Insurance, the New Frontier

So with my upcoming wedding next year, I’ve been spending more time than normal thinking about “responsible” things like insurance and financial planning. *Ugh* I generally enjoy these types of things, but I have to admit that I’d willfully blocked the complexities of the insurance industry out of my memory. When you’re a traditional employee, insurance is generally a pretty easy thing to deal with – you sign the line and get what your employer has setup for you.

But one of the great joys and simultaneously great sorrows of being self-employed is that I get to handle my own insurance. I generally think this is a good thing as it allows me to make decisions that are best for ME and not for some company executive or shareholder. But it also means that I have to wade in and learn enough about things to make good decisions.

With most things, it’s easy to use a iterative try-it-and-then-fix-it approach. Having a few advisors handy (CPA, laywer, etc.) also helps a lot. But the key with any advisor is understanding enough to validate that the advice you receive is good advice. So while I’m not an expert at taxes or business law, I understand enough of the basics to have a framework. Then when my advisors tell me something new, I fit it into the framework and see how it works. If it doesn’t seem to fit right, I ask questions and read up on it until everything makes sense.

The fundamental issue then, in the insurance world, is that I just don’t know enough about the options to have a framework. So I guess the next few months will be filled with reading background material (Wikipedia, here I come) and talking to my insurance agent. Anyone else out there deal with insurance on your own? Got any advice?

The Hemorrhaging, Make It Stop!

I’ve been hemorrhaging cash left and right lately. This has been an expensive few months for me, and it doesn’t look to be getting better this month. Fortunately, almost all of these expenses can be viewed as investments in my life instead of frivolous spending. Today’s latest round of spending was a Dell R210 that had a $573 discount on it and an Apple iPad.

The Dell R210 is going to be the foundation for the NinjaLAN in our new apartment. It’ll have ESXi on it so I can setup VMs to experiment with Windows 2008 and Linux (two skillsets I need to polish). It also has a iDRAC6 card, so I can remotely power it on and off when I’m traveling for work.

The iPad is the more controversial of the two purchases… When the iPad came out, I was fairly vocal about my disapproval of the pricing. And truth be told I still think it’s overpriced. (It’s Apple, so no real surprise there, right?) But I’ve decided to make a real push at going completely away from paper for my work. At this point, I’m down to a notepad that I use for daily notes and at meetings, etc. I’ve already started transitioning everything I take notes on to Evernote, but the iPhone is just too small and unwieldy to use as a note taking tablet in meetings.

The other hurdle I’ve had with the iPhone platform for the last year or so was the absence of a task tracking sync between Outlook and the phone. However, I started using ToodleDo this past month and have been extremely happy with it. The features are so much richer, I would have happily moved to it from Outlook regardless of the mobile device issues. The combination of the ToodleDo app and the ToodleDo mobile website make using the iPhone and my laptop/desktop a perfect integration.

So now the end goal is to get to a completely virtual workflow for my professional work. The last impediment to that goal is the paper notebooks I lug around. I have more than one, because I separate my clients into separate notebooks. (I typically surrender the notebook to the client when a long term project completes, so they have complete work notes of how everything was put together.)

So we’ll see how it all works out in the end. Hopefully this really will be the last major expense for a while!

Dr. Strangecredit

or How I learned to stop worrying and love AMEX

Justin Levy talks about the power of a hand written note in a recent blog post and it reminded me that I wanted to give a kudos to American Express for their handling of my recent credit card dispute. I had recently renewed my subscription to the Clear Registered Traveler service that lets you avoid the long lines at the security checks at major airports. Unfortunately for me and about 100,000 other people, two months after I had paid the yearly renewal fee, Clear announced that they were ceasing operations immediately due to their inability to find sufficient credit.

This, of course, is exactly the scenario that economists were afraid would happen on a pandemic scale during the “credit freeze” last year. Regardless of whether you think the actions of the Federal Reserve & Congress helped or hurt the situation, it’s clear now that we avoided the worst case scenario from that credit freeze, but that doesn’t mean every business was going to make it. Apparently, the business I had just paid $176 to was one of the ones that was failing.

There was a lot of talk online about how Clear had screwed people – Clear made it clear (no pun intended) that they wouldn’t be refunding any payments even if the customer had signed up the day before the announcement.

