Take care to evaluate how you have protected your assets so that you don't jeopardize your ability to continue in business if an economic downturn occurs, or a natural catastrophe strikes, or a partner either dies or wants out of the business, or your landlord suddenly decides to sell the building to someone who doesn't want you as an occupant?
I could go on and on, but just want to alert you to some of the events that could dramatically impact your business operations.
Perhaps you should review your lease agreements, insurance policies, key man insurance, and even your financial statements compared with your strategic business plans.
JULY 1, 2010
WHO'S RESPONSIBLE for the economic meltdown and how it affects your business plans?
Pointing fingers smacks of the "Blame Game" all the politicians and so-called economic experts love these days. So I might as well join them. I feel the need to do this in order to help you look forward.
If you want to start a business one of your primary sources of seed money is your home. Up until now using the equity in your home as collateral for obtaining a second mortgage or an equity line of credit from your bank has provided that needed cash reserve or cash investment money. If you have already established that source, and your bank is still around, you still have access to it.
Here's where I must now take a look back as a warning. For the past almost twenty years banks have been willing to loan up to and actually exceeding 100% of a home's value. They have done this with the idea in mind that inflation of home values would continue and it would actually result in the homeowner gaining equity over time. Some banks preferred to refinance the original mortgages that were based on an initial equity requirement of from five to twenty percent equity ownership maintained by the home buyer. The refinance deal sometimes actually exceed the current home value by up to twenty-five percent.
That is absolutely throwing good lending practice out the window. I won't go into all the reasons for the lenders doing this because that is not my purpose here. My purpose is to tell you that NOT accepting such a loan offer is your responsibility, especially if you plan to use the money to start a business. Don't add the high risk of a new venture to the risk of not only losing your home, but of owing more that the value of that home. That type of situation is called "upside down" by the real estate community. You MUST be able to focus on the business and not the cash flow needed for the financing. Doing this is a sure recipe for failure on both fronts.
Remember, it is not only the banker's fault for the stupidity of bad lending practices. It is also your fault for accepting them.
PLAN WRITING COMMENTARY
July 5, 2010
Not to long ago I read the executive summary in a annual report I had received from a publicly held company. I found sixteen (16) grammatical errors in the first four pages.
What kind of an impression does that provide to the millions of shareholders of this company?
I also recently had the opportunity to read a newsletter written by the CEO (Harvard MBA) to all his business partners around the United States. Now I know this man personally and he is a very intelligent individual, but I nearly threw up when I read the newsletter. Its content not only contained grammatical errors but had many confusing statements. Syntax is extremely important to meaning. Why write if the reader doesn't understand your message?
Business plans contain the executive summary, marketing and operating plans, financial projections, form and organizational structure.
There are seven parts to a complete marketing plan. It must include things such as advertising methods and support, form of sales (eg. direct, representative, internet, etc.)
How much money are you willing to invest up front? Do you have collateral? Do you have partners? What form of corporation will work best?
NOW - once you have considered these things, how do you put it all in a format that a potential investor will like?
My fees are based on many factors such as how much work in writing the plan will you do and how many rewrites will be required to get it right, etc.?
My specialty involves working with small businesses and start-up operations. fwconsult@aol.com
July 6, 2010
THE EXECUTIVE SUMMARY OF YOUR PLAN.
1) Assuming this is your initial plan:
The purpose of this section is for the reader to gain a quick idea of what you have accomplished in past business operations and to briefly explain what you intend to accomplish with your business in the near future term of one to five years.
2) If you have been in business, then this part of your plan should provide a brief summary of your accomplishments during the past year and your plans to build on this during the next five years.
The key to writing a good executive summary is to know what you want to accomplish and to whom you need to show the plan to achieve this objective.
Typically your first plan will be written to acquire funding and so your reader will be a banker, a venture capitalist, a business "angel", or maybe a rich relative. They all have one primary objective. They want to know how much you need and how you will repay them.
More on financial plans next time.
Academics are liberals because they spend their days trying to motivate young minds. Teaching so that their students will be able to grow unimpaired by worldly pressures to earn money. They know that living life just to earn money is never satisfying or self enriching.
