The Business Value of Diamonds

As the king of jewelry, diamond has a huge business value which demonstrates its own superiority. It's expensive not only because of its natural quality but also of its great business potential.

It needs a great deal of time and money to find a diamond and cut it. Beyond its gorgeous appearance concentrate great efforts. The diamond deposit is not that easy to find, and this process requires several years or even decades of years. The cost of digging a deposit is incredibly high, which attributes to the high price of the diamond.

When it comes to cutting, design and skills are necessary. A good diamond needs to be polished well, or it will lose its own value. A small mistake in cutting may result in huge loss. In order to make good use of the material, the owner of the diamond will try his best to find the best cutter. The owner has to pay a lot to his employee.

Design is another thing that the owner needs to do. A good diamond should be in great shape. If the design is too easy or too complicated, it will affect the price of the diamond. What's more, some people are more interested in the diamond's appearance than its quality. A good design is definitely popular among them.

Diamond has a huge market as jewels. It attracts many women and makes them pay for it. Also, it's applied to the industrial world for its unusual solidness. In the financial world, however, diamond plays an important role as well. It has a store of value. Its value has already surpassed the gold, because its price is rather stable.

All in all, diamond has the functions of decorating and storing. It will be a good way to keep a diamond.

Monica is a freelance writer who has written thousands of articles on various niches. She likes to share her knowledge with her readers and provide them with the best information on various topics. She also likes to write about replica watch

Investing in Car Dealerships - How to Value Them

Most business valuations are driven substantially by the company's historical financial statements, tempered by other factors such as: location, brand name, management and such. In truth and in fact, the dealership's balance sheet represents less than half the information necessary to properly value an automobile dealership. The balance sheet is but a starting point from which a number of factors must be added and subtracted in order to determine the true value of the assets.

Valuing new car dealerships has to do with projecting future profits and opportunities based upon the "dynamics" of the particular dealership being valued and of the automobile business itself.

The Internal Revenue Service recognizes that valuations include more than financial statements: "The appraiser must exercise his judgment as to the degree of risk attaching to the business of the corporation which issued the stock, but that judgment must be related to all of the other factors affecting the value." Revenue Ruling 59-60, Section 3.03.

DEFINITION OF MARKET VALUE

The definition of market value according to the American Institute of Real Estate Appraisers' Dictionary of Real Estate Appraisal, is: "The most probable price in cash, terms equivalent to cash, or other precisely revealed terms, for which the appraised property will sell in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self interest, and assuming that neither is under duress." American Institute of Real Estate Appraisers, The Dictionary of Real Estate Appraisal. (Chicago: American Institute of Real Estate Appraisers, 1984), 194 195.

In Revenue Ruling 59-60, the Internal Revenue Service defines "fair market value" as follows: "...the price at which the business would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge and relevant facts."

The purpose of Revenue Ruling 59-60 is to outline and review in general the approach, methods and factors to be considered in valuing shares of the capital stock of closely held corporations.

The methods discussed in the Revenue Ruling apply to the valuation of corporate stocks on which market quotations are either unavailable or are of such scarcity that they do not reflect the fair market value.

The Ruling goes on to state that no set formula can be devised to determine fair market value of closely held stocks and that the value will depend upon such considerations as:

(a) The nature of the business and the history of the enterprise from its inception.

(b) The economic outlook in general and the condition and outlook of the specific industry in particular.

(c) The book value of the stock and the financial condition of the business.

(d) The earnings capacity of the company.

(e) The dividend-paying capacity. The ability to pay dividends is often more important than a company's history of distributing cash to shareholders, especially when valuing controlling interests.

(f) Whether or not the enterprise has goodwill or other intangible value.

(g) Sales of the stock and the size of the block of stock to be valued.

(h) The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter. With respect to an individual dealership sale, the best comparable is the amount the public company paid or received for buying or selling a similar dealership, not what the public company's stock value or earnings multiple, per se, that is reflected on the stock exchange.

In practice, in arriving at the fair market value of a new car dealership, several different formulas have been used:

1. Return on Investment (or earnings valuation) Formula: The value of a business to a particular purchaser based upon a return on investment analysis. This value varies from purchaser to purchaser, according to the purchaser's investment criterion, and it may or may not reflect fair market value. The National Automobile Dealers Association (NADA) refers to this value as "Investment Value." A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995, Revised July 2000.

