Of Independent Means

Last week I had the pleasure and satisfaction of watching six women entrepreneurs present their business stories to their peers and loved ones at the Slate Gallery in Oakland’s Temescal District. Each woman had just completed a 12 week course in entrepreneurship developed by the Hatch Network, a new, San Francisco-based company whose mission is “to be the absolute best provider of entrepreneurial education and services for women in the world.”   

What the Hatch Network does, besides provide the curriculum, is to establish a network that connects experienced business veterans – the mentors – with ambitious business owners – the students.  Once those connections are established, the teaching/mentoring begins.

When Hatch Network co-owners, Allie Covarrubias and Claire Fontana asked that I become a mentor in their network, I didn’t hesitate. I was already familiar with their skills as leaders and visionaries and I wanted to become a part of their new venture.  Mentoring women entrepreneurs seemed like such a great complement to my financial planning practice, where I focus on women, their families and businesses.My initial concerns about time committments (I’m a solo practitioner, self employed) proved to be premature. This was a rich and rewarding experience.

So, back to the graduation celebration at the Slate Gallery in Oakland. The 12 weeks of classes are structured so that at the end, students are prepared for and required to present their business story as if they were presenting to investors or clients. They outline the who, what, when, why and how much of their business. The challenge is meant to help them achieve clarity over important business questions. Who are we? What do we provide. Who are our clients? Why are we unique? What benefits accrue to our customers? How much does our service cost? How much will we sell? And most important, how much will we make? 

As you might expect, each of the six women were as nervous as a long-tailed cat in a roomful of rocking chairs. Public speaking was a daunting prospect, added to the writing and technical skills needed to pull together a dynamic  8-10 minute presentation. But when they each took their turn, it was as if they had been practicing for days….each more polished and professional than the next. It was truly gratifying to watch them and to have been a part of their story.

Who are these ambitious women and what are their businesses? 

Pascale Teysseire
Owner,  Funding for College 
Provides a personalized college funding search to assist students/parents in attaining financial aid: scholarships, fellowships, and grants –  necessary to attend the college of their choice.

Jane Inch    
Owner, Jane Inch Life Coaching:  Reveal Your Inner Sparkle (website coming soon!)
Provides lifestyle and business design programs for the midlife/empty nester who is seeking clarity and is ready to launch “what’s next” in her life. 

Linzi Oliver
Owner, Doggy & Me Fitness
Provides an outdoor fitness class for you and your dog. 

Feleciai Favroth 
Owner,  The Art of Bathing
Provides handcrafted creams and soaps with the finest natural ingredients including shea butter
olive, jojoba, coconut and essential oils.  

Elizabeth Husserl 
Owner, Inner Economics
Facilitates  processes of awareness and change around people’s relationship to money.

Anne Cavazos 
Owner, Cavazos Environmental Consulting
Provides high quality and cost effective environmental consulting services.

Congratulations, ladies!

If you’re interested in becoming a Hatch Network student, my next class starts in January and will be held in Oakland, California. Here’s an abbreviated course syllabus:

Week 1:  Evaluating your Entrepreneurial Opportunity
Week 2:  Identifying Your Ideal Customer
Week 3:  Scoping Out The Competition
Week 4:  What Are You Selling
Week 5:  Building your Brand
Week 6:  Your Company Message
Week 7:  What To Charge
Week 8:  Marketing Focus
Week 9:  Sales 101
Week 10: Finding  the Money
Week 11: Book Keeping, Briefly Legal, Insurance 101
Week 12: Be the Boss Lady:  Team Building, Leadership
Week 13:  Your Business Story

If you would like more information, go to The Hatch Network’s website or email Cathy Curtis
at cathy at curtisfinancialplanning.com

Hatch away!

Living Within Your Means – 10 Tips on Saving Money

When did dining-out, facials, manicures, pedicures, personal trainers, pricey haircuts, books, magazines, CD’s, I-Phones and expensive annual vacations become necessities? How did we get here?

This fee-only financial planner contemplates this question as client after client comes in with cash flow issues — agonizing over credit card statements, wondering how they can keep up with an avalanche of bills.

As a first step in my financial planning process, I ask clients to complete a detailed cash flow worksheet. This is followed by a meeting to review this document line by line.

This exercise is as exhilarating as it is agonizing  – clients are relieved to finally be doing something around financial planning, but terrified that the end result will be deprivation.  Everyone has his or her own “can’t give this up” list.

I’ve learned to remain neutral as a client explains to me why they can’t possibly cut out their $400 a month Amazon habit or can’t postpone the $4,000 vacation for a couple of years. Really? Are you sure?

Lately, there are more and more cash flow challenged clients at my door, and of course, it’s the economy.  No longer is cash-out refinancing an option as house values plummet and equity lines of credit disappear or decrease. And, to make matters more difficult, credit card companies are lowering limits and raising interest rates. Brokerage balances are also down.

Some state employees are seeing pay cuts as high as 8 %. The self-employed and free-lancers lament incomes that have been slashed in half over the last year.