Just think, if one can focus on the beauty of art or science without being encumbered by basic human needs, then the mind can be expanded beyond the imagination and into new paradigms of discovery.
If this is carried to the extreme as is attempted by many in academia, it means the academics need not have an awareness of crime, political infrastructure influences on society, wars, taxes, human corruption, genecide, economics, or health of society as these issues detract from the teaching of more important subjects such as understanding the plays of Shakespeare or the proper conjugation of verbs in Latin.
Knowing their subject is only part of the teachers' responsibility. They must also have an in-depth knowledge of how students learn best so they can taylor their teaching style to each one of the sometimes twenty-five or more students in their classrooms. For example they may have the following mix of learners: 5 - 10 love video games; 5 - 10 have ADD or ADHD; 2 - 5 have dyslexia; 5 - 10 may have the intellectual capacity and desire to go to college; 5 - 10 may have the mechanical apptitude and desire to learn a specific vocation. Yet they all have the minimum educational needs upon reaching adulthood of reading at a sixth grade level, knowledge of basic arithmetic, and writing to communicate clearly using correct spelling and grammar. Beyond these basics the commonality of need nearly disappears making mass instruction a nearly futile exercise developing high levels of frustration for the serious teacher and potentially degrades the creativity and capacity for cognition of our population as a whole.
This is a brief outline of a plan that will dramatically improve our health care system on a budget neutral basis and without growth in the government. It uses the private health insurance and provider sector, government control agencies already in place, and has the following benefits for the American people:
1) Places the focus on supporting the improvement of the professionalism of health care providers while reducing the costs.
2) Provides transparency of health care provider pricing thereby equating charges to all patients whether insured or not.
3) Increases availability and portability of insurance coverage thereby increasing the number of Americans covered and reducing the need for employer group insurance plans.
4) Provides coverage for pre-existing conditions without dramatically increasing the premiums for either those who have the conditions or others who do not.
5) Any additional cost to the government would be born by all insurers who will build it into their rates and, therefore, spread it to so many Americans that the cost would become minimal in effect.
6) Increase health insurance competition to lower the premiums for all thereby increasing the numbers of Americans covered by health insurance.
7) Reduce Medicare fraud without reducing coverage and without increasing government costs.
8) Eliminates the need, perceived or real, for a public insurance plan with its huge potential costs and negative political impact.
The plan outline is as follows:
1) Require all providers to provide follow up care without additional charges to the patient if the procedure either was performed in error or did not help resolve the health issue. At the same time mandate the individual states pass tort reform as follows: cap the maximum recovery for professional malpractice claims; eliminate punitive damages for malpractice claims altogether; and require the plaintiff pay all legal fees of both parties and court costs if their suit is lost. This mandate would be accomplished by eliminating federal funding to the individual states that do not comply with the outlined tort reform within one year. This will result in better patient care and lower costs.
2) Mandate that providers make no difference in their fees for services so that no patient is charged more for a procedure than another regardless of ability to pay or the existence or lack thereof of health insurance. Insurers must provide rewards to insureds when the insureds, through their own independent review of the provider charges, find incorrect, duplicate or erroneous fees charged for their medical procedure.
3) Repeal the McCarran Ferguson Act making insurance interstate commerce. The regulation mechanisms are in place in each state but the best state insurance department organization is New York. New York already requires that any insurance company licensed to do business in New York must not only comply with New York State regulations but must use those same criteria in any other state where they are licensed. At the same time as repeal of this act the fed would convert the New York Insurance Department for Health Insurance Company regulation to a federal agency in charge of the regulation of insurance in all states. All other state regulators must report to this agency and use their own auditing staffs and regulators. Thus, insurance competition automatically dramatically increases making it available to all. The competitive forces will then work to reduce insurance premiums and create an environment of much greater portability.
4) Establish an insurance pooling arrangement to cover pre-existing conditions. This can be done in the same way that substandard drivers are insured by the various state assigned risk plans. Or a reinsurance pool could be established to reinsure insurers who cover this risk. This pool would be populated by reinsurers from around the world thereby spreading this risk so as not to have an adverse impact on any one insurance company’s financial viability. The pool would be facilitated by the federal government providing catastrophic coverage for the pool thereby removing that financial risk from the private insurance company sector. The cost of this catastrophe coverage would be born by the health insurers who then build it into their overall rates for all their customers. This reinsurance arrangement would mean the government could mandate all insurers provide pre-existing health coverage at little additional cost to either those insureds who have the condition or those who do not.
