Victor Varma | Blog

That jingling you hear may not be bells. Could be what’s left in your pocket.

Posted on December 13, 2019November 8, 2019 by Victor Varma

For those caught up in the buying frenzy of the holidays, Christmas Eve could find them with a handful of change in their pockets and little else.
Of course, every year you think you’ll avoid the rush by accumulating gifts throughout the year. That would be smart, but it doesn’t do much good in November and December and the shopping list looms.
A survey by The Wall Street Journal shows that more of us are controlling credit card debt by adopting new traditions that reduce the loot under the tree.
Women do most of the Christmas shopping, says Eileen Fischer of York University in Canada, who studies consumer behavior. They give gifts to reinforce relationships with spouses, kids, in-laws, co-workers, friends and helpers.
Here is some classic advice on keeping your holidays affordable:

If you have a multitude of relatives to buy for, talk with them about exchanging cards this year. They will be happy to do it in most cases.
Decide in advance how much you will spend on gifts.
Give gift certificates to teens. They keep you within your specific amount, and teens enjoy shopping.
Skip the stocking stuffers.
Shop with a specific list, especially online where easy clicks add up to big money.
Don’t buy for yourself at the same time. Stick to the project.
Financial advisor Jane Bryant Quinn says: Add up your consumer debt and write the number at the top of your shopping list or computer.
An advantage of buying less: Less time spent opening gifts. It can drag on and on for a large group.
The holidays are more joyful when you know you can pay the bills as they arrive in January.

Little shoppers learn realities of money

Posted on December 6, 2019November 8, 2019 by Victor Varma

Christmas shopping is here and your kids will want to be part of it. It’s a good time for a little value teaching.
Help your child make out a list of people and consider what gifts are within a budget you have set.
For younger kids, try shopping in real stores with real cash. One of the best ways to teach money management is to give them some money to handle. They can shop for gifts, while keeping track of the money left for the next gift.
It is never too early to start teaching your child about money. The best time to begin talking to children about money is when they start asking for things. Even a 5-year-old demanding a toy can be taught the value of money and the cost of things. He can also be taught that he has an option to save the money instead.
Your daily routine provides many opportunities for lessons. Talk about how you spend and save money. Show them your grocery list and explain why it is a good idea to make a list. Show
them how a debit card works, being sure to point out that the money is subtracted immediately from your bank account.
Linking an allowance to chores depends on parental goals. If the goal is to teach the child how to manage his money, it is best not to link the work with the money; if the goal is to teach that some things must be earned, an allowance paid for chores could help in that lesson.

What to consider when getting out of a rental and taking a mortgage

Posted on November 22, 2019October 7, 2019 by Victor Varma

You have many factors to consider in your journey to home ownership.
Here are some basic considerations:

If you can make a down payment of 20 percent, whatever mortgage you choose, you won’t have the cost of mortgage insurance added to your monthly payment. Many buyers can’t come up with the large down payment, but mortgage insurance is only charged by mortgage companies until equity reaches 20 percent.
Many conventional mortgage lenders ask for 5 percent to 10 percent down.
What is your credit score? To qualify for a conventional mortgage, you need a score of 620 to 640 or higher. But if your score is at least 580, you can still quality for an FHA mortgage.
The big advantage of an FHA mortgage is its low down payment requirement, just 3.5 percent. They account for 30 percent of all mortgages today. But if you have to move in very soon, beware, it takes a longer time to get one.
If you have a credit score lower than 580, you still might be able to get an FHA loan with 10 percent down.
How long will you stay in the house? If that might be for just a few years, an adjustable rate mortgage might be a good choice. Consider it if you are in the military, your job requires you to move every few years, or if this is just a “starter house” for you.
If you plan to live in the home for a lifetime, a 30-year fixed rate, or a 20-year fixed rate, would be better. Or, if you can afford the higher payments on a 15-year fixed rate mortgage, you’ll get the best interest rates of all.
The VA loan is for service members or (this is important), for former service members.

The impact of target marketing in small business

Posted on November 15, 2019October 30, 2019 by Victor Varma

Target marketing, according to Inc., is collecting information to determine your ideal customers among those who also need and will pay for your product or service.
For these purposes, you need their age, gender, family size, education level, and occupation. To find out where they are, you need their zip codes, size of the area, its population, and climate.
How does your ideal customer decide to make a purchase? The answer helps you determine why they buy what you’re selling, how much of it they need, and how often they must buy it.
Most social media profiles for your business provide a free demographic breakdown of customers like yours. Zip Codes can furnish vast amounts of info from the U.S. Census Bureau.
If you’re currently in business, your sales data clearly show what your customers are buying, when, and their purchase prices, among other data. For the essential feedback, talk to them in person or on the phone, conduct a few customer surveys. You don’t need a ton of responses to acquire a pretty good sense of your customer base.
In addition to the basic demographics, these should be among the takeaways from your target customers:
Is the distance to your location a problem? Parking? Public Transportation? Do, or can you, deliver?
How do they make a living? Knowing what your primary customers do can help you adjust your hours to fit their needs or devise special offers. Having an idea of the money they can or are willing to spend can help with your pricing. With this kind of information, you can confirm some of your assumptions regarding your customers and dismiss others.
Practical target marketing is almost always beneficial. And genuine interaction with your patrons — plus giving them what they want — is almost always a pathway to loyalty and future growth.

