Lower Taxes - a Liberal Idea?

Today, Obama announced his plan to cut corporate tax rates to 28% from the existing 35%.  There is a lower effective tax rate proposed for US manufacturers, firms that return jobs to this country and to companies that relocate to some communities that have lost big employers.  The craziest part about this ... the other side is already baulking at the proposal.  Since when is lowering taxes something the Republicans don't like?


It is important to understand that something clearly had to be done.  Currently, the US corporate tax rate (35%) is the highest in the world behind Japan (and we all see how that's working out, both for Japan and for us).  This has led to numerous large companies moving operations and investing profits overseas in order to avoid the US tax rate (a very smart thing to do, because you will earn more on $X invested than 2/3 of $X invested).  And before you scream about corporations taking that 2/3 of $X and pocketing it, keep in mind that the vast majority of small and medium sized businesses (SMEs) typically reinvest in their own business, which keeps people employed (or hires more as the company grows), trains employees, contributes to local sales and property taxes, etc.  It's not going to the coffers of entrepreneurs ... trust me.

Of course, there are some caveats to the proposal:

"In turn, corporations would have to give up dozens of loopholes and subsidies that they now enjoy. Corporations with overseas operations would also face a minimum tax on their foreign earnings."

Ah ... FOUL!!  Wait.  Those are the caveats?  Really?  So, let me get this straight:

• Manufacturing and produce jobs IN the US and pay a lower tax rate?
• Relocate or open a business in a ravaged part of the US to help reignite economic prosperity to communities hit by hard times ... and pay lower taxes?
• Encourage SME growth by levelling competitive landscape by requiring ALL corporations, big and small, to be taxed at the same rate?
• Tax overseas revenues made by US-based companies (who utilize US infrastructure and US employees) so you are more likely to invest in the US and not in China?

Well, that sounds good to me.  And from my understanding, this will not raise overall taxes or affect individuals (although it might help individuals by encouraging more production and jobs in the US).  Hmm, it will be interesting to see the arguments against this.

This article was found on Yahoo News and written by APs Alan Fram.  Follow both on Twitter at:
@YahooNews
@ASFram 

What Private Equity Can Teach Entrepreneurs

It is rare that private equity will offer an entrepreneur anything more than indemnification or a really rough and painful life lesson, which is why I found the article in Strategy and Business Finance that offered entrepreneurs the "Seven Value Creation Lessons from Private Equity" wonderfully refreshing.  The lessons are so simple, and yet I find many entrepreneurs, myself included, deviating from them everyday.  Personally, I think every business owner should have these seven lessons printed on a card, kept on their persons, and reviewed daily!  Seriously.

1. Focus on value (relentlessly)
2. Cash is king (always)
3. Time is money (but money is not always time)
4. Use a long term outlook (don't panic)
5. Assemble the right team (including understanding your strengths and weaknesses)
6. Link pay to performance (for the entire team)
7. Select (and use) goals and performance measures

While fresh business education material is often difficult to find, sometimes a fresh take on old basics is just what the doctor ordered.  This is definitely served up by S&B authors Vinay Couto, Ashok Divakaran, and Deniz Caglar.  Now, I'm waiting for the next series of lessons served up by Wall Street ... which I hope come from Family Guy's Stewie Griffin:

Toy Fair NY 2012

The Toy Industry Association (TIA) Toy Fair in NY concluded this past weekend, and after our fourth year attending, I can say it went by pretty much as planned.  Much of the product development and new partnerships we are working on will not be ready until the summer (most likely for A.S.T.R.A. in Baltimore, MD), so this trip for me was to showcase our partnership with the Flipoutz and SnapTagz brands as well as an expedition to see new products and meet industry friends and associates.  And, while I can't say too much about what I took away (I don't want to give away too much here), suffice it to say ... it was a great trip!

Some of the highlight:

The Flipoutz booth (#5409) with (L2R) Rhett Power, Frank Werner, me

ABC's Shark Tank's Daymond John stopping by our booth

I literally ran down the Power Rangers in order to get this picture for my kid ... they thought I was a crazed fan

Got to hang with Elf on the Shelf (among other "celebrities")

I would be remiss if I didn't mention that one of the best reasons for attending the show ... New York City.  I (heart) NY!! 

Millennials and Wharholism

Most entrepreneurs and business managers are aware of two important trends that affect business these days:
1. The Baby Boomer Generation is HUGE, reaching retirement, and possesses significant assets that they are predisposed of spending.  They are also easier to relate to for most business managers (i.e. - me).
2. The birth rate in the US has been in decline, meaning that the market for upcoming generations of consumers is shrinking.  As well, generations such as the Millennials are maturing faster and are more sophisticated then their predecessors, which means they are more difficult to reach (figuratively) and relate to.
It is easy, therefore, to tend toward a business strategy that focuses on older consumers (let's face it, it's smart move).  With that said, however, if companies are able to develop a strategy to tap into the potential of younger generations (an easy task if understood properly), they can develop an intense loyalty that will be easy to defend against larger, stodgier companies.

Tina Wells of Buzz Marketing penned a great article in YEC (Young Entrepreneurs Council), a wonderful resource for young and aspiring entrepreneurs.  In the article, "Ten Millennial Trends for 2012", Wells lays out very useful insights for how Millennials are shaping up to be consumers.  These trends are can be a little intimidating, especially to aging managers operating under older business paradigms.  The behaviors, desires and ambitions of Millennials are disruptive and differ radically from even the generation preceding them.  The reality is that every new generation following will require an entirely new understanding.

