Let's face it. With the market dropping hundreds of points daily right now you not only need ways to protect your money -- but a big way to bounce back..Don't fall for it. If you need the safety and liquidity of a money market, go for a money market account. Beware of any "cash" account that offers significantly higher yields. It's either charging rock-bottom fees or taking on extra risk that leaves your account open to failure.Here's how dividends can make you a fortune.
Let's rewind to 1950, put $1,000 in your hand and let you choose between two solid stocks to invest in for the next five decades. Your option is to invest in Standard Oil of New Jersey (now Exxon) or International Business Machines, better known today as IBM.
Over the next 53 years Standard Oil earned a compound average of 14.42% while IBM garnered just 13.83% -- a difference of just 0.59 percentage points. I'll give you some added info. Oil stocks went from 20% to 5% of the overall market value between 1950 and 2000, while technology stocks soared from 3% to nearly 18%.In spite of the soaring market value of tech stocks and the seemingly paltry difference between earnings -- Standard Oil was not only the better investment you actually come out an astounding $300,000 ahead!
How can this happen? By reinvesting your dividends. You see, in the scenario above, IBM's share price actually grew more than three percentage points a year over Standard Oil's, but because Standard Oil had a higher annual dividend return -- 5.19% vs. 2.18% -- you end up with $300,000 more in cold, hard cash
Tuesday, December 30, 2008
Thursday, April 3, 2008
Personal affairs through a Trust
Reason number 1 ? protect your assets from creditors.
When you run your affairs in your own name you expose all your assets to the mercy of creditors. So if you ever get into financial trouble you could end up losing everything but the shirt off your back! One of the main benefits of a trust is that you are able to separate yourself from your assets, thus providing protection of those assets from creditors in the event of you ever being sued. With the correct estate planning you are even able to protect your business assets from creditors as well.
Reason 2 - You don`t pay executor`s fees with a trust.
Your estate and ultimately your family will pay 3.5% plus VAT or 3.99% of the gross value of your estate away in executor`s fees. But if you manage your estate through a trust, NO executor`s fees are payable. It doesn`t seem like much but listen to this example to get an idea of what 3.99% of the gross value of your estate could amount to.
Work out your own current scenario by taking the value of your gross estate today and multiplying it by 4 and then multiplying that amount by 3.99%. This will work out the kind of saving you would benefit from if your assets were owned by a trust and you died in 12 years time.
The third reason is the state won`t freeze your assets.
When a person dies their estate is immediately frozen and it takes on average two years to wind up an estate. This means that your family has very little access to your assets on your death, potentially causing huge problems for your loved ones. But in a trust, the assets are not frozen, so your family will be able to access your estate immediately.
Reason number 4: you get absolute security in the event of a disability.
If you were in a coma and could not continue to manage your own affairs a curator would need to be appointed by the high court. This would cost thousands of rands even the curatorship is not contested. In a trust all that would happen is that you would be relapsed as a trustee and your affairs would carry on as normal. So your family and business will always remain financially secure, even in difficult or unfortunate times.
Reason 5: You could save 20% in donations tax
You will pay donations tax at a rate of 20% on any donation in excess of R100,000 per annum or R200,000 in the case of married couples. However, with a trust, no donations tax is payable on any capital or income passed to a beneficiary of the trust.
So for example: Let`s assume that you wanted to give R500,000 to one of your children. In your private capacity you would pay R60,000 in donations tax while through a trust you would not have to pay any donations tax.
The 6th Reason is you won`t pay any estate duty with a trust
One of the main disadvantages of running your personal affairs in your own name is that estate duty is paid on the future growth of your assets. But with a trust, no estate duty is payable.
So for example: You pay estate duty at a rate of 20% on net assets in excess of R3 500,000. So if your net estate was worth R5,500,000 and you died leaving your entire estate to your children they would pay an estate duty fee of R400,000. If these assets were in a trust NO estate duty is payable.
And lastly -
You are able to regulate your ex spouse`s maintenance with a trust
A main disadvantage in case of a divorce is the fact that if maintenance is paid for a child to an ex-spouse, the ex-spouse would have a capital claim against your estate for all future maintenance at the time of your death.
