SOCIALIST BUSINESS ADVISORS

     For most of us, when we think of socialism we think of a political construct, like Communist Soviet Union, or Venezuela under Chavez.  But, our loyal JAM Views readers now understand that all politics are about money, nothing else.  Socialism is about controlling the money and, therefore, controlling the people.  Socialism, and all of its euphemistic cousins, takes money from the producers and gives it to the looters under the guise of creating equality.  It was a scam as a first thought thousands of years ago, and remains today the greatest detriment to the forward progress of mankind.
     We are thankful for the President calling out this ridiculous socialist ideology during his recent State of the Union, as the socialist agenda has once again become trendy among the economically-unaware.  The last person, or organization, you want to be in charge of your money is a government.  Throughout history, these entities have a dismal track record for reducing expenses, increasing revenue, achieving objectives, or successfully allocating capital.  Remember, British Prime Minister Margaret Thatcher famously quoted the problem with socialism is "eventually you run out of other people's money."
     Let's review a few current socialism examples getting press in our county:

1.  California's high-speed rail project, initially conceived to connect San Francisco and Sacramento with Los Angeles and San Diego, was approved by voters in 2008 to be funded with a $10 billion bond offering, $3.5 billion in federal government funds, and incentivised private partners.  Construction began in 2015, and, now, New Governor Gavin Newsom has basically pulled the plug on the government project due to the recent estimate of $77 billion to complete!  What a disaster and embarrassment.

2.  California utility PG&E filed Chapter 11 bankruptcy this month as it expects $30 billion in liabilities from more than a dozen major wildfires in recent years caused by its equipment.  This failure is due to the government overseers prioritizing the state's climate goals over safe and reliable service, in other words running a proper business.  The politicians last year approved a $269 million rate hike to pay for "fast charging" stations for everyone's Teslas purchased with other government credits (my apologies for always picking on Teslas to my Academy roommate, the coolest guy on the planet, who has two in his California driveway!), and another $437 million to pay for employee retention programs while shutting down the nuclear plant which produced over 25% of their total power (Did we say "Soviet Union?").  Then, the legislature voted to mandate 100% of PG&E's energy be generated by solar and wind by 2045.  While PG&E was spending a billion here and a billion there on these mandates, they forgot to invest their capital on insulating equipment, clearing overgrown vegetation, and taking other precautionary measures to reduce wildfire hazards.  Now, California politicians are tweeting about the company's focus on profits over safety, even though the politicians are 100% responsible for the disaster. (I once heard a story of how the government shut down an extremely valuable investment company, the golden goose they called it, over a minor regulatory dispute, and then rallied the shareholders and community against the company, all to their own significant detriment.  Unfortunately, this scenario plays out every day in our country).

3.  Now, Bernie Sanders and 16 other Senators are campaigning diligently to replace ALL private health insurance in the U.S. with a government-run single health care plan (Did we already say "Soviet Union?").

4.  Forty Congress members now propose The Green New Deal which includes "a job guarantee program to assure a living wage job to every person who wants one." (I foresee long bread lines).

5.  Elizabeth Warren is demanding a new federal charter for business which would now make companies answer to not only shareholders (the owners), but also to politicians and government oversight groups. (Such as the Politburo?).

6.  And, of course taxes.  Elizabeth also wants to add a new, extra 2% tax not on income or consumption, but just for having accumulated savings and net worth.  This 2% "wealth tax" is government confiscation which even France recently abolished!  No more storming The Bastille!

     Let's stop there this week, as it's probably all our stomachs can withstand.  This week please do your best to help the economically-unaware begin to realize that the LAST "person" you want to run your business, manage your project, or to efficiently allocate your capital is the government.  Take an aggressive stand today, like the President, and call out these ridiculous talking heads.  See through politics and understand money.  That's all there is.  As Margaret foretold, soon they are going to run out of yours.

"The robbed that smiles steals something from the thief."  -  Shakespeare, Othello

* Thank you to Alejandro Lazo & the WSJ, Forbes, & Fortune for the above statistics and quotations.

