1. Never let on how much you need the other guy’s money.
2. Stay in control. He wants a rate of return and you want to scale your business. This is not a unilateral transaction.
3. Express a level of confidence in your technology based on a solid understanding of it, your market and your competition.
4. Understand and be responsive to the interests of your investors.
5. Be sure to play side one of Led Zeppelin IV at the closing table.

I hope you get lucky…

Bo Peabody, co-founder of Tripod.com and Village Ventures, was the keynote speaker. Bo’s book, Lucky or Smart?, is available on Amazon.

I am pleased that my new venture, QuoteJuice.com, was chosen to present. For the past couple years, Andrew Lunde, one of Atlanta’s most accomplished technologists, and I have been building the site. We are sticking to the adage that if you aren’t embarrassed by the way the site looks then you launched to slow. We are continuing to make improvements that will make the user’s experience better.

Quotejuice.com allows consumers to easily quote and compare side-by-side competing health plans, and to make application for the insurance product that best fits their needs. The company is a licensed insurance agency in Georgia, California, Colorado, North Carolina and Tennessee. QuoteJuice, founded in March 2007, is a member company of the Advanced Technology Development Center at Georgia Tech.

Paul Stamatiou wrote a comprehensive piece on Startup Riot. Here are some pictures from the event:

Sanjay briefs the presenters.

Andrew Lunde and Sig Mosley.

Angus pitches QuoteJuice!

James Harris pitches Artisanal Influence!

Keith McGreggor oversees the snarkiness on BackNoise; Paul Freet, Jeff McConnell and Sig Mosley.

So, what inspired you to part with your hard-earned dollars and sponsor Russell’s trip? Here’s my reasoning:

I had been following with interest the back and forth twitter of Urvaksh Karkaria, a journalist with the Atlanta Business Chronicle and author of the AtlanTech blog, and Paul Freet, a serial entrepreneur and Commercialization Catalyst at Georgia Tech’s VentureLab. Their conversations basically centered around the future of the dead tree (print) media in relation to “new” media. So, in the end, I viewed the call for sponsorship of Russell’s trip as a way to (i) help the Atlanta start-up community, and (ii) participate in a new media experiment.

What I expect to see from Russell’s reporting is an unabashed level of honesty and candor, a Linus-like level of sincerity, a tenacious dedication to the story, and a good dose of humor that is unique to the man.

Good business reporters like Urvaksh will always have an audience. A niche, however, is being carved out for stories that don’t fit the traditional print model. Pick up a subscription of the ABC – it’s well worth it. But also take the time to follow Russell’s reporting at TechDrawl.

1. Get fired from your job.
2. Have your former employer fail to notify you of your COBRA or state continuation rights (thus you become uninsured).
3. Come down with a terrible illness or injury and incur thousands of dollars in uninsured medical bills.
4. Sue your former employer for failing to notify you of your right to continue on the company health plan.
5. Take stock ownership of your former employer because they don’t have the cash to pay off your Mac-Daddy judgment!!!

Yep, it’s that easy. You just have to work for a company that doesn’t take its fiduciary duties seriously. President Obama just signed into law the American Recovery and Reinvestment Act (ARRA) which mandates that taxpayers cover 65% of COBRA premiums for involuntarily terminated individuals.

There are new Department of Labor notices that must be mailed to everyone who lost coverage since September 1, 2008. The deadline to send these notices is April 18, 2009. Let me know if your company might need some help (or not if you aspire to own them one day)…

1. Ditch the PEO. If there was ever an inefficient, expensive way to deliver employee benefits this is it. Buying workers comp, payroll administration and group insurance from standalone vendors should afford immediate dollar savings.
2. Reduce non-network medical benefits. It is not unusual for 90 or 95% of medical claims to be incurred with in-network doctors and hospitals. So why have overly generous non-network benefits that few people use? An employer may have non-network medical benefits paid at 80%; consider reducing to 70%. If at 70% consider a change to 60%.
3. Institute an opt-out program. If your plan pays a significant amount of dependent premiums and a decent number of those dependents have access to other coverage (through their employer’s plan), then providing an incentive to get off your plan will lower your premium costs.
4. Install an HSA or HRA plan. This solution is not for everyone. Much will depend on the overall health of your group, you and your employees’ willingness to take on claims liability, and the financial ability of you and your employees to fund the HSA or HRA.
5. Eliminate unused plans. We’ve taken over a number of groups that were paying for benefits that their employees just didn’t use – a vision plan for instance. Go to your employees and have a heart-to-heart. Discuss what forms of compensation are important – salary, commissions, bonuses, each employee benefit, etc. You may be surprised with their candor and understanding.
6. Tighten up your definition of an eligible employee. If presently an employee must work 30 hours a week to be eligible for benefits, consider raising the requirement to 40. If presently an employee must wait 30 days before benefits start, consider increasing that wait to 60 or 90 days.