The capitalization rate is determined by the stability of the dealership's earnings and the risk involved in the automobile business at the time of sale, investment, or valuation. This method is highly subjective as the capitalization rate is based upon the particular appraiser's perception of the risk of the business; consequently, the lower the appraiser perceives the risk, the lower will be the capitalization rate and the higher will be the price he would expect a potential purchaser to pay for the business.

In short, the capitalization rate is the appraiser's opinion as to a rate of return on investment that would motivate a prospective purchaser to buy the dealership. Considerations include those specified in Revenue Ruling 59-60, as well as available rate of return on alternative investments.

2. Adjusted Net Worth Formula: Net worth of the company, adjusted to reflect the appraised value of the assets used in the day to day operations of a business, assuming that the user or purchaser will continue to make use of the assets. To this "net worth" value will be added blue sky or goodwill, if any. The "Adjusted Net Worth Formula" is the most common method used in purchasing and selling a new car dealership.

3. Orderly Liquidation Formula. This method values the assets as if all of them had to be sold - not at a "fire sale," but in an orderly manner and without time constraints. Normally, if the dealership is profitable, some value will still be placed upon goodwill.

4. Forced Liquidation. The lowest of all values, forced liquidation means that all of the assets must be sold at a forced sale such as an auction, creditors' sale or by order of a bankruptcy court. A bankruptcy proceeding regarding a new car dealership almost never brings goodwill. This might be the most appropriate formula if the dealership has no lease (or only a short term remaining on its lease) and cannot, as a practical matter, relocate.

5. Income Formula. The income formula is basically taking the store's earnings and multiplying it by an appropriated capitalization rate. The trick here is the definition of "earnings." In determining "earnings" a perspective purchase could use any combination of the following:

(a) current earnings

(b) average earnings - add the last five years together and divide by 5

(c) weighted average earnings - usually an inverted weight with the current year multiplied by five, last year by four, the year before last by three, four years ago by two, five years ago by one, then adding them together and dividing by 15

(d) cash flow - net income plus agreed add-backs such as depreciation, LIFO, personal expenses, excess bonuses and such

(e) forecasted earnings - future projected earnings discounted to present day value.

6. Fair Value. NADA also refers to a third value in addition to "Market Value" "Investment Value," which it calls "Fair Value." NADA describes "Fair Value" as being "...primarily used when a minority shareholder objects to a proposed sale of the company in assessing liquidating damages." and defines it as: "The value of the minority interest immediately before the transaction to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the transaction and without reference to either a minority or non-marketability discount."

The NADA guide states: It is not common for auto dealers to run across this particular valuation standard. This author has never used, nor has ever seen this value used with respect to valuing automobile dealerships.

As can be seen in this report, this author in discussing valuations excludes what NADA describes as "Fair Value".

7. The Greater Fool Theory. The National Automobile Dealers Association publication (A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995), bemuses, in part: "A Rule of Thumb is more properly referred to as a 'greater fool theory.' It is not 'valuation theory, however." (In its "Valuing an Automobile Dealership: Update 2004" NADA dropped the reference to "fool" and simply states that the theory is ". . . rarely based upon sound economic or valuation theory," but advises sellers to "Go for it, and maybe someone will be stupid enough to pay [it]."

The considerations for valuing new car dealerships are more complex than those used for valuing most other businesses. Dynamics such as the unique requirements of automobile manufactures and distributors can limit the amount of monies that may be paid for a dealership, regardless of what perspective purchasers may offer to pay for the store.

Therefore, the value of a new car dealership varies based upon the needs and ability of the purchaser and, consequently, the same dealership could have two different values to two different purchaser and both values would be correct.

Thus, our valuation of the subject dealership should be considered in the context and limitations of the facts and history of new car dealership sales as delineated herein.

Mr. Pico served as a court appointed "Consultant to Debtor" in bankruptcy cases, a "Court Appointed Mediator" in automotive disputes, the "Court Appointed Arbitrator / Appraiser" in partnership disputes, a "Court Approved Consultant to Receiver" in a check-kiting case, as a "Superior Court Mediator" in dealership/lender litigation and has been recognized as an expert witness on both State and Federal levels.

He has consulted on upside-down positions of over $50 Million, out of trust position of over $4 Million and a bank overdraft of $30 Million. Since 1972, Mr. Pico has completed over 1,000 automobile dealership transactions, whose combined values exceed One Billion Dollars.

In 1986, he authored and National Legal Publishing Company published the nation's first book on Buying and Selling Automobile Dealerships. You can view his biography at http://www.advisingdealers.com

Chronic Diseases - How Expensive Are They?

