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Elizabeth: Welcome back to another addition of the Small Biz Ahead podcast. Gene, thanks for being here again with me this week.

Gene: Happy to be here. Having fun?

Elizabeth: We’re having so much fun, I hope the audience is too, because I’m enjoying … I’m learning so much from the questions, from you, and from the research were doing for this … It’s so much fun.

Gene: Do you know why Elizabeth you’re having fun is because you’re doing something different from your daily job.

Elizabeth: Exactly.

Gene: You’re out of your cubicle and we’re sitting here in a studio and we’re talking. It’s like a change up. I have to say that’s the case for any business owner. When you’re running a business you get so wrapped in all the minutia and the BS. Any employee, it’s the same thing.

I’ll never forget when I started writing, this was 10 years ago, and I started writing columns. I’d be driving out to a client and I’m all upset about some issue that’s going on or some nonsense that’s going on or whatever, but instead of thinking about that I’d be “Oh what am I going to write about for my next column?” It would totally change your state. It just switches you up.

I always say that to my clients as well. It’s very, very easy to get over absorbed in your business. Take it from me, find something else outside of your business that you really like to do. Find anything else that you enjoy, that you enjoy thinking about, talking about, whatever. Because when things are driving you nuts in your company turning to another activity, even just thinking about it will make you much less mental.

Elizabeth: Okay, so I have a really, really good recommendation for business owners for this. It might scare them a little bit and we’re going to talk about it in the words of brilliance at the end.

First we’re going to get to questions though, so we’re going to hear from our sponsor and then we’ll be right back.

QUESTION 1: Could a Premature Product Launch Doom My Business to Failure?

Elizabeth: Question 1 from Bennett from Florida. Gene do you want to talk about your mom for a minute?

Gene: My mom is back and healthy and she’s back from Florida. It was bad weather when she was there most of the time unfortunately this winter. It cleared up the last couple of weeks she was down there. I totally get that. When I’m in my 70s, I get why you leave the northeast and go down to the warmth of Florida.

Elizabeth: I just love that whenever we get in another question and it’s someone from Florida, I’m like “Oh Gene’s going to talk about his mom”.

Gene: She likes going to Florida.

Elizabeth: Bennett from Florida says

“I have a really good idea for a product, but developing it is taking forever. I’m sure that’s a universal thing. I want to start doing business now, but I feel that my product isn’t perfect yet. When should I stop adding polish to it and start bringing it to market? Could a premature market launch doom the product forever?”

My quick answer to this is when you’re building a business, you’re not just developing a product. There are so many steps and I think that you’re going to feel a lot better if you actually sit down and make a list of all those little steps you need to take and start tackling some of those. You probably shouldn’t launch your product until you are, let’s say 80% sure about it.

Gene: That’s good advice.

Elizabeth: But you can start working on like you’re probably going to need a website, your probably going to need a marketing plan. I know when people have an idea for a business, they want to get started right now and it can be really frustrating to not be able to launch right away, but there’s still so many things you have to do, so just start doing something.

Gene: You know I’ve got to give a hat tip to Alexis Ohanian, who is the CEO and founder of Reddit. I know him, we’ve been speaking together at a couple of events. He gives the same presentation each time, which is a great … If you ever … you’ve got to see Alexis speak, he’s fantastic.

Elizabeth: We’ll link to that in the show notes.

Gene: He talks about the very same issue. When Reddit was first introduced. Reddit is a very popular website, it’s supposed to be Reddit … It’s a news type site. It’s turned into a giant site of huge communities and sub-communities. When they introduced their product, it was a mess. It turned out a lot different, it evolved into something much different than what they originally introduced. The advice he was given back then, him and his co-founder were obsessing over the intricacies and making it perfect. They were told, get it out there. Get it out there and let it evolve.

Because the bottom line is, your product or service, whatever you’re thinking of doing Bennett, it’s going to be a lot different two years from now than it is right now. It’s just going to change. Not only that, it’s probably not very good now because you just don’t have experience with it. It’s not going to be good. Now Alexis used different words than I’m using now. It’s not going to be good until you actually get it out there and listen to your customers and make changes and then do other things to it.

You had said the 80% rule. I totally agree with that. We live in an imperfect world, so nothing is ever … This is why software companies release products and then they make you buy maintenance or subscribe to it because they know that the product isn’t perfect. Thank God they’re not building airplanes by the way. They know that the product isn’t perfect.

Elizabeth: Bennett, if you’re building an airplane, hold off.

Gene: Don’t take this advice, Bennett. Make sure it’s absolutely perfect.

