Nick Yates on Travel

The tropical Central American country of Costa Rica boasts reasonable prices and a location scant hours away by air from major U.S. cities.  It also has friendly inhabitants, beaches on two oceans, vast rainforests and impressive volcanoes.

It’s long been a Mecca for environmentalists, who revel in the generous amount of land the Costa Rican government has set aside for those especially interested in viewing nature’s wonders.

Perhaps few countries benefit so much from compact size as this one.  In the space of a day, you can drive from the volcanic sands of idyllic Pacific beaches to the coral sands of Caribbean ones.  You can view lush, triple-canopy rainforests at coastal elevations — and then the distinctly different ones found among the clouds, without the rigors of great distance.

The Nicoya Peninsula, on the Pacific side of the country, contains the beaches most popular with travelers.  Montezuma Beach is as pleasant as they come, with a mile or more of golden sands punctuated by volcanic rock outcroppings.  Jaco Beach, to the east across the water, is a surfing center;  Tamarindo Beach, to the west, is an established tourist center.

Long known for its language schools, the country is host to a continual legion of Spanish language learners who soak up the culture while improving their Spanish speaking ability.

Costa Ricans — Ticos, as fellow Central Americans refer to them — are a hospitable lot.  Their accepting nature has been popular with both American and European travelers for decades, and they have come to accept their good fortune with a grace which becomes them.  It is rare indeed to find anything unflattering said about them or their society in the popular tourist guides.

Much of this is the result of a stable political life which seems to respect differences of opinion in a way unique to this part of the world.  Perhaps this also accounts for the easygoing nature of Ticos themselves — or is maybe the result of it.  Costa Ricans are used to their country being thought of as an island of political tranquility and reason, and find pride in it.

Costa Rica offers a mellow alternative to some of the more fashionable hotspots south of the border.  And sometimes, mellow is just better.

Content approved by Nick Yates.

Author: Nick Yates

All that heat your office computers put out in the course of enabling your company to stay connected daily with the marketplace — suppose it could be captured and channeled in useful ways?

The next approach to providing efficient cooling for increasingly powerful IT hardware systems may be a move away from air cooling toward water cooling.  Especially as the trend toward stacking computer chips one on top of another internally, to improve communication between them, is making heat dissipation a problem that threatens to outgrow traditional air-cooling solutions.  In the huge regional data centers which have sprung up to handle the flow and storage of information, a more efficient manner of handling excess heat is already much needed.

Some technicians are thinking out of the box to solve this problem.  Innovations such as micro-sized circulation channels fabricated into high performance silicon chips, for instance, allow water to circulate through and cool critical parts.  Water, even in miniscule amounts, can absorb heat thousands of times more efficiently than mere air.  And water’s cooling efficiency may become absolutely necessary as computers continue to gain computing power while simultaneously shrinking in size.

The heat from a medium-sized data center, consuming one megawatt of power, could potentially be used to heat about seventy average-sized homes!  Suppose the heat transferred out of your company’s own number-crunching computers could be channeled to heat your own office space or that of your entire building?  Or perhaps used to lessen the need for electricity to heat water for sanitation or production purposes?

Pairing a necessary function such as equipment cooling with other critical needs could have a very real effect on the total output of pollutants by municipal power plants.  While lowering office electricity bills, this otherwise wasted heat energy could be recycled into useful purposes that both save money and lessen the dependence on outside resources.

With today’s emphasis on “green” living, that could prove popular indeed. This has been Nick Yates with another installment of business tactics.

The rise in energy prices has added not only to families’ transportation costs but to those of businesses as well.  High energy prices have also diverted extra dollars away from non-energy consumer spending.

Happily for both businesses and consumers the recent energy price increases have, as might be expected in a free market economy, resulted in a rise in innovation which promises relief — perhaps soon.

The world car industry seems to have set aside, at least for now, its quest for a usable hydrogen fuel cell to powered its cars — in favor of more readily attainable battery power technology.  According to scientists, we’re close to producing practical and affordable batteries for use in electric cars, and within the next few years mass produced and affordable electric cars should actually start rolling off assembly lines in numbers.  Several leading car companies are now talking about a model year 2010 kickoff.

