Tuesday, March 17, 2009

Being laid off? Think about becoming an entrepreneur

Overview
With millions of talented people being laid off during the current financial crisis, there is opportunity to turn tragedy into triumph by becoming an entrepreneur. I would recommend first trying hard to get another comparable job so the income stream is there to support day-to-day expenses. However, if you are not able to get a job, then perhaps entrepreneurialism might be your path forward. Even if you do have income from a job, it may make sense to start a business on your own while you have the income stream. Over time, your business may grow to take over as your primary and ongoing income source providing you with many more options with your career than currently might be possible.

What do you need to consider when going into business?
There are a lot of things you need to consider. However, don’t get so wrapped up in worrying about all of the minute details that you procrastinate actually getting started. The first thing I recommend is nailing down what business to start. Do this by creating two columns on a blank piece of paper labeled strengths and weaknesses. Write down all of the strengths and strong skills that you have personally, in business, relationships, etc. Then write down all of your main weaknesses in the same categories. Really study the list. Look for ways of overcoming your weaknesses to turn them into strengths. Perhaps you need to get some education that will build your abilities in certain weak areas. Perhaps one of your strengths could be paired with the weakness to help overcome it. Personally, I like to face my weaknesses and fears head on. I like to force myself to learn and grow in those areas to turn them into future strengths. That is my own challenge so I’m always growing and not allowing weaknesses to keep me stagnant. Continually overcoming weaknesses will give you knowledge and skills needed to face and overcome barriers that will come while growing a business.

Find a mentor/possible partner
Find someone that is strong in the area(s) you are weak in that can mentor and guide your development. This may actually be a way of finding someone else who would be a good fit for you in starting the business. Many times people who are opposites have made the best business pair since one was strong in an area the other was weak. They are able to recognize the strengths and weaknesses of each other to capitalize on who would be best suited for a particular task/client/etc. while building the business.

Ego can be your friend and enemy
We all know people who have very strong ego. Many times these people make very strong managers that take action and get things done. It is fine when ego is used constructively to drive action and get results. However, when ego is used to put others down and gets in the way, then it is a huge barrier to ever getting long term success. You must recognize what level of ego you and your partner(s) have, understand if it is constructive or destructive, take corrective action as needed to reshape the ego to be a positive driving force that motivates others to feel passionate about succeeding together.

Also, never be so proud that you don’t listen to and use the advice and help of others. Always known your weaknesses and recognize when someone can help, then accept that help. Life is too short to let pride get in the way of success.

You need a team to create long term success
Going completely on your own is a very hard way to start a business. Start meeting people as you take training classes, work with clients, go to church or other gatherings, etc. Get to know who has strengths that could be tapped to help you in business. Find a way of bartering for their help – perhaps you will provide a product or service to them in exchange for them doing the same for you.

The Small Business Administration and SCORE are invaluable resources
Don’t forget that the Small Business Administration (SBA) is an invaluable source of education and counseling to help you succeed. They also have a separate arm called SCORE, which is comprised of retired executives who now volunteer their time to consult with business owners and many other resources to help entrepreneurs succeed. In fact, the SCORE website www.score.org has set up a feature for you to select consultants for free geographically and by industry at http://www.score.org/ask_score.html. They also have online classes on various subjects. Anyway, SCORE is an amazing free resource that can help tremendously with starting, running, and growing a business.

Consider the finances required
Once you have a business, create a business plan that includes timelines of accomplishments and any project income and expenses at each milestone on the timeline. Always know where your finances stand. Know when you need to make cuts to get by enough to continue moving forward. Also recognize when the business is not going to succeed to cut your losses early and try another business. Again, don’t let pride keep you from moving on. However, always learn from everything you do to incorporate your knowledge into the next venture.

Don’t take things personally
Don’t take rejection personally. Don’t take failure personally. Recognize that these things always happen and are a requirement for success. Until you have failed or experienced rejection, you don’t really learn how to overcome them and move forward. Personally, I look forward to failure and rejection since those are my most challenging times that require me to be very resourceful in finding solutions to overcome. I feel the most personal growth and satisfaction after overcoming my hardest challenges. Welcome them as opportunities to grow and become an overcomer.

Share your success
Treat your employees well. Provide unexpected small bonuses such as a gift certificate to a nice restaurant or store when someone does something nice. Write a hand written note that says you are proud of their accomplishment on a task. Get a simple plaque made that they can put on their desk. Bring them into your office to tell them how much you appreciate their work on that task.

Consider doing similar things for people outside of your company who help you and your business. Give your supplier, banker, customer, etc. a nice surprise. Let them know they are appreciated and valued.

