There is a Chinese proverb that states, "Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime". The central premise of this proverb is the same as the more recent axiom of "each one, teach one". Passing knowledge from one person to another is the surest way of increasing the success of future generations and society in general. Many of the services and products we purchase are the direct result of years of painstaking craftsmenship, which was passed down through generations of people. The end result of this passion was excellence, dedication, and high quality.   

Over the past five years, I have noticed a growing trend among Generation "Y",  that is in the opposite direction. Our young people no longer want to take the time to learn anything, they put instant gratification before the reward of working toward a goal. Evidence of this growing trend is the number of Baby Boomers who now have children between 20 - 25 still in their homes. Many have already graduated from college, but don’t want to deal with the harsh realities of life on the outside and have retreated back to the safety and surety of Mom and Dad’s place. To make matters worse, there are many parents who feel it is okay for them to return, which only compounds the problem.

Unfortunately, it isn’t just Generation "Y" that is having problems, many of the same traits are being exhibited in Generation "X" and Baby Boomers. I am reminded of the last two consults I had with potential clients. One was a team in their mid twenties and the other was a service provider in his late thirties. In each case, they were seeking funding for a start-up business and wanted to know what it would take for me to get them funded. I explained it was a lengthy process, but if they were willing to do the work, it could be done.

As is my standard practice for an initial consultation, I pulled out a marketing form I devised that talks about the five C’s and the four P’s of introducing a product into market. As I began to explain to the twenty year olds, they had the same look on their face, your four year old does when you are trying to explain the importance of eating vegetables. This only got worse as I explained how most of the information that goes on this sheet must be provided by them. It wasn’t that I didn’t know how to complete the form, but I wanted them to understand all that is involved in convincing a financier that they are a worthwhile investment. More importantly, I wanted to teach them the process of determining who their target market was, how to differentiate themselves from the other companies that offer the same services, and all of the intricacies of starting and maintaining a successful business.

The service provider in his late thirties was more receptive to the marketing form and had a fairly good grasp of his target audience. However, he questions were about how long it would take to get the money. When I explained it depended largely on who he was trying to get the funding from he began to look at me as though I had no idea of what I was talking about. I went on to tell him of the various sources of funding and what they require and how I could help him create a business plan or funding proposal to facilitate his needs, but there was no quick way other than loan sharks. Finally, I referred him to my website and told him to get a flavor for who I am and my philosphies and to give me a call if he thought we could work together…………I’m still waiting.

Both of these examples further my postulation of the "just gimme the fish" mentality. They view the detail of obtaining what they want as blah, blah, blah and insist on a faster solution to get them what they want. One of the twenty somethings said to me, "I didn’t know it took all that" and I explained the reason it does is so you fully understand the responsibility your are taking on and have every opportunity to succeed. The older gentleman wanted to know why they just couldn’t give him the money, "he was good for it" and would make repayment in no time.

We as a society need to get back to a few simple truths: No there is no easy way out. Yes, life is hard, and Yes, you have to work for everything you get! The best advice I can give is take the time and let a few good fisherman teach you about bait, tackles and weather conditions and get ready for a lifetime of fresh fish!!

Word to the Wise | No Comments »

Americans are feeling pain at the pump greater than ever before. Politicians are seizing this opportunity to suggest nonsensical solutions such as reducing the gas tax by penalizing the oil industry for benefiting from the very thing they do…sell gas! How ridiculous!!!

If you want long-term relief from rising fuel costs and food costs, tell the government to let you keep more of the money you actually earn! Just imagine how you would feel if you earned $1000 in a week and received a $1000 paycheck? That would certainly help cope with the ever rising cost of filling up.

How is that possible? The Fair Tax. Before your eye glaze over and you begin shaking your head as if to say "here we go again", let me explain a few truths. Our system of taxation has made it impossible for businesses maximize profits and offer competitive wages and benefits. The United States has the highest corporate tax of any industrialized nation at 40% and the affect of that can be seen in the growing trend toward outsourcing.   

Here is an abridged version of the Fair Tax and its benefits:

• Abolish the IRS (Saves over 10 billion per year)
• Removes all embedded taxes (25%)
• Monthly stipends for food expenses
• Adds a national value added tax of 25%
• No inheritance taxes, ad valorum, or capital gains
• Receive every dime of your paycheck
• Bring jobs back to the United States
• The underground economies pays their fair share

Of course there are far more details than I have listed here and you can read them all at www.fairtax.org, but for our purposes I wanted to highlight why the Fair Tax is a better solution.

Of the benefits listed, the most pressing reason for the change is "Brings jobs back to the United States". By removing the corporate taxes, several things happen;

• Companies will be able to invest more money in technology and innovation, which not only produces a better product, but in most cases lowers the price.
• Employers will be able to indentify "best practices" and pay higher wages to employees who embrace those practices.
• Foreign businesses, whose corporate tax average 28%, will relocate to the U.S., create partnership with U.S. firms, or expand into a multinational organization. Either of which means more jobs!!

As you can see, the solution to many of our country’s problem are cured with the implementation of the Fair Tax. So why hasn’t it happened? One word….Power! Making the Fair Tax law would remove all of the leverage of the Washington Lobbyist, who mainly lobby for tax favors, and special interest groups who exchange votes for favorable subsidies and tax breaks.

Secondly, the amount of savings that would be generated from eliminating the IRS and its related expenses, coupled with the increase in empowerment of the American people, would certainly start calls of downsizing the government. While this is welcomed by one political party, the other bases its very existence on dependence and their ability to make decisions for you. Afterall, you aren’t smart enough to figure things out for yourselves….right?

