later costing big bucks. The small business that decides to save a few hundred dollars by not using a tax professional more often than not spends a lot more in taxes than was saved. The other side of the idiom is when great care is taken managing the small amounts and then not paying the same attention to the larger expenditures.

Every business needs one person that will watch the money closely to see that none is wasted and expenditures are correctly approved and noted. The money watcher needs to be involved when expenditures are being considered, but and it is a big but, the operating decisions must not be solely directed by a penny saver.

The penny saver often can only see the cost of marketing, equipment and research and has little patience when immediate results are not apparent. Labor saving equipment certainly needs to be purchased in time to benefit operations, research is important and sales need to be preceded by a marketing strategy. The coordination between operations and the financial sector on such expenditures is often the most tricky moment in running a small growing business.

Pay role needs to be met, credit built and suppliers paid promptly. The financial responsibility is a pressure position in a small growing business. That pressure needs to be recognized by sales and operations and regular meetings scheduled to make sure that everyone is on the same track in the search for success. The financial reality needs to be understood by all elements in the small growing business.

Typically each element pushes for their needs to be met and usually believes that their area of responsibility is key. Leadership has a critical responsibility to unify the staff in understanding the goals and path needed to achieve success and to keep everyone working together in the best use of the available finances.

Unified purpose is the needed element to move a small business through the critical early days. A leadership team that maintains the unity can be found at the core of almost every business that started as a good idea and a few dedicated people moving together to succeed.

April in 2011 is not the period to work on tax saving strategy for 2010. The decisions made in setting up a business and starting operations often overwhelms the entrepreneurs and tax time seems like a distant event that can be dealt with later. Not always, but often that oversight can be very costly.

I think that April 16th is the perfect day to start preparing for the next years tax event. The review of your current remittance and to spend time developing an approach to tax time for 2011, can pay significant dividends for your business.

If your business is a self proprietorship with growing revenues now might be the time to consider moving the structure to an LLC (Limited Liability Company) which will provide some protection and does not have the requirements of a C Corporation.

A review of business expenses and their proper recording is critical in any business, small or large. In the small start up the entrepreneur often reaches into personal funds to cover a business need without proper documentation to support deductions at tax time. Setting up a simple system to handle this is an April activity that will help next year at tax time.

Getting tax help is something that is an activity that can be gainfully pursued in May.
Interview prospective tax accountants after the excitement of April has passed and you have clearly identified areas where you could use some expert guidance. Establishing a relationship with a tax accountant with a record of helping grow small businesses should start when the pressure of April 15th is passed. (April 18th this year)

Credit cards need a review and this is a good time to see if you are getting the best rates available. Discover Card has a limited time offer to transfer a balance with no interest for 24 months. This offer is currently the most attractive offer among the major cards. The no interest for transfers can be extremely helpful in strengthening a small businesses credit structure.

If the small start up has had a profitable year it is time to have a talk with your bank.
Banks are not currently seeking small businesses but with a record showing growth this is the moment to find a bank that will give your business a line of credit. That first line of credit is important to establish and the amount is almost of secondary importance.
Establishing a banking relationship where you effort is recognized is an important step in a new or small growing business. You need a bank that is more than simply a clearing house for your revenues and disbursement or those funds for salaries and supplies.

Tax time is seldom fun but the experience should be used to find the avenues that will minimize that yearly trauma with the IRS

Intel announced a few months ago that they are investing $500 million dollar in expansion of their manufacturing facility in County Kildare Ireland. The expansion will create 1000 new jobs in conjunction with the project.

I wonder if any of the current administration in Washington has taken the time to call up Intel and ask why they have decided through the years to spend about $7 billion dollars on facilities in Ireland. I am sure that did not happen because the answer they would have gotten was one that they already know. Ireland has resisted the pressure of the Common Market to raise their corporate taxes which are about 12.6%.

Ireland has suffered greatly in the current economic and unemployment problems troubling much of the Western world. They have recognized that the road to recovery requires companies succeeding and providing the needed jobs to stimulate a recovery. Finfacts, Irish Business News, reported that the Intel decision was made because of the demonstration by the Irish government to maintain a friendly corporate tax rate.

The flight of business from our country is directly related to the cost of production. Wages are part of that cost and an element in which a company has a degree of control. Taxes are an issue where control is pretty much limited to moving the production facilties and/or corporate headquarters. read more…

I have been encouraged by a friend to show more compassion in my feeling towards the angry Muslims who from time to time decapitate innocent people who are not Muslims.
Here are a few paragraphs from the “compassion email” that was sent to me.