Doing these things will go a long way toward building fierce loyalty. People will remember you and your company will be their first choice when needed.

Understand you are in the business of people, not products or services
Remember, you are in the people business, not a business of selling products or services. Products or services won’t likely be bought until you have first built the relationship with a decision maker/customer. Think about yourself – would you rather buy something from a friend or complete stranger? Take that even further – would you be willing to pay more buying from a trusted friend or paying less from a complete stranger? In that case, you can see there is a financial value placed on the level of trust and friendship you can build with the customer, and with your employees.

Be a lifelong student of business
Take every opportunity to continue learning. As mentioned before, take classes and read books about areas you are weak in. Continue building on your strengths through ongoing education. Talk with successful people who can mentor you. Always be moving forward with your personal development and knowledge of every aspect of business.

Summary
As you know, there are many books, articles, etc. on starting a business. I could not possibly include everything that is needed to start a business in this article. My hope here was to at least get those who are currently being threatened by the negative job market to consider going into business for themselves. Doing so could be a way of creating job security in the long run. Sure there are up and down periods in business, but those events can be anticipated and planned for through proper investments that ensure continued survival of the business. If you do take the entrepreneurial plunge, I wish you the very best and say it will be hard, but very rewarding in the end. Expect many challenges, but make those opportunities to develop character and strengths as an overcomer.

Copyright 2009 Ole Cram, President of Marcobe Investments, Inc.
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Two Investor Learning Resources:
MarketClub is an online charting system with buy or sell signals designed to help traders research and help time getting in and out of trades as quickly and efficiently as possible. Learn more by copying the following URL into your browser: http://www.ino.com/info/69/CD3400/&dp=0&l=0&campaignid=8

INO TV is an online collection of over 500 video trading seminars from some of the foremost experts in their areas, designed to teach new and seasoned traders alike from the comfort of their home. Learn more by copying the following URL into your browser: http://www.ino.com/info/128/CD3400/&dp=0&l=0&campaignid=13

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This article was posted at Accredited Investor Blog: http://accreditedinvestortalk.blogspot.com/

Your feedback is wanted:
Please provide feedback to our generic email at AccreditedIT@yahoo.com on questions you have, ideas for future articles, and any other thoughts that could lend themselves to future articles for the benefit of all readers.

Marcobe Investments, Inc., is a corporation that invests in various oil and gas ventures and refers accredited investors, investment managers, financial advisors, investment funds, and others to the associated oil producer of these projects for their consideration. We are not licensed to sell any interest in a project, nor are we registered advisors.

Disclaimer: This article is provided for educational purposes only and is not meant to be a substitute for tax, legal, financial, or other registered professional advice for your specific situation. Always seek the advice of a professional before making any related decision.

Find similar articles by clicking the Sphere.com icon below (viewable on blog site only):
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Monday, March 9, 2009

Why do you need to earn a higher rate than the percentage of investment loss?

Overview
One thing that confuses many investors is the fact that any percentage loss must be recovered by earning a higher rate of return than the percentage of loss (will illustrate this with examples later in this article). Accredited investors are aware of this difference and understand the relationship between percentage loss and percentage required to gain back the loss. This article will provide the math behind the relationship in a easy to read format. I’ll first look at the mathematical equation used to calculate the percentage loss of an investment. Then I’ll look at the mathematical equation to calculate the percentage gain required to make up a loss. By the end, you will be able to understand what percentage of a gain is required to make up for any loss in your investment. This knowledge is required to accurately manage your investments while implementing your long term investment plan.

We now consider the equation for calculating the percentage of loss.

Equation to calculate the percentage of loss:
Percentage loss = (Initial value – current value)/initial value

This is derived by thinking about this in the following way…
If you lose money, the loss is based on the initial value of the investment. You consider what the value was initially and what it is currently. The difference between the two is the amount of loss. That is where the equation shows (Initial value – current value). Then to get the percentage of loss, you need to divide this amount of loss by the initial value of the investment. The idea is the find out how big this loss is when compared to the initial value of the investment. That is where you see this difference between the initial and current value being divided by the initial value in the equation. The result of this division tells you what percent of the initial investment was lost. Now consider an example to help understand the equation better.

An example of a 25% loss:
For this example, lets assume Joe had a retirement account with $100,000. Now, some time later, the account is worth $75,000. I will walk through the percentage of loss equation to calculate the percentage of loss.

Percentage loss = ($100,000 - $75,000)/$100,000
Percentage loss = $25,000/$100,000
Percentage loss = 25%

So we calculate that a drop from $100,000 to $75,000 is a 25% loss.