When you run your affairs in your own name you expose all your assets to the mercy of creditors. So if you ever get into financial trouble you could end up losing everything but the shirt off your back! One of the main benefits of a trust is that you are able to separate yourself from your assets, thus providing protection of those assets from creditors in the event of you ever being sued. With the correct estate planning you are even able to protect your business assets from creditors as well.
Reason 2 - You don`t pay executor`s fees with a trust.
Your estate and ultimately your family will pay 3.5% plus VAT or 3.99% of the gross value of your estate away in executor`s fees. But if you manage your estate through a trust, NO executor`s fees are payable. It doesn`t seem like much but listen to this example to get an idea of what 3.99% of the gross value of your estate could amount to.
Work out your own current scenario by taking the value of your gross estate today and multiplying it by 4 and then multiplying that amount by 3.99%. This will work out the kind of saving you would benefit from if your assets were owned by a trust and you died in 12 years time.
The third reason is the state won`t freeze your assets.
When a person dies their estate is immediately frozen and it takes on average two years to wind up an estate. This means that your family has very little access to your assets on your death, potentially causing huge problems for your loved ones. But in a trust, the assets are not frozen, so your family will be able to access your estate immediately.
Reason number 4: you get absolute security in the event of a disability.
If you were in a coma and could not continue to manage your own affairs a curator would need to be appointed by the high court. This would cost thousands of rands even the curatorship is not contested. In a trust all that would happen is that you would be relapsed as a trustee and your affairs would carry on as normal. So your family and business will always remain financially secure, even in difficult or unfortunate times.
Reason 5: You could save 20% in donations tax
You will pay donations tax at a rate of 20% on any donation in excess of R100,000 per annum or R200,000 in the case of married couples. However, with a trust, no donations tax is payable on any capital or income passed to a beneficiary of the trust.
So for example: Let`s assume that you wanted to give R500,000 to one of your children. In your private capacity you would pay R60,000 in donations tax while through a trust you would not have to pay any donations tax.
The 6th Reason is you won`t pay any estate duty with a trust
One of the main disadvantages of running your personal affairs in your own name is that estate duty is paid on the future growth of your assets. But with a trust, no estate duty is payable.
So for example: You pay estate duty at a rate of 20% on net assets in excess of R3 500,000. So if your net estate was worth R5,500,000 and you died leaving your entire estate to your children they would pay an estate duty fee of R400,000. If these assets were in a trust NO estate duty is payable.
And lastly -
You are able to regulate your ex spouse`s maintenance with a trust
A main disadvantage in case of a divorce is the fact that if maintenance is paid for a child to an ex-spouse, the ex-spouse would have a capital claim against your estate for all future maintenance at the time of your death.
The Science of The Stock Market
The first one you need to look at is the Dividend yield.
A dividend is the money paid on each share from the company`s net profits. Small companies often don`t pay dividends ? they plough their profits back into growing their business. But if a large company doesn`t increase its dividend or cuts it, you can bet it needs the money simply to survive. As the share price falls though, the dividend yield (dividend compared against share price) will rise. This could make the stock a relative bargain.
The second and most important ratio is the Earnings per Share or E.P.S.
It represents a company`s post-tax profits divided by the total number of shares in issue. Generally, an E.P.S. higher than the cash flow per share (shown on the cash-flow statement in the company`s annual report) indicates a company with strong value. A steadily rising E.P.S. indicates financial health and growth.
The next ratio is the Dividend Cover.
This tells you whether a company can afford to pay its shareholders their dividend or not. Divide the E.P.S. by the dividend announced by the company. The result should be 1 or higher. If it`s less than 1, avoid it. The firm hasn`t got the cash to pay its dividend and is digging into cash reserves.
The fourth ratio is the Price-Earnings Ratio or P.E.
It`s calculated by dividing the share price by the earnings per share. If you`re investing for the mid to long term, look for shares with a low P.E. compared with other firms in its sector. If you want a fast profit though, you could buy a stock with a high P.E. Although these shares are overvalued, the price will have upwards momentum. Investors who move quickly can make money. But you must sell the stock before it rebounds.
The next one is the Price/sales ratio or P.S.R.
Use this ratio for new companies with fast growth, but no profits yet. Divide last year`s sales figure by the market value of a firm. Buy if a stock has a low P.S.R. compared to others within its sector ? especially if it`s less than one. For market leaders, the P.S.R. will be around 3 or 4.