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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DRIVING MYSELF TO PRISON

Due to extenuating circumstances, Jeff was unable to send a blog for this week's JAM VIEWS. 
FOJ chose an oldie but goodie:


I had rejected three Government plea offers, endured a four week trial debacle, and received a twelve year prison sentence. Following the egregious trial, I was assured I would remain free on bond while the Appeals Court reviewed the facts and would certainly reverse the decision. But, I had not yet received confirmation of this reprieve.  
On November 12, 2013, I was meeting with my new consulting team and reviewing the day's rebuilding progress. At 4:15 PM my cell phone buzzed with a call from the attorney's office. "Jeff, you're not going to believe this, but the Appeals Court answered our forty-page Motion with one sentence, 'Bond is Denied.' You have to report to prison in Morgantown, West Virginia by Noon tomorrow, and whatever you do, don't be late." I had been naive about the system. I had always believed that common sense would prevail, things would be resolved, and we would rebuild our organization and restore our shareholders. 
After many tears with my amazing team, I decided to spare my family and friends an uncomfortable road trip to West Virginia. I would drive myself to prison. At 3 AM I texted my son in college that I loved him, I smooched Mom, I punched Morgantown into the iPhone's GPS, and I began my journey West. 
The dramatic fall from grace swirled through my mind as I kept asking myself out loud, "How the hell did we get to this point?!" I decided to use my voice texting function to say goodbye, hopefully only temporarily, to all my friends listed in the phone's contacts. At least I wouldn't wake them up with a 3 AM call and make their day as miserable as mine. "Kevin, I'm driving myself to prison today! You better find another partner for the Member-Guest, but hold my slot for next year!" "Sean, write this down. Don't ever, ever invest in a solar stock!" "Dave, you're probably just getting home from the L.A. bars, and I'm driving myself to prison. Tell me a good story!" And on I drove, reaching deep into my contacts list, going all the way back to military buddies, business partners, and the neighborhood gang. It was a long drive. I imagined friends waking up across time zones saying, "Honey, I'll be damned. Martinovich is going to prison today!" and then, "Oh, don't forget to pick up my dry-cleaning," as they quickly moved on with their own lives and responsibilities. 
As the sun rose in my rearview mirror, I started to receive a few responses - "WTF???," "Dude, I'll send some cookies! Do you like Rice Krispy treats?," and "Turn left! Turn left!" I also received a call from my attorney, James Broccoletti. "Don't worry. Hang in there. We will get the appeal in as quickly as possible. Remember, don't be late!" (He would send me a letter in prison one week later stating that he had withdrawn from my appeal case, and to this day he has refused to return the $25,000 deposit!). 
Then the phone died. The GPS was gone. In the confusion I had forgot to bring the phone charger. I had no paperwork for where I was supposed to go. I contemplated stopping for a morning cocktail since this was West Virginia, and someone had to be serving a beverage which could calm the nerves. But a quick calculation said that I might be cutting it close, I didn't know where I was going, and I remembered Broccoletti saying that the first thing they do is give you a breathalyzer! 
As I got closer, I stopped at two stores for directions, but to no avail. Time was short, and the blood pressure was rising. I asked God to not let today be another disaster on top of a long list of recent disasters. I stopped again at a corner restaurant and engaged the pierced and tattooed hostess, "Hi, I have a meeting this morning at the Morgantown Prison. Can you please give me directions?" I chuckled internally at my embarrassment. She paused, looked me over in my Hugo Boss sport coat and Gucci loafers, and pointed, "Mile and a half down the road." I thanked her, ran to the car, and felt secure in the forty-five minutes I had left for a safe arrival. 
