Private Success, Public Failure: PA Tech Boom is Juicy Prey for Harrisburg Predators

By: Clark Stephenson

If you’re going to be a business owner, or be involved in the creation of one, the importance of knowing your market cannot be understated; but that involves a lot more than just your own customer base.  Your market is being shifted and shaped 24 hours a day by your local economy, your competition, your suppliers, their competition, etc. and certainly by your local lawmakers.  And if you’re in tech, that’s all happening aboard a bullet train that’s about to be upgraded to a Hyperloop.  If you’re going to be a vigilant citizen, much less a successful business owner in this uncertain economy, it is paramount that you stay up to date on how your industry is being regulated, and how it affects everything you do.  For the current tech boom in PA, Harrisburg is looking for new ways to lower the boom.

Earlier this year, Governor Wolf proposed a new “tech tax” as part of his 2017-2018 budget that would have imposed severe sales and use taxes across a wide array of computer service providers, and by severe, I mean the worst in the country:

states imposing computer taxes

The measure would constitute a 330 million dollar kick to the stomach of the technology industry in PA, and would hurt smaller independent contractors & startups the worst; all to help cover up for budget craters in Harrisburg, because companies who are good at their jobs are always punished by bureaucrats who aren’t.  However, thanks to stern opposition by the Pittsburgh Technology Council, their counterparts in Philadelphia, PA House Speaker Mike Turzai, and at least 1500 companies across the state just to name a few, the proposal was thankfully scrapped, and indeed not part of the budget the PA Senate approved at the end of July, according to Governor Wolf, who said it’s “not an issue anymore.”

So that’s good news, for now, but that’s not the only prey Harrisburg is on the hunt for.  As if the tech tax wasn’t bad enough, some lawmakers are pushing for a re-work of the “Amazon tax”, just in time for Pittsburgh to submit its proposal for the online retail giant to build its second headquarters here, because there’s nothing like kicking a gift horse in the mouth, especially when you’re regarded as the top contender for said gift.  And despite receiving the same fervent opposition as the tech tax, the measure is “still on the table” according to the Tribune article.  Let’s hope it doesn’t spoil our chances of landing Amazon’s new playground.

Whether you’re a small, independent computer services provider, or a giant in the industry, the forces shaping your market that emanate from your State Capitol are something you can’t afford to ignore, especially if you’re just starting up.  Stay informed, get involved with local organizations & councils, and contact your local representatives to voice your support or opposition whenever possible.  At the very least, you’ll be more prepared to deal with the aftermath of a new law if you’ve done the math ahead of time, and at the very best, you’ll help to keep the State predators at bay.

Keep It Simple, Simon Says

By: Clark Stephenson

It is no secret that everybody, and their grandmother thrice removed, has a “startup” these days, many in tech but other industries as well. They’re more common than casual Fridays. But with only a 10% success rate, 1) How can you avoid becoming another “fail fast” statistic, and 2) Why even bother?

Let’s get the latter out of the way first. We bother because we’re driven to do great things – the odds of failure be damned. We bother because a fire burns inside us that pushes us over the obstacles; because we see opportunities missed by the current market, and we want our products filling that cavity. This is the way of the successful entrepreneur – the renegade, daring, no-guts-no-glory way.

That said, be sure to not let your passion for ultimate glory cloud your vision, or you will indeed fail fast. You might have your head in the clouds imagining swank offices and feature stories in Fortune & Time after you turn the industry on its head, but focus on fundamentals first. You’d be surprised how many startups don’t. That article cited a report released in 2014 (and added to since) by CB Insights, a tech market analytics firm, that revealed a staggering 42% of failed startups profiled cited a lack of market demand for their products. That is an astonishing figure. And it’s likely higher than that when you consider that “running out of cash” was the 2nd-most reason cited, at 29%, because as Steve Hogan from Tech-Rx is quoted in the Fortune article:

“Running out of cash does not cause a startup’s failure, Hogan says—it’s merely a symptom of another issue. Excluding instances of “stupid spending” or the inability to raise capital in the first place, startups tend to run out of cash when a CEO has overlooked all other indicators of failure. “Unfortunately, sometimes it’s the only ‘symptom’ that the leadership sees,” he says.”

Unless you’ve successfully ran a business before, you’ll want to learn the physical operations of one before you create one. Take an intro to business class at your local community college, and then take others in accounting, finance, operations, marketing, and other areas, or seek out one of the many free resources available online. You’ll be able to apply your classwork to your own startup operations, and vice versa.

Focus on the fundamentals first, like making a product people want to buy. You’d think that would be chapter 1, page 1, of Business 101, but sadly it often gets lost in delusions of tech-grandeur. In the Fortune article, Erin Griffith rightly points out:

“That should be self-evident. If no one wants your product, your company isn’t going to succeed. But many startups build things people don’t want with the irrational hope that they’ll convince them otherwise. 

The most prominent modern example of this phenomenon is the mobile phone. People dismissed it as a novelty in its early days. Obviously, cell phones are no longer a novelty. The late Apple co-founder Steve Jobs famously said, “A lot of times, people don’t know what they want until you show it to them.” The problem is that entrepreneurs have taken that to heart. For every $19 billion company like Uber, the private transportation service, there are countless frivolous products that never catch on.”

So, keep it simple, and learn from those who didn’t. Find the hole in the market that consumers want filled, and learn how to manage basic debits & credits; and instead of joining the strange cult that has become the failure post-mortem pity party, they’ll be taking their cues from you.