I have been an investor in Chesapeake Energy (CHK) for a number of years.  Aubrey McClendon is the ultimate wildcat gambler. He gambles with his finances and with the company itself. However, the SEC may finally be saying “guys, come on.”.  The shenanigans might just come to an end. This is the second major issue in the past few years with Aubrey.  Could get interesting, but I doubt it.  That is a well connected company with enough money and influence to cover things with a fine.  Aubrey might just be asked to ride off into the sunset this time.

Many wonder why McClendon has been allowed to slide for so long.  Here is a factoid that might allow you to put the pieces together:

• Katie Upton, Aubrey’s wife, is a (first?) cousin of US Congressman Fred Upton. Coincidentally, he is the chair of the House Energy and Commerce Committee.

Ahh, the connected.  Makes you very sick if you dig too deep.  Put your head down, work hard, and live your life.

NEW YORK (Reuters) – The Securities and Exchange Commission has opened an informal inquiry into Chesapeake Energy Corp’s controversial program that granted Chief Executive Aubrey McClendon a share in each of the natural gas producer’s wells, a source familiar with the matter said on Thursday.

Reuters: Top News

Recently, CNBC did a story on the “Most Promising Franchise Opportunities.” available. Here are the rankings:

1. Senior Care
2. Employment Services
3. Restoration Services
4. Business Coaching
5. Frozen Yogurt
6. Education Services
7. Fitness
8. Hair Salons
9. Maid & Personal Services
10. Fast Food
11. Pet Services

There are many opportunities within these industry segments. Some opportunities, however, are clearly better than others. With over 3,000 franchise opportunities available, I have developed a short list of favorites based on CNBC’s article. For my money, these are some of the best franchise opportunities available…base on a number of factors.

“My Favorite” Senior Care Franchise:

Franchise 500 member
Reasonable investment
Master franchise possibilities
Good margins and financials
Support and training
Industry growth is impressive
Semi-passive (if desired)

“My Favorite” Employment Services Franchise:

Franchise 500 member
Reasonable investment
Good margins and financials
Support and training
Growing industry

“My Favorite” Restoration Services Franchise:

Top 50 franchise satisfaction award
Reasonable investment
Good margins and financials
Franchise 500 member

“My Favorite” Frozen Yogurt Franchise:

Efficient business model
Master franchise possibilities
Good margins and financials
Great franchisor management team
Semi-passive (if desired)

“My Favorite” Pet Franchise:

Dog industry is growing
Good business model
Strong company history
Franchise 500 member
Strong and supportive franchisor

“My Favorite” Business Services Franchise:

Great business model
Mature industry with lots of customers
Master franchise possibilities
Low investment
Diverse products and services under 1 roof
Semi-passive (if desired)

Owning a franchise is about being in business for yourself, not by yourself. If this is the dream you are chasing, seriously consider what I believe to be some of the best franchise opportunities available. Remember that franchises offer protected territory. Your territory might be available today and gone tomorrow.

Go from having little control over your life to the kind of control that can really make a difference. What are you waiting for?

Scott Hill writes regularly for BobandScott.com. He is a franchise consultant and small business adviser. His franchise consultation is a free, no obligation service designed to help you  find out if franchising is right for you. He can be reached at 615.669.0688. The website is http://www.williamandhill.com

Recently, I heard there is an Illinois business law that says you cannot have similar businesses within 4,000 feet of one another.

As with anything, there are always 2 sides this issue. One one hand, I see how the state of Illinois wants to provide business owners with some level of competitive protection. If a business owner can get a business license in the state of Illinois for, say a check cashing business, then no one within a mile can have a competing business. As a businessman, that sounds like a sweet deal. The business value must be great if the business owner wants to sell right? If no one else can get a business there, the value goes up. Location, Location, Location!

On the other hand, don’t we live in a capitalist society where free enterprise carries the day? How can customers in a one mile radius expect good service if the business has a monopoly? What incentive does the business owner have to provide good service and competitive prices if there is no other business holding them accountable?

While I’m not sure of the exact specifics of this law (for example, there must be an exception for food businesses), I know franchisors are frustrated with the state of Illinois law.

In talking to several franchisors, they won’t get registered in the state because it’s so hard to get a business license for a franchisee.

If anyone knows more information about this law, I’d love to hear about it.

Sergey Brin and Larry Page have found a way to retain voting control at a $200+ billion company while keeping the shareholders happy.  Funny how huge profits will do that for a leader.