I pulled up to the gate, and the lone guard walked out of his shack. 
I offered, "Hi, I'm Jeff Martinovich, and I'm reporting to prison today." 
He leaned onto my door, looked into the empty car, and inquired with a perfect West Virginia twang, "You drove yourself to prison?" 
I nervously replied, "Well, it's a long story. I didn't think I was making the trip. Everyone fell apart last night. I thought I'd better just drive myself. I'm going to park in that lot over there. My buddy, Mike, owns a car lot, and he'll send a couple guys over to pick it up tomorrow." 
He looked at me like I'd lost my mind, leaned back, spit tobacco juice on my front left tire (true story!) and said, "You're not parking your car here. Your only option is to go back into town, leave your car, and take a taxi back here. And, you have thirty minutes to make it back, or you'll be starting your sentence in the Hole!" 
I wasn't sure what the Hole was, but it certainly did not sound good! I had scary visions of Paul Newman in "Cool Hand Luke." I whipped the car around and headed in the opposite direction. There would be no time to get a taxi, and surely the guard took great enjoyment in knowing this fact. My only hope was my Goth hostess. I pulled into the restaurant's small parking lot and ran in to ask if I could leave my car there overnight. 
"Oh no, Sir. John The Manager would never allow that. There's never enough space as it is." 
I interrupted, "I'm sorry to be short, but I'm in a huge hurry. May I please speak to John?" 
Soon appeared John The Manager displaying double the piercings and tattoos as our hostess, died black hair, and thick black eyeliner. "Cannot do it. No way!" he rolled off his pierced tongue. 
I proceeded to employ every Dale Carnegie technique I could remember to influence this fine, young gentleman to allow me to leave my car, but I was getting nowhere. Then, I went to Plan B and just would not accept "no" for an answer. Finally, in exasperation, he yelled, "Fine! But if it is still here tomorrow, it will be gone!" and he stormed back to the kitchen. 
I turned back to my hostess. "Miss, I didn't exactly tell you the whole story before. If I don't report to prison in fifteen minutes, they are going to throw me in the Hole! Is there anyway I could talk you into driving me to the front gate so I can make it on time? You can even drive my car!" 
I then experienced for the first time the label of a "felon" as she took two dramatic steps backwards and made clear that my request would not be possible. 
I ran to the car. My watch noted I actually had sixteen minutes remaining. I threw the watch, the phone, the wallet, and the keys into the glove compartment. I slammed the car door, looked to the sky, and let out a yell, "Okay God, if this is the way it's got to be, then this is the way it's got to be!" 
I took off in a sprint across the snow covered parking lot. I crossed the street, dodging a few cars, and ran as fast as I could against traffic on the side of the narrow rural road. The snow was deep on the side, and the shoulder was covered in slush and puddles. The road was occupied with Ford F-150's barreling down on this lunatic running for his life against traffic in a black sport coat and loafers! The trucks showered me with spray as they passed too close for comfort. As the mind slows down at these extreme times, so many events which had brought me to this point played like a movie in front of me. 
I was soaked to the bone, the snow was deep, and I knew I wasn't making good time. I screamed to God once more, "After all of this, you have to let me make it!" 
I spotted the prison ahead, and it gave me a final burst of energy. There was a gap in the oncoming traffic, so I moved onto the road and gave it all this forty-seven-year-old body could summon. I sprinted through the gate like Eric Liddell winning the Olympic gold in "Chariots of Fire." 
The guard walked over to me as I clutched my knees, heaving and gasping. He looked me over and shook his head. "Two minutes to spare. I never thought you'd make it." 
I followed him into the Processing Center. There would be no Hole for Prisoner 81091-083 today! 