The final ratio is the Return on capital employed or R.O.C.E.
This measures management performance. The R.O.C.E. is calculated as profits before tax and interest on loan repayments, divided by capital employed. In sectors like retail, the share price will increase if there is a rising R.O.C.E. A company can improve its R.O.C.E. by buying back shares from the stock market. This can also improve its share price. Buybacks are a definite buy signal for you ? but you have to buy as soon as the buyback is announced to get the maximum financial gain.
A dividend is the money paid on each share from the company`s net profits. Small companies often don`t pay dividends ? they plough their profits back into growing their business. But if a large company doesn`t increase its dividend or cuts it, you can bet it needs the money simply to survive. As the share price falls though, the dividend yield (dividend compared against share price) will rise. This could make the stock a relative bargain.
The second and most important ratio is the Earnings per Share or E.P.S.
It represents a company`s post-tax profits divided by the total number of shares in issue. Generally, an E.P.S. higher than the cash flow per share (shown on the cash-flow statement in the company`s annual report) indicates a company with strong value. A steadily rising E.P.S. indicates financial health and growth.
The next ratio is the Dividend Cover.
This tells you whether a company can afford to pay its shareholders their dividend or not. Divide the E.P.S. by the dividend announced by the company. The result should be 1 or higher. If it`s less than 1, avoid it. The firm hasn`t got the cash to pay its dividend and is digging into cash reserves.
The fourth ratio is the Price-Earnings Ratio or P.E.
It`s calculated by dividing the share price by the earnings per share. If you`re investing for the mid to long term, look for shares with a low P.E. compared with other firms in its sector. If you want a fast profit though, you could buy a stock with a high P.E. Although these shares are overvalued, the price will have upwards momentum. Investors who move quickly can make money. But you must sell the stock before it rebounds.
The next one is the Price/sales ratio or P.S.R.
Use this ratio for new companies with fast growth, but no profits yet. Divide last year`s sales figure by the market value of a firm. Buy if a stock has a low P.S.R. compared to others within its sector ? especially if it`s less than one. For market leaders, the P.S.R. will be around 3 or 4.
The final ratio is the Return on capital employed or R.O.C.E.
This measures management performance. The R.O.C.E. is calculated as profits before tax and interest on loan repayments, divided by capital employed. In sectors like retail, the share price will increase if there is a rising R.O.C.E. A company can improve its R.O.C.E. by buying back shares from the stock market. This can also improve its share price. Buybacks are a definite buy signal for you ? but you have to buy as soon as the buyback is announced to get the maximum financial gain.
- A stock may appear good value on the basis of one ratio, but poor value on another. Use a number of ratios in analysing a stock and look for consistency before selecting the stock you will invest in.
- You must always remember though, the stock market is unpredictable because of the market sentiment factor, so there are times when shares drop in value without any warning, you must be prepared for this too. But stick to a successful picking strategy and you could build a safety barrier for your investments.
Wednesday, April 2, 2008
Blogs and E-letters
Both (a.k.a. e-zines or e-mail newsletters) are ideal marketing tools for small-business owners. They give you two inexpensive ways to communicate with your customers, give them useful advice, and reveal your latest products and services.
But though they have the same purpose, they are very different.
First, let’s define our terms.
A blog is a website that you can create yourself using Web-based software. Blogs tend to have a personal flavour and speak in the distinct voice of the blogger. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Unlike a traditional, static website, the content or information posted on a blog is up-to-the-minute, frequently updated (although it doesn’t have to be), and displayed in reverse chronological order, the most recent posting first. Also, readers can contribute their comments, turning the blog into an online conversation.
An e-letter is basically an electronic newsletter that you send out regularly via e-mail to a list of people who have given you permission to do so. The content of an e-letter is more evergreen. It can be anything from news about you and your business to tips that demonstrate your expertise. When you use an e-mail marketing service or software, it’s also very easy to design and send.
The main difference between the two is this: You "push" an e-letter to your list so you control the contact, while a blog is a "pull." Readers have to go there on their own, so you have a lot less (or no) control over the contact. The quality of the readers is different too. E-letter readers went out of their way to sign up, so you can consider them a lead for your marketing messages. They’ve essentially raised their hands and asked you to keep in touch. Blog readers, on the other hand, are information hounds, so they may not be as responsive.
