techsoldaten's Journal: Correlatives and Holding Companies

So, getting to know what holding companies are. There is a big Wikipedia entry about them, but I am giving up on Wikipedia in favor of rumor and innuendo. Going to go on the definition my friend Mickey gave me, which is corporations formed for the express purpose of building prisons, zookeeping and technical instruction on the art of grappling. Having access to lions, convicts and Hulk Hogan types may be useful...

The past few weeks have had me jumpy, I don't like the idea of doing work without a realistic expectation of payment. The only answer to this ASP idea is to continue collecting information about the real potential and make a decision based on the best facts available. It's a risk to do it, it's a risk not to do it, and the best thing I can do it look at it right now and resist letting other people push me into a questionable decision.

I called everyone I know who has successfully run a business last week and asked for advice. Some of them didn't understand what I was talking about and didn't want to talk. Some of them were tied up with other things and just weren't going to have time. Some of them were interested in helping me over the hump and we lined up meetings. Spent time with some people today, meeting with a couple more tomorrow, then going a non-linear route over the weekendand talking with the family.

The first thing was to talk about market research. Spoke with a PR guy who has a background in marketing technology. It is never a good idea to jump into a new vertical market without knowning a thing or two about what you plan to do when you land. Fortunately, the research bug hit over the weekend and I was able to put together a lot of information about our 'target market'. I had been collecting bits and pieces over the last 6 months and was able to put together some fairly articulate comments about what I was planning to do. The person I spoke with told me I had an over optimistic view of events and more than likely this was a bad idea to begin with. He explained a little bit about identifying markets, how NAICS codes don't really mean anything, and how getting 10,000 people to adopt a new piece of technology was going to require an investment of resources. Offered to put me in touch with some contacts who have done some of this themselves. Also offered me a couple reports on effectiveness of online advertising rate adjusted for blog traffic based on some kind of correlative something something, allegedly this disproved the idea you can just put something out there on Google and break even. Probability says you can't in 99.99% of cases no matter what keywords you choose.

It is good to get knocked down sometimes, lets you know where you need to fortify. I was expecting to be asked questions above my pay grade and walk away feeling low, but knew I was better off for scrutinizing it all. It was a bit humbling seeing how the pros do it. Reminder to myself: never underestimate the power of the DOC's Web sites, they are awesome tools.

The second meeting was more interesting, we talked about founding a holding company to control risk within my primary organization. That way, if the ASP idea does go belly up, the holding company can absorb the losses without causing my main consulting company to run into challenges. This made a lot of sense but sounded complicated. The Houlden Caufield part of me kicked in and wondered what good was it anyways if I had to take money from one to fund the other (something has to give), and may have sent the wrong signals. Made a good point that building products is not the same as delivering services and most products brought to market leave the stage shortly.

So, all jokes about the name aside, a holding company is kind of like an umbrella shielding numerous businesses from the storms raging outside. I was planning on reorganizing my company as an s-corp but now may create second company to hold ASP stuff and holding company to rule them all.

M