A spouse loses a job, two incomes are now one because of divorce, or unemployment — benefits have run out and there’s no job in sight. Not exactly a pretty picture.

All of a sudden, people have to live within their means, and for many, this is the first time they’ve had to watch what they spend and they’re not finding it easy to cut back.

As a financial planner I can assure you – our incomes are finite, there’s just no way around that fact. I remind clients that recessions and hard economic times don’t last forever. The good times will roll again, but in the meantime, this is a good opportunity to really tap into what makes us most happy and to learn to live within our means and make it stick.

Living within your means doesn’t mean that you have to cut out all pleasure. Think of living within your means as good practice for your retirement years when you live off the money you save now. Think of it as living a sustainable lifestyle.

Here’s a few spending tips for the person who doesn’t want to feel deprived:

1. Suspend spending on those items you can do yourself:  manicures, pedicures,  highlights, gym workouts. Or, cut back on frequency.

2. Don’t buy things you can borrow or trade  (books, magazines, cd’s).

3.  Avoid temptation – stay away from your favorite shops and toss out the catalogues unopened.

4.  Stop subscriptions to things you aren’t reading: newspapers, magazines, online and offline.

4.  Eat really well at home.

5.  Bring delicious food to work for lunch.

7.  Buy entertainment a la carte instead of via subscription: movies, theatre, and music events.

8.  Hold onto things longer – your cell phone, computer, car, and oven.

9.  Ramp down the luxury a bit – buy less expensive wines, eat at moderately priced restaurants.

10. Postpone the big vacation for a few years; enjoy smaller trips to great places.

I’d love to hear from you. What are your favorite money saving tips?

It Is Better To Give Than To Receive

TAX PLANNING 101

There are many confusing tax laws, but the one that seems to generate the most misunderstanding is the gift tax law.   Everyone seems to be aware that people can give up to $13,000 (this amount is periodically adjusted for inflation) a year with no tax consequences – but beyond that it’s fuzzy. A client asked me today if she would have to pay tax on a $100,000 gift her parents were planning to give her to buy a house.  The answer is no.

Here’s the low-down on the gift tax law:

1. Anyone can make gifts of up to $13,000 to as many people as they choose each calendar year without any tax implications. This gift is called an “annual exclusion gift” – meaning the gift is excluded from taxes. The donor can start all over again giving gifts up to 13,000 a person each and every year.

2. If a donor exceeds the annual exclusion (of $13,000) to any one person, tax is still not due until they have made gifts totaling an aggregate of more than $1 million during their lifetime.  A minor annoyance:  Form 709 – United States Gift Tax Return – must be filled out and filed with that year’s tax return.   But NO tax is due.

3. The recipient of said gifts whether it be $13,000, $100,000 or $500,000 does not pay tax on the money ever, at all.

Let’s step back and define what a gift is for IRS purposes:  It’s something that is given and nothing is received in return. It is complete as a gift. Loans are not gifts.

What  are some of the reasons people give gifts?:

1. They are generous and kind.
2. They want to help a loved one with expenses such as a down payment on a house,
   education costs, or a vacation.
3. They are very wealthy and want to reduce the size of their estate and therefore, estate taxes.
4. They know they won’t spend all their money during their lifetime and want to
   share it with their loved ones before they die.

Examples:
1. You decide to give $13,000 each to your four grown children for Christmas.  No tax is due and no gift return is filed.

2. A couple gives $100,000 to their daughter to assist in her purchase of her first home. A gift tax return for $74,000 ($100,000 -  $13,000×2) would be filed with that year’s tax return.  In subsequent years, any gifts given over the exclusion amount will be added to the $74,000. If in any given year the total lifetime gifts reaches over $1,000,000, tax will be due.

House Buying in the Bay Area | Jim and Annette’s Financially Sound, Thoughtfully Executed, Excellent Adventure

Jim and Annette in front of their new home

“I really admire the conscientious way you bought your first house,” said I. “That’s because we’re really cheap!” said they, almost in unison. Meet Jim and Annette. They’re in their late 30’s and lucky. They both watch their pennies. If only all my clients would…well, never mind.

While many of Jim’s and Annette’s friends bought houses in the last few years, they held back. The market was too frothy and unaffordable, they thought. At the time, life was a cramped one bedroom apartment in North Berkeley. But of course things change. Soon enough real estate prices crashed, and taking the leap made more sense. They started out on their own, found some neighborhoods they liked and found some houses in their price range: no more than $525,000.

Know Thy Numbers
In the meantime, Jim and I worked on their cash flow adding in housing costs (they’ve been clients since 2007).  Both were adamant that they know the numbers and not get in over their heads.  Jim has an inviolable goal, “I want a six month buffer of living expenses at all times.”  As s self-employed graphic designer, www.jameswilsondesign.com he has a about a thousand good reasons for doing this. And while Annette currently works for Williams-Sonoma – layoffs have begun there.  I recommended they get pre-qualified for a mortgage, which they did.

Here’s a few things they learned along the way.

