Benjamin Michaelson, CPA

You're looking to put $500k to work for you for 5 years and you have 2 options: 1. public markets that will spin out 8% annually and has instant liquidity. 2. private markets that have a 2 year lockup for liquidity (and even then it isn't guaranteed that you'll get out) but it's paying 14% annually. ***The $500k is FU money and you can afford to lose it all.

6

6 Comments

Work at a private company and recieve Restricted Stock Units (RSUs)? You might have "double trigger RSUs," and here's how they work... First, you won't see the name "double-trigger" on your RSU grant. This term just means the RSUs need to meet 2 triggering events until you receive the stock. ☑️ Event 1: Vesting period (time-based period) ☑️ Event 2: Liquidity event (IPO, sale, etc) Only after the second event are the stock shares yours. At a public company, the shares are yours after the time-based vesting period. However, a private company usually has less liquidity, so they create the double trigger. 👨‍🏫Example: You were granted RSUs 5 years ago that vest 25% yearly over 4 years. 100% of the RSUs have now met the time-based vest period (trigger 1), but they are not yours yet... This year, your company is going public (or going through a sale). Once this occurs, the second event (trigger 2) has been met. After this, the shares are yours to sell or hold (pending blackout and lock-up periods). ⚠️The biggest thing to watch out for with double-trigger RSUs is the taxes. You might have tons of RSUs that met the first trigger over the years. Which has built up and is ready for trigger 2. Once the second event happens, all of these RSUs will vest at the same time! This means all the RSUs are taxable as earned income at the same time! Which could be years' worth of RSU grants! This can create a big tax surprise if not planned for well in advance. So, if you have RSUs at a private company... 1. Understand the vesting schedule 2. Prepare for taxes 3. Make a financial gameplan for the RSUs

13

1 Comment

I spent a week traveling around Texas. 7 experiences that really stuck with me: I met w/ Tim Kennedy, another former Delta operative, a trash company CEO, a public company CEO’s wife, and raised $5M for a company. 7 learnings from too many meetings to count in Texas: 1. Texas is stealing from California. It’s stealing talent and money and attention. I met more transplants here than I ever have and they are SMART and GOOD and into freedom. 2. Being around high performers is the ultimate life hack. Hanging out with Tim Kennedy who has count them 10+ companies and an insane building is like taking cocaine. I left feeling like I am playing small and need to do more. 3. Texas is family. When I was in Hollywood, we talked projects and people and profits. When I was in Texas, we talked husbands, wives, chickens (yes), and why we build anything in the first place. 4. Grind > Glitz. Glitz is not as interesting in Texas. Tim’s proudest possessions are pointy stabby killy things that are gritty and expensive but highly practical. No one talked about watches or labels. Unless you were highlighting his bizarrely huge array of battle axes and knives, it wasn’t about owning but doing. 5. Someone is always doing better than you. I told him about a hard thing I had just done... he said, “Hmm… I did that, wasn’t that hard.” I giggled. It’s good to have people better than you. 6. People are more important than place. When I was in Hollywood last, we went to members clubs and a few events. Instead, this trip Tim asked me if I’d go to coffee with his two daughters, and my new garbage friend Spencer asked if I’d ride in his truck and do some pickups with him. I prefer those to wild dinners. 7. Believe bigger than they do. Dinner with a billion dollar public company CEO’s wife was fascinating. Learned a lot on what it takes to support a partner at that level. My biggest takeaway was how she talked about her husband… “He can do anything. Whatever he touches turns to gold.” Inspiring to have someone believe in you like that. Just some Lessons from the Road. Try writing down your lessons as you go… dang if they don’t stay with you more. Life moves too fast otherwise.