"The real test of man is not when he plays the role he wants for himself, but when he plays the role destiny has for him." 
-- Vaclav Havel 

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com

* To access JAM Views directly, please visit jeffreyamartinovich.blogspot.com.

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YOU DON'T NEED AN EMPLOYER

     I know I keep pestering you to take that step; to start your own business, to teach the rest of the world, and to constantly lead by example.  But, I really think this is your year!  The window is open!  Unemployment is 3.9%, and corporations are more flexible than ever - literally ever.  Technology is ready for you, the regulatory environment is ready, and the tax structure is optimal.  Now is the time for you to be the person you always dreamed you could be.  On our death beds we only regret the things we DID NOT do.
     I have an idea.  Why don't you set July 4, 2019, as the date you will launch your new business?  You can execute a responsible and methodical game plan to hit this target.  If you are now an electrician working for other contractors, on Independence Day you will roll out your own organization.  If you are a software engineer, by the time you are watching fireworks, you will have launched your own consulting enterprise.  If you are in sales, by mid-year you will have negotiated contracts to independently represent only products and services about which you are passionate.
     First, review our previous Post, "What Smart Investors Look for in a Business Plan."  Initially, you are not going to need investors but the plan will help you get out of the gates.  Investors will come later when everyone wants to get in on your success.
     Second, let's take the next few months to get everything you need in place.  You will be surprised at how easy and inexpensive it is.  The Friends of JAM have been kind enough to help us with a Virginia, USA, startup example.  I note "USA" since we are honored to have many JAM Views readers from Germany, Ireland, France, and Ukraine, to highlight a few most-frequent visitors.
     While watching "Seinfeld" reruns this weekend you can access Virginia.gov and open your single-member Limited Liability Company (LLC) online in 15 minutes, to include Articles of Incorporation. Pay the $100 fee and you are off and running.  Do it yourself instead of paying an attorney to waste your time and money.  You don't even need to pay Legal Zoom $400.  All these intermediaries do is charge you tons of money to make you think you need them.  Do it yourself so that you understand everything.  Remember, you are taking back your power!  Make a note to also file a simple Annual Report and $50 to the state in 12 months.
     Spend 10-minutes online with IRS.gov, and get your Employer Identification Number (EIN) for your new company.  That's free.  If you think your name or logo is really awesome, you can trademark these at USPTO.gov.  That's $400, or we can wait on this one until the Chinese begin stealing your Intellectual Property (IP).  Open a corporate account with Ally Bank online, so you don't have to pay all the fees from the big banks.
     Download QuickBooks for the Self-Employed, at $10 per month, so you can easily keep track of all the expenses you will now write off your taxes.  Come tax time, as a single-member LLC in Virginia you will simply translate your revenue and expenses to your Schedule C on your personal return.  Easy.  Later, when you add employees and are printing money, you will do a separate return, K-1's, and all that.
     Next, during "Cheers" reruns you will create your online presence.  At GoDaddy.com you will purchase your website name (URL) for $13, and you will also have them host your website for $7 per month.  Next, you will design your website using one of Go Daddy's easy plug-n-play templates.  Super simple.  Then, you click over to Blogger.com to start your own blog (You mumble to yourself, "I've met Martinovich, and if he can do it, anyone can do it!").  This is free.  You open a new blog, and twice a week you begin posting something short and simple that will help people in your industry.  By next year, they will refer to you as "an expert."
     Now, you are going to gradually dip your toe into this new venture by doing a little work on the side.  Steve Strauss wrote in "USA Today" that nearly 40% of Americans now have a side hustle, and "the average side hustler earns about $8,000 a year."  That pays for a lot of ballet lessons, not to mention braces!  I know a beautiful woman who sells R&F on the side, another for Scentsy, and you would be surprised who drives for Uber and Lyft.
     Steve also highlighted the online product Ascend as one tool that allows us to do just as much in our startup from home as we used to only be able to accomplish at the office.  From the dashboard you can manage contacts, give price quotes, manage workflows, and invoice customers.  Over coffee you can run email and social marketing campaigns, create a video in a few minutes, and create search-engine-optimized (SEO) pages.
     Now is the time.  You will not find a better window during your working lifetime.  Grab the opportunity for freedom, challenge, responsibility, and no excuses.  Maybe it will go nowhere, maybe it will be a failure, but then again, maybe you will succeed.  You don't have to build Berkshire Hathaway, but at the end of this journey you need to be able to hold your head high, your shoulders back, and claim, "I played the game, and I gave it everything I had."
     Download "Defending Your Life" this weekend and watch Meryl Streep during her life review.  Notice how she overcame fear.  That's the point.  That's why we came down here.  I will be cheerleading you all the way to Independence Day and beyond!  And, if you stumble, we will all help you back up to stay in the fight.  You can do this.

"Never doubt that a small group of thoughtful committed citizens can change the world.  Indeed, it is the only thing that ever has."  - Margaret Mead

* Thank you to Friends of JAM (FOJ) for the above research conducted, initially, for the JAM Course "Building Special Companies."

* I, thank God, am not a lawyer or accountant, and nothing above is to be construed as legal or tax advice.  Please consult an expert. (Isn't it ridiculous that the lawyers make us include this, or otherwise they sue us to protect their own cartel?  I promise we will fix this, also).

