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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

Delaware Companies Shine
By Devin Scott Monday, October 3, 2011

An initial public offering, or IPO, is when a company first offers the sale of its stock to the public.  Doing an IPO is often called “going public”.  In 2010, 76% of all U.S. IPOs were by companies incorporated in Delaware.  This says a lot about the Delaware Division of Corporations and the strength of the Delaware legal system for corporations.

Read below about the success of two Delaware companies who recently went public:

LinkedIn:  This company founded in 2002 and formed here in Delaware reports more than 100 million registered users, in more than 200 countries and territories worldwide.

LinkedIn, a social media site formed in Delaware, said it sold its IPO shares for $45.  This price rose as much as 171 percent the first day and closed at $94.25.  LinkedIn, similar to Facebook but for business purposes, is a site which allows users to share a photo of  themselves along with a profile page to share additional professional details.  LinkedIn is used for professional networking rather than social networking.

Pandora, another Delaware company has also recently gone public.  From a sale price of $16/share, the stock went to a high of $26 and ended the day at $17.42.  The first day’s return was in the average range for IPO’s.  Pandora is an online radio company formed in 2000 in Delaware that allows users to choose the type of music that is played on their own customizable station.

Both Pandora and LinkedIn made less than 10 percent of their company’s stock available for IPO.  Experts say the launch day for both companies was a success.

If you’re planning to take your company public then Delaware is, hands down, the State where you want to form your company. The type of company you’ll need to go public is the Delaware General Corporation.

For more information on why companies form in Delaware:  https://www.delawareinc.com/blog/video-the-advantages-of-incorporating-in-delaware/

To visit LinkedIn’s website: http://www.linkedin.com/

To visit Pandora’s website:   http://www.pandora.com/

 

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Copping an Attitude | The HBS Blog |
By George Merlis Monday, September 26, 2011

One of my interview rules -- a rule so fundamental I call it a commandment -- is:  “Thou shalt not lie, evade, speculate nor cop an attitude.”  Let me address the last of these -- the one expressed in the least Biblical language: copping an attitude.

There is little the media like more than knocking someone off their high horse.  If you don’t get in the saddle in the first place, that temptation is eliminated. When might we climb on a high horse?  When we are asked the same question innumerable times, when the question comes from profound ignorance and  when the reporter asks a “gotcha” questions designed to catch you up.

Let’s deal with how to avoid copping an attitude in each of these circumstances.

That tired, old question.  A couple of years ago I got a phone call from a long time client who was having a problem with an entertainment personality.  It seemed that this young woman, tiring of a very routine question, was rolling her eyes, heaving sighs and sometimes just snapping angrily at the reporter asking the routine question.  She thought that since she’d answered the question for other reporters previously, there was no need to address it again.  When I spoke to her I recommended that she think of an interview as a performance.  “You sing the same song over and over, don’t you?  Well, perform the same answer.  Each reporter -- especially broadcast reporters -- want that soundbite delivered fresh for them.”

You want to make the routine answer to the routine questions sound and feel fresh, too. The late Peter Falk was a champion at this.  For 30 years he played the role of the disheveled detective, Lt. Columbo.  When asked what about Columbo appealed to the audience, Falk appeared to think hard, and then work out an answer that essentially said, “People see themselves in Columbo.”  But he ACTED out the answer, making it appear that it was forming in his mind at the moment he spoke it.  No doubt Falk’s answer was as convincing the last time he delivered it as it was the first time -- three decades earlier -- because he made it look and sound fresh each time.  He performed it.

Had Falk snapped, “Oh, come on.  You KNOW what makes Columbo appealing, he’s like all of us.”  THAT would have been the story -- his attitude would have overwhelmed his message.

The dumb question.  Increasingly, as newsrooms consolidate and as outlets try to save money by dropping experienced (read highly-paid) reporters for just-out-of-school rookies, you get questions soundly grounded in the journalist’s total ignorance.  You would expect that when a reporter is assigned a story, he would do at least cursory research on it before interviewing anyone.  But these days reporters are expected to be highly productive and quantity of stories is more valued in many outlets than the quality of the story so the reporter may not have had time to inform himself.  (And, sad to say, there are some reporters who, even with the time, won’t bother.)  The problem with answering in the condescending tone that such questions warrant is that the final story is in the reporter’s hands and if he feels he’s being patronized, he may try to get even.  It is said there is no such thing as a dumb question, only dumb answers.  I’m here to tell you that there are lots -- legions -- of dumb questions.  But giving a a condescending answer to one is even dumber than the question.  If a reporter’s question clearly indicates that he doesn’t understand the subject matter, patiently explain the facts and do it without showing your justifiable exasperation.