Let’s compare.
A blog is easier to set up - but not by much. It literally takes 10 minutes to create, and you don’t need any technical expertise. However, you have less freedom with the layout due to the limitations of most blog publishing software (especially the most popular and free ones, like blogger.com and typepad.com). With an e-letter, on the other hand, it takes a bit more time to create the prototype and template, whether in text or html. But once that’s done, you just type the text for each issue into that template and send it out.
It takes more time to write an e-letter. Most small-business owners take time to write and edit their e-letters, as they should. Because you’re pushing your e-letter to people, asking them to read what you’ve written, it has to be well-thought-out, concise, and to the point. On the other hand, since a blog tends to be made up of snippets of ideas posted frequently (sometimes several times a day), bloggers don’t labour over their text.
Plus, a blog is less formal, because it’s like a conversation. That means "you can speak in your everyday voice, which is (hopefully) friendly and approachable." So says Colleen Wainwright, a.k.a. The Communicatrix, a graphic designer who blogs. "On a blog, the expectations are much lower for both grammar and formality. Also, you can combine personal and professional elements in your blog; how much of each depends on what you’re comfortable with and what your prospective clientele will be comfortable reading. You can write about anything (and many people do), but if you’re using it to promote your business, it will be most effective if you focus and use the blog to establish your credibility within that narrow niche."
My e-letter goes out weekly, and between the writing, editing, and layout, I spend approximately one hour on each issue. My blogging takes a half-hour on a Sunday morning. That’s when I draft and schedule my three posts for the week. Each one is usually no longer than a paragraph or two with a couple of links. At least one post is simply a link to an article I like, plus a little intro from me about why I think it’s relevant. If your e-letter goes out more frequently - like Early to Rise - the time you spend on it expands by leaps and bounds.
It takes more time to maintain a blog. For most people, creating fresh content several times a week, or even weekly, requires a certain mindset. It isn’t even that it takes so much time to create the material. (Blog posts are mostly very short pieces accompanied by a link.) What takes time is getting into the groove of blogging - and that involves much more than posting to your own blog. It includes visiting other people’s blogs, reading their posts, and commenting on them. It’s not difficult. It just takes time and practice to get into that mode. E-letters, on the other hand, don’t carry the same expectation of freshness, so there is a lot less pressure to produce. You send it out when you like - daily, twice-weekly, monthly, or even occasionally.
A blog attracts more Web traffic. Even if no one ever reads your blog, posting it regularly can be a tremendous boon to your search engine rankings because search engines love fresh content. Any website with new content will come up earlier in search engine rankings than a site that hasn’t been changed in months (or years). Meanwhile, the traffic an e-letter drives to your website consists of those who already know you, not new prospects and leads.
An e-letter makes more sales. Some people make money by displaying ads on their blogs - but if you want to sell products or services, an e-letter is more effective. Why? Because with an e-letter you "push" (send) your offer to your prospects, then watch while they click and, hopefully, buy. Because a blog is a "pull," there’s no way to measure or track sales. On a blog, you show how much you know. You shouldn’t expect to "get work" from your blog, but it will be good for driving traffic to your website. And once you get people to your website, they can sign up for your e-letter… which will allow you to sell to them directly.
Both inspire trust in the visitor. Inspiring trust depends more on the tone you take than the format. If you’ve spent time composing your e-letter, it will show, and that certainly inspires trust. A blog, with its rapid-fire and often impassioned comments, can convey a sense of impulsiveness, which rarely inspires trust. Trust is important on the Internet (a very anonymous medium), because unless people trust you, they’re not going to buy from you.
If you don’t already have a website to promote your business, a blog is a good first step in that direction. It provides a way for people to find you online without your spending a lot of money or time working with a Web designer or learning Web design software. In fact, some people use a blog as their one and only Web presence.
If you already have a website and are ready to branch out with an e-letter or a blog, which one should you start with? That depends on your goal. If your goal is to generate revenue from a known group of prospects, an e-letter is the right choice. If you are less focused on revenue-generation and are looking instead to position yourself as an expert and make it easier for new prospects to find you online, a blog is better.
If both goals make sense in your business plan, by all means do both. Blogs and e-letters work beautifully hand-in-hand.
