small business owners
On Thursday, NYC taxi drivers shut down the Brooklyn Bridge to formally protest the financing costs tied to their taxi medallions, the certificate that allows them to operate in the five boroughs. Tensions over “Medallion loans” have been bubbling over since last year when it was revealed that many borrowers had signed a Confession of Judgment to obtain their loan, which basically waived their right to settle any disputes with their lender in court should they be unable to make the payments. Since then, COVID has completely devastated an already suffering industry…
“Before it was good, we could make $100-$150 a day,” said Mohammad Ashref, a local Brooklyn taxi driver in a video interview with deBanked reporter Johny Fernandez. “Now it’s very hard to survive, we work very hard to make 60, 70, or $80 a day, but what can I do? I have to make a living. We have no other choice.”
Ashref technically drives a green cab, different from the yellow cabs that were protesting on the bridge in that they’re not permitted to accept street-hails throughout most of Manhattan. Green taxis also operate through a permit rather than a medallion, a still relatively new concept that was first rolled out in 2013 to facilitate ride-hailing in the outer boroughs where yellow cabs did not spend much time.
In the interview with Fernandez, Ashref pointed out that the success of the taxi business is intertwined with the restaurant industry. Many riders in the boroughs depend on cabs to take them to restaurants or night clubs, but with the complete ban on indoor dining still in effect within city limits, that need has mostly dried up.
According to the NYC Taxi & Limousine Commission, yellow and green cabs were making as little as $314 and $210 a week respectively during the peak period of the shutdowns. In a 40 hour week, these amount to a fraction of the $15/hour local minimum wage and that’s even before factoring in driver costs like a vehicle lease, loan payments, insurance, and more.
deBanked has been exploring several areas of the New York City economy over the last few months. For instance in July, reporter Johny Fernandez looked into how the pandemic was affecting a street performer in Times Square that was dressed as Batman.
“The business now is slow,” Batman said. “There’s so few people at this moment […] At this moment I see people scared, they don’t want pictures…”
Batman, like others in New York City, was hopeful that a return to normalcy was just around the corner.
Small business owners in New York have registered dissent against Gov. Andrew Cuomo’s plan to raise the minimum wage in the state to $15 per hour, the highest minimum wage in the country.
In November last year, Cuomo announced that New York will raise the wages of permanent and seasonal workers to $15 by 2021. The business owners gathered in Albany on Tuesday to reject the proposal, claiming that the tax cut offered to ease the process is too little to offset the cost.
Small businesses generate roughly $950 billion in revenues annually and created 2 million jobs in 2014.
American Express hopes to tide over the bitter credit-card deal with Costco by lending to small businesses.
The two companies ended their 16-year partnership when Costco joined hands with Citi in March 2015. This June, customers will receive their Costco-brand Visa credit cards.
AmEx wants to turn its focus on what it is already familiar with — small business loans. In 2014, AmeEx cards for small businesses funded $190 billion in purchases, up from $122 billion in 2010, with enough reason to believe that there is room to grow the business.
AmEx hopes for the small-business loans to make up for the lost revenue from the Costco deal which accounts 20 percent of the company’s outstanding loans, according to a Reuters report.
Continuing The Year Of The Broker Discussion, I wanted to touch on another aspect that isn’t discussed too often in our space (Independent Broker or Independent Agent space), and that’s the importance of creating a profitable business model and rounding up creative debt financing for our Office.
I believe it was the Roman Playwright, Plautus, that said, You must spend money to make money. This is certainly true for Independent Brokers and Agents, as we are entrepreneurs in every sense of the word, or if you operate a one man show like I do, then you would be more along the lines of a solopreneur which is new terminology floating around that refers to certain special entrepreneurs who run their business solo with full responsibility over the day-to-day operations.
However, despite the fact that one must spend money in order to make it, it begs the question as to why many new Brokers have very little networks, resources and other sources for financing?
Not only do they lack these resources, but many new Brokers also have not truly developed a scientific business model for their office based on: If I invest XYZ in data, marketing and all other aspects in association of producing 1 new closed deal, I would receive XYZ back into terms of the revenue off the initial closed deal as well as XYZ back in terms of recurring revenues on the renewals of said merchant.
Many new brokers lack both a scientific and profitable business model, along with efficient financing for said business model, which threatens their survival going forward.
Your Profitable Business Model
I argue with investors across the Investment Community all of the time in relation to which is better in terms of building the most Wealth, is it investing in Stocks or operating your own Profitable Business Model? I have always believed creating your own Profitable Business Model was the fastest way to Wealth due to the lack of control one has over the returns you can generate through the Stock Market. Commentators like James Altucher tend to agree with my mentality as he says: The best way to take advantage of a booming stock market is to invest in your own ideas. If you have an extra $50,000 don’t put it into stocks. Put it into yourself. You’ll make 10,000% on that instead of 5% per year.
