Category: Business Strategy

You would certainly not like the idea of waiting for a period of 3 years or even more to buy your own home. In that case, many prefer to go for resale property. Buying resale property has several advantages. Not only you would be able to get a ready made flat to reside but also several other advantages.

The Advantages of Buying Resale Property

You get the opportunity to shift to the house immediately. This would be highly helpful especially when you have to shift to a shelter within a short time.

Many a times, you might be paying huge amount of money as rent and your calculations show that in the long run buying a property would be more economic than continuing to engage huge sums of money as rent. So, to lookout for a home within a short notice, buying resale property is indeed a good idea.

If you are an individual who loves to be located at a prominent position, go for resale property options. You would find as they were built quite early, they are usually located at good locations, at the heart of the city. In contrast, the latest residential developments are usually found in the suburban regions.
Though buying resale property would be advantageous to many respect, but you need to be careful while buying one. Your resale property is old after all and hence, you need to be assured of the fact that the building is still tough and durable.

Important Checklist for Buying Resale Property

Before you enter the flat, engage some professionals to check the plumbing and electrical works. Inspect whether the repair has been properly done or not. Try not to buy a property which is more than 10 years of age.

Your property must definitely be in good shape so that you do not have to spend much on its maintenance.

Check all the legal documents. The title of the property must be the name of the seller. Check whether all the duties and the dues are paid.

Inspect whether the property you are buying has any illegal constructions or not. In that case, you may get in touch of a lawyer or a civil engineer to learn about it.

Avoid buying resale property for investment purpose. If you are purchasing the property to expect huge returns, this won’t be a good business strategy. Purchasing resale flats is worthwhile only if you have plans to shift to the place immediately.

Let’s get started by concentrating on the S&P 500 – it is intrinsically an index of the 500 largest companies in America. Indeed, it is more. Contrary to popular misconception, the S&P 500 is not a simple list of the largest 500 companies by market capitalization or by revenues.

Rather, it is 500 of the most widely held U.S.-based common stocks, chosen by the S&P Index Committee for market size, liquidity, and sector representation. “Leading companies in leading industries” is the guiding principal for S&P 500 inclusion. We are starting here to achieve safety and diversity.

If you use the S&P 500 as your investment base you won’t have to worry if the CEO has resigned, the CFO has just been indicted, the stock has missed its forecast or any number of things that make stock prices flagellate unsuspecting investors and traders.

You ask: How can you make money investing on the S&P 500?

Consider its graph, the white, bottom most curve on the chart. As you can see, the S&P 500 goes up and down similar to stocks and hasn’t done so well over the past 3 years.

Wouldn’t we do better with a mutual fund? [Actually, you’re getting warmer.]

According to the Motley Fool, “During the 1990s, the S&P 500 has provided an annualized return of 17.3%, compared with just 13.9% for the average diversified mutual fund.” Over the past 3 years only 10 mutual funds had more than a 12% total return [data through 6/4/2010 from 12,392 funds, Morningstar]. You can see that the S&P 500 has not done well, but you would have actually done worse using mutual funds.

Instead of considering mutual funds I’m going to restrict our consideration to just two ETFs, i.e., SSO and SDS. I said simple; this is simple.

We’re going to invest in SSO when the market is rising and SDS when it’s falling. Both SSO and SDS are based on the S&P 500. They track its traded index, SPX. [You have to trade SPX because the S&P 500 is an index that isn’t traded.] The SPX is among the most traded equities and is also one of the most liquid. As an investment it brings diversification.

SSO and SDS are mirrors of each other. Whenever SSO rises the SDS falls, and vice versa. This allows us to trade in rising and falling markets. Simply, pick the correct ETF.

These ETFs have one other unusual property. They move twice the speed of the SPX; they are leveraged 2 to 1. [Proshares has a number of similarly behaving ETFs. They are called Ultra ETFs.]

You said: This would be a safe investment strategy! These are leveraged! Isn’t it safer to invest in sound American stocks?

Rather than give a large list of recently failed stocks, I decided to find if there were any stocks among the current S&P 500 that I would like to have held over the past 3 years. Only 2 emerged, Family Dollar and Autozone. More than 15% of the S&P 500 had more than a 75% draw-down and an additional 35% had losses over 50% at some time during the 3 years. These statistics do not include companies like Enron and Lehman that are no longer included. If they were included these statistics would be much higher.

I don’t know about you, but I’m not much of a stock picker. I want something truly safe. If you are comfortable with your results trading stocks, don’t bother reading further.

What about investing in utilities?

When I began investing, my Dad told me that utilities were always a safe investment. They paid a good dividend that never went down. Their customer base is locked in. Their rates are determined by the states and these always increase. What could be safer?