Why Facebook ads are often not profitable for small business

Posted on November 8, 2019October 7, 2019 by Victor Varma

The revenue of Facebook ads is ever-increasing, and small businesses are the reasons why.
But not all small businesses profit.
With 2.2 billion users every day, Facebook will easily surpass $4 billion in advertising this year. It has a global reach that promises highly targeted audiences.
All this can be managed with a small dollar amount to begin if the audience is local.
Why, then, do 62 percent of small businesses not make any money with their Facebook ads?
The reason has four parts:

Nature of Facebook
Facebook has become a friends-and-family favorite, and enabling conversation is Facebook’s first mission, according to Facebook itself. It is an after-work pleasure for most. The key idea is that people are taking a break from work or are at home when they are on Facebook. Something to remember.
The service or product
Consumer items like clothes, decorations, games, and toys do sell on Facebook. Maybe this is because Facebook ads come to people when they are relaxed.
Facebook targeting
Facebook’s targeting abilities are widely acclaimed. Yet, it is sometimes impossible to see whether your targeted ad hit the target. You might get likes, comments, or shares, but many times you won’t get them from your actual audience. Why is this? Facebook claims that ads are shared. Yet, the person who shares is often not the target market. If your results are bad, change targeting, but you will probably never be able to confirm whether any portion of your ad hit your target.
Consumer products that appeal to nearly everyone work best. Service niches, product niches, just won’t work as well. Business products won’t work as well either, though some do.
User skill
Still, if you want to buy Facebook, you must put in the time to become an expert in its targeting and ad styles.
An eye-catching meme-like ad with an offer usually will attract likes and shares, which expand your audience organically.

Book Review: The dark shadows of “The Four”

Posted on November 1, 2019October 7, 2019 by Victor Varma

According to serial entrepreneur and NYU business professor Scott Galloway, they’re The Four Horsemen of technology and digital media.
In his best-selling “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” Galloway casts a harsh light on the dark features of their business models and impact on society.
He calls out Apple for its eagerness to become a luxury brand that maintains high prices for its devices.
Google, he writes, seeks the image of a public utility.
Amazon continues to devour the retail marketplace while leaving local shopping mails deserted if not already closed.
Facebook? According to Galloway’s book, it’s now “the world’s biggest seller of display advertising – an extraordinary achievement, given Google’s brilliant takeover of advertising revenues from traditional media just a few years ago.”
Indeed, Galloway foresees Google and Facebook ultimately in command of more advertising media spending than any two firms in history.

Less taxes
According to the book, from 2007 to 2015–when the average tax rate for the S&P 500 was 27 percent, The Four Horsemen paid much less.
Apple paid 17 percent of its profits in taxes, Google 16 percent, Amazon 13 percent, and Facebook 4 percent.
Meanwhile, the overall impact of The Big Four continues to alter the economy, impede the growth of innovation, and stifle competition. They don’t have many employees, but they do have millions to spend on D.C. lobbyists.
Nevertheless, Galloway believes the breakup of Big Tech will occur because “We’re capitalists.”
This book is a worthy read, especially for those in or starting a new business competing with even a segment of The Four.

How did the rate cut affect mortgages?

Posted on October 26, 2019September 6, 2019 by Victor Varma

Technically, The Fed’s decision in July to lower interest rates by a quarter-point doesn’t directly affect mortgages. In reality, there are usually some things to keep in mind with any rate decrease or increase.
The Federal Funds rate is a measure of short-term borrowing, or the rate that banks use to lend money to each other. Mortgages are long-term notes.
If you have an adjustable-rate mortgage, you’ll probably see your interest rate go down when there’s a cut. To put that in perspective, a Bankrate article said that a HELOC (home equity line of credit) of $100,000 rises or falls about $250 a year with every change of 0.25 percent in interest rate, up or down. That works out to about $21 a month.
Additionally, variable-rate mortgages usually adjust annually, on their anniversary dates, and some don’t adjust at all for the first two to seven years.
However, this could be a good time to refinance into a fixed-rate mortgage and lock in the historically low rates. The average rate on a 30-year mortgage fell to 3.75 percent, down from a high of almost 5 percent in 2018.
Do a little math to figure out your savings over time, as well as closing costs, to determine whether this is a good move for you.