“Yet, I have deep compassion for those who are angry enough to cut
off heads. Just like teenagers calling out for help by leaving drug
paraphernalia about: cutting off heads is a warning sign that something is causing enormous pain. We need to compassionately feel that pain before we can learn what is the right thing to do.
Otherwise, we might inflame the Islamic world more and lead to furthering the cycle of violence.”

My reaction to this email required considerable restraint. The expressed worry that decapitation activity is a warning sign that the decapitator is suffering enormous pain caused me to actually gag.
I have difficulty thinking about the psychological pain of the decapitator before considering the pain that must be involved in getting your head cut off.

The plea to me to be more compassionate concerning the violent actions of Muslims in Afghanistan was to avoid further inflaming the Islamic world to violence. read more…

The flight of jobs from America and the decline of our industrial base is a point of frequent discussion in political campaigns and on talk shows. Politicians target business with bombastic threats and serious financial consequences for those companies that move money and operations out of the country.

Careful and calm observation indicates that the political involvement in determining business related policies is a major cause for the flight of business to off shore locations. Observations clearly indicate that our government cannot stimulate permanent business gains nor can honestly address the tax issues that drive many companies to seek a more attractive tax rate on new investments.

The Corporate tax rate on new investments in the U.S. is effectively 34.6%. The rate in Ireland is 10.9%. It doesn’t take much thought to understand why Covidien with 42,000 employees worldwide has it’s headquarters in Dublin Ireland. Waterford Crystal is known as an excellent Irish product. When it had financial problems an American holding company bought the assets. I’m sure that the 10.9% Irish corporate tax rate entered into the decision

Tax rates are a major reason that determine corporate locations and our government is at the heart of our corporate tax rates being one of the highest in the world

Much noise has been made about GE paying little taxes in comparison to the major business they generate. Without too much study it is evident that GE decided to take advantage of the incentive created by the government for companies the produced “Green” oriented products. GE went to work to do the governments bidding and built products that qualified for the tax breaks being so generously provided. The taxes not paid due to government incentives were huge.

Corn futures reached an all time high despite the increased production by the corn farmer. Those corn futures are one of the factors causing a sudden rise in food prices, The corn of course is not all being used for food. Government incentives reward corn production for ethanol and the farmers, like GE, are ready to take advantage of the government largess.Increased acreage in corn is producing price increases in other farm products due to decreased production of those products not recieving government incentives.

There is a clear message concerning the government and our economy. Almost everything they do is wrong concerning the factors that drive a successful economy. Government can provide incentives but they seldom provide long term positive economic results.

Corporate taxes in some other countries.

Germany– 23.8%
Canada– 20.5%
China — 16.6%
Singapore– 8.5%
Switzerland–17.6%
New Zealand–17.6%

The only countries with a higher corporate tax rate than the U.S. are:
Argentina, Chad, Brazil, Uzbekistan.

France is slightly lower with a 34% rate

The President has carefully avoided using the word War in his descriptions of his actions in Libya. He has used terminology concerning the use of the military that could indicate that he was doing no more than calling them out to the parade deck for a once around march for visiting dignitaries.

I am not sure where the President got his military training but mine indicated that the firing of Tomahawk missiles and strafing assembled ground troops was activity more serious than a parade of the troops.

The tone of his early afternoon speech describing his orders to attack Libya was not designed to deal with the serious questions of Constitutional authority for his actions.
He blithely skipped past the fact that there was little or no congressional discussion concerning his intentions to attack Libya. He announced his decision and used the UN as the approving body. What is that about?

After some coalition mumbling and stumbling as to how command would work in the Obama war it was decided that NATO would run the war. One of the early decisions was that Gaddafi would not personally be targeted. I am searching for the sense in that decision and am having difficulty understanding it.

I am old enough to remember the formation of NATO and the reasons it was formed. It was an agreement between the United States and our European allies that we would join in defense of any member that was attacked. The threat at that time was Russia and the reason for NATO’s formation.

NATO today has little resemblance to the organization originally formed. There remains the basic reason for it’s existence and that is to jointly defend a member that has been attacked. I have been trying to figure out which or the members has been attacked by Libya which would be the reason for NATO to go to war with that country.

Syria now has some gathering of citizens protesting their government. It has been reported that the Syrian military is firing on the protesters. I wonder if Obama plans to expand his nation building tactics to include an attack on Syria. If not, why not? If his Libyan reasoning was valid, the natural extension would now include Syria.

It is easily understood with even a cursory review that the President is in deep water when it comes to foreign policy and has not considered the deeper ramifications of his actions in expanding our warring activity. He has not made it clear that he understands the make up of the revolutionaries we are supporting. Doesn’t anyone in this administration consider our history in the support of the Afghan Mujehideen?. Might this be a repeat of picking the Devil you don’t know over the Devil you know?