Stop Paying the Dumb Tax

I was having lunch with a friend who was a past President of Pulte Homes, and we were discussing a subdivision I was developing. Being a serial entrepreneur and because this was my first time as a developer, I wanted his opinion on a simple but fundamental issue. Should I pre-sell the lots before the horizontal infrastructure (roads, sewer, utilities, entry way) was in place or should I wait until it’s ready for houses? My reason for meeting was that I knew what I didn’t know; I had never done this before. I was diversifying my portfolio and getting into residential real estate development. I had my business plan, my land, my financing and I was sitting across the table from a veteran developer and builder with my pen, pad and mind all open.

During our conversation we began talking about all the various taxes that developers face, property taxes, back taxes and he mentioned a tax I had never heard of before – the Dumb Tax. We had a good laugh sharing stories with each other about the things we had done in the past where we learned the most expensive lessons because we didn’t know any better at the time.

There are three very interesting things about the Dumb Tax. The first is that you don’t always have to pay for it yourself. Finding someone who’s already paid the Dumb Tax can alleviate you from also having to pay that price. The second is that the bigger your business the larger the Dumb Tax can become. Last but not least is that nobody ever sees the Dumb Tax coming because it’s hidden from our view like the blind spot when we drive. It’s a tax you pay on things that you didn’t know that you didn’t know.

I usually get an email or a call from an entrepreneur when they realize they need a thought partner to navigate important business issues that they have never experienced before. In some form or fashion these entrepreneurs are struggling with growing through the seven phases of the business life cycle. Each of us are either transitioning through a phase right now or we will be. It’s not a matter of if, it’s a matter of when.

There seven stages in the business life cycle are:

  1. Ideation
  2. Formation
  3. Capitalization
  4. Foundation
  5. Growth
  6. Expansion
  7. Exit

Every stage requires planning and execution. You develop a plan and you execute the plan. It is impossible to skip a stage, you may try – but I promise you will be back. At every stage there are opportunities and challenges. An entrepreneur’s success depends on their ability to navigate the company through each phase and avoid the blind spots along the way.

My mentors have helped me navigate rather than navi-guess my way through all seven areas of the business life cycle from Ideation to Exit. Entrepreneurs are doers who plan their work and work their plan.

We believe that sharing stories and experience with each other, finding a mentor or coach who has been there done that will help make better decisions. Better decisions means fewer mistakes, less waste and better results – fewer dumb tax payments!

In today’s world of massive information, we don’t lack information – we lack situational experience on what, when and how to apply that knowledge in the specific situations we face. I’m sure you’ve got a few stories of your own to share about paying the dumb tax. I’d love to exchange them with you that way we both get smarter.