1,077

158 Comments

Expect to raise $10.6M in your Series A Here's a simple Use of Funds test to check when you're ready... ➡️ Can you use that $10.6M to add $10M in revenue in 24 months? $10.6M is still a lot of money to spend (in a capital efficient way) Now I'm not sure I really understand the use of funds strategy back when we were out raising money. Sure, we had our growth targets, hiring plans and product goals, but... At the time, no one really talked about what milestones were required to unlock our next primary round So here's my take... 1️⃣ Hopefully you raised your median $4M seed round because you can show happy customers and a repeatable case study 2️⃣ Now you'll use that median $4M seed money to figure out a repeatable & scalable way to find more of those case study customers And usually those GTM experiments take 18-24 months to figure out which lines up with Carta's Q1'24 median time between seed & series A of 26 months But it's the "repeatable" & "scalable" that are the key words above 3️⃣ Because the use of funds goal for your Q1'24 median $10.6M Series A is to add $10M in net new revenue in less than 24 months Why? Because that'll puts you on the Venture Scale path VCs are looking for → going from $1M to $100M in 7 to 10 years Meaning after you hit $1M in revenue you'll triple to $3M, triple to $9M the year after that and double to $18M the year after (and keep doubling to $100M) Typically you'll raise your Series A in those first few 3x years → It used to be around $1M in revenues → Now it's typically north of $3M But to be able to spend $10.6M to add $10M in less than 24 months you'll need to already have a repeatable & scalable GTM motion from your $4M seed round So if you're going to go down the venture path... Hopefully this gives you a work back plan on what to focus on for your seed round so you're setup nicely for your Series A 🙌 Like Zig Ziglar said: → You can't hit a target you cannot see → and you cannot see a target you don't have -- ♻️ Repost to help a founder in your network Click 'visit my website' at the top of this post to register for my free Unlock your Series A session on how to navigate VC expectations in this market

145

33 Comments

Restricted Stock Units (RSUs) are one of the most common forms of equity compensation. But 90% of people aren't using them to maximize a financial plan. Here are some of the biggest mistakes I see with RSU... ❌ Not estimating RSU income for the year and beyond ❌ Not doing a tax estimate after vesting (and before) ❌ Not setting aside enough tax from RSU vesting (in addition to withholding) ❌ Holding or selling stock without a plan ❌ Thinking there is a tax advantage to holding stock after vesting ❌ Doing the same thing as coworkers

3

You purchased that asset at a 4% cap rate. Assume today that the same asset has NOI of $850K, but the market is factoring in a cap rate of 6%. Now, your $20M asset is worth $14.1M. Did you lose 30% and all of the equity? NO, unless you are selling it right now. Like stock portfolios, you can be off 20%+ last month, but that does not mean you lost 20% of your investment. You only lose if you sell it at that time. Since we are talking about Fed Rates, think about the correlation between a reduction in lending rates and a reduction in cap rates. The relationship between cap rates and lending rates in multifamily real estate is dynamic, and there's no fixed rule for how much the cap rate will drop for every 100 basis points (1%) drop in lending rates. However, there are a few general principles to consider: 1) Interest Rates and Cap Rates Correlation: Generally, there's a correlation between interest rates (or lending rates) and cap rates. When interest rates decrease, borrowing money becomes cheaper, increasing the demand for real estate investments. This increased demand can lead to lower cap rates as buyers are willing to accept a lower yield due to the lower cost of borrowing. 2) Market Dynamics and Sentiments: The exact impact on cap rates also depends on broader market dynamics, investor sentiments, and the property's specific characteristics and location. For example, in a strong market with high demand for multifamily properties, the impact on cap rates might be more pronounced than in a weaker market. 3) Lag Effect: There can be a lag in the adjustment of cap rates in response to changes in interest rates. This means the impact might not be immediate. 4) Magnitude of Change: While a 100-basis points (1%) change is significant, the impact on cap rates also depends on the overall economic context and the starting point of the interest rates. For instance, a drop from 5% to 4% might have a different impact than a drop from 2% to 1%. 5) Investor Expectations and Risk Assessment: Investors’ expectations about future interest rate movements and their assessment of risk also play a crucial role in determining how much cap rates will adjust. 6) Historical Trends: Historically, the relationship between interest and cap rates isn't linear. Many factors, including economic cycles, inflation, and specific real estate market conditions influence it. Any questions? — Hi, my name is Merrill. I post about law, real estate, and entrepreneurship. Subscribe to my newsletter to learn more. Follow me to join the journey.

61

25 Comments

Want to keep $35,000 in your pocket? That's about how much a 2023 tax bill could potentially still be reduced for a South Carolina solopreneur (32% marginal bracket) who requested an extension on their tax filing. Here is how: -Have compensation* of $264,000 or more. -Open a SEP IRA. -Make the maximum 2023 contribution of $66,000. *Compensation = Net Business Income - 1/2 Self-Employment Tax - Your SEP IRA contribution amount SEP IRAs and Solo 401(k)s can still be opened and funded for 2023 up to your tax filing deadline (including extensions). Which type of plan is right for you, depends on a number of factors. There is still time to work with a Financial Planner and a Tax professional to make smart financial moves related to the 2023 tax year. P.S. it's not safe nor practical to actually keep $35,000 cash in your pocket. Put that money to work! ________ Hey y'all, I equip high income earners and lifelong savers with the knowledge they need to make critical financial decisions through every phase of life. To meet with me - https://lnkd.in/dC_cMxei

