Legal/technology services firm partner Robert J. Scott said today, “There are two types of companies: those that have been audited [for software violations] and those that will be.” Scott sees the trend. In the last year, the Business Software Alliance, the main copyright enforcement watchdog for Microsoft Corp, Adobe systems and Symantec, reaped $13 million in software violation settlements, almost 90% of which came from small businesses.   

Here are five things a small business owner can do to reduce the risk of being hit with a software violation claim:

Now is a popular time for small business entrepreneurs to cast vision and set objectives into the new year.  For a long time, managers have been using the goal setting formula known as SMART (Smart, Measureable, Achievable, Realistic, Timely) to set their annual goals. Ray Silverstein is a sales columnist for Entrepreneur.com.  In his article, A Guide to Goal Setting, Silverstein explains what SMART goal setting is and how it works.  

Also this month, blogger Mark Horstman has posted a 3-part podcast entitled How to Set Annual Goals.  Horstman hosts the blog, Manager Tools. In an innovative and fresh look at SMART goal setting, Horstman claims that the seasoned formula is “intellectually flawed” and generally not applied properly in the workplace. Mark Horstman suggests an alternate method, which he predictably calls MT goal setting. 

For small business entrepreneurs, the important thing about annual vision casting and annual goal setting is to do it. It is valuable time spent if the business’ vision and goals are used as “filters” for the choices that are made throughout the new year. 

Whatever method used, having a clear vision of the purpose of the company is essential for both setting meaningful goals and maintaining the momentum of success throughout the year. When Starbucks Chairman Howard Schultz recently reassumed the CEO position of Starbucks, a “back to basics” statement was released by the new Chairman Craig Weatherup. He said that Schultz’ purpose was “ . . .  to relentlessly focus the entire organization on the customer.” Meeting the needs of the customer is the fundamental purpose of every business.

As restated by Starbucks’ management, the fundamental purpose of a business is a good beginning point for vision casting and goal setting. Asking how the business’ product or service meets the need of the customer brings focus to the process. 

Have a very successful business year in 2008 – just as you planned.

Courage is contagious.  When a brave man takes a stand, the spines of others are often stiffened.

It is not necessary for a business to grow bigger; but it is necessary that it constantly grow better.

Headlines in the The Wall Street Journal  describe the shriveling of US and global economies almost every day. Heralding persistent economic decline could discourage small business owners.               

The November 2007 survey of Discovery Small Business Watch  concluded that  “Economic confidence among small business owners declined for the fourth straight month in November, as increased pessimism over the U.S. economy dragged down indicators of relative stability.”   

However, the Discovery survey also said that small business owners were experiencing less cash flow issues over the last three months. When I remember that Peter Drucker considered cash flow more important than profit, better small business cash flow is a huge encouragement.   

So why does the Discovery Small Business Watch survey show a decline in entrepreneurial confidence when small business owners are improving their cash flow situation?

Small business owner Tim Wilburne, of Virginia-based TW Controls debunks Discovery’s survey, saying: “So they found 1000 small businesses with 5 or fewer employees that had time to take a survey? Some weeks I can hardly find the time to even talk to people I know, much less take a survey. It sounds to me like these businesses aren’t putting forth the effort to be successful.” Tim noticed no data about small business owners who refused to spend their time taking the survey.

I like Tim’s attitude. I bet Peter Drucker would too. Professor Drucker explained that “the entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”     

Even in the face of the “doom and gloom” reports and surveys, small business owners show themselves to be entrepreneurs when they respond to change and exploit it as an opportunity. 

What opportunities can you exploit from the economic changes that are happening in your markets? 

As I was driving to meet a friend for dinner last Thursday, I heard on the radio that Congress had passed the Mortgage Cancellation Relief Act.  Sure, it is probably odd to get excited about something like that after hours.  But it caught my attention because it is one of those events that will actually change an oppressive policy.  

The tax law currently requires homeowners to pay income tax on amounts forgiven by their mortgage lender or when their home sells in foreclosure for less than their debt.  Being taxed on the amount a person is unable to pay truly adds insult to injury. This tax policy has been in the cross-hairs of criticism for some time. I read that the National Board of Realtors®  has been lobbying for a change in the law since the early 1990’s. With the current national mortgage crisis and many stagnant real estate markets, more homeowners would likely be affected by this unfair tax now than ever.

If passed by the Senate and signed by the President as expected, the new law will exclude from gross income of individual taxpayers discharges of indebtedness attributable to certain forgiven residential mortgage obligations. In short, it will repeal the “phantom income tax” for homeowners on their primary residences.

Congress clearly wants to respond to how the mortgage industry meltdown is affecting the public. This is a very practical way to ease one way government has been overbearing. When this law becomes effective, at least the tax law will no longer hit homeowners when they are already down. 

Many people are nearing the 3, 5 or 7 year mark of an interest only mortgage. They are finding it is difficult or impossible to sell their home at this time for enough money to cover selling costs and the mortgages of the home. I hear about more people considering a “short sale.” A “short sale” is when the home is sold for less than the total of the mortgages on the home because the lender(s) agree to take less than the total that is owed them. 

Be careful. There are consequences to doing a “short sale.” While a person can avoid having a foreclosure, a “short sale” can be reported as an unsatisfied debt, which is not a good thing. The values of the neighborhood could be affected by a lower purchase price by the buyers in a “short sale.” Your real estate professional will probably be “squeezed” to give up some of his or her commission to make the deal work –risking giving you less attention than other transactions. The amount of your debt that is forgiven by your lender could be treated as ordinary income to you – meaning that you could be taxed on money that you do not actually receive. 

A seasoned real estate professional or experienced real estate attorney should be able to discuss some options for you, including (1) just selling the property with aggressive marketing; (2) doing a sale at full price, but having the buyer take the property “subject to” the existing loan (probably at a lower interest rate than could be obtained otherwise); (3) doing a sale with an Note secured by an All Inclusive Deed of Trust (sometimes referred to as an AITD or a “wraparound” loan); or (4) doing a lease option instead of a purchase transaction.

There are risks and benefits to each of these options. You should consult an attorney to explain each to you before structuring a transaction in any of these ways.

As usual, there are usually alternative ways to tackle most obstacles in life.   Doing a “short sale” is only one of the ways to deal with an approaching balloon payment or change in monthly loan payment. 

Read, every day, something no one else is reading. Think, every day, something no one else is thinking. Do, every day, something no one else would be silly enough to do. It is bad for the mind to continually be part of unanimity.  - Christopher Morley

Hi.  I’m Ralph Martinez of the Martinez Law Group.  I want this space to be a place where I and other members of the firm share information and ideas that made us think of you, the entrepreneur.  We want you to have the ideas we have found to be practical, innovative, insightful, inspiring or just intriguing.  We´ll be sharing our favorite books, articles that have caught our attention, links to other resources, and general musings on life and business.

We are going to do our best to break out of the ¨legalese¨ and informally post our thoughts on what we see happening in the world, including what affects your world.

Please let us know your thoughts on how to make this blog more meaningful to you.  Where we think your comments may be helpful to others, we may post them.

The Essential Drucker: The Best of Sixty Years of Peter Drucker’s Essential Writings on Management, by Peter F. Drucker

Why Great Men Fall, by Wayde Goodall

Good to Great, Why Some Companies Make the Leap . . . and Others Don´t,  by Jim Collins.

Younger Next Year, a Guide to Living Like 50 Until You´re 80 and Beyond, by Chris Crowley and Henry S. Lodge

Blink, The Power of Thinking Without Thinking, by Malcolm Gladwell

The Lincoln Lawyer, A Novel, by Michael Connelly