This is why you should always use a credit card for purchases…

I called American Express and disputed the charge on my card, since I had paid for 12 months of service and only received 2 before Clear had shutdown. The AMEX representative immediately put a hold on the charge while the dispute was researched. A few weeks later, I got a call from AMEX letting me know that they had given me a prorated credit for the 10 months of service I hadn’t received. There would be formal letter in the mail, but I appreciated the phone call and was once again pleased at how well AMEX treats their customers.

When I got home from New York and checked my mail, there was indeed the formal letter from AMEX outlining the resolution of the dispute and the credit to my account. There was also this…

That’s right, the AMEX rep sent a hand written thank you note. A note thanking me for the chance to resolve a dispute. This is what sets AMEX apart from any other credit card company I’ve dealt with. Anyone who wants to see what a customer centric business is like should get an AMEX card and start using it!

Ironic… no wait…

I was going to use “irony” in this post, but since everyone always complains about misuse of that word (we’re talking about you Alanis), I thought I would double-check the definition. It seemed suspiciously close to sarcasm, so I looked up the definition for it as well. Turns out sarcasm is “irony with the intent to cause pain.” Huh. Who knew? So all those times I was being sarcastic w/ my friends, at least 50% of the time it was actually irony. What a crazy world. Anyway, back to the point of this post… (which apparently isn’t ironic – glad I looked that up!)

Since this isn’t “ironic”, I guess it’s in the category of stupidity… Why are companies so stupid? Seriously… Now that I’m a small business owner, these seem like obvious things not to do?

  • Give your employees security awareness training about things like don’t go to websites with invalid certificates and how to avoid running untrusted mobile code (like Java applets). Then, setup your company webmail with an invalid SSL certificate and include a Java applet with an invalid signature.
  • Setup a multimillion dollar project to sell your client a document management system. But put all your internal project documentation on a file share, then email copies around to get edits, and have no internal document management practices or tools.
  • Tell everyone you’re in a cost cutting mode and that they need to share rental cars and try to reduce costs. But don’t setup a telework arrangement even though you’re spending $100k per month on travel for the team. And you have the equipment and expertise to setup a telework VPN with minimal effort or investment.

Got any other examples?

Small Business Lessons

In January, I completed my first 12 months as a independent consultant. Here’s a list of things that I learned, good and bad, over the first year of working independently….

Liability insurance costs. My liability insurance (with limits required by my client) ran over $2300 per year in premiums.
Extra paperwork. Despite having a healthy expectation for the increase in paperwork, it was still more than I anticipated. Tax forms, both federal and state, payroll, insurance audits, invoicing, billing errors, and on and on.
Tax savings. As a normal employee, you can put $15,500 (for 2008) into your 401(k). As a small business owner/operator, I can put $15,500 of my salary AND 20% of the profit of the company into the 401(k). This can add up to a huge number! And that additional contribution from the company is tax deductible, just like your salary deferral.
Fulfillment. I’ve always tried to bring a good attitude to work, but it’s a amazing the extra boost you feel when you wake up in the morning and realize you’re working for yourself. You still have to please your bosses of course. But now your bosses are your clients. And solving problems for them nurtures a positive win-win relationship instead of putting in extra hours for no reward.
Risk Planning. If you don’t already save something for a rainy day, you will get in trouble running your own business. Especially in a consultancy like mine, if you lose a primary client there may be a significant time before you can close another contract. You need to have adequate funds to cover those dry spells.
Banking hassles. As an employee, your employer probably offers you direct deposit. For independent consultants, that’s not as common. When you’re independent, your bills go through the accounts payable department at your client, not the payroll department. One consequence of this difference is that you are much more likely to receive paper checks for payment.
Income delays. Another direct consequence of your pay coming through the accounts payable department is that your checks may not be sent every week. So if your client typically pays on “Net 30” terms, you won’t be paid until 30 days after you send them an invoice. This is another reason to have good cash flow management skills.

All told, I have really enjoyed the last year. Some of the things mentioned above are negative, but I would still recommend the experience to anyone who is ready to work to achieve success.
Have you already started a small business? What lessons did you learn that I haven’t mentioned?