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Ensuring Ongoing Success: 2

Ensuring Ongoing Success: 2

January 7, 2006
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Will virtual reality boost the paysite market?
Yes, it will soon
  39.66%
Yes, but in a few years
  36.87%
No
  23.46%
Out of 179 votes. Results based on votes submitted by members of XBIZ.net social network.

" Asset protection involves more than tax shelters and investment opportunities "

In part one we looked at the importance of management and exploring new frontiers. In this conclusion, we'll examine core business evolution, asset management, going public and beyond.

The Core Business
Now the affiliate program, rather than the original paysite, becomes the company's core business. Before the principals realize what is happening, affiliate demand for help in promoting their sites leads to an expansion of the company's support services, through a publicly available message board, for example.

Add a catchy name, and the masses will soon follow. These masses become an attractive audience for advertisers, and soon the company's focus shifts once again, now to become an advertiser-supported online "community." Launch a magazine to offer more options to these advertisers, and you're in the "publishing" business. Or perhaps organize a trade show and enter the "events" business.

While it's nice when such evolution comes to fruition as the result of hard work and a carefully orchestrated plan, unanticipated business evolutions are a fact of life and need to be considered — and embraced. Just remember the example of the cook who no longer has time to spend in the kitchen doing what he enjoys; some folks are better off sticking to their lone paysite or the other original, core business that excited him or her in the beginning.

Asset Management
By now the cash is rolling in, and you are suddenly facing a serious problem: having too much money — yes, there is such a thing.

The complicated subject of tax-deferred investments and asset protection is well beyond the scope of this article but still something that needs to be touched upon. While paying your taxes is not only an obligation but the right thing to do, you should pursue legal ways of protecting your hard-earned money through the use of the best accountant you can afford. Your accountant should be able to introduce you to a qualified investment adviser that can help manage your assets in the best way for your unique situation.

Asset protection involves more than tax shelters and investment opportunities, however. Especially for operators in the adult industry, protecting your assets from seizure and forfeiture, as well as from civil actions, is vitally important. Having Uncle Sam (or other governmental entities in your jurisdiction) grab all of your hard-earned cash is a nightmare that many operators rightfully dread — and one that some have faced.

Proper procedures governing all aspects of your operation, including policies addressing employees, their interaction with the company and with each other, will all go a long way toward mitigating any possible negative judgments or criminal penalties. Relocating your operation to a more legally friendly (and stable) jurisdiction also may be helpful and advisable for some, and maintaining adequate levels of insurance is advisable to all.

Another consideration is the revisiting of your company's business structure. Several multi-million dollar companies are run by sole proprietors, but adopting a corporate structure will almost always reduce tax burdens, shield principals from certain types of litigation and financial penalties, ensure the continued operation of the business despite the death or incapacitation of the principal and ease the obtainment of venture capital for new projects or expansion.

Remember, it's not what you make, but what you get to keep.

Going Public
Sometimes, however, it's best to "let go" rather than keep holding on, especially in situations where the entrepreneur would rather move on than be tied down. The subject of turning your "baby" over to a new owner is one worth considering, despite the often emotional attachment most business owners feel toward their company.

A bright idea, a catchy name, a colorful logo and a bunch of media hoopla — during the glory days of the Internet, that was all that was needed to launch an e-business and take it public, sell off a bunch of stock and retire. Things are more complicated these days, but the process is remarkably similar. Whether privately or publicly held, the greatest rewards from your hard-worked investment might only be realized once you've parted with it. The question is how and when? For many successful business owners, working their company until retirement isn't the goal. Working it up into an attractive target for acquisition is. I previously alluded to the fact that acquisition is a great way for you to consolidate market share. Consider now that it could be your company that is the target of such a power play.

Sometimes this happens as an open solicitation on your part; sometimes the offer is made to you. In the case of a publicly held corporation, it could happen without your knowledge, consent or further involvement. The key to maximizing your "take" on the deal is to not only build a strong company but to foster the perception of its strength.

No one will buy out a company, whether it is successful or seems doomed to failure, unless the company possesses attractive, negotiable assets. These assets could be intellectual property such as copyrights and patents (think of Acacia's business model), real property, domain names, email lists, affiliate contacts, etc. Developing, documenting and preserving these assets should be a consideration from the first day — a consideration that could pay off handsomely on the last day.

Regardless of the company's assets and liabilities, your ability to sell it is based upon demand. Operate in a way that builds the company's strength, keep it in the public eye, develop its brand and keep the balance sheet as clean as possible. This will contribute to its attractiveness as a target for acquisition, while making it more profitable in the meantime.

While no one article or series of articles can comprehensively illustrate all of the action points and pitfalls that the entrepreneur will encounter or need to consider, I hope that this short series has helped guide your actions and given you new factors to consider while developing your business and marketing plan. Good luck!


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