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Saturday, June 21, 2008

The 800-lb Gorilla

We all know the metaphor about the 800-lb Gorilla, or the large customer who gets his way. Dealing with these brutes can be quite the challenge, especially given the delicate politics of the situation.

The vendor to the 800-lb Gorilla has many obstacles:

the signing of strict legal contracts, agreeing to long payment terms, satisfying tight delivery dates, and complying with the electronic delivery of business documents at a precise level of accuracy.

Because of the volume of "bananas" and magnitude of product replenishment, the Gorilla's appetite for efficiencies exists throughout the entire supply chain. From the procurement of raw materials, through manufacturing and distribution, numerous techniques are employed to streamline the process; Just-In-Time inventory is one example; Track and Tracing is another.

The Gorillas have their processes honed to a science... at least most of them do. Not long ago, I was assisting a small supplier to a large retailer in correcting some of their electronic documents. The documents were already in production, but the supplier started receiving charge backs (fees) from the retailer due to non-compliance.

One example of non-compliance was that the retailer required an ANSI X12 Inventory Advice. The supplier was transmitting the document as agreed, but a particular data element was not in the format desired by the retailer. My task was to research and fix the "bad" element. Sounds simple, right?

We fixed the inventory advice and wanted to test with the retailer. This spawned numerous calls through the business channels to ultimately obtain a "vendor hotline" number. Calling this number landed us in India, and the person on the other end had no idea what the electronic document was. Our case was escalated to level 2.

A couple of days later, we were contacted by level 2 (still offshore), but the person was proficient in X12 terminology. After explaining our intent, she gave us another contact who deals directly with testing. We called this number, only to get a message that the test coordinator was out of the office for the next two days. We are now one week into the task, charge backs are coming, tempers flaring, and no hope of resolution until after testing next week.

After about three weeks of playing electronic musical chairs, the retailer and the supplier are both finally satisfied; although my team and I (along with the management) are mentally exhausted. In this example, the need for efficiency created an inefficient process. A process fashioned by the very Gorilla who wanted efficiency in the first place.

Or maybe this Gorilla was more of an Orangutan? ;)

JM Kelly, The IT Entrepreneur

Friday, June 13, 2008

How do I incorporate (form a legal entity)?

By now, I hope that you have made the conscience decision to legally structure your company. Doing so will help to limit your liabilities by providing for protection of your personal assets. It will also help reduce your tax burden and provide for the writing off of expenses with pre-tax dollars.

The ability to file ones’ own paperwork is now tremendously easier thanks to The Internet. Traditionally, you would have had to hire an attorney, legal secretary, or other legal professional to assist you (and you still can if you feel uncertain).

If you want to tackle the job yourself, you can save a few hundred dollars by doing so. The best place to start is with the Secretary of State in your home state. You can also form your corporation in other states that make the process easier; for example, Delaware is known as a corporate haven. From their website: “More than 800,000 business entities have their legal home in Delaware including more than 50% of all U.S. publicly-traded companies and 60% of the Fortune 500.” See the Delaware Secretary’s corporation division at

When checking the Secretary’s website (in any state), bear in mind that the name you have picked out may already be taken, so it’s a good idea to establish your name before printing up letterhead, creating advertisements, etc. The process takes only a few minutes, and most states will immediately issue your state registration number.

The next step is to go to the IRS EIN website and apply for an EIN (Employer Identification Number), which is similar to a Social Security Number, but for the business. Once on this page, click the “APPLY ONLINE NOW” button. You will need this EIN to open a bank account in the name of the corporation.

Other considerations:
You will have to decide which type of corporate structure is best for your business and your tax situation. If you are unsure, check with an accountant or CPA. I have found that for small business, the S-corp or an LLC is best. If you are a sole proprietor, then a single member LLC is a good choice, and allows you to file an extra schedule on your regular 1040 tax form (versus filing both corporate and personal tax forms each year).

If you are still unclear whether or not you can do all of the paperwork yourself, try using as they have a good reputation for assisting business owners through the corporate structuring process.
Good Luck!
JM Kelly, The IT Entrepreneur

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