13

9 Comments

The relationships between working capital accounts and why profit doesn't always equal cash (2 mins) 👇 Pretend the image below is the monthly financials of a company that sells just one pair of shoes. 1. The company records a $100 Purchase of shoes in Inventory. In our heads, sometimes the word "purchase" sounds like "paid in cash," but this company uses accrual accounting, so the "Purchase" here is actually when the shoes arrive at the store, NOT when they're paid for in cash (that's later...). ~~~ 2. The company records that SAME $100 Purchase in its Accounts Payable account as a liability. In simple terms, "We've received the shoes in the store, but we still have to pay our supplier for them in cash eventually." ~~~ Two months later, the company must pay CASH to the supplier for the shoes. So the steps are: 3.1 The company gets rid of its Accounts Payable by paying off the $100 liability, and; 3.2 The company records a $100 cash outflow in its Statement of Cash Flows 💡KEY POINT: Even though this company will eventually sell the shoes and make a profit (in a future step), RIGHT NOW they don't have any cash from the sale, so they have to come out-of-pocket to cover the $100 liability (you can see ending cash is negative). ~~~ A month later, the company finally sells the pair of shoes for $250. 4.1 The $250 Revenue is recorded on the Income Statement and simultaneously in Accounts Receivable, and; 4.2 The Inventory account is reduced by $100, because that was the COST of the shoes they SOLD. So this $100 appears on the Income Statement as well in COGS. HOWEVER, just because the company SOLD the shoes, doesn't mean they've been paid in CASH (yet). You can see "Change in Cash" in April is actually $0. It's just when the transaction took place, but has nothing to do with cash (this is the essence of accrual vs. cash basis accounting). ~~~ 5. A month later, the company finally receives $250 CASH for the shoes they sold, so the Accounts Receivable is reduced by the $250. ~~~ 6. The Cash account has $250 of actual dollars sitting in it (b/c in reality $100 would have needed to go into the business in March to pay off the purchase liability). ~~~ At the end of the day the company made a profit: $250 price - $100 cost = $150 profit HOWEVER, it had to go through the cash flow cycle of its working capital to get there, which in this example took 5 months end-to-end. ~~~ The "business lesson" here is to make sure you are collecting Receivables before you're making Payables, so that your sales are self-funding and you don't have to come out-of-pocket to pay bills. It's a long and intricate process, but if you understand it, you can help a company bridge the difference between its accrual-based books and tactical day-to-day cash management. ~~~ 👋 Hey, I'm Chris Reilly, thanks for reading. ➕ Follow me to learn Financial Modeling for the middle-market. 📥 Grab my Ultimate Guide here: https://bit

301

17 Comments

I get asked this a lot and I post this same example a lot... "Hey Jeff, what is a deal room and why should I use one for my raise?" Here's an example of a deal room for one of our funds https://lnkd.in/g8XQKVXR You use them so that the investors have all of the information they need online in one place so that they can make a decision quicker and easier than the old school ways like pamphlets, mailers, email attachments etc. They can even invest on the portal, E-sign documents, get updates, reports etc. all in one place. And if the sponsor does multiple deals on one platform, they can see them all under 1 login.

2

They paid me $10,000 to speak. I recently spoke to a group of 300 financial advisors🔥 Sure, the check is nice✅ But what fires me up is when advisors actually use my principles to generate more revenue💪 Personally, if the firm doesn’t see an increase of at least $100k in new revenue from their advisors within 6 months of this particular keynote, I offer to give my fee back (which to date, I’ve never had to do.) They just simply need to follow my proven plan. You might find this interesting…🤔 The ROI on speaking is a fascinating case study (based on 300 FA’s in the room and only 10% actually implementing my principles): 👉 Fairly believable average case: 30 advisors (10% of the attendees) x $25k (additional revenue) = $750,000 of new revenue 👉 Very worse case: 30 advisors (10% of the attendees) x $10k (additional revenue) = $300,000 of new revenue The very worse case produces a 30:1 ROI on my speaking fee. Relationships = Revenue💯 When your advisors learn how to connect with high net-worth prospects. And relate to those prospect’s problems. They will see their motivation and their revenue grow🙌 Because advisors deserve to have the tools they need to succeed. And know how to solve the problems of today’s high net-worth prospects💪

