Friday, January 20, 2006

This was the week of meetings with my various advisors, accountant, business coach and personal financial planner. Tuesday I met with my accountant and it was uglier than I thought. I knew on an accrual basis that I’d lose money for the quarter, its not an expectation to earn back all of the money that I invested in the start up in even the first year; in addition I budgeted a salary for myself that I didn’t take. But I didn’t expect to lose money on operations.

What happened? A couple of things one planned the other a mess up. First I was very aggressive with my pricing. I did not want to lose a deal because I was more expensive, so I bought some business. Essentially I intentionally sacrificed my salary to win business. Also I used the best (and most expensive) subcontractors I could find to insure that my work was of the highest quality. But that didn’t leave much of a margin of error and missing large costs in two deals was more then enough to get me transferring funds from my personal to business accounts.

The good news is that all my bills are paid.

We also began discussions about taxes. One of the problems of working overseas is that you file and pay taxes in the country that you are located in and file taxes (and sometimes pay) in the US.
Having a business just adds to the complication.

Needless to say I was upset, and still was on Wednesday when I met with my business coach. He was unperturbed. He pointed out that for a first quarter of a business my activity was good and that looking forward there is a good book of business for the second quarter. That I’m getting second opportunities to work with companies and that the margins on the upcoming deals are better.

We also examined where I am getting business and what type of opportunities those are. By and large these have been small deals with low risk for the principal that are intended to test my abilities. Also most of the work has been as a sub contractor and when it has been a direct with the principal opportunity, the company has been one that I have a personal connection. Over our next few meetings we are going to focus on getting beyond this position and also getting that elusive long-term account.

The meeting with my financial advisor was very pleasant as my portfolio is doing pretty well. Funny how a rising stock market makes you look like a genius.



Anonymous Anonymous said...

thanks for reminding my why I don't want to be a business person.

Good luck with it.

3:07 PM  
Blogger el Bow said...

I though that if you were out of your country for 2+ years than you were not required to pay taxes in your country of origin.

Does that have something to do with your visa or immigration status?

One more reason to be grateful for multiple citizenships.

3:11 PM  
Blogger Merisi said...

Accrual basis? You don't actually use that, do you?

5:53 PM  
Blogger Kim said...

At the end of 2005 I had been living in France for just over two years and nearly three months. I still have partial years income.

Accrual only in an informal way so that I can see when I've earned back the initial investment and cash inputs.


12:51 PM  
Blogger Merisi said...

You should be thinking more in a return on investment mode. Maybe you are, but it's unclear. Your startup costs are equivalent to an interest-bearing loan from a third party. A very good way to track how you're doing is to assign a rate of return to that money. Then you have a clear picture each month, quarter, whenever of how you're doing as if you were paying out a return.

Take standard commercial terms. Here, those would be a 5 or 7 year loan that amortizes on a 20 or 25 year schedule. The 5 to 7 year money is what banks generally lend on, though the changes in interest rate structures is affecting that as longer rates become more relatively attractive.

If you earn more than the "payment", you can prepay, lowering your principal balance and the future payments.

4:42 PM  

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