Know your must-haves
Jim and Annette knew what they had to have:

1.  A good location so they could walk to shops and services, and have an easy commute.
2.  A live-in ready house: some work would be okay, but they wanted no delays or additional costs.
3.  They wanted to live near their friends.

What you can live with?
No house is perfect, especially a house in the Bay Area in the $500,000 price range. Here’s what Jim and Annette had to contend with:

Close proximity to Bart meant noise, so new windows are planned.
They lack storage space, typical of older homes (1926).
They have $18,000 worth of work  to do – plumbing upgrades, electrical work, window replacement, foundation repair and some unexpected termite damage. Closing cost credits (due to the fine work of their realtor Carol Parkinson) and first time home buyer credits ($8,000 on their 2010 taxes) will help pay for all this.

Know what you care about most
Jim and Annette are now proud and busy homeowners: they’re refinishing floors, knocking out walls and buying a few new furnishings. They splurged – on a $4,000.00 Thermador Range.   When I questioned the decision, Annette said something to me that I thought was very wise:  “It’s about knowing what you really care about” she said, “and putting resources and energy towards those things, and then making compromises on the rest.” Wise words.

My Take: Top 5 things to consider when buying a home in the Bay Area

1. Know what you can afford before you start looking for a home.  Get pre-qualified.
2. Identify the neighborhoods where you want to live. Get to know prices.
3. Make a list of your no-compromise must-haves.
4. Get referrals for real estate agents and mortgage brokers.  Make sure you’re comfortable and that there’s a level of trust between all parties.
5.  Know that the costs of home ownership don’t end with the purchase.  Endless amounts of money can be spent improving, furnishing and decorating a home. Carefully plan your expenditures based on your income and budget.  Most important: don’t rely on credit.

Can street smarts, charisma and passion stand in for a business plan?  It all depends on who you ask.

Women in the Food Business at the San Francisco Commonwealth Club - From left to right: Kathy Wiley, Christine Doerr, Malena Lopez-Maggi and Mindy Fong

I recently hosted two panel discussions that focused on women entrepreneurs in the food business. Participating were eight vibrant businesswomen in their 20’s and 30’s.  Each had the entrepreneurial bug from an early age, each has boot strapped their business and most had no written business plan before they launched.

Of Passion and Practicality

Molly Fuller of Hands On Gourmet and Kathy Wiley of Poco Dolce are self-described pragmatists. “I wanted to make money,” said Molly. “My father always told me to do it myself, that was the way to make money.” Kathy Wiley said her decision “came down to the stable shelf life and high price point” of high-quality artisanal chocolate. Other participants cited their love of good food, and their lifelong desire to start a food business.

Fire, Ready, Aim

Kika Besher of Kika’s Treats and Christine Doerr of Neo Cocoa are graduates of La Cocina, a food business incubator in San Francisco where eligibility requires a business plan. Kika’s current business profile no longer resembles her first plan and she wishes she had a new one. “So many things change,” she said. Christine Doerr said her plan has changed and there’s a lot of “fire, ready, aim” in her business.  Kathy Wiley (Poco Dolce) started a number of business plans, only one of which she came close to finishing. Malena Lopez-Magg of The Xocolate Bar said, “I did write a long business plan but it was obsolete as soon as it left the printer.”

Recurring Themes

-    Understand the numbers, but don’t get hung-up on producing a document.
-    If you make a plan, be aware that things change and the plan may need updating.
-    Pay attention as you go and you’ll learn.
-    If you are self-funded, the decision to create a business plan is in your hands.

A Different Take

I have no doubt that these amazing women will succeed. Street smarts and passion can take a business a long way. However, as a financial planner I see what bootstrapping can do to a business owner’s personal finances and I am duty bound to counsel caution. Here are  my three reasons why you should consider developing a business plan.

Writing a business plan compels you write down the numbers and
decide which are most important to your particular business – then it’s
up to you to watch them like a hawk.

Taking shortcuts doesn’t work when it comes to growing a business.
Writing a plan helps you to think strategically and decide what’s best for the company in the long term. This can even include an exit strategy.

Assumptions change and circumstances change, but don’t make that an excuse to avoid having a plan.  Even if you launched on sheer gut instinct, step back and create a plan now. You’ll be rewarded with clarity and peace of mind.

What do you think?  Is a business plan an integral first step to launching a business? As always, your comments are welcome. If you have any topics you’d like to see here, feel free to let me know.

Women Entrepreneurs in the Food Business Panel
Molly Fuller, Hands On Gourmet http://handsongourmet.com
Nona Lim, Cook! S.F.  http://cooksf.com
Gabrielle Fuersinger, Cake Coquette http://www.cakecoquette.com
Kika Besher, Kika’s Treats http://www.kikastreats.com

Women and Chocolate – A Natural Combination Panel
Malena Lopez-Maggi, The Xocolate Bar http://www.thexocolatebar.com
Kathy Wiley, Poco Dolce http://www.pocodolce.com
Christine Doerr, Neo Cocoa http://www.neococoa.com
Mindy Fong, Jade Chocolates http://www.jadechocolates.com
Dayna Macy, Author  http://daynamacy.com