A very small percentage of our population is consuming a very large percentage of our health care dollars. These patients with chronic conditions account for 83% of the $1.67 trillion spent on health care and cause two-thirds of the deaths in the U.S.

The major chronic conditions are: heart disease, stroke, cancer, diabetes and chronic lower respiratory diseases. These diseases are major killers and a major source of illness, hospitalization and health care costs. Not to mention the cost of long-term disability associated with them. And without aggressive intervention these costs are expected to worsen.

As mentioned earlier total national spending on healthcare rose to $1.67 trillion dollars. That is over $5,500 per person in the US. And that is a 7% increase over the year before.

Health care spending for a patient with a chronic condition is on average two and a half times greater than for a patient without a chronic condition. Or put another way the average cost for a patient with a chronic condition is over $13,000.

It is not surprising that many of those people with chronic conditions have less insurance requiring greater out of pocket expenses. Also they file for bankruptcy more often (51% of those that file for bankruptcy cite medical expenses as the cause). And the number of medical related bankruptcies has increased 30 times since 1980.

To make these figures more devastating one only need to factor in the aging population. By 2011 the first of the baby boomers will reach 65, the added strain that will put on these numbers cannot be doubted. Also due to medical technology, those with chronic conditions are living longer, requiring more services and additional costs.

For a more detailed look at how this relates lets look at one condition and see its impact. Diabetes is the body's inability to utilize glucose. Some diabetes can be controlled with diet and/or oral medications while another type requires insulin injection and close monitoring of glucose levels. Diabetes can be linked to other illnesses such as neuropathy, glaucoma and heart disease to name a few. Over 18 million Americans have diabetes and roughly one third don't even know they have the disease.

By the year 2050 it is estimated 29 million residents will be diagnosed with diabetes. It is now the sixth leading cause of death, with over 200,000 deaths each year from diabetes or related complications. The estimated cost in 2002 was $132 billion, of that $92 billion was for direct medical costs, $40 billion was for indirect costs such as lost work days, restricted activities and disability.

Heart disease and stroke amass similar numbers: 70 million of us or 1 in 4 live, with cardiovascular disease; and heart disease is responsible for 1 death every 34 seconds. It cost the U.S. $394 Billion in 2005 from direct and indirect costs.

You can see how quickly these chronic conditions can amass staggering numbers. You can also see how those few in the Medicare/Medicaid rolls can account for 83% of health care spending.

Many state governments are looking at this problem and possible solutions to ward off financial crises. Even the federal government is investigating cost saving measures. Disease management programs are one option. These programs not only help prevent chronically ill patients from further disease and costly treatments, it also involves patients in managing their own care. This frees scarce health care resources.

Disease management is used by insurance carriers and private industries. Those identified with diabetes for example are contacted and kept informed about the importance of healthy behaviors. Specifically, they are contacted by phone and asked how often they check their glucose and what the values are. Those without strict control are advised to visit their physicians.

Another method to limit chronic conditions and their enormous costs is through prevention. Several states have instituted these programs. Whether it be cancer screening procedures like mammograms or colonoscopies in Michigan or smoking cessation programs like Arizona and California, states are becoming more proactive.

It is vital to our nation that chronic conditions such as heart disease and stroke be limited. Not only for the direct costs each of us has to pay but the indirect costs to our workforce and nation. And as the population ages, more and more patients will be diagnoses with chronic conditions thus ballooning an already strapped system. We must find a solution now before the cost is beyond reach.

I have been a nurse for over 30 years. And as a baby boomer, I am concerned about the state of health care in the U.S. My son and daughters will be asked to change the system that will provide care for my care when I become Medicare eligible.

For more information on chronic diseases and health care please visit Health Resources Health Resources provides timely information and tips on a variety of health care issues. Health Resources focuses primarily on prevention as a means to lower health care costs. Visit Health Resources today.

Measuring Brand Equity - The First Crucial Step in Maximizing Value

Intangible assets are crucial to a company's future. Assuring long-term growth and constant increase of shareholder value depend on the company maximizing its brand value.

Improving brand value should be a key goal for management and workers alike. To improve brand value, it must be constantly monitored and measured, as exemplified by the model described herein, which was developed for that very purpose.

Accounting standards address the issue of measuring the value of intangibles, for instance through IFRS3, but these present methods for measuring brand value are flawed. One of the problems is that there is no distinction between goodwill resulting from the brand and goodwill in general. For another, a brand developed in-house does not appear in the books: it is not considered an asset. Its value only appears during an acquisition event, whether it is acquired alone or as part of a business operation. Bare accounting practices, as expressed in the company's books, cannot provide a full picture of the company's value, including all tangible and intangible assets.