5) Medicare fraud would be handled by contracting to independent CPA firms across the country. These firms would be compensated only when or if they actually find fraud. Their compensation would be based on the amount of fraud uncovered and the remedies put in place to prevent further fraud. This would fall within the area of Health and Human Services Agency.
I am not only an expert in the insurance business but am no longer employed in that industry so I have no axe to grind. I teach future voters not only educating them but taking pride in the knowledge that none of them can tell what my political leanings are. My students often ask me if I am either a Democrat or Republican, especially those who take my Contemporary American Issues Class. We must have a better educated populace and I am committed to that goal.
The national news media and interviews with our leaders, both elected and appointed, continually overlook regulations already in effect for the financial industries. The Comptroller of the Currency is the ultimate federal banking regulator and there are three agencies providing that level of regulation while each state also has an agency that provides regulations for state chartered banks.
The insurance business has been determined not to be interstate commerce and so is regulated by an insurance department regulator in each state. Banks and insurance companies undergo in-depth financial analysis once every three years and must also file in-depth financial statements annually with the appropriate regulator.
One final regulator involving both areas of this industry is the IRS.
The major issue with regulating these financial businesses is that, unlike other businesses that have "hard assets" like machinery, equipment, and supplies, their assets are intangible. The regulation requires a level of sophistication unlike any other. Many of the states do a good job, but they really have a tremendously difficult task in finding and hiring top people because of low pay scales and tedious work.
I tell you all this because it is my firm belief that adding more oversight will not prevent a recurrence of recent failures and I predict will slow down the process of operating these businesses, reduce their ability to comply with demands to provide better products to the public, and deteriorate their functional integrity by chasing off high quality, profit-motivated talent.
Stimulus Package
February 2009
Just today our Speaker of the House of Representatives said that every month that goes by without passing the "Stimulus Package" we lose five hundred million American jobs.
Not only is this woman, a graduate of Notre Dame High in Maryland and Trinity Washington University pro choice, but if she is right about those jobs we will lose more jobs in one year than the entire population of China, Europe, and, oh yes, the USA. I hope she isn't the one adding up the numbers for the so-called "Stimulus Package" that will save us from financial disaster, duhh.
As a Catholic and an educator I am ashamed and embarrassed by this woman. I believe she is the most dangerous person in Washington D.C.
Unfortunately, we have other Washington D.C. "characters" trying to "fix" us, and I fear that if we let them, we will be giving up the freedoms many have fought and died for.
Please write your Senators and Congressmen and tell them we prefer to spend our own money rather than have them do it for us, especially considering many of them aren't much brighter than Mrs. Pelosi.
November, 18, 2008
Who wins with bailouts?
$25 billion, $700 billion, who know where it stops. This is obviously a rhetorical question since no one really knows the answer. Consider this: Every industry evolves over time, but it is the truly well managed businesses that survive in a free market. General Motors set the standard for developing the automotive manufacturing business. Ford created the assembly line that made automobile ownership possible for the vast majority of Americans. Chrysler became known as the engineering automotive company. Over time they all became very successful, so much so that they allowed unions to fill their expenses with wonderful employee benefits. The question is whether they really understood the long term implications of those increased costs.
When three companies have 95% of a market they may feel no need to be concerned about expenses, that is, until competition enters. Due to the high cost of entry into the field of automobile manufacturing it was felt nearly impossible for that competition to happen, but, alas, it did.
We now have three domestic auto companies bloated with costs making them no longer competitive and we are being asked to donate to their failure rather than let them fix it. Recently, the members of the board of directors of GM said they had faith in the current management team. If that is so, that management team should find ways to fix their problems or go out of business.
Will there be lost jobs? Yes. Will these unemployed people be permanently unemployed? No. There are still opportunities for them with other successful automobile companies if they want to stay in that industry. Or, perhaps they should consider reevaluating their skills and retraining to enter other areas of our economy.
When I was a business owner we were constantly looking for new products and better ways to operate, shouldn't you?