Initially, such cars will include small internal combustion engines which will be used primarily to provide charge for batteries rather than for propulsion.  What seems do-able now are cars that can travel forty or so miles on a single charge, but which are able to go beyond this by using small fuel engines to generate electricity and top-up batteries while on the road.

If battery charging can be reduced from six hours down to mere minutes — as might well become the case as battery technology evolves — shopping mall parking lots could feature free charging stations as a lure to shoppers.

Larger vehicles such as trucks may have to continue to rely on souped-up diesel engines for power.  But with passenger cars out of the mix, diesel fuel prices should fall accordingly.

If all this results in lower — or at least stabilized — transportation costs, businesses should benefit not only from lower overall production costs but also from the freeing up of consumer dollars for purchases of other goods and services.

Which would be good news indeed. Fuel costs in Australia are still very much an issue, and probably will be for the foreseeable future. This has been Nick Yates with your business installment for the week.

As your business grows your enterprise resource planning (ERP) software may face growing capacity problems.

Where to go from there?  There are robust software options on the market designed for small, mid-sized and large companies — Microsoft’s Dynamics AX and Infor, to name two in the mid-sized range.  The Fortune 500 crowd may opt for truly heavyweight systems such as SAP or Oracle.

But to whichever solution your company turns, there will be conversion issues that many business will imperfectly come to grips with.  Starting off in-house.  No amount of reasoning is going to convince some hold-out staffers that they need to spend mega-hours learning some new system — and then to labor mightily to put it in place.  Also, the new system designated by management isn’t going to immediately win all hearts and minds.  There will be as many perceived benefits to alternative systems as there are hearts in your office to champion them.

And, sad to say, software salespersons sometimes exaggerate.  Really.  The ease with which your legacy systems will roll over into the new one may not (read will not) quite live up to pre-sale predictions.  Be ready for operational havoc — and have the foresight to plan conversions for the least busy part of the business quarter.

Make sure the vendor supplying the enterprise software assigns their top people to the account.  The last thing your company needs is to find itself paying top consultant dollars to train new consultants in the software they’re already supposed to know!  Have the names and requested hours of preferred consultants included in the purchase deal itself, just so there’s no misunderstanding about your expectations.

And get the consultants’ advice before attempting to customize the new system to better meet your needs.  Not every change you affect will sit well with the underlying program code.  Ditto for that legacy data you might be sorely tempted to blithely feed in without any serious second thoughts.  What’s the saying about fools rushing in where angels fear to tread?

And do keep in mind that the full advantages of modern enterprise systems only come to those prepared to winkle them out.  Remain alive to potentialities and open to learning about them.

Author: Dave Miller

You’ve got a great idea for a business - you know it will be successful - if you can just get the money to make it happen. You know that the best way to present your project to lenders is with a business plan.

Lenders have money to lend - if they can just find a business that they can reasonably expect to be successful. They know that the easiest way to review a project is by reading its business plan.

Presenting your business plan to a ready lender should be a match made in heaven, right? Yes, but…

Every borrower thinks that theirs is a great deal. To hear some borrowers tell it, the millions will magically appear with no chance of failure. Life is good and it’s going to get better.

Lenders, on the other hand, are paid to make objective judgments - to get past the sales pitch and identify the real deal. Lenders don’t care what you think about your project - they know that you love the deal even before they open your business plan. Their job is to make an objective assessment of your plan. In a word, they need facts.

A fact can be defined as knowledge or information based on reality. While you can present anything as knowledge or information, the lender will decide whether or not they believe that your information is based on reality. Do the following and lenders will likely conclude that your statements are factual:

Keep your statements clear and concise - unread is worse than unbelievable it’s unknown. Use as few words as possible while still getting across your message. Lose the flowery adjectives and state simple, objective, reasons why your business plan will succeed.

Avoid technical or industry jargon. If you must use jargon, make sure that you explain its meaning. No one is impressed that you know all the latest buzzwords within your industry. Rather, they are unimpressed that you weren’t able to communicate your message without resorting to jargon.

