Category Archives: Business

Goals & Priorities

After watching Laura Vanderkam’s: How to gain control of your free time Ted Talk, it inspired me to move my butt off the couch and come upstairs to write this post. While a relatively benign title, the content of the talk really resonated with me.

Takeaways

  • “I don’t have time really means that’s not a priority to me”. This is a good reminder for what I had learned early in life and what hopefully is obvious to everyone. Laura gave an example of how a homeowner had their hot water heater break and water leak all over. The homeowner spent 7 hours cleaning up the mess and fixing the issue. Laura then went on to say with this person so busy how did he or she find 7 hours in one week to resolve this.
  • When setting goals, set goals across different areas of your life. Her recommendation was setting goals across “Career / Profession, Relationships, and Self”. To me, that’s brilliant because that encompasses the major life areas. If I had to add one, it may be “environment”.

Laura definitely has me rethinking my Goals & Priorities. As someone whose goals and priorities frequently change, I thought I’d write them down and share them. This will allow me to reflect on what things are a priority or not and have a greater likelihood of commitment and attainment.

Goals & Priorities

Happy & Healthy Family

Having a happy and healthy family is by far my biggest priority and goal. There will be unhappy and unhealthy times but striving for this is where it’s at.

How will I do this? By “making it so” as Captain Picard used to say. And by allocating time for family, and by providing for them, and by doing the right thing.

I thought about including weight loss but I’m actually quite happy with my body and health so this isn’t a priority for me.

Relationships

Relationships with people is where there’s opportunity for great improvement. I tend to be a loner. A guy who likes to read, learn, analyze and tinker with things. Lately though, I’ve found that spending quality time with people brings great pleasure and fulfillment to my life. As a result, I will take every opportunity that comes my way.

Helping Others

Helping others is another priority for me. This reminds me of a “Walking Dead” scene where Carol asks King Ezekiel “Why are you helping me?” and he responds “because it makes me feel good”.

One way I’m doing this is by mentoring a junior in high school in his independent study class to learn Object Oriented programming and design to help build a 2D game engine he’s been wanting to build. I have to brush up on my C++ but am really looking forward to this. I wish I had a programming mentor when I was in high school.

Provide Best Service To Customers

Providing the best service possible to my customers is very important to me. If you’re paying me to do a job, you’re getting the best I have to offer each and every moment!

To a Lesser Extent

  • Keep Learning and collaborating with others.
  • Minimize complaining and take action to eliminate the complaint. This is something that I’ve done a lot more in recent years. It’s better to try to fix the complaint than endlessly talk about it.
  • Become a certified Salesforce Technical Architect.

What are your goals and priorities?

 

Reflecting on 4 months in Business Part 2

Here’s a follow-up post detailing my findings after researching if I could have a Child Care FSA and doing a more detailed business and personal budget. Reflecting on 4 months in Business Part 1

Child Care Flexible Spending Account (FSA)

I am not eligible for a Child Care FSA aka Dependent Care FSA because my wife is an awesome stay at home mom. This FSA requires that both parents work or attend school. For more info, see Dependent Care FSA Guidelines.

With the IRS allowing an additional exemption of $4,000 in 2016 per child and up to $1,000 with the child tax credit, that’s not too bad. The FSA would’ve been icing on the cake.

Personal & Business Budgeting

Business, finance, and accounting are other subjects I’m passionate about besides software. Taxes to a lesser extent. While getting my MBA, I considered becoming a Certified Public Accountant (CPA) or Certified Financial Planner (CFP).

Creating budgets and sticking with them is fun. With Paychex Flex, it’s really easy to put in different salaries, withholdings and deductions to run different paycheck projections. In the past, my paycheck projections were run using the Paycheck City Salary Calculator, which tends to be accurate within a few dollars.

After projecting my personal and business revenue and expenses, here are my findings:

Relatively Low Business Expenses

  • Payroll is my largest expense because I have to pay myself a reasonable salary and I want to cover my personal expenses with my salary.
  • Health insurance is the next largest expenditure at around $1,000 per month for a HDHP, HSA eligible Silver plan for my wife and I and a Child Health Plus plan for our child. For those not doing the math, that’s roughly $12,000 in premiums per year. That’s premiums only. There’s still a high deductible to pay before co-insurance kicks in. That definitely sucks.
  • Liability insurance is the next one at around $1,000 for the year. Despite having S-Corp liability protection, having additional “liability” insurance give me peace of mind.
  • At this time, my home office is good enough for me. I wasn’t entirely sure how much more utilities would increase from working from home. After a few months, there’s been no increase in electricity or gas.
  • Thanks to Moore’s Law, my new laptop should easily last me a few years and was relatively cheap at $1,500.