In most cases, you’re 80% there, you have to expect that your first six months to a year you’re going to lose money. You’re not going to make any money and that’s part of the capital that you have to have while you get product out there for free or a very reduced price to your customers so they can start using it. You can start fixing it and making it better until you get it to a level where you then have customers that can recommend it and you also have a product that’s really scalable and something you can sell to a group of people. Sooner rather than later.

Elizabeth: Something you might want to think about, you mentioned a pre-market launch. If it’s something that you could put out in beta, I would encourage you to do that. What I mean by beta is, even if it’s … Let’s say it’s an online course, you just charge people less than what you’re planning on. Lets say it’s an online course for $99. You put it out there, okay this course is in beta I’m going to charge $45 for it, but the people who buy it in beta can use it for a lifetime no matter what the price goes up. If it’s a widget, you sell it in beta. You just tell people “I’m going to give you a discounted price.”

Maybe you’d feel a little more comfortable doing something like that. Because with products, you really do need a lot of feedback. You can do so much market research, but until someone is actually interacting with your product you really can’t get a good sense of how successful it’s going to be.

Gene: Good stuff.

Elizabeth: All right, we’re going to be back with question two, which is about funding your business, after we hear from our sponsor.

QUESTION 2: Funding Your Small Business with Lots of Money

Elizabeth: Okay, we’re back with question two. This is from Kelly from Rhode Island, a fellow New Englander. This question is kind of funny to me. She asks

“Is there any downside to starting a business with a huge amount of money available to finance it?”

Elizabeth: No. [laughs]

Gene: What does that mean? She’s not looking for money? She’s got a bunch of money and …

Elizabeth: Unless she left out a “not”.

Let’s answer it both ways.

Gene: First of all, you’re talking about a huge amount of money to finance it. The issue when you start a business, the issue when you buy a house, the issue when you fund the federal government is not the amount of debt, but your ability to service that debt.

Honestly, if I want to start a business today there’s tons of places that I could get it. There’s crowd funding sites, there’s online bankers, even private companies that will loan you money. That’s all fine. Right now we’re lucky enough in 2016 where capital availability is actually quite good.

The question you have to ask yourself is, is this a good debt and also am I going to be able to maintain that debt, will I be able to service that debt payment. If your business is one that’s not going to be the type of cash flow that will be there to finance and service a debt, then it’s not a good time to do that.

Again, I don’t think it’s the amount of money you’re looking for, I think it’s your ability to pay it.

Elizabeth: Exactly. Now what about if the question was “Is there any downside to starting a business with a huge amount of money not available to finance it?”

Gene: Which is what most startups find themselves in that situation. They don’t have the money to do it. Look, Kelly we live in a capitalist society so to start up a business you need capital and capital comes in two forms, either money or labor. When you start up a business that labor is pretty much going to be your labor. If you have a little bit of money, but you have a lot of time then you might have a lot more capital than you think you have to start up and get a business going. If you have no time and even if you have all the money in the world, I got news for you, I’d rather take that money and give it a to a money manager. You’d probably get a better return on investment than throwing it away on a business that you can’t dedicate the time to.

It is a balance of that capital that you’re going to need to successfully launch something.

Elizabeth: I definitely wouldn’t recommend if you have access to a huge amount of money to finance a business, I’m just assuming from this question that maybe Kelly is thinking “I have this available to me from a family member.” Let’s say it’s going to take you $10,000 to launch the business and then you think “Well, I have $50,000 available.” I would recommend just sticking to that $10,000. It’s great that you have an extra reserve there, but I would hold yourself accountable for the smallest amount you need to actually launch the business and then go reassess it later. Because I think, and again I’m just making this assumption that she’s saying it’s a huge amount of money available. Maybe someone is willing to throw a lot of money at her. Don’t bite off more than you can chew.

Gene: Very good.

Elizabeth: All right, we’re going to be right back with our moments, Words of Brilliance.

Gene: Words of Brilliance.

WORDS OF BRILLIANCE

Elizabeth: Okay we’re back with our Words of Brilliance. I’m going to go first this time.

Gene: Go for it.

Elizabeth: We’re going to loop back to the intro. So … You talked about kind of getting outside the box. When you’re a business owner and you’re running a business every day you’re in a box. You’re dealing with these things. We just did a whole series of articles that you wrote and we also had other writers contribute to this too on public speaking. This is something that, this is a great way for a business owner to get outside the box. The reason being, and you brought this up in one of your articles, there are so few small business owners, there are so few people that feel comfortable public speaking, that if you can do it at all, you should do it.