Quote research and sources. To state “the industry will grow at a rate of 15% annually” is likely to be read as a sales pitch. To state “A recent US Department of Commerce study shows that…” is likely to be read as fact. Good sources of low cost or free independent research include government agencies, industry associations, franchisors and, if yours is an industry with public companies, stock analysts.

Avoid stating your own opinions. Rather than saying “We believe…” state the reason you believe, hopefully, as a believable fact. If you must use an unsubstantiated opinion try to use that of an outside professional (your accountant, lawyer, appraiser, etc.).

The watch phrases for a successful business plan are “short, sweet and to the point” and “factual and if not provable, believable”. A short, well written plan loaded with verifiable facts is much more likely to succeed that a long, poorly written one, loaded with flowery writing and your personal opinions.

Author: Dave Kauppi

I must admit that I have had a bias against my clients selling their businesses to private equity firms until I discovered that there are some situations where it might be the best exit strategy. Our firm represents business sellers primarily in the information technology and healthcare industries. Because the valuation multiples in these industries can get a little rich, they do not normally fit the more conservative EBITDA models of the private equity industry.

We normally achieve a better initial valuation from industry strategic buyers that build other synergy factors into their purchase valuation models. In this article we will present some situations where the private equity model is a superior solution for the business seller. We will also present, as one of my colleagues calls it, the “mathamagic” of a good private equity acquisition. Below are four scenarios where private equity may be the best solution.

1. A company in need of growth capital

2. A company where one partner wants to retire and sell and the other partner wants to continue to run the business for several more years

3. A business owner that has 85% or more of his net worth tied up in the business and is “business poor”

4. The business owner that is nearing retirement and wants to take some chips off the table from a position of strength

Before we explore these in greater detail, below are the general investment criteria for most private equity buyers:

1. Strong Management

2. Leading market share or Rapidly Growing Market

3. Established brands and/or strong customer relationships

4. Strong sales and distribution capabilities

5. Platforms with potential for expansion into new products, services and technologies

6. A minimum EBITDA level (private equity firm specific) - Small $2 million to $5 million, Medium $5 million to $10 million, and Large greater than $10 million

7. A minimum transaction size and equity investment level (private equity firm specific)

8. Management teams interested in retaining an ownership stake

A hypothetical transaction:

The business owner is 50 years old and has reached a crossroads point in his company. The business is doing $25 million in revenue and producing an EBITDA of $3 million. The owner is considering taking the company to the next level with either a major capital expenditure or a major expansion of his sales effort. However, he is at the point where he should be diversifying his assets and not plowing an even greater percentage of his net worth back into his business. He loves his business and is not ready to retire.

If he sells to a strategic buyer, for example, he may get a higher initial price. For this example, let’s say that he can get $25 million from an industry strategic buyer. A private equity firm that specializes in his industry offers him a company valuation of $21 million and wants him to invest some of that equity back into the company and have he and his team remain on board to run the company. The “mathamagic” is as follows:

Sale price $21 million

Total debt used to fund the transaction(65%)$13.65 mil

Total equity investment required $7.35 million

Private equit firm portion (70%) $5.145 million

Owner reinvestment portion (30%)$2.205 million

The beauty of this model for the owner is that the private equity firm welcomes the equity reinvestment by the seller at the same leverage that the PE firm employs. You might think that if the owner invested $2.205 million into a company valued at $21 million that his ownership percentage would be 10.5% ($2.205 million divided by $21 million).

Because the PE firm relies on debt leverage, the owner gets to reinvest with his ownership equity on a par with the PE firm. Therefore, his $2.205 million represents 30% of the equity in this company and he now owns 30% of a $21 million company. One could argue that he really owns 30% of a $25 million company based on the strategic company valuation. The economics of the initial transaction are:

Company selling price $21 million

Owner equity reinvestment $2.205 million

Owner pre tax cash proceeds $18.795 million

Owner value creation

Value of 30% interest in $25 mil company $7.5 mil

Add cash proceeds from the sale $18.795 mil

Total post sale value $26.295 mil

Now let’s look at how this can get really exciting. First, the owner has secured his family’s financial future by taking the majority of his company value in cash allowing him to greatly diversify his asset portfolio. He still gets to run his company. He receives an industry standard compensation package with bonuses as an employee CEO. He gets to retire in another five years, which was his original schedule, when the PE firm exits from their investment.