28

11 Comments

The seamy underbelly of 1031! Less Tax Deductible Depreciation!😱 👉 When doing a 1031 exchange, TAX BASIS in the replacement property is REDUCED by the amount of gain deferred through the 1031 exchange.   👉 The math formula that determines replacement property basis 🧮: Depreciable basis in the new property = Cost of new property - Gain not recognized due to 1031   👉 Ipso Facto: Depreciation tax deductions on a property acquired through 1031 exchange will be lower than those available through a similar acquisition effected w/o 1031. 👉 In almost all circumstances, the advantages and benefits of a 1031 exchange far outweigh any "lost" depreciation deductions. A strategically executed 1031 can actually INCREASE your tax deductions!😎 👉 Basis in the replacement property is allocated between land and improvements in proportion to their relative fair market values. 👉 The allocation of basis between land and improvements of the relinquished property does not impact the land-improvement allocation applicable to the replacement property. 👉 You can increase depreciation deductions by acquiring replacement property with a larger portion of the basis allocated to depreciable improvements. 🎉 #1031exchange #costsegregation #tax #sdira #cre #resurefinancial

16

1 Comment

What I am seeing with Seed rounds… - Seed rounds are getting done, but definitely with more concrete revenue milestones - Series A firms are looking for good deals and having heavy competition. Multiple have reached out looking for good companies that will be raising soon. - A “good” company is now far better than it was in previous years, meaning the goalposts have moved in relative terms. Everything is relative, and if the top 20% are getting funded with stellar metrics, then everyone else needs to have better metrics. - I don’t feel things are bad, given that fundraising environments well before COVID were very similar, with far fewer firms. This is mean reversion and too many people are anchored to a COVID/ZIRP reality that was transient by definition. - The pendulum on consumer startups is swinging back to positive with firms who said 6-12 months ago they were doing only B2B and are now doing consumer deals. What is largely true is that the brief bubble in funding exuberance is rationalizing and mean reverting. Nothing more and nothing less. Its not good or bad it is just the norm for now. I try hard to not qualify things as its important to just suspend reality with startups. You got to do what you got to do given current realities.

16

2 Comments

A $250M movie and a $250k movie have the same business fundamentals: - Audiences pay you to watch them. - If the audiences pay you more than it costs you to make and distribute the movie — you make a profit (sometimes you still lose but that’s a different conversation). Unfortunately, many filmmakers think of the $250k movie as a stepping stone to the $250M one. So they ignore the fundamentals. They focus on just making the movie rather than making a profitable one. They hope that their smaller budget movie will be seen by the powers that be and they’ll get their big break. Their career will be set and their name will be etched in the film history. When you do that, you’re giving up your power as a creator. You’re assuming that unless a studio finances your movie, you’re not going to be able to make a career out of filmmaking. That’s not true. Movies can be very profitable at every level. Often smaller movies are a much better investment than the bigger ones. What they usually lack, is a systematic approach that comes with the studio movies (more or less): - A good story, - Money to make it, - And a way to show it to people. Easier said than done. Join our community of filmmakers as we figure out together how to solve those problems. The link in the comment below.

6

2 Comments

These deals seem to get funded, but I just don't play in them. 5 different classes of stock with different terms depending on how much you invest. $10k class E restricted, no pref, last in line for distributions. $100k class D restricted, 4% pref, middle in line. $1 mil. class C non restricted, 6% pref, last in line for non restricted. $3 mil. class B non, 8% pref, middle $5 mil.+ class A non, 10% pref, top. Even worse is when there are multiple waterfall tiers based on ARR. GP-LP split is 20% up to 10% including any pref 30% up to 15% including pref 50/50 at 20% or more including pref These are typically the sponsors who will cut you a side deal if you come in with $10 mil. or more and then they don't disclose that deal with the other LP's. That drives me nuts! Thanks, but no thanks!

