Tuesday, February 19, 2013

Death and Taxes

I recently came across a post in regards to Manny Pacquiao refusing to fight on US soil due to the high tax rate applied to his earnings. From his last fight, the total payout was $24 million (he lost to Marquez) -- but after tax, it can turn out to be $15 million. At 39% tax rate, it becomes stupid to think about fighting on US soil.

Incidentally, there are reports of Americans giving up their citizenship for other countries to "evade" tax -- One being Eduardo Saverin, who saved over 60 million dollars in tax when Facebook IPO'd. He now lives in Singapore. Looking at tax rates per country, it almost always feels like the go-to country to setup a corporation will always be Ireland. Setting up shop in Ireland is a fairly common "pay less on taxes" strategy because it is only 12% for corporations. One thing I am starting to notice in startups that start to gain traction and revenue is that they all start bringing in a CFO who has significant experience in being able reduce paying taxes in order to invest more money into engineering or marketing. The stages (when growth happens) are usually:

1) MVP
2) Get users
3) Convert users to paying customers
4) Hire a CFO in order to "shift" money into more product development when revenues reach X/year

Howard Hughes is another great engineer who moved his companies around into different states to get around paying too much tax. While governments have become smarter about stopping these processes, it is always a constant battle because as a growing company, every dollar counts. If a startup can pay another salary in engineering or marketing because it didn't pay that amount in taxes, it can increase the potential of the company to grow.

Ultimately, 40% in tax seems ridiculous for boxing earnings. I'm in total agreement with Pacquiao's team to never fight on US soil. Boxers spend their lives on training (they only have a few years of being professional), pushing themselves to the limit -- they deserve every penny of the agreed amount when signing a fight contract.


Monday, February 11, 2013

A search for more sustainable business in Vancouver

I recently saw that the government is wanting to introduce a sales tax to help improve the transportation services in the lower mainland. There was massive uproar from people who claim that they're already paying too much ($151 per month for 3-zones). While I do agree that the costs of living in Vancouver are becoming insane, I do believe that the government is doing a great job of keeping the service up and running.

The Skytrain is the backbone of our city. The interesting thing about Vancouver is that the core of downtown is full during work hours but drops drastically in the evening. This is because most people who are downtown are only there for their jobs. Incidentally, an increase in tax would require too much effort to collect and would dispel its advantages. I'm sure they have run the numbers on this strategy but I'm thinking a better way to go about lowering the cost of transportation is to help businesses transition to a model that

  • allows remote working (usage of Skype/IRC/Yammer/Basecamp/JIRA/Confluence to communicate) -- this will allow employees with a growing family to take care of their kids while working
  • provides biking/walking incentives (if you have a bike and you bike to work, provide showers, enviromentally-focused employee awards, etc)
  • redistributes startups/divisions across the lower mainland (Surrey, Port Coquitlam, Burnaby, Cloverdale) instead of staying in downtown core
The problems with Skytrain aren't the cleanliness issues, the crime, or the ridiculous cost per month -- it's the reliability and scalability of the system as a whole. During the mornings, if there's a problem and people are late coming to work by a specific amount of time -- that's a cost that businesses are swallowing every morning. One can easily say, "just go to work earlier" -- waking up at 5am and leaving for work at 6am sounds like a logical plan but practice that for several months -- you'll find that on average an employee will be in "work mode" for 11+ hours (3 hours transit and 8 hours of work). I don't think any person with a growing family will find this sustainable.

Zooming out, that 0.5% tax increase is nothing compared to how many businesses are literally losing money from the Skytrain being delayed for several minutes across multiple stations. In my mind, the Skytrain is an intermediate service that should be used in order to transition to a new, more cost efficient way of living -- a more sustainable, environmentally-focused way of "going to work".

In order to help companies adopt these initiatives, a program much like SRED but for "environmentally-focused / healthy living companies" would need to emerge. If a company was to allow remote working (tracked by hours and results), provide biking/walking incentives, and create sub-offices/shared offices in other cities (branching), they would receive a tax credit. The problem I am trying to solve in my thinking is, how can we make Vancouver a city with healthier, happier employees?


Sunday, February 3, 2013

Momentum



We've all been through that phase in product development where you're extremely excited to keep building out specific features and you're hustling so hard that you want to get it into the hands of your users and get feedback (The MVP, minimum viable product). Incidentally, I've come to the conclusion that what really makes or breaks startups is momentum.

If the team stagnates on product development and continuous improvement, your team's overall confidence, dedication, and motivation will dissipate slowly. Taking this advice on, it becomes ever so clear on how to determine whether a team is going to be successful; also, it provides you that level of insight when to cut your losses short.

They say, "never give up when all hope seems lost". I'm a big believer in this; only if I'm the only person in the equation. For example, if I'm on the treadmill with no breath and needing to hit a specific benchmark (time or distance) -- I'll muster up an immense amount of motivation to hit that mark because I know in the long run it'll have a return on investment. 

When you're in a professional, collaborative environment where you have to rely on founder (majority stakeholder) to pull their own weight as part of a business venture -- the situation gets increasingly more complex. 

Ultimately, everyone has to make tough decisions and I'm passing this advice to anyone wanting to do any risky business venture, you should always be surrounded by people with the same level of passion and dedication. This will allow your team to gain momentum and sustain development velocity to really nurture a great product, grow your user base, and make a positive impact on your customers.