Now that I have posted a few times and read quite a few posts I think it is a good time to explain my ultimate blunder:
I had a company, Advanced Outsource, Inc. which took me 5 & a half years to build into a small conglomerate of 4 subsidiaries under the Advanced Outsource parent company.
1. The 1st was Advanced Outsource Online Technologies where we built Web systems for large companies. Completed about 2-3 projects a year for approx. $80,000 - $200,000 each. Usually a 25% profit margin.
2. The Washington Henry Fund was a private Stock Market fund (mine & best friend's money). Gains were about $50,000 per month, the year it was open (last year of the company).
3. InsuranceFix.com; same as 1-800 Dentist online, which collected permission based medical info from consumers to help them find a good Health Insurance Agent. We rated the agents and sold them the profiles (leads) at a premium. 80% success rate. Free to the consumers. We grossed $75,000 per month for the year it was opened. Had the Agents ready to go when we opened the doors.
4. Advanced Outsource Marketing; I gave seminars on Web Marketing and developed & managed Web Marketing campaigns for a few Marketing Firms. Grossed approximately $20,000 - $40,000 per month with low costs providing a 60% profit margin.
All in all my company grossed from $3,000,000 - $5,000,000. Net was more like $1.2MM. Here is where all went wrong:
I hired a law firm in the area to manage my legal entity structures, an accountant to square away the company finances, and a new President for InsuranceFix.com(abbrev. IFX.com). IFX.com was the only structure that was a DBA for Advanced Outsource, Inc. because we moved too fast to form it into an LLC. ahead of time (mistake No. 1). Second mistake, the new President was recommended to me by the largest insurance brokerage in a way that I felt I couldn't refuse; they said they would provide enough Agents to IFX.com to surpass our break even point if this new President managed IFX.com. They thought the world of him and his references checked out, even a background check (surface only) checked out. He turned out to be a conman who built his references over a year just for this kind of situation! He stole money from the IFX.com account and falsified reports. 3rd mistake; the law firm I hired took over $50,000 to structure the various subsidiaries until they talked with the accountant who noticed funds missing. Based on this info, he recommended we shut down the trading account to avoid red flags from the government. Then we all found out that the President also fraudulently modified the contracts for IFX.com resulting in 56 simultaneous lawsuits from the insurance agents! The law firm saw an opportunity to recommend bankruptcy to my board of directors insisting I would be breaking the law in asking them to cover the lawsuits financially and turning the company around. I believed him (mistake 4).
Needless to say, the law firm received over $55,000 in total to handle my company's and my personal bankruptcy, the accountant which worked closely with the law firm received $8,000 to assist with the bankruptcy and the President fled to New Mexico! In 2005 my bankruptcies were accepted and I lost all assets. The law firm in my area has a reputation for recommending bankruptcies in 2005 because of the law changes in October. What could I have done better?
1. Make sure all companies are structured correctly.
2. Getting the customers 1st was right, but research the customers.
3. Conduct a deeper background check for all management, especially executive management.
4. Build up the personal "Oh Crap!" fund (right move) but don't re-invest it in the company all at once.
5. Research my advisory board better especially if I am going to pay them for services.
6. Safeguard the companies (subsidiaries) that are profiting.
7. Try to avoid Investors from the beginning, or research their risk aversion and experience. My board was made up of my investors, many had very little Entrepreneurial experience which fostered their fear when the lawyer decided to give business advice.
8. Lawyers, accountants and most consultants work for me, not the other way around. Make sure I don't allow them to take the reigns of my company.
I hope this helps others avoid my mistakes.
I had a company, Advanced Outsource, Inc. which took me 5 & a half years to build into a small conglomerate of 4 subsidiaries under the Advanced Outsource parent company.
1. The 1st was Advanced Outsource Online Technologies where we built Web systems for large companies. Completed about 2-3 projects a year for approx. $80,000 - $200,000 each. Usually a 25% profit margin.
2. The Washington Henry Fund was a private Stock Market fund (mine & best friend's money). Gains were about $50,000 per month, the year it was open (last year of the company).
3. InsuranceFix.com; same as 1-800 Dentist online, which collected permission based medical info from consumers to help them find a good Health Insurance Agent. We rated the agents and sold them the profiles (leads) at a premium. 80% success rate. Free to the consumers. We grossed $75,000 per month for the year it was opened. Had the Agents ready to go when we opened the doors.
4. Advanced Outsource Marketing; I gave seminars on Web Marketing and developed & managed Web Marketing campaigns for a few Marketing Firms. Grossed approximately $20,000 - $40,000 per month with low costs providing a 60% profit margin.
All in all my company grossed from $3,000,000 - $5,000,000. Net was more like $1.2MM. Here is where all went wrong:
I hired a law firm in the area to manage my legal entity structures, an accountant to square away the company finances, and a new President for InsuranceFix.com(abbrev. IFX.com). IFX.com was the only structure that was a DBA for Advanced Outsource, Inc. because we moved too fast to form it into an LLC. ahead of time (mistake No. 1). Second mistake, the new President was recommended to me by the largest insurance brokerage in a way that I felt I couldn't refuse; they said they would provide enough Agents to IFX.com to surpass our break even point if this new President managed IFX.com. They thought the world of him and his references checked out, even a background check (surface only) checked out. He turned out to be a conman who built his references over a year just for this kind of situation! He stole money from the IFX.com account and falsified reports. 3rd mistake; the law firm I hired took over $50,000 to structure the various subsidiaries until they talked with the accountant who noticed funds missing. Based on this info, he recommended we shut down the trading account to avoid red flags from the government. Then we all found out that the President also fraudulently modified the contracts for IFX.com resulting in 56 simultaneous lawsuits from the insurance agents! The law firm saw an opportunity to recommend bankruptcy to my board of directors insisting I would be breaking the law in asking them to cover the lawsuits financially and turning the company around. I believed him (mistake 4).
Needless to say, the law firm received over $55,000 in total to handle my company's and my personal bankruptcy, the accountant which worked closely with the law firm received $8,000 to assist with the bankruptcy and the President fled to New Mexico! In 2005 my bankruptcies were accepted and I lost all assets. The law firm in my area has a reputation for recommending bankruptcies in 2005 because of the law changes in October. What could I have done better?
1. Make sure all companies are structured correctly.
2. Getting the customers 1st was right, but research the customers.
3. Conduct a deeper background check for all management, especially executive management.
4. Build up the personal "Oh Crap!" fund (right move) but don't re-invest it in the company all at once.
5. Research my advisory board better especially if I am going to pay them for services.
6. Safeguard the companies (subsidiaries) that are profiting.
7. Try to avoid Investors from the beginning, or research their risk aversion and experience. My board was made up of my investors, many had very little Entrepreneurial experience which fostered their fear when the lawyer decided to give business advice.
8. Lawyers, accountants and most consultants work for me, not the other way around. Make sure I don't allow them to take the reigns of my company.
I hope this helps others avoid my mistakes.
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