Generation X Finance – Meet this Entrepreneur
February 27, 2007
There is hope for Generation X! Jeremy, who currently runs the personal finance blog Generation X Finance is the first entrepreneur to share his insights with us this week. Here’s a little background to help understand where he’s coming from.
“I currently act as a retirement plan specialist serving an employer with a large client base. It is my job to help employees learn about, understand and enroll in their retirement plan and make appropriate investment decisions within the plan. Prior to specializing in retirement I spent some time at a few firms as a financial planner/advisor.”
“Prior to entering the financial world I spent quite a few years as an entrepreneur and started and ran multiple businesses since 1998. Some ventures became very successful and others failed miserably so I have encountered it all. I have run home-based internet businesses, brick and mortar retail and even a nationwide franchise. Even though I did not attend college for business specifically, I have always had a great interest in it.”
Jeremy did what I wished I had back in college, started his own business. He started getting his hands dirty and learning from his mistakes. I’m just now heading down that path and hope to learn a few things from him. In addition, his commitment to helping others in his generation be financially savvy is another reason I thought of Jeremy right away when I decided to hold these interviews. Read on to hear about his experiences in running a business, personal finance, and blogging. If you learn something from Jeremy’s answers be sure to subscribe to his feed for financial tips for Generation X.
When you were getting started with each of your businesses, what were the most important first steps you took?
The single most important first step is educating yourself on running a business. You don’t have to be an MBA to be a successful business owner, but you do need to understand how to think like an entrepreneur. Regardless of the type of business you plan on starting you need to know some basics such as accounting and tax issues, legal business requirements for your country/state/city and general business practices.
Aside from the general business knowledge I researched the market for each of my businesses. Even though I may have come up with a great idea it would prove worthless if I didn’t know who was already out there doing something similar, how much competition there is or what the potential for growth was. One of the keys to success is to understand your market and find out what you can bring to the table to make people choose you over someone else.
Who did you turn to for advice and help?
With almost no business experience other than some basic courses in college I had to turn to others for help. Much of the information you can get from books or on the internet but some things you need personal experience. For this I turned to some friends and family that either run a business or have in the past.
Pick their brain. Find out why they got into business, what they like and dislike about it, and find out what they have learned or would have done differently. These personal experiences they share will be more valuable than anything you read in a book.
How much did you spend to start your first business?
It depends on how long you consider “starting”. My first business was born out of a college dorm room in the late 90’s when the internet was all the rage. It came to be out of necessity. I ran a few websites as a hobby. Over time I realized that I was paying an arm and a leg for web hosting for these multiple sites and I wanted to cut costs since they were just a hobby. So I decided to purchase my own server, have one monthly bill and host as many of my sites as I wanted from my own machine.
I then realized that I had plenty of power and space on the server still to spare so I offered up space to friends at college for a few bucks a month. The response was tremendous and I started to have friends telling their friends where they could get some space to put up their website or files. It was then the light bulb went on and I saw the potential to make money. The web hosting company was born.
So you could say that it really cost me almost nothing to start this first business since I was paying to host my own personal sites anyway, but actually starting the business and getting word out to the public did become quite costly. Over the course of the next year I would say the total outlay of capital was around $10,000. Most of this in the way of bandwidth and server costs, a little bit of marketing and purchasing the required business software needed for daily operations.
What are your favorite print and online resources for small business owners?
My favorite print resource is Business 2.0 and Business Week. They are full of the latest business news and great ideas that any business owner can apply to their own business. They can provide motivation and inspiration when things get tough. Online I would have to recommend the Small Business Administration (SBA) as the top resource for anyone considering or owning a business. There are a ton of articles to help you get started and even a great collection of local resources where you can likely find others in your area to speak to directly.
What was your biggest mistake in business?
The absolute biggest mistake was how I obtained financing for a business. I was not completely aware of how credit worked for businesses and it burned me. Two of my businesses I set up as corporations. I did this because I wanted the ultimate protection from a liability standpoint. I also wanted to separate my finances as much as possible from the business. So in the attempt to obtain a loan or line of credit for the corporation you would assume that since the corporation is a separate legal entity and has its own EIN number that it would run under its own credit history.
This is true to an extent. When your account is in good standing, these lines of credit or loans don’t show up on your credit report. They are business, not personal. But the moment you make a late payment or some other derogatory mark on these business accounts it will affect your personal credit.
While it is easy to open business accounts it is not made very clear in the very fine print that when you sign the application you are signing a personal guarantee. Meaning if you miss payments or default on the credit/loan you are obligated to pay. Even if you have a corporation and it was opened as a corporate account.
So when one of my businesses was in trouble and I was faced with closing the doors I faced with months where the business couldn’t make the full payment or missed payments completely. Come to find out later my credit score was destroyed. Not only that I was finally forced to shut down and I’m stuck holding the bag on about $20,000 in various business debts left to repay. You would think as a corporation you could just file corporate bankruptcy, liquidate all of your assets and be on your way. Companies do it all the time right?
Well since all of this was supposedly corporate debt with a personal guarantee I was on the hook for everything. Let me tell you, that was an expensive lesson that I’m still paying for. What I found out is that to obtain pure corporate credit or loans without a personal guarantee you need to build up a credit history with the business just like as an individual. Almost no bank will give your business a credit card or loan to your business without a credit history and without a personal guarantee. So it can take a few years of building credit with small vendors to get to a point where you can obtain true corporate credit and removing yourself from the personal liability.
What’s the most important thing you learned from running your own business?