Here’s how we do that at Marketing Mentor: I want to be able to reach out to my qualified prospects on a regular basis, to keep reminding them who I am and what I have to offer. I don’t want to wait for them to come back to my website or have time to read my blog. I want to be in their inboxes, rather than on their browsers.
But though they have the same purpose, they are very different.
First, let’s define our terms.
A blog is a website that you can create yourself using Web-based software. Blogs tend to have a personal flavour and speak in the distinct voice of the blogger. A typical blog combines text, images, and links to other blogs, Web pages, and other media related to its topic. Unlike a traditional, static website, the content or information posted on a blog is up-to-the-minute, frequently updated (although it doesn’t have to be), and displayed in reverse chronological order, the most recent posting first. Also, readers can contribute their comments, turning the blog into an online conversation.
An e-letter is basically an electronic newsletter that you send out regularly via e-mail to a list of people who have given you permission to do so. The content of an e-letter is more evergreen. It can be anything from news about you and your business to tips that demonstrate your expertise. When you use an e-mail marketing service or software, it’s also very easy to design and send.
The main difference between the two is this: You "push" an e-letter to your list so you control the contact, while a blog is a "pull." Readers have to go there on their own, so you have a lot less (or no) control over the contact. The quality of the readers is different too. E-letter readers went out of their way to sign up, so you can consider them a lead for your marketing messages. They’ve essentially raised their hands and asked you to keep in touch. Blog readers, on the other hand, are information hounds, so they may not be as responsive.
Let’s compare.
A blog is easier to set up - but not by much. It literally takes 10 minutes to create, and you don’t need any technical expertise. However, you have less freedom with the layout due to the limitations of most blog publishing software (especially the most popular and free ones, like blogger.com and typepad.com). With an e-letter, on the other hand, it takes a bit more time to create the prototype and template, whether in text or html. But once that’s done, you just type the text for each issue into that template and send it out.
It takes more time to write an e-letter. Most small-business owners take time to write and edit their e-letters, as they should. Because you’re pushing your e-letter to people, asking them to read what you’ve written, it has to be well-thought-out, concise, and to the point. On the other hand, since a blog tends to be made up of snippets of ideas posted frequently (sometimes several times a day), bloggers don’t labour over their text.
Plus, a blog is less formal, because it’s like a conversation. That means "you can speak in your everyday voice, which is (hopefully) friendly and approachable." So says Colleen Wainwright, a.k.a. The Communicatrix, a graphic designer who blogs. "On a blog, the expectations are much lower for both grammar and formality. Also, you can combine personal and professional elements in your blog; how much of each depends on what you’re comfortable with and what your prospective clientele will be comfortable reading. You can write about anything (and many people do), but if you’re using it to promote your business, it will be most effective if you focus and use the blog to establish your credibility within that narrow niche."
My e-letter goes out weekly, and between the writing, editing, and layout, I spend approximately one hour on each issue. My blogging takes a half-hour on a Sunday morning. That’s when I draft and schedule my three posts for the week. Each one is usually no longer than a paragraph or two with a couple of links. At least one post is simply a link to an article I like, plus a little intro from me about why I think it’s relevant. If your e-letter goes out more frequently - like Early to Rise - the time you spend on it expands by leaps and bounds.
It takes more time to maintain a blog. For most people, creating fresh content several times a week, or even weekly, requires a certain mindset. It isn’t even that it takes so much time to create the material. (Blog posts are mostly very short pieces accompanied by a link.) What takes time is getting into the groove of blogging - and that involves much more than posting to your own blog. It includes visiting other people’s blogs, reading their posts, and commenting on them. It’s not difficult. It just takes time and practice to get into that mode. E-letters, on the other hand, don’t carry the same expectation of freshness, so there is a lot less pressure to produce. You send it out when you like - daily, twice-weekly, monthly, or even occasionally.
A blog attracts more Web traffic. Even if no one ever reads your blog, posting it regularly can be a tremendous boon to your search engine rankings because search engines love fresh content. Any website with new content will come up earlier in search engine rankings than a site that hasn’t been changed in months (or years). Meanwhile, the traffic an e-letter drives to your website consists of those who already know you, not new prospects and leads.