I’ve always used a model of at least a 400% return within 24 months for operating my office because, not only did I have to cover business expenses and taxes, but I also had to cover my personal expenses, the funding of my emergency funds/savings, and the funding of my retirement accounts which includes SEP IRAs, Social Security, and Health Saving Accounts.
So for example, my model might have it to where if I invest $30,000 into my office, that should produce revenues of around $180,000 within 24 months, revenues include commissions from new deals, renewal deals, side processing residuals and other valued added products. This would leave a profit before taxes of $150,000 or a 500% return. Now the 500% range is just the benchmark used, in terms of actual returns, they have been at least double this amount due to my focus on maintaining clients for the long term as with recurring clients, there are no investment dollars spent on the acquisition of those additional revenues but they do continue to add to the overall “profitability” measurement of the original investment.
Utilizing this predictable model allows for the use of creative financing for leverage, cashflow management, along with the preservation of savings, and other investment portfolios. One of the tools I have been using for creative financing have been Credit Card No Interest Promotional Offers.
Using Credit Card Promotional Offers To Finance Your Office
I’m a Dave Ramsey fan like many Americans, but I’m totally against Mr. Ramsey’s consistent hammering of the use of “debt,” specifically the use of Credit Cards. Credit Cards are just like hand guns, if you put the gun in the hands of a solider, police officer, hunter, or a responsible home owner, then you protect human life, build nations and protect communities. If you put the gun in the hands of the common Chicago inner city street thug, then you get crime and homicide. If you put a Credit Card in the hands of a responsible person, the Credit Card is used to bring a variety of additional benefits to said user. But in the hands of an irresponsible person, the Credit Card just adds to their financial woes.
If you strive to keep your personal credit profile clean and with high efficiency, you should qualify for a number of Credit Cards that not just provide cashback rewards, but they provide short term financing in the form of 0% interest for 12 – 18 months, with a 1% – 3% upfront fee. This means you can receive an up to 18 month loan for only 1% – 3% in borrowing costs. These offers are not presented just when the card is opened, but they are generated usually on a monthly or quarterly basis.
So coming back to my business model, I might put that entire $30,000 on a credit card promo deal for 18 months with an upfront fee of 3%, which means the borrowing costs are $900. I would continue paying the minimum payment every month which is usually calculated as no more than 0.5% – 1% of the outstanding balance. I would invest the $30,000 into my business model and would have obtained the break-even return and profit measurement in a relatively short period of time (usually 3 – 5 months) and then be profitable on the investment. I would eventually end up paying off the outstanding balance on the Credit Card well before the promo period ends, which further increases my positive credit history allowing for larger credit limits to be requested.
Other Benefits Of Credit Cards Over Other Payment Options
Credit Cards also provide a host of other benefits including cashback rewards of anywhere from 1% – 45% depending on the reward category, these rewards and savings are not available through any other form of payment option. If you seek out cards with no monthly fees, setup fees or annual fees, you could run up balances, pay them off before the grace period ends, and obtain a stream of free income.
Credit Cards also include Chargeback Protection that can save you a significant amount of headaches down the line should you run into an unscrupulous vendor, or if you are the unfortunate victim of theft such as a robbery, identity theft, strong-arm theft, etc. For example:
- If someone steals your wallet and goes on a “card swiping spree”, once you report your Credit Card stolen then you aren’t responsible for any of those transactions. This isn’t as efficient if you carried a Debit Card, as the money would be gone from your Checking Account until the Bank recovers the funds in 30 – 90 days, which might cause you some cashflow issues. If you carried Cash, the money might never be recovered.
- If you ordered something from a vendor and didn’t receive it, you are protected with the use of Credit Cards. With a Debit Card or Check, it will again take 30 – 90 days for the dispute to complete with the Bank, however, throughout this period of time the money is still gone from your account until the dispute is over, which might cause some cashflow issues. If you used Cash for the order, the money might never be recovered in this case as even though you are likely to obtain a judgment by suing the vendor, the Courts do not assist you with collections.
In order to survive going forward as an Independent Broker or Agent, remember the importance of developing a profitable business model as well as having low cost sources of financing for said model. Credit Cards are one of the ways you can creatively finance your business model.
I’m on track to end the year with near or over $200,000 in total credit limit availability. This credit limit availability is spread out over a number of different accounts, but some of my favorite Credit Card Accounts include: The Double Cash Card ™ from CitiBank, The Discover IT Card ™ from Discover Bank, The BankAmericard Cash Rewards Card ™ from Bank of America, The Chase Freedom Card ™ from Chase Bank, The Upromise Mastercard ™ from Barclay’s Bank, The QuickSilver Rewards Card ™ from Capital One Bank, and The Blue Cash Everyday Card ™ from American Express.