Surplus of Funds With Conservative Income Estimate

With my conservative income estimate, there’s a surplus of funds that can be allocated towards different things such as

  • 401K Profit Sharing. I love investing and seeing compound interest at work.
  • Additional Training. For example, going to Dreamforce or other conferences.
  • More ergonomic office furniture such as a standing desk and very nice chair.
  • Reinvesting in the business for growth to hire employees and/or create product(s).
  • Diversifying my income streams by investing in other investments classes such as real estate or peer-to-peer lending.
  • Paying down existing debt faster while credit card churning for travel hacking purposes. This is something I’ve wanted to try for a while but we’ll see. I wouldn’t probably start this until there’s a significant account balance and revenue is smoother.
  • Work less and spend more time with family, friends, and hobbies.

What have you done to keep your health insurance premiums low as a freelancer? With an expected surplus of funds aka “profit”, what did you do with the extra money?

Reflecting on 4 months in Business

That was fast. I’ve been in business 4 months now. It was only 2 months ago that Reflecting on 2 Months in Business was published.

What’s New?

  • New Client. I have a new client from someone that approached me. That was a first and we turned the deal around quickly.
  • Switched health insurer. Health insurance premiums went up again so I decided to switch carriers for a slightly higher premium but better metal level. This year, I actually saw catastrophic plans listed on the NY Health Exchange but they were at the end after all the bronze, silver, gold and platinum plans. Wasn’t Obama Care supposed to lower premiums without subsidies too? Health insurance, besides paying myself a salary, is my largest expense so far. I really wish the U.S. had a Single Payer system and we paid a tax to fund it.
  • Job Offers. People have offered me full-time jobs but have declined because the autonomy and flexibility of being self-employed trumps being an employee right now. It has made me consider under what conditions would I go back full-time. My bare minimum requirements would be
    • Work From Home whenever you’d like.
    • Flexible schedule. Want to take the afternoon off, go ahead but ensure the work is completed.
    • Full or mostly full autonomy. I want to be given some objectives and then left alone to complete them. For example, if an employer were to say Luke here’s some investment capital and go write this product or start offering this line of business, that would intrigue me. If I have to answer to multiple managers, especially in a matrix organization, I’m definitely passing. If they say we need a process with lots of oversight for that or we have to meet  daily, pass.If I ever hire employees, I want them to be mostly autonomous peers who need little direction but who assist each other as needed to get the work done. Perhaps this should be at the top of the list?
    • Great compensation package with awesome salary, benefits and PTO.
    • Training Opportunities. I’d like to go to more conferences to stay current with technology and network with the community or perhaps take additional classes.
  • Missing Professional Camaraderie. I absolutely love working from home. No commute. Limited distractions. Nice Office. However, I miss being around other professionals and talking shop about different ideas on a whim. This still happens occasionally but not like it was.

What’s Next?

  • More Detailed 2017 Budgeting & Taxes. Revenue & expenses are fairly predictable now so I’ll have a more detailed 2017 budget compiled along with taxes too.
  • Research Childcare Flexible Spending Account Feasibility. With our daughter getting older, it would be nice to put her in daycare part time to socialize with other kids and give mom and dad some “flexibility”. Am wondering if there’s a tax saving opportunity here.
  • Expand the Network. I want to get more involved in the Salesforce and tech communities and am debating how to pursue this. My primary method has been the internet via this blog and others. Other possibilities are joining the local Salesforce User Group, joining online groups, contributing to open source projects, or attending various networking events / activities.
  • Become Lightning Proficient. Lightning adoption has been slow in the Salesforce world for various reasons but predict it will pickup considerably in 2017. To stay current, I’ll be using Trailhead and other resources to become proficient at Lightning and remain so.

What are your professional goals for 2017 and how will you reach them? Do you think I use too many bullet points?

Hope you enjoyed the update and happy holidays.

Solo 401K Setup & Lessons Learned

Most of my posts are technology related. In this one, I want to share my experience with setting up a Solo 401K and my lessons learned.

Why Bother?

  • Tax Savings. Up to $53,000 can be saved in income taxes. $18,000 from employee contributions and up to $35,000 from employer contributions in 2016. Employer contributions are limited to 25% of employee wages for an S-Corp so if I pay myself say $40,000, the employer contributions are limited to $10,000.
  • Investing Flexibility. The vast majority of 401Ks offer mutual funds only. Depending on the 401K provider selected, you can get all the investment options that they offer and this varies widely. I ended up selecting Fidelity using an Investment Only Plan with complete check writing control. This allows me to invest in traditional investments like stocks, bonds, mutual funds and ETFs or more exotic investments like buying real estate.
  • After-Tax, Non Roth contributions. Depending on how much salary one pays themselves and how much revenue the business earns, the employer contribution may be rather limited and if you can contribute more, an employee can contribute after-tax, non roth contributions that aren’t subject to the regular $18,000 employee limit. This is helpful in the Mega Backdoor Roth Strategy. My plan is to invest pretax whenever possible but have this as an option as needed.