An e-letter makes more sales. Some people make money by displaying ads on their blogs - but if you want to sell products or services, an e-letter is more effective. Why? Because with an e-letter you "push" (send) your offer to your prospects, then watch while they click and, hopefully, buy. Because a blog is a "pull," there’s no way to measure or track sales. On a blog, you show how much you know. You shouldn’t expect to "get work" from your blog, but it will be good for driving traffic to your website. And once you get people to your website, they can sign up for your e-letter… which will allow you to sell to them directly.
Both inspire trust in the visitor. Inspiring trust depends more on the tone you take than the format. If you’ve spent time composing your e-letter, it will show, and that certainly inspires trust. A blog, with its rapid-fire and often impassioned comments, can convey a sense of impulsiveness, which rarely inspires trust. Trust is important on the Internet (a very anonymous medium), because unless people trust you, they’re not going to buy from you.
If you don’t already have a website to promote your business, a blog is a good first step in that direction. It provides a way for people to find you online without your spending a lot of money or time working with a Web designer or learning Web design software. In fact, some people use a blog as their one and only Web presence.
If you already have a website and are ready to branch out with an e-letter or a blog, which one should you start with? That depends on your goal. If your goal is to generate revenue from a known group of prospects, an e-letter is the right choice. If you are less focused on revenue-generation and are looking instead to position yourself as an expert and make it easier for new prospects to find you online, a blog is better.
If both goals make sense in your business plan, by all means do both. Blogs and e-letters work beautifully hand-in-hand.
Here’s how we do that at Marketing Mentor: I want to be able to reach out to my qualified prospects on a regular basis, to keep reminding them who I am and what I have to offer. I don’t want to wait for them to come back to my website or have time to read my blog. I want to be in their inboxes, rather than on their browsers.
Friday, March 28, 2008
3 Steps to Starting A Business
Step 1. Identify something that people want and will pay for.
One of the most common stumbling blocks for aspiring entrepreneurs is deciding on a product or service to market. The primary consideration is to choose something that people will buy. And the easiest way to do that is to go with something that other people are already selling successfully.
Ideally, that will be something you love and/or know a lot about. For instance, if you’re an accountant, you could create and sell programmes about how people can prepare their taxes, how they can make a household budget, and how they can find hidden tax deductions. Or, if you’ve always loved animals, you could sell pet toys, treats, and accessories.
If you have trouble coming up with a likely product or service based on your own interests and/or expertise, choose a relatively simple service that’s in high demand. A house cleaning service, for example, or bookkeeping, lawn mowing, resume writing, or house painting. The possibilities are almost endless.
Step 2. Find a way to supply it.
This step just requires a bit of business common sense. If you’re selling a service, you would either supply the service yourself or hire someone else to do it (or help you). If, for example, you’ve decided to go into the moving business, you don’t have to be capable of handling furniture yourself. Simply hire a few people who can do heavy lifting and either buy or rent a truck.
If you’re selling a product, you would ideally seek out suppliers that can provide you with merchandise at a low enough price for you to be able to make a profit. But that usually means buying in volume - which may not work for you when you’re just starting out. Let’s say you’d like to sell bookshelves. In this case, it might make more sense for you to get your business going by buying the lumber and building the shelves yourself (or hiring someone to build them for you).
Step 3. Sell it to the people who want it.
I’m a big believer in direct marketing for small start-up businesses. It’s a relatively inexpensive way to get your marketing message to prospective customers via e-mail, regular mail, ads in local papers, or even flyers distributed door to door.
Let’s say you want to start a housekeeping service. You’d identify a few affluent neighbourhoods where the homeowners could, presumably, afford maids. Then you’d target them with either flyers or small mailers.
Or suppose you want to start a business where you take people on charter fishing boat trips. You’ll be marketing primarily to tourists, so you’d work on getting yourself listed in local tourist guides and maybe advertise on a few bus benches in your city’s hotel district. If you decide to go after locals too, you could contact local fishing clubs and see if you can rent their membership lists to do a mailing. You might also make a deal with local bait shops to distribute your flyers.
Obviously, starting and running a successful business requires time, energy, and effort. Still, when you break down the process, it’s just those three simple steps.
One of the most common stumbling blocks for aspiring entrepreneurs is deciding on a product or service to market. The primary consideration is to choose something that people will buy. And the easiest way to do that is to go with something that other people are already selling successfully.