Gene: That’s great advice.

Elizabeth: It’s such a huge boon to your business. We did an article and it sounds really old fashioned, but I’m just going to put it out there. We did an article on if you’re not sure about public speaking, if you’re not sure if you’d be good join a Toast Master’s Club. It’s a really welcoming environment. It’s a safe place to go for people that don’t really, you know they’re just dipping their toe into public speaking. It’s also a way to knock networking out of the park. You’re probably going to be surrounded by a bunch of other small business owners.

Gene: Very true. When I first started out public speaking, because I do a lot of public speaking now and I get paid to speak so I’m as much a professional speaker as I am running a sales and marketing company. When I first started out, and this was like eight years ago, nine years ago, I spoke to a lot of Rotary Clubs and Lions because they’re free, old school. First of all Rotary is a wonderful organization and they’re all over the place. They have breakfast meetings, lunch meetings and dinner meetings. There might be 15 people at a meeting. The largest Rotary Club I spoke to was in York, Pennsylvania. There were like 250 people there for a Rotary Club. It was their monthly lunch that they do and it was a big deal. It’s usually much, much less than that. Great place to get out there and test out your platform skills in speaking to a small group.

You don’t have to speak about your business. If you like fishing or if you’ve got some hobby or expertise you want to share with the group they love it. They’re not going to pay you, they’ll give you breakfast. It’s a great opportunity.

Elizabeth: You’ll get some scrambled eggs out of that.

Gene: You get some scrambled eggs and it just breaks up the day. It’s fantastic.

Elizabeth: It breaks up the day. Also, If you go and speak to that group and they enjoyed it or they felt a connection with you they might refer you some business.

Gene: Absolutely right. It’s a great idea. The final thing is when you speak and one of the things I really do enjoy about speaking is … We sell technology so I get yelled at a lot all day by my clients when stuff doesn’t work. Then when I go and I speak and then I finish speaking and everybody’s applauding. “Oh wow. Look at me, this is unbelievable. You actually like me.” It really does break up the day and it’s great advice.

Elizabeth: It’s a great way to kind of play too. It’s a good skill to have and it can also be really fun. Although I think most of the time when you hear about public speaking people think “Oh it’s so scary.” It can also be really fun.

So Gene, your word of brilliance for the week.

Gene: My word this week is write off. W-R-I-T-E O-F-F and here is why.

This podcast, whenever it airs, is going to be sometime during the year and I don’t even care if this is 2016 or 2023, it’s still applies. The application is this about writing off, if you in your business have an accounts receivable on your books from a customer that owes you. You sold it to that customer and he seemed like a really good guy, but it’s been like a year and he hasn’t paid you, but he keeps telling you he is going to pay you. He promises he’s going to pay you. He might pay you, he might not pay you.

Here’s the thing. He’s not going to pay you. If it’s been a year, the guy is lying to you, clearly he’s a deadbeat. He’s not going to pay you. You know what you need to do? After your receivables have been open for say more than, I usually give it like six months, that’s a pretty long time, write it off. When I mean write it off, I mean you take it off your books entirely so you can take a deduction for it.

Too many business owners I know walk around with receivables on their books that they’re never going to collect and they could be taking a tax deduction for, because by writing it off you’re allowed to deduct that on your taxes. I’m saying that as a CPA, this is Gene Marks’ advice not the Hartford’s advice. This is what the reality is.

By the way it’s not just accounts receivable, it’s about inventory. You bought that product, it was a really good buy, you got it as some auction or some sale, a little piece of equipment or part or whatever. You have it in your warehouse, you’re absolutely going to sell it. You got a really good deal on it. It’s been like three years and you haven’t sold it yet. You’re not going to sell it. It’s just not going to happen. It’s sitting there, it’s collecting dust, it’s taking up overhead, it’s in your way, people are tripping over it. It was a great idea at the time. You’ve had lots of great ideas, some of them worked out, some of them didn’t work out so well.

Write it off. Get rid of it. Scrap it. Get it out of your warehouse. Dispose of it and then write off the value of that inventory. Take the tax deduction. It is a relatively high tax period that we’re in right now and business owners are looking everywhere for where they can deduct. Old receivables and old inventory, write them off

Elizabeth: Great advice. Gene thanks for joining us for another week.

Gene: Glad to be here.

Elizabeth: We’ll be back next week. Thank you.

The views and opinions expressed on this podcast are for information purposes only and solely those of the podcast’s participants, contributors and guests and do not constitute an endorsement by, or necessarily represent the views of The Hartford or its affiliates.