He now has a deep pockets partner to actively pursue his growth strategy. With a private equity firm that specializes in his industry, this is very smart money. They leverage their industry contacts and industry expertise to expand markets and distribution.

They actively pursue tuck in acquisitions to add to the organic growth that they help orchestrate. For purposes of this example, we will assume that the PE group invites the previous owner to invest in these tuck in acquisitions at the same leverage so that his ownership is not diluted. Over the next 3 years they make several small acquisitions totaling $12 million and they employ the same 65% debt. The total equity requirement is $4.2 million. The previous owner reinvests $1.26 million to retain his 30% position.

Fast forward 2 more years (typically 5 year holding period) and the company is now at $100 million in revenue and is a valued target of a big strategic industry player. The PE firm sells the company for $225 million. Our owner’s final cash out is valued at $67.5 million. Not a bad outcome for our business owner. Below is a more in depth look at the situations that this strategy can be successfully employed:

A company in need of growth capital - This is a cross roads decision for an owner. He recognizes the potential in his market, but in order to capture it, he must make a substantial investment back into the business either in the form of debt or his own capital. He determines that having a deep pockets partner with industry presence and momentum provides him a superior risk reward profile.

A company where one partner wants to retire and sell and the other partner wants to continue to run the business for several more years - often a successful business is run by two partners with a meaningful difference in age. One may be 65 years old and is a 70% owner in the business and the junior partner is 50 years old and a 30% owner. The senior partner decides that he wants to retire and wants the junior partner to buy him out.

The junior partner does not have access to the capital required. Now he is faced with the company being sold to an industry buyer and he looses his desired management control and his normal retirement timeframe. This is an ideal situation for a PE group to acquire the senior partner’s equity and retain the rest of the management to run and grow the business.

A business owner that has 85% or more of his net worth tied up in the business and is “business poor” - This is a fairly common situation and sometimes for marital harmony, the business owner decides to unlock the liquid wealth in his business. The spouse is often in competition for her mate’s time with the mistress - translation the business that occupies 60 plus hours of his time per week and much of his thought outside of business hours.

That is bad enough, but when every spare dollar is plowed back into the business to support his growth goals, that can be the breaking point. The conversation might be something like, “You keep telling me we are wealthy, so where is the vacation, the new house, the spending money we should have?” It just might be the right time to recognize your life’s priorities.

The business owner that is nearing retirement and wants to take some chips off the table from a position of strength - I can not stress enough how important this can be to your family’s financial future. You are 60 years old and you want to retire in five years. Your company is doing great and you still have the energy and desire to run your business. Why would you sell now? There are several compelling reasons.

This strategy requires the business owner to view the business sale and their retirement as separate, contingent events. One answer is to move up your sale timeframe, but not necessarily your exit timeframe. While this scenario may be difficult to envision at first, it can be very advantageous.

Too many owners wait too long and end up selling because of a negative event like a health issue, loss of a major account, a shift in the competitive landscape, or family demands. So, the best decision is to sell your company to a PE group 5 years before you plan to retire, put the bulk of your net worth into a diversified portfolio of financial assets, and agree to run the company for the PE firm for five years.

An additional, unsettling factor for business owners contemplating retirement are potential changes to the tax code. Democratic party leaders, including the major presidential contenders, have put forward proposals to change the current tax structure. Business owners and other wealthy citizens should pay close attention. Most of the proposals would increase personal income tax rates and other forms of taxation.

For example, the current 15% tax rate on capital gains, previously scheduled to expire in 2008, has been extended through 2010 as a result of the Tax Reconciliation Act signed into law by President Bush in 2006. However, in 2011 this lower rate will revert to the rates in effect before 2003, which were generally 20%. It could potentially go higher, if the federal budget deficit worsens and Congress adopts a tax the wealthy philosophy. The 2 democratic candidates are in favor of a 25% or higher capital gains tax rate.