Ideally, that will be something you love and/or know a lot about. For instance, if you’re an accountant, you could create and sell programmes about how people can prepare their taxes, how they can make a household budget, and how they can find hidden tax deductions. Or, if you’ve always loved animals, you could sell pet toys, treats, and accessories.
If you have trouble coming up with a likely product or service based on your own interests and/or expertise, choose a relatively simple service that’s in high demand. A house cleaning service, for example, or bookkeeping, lawn mowing, resume writing, or house painting. The possibilities are almost endless.
Step 2. Find a way to supply it.
This step just requires a bit of business common sense. If you’re selling a service, you would either supply the service yourself or hire someone else to do it (or help you). If, for example, you’ve decided to go into the moving business, you don’t have to be capable of handling furniture yourself. Simply hire a few people who can do heavy lifting and either buy or rent a truck.
If you’re selling a product, you would ideally seek out suppliers that can provide you with merchandise at a low enough price for you to be able to make a profit. But that usually means buying in volume - which may not work for you when you’re just starting out. Let’s say you’d like to sell bookshelves. In this case, it might make more sense for you to get your business going by buying the lumber and building the shelves yourself (or hiring someone to build them for you).
Step 3. Sell it to the people who want it.
I’m a big believer in direct marketing for small start-up businesses. It’s a relatively inexpensive way to get your marketing message to prospective customers via e-mail, regular mail, ads in local papers, or even flyers distributed door to door.
Let’s say you want to start a housekeeping service. You’d identify a few affluent neighbourhoods where the homeowners could, presumably, afford maids. Then you’d target them with either flyers or small mailers.
Or suppose you want to start a business where you take people on charter fishing boat trips. You’ll be marketing primarily to tourists, so you’d work on getting yourself listed in local tourist guides and maybe advertise on a few bus benches in your city’s hotel district. If you decide to go after locals too, you could contact local fishing clubs and see if you can rent their membership lists to do a mailing. You might also make a deal with local bait shops to distribute your flyers.
Obviously, starting and running a successful business requires time, energy, and effort. Still, when you break down the process, it’s just those three simple steps.
Thursday, March 27, 2008
7 reasons why you need to own a Trust.
* To protect your assets from creditors in the event of your insolvency, disability or divorce.
* To legally pay as little tax as possible.
* To make provision for your estate to be passed on to your beneficiaries as smoothly as possible.
* To maximise your overall profits when buying property and significantly reduce your CGT and estate duty bill.
* To avoid all inheritance tax liability.
* To create personal confidentiality.
* To safeguard against financial loss in your own business.
* To protect your assets from creditors in the event of your insolvency, disability or divorce.
* To legally pay as little tax as possible.
* To make provision for your estate to be passed on to your beneficiaries as smoothly as possible.
* To maximise your overall profits when buying property and significantly reduce your CGT and estate duty bill.
* To avoid all inheritance tax liability.
* To create personal confidentiality.
* To safeguard against financial loss in your own business.
Wednesday, March 12, 2008
Cash flow Rules.
Profits aren't cash; they're accounting
And accounting is a lot more creative than you think. You can't pay bills with profits. Actually profits can lull you to sleep. If you pay your bills and your customers don't, it's suddenly business hell. You can make profits without making any money.
Cash flow isn't intuitive.
Don't try to do it in your head. Making the sales doesn't necessarily mean you have the money. Incurring the expense doesn't necessarily mean you paid for it already. Inventory is usually bought and paid for and then stored until it becomes cost of sales.
Growth sucks up cash.
It's paradoxical. The best of times can be hiding the worst of times. One of the toughest years my company had was when we doubled sales and almost went broke. We were building things two months in advance and getting the money from sales six months late. Add growth to that and it can be like a Trojan horse, hiding a problem inside a solution. Yes, of course you want to grow; we all want to grow our businesses. But be careful because growth costs cash. It's a matter of working capital. The faster you grow, the more financing you need.
Business-to-business sales suck up your cash.
The simple view is that sales mean money, but when you're a business selling to another business, it's rarely that simple. You deliver the goods or services along with an invoice, and they pay the invoice later. Usually that's months later. And businesses are good customers, so you can't just throw them into collections because then they'll never buy from you again. So you wait. When you sell something to a distributor that sells it to a retailer, you typically get the money four or five months later if you're lucky.