The gotcha question.  In this instance the reporter asks you a question you can’t answer because you don’t know the answer or any answer would be incriminating (“When did you stop beating your wife?”)  Typical of the former is the new stock-in-trade of political reporters: asking an official or a candidate the name of an obscure office-holder in a far-away land that the reporter has just gleaned from a last-minute Google search.  In either case -- “When did you stop beating your wife?”  and “What’s the name of the environmental  minister in Austria?” -- it’s important not to get angry or defensive. A good approach is to label the question.

“When did you stop beating your wife?”

“No matter how I answer that question, my response will sound incriminating.  In point of fact, my wife and I have a wonderful, mutually-supportive relationship.....”

“What’s the name of the environmental minister in Austria?”  “That’s a “gotcha” question.   I don’t know, but I’ll find out.  What I can tell you is.....”

The key to a successful outcome when confronted with one of these questions is to avoid copping a defensive attitude, to label the question for what it is and to use a bridge from the question to your own agenda.

 

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Essential To-Do List for First-Time Entrepreneurs
By Carleigh Lowe Tuesday, September 20, 2011

Check out the terrific advice in the article "The Essential To-Do List for First-Time Entrepreneurs" from CBS Money Watch. Below is an excerpt.

Before we go into how to increase your chances for success, first a few dire facts. Only about half of small business start-ups survive 5 years or longer. The top two reasons for failure are:

1. Lack of experience — not operational (building or selling your better mouse trap) but lack of business experience.

2. Running out of cash — the earning curve never catches up with the learning curve.

So, our best piece of advice to you is this: When you control your money, you control your future. Here’s a to-do list to help you get to the five-year mark — and beyond.

1. Overestimate (generously) your costs to start up.

A few years ago, a rock climber in Phoenix needed rescuing when he tried to rappel a 400-foot rock face with a 250-foot rope. Your initial cash for your start-up is like your rope. Are you going to leave yourself dangling 150 feet from your destination?

Don’t make the mistake of underestimating the cost of your new business and overestimating sales and your break-even point. Instead, try this: Take your best, conservative estimate for your start-up costs, then double it. Then add 20%. Surprisingly, this is usually pretty close to reality.

2. Know your break-even point.

Ten thousand dollars in sales does not cover $10,000 of expenses. Your cost of sales could easily be $7,000, leaving you $3,000 in gross profit, which you will need to pay all of your sales, general, and administrative costs. It’s simple arithmetic: You reach the break-even point when your gross profit equals all remaining business costs.

3. Realize that you can’t make up in volume what you lose in profit — so price accordingly.

One of the great myths in business is that by offering lower prices you will attract more customers and then, down the road, you can raise your prices. Without proper profit margins, you will not generate the cash flow to stay in business. You can’t be all things to all people. It is far more important to establish a clear and unique value proposition, then price your goods and services accordingly.

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101: Blogging and Twitter Hazards
By George Merlis Monday, September 19, 2011

Recently, I was conducting a media training workshop for a prominent organization and a staff publicist asked me if I would add a few words about the need to be discreet when blogging. There was a back story that offers any of us who blog, tweet or e-mail a teachable moment.  Someone in her organization had upended a publicity effort by an innocent posting on his personal blog.  Since the blogger in question was authoritative in his field, he had many readers of his posts -- people who were keenly interested in his thoughts.   One of those keenly interested readers was a reporter for a specialty magazine.

Something exciting had happened at the blogger’s workplace and he went home that evening and wrote a post about it.  The magazine writer read the blog and, based solely on that entry -- without calling the blogger for more information -- wrote a couple of paragraphs about it on the magazine’s online edition. A wire service picked it up from there and several publications and radio outlets carried the story, citing the specialty magazine as the source.  These outlets assumed, incorrectly, that the magazine had vetted the story.

The problem was the story was incomplete. The original blogger was in possession of only partial information about the development and his organization’s public affairs department was pulling together all the elements to make available a comprehensive story.    When they issued their official release, the media treated it as old news and ignored it.  The blogger had scooped his own organization with a partial story.

With so many people writing blogs, so many more tweeting or posting on Facebook and more still sending e-mails to friends and colleagues, there is a constant danger of premature and/or incomplete information reaching the media.  That sort of information can distort or misinform and, in some cases, do damage to a company or organization. News casually disseminated in via blogging, social media and e-mail often lacks the necessary vetting by public relations,  public affairs and executive personnel.