Finally, the baby boomer retirement issue presents another compelling reason to sell now and retire later. Experts project a doubling in the number of businesses that will hit the market looking for a buyer by 2009. According to the Federal Reserve, in 2001 50,000 businesses changed hands. That number rose to 350,000 in 2005 and is projected to increase to 750,000 by 2009.

As the overall population ages and sellers outnumber buyers, the laws of supply and demand point to an erosion in valuations for business sellers. At this point, the trend looks to be gradual. However, as we have seen recently in the prices of certain stocks and debt obligations, a rush to the exits can precipitate a sudden, calamitous drop in prices.

As I said at the beginning, I had a somewhat narrow view on selling businesses to private equity groups based strictly on the initial company valuation compared to potential strategic buyers. I am now enlightened and can more objectively view the potential outcomes for the business owner that encompass the owner’s retirement timeframes and risk reward profile. A private equity firm can provide an initial - secure your family’s future - cash out. An industry specialized PE firm with a track record can provide, not just the first bite, but often a very exciting second bite of the apple when you exit together in five years.

By Robert Flowers

Wealth is a mindset. Something that one is going to need in order to become prosperous. In other words, there is no wealth with a poverty mindset. One will remain in poverty. The experiences of starting a business is good, it is an idea. However, if one’s mind is not ready to receive wealth he or she will remain poor. Think about it for a moment.

Eighty percent of the population is living in poverty or just above poverty. Even the ones that are in the rat race to keep up with the Jones. Either debt, earned income, or lack thinking are just some of the anchors that keeps one living the life of penury. One must concentrate on passive income, portfolio income. Utilize the earned income to move you towards passive income. Starting a business is a good way of moving in the right direction. However, there is no magic button in starting a business my friend. It takes planning, development and most of all persistence. This is where most of us fall to the waste side.

The quickest way to start a home base business is to first think about what you want to do and how much value will it contribute to the world. For example, if you want to make Two Hundred Thousand dollars a year, find out who’s doing it. Mimic what they are doing. That in itself will cut a lot of time and wasted energy from your learning curve. Next, what value will it bring. Will what ever you want to do bring enough value that will warrant Two Hundred Thousand a year? For example, when I go to pay my electric bill.

Think about all the people who need electricity and are willing to exchange money for it. Reasons, They are providing you with lights so that you may see, electricity for your stereo so that you may listen to music, and other devices that need this service. That’s value. One must learn that there is no free lunch, and even with a free lunch, you must take action to eat it. Your work is cut out for you in developing your business, but you must be in the right mindset. Your creator can only do for you what he can do through you.

Let’s say one wants to start a shoe store and he only has a budget for a shoe shine stand. He or she must work that shoe shine stand until it produces enough to expand into a shoe department that sells shoes. You must grow in everything you do. There is no such thing in not having enough. It is enough for everyone. When one is looking for Prosperity, it is like a fish in the Atlantic ocean looking for water. It is all around you. But you must be open to receive it.(by Randy Gage author of Prosperity).

Learn how he went flat broke and was in debt and is now a multi-millionaire within three years. This is what I did when I got sick of being in poverty. I watch The Secret, then it led me to research on prosperity. All other things were attracted to me just from changing my thoughts. I got rid of the lack thinking of poverty mindset and adopted prosperity thinking into my everyday life. It is not quick fix. It takes time to undo what you have been doing for years.

Start looking at your bills as blessings you have already received. Because that’s all they are. Now, once your mindset has changed, you can go into business giving value and not trying to make a quick buck that you won’t be able to keep anyway. That’s why the laws of chances don’t work. Gambling, winning the lottery. If winnings are made and that money is not producing anything of value, one will loose it all. That is not true prosperity. So there is the light switch. It is up to you to turn it on!

By Pam Lawhorne

I am a firm believer that everything happens for a reason… even bad things. You’ve heard the old saying “What doesn’t kill you will only make you stronger.” Well that statement couldn’t ring more true. When I do seminars or training, even after I go through my entire presentation, it never fails that I will have at least one person come and ask me “How will I know if I have what it takes to become a successful entrepreneur?” My answer is always the same “Success is ready for you. The real question is are YOU ready for success?”