You can’t get back your investment by earning the same percent that was lost
You may be tempted to think a 25% gain is needed to get back to $100,000. However, the problem is Joe now only has $75,000 to start with. The amount of gain required is against $75,000, not against $100,000. The 25% loss was against the initial $100,000 account value and any percentage gain must now be against the remaining $75,000. Before calculating the percentage gain required to get back to the initial $100,000, consider the associate equation…

Equation to calculate the percentage of gain required to make up a loss:
Percentage gain required = (Initial value – current value)/current value

Did you notice the very slight difference in the equation? The only change was dividing the loss by the current value of the investment instead of dividing by the initial value. This is required since you are starting with the current value that remains after experiencing the loss. You need to know what percent of additional funds are required against the current value to get back to the initial value. Now use the equation against the above example to find out what gain is required to make up for the 25% loss.

Calculating the percentage gain required to make up for the 25% loss:
Using the above equation for calculating the percentage gain required,

Percentage gain required = ($100,000 - $75,000)/$75,000
Percentage gain required = $25,000/$75,000
Percentage gain required = 33.3%

So, we need to earn 33.3% against the remaining $75,000 in order to get back to the initial $100,000. Now consider additional examples.

Example of a 50% loss and calculating the percentage gain required:
Here Joe’s $100,000 initial account value drops to $50,000. Calculate the percentage loss first…

Percentage loss = ($100,000 - $50,000)/$100,000
Percentage loss = $50,000/$100,000
Percentage loss = 50%

Since the current value of the account is $50,000, what percentage gain is required to get back to the initial $100,000 value?

Percentage gain required = ($100,000 - $50,000)/$50,000
Percentage gain required = $50,000/$50,000
Percentage gain required = 100%

Joe now needs to earn 100% against his remaining $50,000 value to get back to the initial $100,000 value of the account.

Example of a 75% loss and calculating the percentage gain required:
Here Joe’s $100,000 initial account value drops to $25,000. Calculate the percentage loss first…

Percentage loss = ($100,000 - $25,000)/$100,000
Percentage loss = $75,000/$100,000
Percentage loss = 75%

Since the current value of the account is $25,000, what percentage gain is required to get back to the initial $100,000 value?

Percentage gain required = ($100,000 - $25,000)/$25,000
Percentage gain required = $75,000/$25,000
Percentage gain required = 300%

Joe now needs to earn 300% against his remaining $25,000 value to get back to the initial $100,000 value of the account.

Recap of above examples:
If Joe has a 25% loss, he needs to invest in something that will provide a 33% gain against his remaining funds to get back the loss.

If Joe has a 50% loss, he will need a 100% gain against the remaining funds.

If Joe has a 75% loss, he will need a very high 300% gain.

Summary
As you can see, there is a very large difference between the percentage loss of an investment and the required percentage gain to get back to that initial value. The higher the loss, the dramatically higher the required gain will be to make up for the loss. As the amount of loss increases, the required gain to make up for the loss increases much more since the remaining funds get smaller to use for making back the much larger loss. Again, seasoned investors, such as active accredited investors, understand this relationship between percent loss and percent gain required to make up the loss. Understanding the relationship will allow you to consider which investment strategy to consider as you move forward toward your long term financial goal.

Copyright 2009 Ole Cram, President of Marcobe Investments, Inc.
- - - - - - - - - -
Two Investor Learning Resources:
MarketClub is an online charting system with buy or sell signals designed to help traders research and help time getting in and out of trades as quickly and efficiently as possible. Learn more by copying the following URL into your browser: http://www.ino.com/info/69/CD3400/&dp=0&l=0&campaignid=8

INO TV is an online collection of over 500 video trading seminars from some of the foremost experts in their areas, designed to teach new and seasoned traders alike from the comfort of their home. Learn more by copying the following URL into your browser: http://www.ino.com/info/128/CD3400/&dp=0&l=0&campaignid=13

- - - - - - - - - -
This article was posted at Accredited Investor Blog: http://accreditedinvestortalk.blogspot.com/

Your feedback is wanted:
Please provide feedback to our generic email at AccreditedIT@yahoo.com on questions you have, ideas for future articles, and any other thoughts that could lend themselves to future articles for the benefit of all readers.

Marcobe Investments, Inc., is a corporation that invests in various oil and gas ventures and refers accredited investors, investment managers, financial advisors, investment funds, and others to the associated oil producer of these projects for their consideration. We are not licensed to sell any interest in a project, nor are we registered advisors.

Disclaimer:
This article is provided for educational purposes only and is not meant to be a substitute for tax, legal, financial, or other registered professional advice for your specific situation. Always seek the advice of a professional before making any related decision.

Find similar articles by clicking the Sphere.com icon below (viewable on blog site only): Sphere: Related Content
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