Here are some of the highlights of her article, including her new "buzz" phrases and words (which are actually quite entertaining to say):

• Conscious Consumption and Profitable Purpose: Brands that contribute to the "greater good" are more likely to be in the good graces of Millennials.
• Cake Baking: Millennials are interested, curious and active.  They also have the ability to research and find information 24/7.  Businesses should embrace this and be prepared for an unprecedented amount of transparency. 
• Instanity: I love this one. Millenial's desire to have and the ability to get anything, anywhere, any time.  They have it, and there is no taking it away.
• Hand-Me-Ups: Millennials are more prone to be "first adopters", and parents less so.  There is therefore a trend for parents to buy new items, especially technology items, for their kids and use the older devices.  Not necessarily for my selfish needs, but generally speaking.
• Wharholism:  Millennials are less concerned with fame, but they know it can be obtained easily.  With the access to Tweeter and YouTube, kids with real talent now have the tools to reach a large audience quickly.  They are also becoming less interested in A-list celebrities, and these celebrities are finding it more difficult to manage their reputation with the fickle younger and connected generations.
• Existential Experience: Millennials are about the "once in a lifetime experience", and they want to live life to the fullest.  For most, working and saving are less attractive than risk taking and experience. 
• Technoholism: This is the first generation who will not only be completely comfortable with technology, they will be uncomfortable without it. Content is king, and creating an "Existential Experience" through technology will keep them engaged.  It should not be looked at as a threat but an opportunity.
• Segmented Engagement: The attention span of Millennials is shrinking.  It has ... wait, what was I saying?  I jest, but with all the distractions, messages need to be said fast, right and quickly.

These are great points about the Millennials, and if business managers want to successfully tap the potential of these up and coming consumers, we should embrace and not repudiate these trends.  Let's engage, have fun and create those "once in a lifetime experiences" for ALL of us.

Whoops, gotta to ... got a new text message and a move on "Words for Free"!

Anyone Investing in Facebook?

Is Facebook sustainable? Source: Examiner.com

Facebook announced this week that it anticipates filing for its much anticipated initial public offering, or IPO, as early as this Wednesday, 1 February 2012.  It is estimated (by some very smart people) that the company could raise $10 billion (that's US$, and with a "B"), which would give the company an immediate market capitalization ranging between US$75-100 billion.  To put this in perspective, the Washington Post compared this to other discussion-worthy IPO's, which shows that Facebook is in impressive company:

1. It would be the sixth largest IPO in history, falling somewhere between AT&T and Kraft Foods.
2. It would be the largest technology IPO in history, unseating Google's none-to-shabby $1.66 billion IPO in 2004. 
3. It will put Facebook at a higher market value than Disney ($70B) and GM ($38B), although quite short of its brethren Apple ($422B), Microsoft ($248B) and Google ($187B ... which gets its revenge for being unseated).

This does beg the question, for me anyway, of whether Facebook, which will now face increasing scrutiny from its public investors, its board of directors, and the SEC, can continue on its breakneck growth pace and push the boundaries of privacy protection that has made it so valuable thus far.  As their user count surpasses 800 billion people (making it the third largest "country" in the world, far surpassing the US), you have to question whether Facebook is at its peak right now, or nearing it quickly.

Another question burns ... can Facebook protect the social media space it current dominates?  I made the argument in "Facebook vs Google+" that the company is making great strides to transform its strategy from merely a social networking website to become the preeminent developer of the social media platform we will all use in the future.  It is working, but is it sustainable (the $10B question)?

Rob Go of CNN Money wrote a great article expressing his doubts about the sustainability, saying that Facebook's success is reminiscent of the growth of Yahoo!, which at its peak was a market leader in online platforms.  Of course, Yahoo! declined because they weren't successful at staying at the forefront of the industry.  Facebook faces a few of these same threats:

• True, users spend on average 23 hours per month on Facebook and represent 38% of all internet traffic, or and ungodly 3 out of every 8 hours online (don't these people have jobs?).  Impressive, but new companies are sprouting up everywhere, providing social interactions that are more local, specialized and meaningful.  Photo sharing on Instagram is easier, better and more creative.  More specialized social curation of products is available on Pinterest.  Blogging and self expression can be more creative on Tumblr.  You can earn "mayorships" and badges on FourSquare (although my interest personally is waning quickly ... you can only be the mayor of so many places in Myrtle Beach).  These are just a few examples of how people's interest and the industry are changing, and while Facebook scrambles to keep up, they won't be able to successfully please everyone all the time.
• It is obvious that we are becoming a more mobile (phone) society.  Mobile usage statistics are staggering (see my post for "Coastal Carolina Key Note"), especially when you consider where we were just a few short years ago (does anyone else remember the Motorola Krazer?).  It is also important to understand that the mobile smart phone era is in its infancy.  All of this poses a problem for Facebook, which by its nature is not mobile.  It is adapting, and you don't have to be an insider to know the company leadership is most likely taking extensive steps to transition.  Like Netflix's attempts at becoming the leader in movie streaming while maintaining its lead in the "DVD delivery" category, I think Facebook will find it difficult to dominate both computer and mobile at once.
• Mr. Go also makes a case for the "talent exodus" at Facebook, which many leading companies in the technology industry face.  This is obviously an area I can't speak to (technology, not talent), but I think it also poses a serious threat.

With all of this said, Facebook does have much working for it.  It's young, it's exciting, it's massive, and if the IPO plays out like analysts believe, it is going to be a powerhouse for the foreseeable future.  The problem is, "foreseeable future" isn't nearly as long as it once was.  Stay tuned.

Anyone want to go in halvsies with me?

January 27, 2012