Inventory sucks up cash.
You have to buy your product or build it before you can sell it. Even if you put the product on your shelves and wait to sell it, your suppliers expect to get paid. Here's a simple rule of thumb: Every dollar you have in inventory is a dollar you don't have in cash.
Working capital is your best survival skill.
Technically, working capital is an accounting term for what's left over when you subtract current liabilities from current assets. Practically, it's money in the bank that you use to pay your running costs and expenses and buy inventory while waiting to get paid by your business customers.
"Receivables" is a four-letter word.
(See rule 4.) The money your customers owe you is called "accounts receivable." Here's a shortcut to cash planning: Every dollar in accounts receivable is a dollar less cash.
Bankers hate surprises.
Plan ahead. You get no extra points for spontaneity when dealing with banks. If you see a growth spurt coming, a new product opportunity or a problem with customers paying, thesooner you get to the bank armed with charts and a realistic plan, the better off you'll be.
Watch these three vital metrics: "
Collection days" is a measure of how long you wait to get paid. "Inventory turnover" is a measure of how long your inventory sits on your working capital and clogs your cash flow. "Payment days" is how long you wait to pay your vendors. Always monitor these three vital signs of cash flow. Project them 12 months ahead and compare your plan to what actually happens.
If you're the exception rather than the rule, hooray for you. If all your customers pay you immediately when they buy from you, and you don't buy things before you sell them, then relax. But if you sell to businesses, keep in mind that they usually don't pay immediately.
Profits aren't cash; they're accounting
And accounting is a lot more creative than you think. You can't pay bills with profits. Actually profits can lull you to sleep. If you pay your bills and your customers don't, it's suddenly business hell. You can make profits without making any money.
Cash flow isn't intuitive.
Don't try to do it in your head. Making the sales doesn't necessarily mean you have the money. Incurring the expense doesn't necessarily mean you paid for it already. Inventory is usually bought and paid for and then stored until it becomes cost of sales.
Growth sucks up cash.
It's paradoxical. The best of times can be hiding the worst of times. One of the toughest years my company had was when we doubled sales and almost went broke. We were building things two months in advance and getting the money from sales six months late. Add growth to that and it can be like a Trojan horse, hiding a problem inside a solution. Yes, of course you want to grow; we all want to grow our businesses. But be careful because growth costs cash. It's a matter of working capital. The faster you grow, the more financing you need.
Business-to-business sales suck up your cash.
The simple view is that sales mean money, but when you're a business selling to another business, it's rarely that simple. You deliver the goods or services along with an invoice, and they pay the invoice later. Usually that's months later. And businesses are good customers, so you can't just throw them into collections because then they'll never buy from you again. So you wait. When you sell something to a distributor that sells it to a retailer, you typically get the money four or five months later if you're lucky.
Inventory sucks up cash.
You have to buy your product or build it before you can sell it. Even if you put the product on your shelves and wait to sell it, your suppliers expect to get paid. Here's a simple rule of thumb: Every dollar you have in inventory is a dollar you don't have in cash.
Working capital is your best survival skill.
Technically, working capital is an accounting term for what's left over when you subtract current liabilities from current assets. Practically, it's money in the bank that you use to pay your running costs and expenses and buy inventory while waiting to get paid by your business customers.
"Receivables" is a four-letter word.
(See rule 4.) The money your customers owe you is called "accounts receivable." Here's a shortcut to cash planning: Every dollar in accounts receivable is a dollar less cash.
Bankers hate surprises.
Plan ahead. You get no extra points for spontaneity when dealing with banks. If you see a growth spurt coming, a new product opportunity or a problem with customers paying, thesooner you get to the bank armed with charts and a realistic plan, the better off you'll be.
Watch these three vital metrics: "
Collection days" is a measure of how long you wait to get paid. "Inventory turnover" is a measure of how long your inventory sits on your working capital and clogs your cash flow. "Payment days" is how long you wait to pay your vendors. Always monitor these three vital signs of cash flow. Project them 12 months ahead and compare your plan to what actually happens.
If you're the exception rather than the rule, hooray for you. If all your customers pay you immediately when they buy from you, and you don't buy things before you sell them, then relax. But if you sell to businesses, keep in mind that they usually don't pay immediately.
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