Finally, take the time to look at what the real problems are and don’t let politicians tell you how they are going to solve your problems. Choose a path that allows you to make decisions for you and your family. Have the resolve to make tough decisions and take a stand for the freedom our founding fathers and many others fought for…..in other words, its time to Man Up!! 

Word to the Wise, Rants | No Comments »

Welcome to the final section of the business plan before the Executive Summary…..Yeah!! Unfortunately the Financial Plan section takes longer than nearly any other section in the plan. This is true because here you will establish your company’s goals and expectations for sales, revenue, and growth. It is important that you properly research your industry and set expectations based on industry performance over the last two to three years. If your company is a smaller section of a larger industry, try to find a breakout percentage and use it for your research.

If you have a innovative product and stand to gain far above the norm, use industry standards anyway. Nothing scares investors more than prospective financial statements that far exceed the norm. It is better to out perform expectations then to have to explain miscalculations in the second phase of funding.

As you can see by the diagram below, it will take an additional couple of weeks to discuss the sections of the financial plan. This week we will discuss important assumptions, key financial indicators, and break even analysis.

Financial Plan

• Important Assumptions
  • General Assumptions
• Key Financial Indicators
  • Benchmarks
• Break-even Analysis
  • Break-even Analysis
  • Break-even Analysis
• Projected Profit and Loss
  • Profit and Loss
  • Profit Monthly
  • Profit Yearly
• Projected Cash Flow
  • Cash
  • Cash Flow
• Projected Balance Sheet
  • Balance Sheet
• Business Ratios
  • Ratios

Important Assumptions

Initially your assumptions should address those factors in your industry that traditionally affect your business’s finances. For example, if you are a bathing suit manufacturer in the United States, stating a 15% drop in production during the 4th quarter is a reasonable assumption. Be certain to list any mitigating factors such as government regulations, tax increases, seasonal expenses, and/or predictable fluctuations in revenue.  

General assumptions should list factors that have a reasonable expectancy to remain consistent throughout the time period specified in your business plan. For example if your are a car dealer, you can list the following:

• New car inventory will be maintained at 40% of showroom
• Manufacturers setback remain at 3%
• Sales team will contain 10 members
• Sales commision average 15%

These assumptions can easily be put into a spreadsheet and the results posted in your plan.

Key Financial Indicators

Key Financial Indicators (KFI) represent the major financial factors that affect your business during the periods of your business plan including revenue, expenses, profit margin, inventory, and employment costs to name a few. Of course, each business will have different KFIs, but the intention is the same; to provide a overview or 10,000 foot view of the information that will be provide in susequent reports. I have included an example in graph form below:

 Break Even Analysis

The break even analysis represents the point where revenues and are equal. Graphically it shows how much income is required to offset all of the expenses your business incurs on a monthly basis. It is very important that you have accurate figures for this section, make sure all of your expenses listed on your Income Statement, Balance Sheet, and P/L Statement  are included in your break even analysis. The graphical representation below gives a gfood example of how your analysis should look.

Next week will we complete the  Projected Profit and Loss Statement and the Projected Cash Flow Statement. Research is the key to solid financials and I am here to answer any questions you may have.

Business Development | No Comments »

Okay, I’ll try to keep this short. We as a nation have to come to grips with the consequences of our decisions. We have chosen to turn a blind eye to the government and let Congress tax us into the situation we find ourselves in today.

How, you may ask? With corporate taxes being over 40% in our country, businesses have turned to outsourcing to offset tax and employee expenses. This in turn leads to a need for improvements in the infrastructure of the host countries as other countries contract services.

The emerging markets abroad create opportunities for US companies to partner with foreign companies to share in the growth and increase their profitability without the penalties of huge corporate taxes and reduced employee expense. Unfortunately, as we build their infrastructure, we help increase the worldwide demand for oil, food and other natural resources. Add to that the growing

Clearly globalization is a good thing, but why are we acting surprised that is has ramifications worldwide?

Additionally, our refusal to build refineries and nuclear power plants, over the past twenty years has diminished the capacty to serve all of the demand for energy…but the caribou are safe!

To add injury to insult, we are now trying to develop alternative fuels such as ethanol made from corn which is causing food cost to rise because of demand. Farmers who would have normally planted wheat or soy, now plant corn, which causes a stress on wheat and soy supplies. Also, many types of live stock are fed with corn, so there is the increase in meat prices (PETA would be proud).

Back to taxes! Our current system of taxation has taken away the ability for Americans to be competitive in the world. As consumers we are faced with all of the embedded taxes of the products we use, a punitive tax on earnings and the taxes that are passed on to us by the coporations…that’s right, corporations don’t pay taxes, people do!! Whether it is a reduction in the amount of raise you get yearly, smaller bonuses, price increases, or in the worst cases job cuts.

The only way out of the situation we are in today will be to revamp our tax structure, eliminate the IRS and replace it with the Fair Tax. This would make the US more attractive to companies abroad, which brings back jobs and ease the crunch of rising costs. Secondly, we need to begin drilling for oil in places we know it exist Alaska, the Gulf of Mexico, off the coast of Florida, etc. 

As the electorate we must vote for candidates that are interested in weening the US off the international energy teet and buiding more local sources whether greater refinery capacity, wind technology, hydro-electricity, cleaner coals, or solar energy. None of these solutions are a quick and we simply have to eat the elephant for the forseeable future. Just know it is we who killed it and put it on our plates! 

Rants | No Comments »