The suggestions above, in relative terms, have little impact on an employee’s perception of his or her benefits package. Let’s assume, however, that items 1 – 6 did not produce the necessary level of savings. Even though your goal of attracting and retaining employees will suffer, you may be forced to consider these more drastic measures:

7. Reduce benefits. Now we are getting serious. You are shifting costs from the employer to the employee. Increase deductibles, copayments, and patient out-of-pocket costs. Switch from the more expensive PPO and POS plans to the more restrictive, cost effective HMO products.
8. Adjust employee premium contributions. This one will hit to the heart of the matter. Very simple – make your employees pay more out of their pocket for their insurance.
9. Eliminate benefit plans. I always say that you should insure catastrophic risks. Keep your medical and long-term disability plans. Keep your dental plan if possible. Dental insurance is not covering a catastrophic risk, but it is a great employee benefit. In tight times short-term disability and vision plans are luxuries and should be on the chopping block.
10. Eliminate a class of eligible employees. In certain industries (mainly blue collar ones) you may see the elimination of a whole class of employee from eligibility. For example, exclude all hourly employees from the eligible class. Obviously this is a last ditch tactic.

None of this is fun to think about, but know that reducing costs as early as possible will enhance a company’s chance of survival. Some of these suggestions can be implemented with little effect on employees and their moral. Others will have a direct and real impact on the employees’ disposable income.

Effective employee communications is key. How any change is presented to the employee population is important. While I’m biased on this issue, an ethical, competent and experienced insurance broker is your best resource at a time like this. Call us if you need help: 770-300-0001.

Many readers were actually surprised that a small business owner would expect his tax costs to increase though Obama has said, and said, and said, and said, and said some more that he would raise taxes.

A well-respected techie who is a huge Obama supporter DM’ed me: “interesting post, I don’t know your bracket, but the cuts work pretty much across the board. Obama specifically mentioned startup.” Cuts? Across the board? Mentioned startup? Dude, Obama has explicitly told us that he will increase taxes on the biz owner who buys your ninja dev skills. I’d throw my hands up in the air but then couldn’t type!

One reader made the point that though taxes will increase they would do so slowly and therefore the small business owner won’t feel the impact of those higher costs. Using the same logic one shouldn’t mind being raped as long as the act is gentle.

A somewhat loquacious commenter thought my tax planning needs improvement – pay myself dividend income instead of payroll income. Smart by half. With dividends the business owner gets slapped once on the corporate return and then again on his personal return. The employer still pays its half of FICA. The reader’s logic is further eroded as Obama promises to increase the dividend tax rate from 15% to 20%. On top of that capital gains taxes will go from 15% to 25%. There is no escape!

One person contended that Obama’s free health care for small businesses will offset the higher taxes – problem solved! My thoughts on national healthcare. If you think healthcare is expensive now, wait until it is free.

The bottom line

In the end only Lance Weatherby gave an answer: fire the developer. His advice is sound, rooted in years of business experience – stick to my core business of helping companies with their employee benefits; the one that has proven to earn a paycheck. He suggests that I should abandon my glorious vision of becoming a high-powered dot com success and close down my start-up.

I’m not necessarily smart enough to take Lance’s advice (Andrew Lunde can relax for now), but know that I have to keep that arrow in my quiver.

To pay for the additional tens of thousands of tax dollars I will owe under an Obama presidency which of the following changes should I make?

Reduce my take-home pay.

Reduce time with my family / work harder to satisfy additional tax burden.

Hire only one new employee this next year, not the two as planned.

Eliminate the discretionary sponsorships I make to groups such as TAG, TiE, Startup Lounge / Riot / Weekend, etc.