Setup

Aside from technology, business, finance, and personal finance are other subjects I’m very passionate about. I like to learn all the nitty gritty details about things. I knew a fair bit about the financial aspects of 401Ks but not the administrative and compliance side of things. Those are very complicated.

It all starts with the 401K Plan Documents. These documents list all the different options that are allowed by law and you select the options you’d like to have. For example, do I want to offer Pretax only accounts or Roth and After-Tax accounts too. Do I want to offer matching employer contributions, profit sharing contributions, or perhaps a Safe Harbor non-elective employer contribution.

After the options are selected, they have to be administered and followed. There are also various compliance and reporting requirements to keep your 401K’s tax advantaged status. For example, if you have employees, you must send them 401K reports periodically and depending on options selected, you have to do Highly Compensated Employee (HCE) testing to ensure that all employees are being treated fairly. With employees, there’s also tracking desired contribution amounts to be withheld from payroll, deciding which investment options to offer, and allowing them to manage their investments.

All of this is very time intensive and requires in-depth knowledge. This is why many companies outsource it to a third party administrator (TPA) who will handle 401K setup and administration or some combination. As you can imagine, this can be expensive.

As the sole employee of an S-Corp, I am eligible for a Solo 401K that isn’t subject to HCE testing and many other things. If I ever hire someone, then I will be. Since Solo 401Ks are fairly simple compared to a “Traditional” one, many providers offer them and they can be really cheap depending on what they offer.

The first provider I asked quoted me $1500 for setup, a $55 monthly maintenance, and then 0.45% of plan assets annually but they would take care of everything for me. Since I plan on doing everything myself, for now anyway, and need advice when needed, this was more than I was willing to pay at this time.

Next, I looked at Vanguard because I’m a big fan of Jack Bogle and passive index investing. Their i401K offering looked attractive at first because they only charge $20 per mutual fund selected per year. However, they only let you invest in a “Pretax” account, only let you invest in “investor” level mutual funds that charge higher expense ratios, and don’t do any 5500 reporting for you.

After more investigation, I decided to go with My Solo 401k. They’re a TPA that does 401K setup and plan documentation administration services. Their website is very thorough. They charge $795 for the first year and $125 per year afterwards. When I called I spoke to the owner and his colleague and they’re awesome. They are experts, answered all my questions, and did most of the setup for me. They helped me setup Non-Prototype 401K investment accounts at Fidelity for Pretax, Roth, and AfterTax 401K accounts where I have complete control over what I invest in and Fidelity doesn’t charge for having accounts with them! Their regular trading fees and mutual fund fees do apply.

Lessons Learned

  • Learn what’s involved with having a 401K and the tradeoffs so you can select a provider that will have provide the right amount of services for your desired level of outsourcing and price point.
  • 401K employee contributions have to be done within the calendar year but employer contributions can be made up to March 15th of the following year. This later deadline gives additional flexibility for employer contributions.
  • Profit Sharing! An employer can elect to contribute non-matching amounts to the 401K in addition to matching or Safe Harbor contributions. They can even do this even if they have no profit but it’s not recommended. For the time being, I’ve elected to only have profit sharing as the only employer contribution option so I can contribute however much I’d like whenever I’d like up to the dealine on the employer side up to the employer limit.
  • If you hire employees, things are more complicated and would recommend hiring a full service TPA.
  • Depending on the 401K custodian, the available investment options vary greatly. With my self-directed 401K, I can invest in real estate, tax liens, and other alternative investment options in addition to traditional investments like stocks, bonds, mutual funds, and ETFs.
  • Employer contributions are always pretax. They can not be Roth or after-tax, non roth contributions.
  • Employer contributions are considered a business expense and can be deducted from income taxes. They’re also not subject to employment taxes even though employee contributions are! Put differently, you transfer money from your business checking account into your Pretax 401K employee account and then get to deduct that amount from your income taxes.
  • In 2017, the employee contribution limit remains the same at $18,000 but the employer contribution limit increases by $1,000 to $36,000 for a total contribution limit of $54,000.

What was your experience setting up a Solo 401K or other employer retirement plan? What other things did you learn?

Reflecting on 2 Months in Business

It’s been 2 months since taking the plunge and things are good. Business has kept me so busy that my regular posts have taken a dip. While my daughter is sleeping right now during an afternoon off, I thought I’d share some experiences, feelings, and thoughts since starting the business.

Being The Boss

After working for many years in different industries in blue and white collar jobs, I’m now my own boss. I’ve dreamed of this for a long time but the funny thing is that now I have a different kind of boss, my customers. They need answers, software, and me to be available on their schedule.