Let’s deal with blogging, social networking and tweeting and e-mailing separately.

Blogging

It has never been harder to keep a secret than it is today.  Everyone is connected via e-mail, Twitter, Facebook.  Many people write personal or professional blogs.  If you are part of a large organization, check with your public relations representatives before posting new information.  If you are part of a small organization, confer with colleagues before going public on your blog.  You want to avoid disseminating to a small audience (your blog readers) information that might be compelling to a huge audience (the public at large).   Reporters hate being scooped.  By blogging news, you are necessarily scooping those media outlets that don’t follow your blog.  As in the case I cited, a blog post can undermine a well-planned media campaign by stealing its thunder.

Twitter

As someone who takes 140 characters to say, “hello,” I’ve always been dubious about sending out any substantive information via tweet.  The compression factor by necessity forces you to leave out details.  There’s nothing wrong, however, with teasing a release or calling attention to a release via Twitter.  Just coordinate with your public relations people or colleagues before you take to the keyboard. (And please check your spelling.  If you are tweeting on a smart phone, it is very easy to misspell words and sometimes misspellings can change meanings.)

Social Media

As with Twitter, there are limitations on how much you can post on Facebook and other social media sites.  Although the allotment of characters is typically double Twitter’s, it’s still limiting.  Best to use social media to direct attention of your friends and followers to a web site where an official news release can be read.

E-mail

As virtually everyone knows -- to his or her grief -- it is entirely too easy for an e-mail recipient to forward a message to another couple of people, each of whom forward it to several more...... and your message to a single person suddenly goes viral.  E-mailing something -- even if you mark it “confidential, eyes only,” is like printing up a billboard and standing on the street corner below with an arrow sign pointing up and reading, “Please don’t read the billboard.”  When dealing with company or organization news, I like to use e-mail the same way I use social media -- directing attention to the website with the full media release on it.  That way if your e-mail goes viral only the official, approved version is available to the media and public.

Bottom line: when you’re dealing with company news, think long and hard before hitting “send,” “post” or “publish.”

 

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101: Supply and Demand Part II
By Gregg Schoenberg Wednesday, September 14, 2011

In the first of our two-part post on supply and demand, we looked at the relationships that supply and demand have to the price of goods, and we defined the concept of elasticity.  Now let’s move on to see how supply and demand interact in order to create the prices for all of the goods and services that we produce and consume.

While we promised that no math would be involved in this discussion, we didn’t say anything about charts, and the following one is rather instructional so let’s take a look at it.

Supply & Demand

A quick glance at the demand curve (the red line) confirms what we stated in our last post: as the price of a good falls, demand for it increases.  Looking at this relationship visually helps us to understand why a demand curve is often referred to as a downward-sloping curve.

The opposite, as you will remember, can be said of the supply curve (the blue line).  As the price of a good rises, its supply increases, resulting in a curve that is upward sloping.

The point where the supply and demand curves intersect generates a tremendous amount of excitement among economists, and makes the rest of us think that maybe economists should get out of the house a little more often.

In this case, however, economists’ excitement is justified, as the intersection of the supply and demand curves represents something with great importance to all of us: the point of market equilibrium.  At market equilibrium, the quantity that suppliers are producing exactly matches the quantity that consumers are demanding, and the price that suppliers are charging is equal to the price that consumers are willing to pay. These equilibrium prices and quantities are known as the market price and the market quantity, and they represent the amount of goods that actually get produced and the price paid for these goods, when a market is in equilibrium.

While we may struggle to find equilibrium in our lives, markets always gravitate toward it and can thus be said to be self-correcting.  A quick look at our chart demonstrates why this is so.  Pick any price in the chart that is above the equilibrium price, then draw a line from that price to see where it hits the supply and demand curves, and you should notice the following: at any price above the market price, supply is greater than demand.  If suppliers are left with excess product, it is pretty easy to imagine what happens next: they have a sale, so to speak, and drive prices down until they reach the equilibrium point.  If, on the other hand, prices start out below the equilibrium price, then demand will be greater than supply and buyers will bid up prices until they reach equilibrium.

As a small business owner it is important to understand how supply and demand interact to create market prices.  While you cannot dictate the market price for the goods and services you produce, you can and should pay close attention to what the market tells you any time you change either the amount of goods you produce or the prices you charge.  It can really pay off to keep detailed records of how your sales and profitability change for any given change in the prices you charge or the quantity you produce.  Doing so will allow you to see how the forces of supply and demand affect your specific business, and should help you determine your optimal quantities to produce and prices to charge.

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