Hot trend: Build to rent

Posted on October 18, 2019September 6, 2019 by Victor Varma

An interesting real estate trend has cropped up in recent years: while demand for rents has stayed strong, consumers have also turned their attention to single-family homes.
Renting is like having a home without the commitment. Or living in a home but retaining the agility to up and move quickly.
As prices of single-family homes have risen and lending remains strict, down payments and loans have become harder to come by. Add in Millennials, a generation of buyers with sometimes staggering student loan debt but growing families, or Baby Boomers, who don’t want the headaches involved with homeownership.
Flexibility and mobility have become the driving force.
Now, builders and investors are building single-family homes with the intent to rent instead of sell. In one of the bigger moves nationwide, Toll Brothers announced earlier this year that it had committed to invest $60 million in a $400 million venture that would build homes for rent in seven major U.S. cities.
An article in CNBC this summer called the built-to-rent (or B2R), the fastest-growing trend in real estate. Last year, about 43,000 single-family homes were built for rent, it said. And the built-for-rent share of housing starts is also rising, to nearly double its recent historical average from 1992-2012.
In Pradera, a gated community of three- and four-bedroom homes in San Antonio, Texas, the rents are $1,800 to $2,300 a month and the community includes a pool, fitness center, community kitchen and party space, plus dog park and dog-washing station. Interestingly, the average annual household income in Pradera is more than $100,000 — meaning many of the tenants can afford to buy but have chosen not to.

Wage and hourly lawsuits: Easy to file, devastating to lose

Posted on October 11, 2019September 6, 2019 by Victor Varma

As a small business owner, are you 100 percent sure you’re paying employees correctly? Are you tracking their hours accurately? Are those you’ve classified as exempt really doing the work that qualifies them for it?
If not, take a sharp eye to your payment system very soon.
In the last few years, numerous small businesses have been hit by lawsuits citing them for underpaying or misclassifying employees, failure to pay required wages, and sufficient overtime.
And the smaller the company, the higher the risk.
Also, the threat to unprepared employers will increase early next year when a rule proposed by the U.S. Department of Labor takes effect. In its current form, the law would make an estimated one million more workers eligible for overtime pay.
Any vulnerabilities in a business’ payment system are red meat for plaintiff lawyers who appear to be getting more successful in their pursuits. They won 79 percent of 273 wage-and-hour certification decisions in 2018, an increase of six percent over the previous year.
Companies also absorbed a decrease of 11 percent in their odds of defeating cases with successful decertification motions.
Even more foreboding is the lone discontented employee who could hire a plaintiff attorney who then could parlay the case into a class-action lawsuit that would be very expensive for any company to fight.
According to the Society for Human Resource Management, wage and hour disputes are cash cows for plaintiff attorneys: Their fees are easier to obtain than in other forms of commercial litigation.
To protect your business–and ultimately you and your family–make sure that all your workers (contractors, staff, overtime-exempt, and non-exempt) are classified correctly, and that they are being paid according to federal and state laws.
Also, seriously consider proposing an arbitration agreement with your employees that includes a class-action waiver.

Entrepreneur Michael Rubin: Bankrupt at 16, Millionaire at 21, Billionaire at 38

Posted on October 4, 2019September 6, 2019 by Victor Varma

At the age of 16, Michael Rubin said there are only two kinds of business people: Those who take risks, and those who are rational.
What was he?
At 16, is it risky to own a snow-ski business in Pennsylvania’s sweltering summers while owing creditors more than $200,000?
At 21, is it rational to own a business worth $1 million, and $50 million a couple of years later?
According to Rubin, being $200,000 in debt was “a near-to-death” encounter.
Somehow, someway, he managed to pacify his creditors with the $37,000 he borrowed from his father. Then, honoring his Dad’s terms of the deal, he enrolled in college.
Six weeks later, he dropped out of Villanova University. Too boring, he said, answering the calls of his businesses.
Working smart had inspired Rubin since he was a kid.
At the age of eight, according to Enrepreneur.com, he was walking door-to-door selling vegetable seeds to his West Philadelphia neighbors. At 12, he’d opened Mike’s Ski Shop in the basement of his parents’ home.
At 14, he was operating a chain of ski shops, businesses, and a discount ski equipment retail shop (hence, the debt).
At 19, he had merged his burgeoning ski business, KPR Sports (named with his parents’ initials), with then publicly-traded athletic shoe company Ryka to form Global Sports Inc. (later GSI Commerce).
At 26, GSI was generating more than $130 million a year.
At 38, Rubin had sold GSI Commerce to eBay for $2.4 billion.
Rubin then bought and merged Fanatics (a licensed apparel retailer), Rue La La (a fashion flash site seller), and Shop Runner (a retail benefits program) and molded them into Kynetic, a billion-dollar e-commerce company.
Rubin is 47 now, and according to Forbes, his net worth is $3 billion.