During the last 3 years, Duke Energy fell over 40% from a high of 20.66 to a low of 12.39. Over the same period, the index of gas utilities had a high of 33.84 and a low of 20.11. Electric utilities fared worse falling from a high of 40.01 to a low of 20.85. Even utilities don’t look safe anymore.

From my point of view, it’s the story of the turtle and the hare. Stocks behave like the hare. You cannot predict in which direction they are going to run.

These two ETFs, SSO and SDS, in comparison are turtles; admittedly turtles with racing stripes. At this point we do not have anything more than a rough plan for investing in the S&P 500. This is not enough to qualify as an investment strategy.

We shall begin to upgrade this plan into a practical trading strategy. First, we need an unbiased indicator to determine on which ETF we should place our money, SSO or SDS. Any day, the majority of pundits on CNBC will tell you the market is going to rise. But on the same day, many of their pundits will provide reasons why it will fall. So, you cannot rely on them. Also, the Futures, prior to the Open, seem no more reliable for choosing either SSO or SDS.

After many years of trying, I developed a market timer that combines the market movement of the SPX with market sentiment. I call this the SPXTimer. There are many market timers available. I’ll let you be the judge which to choose.

They are invaluable for making a well guided decision about which ETF to select. Mine gives you three choices. When it’s bullish take SSO; bearish SDS and when it’s neutral stay in cash. What could be simpler?

The red curve, third from the top judging from the right hand side of the chart, shows the results of trading SSO and SDS from 9/12/2007 until 5/5/2010 only using the SPXTimer. $10,000 invested on 9/12/2007 grew to $13,737. Most investors and funds didn’t do that well over this difficult period.

I think you will agree, these results are not very good in terms of what you would hope to achieve. Look at the yellow oval in the middle the graph. During that interval of time, the investment fell from a high of $14,469 down to $11,158. That’s a big hit. We would like to sleep well at night; that fall would make sleep very difficult.

Sometimes these ETFs do not move in sync with the market timer. A little patience is required before charging into the market. I added a mild momentum constraint to the strategy to ensure the entry is in sync with the timer. The ETF’s momentum, not necessarily the price, is required to be rising over 2 days. [A service bureau provides me with this information.] Sometimes this constrains delays entry for several days.

The blue curve provides the results of adding this constraint. Here, based solely on the S&P 500, my market timer and an entry constraint, the $10,000 investment grew smoothly to 16,525. That’s over 20% per year! There were pull backs, but you could sleep soundly.

I was still concerned with giving back profits. After each big run-up in profit, it seemed there was a comparably big pull back. Many investment managers recommend adding to a position as it is rising in value.

I decided to try subtracting from the position size as the profit rises. If timed properly, this might reduce the amount of profit given back. Plus, it would reduce the risk while adding some of the profit to the bank. To do this, I decided to incorporate the following Money Management with the two strategies that were in place.

Say you started with $10,000. The idea is to keep the money at risk between $9,000 and $11,000 [+/- 10% of the initial investment].

Whenever your equity grows over $11,000 sell enough shares to withdraw $1,000. This should reduce your money at risk to under $11,000. The next time it appreciates over $11,000, do it again.

If, on the other hand, the investment falls below $9,000 add $1,000 worth to the ETF investment.

The results are remarkable. This investment, the yellow, top-most curve, grew to $17,780. That’s close to 30% annually; not bad for a turtle! The chart doesn’t show this statistic, but 75% of these trades were winners.

I repeated this test on three more broad based indexes: the Nasdaq 100, S&P Mid-Cap 400 and the Russell 2000 changing only the two ETFs. Each did better. The statistics of these investments, starting on 9/12/2007 with $10,000 and ending on 5/5/2010, are shown in the table below. All data is based on back-testing, not actual trades.

The basic plan: buy one of these ETFs when bullish and the inverse ETF when bearish, or stay out of the market in cash, is as simple as it can get. The SPXTimer brings order and safety to the investment because you know whether to buy the bullish ETF or the bearish ETF. The entry condition, combined with this money management strategy, will improve your investment results beyond what you might hope to achieve with stocks or mutual funds – with much less risk. Now isn’t that what you wanted all along?

Footnote
You may be wondering about the choice of dates; particularly since on 5/6/2010 the Dow fell over 1000 points in less than a half hour. Many of these ETFs were first introduced in 2006 and 2007. As a result, data was not collected for the SPXTimer prior to mid 2007. The start date corresponded to the first change to a bullish signal. On 5/5/2010 the timer signaled a close for all bullish positions. Prices in the table reflect the Open of 5/6/2010.

