Written by Jay Turo on Monday, March 16, 2009
By far the biggest aspect of private company investing, which causes severe hesitation on the front end and sleepless nights on the back end, is risk.
All of us, of course, are profoundly interested in getting early stakes in high-flying companies but are downright frozen in our tracks by the considerable risk-taking involved in actually doing so. And once invested, the hard realities of company-building quickly take hold:. These include: longer than expected times-to-market, lower than expected cash flow, harder to attain market recognition, etc...
... The intelligent investor views risk simply as a measurement of the likelihood of a set of future outcomes, or of probability.
There are three main drivers of the probability of success: 1. Technology Risk. Can the enterprise actually bring-to-market the product or service as designed and on what timeframe?
2. Market Risk. Once the product is in the market, will anyone care?
3. Execution Risk. Can the the people of a business manage its technology and market risk to build brand, asset, revenue, and most importantly, cash flow growth over a sustained period of time?
... Suffice to say for now that risk for any business is driven not by the addition of these factors to one another, but by their multiplication to one another. Lack of performance on any one of the above has an exponential impact on a business' overall risk profile. ...
... For now, I will close with the words of perhaps the greatest entrepreneur of them all - Thomas Edison - who once said, "Restlessness and discontent are the first necessities of progress."
Tuesday, March 17, 2009
How To Assess Risk in Private Company Deals
Five Ways to Fix Up Your 401(k) Plans
By ELEANOR LAISE
In the midst of a market meltdown and economic crisis, many Americans' 401(k) retirement plans are looking a bit bedraggled. But some tender loving care from plan participants, employers and policy makers can help spruce up these accounts. ...
Tim Foley
Lawmakers and employers already are looking at ways to improve the 401(k). ... But you don't have to wait for change to come.
You, your boss and Congress can start fixing up 401(k) plans today. Here's how:
1 Save till it hurts …
... Think you can't save any more? Ask your payroll manager to calculate what your paycheck would look like if you boosted your 401(k) contribution, suggests Christine Benz, director of personal finance at investment research firm Morningstar.
"The percentages might seem daunting, but if you look at it in dollar-and-cents terms, you might find it's something you could easily implement," says Ms. Benz.
2 … Even with no match.
... If your employer has suspended the match, you should boost your own contributions to make up for it. Together, the employee and employer should contribute at least 10% to 15% of the worker's salary to build a healthy nest egg, retirement experts say.
The maximum amount most workers can contribute to a 401(k) this year is $16,500. Workers age 50 or older can contribute an additional $5,500.
3 Set it and forget it.
Sharp market swings can lead 401(k) savers to make some poor investment decisions, like fleeing stock funds simply because they've taken a dive. Investors who dump stocks at depressed levels lock in losses that could take a big bite out of their savings.
People who leave the asset-allocation decisions in the hands of a professional don't have to worry about making emotional investment decisions in rocky markets. ...
4 Pay attention to fees.
Hefty fees can put a lot of cracks in your nest egg. ... You should be able to see the total dollar amount you're paying in plan fees so you can compare the 401(k) and other savings vehicles such as an IRA, Ms. Benz says. ...
5 Get more workers saving.
Many companies don't offer 401(k)s, and many workers who do have the opportunity to invest often simply don't.
More and more employers are automatically enrolling workers. But many of these efforts focus only on new hires. They should also include existing employees. What's more, many workers don't have access to a 401(k). The costs and administrative burdens can be daunting for small businesses.
One solution might be for the government to make it easier for small employers to band together to offer workers 401(k)s, says Paul Stevens, president and CEO of the mutual-fund industry trade group the Investment Company Institute.
Email: forum.sunday03@wsj.com
Wednesday, March 11, 2009
Key Man Insurance: Why It Is So Important To Your Business
Written by Dave Lavinsky on Tuesday, March 10, 2009 ...To begin, Key Man Insurance or KMI is a life insurance policy covering a business owner, president or a key employee. The business is the beneficiary under the policy.
The fact that most venture capital firms require KMI explicitly shows that venture capital firms provide funding to PEOPLE, not firms or ideas. ...
What this does NOT mean is that you should rush out to purchase key man insurance if you are seeking venture capital. What it does mean is that you need to make sure that you have a management team that is worthy of KMI. ...
What it also means, and this applies even if you are not seeking venture capital, is that you should create systems to minimize the business risk of something happening to a key employee.
These systems can include:
You and your management team are the lifeblood of your business. You always need to be thinking about how to improve, protect and grow your team, as this will have the greatest impact on the long-term success, or lack thereof, of your business.