Shut down my second software venture and not pay the programmer the $40,000 or so I had budgeted.

There are a number of other reasons I like McCain over Obama, but what I have outlined above is a true representation of how an Obama presidency will negatively impact the Atlanta start up community.

I do not mind paying my fair share of taxes (and I do), but my definition of “fair” differs greatly from Obama’s. And, a capitalist market delivers prosperity more efficiently than does government. As the saying goes, “When have you every gotten a job from a poor person?”

What do you think? Any options I have not considered?

In a nutshell, a PEO, sometimes called a “staff leasing company,” will put your employees on its payroll and provide them with employee benefits and workers compensation coverage. It also provides you with payroll administration and a human resources help desk service. In turn you pay your insurance premiums and an administration fee (typically a percentage of payroll).

A PEO’s sales pitch is pretty enticing to an uneducated small employer: (i) Get access to large company benefits, HR expertise, and reduce your liability as a plan sponsor. (ii) Avoid the hassles of administering a benefit plan. (iii) By combining your few employees with the PEO’s larger group you have access to lower insurance premiums and less volatile renewal increases. But, the devil is in the details.

Several weeks ago we had the opportunity to compare one of our client’s benefit package against the quote of a PEO – and we kicked butt! The PEO came in promising this eleven employee group $17,000 in annual savings. But we noticed an inconsistency in its proposal. In its spreadsheet the PEO quoted $18,800 in annual administrative fees, but when you did the math using the rate outlined in the quote those costs came to $57,200. And, the medical insurance we provide is far superior to that quoted by the PEO. So, in the end, when you made an apples-to-apples comparison the PEO had $102,200 in total annual costs (or $140,600 if you used the higher $57,200 fee) against our program for $86,400.

One component of the PEO sales pitch is that it will reduce your liability as a plan sponsor. To a degree this may be true, but probably not to the extent you may expect. You still have a number of responsibilities. For example, if Fred quits work and you fail to notify the PEO for several months then the PEO may rightly balk at providing COBRA benefits, thus leaving you with an uninsured liability to pay the person’s medical bills for the next eighteen months. In a similar manner, if you do not pass out the benefits booklet you may be on the hook for certain unpaid claims. Many responsibilities you have as an employer are still present under a PEO. The PEO’s contract will spell out your responsibilities – and will typically include a hold harmless agreement as well.

So after all of this what is my recommendation? Let the free market work! Get quotes from Administaff, ADP TotalSource, Oasis, Adams Keegan (I find it funny that this one seems to avoid at all costs the PEO / staff leasing label. Come on, be proud of who you are!) or some other PEO and from an ethical insurance broker that knows how to compare a staff leasing product to a traditional benefits package. Pretty quickly you will see the value of keeping your benefits in-house.

Several years ago we moved a 65 employee neonatology practice from one of the aforementioned PEOs and in doing so saved the employer over $190,000 in annual costs. We moved payroll to a national payroll administration company, workers compensation to a stand-alone policy, and kept the employer’s medical with Aetna (the same carrier and benefit design they had through through the PEO).

If you do not have the time or expertise to administer your payroll through QuickBooks or a similar program then consider using ADP, Paychex, or your accountant/bookkeeper for that task. Find a competent insurance broker to handle your employee benefits and your property and casualty coverages.

An Atlanta start-up may be tempted to turn to a PEO in order to minimize time spent on payroll, employee benefits and HR issues. But doing so will be expensive compared to the in-house alternative. Convenience has its price!

Start-Up Riot was a great opportunity for me to meet in person a number of folks I’ve only followed on-line: Keith McGreggor, exercise freak Rob Kischuk, and Wei Yang. I enjoyed catching up with Todd Merrill, Duncan Freeman, and fellow gun nut Michael Mealling.

A number of our clients were at the event. Jungle Disk both presented and sponsored. My office just started using their services to back up our systems. Dave Wright and his crew come highly recommended.

Another client, Servinity, had a great presentation. Having worked in the restaurant industry early in my life I can appreciate how Servinity’s technology will make things easier for managers and employees.

I wasn’t able to see all the presentations as my day job got in the way. I missed seeing Josh Watts (Blue Violin) and several others. I also missed the after party, but am sure that there were some good photos to be had there. The ones I took are posted in the Photo Gallery. Congratulations again to Sanjay for a job well done!