Any great consulting firm has a suite of classic and emerging business strategy development frameworks. Firms and consultants use these business strategy development approaches to look at, analyze, and solve a number of different types of business problems, which occur in different business situations. Many such business strategy concepts hinge on the foundational thought leadership of Michael Porter, the originator of contemporary business strategy. Through the years, top consultancies, such as McKinsey and Bain, have come up with frameworks that are widely used in the corporate world today.

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Structured business communication is oftentimes framed under a business framework. Crawl Walk Run is a popular way of thinking for representing the progression of organizational change, from an initial crawl stage eventually to walk activities and eventually tothe run phase of automated processes. The Pyramid Principle is ingrained into the presentation storyboarding process. Well known ones include Pinto?s Pyramid Principle, which is commonly used by management consultants and management executives in developing ppt presentations.

A common business strategy problem many methodologies aim to solve is the challenge of achieving sustainable sales growth. In particular, enterprise companies struggle to grow. Companies that have greater than 20% sales growth almost always dwindle down to 8% within 5 years. Between the 1960s and 2010, Fortune 500 companies experience an average growth rate of in less than 6% in real terms (and under 10% in nominal terms). Only about a third of the Fortune 500 companies are able to sustain revenue growth above the national GDP and generate returns above the Standard & Poors 500. Furthermore, real revenue growth is much less stable than ROIC ranging from 1% to 11%. Also, 90% of them are focused across the 4 sectors of Financial Services, Life Sciences, Technology, and Retail. For those companies that do achieve high growth rates, these growth rates also decay quickly. The fact is that most organizations have difficulty achieving significant growth, YoY.

For traditional growth strategy thinking, many people rely on the time-tested business strategy framework Porter?s Five Forces, developed by Porter. In Porter?s Five Forces, we look into various forces that affect any sector, which include internal rivalry, threat of new entrants, customer power, supplier negotiation power, and threat of substitution products. By evaluating these industry forces, an organization can decide on its competitive strategy, which falls into either one of four focus areas: cost leadership, differentiation strategy, cost focus, or differentiation focus.

There are a number of paths to growth, which can be categorized into the two areas of increasing existing business scope and growing the value from current business. To maximize the value from the existing business, a company can better its value proposition, strengthen customer relationships, optimize pricing, penetrate new markets with their existing offerings, and improve its product mix. To expand the business scope, an organization can branch off into emerging segments, expand into new categories, develop new services, innovate new brands, develop new formats and distribution channels, and expand geographically.

To develop a robust business strategy, organizations all must perform business strategy development beginning with a collective set of beliefs around its business positioning and identified strategic barriers to growth. Proper strategy development involves more than a focus on maximizing profitability. Strategy is about value innovation, strategy is about competitive selection, and strategy is about business agility. To properly gauge and analyze your strategic challenges, you must begin with a comprehensive current state understanding of your situation. The next steps include defining what the future state vision of the organization is and then delving into the details of strategically planning how to achieve that state.

A newer business strategy development idea addressing the growth strategy challenge is called Blue Ocean Strategy. Blue Ocean Strategy represents a shift in thinking to make competition irrelevant, thus creating a blue ocean; whereas, in the traditional competitive environment, business play in a crowded, red ocean business environment. With value identification, a company truly understands what the customer values and prioritizes its resources and business initiatives per such customer-centric beliefs. Effective business execution relies on both concept execution and creating a sustainable organization culture. Value Innovation Strategy thinking focuses on enabling innovation, value creation, and effective execution. With value creation, a business selects and develops the optimal growth option by finding the best tradeoff between costs and value.
business strategy

Knowing how to approach investors is not the only thing you need to know when you meet with an investor. Investors like to see numbers and you need to be well prepared if you dont want to get blown out of the water. Usually, when you meet with an investor, an investor will ask you several questions that can cause you to either win the investment or loose the investment, depending on how you answer these questions and how well you can defend your answers.

How much money are you asking for and what will you use it for? This obviously will be the first and the most critical question an investor will ask you as he starts the meeting with you. How you answer this question can be very critical. If your figures are wrong and your answers dont seem confident to the investor, you can kiss the funding good bye. So, what can I do to have the best chances to win the investment that I need for my company? When preparing your business plan, you should think about spending money to hire the right people and obtain the right resources to have a good realistic prognosis that investors can be interested in. The first thing you should do is to hire an accountant and legal counsel. What? Why do I need a lawyer for? Companies need to be registered and need to have a legal definition. Legal definition is usually the abbreviation that follows your companys name, such as LLC, Ltd., Corp., etc. These are usually the legal titles in the United States. Other countries can have different legal definitions for companies, such as GmbH or AG in Germany, OOO or OAO in Russia, s. r. o. in the Czech Republic, etc. A good business lawyer can find the best legal definition for your company, which investors would like to know. The accountant should be hired to balance the books and have all the percentages of your company well balanced and clearly defined.