4

4 Comments

Assessing the Prospect for a Pullback In baseball, three strikes and you’re out. With inflation, a third straight month of hotter-than-expected consumer inflation data nearly ruled out probabilities for a June rate cut yesterday (now less than a 25% chance, according to fed funds futures). The core Consumer Price Index (CPI) rose 0.4% in March, or 3.8% when compared on a 12-month basis, topping respective estimates of 0.3% and 3.7%. Investors quickly dialed back rate-cut expectations on the news, pushing Treasury yields up by 0.15% to 0.20% and stocks down around 1%. Based on the breakout higher in Treasury yields, the message from the fixed income market yesterday appeared to be ‘not so fast’ regarding the timing of an interest rate cut, echoing the patient tone of the Federal Reserve (Fed). Based on the breakdown below the S&P 500’s uptrend, the message from the equity market yesterday served as a warning sign for a potentially deeper pullback. As highlighted in the chart below, the S&P 500 violated an uptrend/20-day moving average (dma) yesterday — a consistent spot for buyer demand on dips. When support no longer acts as it should, be on alert, especially if there are correlative signs of macro conditions potentially changing. The bottom panel features 10-year Treasury yields and their breakout above 4.35% yesterday, an important resistance level tracing back to the October 2022 highs. As highlighted, yields last broke out above this area in August 2023, and the subsequent advance in yields proved to be too much, too fast for equity markets to absorb. While we are not suggesting a correction is imminent or that stocks and bonds will follow the exact same path, the shift in risk appetite after yields topped 4.35% last summer provides another warning for a potential pullback in stocks. Follow this link to read the complete article and important disclosures: https://lnkd.in/gzpCMwPM Follow this link to learn about independent financial planning and investment management through Mountain-Bishop Private Wealth Management: https://mbpwm.com/ #privatewealthmanagement #MarketMomentum #RateCutExpectations #PullbackAssessment

6

Are you working with a financial advisor? Make sure they aren't conflicted. Fee-based advisors get compensated as a percentage of assets under management. The industry average is about 1%. Move more money to them? They make more money from you. Use your money for other things? Lost revenue. In many cases, incentives are aligned because you grow together over the long-term. BUT, as this The Wall Street Journal article points out, there are some potential conflicts. Some advisors are: -recommending early withdrawals from social security, because this boosts the assets they manage -recommending to clients not to pay off a mortgage early, because this boosts the assets they manage -avoiding buying annuities for clients, because this moves assets away from them These are some things to be mindful of if you are currently working with an advisor or plan to in the near future. As in any industry, there are great actors and bad actors! Link to full article in comments. #financialadvisor #retirement #investing #mortgage #socialsecurity

2

1 Comment

If the 1031 exchange were ever eliminated, And I wanted to avoid taxes on my real estate investments, Here’s what I would do: 1 - Adopt a “hold forever” model : Gain is only taxable when a property is sold at a value higher than it’s adjusted basis. If I never sell, I’d never have taxable gain. And if my heirs inherit my properties, they’d get a stepped up basis (gain would be eliminated). 2 - Cash out refinances : If I needed equity, or wanted to re-deploy capital, I’d use debt. Tapping equity via debt (like a cash out refi), does not create a taxable event. Tough to pull off with interest rates as high as they are today, but tax impact of liquidating is higher. 3 - Lazy man 1031 : Any year I buy a property, I can accelerate depreciation to create a large tax deduction. The resulting tax loss can offset gain on sale of any property I sell. Sell one property at a gain, buy another and create a tax loss. A 1031 without doing a 1031. IMO, if Congress ever wanted to truly eliminate the 1031 exchange, they would also have to make changes to: 1. Stepped up basis rules 2. Bonus / Accelerated depreciation rules For regular update, follow & share our page: https://lnkd.in/gMFZ_bTK Shri Hari 9 Universal Solution is a firm that specializes in bookkeeping, accounting & tax services. As a centrally located accounting and tax  firm in New Jersey, we work with a wide variety of business owners, CPA firms & individuals. Visit Website : www.shrihari9.com #accounting #AccountingJobs #accountants #assocham #applynow #bookkeeping #business #bookkeepers #cii #cpafirm #cpa #career #CareerGrowth #connections #cpa #ca #careeropportunities #cashflow #employee #employer #economy #ficci #Finance #FinancialReporting #financialservices #financialplanning #financejobs #growthmindset #healthcare #hiring #hr #innovation #IRS #jobs #JoinUs #networking #partnership #QuickBooks #recruiter #smallbusiness #tax #taxplanning #taxation #TaxCompliance #technology #uscpa #USA  #w2 #WalkinDrive #workfromhome #workfromoffice 

6

If an investor is only interested because you're offering them a discount valuation, then they're not really interested. Valuation is important. But an investor should be interested because they can build conviction around what you're building in the market you're building in and the team that's building; not because you've offered them a discount.

14

4 Comments