Brin and Page have certainly earned the right to continue to lead this company. Not much good can come from a multi-layered organization where every layer has input into decisions of the company.  The organization where there is clear leadership, who will listen to feedback, and make their own decisions is generally going to operate best.

Obviously the leader cannot be just anyone. There is a special type.  Look at Bill Gates and then follow that up with Steve Ballmer.  Gates was the clear leader with a vision and an grip on the company.  The company flourished. Ballmer has had a bit of struggle in comparison.  Perhaps it is not a fair comparison.  It could be said that Gates rode off into the sunset due to the fact that his company was far behind in the future growth areas.  However, you cannot argue with the track record of Bill Gates. He dominated like Michael Jordan.

Steve Jobs and Mark Zuckerberg are also examples of the strong leader who retains that grip on the company.  It is amazing what Steve Jobs was able to do with Apple and Pixar.  Zuckerberg deserves a lot of credit, but the company is still very young.  He was brilliant enough to retain voting rights to shares that the company sold to investors such as Digital Sky Technologies (Yuri Millner).  He controls the voting rights to those shares.   By doing so, Mark has the final say and probably the initial say regarding product, design, and direction. In fact, many say that the Instagram deal was purely Mark Zuckerberg’s doing.  24 hours after receiving funding at a $500m valuation, Zuckerberg agreed to pay $1b.  Investors must have been celebrating that night. Mark probably owed someone a favor.  Done!

Larry and Sergey continue to innovate and bring new products to market.  Google could be an entirely different company in 10 years.  Search, as we know it, might not exist and the projects that Sergey is working on might just be the future of Google.  Google’s self driving car, Google Green/Energy, Google Glass (glasses). Time will tell.

SAN FRANCISCO (Reuters) – Google Inc announced a stock split designed to preserve the control of co-founders Larry Page and Sergey Brin over the world’s No. 1 Web search engine, asking investors to trust their long-term vision.

Reuters: Top News

WASHINGTON — Bank of America is suing itself for foreclosure.

“It’s crazy,” housing data analyst Michael Olenick told HuffPost. “They shouldn’t be suing themselves.”

via Bank Of America Sues Itself In Unusual Foreclosure Case.

LONDON (Reuters) – Sky News, part of Rupert Murdoch’s media empire, said on Thursday it had hacked into emails on two occasions but insisted it had acted in the public interest, as the channel’s parent company faces an investigation by British regulators.

Reuters: Top News

Groupon Shares Plummet 17%

Yesterday, Groupon Shares Plummeted 17% after the coupon company delivered an earnings restatement. According to the company, they did not set aside enough money for customer returns. Since it’s gone public, the company has also been forced twice, by the SEC to address accounting concerns and it’s stock is off 52 week high of $31.44.

I don’t make a practice in life of say, “I told you so” but this time I believe it’s appropriate. While I have not been publicly telling the world my thoughts on Groupon, I certainly have witnesses to how I feel about this company.

While the business is generating massive revenue, I hate the business model. I absolutely hate this business model. First of all, they got their start by offering great deals to the consumer at the expense of the business. When you create a business model where it’s a win-win-lose for the three participants and the “product” is the loser, you are eventually going to have problems.

Loser Business Model
Why is the business or “product” the loser? Back when they started, the business owners they worked with had to offer a impressive deal (50-70% off) so they would get customers like you and me to buy the Groupon. Sounds great right? For us and Groupon, the deals are magical. For the business owner, the deals are pathetic. Here’s why: First, the business owner gets coupon customers. This type of customer is the wrong customer for business owners. If the business creates a coupon based business, no one will ever pay full price for anything. Think of your favorite restaurants or think of the best restaurants in town. When’s the last time these restaurants gave out coupons? Secondly, Groupon not only had the business give to 50-70% off, Groupon took half of the Groupon dollars generated. So if Groupon offered a 50% off $30 worth of merchandise at a store, the Groupon was priced at $15. Groupon took $7.50 so the business owner generated $7.50 for every $30 worth of merchandise. Please tell me businesses you know who can survive on taking in $7.50 for every $30 out the door? Third, Groupon probably doesn’t get many repeat customers. How can they? No business can survive consistently losing that kind of money. Don’t believe me? Comb the internet. There are lots of stories about business owners who sold thousands of dollars worth of Groupons in 24 hours only to realize how much money they were about to lose. Fourth, if you bought a Groupon, and didn’t use it, Groupon kept the money generated further adding to their “profits.” Lastly or fifth (how many reasons do we need?!), Groupon did all this a midst the worlds 2nd worst economic downturn of the last 100 years. Taking advantage of desperate business owners is not likely to happen very much longer as we come out of this bad economy. The result is, Groupon will have to give average deals which will keep you and me from buying as many and businesses, enjoying a better economic environment will not use Groupon as much. In other words, unless you need a massage or lasik surgery, Groupon is in trouble.