- Training manuals that document key tasks performed by key personnel, so that someone else could take over their job requirements in the event that they were out of the office temporarily or long-term
- A hiring plan that allows you to efficiently recruit and train new personnel
- Constantly networking and telling people the exciting aspects of your business so that there is a pent-up demand to work at your company
Sunday, March 8, 2009
Your Best Customers are Depending on YOU in Times Like These
Wednesday, March 4, 2009
Check out 10 Factors That Affect Employee Engagement
I want you to take a look at: 10 Factors That Affect Employee Engagement
- Professional Growth
- Personal Growth
- Leadership
- The manager
- The company
- The team
- Work environment
- Pay
- Respect
- Other personal issues
Four Mistakes Leaders Make When Downsizing
Avoid these management traps, and maybe your company can emerge from the recession in stronger shape
...If you're in a market segment that won't be hit too hard, you're lucky. If not, though, recessionary pressure need not spell disaster. If your company has been prudent in its use of leverage, you might even pick up a few points of market share as your competitors batten down the hatches. Just be careful to avoid the following four common mistakes leaders make when scaling back.
1. They kid themselves. ...[Leaders] tend initially to kid themselves in underestimating the scope of a downturn—and as a result, they find themselves chasing a falling revenue curve and risking death by 1,000 cuts.
... Instead, get your core team together and take a brutally honest look at how bad things are likely to get for your business. Then size your business to make a profit at the level of revenue you think is most likely. ...
2. They make across-the-board cuts. A common approach in a downturn is to declare reactive, across-the-board reductions—which usually just make things worse. ...
...[It] is vital that a company know exactly how much money it makes by customer group and by product. ... Identify the 20% of the activities that produce 80% of the results—and protect them at all costs.
3. They fail to demonstrate generosity and concern. ...Show courage and commitment—meet with people you have to lay off, help them transition, commit to show a generosity of spirit. Survivors in the organization will be watching you closely ... If they see even a hint of dispassion, they are likely to lose faith in you and begin to look for another job.
4. They clam up. ...As soon as you determine a course of action, communicate fully and often to the troops (BusinessWeek.com, 10/21/08). Send the signal that you fully grasp the seriousness of the situation, but that you also have a plan for helping the company survive and even flourish.
If you avoid the traps described above, you may even find that your business will emerge from the recession stronger than ever. ...
Keith McFarland is author of the #1 Wall Street Journal bestseller The Breakthrough Company: How Everyday Companies Become Extraordinary Performers. He is founder of McFarland Strategy Partners.
Monday, March 2, 2009
Small Businesses Could Lose More Than $5,000 Per Employee Per Year to Inefficient Communications
Communications barriers and latencies can cost small and medium businesses up to 40 percent of their productive time, according to a Siemens-sponsored global study.
On average, 70 percent of employee respondents of small and medium businesses (SMBs) with up to 400 employees said they spend 17.5 hours each week addressing the pain points caused by communications barriers and latencies, according to a global study sponsored by Siemens Enterprise Communications and conducted by SIS International Research. The research also showed that while SMB awareness of unified communications as a solution is rising, nearly 60 percent of SMBs do not currently employ one based on the sampling.
In addition, researchers at SIS International Research determined that the time spent per week dealing with communications issues was more than 50 percent higher in companies with more than 20 workers. In hard costs, the study concluded, companies of 100 employees could be losing more than $500,000 each year by not addressing their employees’ most painful communications issues.
Key Findings. The Siemens-sponsored SMB study ascertained the top five pain points to be, in order of their estimated expense to an SMB ...:
1. Inefficient Coordination: Sixty-eight percent of respondents have trouble coordinating communications among team members... They ... average 3.7 hours per week attempting to coordinate communications across team members, slowing the realization of goals and deadlines.
2. Waiting for Information: Sixty-eight percent of respondents said they experience work delays while waiting for information from others ... The average delay is 3.5 hours per week per knowledge worker. ...
3. Unwanted Communications: Unwanted communications, including low-priority calls and voicemail, were experienced by the survey group by 77 percent of respondents, who said they spend two or more hours per week dealing with unwanted communications. ...
4. Customer Complaints: Seventy-four percent of respondents said they average 3.3 hours per week dealing with negative comments or complaints from customers, specifically because the customer was unable to reach them in a timely fashion. This eight percent loss in productivity is itself significant, but the true cost of customer dissatisfaction may be much greater.
5. Barriers to Collaboration: Sixty-one percent of respondents find difficulty in establishing collaboration sessions with colleagues and average 3.3 hours per week attempting to address issues of inaccessibility or lack of full collaboration with colleagues.
... Overall, SMBs placed a high or very high priority on improving communications for mobile workers.
Researchers also confirmed that SMBs are increasingly using various communications technologies, including phone, instant messaging, and video conferencing, in an effort to increase productivity. ... The resulting fragmentation of the SMB communication fabric can create a barrier to effective communications and collaboration.
... “With the SIS research suggesting that unified communications can help SMBs eliminate as much as 20 percent of hidden costs due to fragmented communications, it’s clear that the return on investment is significant,” [said Frost & Sullivan analyst, Vanessa Alvarez.] ...
The study surveyed a total of 513 knowledge workers, in Brazil, France, Germany, India, Italy, Russia, United States, and United Kingdom. The knowledge workers also represented eight key vertical industries: communications, finance, healthcare, insurance, manufacturing, professional business services, real estate, and wholesale or retail trade. For an executive summary of the research, go to [www.siemens.com/us/open/smb].
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