People often want to know what the definition of success is. Well, that depends on whom you ask. The definition in Webster’s Dictionary is: The achievement of something desired, planned, or attempted. I think that’s a good start. My definition of success may be different from your definition because “success” in any form holds a different connotation for everyone.

Will becoming an entrepreneur make you successful? Well that’s a question that only you can answer. I know women who are stay at home moms whose sole purpose is to raise their children and take care of their families. To them this is an accomplishment and it therefore makes them successful. I know of others who are desperate to rise up the corporate ladder. Once they get there they feel a sense of accomplishment and to them, they are successful. By definition, I have achieved success. I’ve achieved several things that I have set out or attempted to do, however, I have not realized the level of success that I am yearning for.

For me, as a business consultant, my success is not measured by how successful I have personally become but by how successful I make my clients. I know that when people hire me as their consultant they are hiring me because they know that I have a vested interest in their future. Why? Because my livelihood as a consultant depends on their success. So as you can see again, the definition of success to one person may be different than that of another.

I once had someone ask me at a presentation I did what was my definition of an entrepreneur. I had to think for a moment but my answer was basically that an entrepreneur is someone who is willing to take risk, both calculated and uncalculated. Entrepreneurs throw caution to the wind and dance to their own beat versus that of others. The dictionary says an entrepreneur is a person who organizes, operates, and assumes the risk for a business venture. Now when you put the definition of success and entrepreneur together you get this: A successful entrepreneur is a person who achieves and plans out organizing, operating, and assuming the risk for a business venture.

Author: Sean Mcalister

Entrepreneurship is often difficult and tricky, as many new ventures fail. Entrepreneurs usually have strong beliefs about a market opportunity and organize their resources effectively to accomplish an outcome that changes existing interactions. Entrepreneurship creates jobs and drives the US economy. Entrepreneurs exemplify the American dream working without a boss and using their own hands to build a livelihood.

Business

Entrepreneurs that specialize in business operations are viewed as fundamentally important in the capitalistic society. Modern myths about entrepreneurs including the idea that they assume the risks involved to undertake a business venture, now appear to be based on a false translation of Cantillon’s s ideas. A person who can efficiently manage these factors in pursuit of a real opportunity to add value in the long-run, may expand (future prospects of larger firms and businesses), and become successful. Some distinguish business entrepreneurs as either “political entrepreneurs” or “market entrepreneurs,” while social entrepreneurs’ principal objectives include the creation of a social and/or environmental benefit.

Entrepreneurship

Previous studies have shown a strong link between high-potential entrepreneurship and subsequent economic growth. US Entrepreneurship and small business represent the third largest global economy. If we were to compare the size of the small business economy with the rest of the world, the US entrepreneurship and small business economy would rank third in the world behind the US medium and large business economy and Japan. I understand that some of my readers may be disappointed about me not having created my own company, long considered the epitome of “real” entrepreneurship. To others, entrepreneurship is about starting a business all on your own.

Resources

They are successful because their passion for an outcome leads them to organize available resources in new and more valuable ways. Those factors are now deemed to include at least the following elements: land (natural resources), labour (human input into production using available resources), capital (any type of equipment used in production i. Private-Sector Resources –Technical and business support resources willing to work with the little guy.

Social

A social entrepreneur is someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs assess their success in terms of the impact they have on society. While social entrepreneurs often work through nonprofits and citizen groups, many work in the private and governmental sectors. The terms social entrepreneur and social entrepreneurship were first used in the literature on social change in the 1960s and 1970s [1].

A female entrepreneur is sometimes known as an entrepreneuse. The research data indicate that successful entrepreneurs are actually risk averse. Most commonly, the term entrepreneur applies to someone who creates value by offering a product or service. The word “entrepreneur” is a loanword from French. Entrepreneuse is simply the French feminine counterpart of “entrepreneur”. Reich considers leadership, management ability, and team-building as essential qualities of an entrepreneur. A more generally held theory is that entrepreneurs emerge from the population on demand, from the combination of opportunities and people well-positioned to take advantage of them. An entrepreneur may perceive that s/he is among the few to recognize or be able to solve a problem.

Wishing you and your team Success!