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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BUILD A VALUABLE COMPANY INSTEAD OF HIGH CURRENT INCOME

     Even before this Presidential Administration lowered corporate tax rates to allow U.S. companies to be more competitive domestically and internationally, the smart business owners already knew to reinvest their income back into the company instead of taking out high, current, taxable income.
     Dr. Thomas Stanley wrote years ago "The Millionaire Next Door," in which he explained how true wealth was not found in the neighborhoods of large homes, small trees, and BMW's in the driveways.  These communities contained substantial debt and nightly spending arguments between husbands and wives.  Real wealth and independence was found in neighborhoods with small homes, large trees, and early model Buicks in the driveways.
     The homes with Buicks were inhabited by the owners of Sammy's Heating and Air, Tommy's Auto Body Shop, and Susan's Premier Staffing Agency.  These business owners had built value into their corporate entity, as well as saved significant dollars in defined benefit plans, deferred compensation plans, and second-to-die whole life insurance policies.  These people  had real walk-away, liquid, tax-favored money for whenever they chose to move onto the next adventure; and they had worked their buns off and deserved every dime, and more.
     If we choose to maximize our short-term income, we will be taxed at the highest rates, not long-term capital gains rates, and we will likely increase our standard of living to match however much income we bring home.  Children psychology studies conclude that lower IQ children will choose 2 M&M's now instead of 5 M&M's in five minutes, while higher IQ children will forego instant gratification in anticipation of a much greater reward.  They must innately understand at an early age the power of tax-deferred compounding, which even Einstein labeled, "The 8th Wonder of the World."
     As entrepreneurs building our Special Companies, we must find our comfortable monthly income level for our family, and then we must fix that number and decide to, at least for a while, reinvest all surplus income back into growing the value of the company.  In the year 2000, I pegged my monthly take home pay from our companies, and even though our revenue increased significantly over the next ten years, I reinvested all of this extra income back into acquisitions and personnel which greatly increased the enterprise worth of our businesses.
     But, we must understand how to increase our company's marketable value far beyond the simple math of revenue and earnings multiples.  Recently, IBM acquired Red Hat.  The acquisition of Red Hat only added 4% additional revenue to IBM's financial statements, but IBM paid in cash $33 billion for Red Hat, which equaled one-third of the total value of IBM.  33% for 4% more revenue!  Is IBM crazy or brilliant?  We will see.  But, how can we make our organization extremely valuable, even outside the numbers, like Red Hat:

1) Maximize intellectual property (IP) which includes patents, copyrights, and trademarks.  So often we miss this opportunity to add value by protecting our long-term reputations and achievements, and by even re-licensing this property to others (Google "3-peat").

2) Build recurring revenue instead of a transactional business. If you have to wake up every day, every month, and milk the cows, you will be valued much lower than the organization which milks them automatically.  In the investment world, firms whose revenue is generated by quarterly asset-based fees are valued substantially higher than firms who rely on transactional brokers.

3) Ensure the company can eventually run without you, and not miss a beat.  In my book, "Building Special Companies," I recount the month in which I took a sabbatical from the business for this very purpose, and to re-charge my batteries.  Not only did the organization not miss me, they all elevated their game and accomplished so many tasks to which they believed I might object.  They were brilliant, and our value stepped to the next level.

4) Work on consistency of earnings.  If your income is all over the map due to contracts won and lost, lawsuits, or windfalls, a buyer will greatly discount your expected future earnings, thus lowering your current value (Net Present Value - NPV).  This is why Microsoft, Apple, and others have always been accused of artificially "smoothing" their earnings - which is true.  This gives their stock a higher valuation.

5) Monetize your brand and your followers.  Our investment firm was valued higher because we had the honor of servicing over 3,000 clients whom mostly utilized our firm for three or more services; planning, portfolio management, insurance, mortgages, wills & trusts, and more.  Psychologists claim that once a client utilizes an organization for three separate services, their retention rate is nearly 100%, as it is too much trouble to transfer all of these relationships. Maximize the Twitter followers, the blog subscribers, and all of the people you may influence.  Be an influencer!

     We will stop here for this week, but I want you to understand that we can begin with the end in mind.  Forego the 2 M&M's, and position your company to be so much more valuable to a strategic buyer who will take advantage of the substantial value you have built.  I mean, really, how many Teslas do you need?

"If you want to change the world...don't back down from the sharks."  -  Admiral William H. McRaven, Make Your Bed

* For more information on Jeff's Books, Blog, and Legal Challenge, please visit www.jeffmartinovich.com.

** To access JAM Views directly please visit jeffreyamartinovich.blogspot.com 

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