Frankly, I don’t know what the splits are between the business owners and Groupon these days. I’ve completely sworn off the company. I don’t care what the deal is, I’m not using Groupon. My guess is they have all sorts of games they play. Some customers probably get better deals than others. The more desparate the business owner for traffic, the more Groupon probably takes. I’d love to know how many Groupon customers repeat and also how many Groupon customers over the years have gone out of business. It’s probably allot.

I’m sure there are a lot of good people at Groupon. But it’s a bad business model when Groupon, as a company makes money by taking advantage of the customer. This is an “I told you so” moment for me because I’ve been, for a long time, talking about how they take advantage of their customer. I also think it’s a bad stock to own. Stay away and invest in a company where everyone wins. There are lots of companies like that.

So what attributes make up the perfect small business?

Some of us have a money tree we can draw from to create the “perfect small business.” Most of us, however, do not. We have to be wise with our money because we can quickly run out of it. Here are what I believe to be some very important attributes to the perfect small business:

1. Low or No accounts receivable – I like money in hand immediately.
2. Favorable competition environment – no competition is a yellow flag. A saturated market is no good either.
3. Residual or recurring income – Ask a successful insurance agent how nice recurring or ongoing business is.
4. Low start up costs – If we can get into a business for a low start up cost, we’ve got a shot…right?
5. Potential for passive income – Working hard is ok if at some point, we can step back and the business won’t die.
6. Flexibility – I want a life. I don’t want to be married to the job. I prefer normal business hours with free weekends.
7. Not seasonally or economy dependent – The business should do well regardless of the season or economic environment.
8. Manageable to Low inventory – tying up money in inventory is no fun.
9. Low Overhead – high fixed overhead costs will keep you up at night…trust me.
10. Reasonable labor issues – Ideally, the fewer employees the better. Fewer headaches. But, to create leverage where other people do the work, you’ll have to have some employees.
11. Market Potential – The business has to have a market for your products and/or services. Income potential has to be good.

There you have it. I realize there are plenty of very good small businesses that have high overhead, are seasonal, or have many employees. However,  if you can create a business with as many of these characteristics in mind as possible, you’ll be well on your way to having the perfect business. Good luck.

Frontline ran an episode on the Murdoch scandal last night.  If you didn’t catch it, click on the image to head over the the Frontline web site. Full episode online.

LONDON (Reuters) – An angry Rupert Murdoch on Thursday declared war against “enemies” who have accused his pay-TV operation of sabotaging its rivals, denouncing them as “toffs and right wingers” stuck in the last century.

Reuters: Top News

If you are a web site operator, you probably monitor your traffic on a daily basis.  Most web site operators tend to use Google Analytics due to the level of detail that is provided about a web site along with the fact that it is free and easy.

If you have experienced some wild traffic fluctuations over the past year (from February 24, 2011 – today) and are wondering what the cause could be, compare your statistics to the Google Panda updates timeline below.  I know that many site operators just exist and move forward with their business. There are hardcore SEO’s who worry about the search engine updates such as Panda and employing one to assist with your web strategy is often a must.

Barry Schwarz at www.seoroundtable.com does a terrific job keeping up with the changes and confirms his information as best he can. Confirmations from the search engines are a bit rare given their tight lipped nature with regard to their algorithm changes.

Past Panda Updates:

• Panda 3.4 on March 23rd, 2012
• Panda 3.3 on about February 26th, 2012
• Panda 3.2 on about January 15th, 2012
• Panda 3.1 on November 18th, 2011
• Panda 2.5.3 on October 19/20th, 2011
• Panda 2.5.2 on October 13th, 2011
• Panda 2.5.1 on October 9th, 2011
• Panda 2.5 on September 28th, 2011
• Panda 2.4 in August, 2011
• Panda 2.3 on around July 22nd, 2011
• Panda 2.2 on June 18th, 2011 or so.
• Panda 2.1 on May 9th or so.
• Panda 2.0 on April 11th or so.
• Panda 1.0 on February 24th

In my opinion, if you have a site that provides quality, unique content, you will eventually bubble up toward the top.  Keep growing your site with quality content and engage your community.  Put the blinders on and work.

If you build it, properly, they will come.