At this time, the only employee is me but there’s still a lot to manage. Things like getting a good team, such as an accountant, lawyer, and other advisers in place to support you when questions arise or assistance is needed.

Payroll

There’s also things I used to take for granted like doing payroll. When payday rolled around, you just get paid. Not so easy anymore. Choosing a payroll provider was no easy task because there are really cheap providers and market leaders like Paychex and ADP and price alone isn’t always the best reason to choose something. I chose Paychex because I worked at Paychex, know they provide excellent customer service, are very responsive, their online software is excellent, and they give you a dedicated payroll specialist.

As an S-Corp, I have to pay myself a “reasonable” salary. What’s reasonable is dependent on industry, services provided, variable income, and other considerations. The general guidance is to pay yourself what you’d pay an employee to do those tasks. So far, I’ve been paying myself a reasonable salary based on my pay period’s income. I’ve actually said to myself, “How much will I pay myself this time”. Perhaps a bit naive but I thought you had to pay yourself a salary no matter what. Nope. The pay is up to you.

Team

Having a great team in place is a necessity. One can’t do it all. I’ve found a great accountant, payroll provider and other advisers. Great people work with other great people so when looking for a particular service provider, I’ve asked them and they usually refer me to other great people. Thank you!

Accounting

With an accounting background, I decided early that I wanted to do my own bookkeeping. My biggest challenge was deciding which accounting software to use.

My accounting firm is certified in QuickBooks Online and decided to select that after researching it. I couldn’t be happier! It’s web based, easy to use, fast, and allows my accountant to login and review my journal entries and make any adjustments as needed. Since I want to keep all my documents electronic, being able to attach receipts to expenses, invoices to sales receipts, and other documents is awesome. Things can be a bit time consuming using a consumer grade scanner but luckily I don’t have to scan too many things.

Overall, this is pretty easy and I spend probably a few hours a month recording transactions and doing bank reconciliation.

Health Insurance

Purchasing health insurance has been one of the hardest tasks thus far. Around 15-20 hours were spent on this before a decision was made.

Bronze, Silver, Gold, or Platinum, that is the question.  Bronze is the high-deductible, low premium tier while Platinum is the co-pay, high-premium tier. In my area, family Bronze plans across the providers cost approximately $800 per month and Platinum plans are $1,600 per month. Another factor is do you buy a plan from the health exchange or from the provider.

Not happy with the options seen, I started looking into non-traditional health care insurance providers such as freelancers insurance but that turned out to be even more expensive.

I then started looking at the business health insurance plans on the health exchange which were a little cheaper than the individual plans but essentially had the same coverage. After speaking to a health exchange rep, I learned I wasn’t eligible because a business needs at least 2 employees, one of whom can’t be a common-law employee aka can’t be related to the owner.

In the end, two plans were purchased. One for my wife and I and one for our daughter.  Our daughter is covered under Child Health Plus which is an HMO plan that has the major things fully covered with no deductible or co-pays. The tradeoff is that she must see her primary care physician first for everything and then be referred to a specialist, unless it’s an emergency.

After all of this, it reaffirmed my belief that I would gladly pay extra taxes for universal health coverage.

No Written Business Plan

The traditional business advice is to have a business plan written down describing the goods and services that will be provided, how the company will be funded and the funding sources, what your target market segment(s) will be, what actions will be taken over X number of years, and other things. This was too much for me for now.

I had thought about starting my own business for years and had tossed around many different ideas with friends and mentors. For example, even though I’ve always been drawn to computers and creating software, do I want to stay in this industry or do something else. Besides software, I’m also drawn to finance and accounting and have thought about becoming a CPA or a Certified Financial Planner.

After switching to a technical consultant position at NimbleUser, I discovered that I really liked consulting and helping people more than the programming aspect. With that discovery, I decided to start this Salesforce consulting practice and see how it goes.

So far, things have been good and have not regretted writing a lengthy business plan. If I was to do something else, I’d probably do a business plan.

Financial Cushion

Having savings as a financial cushion really eased my worry about taking this plunge. Knowing we could go for a while without any income and that I could find another job quickly is a big relief. Will I always be able to find another job in this industry? Who knows but for now I can.

Growth Plans?

I keep asking myself and others have asked, “will you hire anyone or expand?” and for now, no. I have never been happier and the work-life balance is great. I have more family time and love working from home. I have turned down more work with no regrets.

Of course, things may change so we’ll see.

Other Items

Some other items like staying focused, having a designated workspace, and potentially getting rid of my car were other topics I had to write about but my wife, daughter and I are going to go for a walk now while the weather is good.

What reflections and observations do you have from starting your own business?