The accountant can create the spending plan for the capital. This is very important. When starting a company, you will have many expenses, that the capital is to help finance. Furthermore, an investor will not give you a $3 million investment in one lump sum. You have to have a set of milestones that you will have to meet. You will be given a tranche of $50 to $300 thousand that will be used to accomplish each milestone. Only once a milestone is met, will the next tranche be issued. So what do you need to do with each tranche? Well, this is where the accountant plays an important role. You need to show the investor that you can balance the budget. Even when you do win the investment, if the investor sees something that is not right and milestones are not met efficiently, you might not get the next tranche. This is important. You need to have a percentage for monthly salaries, a percentage for product development, a percentage for real estate, etc. All this needs to be clearly mapped out.

What is your companys valuation? Another important question that you need to answer correctly and have realistic figures for. If your figures are too high or you deliberately hype up your figures, investors will catch on very quickly and see right away that youre not serious. If your figures are too low, the investor might see that there wouldnt be any value and wouldnt be worth their investment. Your accountant should be able to make these projections also. Investors are very savvy in forecasting the markets and basically take risks if the market potential is there for them to make a great profit from their investment.

Knowing this, you need to have your company valuated realistically with realistic figures that investors can relate to and your analysis should be very accurate and coincide with the investors analysis. This is very important. If anything is wrong with the valuation data of your company, the investor might either deny you funding or might make you work on it even more to get it up to their standards.

Whats your exit strategy? Investors invest in your company to make a profit, not to be charitable. This is why you need to plan for an exit strategy. Most investors, especially your classic equity investors, such as venture capitalists, will want to invest in your company for a certain period of time and then they want to make an exit and collect their profits. This exit strategy can also be known as a liquidation event. There are several options for exit strategies, but you should keep all your options open when planning your exit strategy. Keep in mind, that though an exit strategy is important, you should focus more on building a valuable company that can generate a large amount of revenue. There are several exit options that you can choose from below.

IPO or initial public offering, is one option. This is usually when a company is prepared to go out to be publicly traded on the stock exchange. To prepare for this, your company will need to get mezzanine funding, which is usually used to balance the companys books to have it set for public trading.

Management Buyout is a strategy that is a slow sale process of a company. Management buyouts are usually done when the management of a company and either an investment firm or another company work together with the ultimate goal of one company buying the other out.

Leveraged Buyout is also where a company is bought by a financial institution or another company by the buying company leveraging the buyout via a particular debt or a condition for an investment.

These above mentioned exit strategies are not the only options, however. Other exit strategies can include mergers, buy ins, recapitalizations, and more. You might not know what can be the best strategy at the time of the exit, this is why it should be kept open.

The stakes are always high when you’re in business. Aside from the constant need to dominate your competitors, you’re also prone to a lot of stress and hassles in the working environment. Time counts, and one can’t afford to waste a single minute. Even a simple task such as document shredding tends to consume the productivity of an employee.

Whether you’re part of a business conglomerate or a simple franchise, you’re going to encounter sensitive information vital to the business. Confidential data tend to accumulate over time, and in order to not encounter problems in the future, these data need to be kept under lock and key or completely destroyed.

Most business owners find it wise to outsource paper shredding services from other companies. Although storing documents is good, it doesn’t give business moguls the assurance that they’ll be kept safe from rivals. Sensitive business information can cause serious threats as well as damage to the business if it gets in the wrong hands. Opting for shredding services will assure businesses that there will be no traces of sensitive company information spreading about, and it also gives them the following benefits:

Security

This is the ultimate benefit of having a shredding service. Data management agencies assure clients that there will be no vital pieces of information breaching across competitors or nosy people. In addition, shredding also reduces the business’ risk of falling victim to identity theft, and mishandling money due to unnecessary document storage costs.

Cost-efficient

Clients are assured that data management agencies such as Los Angeles shredding service providers aren’t costly. In fact, it’s very affordable – even a small franchise business can obtain hire them. Shredding agencies use superior facilities to help them with the shredding process; these machines are so modern that it only requires very little time to shred large amounts of documents. There’s no need for the business to hire a regular staff member to perform the job.

Efficiency

The minutes spent on shredding could’ve been used for performing a productive task resulting to profit. Efficiency is what Los Angeles shredding agencies are always aiming for. Shredding of vital documents can be done in minutes when a professional handles the job instead of the employee, making the business more productive.

Save on Storage Space

Stored documents tend to eat office space. It’s best to get rid of them by obtaining Los Angeles shredding services since office rents have escalated. Businesses these days can’t afford to waste a single space for storing documents. Visit theshreddingservices.com for more information.