I think one of the most important things I have learned is that you can’t underestimate the value of hard work. I know a lot of people who think running a business is easy, or that they can make decent money by doing something online from home. There is no doubt that you can make money, especially online with minimal effort, but to become truly successful you need to work at it.
That is how I started with my first web hosting business. It was great; I could do it part-time while in college, and make some extra money doing it. This was fine for a while, but after the business began to grow I had to put more time in. I wanted to make more money so I had to expand and attract more clients. This turned into more work being spent on customer support, which was required to retain clients which turned into more new clients that required even more time.
It didn’t take long until I was at a point where I was spending more time running a business than actually attending classes. Could I have stuck with a few clients and make enough money for weekend spending while working little? Sure, but I wouldn’t have made much long-term. So it slowly turned into something that required 8-12 hours a day, everyday just to handle the organic growth and keep customers happy. At that point you’re faced with hiring help to reduce your workload, but that can severely cut into your profits. That is a hard decision to make, weighing the time you put in with the money you are making.
So to sum that up, I think it is important to realize that even though you may start out in your business doing very little work, or find it easy to make money, you will need to put in some hard hours to sustain the growth and truly become successful. Nothing comes easy and I think people get a false sense of what running a business really takes.
Your site is about personal finance issues for Generation X. What do you think are the biggest personal finance issues facing this generation?
I think the biggest struggle with our generation is getting rid of our debt while saving money for the future (namely retirement). We grew up during a time where it was incredibly easy to obtain credit. Our mailboxes were flooded with pre-approved applications as soon as we turned 18. Many of those people were in college at the time and without any prior knowledge of how credit really works took advantage of this “free money”. This generation is slowly coming to grips as to the importance of eliminating this debt and I think many are on the right path.
That comes to the second area of saving, which is an even harder issue to come to grips with. Many people in this generation began their careers during the great market of the late 90’s. Those who were saving at the time saw fantastic gains and jumped on the investing bandwagon. Unfortunately, they immediately saw their accounts drop a few years later which caused somewhat of a panic for these same investors. They have experienced the best and the worst in just the first few years of their young careers.
This experience has left many people skeptical about saving again. I know a lot of people who reduced or stopped saving in retirement accounts altogether after losing a lot of money in just a short amount of time. Those who are still investing are largely more conservative than they should be in fear of a similar situation happening. I meet with people all the time who are only about 30 and are in 70% bonds and only 30% stock.
When you combine the above issues with that of their baby boomer parents not stressing the importance of saving because of pensions and social security you find yourself with a demographic of individuals who are in a serious situation.
What, if any, effect did running your own business have on how you viewed or managed your personal finances?
Running my own businesses for the better part of 9 years has had a profound impact on my personal finances. Now I treat our personal finances like a business. If you break down your personal finances into the same categories of a business you can obtain a clear picture of your overall situation. You have income, expenses, taxes and saving. To most people they don’t mean a whole lot. They know how much they make and they know they have bills to pay and that is the extent of it.
But when you really break things down and analyze your finances from all aspects and treat your life as a business you find it much easier to find ways to cut expenses and increase revenue. I don’t think many people truly understand this until they have run their own business which forces you to think about finances in a different way.
Which blogs do you get the most out of?
The type of blog that I find the most helpful are those that present personal finance topics with common sense. If there is one thing that many people can benefit from it is taking what could be a complex topic and breaking it down into common sense that can be applied by anyone.
There are all sorts of sites that will go into tremendous detail as to how to shave pennies from everything you buy, credit card arbitrage and even complicated investing strategies to make you wealthy. I don’t personally see this as a help to the common person looking for personal finance advice. Surely there is a niche that is filled with these topics, but I enjoy and think most people can benefit the most from simply getting back to basics.
What type of time and resources do you put into Generation X Finance each week?
Well I can certainly say that I put in more time than I ever anticipated when I started. As mentioned above about underestimating the value of hard work it proves true in this application as well. I would say on average I spend at least 4 hours per day, but this time increases as time goes on.
The bulk of the time comes from simply checking up on the other sites, reading, and answering comments and emails. Actual time spent writing takes up the rest. I’m not a power poster and don’t post multiple times of day typically, nor do I want to get into that habit. I work full-time and by the time I get home in the evenings, make dinner and relax for a bit the last thing I want to do is spend the rest of the night on the computer.
I figure if I do much more than that I will end up treating the site as work and if it becomes work and not enjoyable, not only will I be unhappy but the site will suffer as well. I need to keep the balance in check as much as possible.
Why should people read your blog?
People who are looking for easy and smart ways to better their finances should read the site. I won’t bombard you with a ton of complicated information and I won’t bore you with excessively frugal or seemingly unrealistic means of saving or investing money. I will use my knowledge and experience to present finance topics that the average person can benefit from.
Why do you run the Generation X Finance blog?
I want to help people. That is the real reason. In everything I’ve done it has revolved around helping people. My current job as a retirement plan specialist means I am the person who has the ability to change people’s lives. It is up to me to educate people on how their employer retirement plan works, how to invest the money and plan for the future.
I primarily deal with two groups of people, the baby boomers who are approaching retirement and the younger people who are close to my age and are just getting started to save. For some young people I may be the only person that can convince them the importance of enrolling in the plan.
Unfortunately, this job only puts me in contact with about 3,000 of the employees within the company. I can do a great deal with those people but I wanted to reach more people. By starting a blog I have the ability to reach many thousands more. I hope my knowledge and advice in the area of personal finances can be heard by even more people who need
the most help.
To a lesser extent I think that blogging is a great way to build relationships. I think people underestimate the importance of building a network. By writing in a topic area that covers my field of work I can establish relationships and new contacts that could prove to
benefit even more people at some point in the future.
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