To illustrate the point, just compare the book value of companies versus their fair value (market value). Over the years, it has become apparent that intangible assets are driving value creation for shareholders. A study conducted over 20 years on the Russell 3,000 companies found a sharp shift towards intangible values. If in 1978, 95% of a company's value was clear from the books, by the beginning of the 2000s that proportion had plunged to about 15%. Other studies carried out among S&P-500 index companies and among the 350 largest-cap companies listed on London's FTSE delivered similar results - 70% to 75% of the companies' values, respectively, could not be explained by their books.

Let's look at specific companies. In Disney's case, 70% of its value can't be explained through the book figures. For Heinz that ratio rises to 85% and for Microsoft, 98%. Coca Cola's ratio is 80%. Where is the value coming from? Intangible assets, mainly the brand.

Companies are increasingly beginning to grasp that they have to manage their intangible assets, just as they do their tangible ones. During the economic downturn in the early 1990s as part of the global economic cycle, companies slashed expenditure. They scaled back their tangible assets and stopped investing in supporting their intangible assets, including their brands - without carefully considering accruing and future outcome of these actions.

In hindsight, we now know that companies who didn't neglect their intangible assets, and continued to build and financially manage their brands, weathered the trouble. The capital markets applauded their sustained growth, too. As a retail giant, Wal-Mart for instance is highly vulnerable to market fluctuations: yet it did not cut back spending on branding, and in fact leveraged the recession to build up its brand even more, creating a sustainable competitive edge for itself. The lesson is that even when times turn rough, a company must not cease managing its portfolio of tangible and intangible assets. It needs not to stop spending, but rather spend effectively.

The benefits of measuring brand value touch on almost every aspect of the business, from strategy and management to finances, marketing, and even the legal department. Brand value is a factor when analyzing returns on marketing drives, brand portfolio, or brand performance, even management performance. Brand value is key when evaluating a company for the purposes of M&A or in the event of ownership disputes, licensing lawsuits, partnership conflicts, and licensing agreements.

The Tefen-Globes-Giza Model

The model we developed is based on premium pricing, a method designed to calculate the current net value that the brand can be expected to produce for the company, and to other links in the value chain along the years.

The model focuses on the basic role of the brand - to create a preference based on which the consumer can be charged a premium. Therefore, the monetary value that the brand creates is the total premium revenues collected from the consumer, minus the brand's maintenance costs (advertising, support, and so on), capitalized based on the risk of the brand minus the rate of growth.

How is the premium underlying the brand calculated? The premium is the difference between the branded product's price, and that of the identical non-branded product available on the shelf. The premium is the end that which the consumer is willing to pay.

The premium paid by the consumer is divided by the different value chain components. For example, the premium paid for Coca Cola, will be divided between Coca Cola, the brand owner, and the specific retailer selling the brand.

Tefen and Giza carried out risk evaluation of each brand in the Israeli market, assessing the risks at three levels: sector risk, the specific risk of the brand, and the inherent risk of the brand owner. Each of these levels present different risks for the brand. The analysis compared these risks and focused on evaluating each and every brand by analyzing the ten most dominant parameters, such as degree of regulation, steadiness of demand, entry barriers, and intensity of competition. The lesser amount of risk, the greater the value the brand will hold.

There are other models, alongside the Tefen-Globes-Giza model used in business circles to evaluate brand value. One such model is the Interbrand model. Developed by Omnicom, Interbrand ranks the leading brands in world markets each year and the leading brands in selected markets. The model's methodology measures the brand value in three phases: financial forecasting - identifying revenues from the model or service that originate from the company's intangible assets, and building an estimate of future revenues originating from the intangible assets over the next six years; the role of branding - identifying the proportion of revenues from the intangible assets that originate from the brand alone; and brand strength - to calculate the net present value of the brand's revenues, a deduction representing the risk profile (time and likelihood of the scenario).

The Tefen model, unlike the Interbrand model, can measure more than just the brand value of companies: it can also measure the brand value of products. This is especially significant in markets such as FMCG, where companies have developed into "houses of brands." Leading companies such as P&G and Unilever should measure the value of each brand separately, since the consumer is usually unaware of the corporate brand.

Brand Management

Much has been written about brand management, but a thorough investigation using the Tefen-Globes-Giza model shows that a company must invest its efforts on three main fronts to squeeze the most out of its brand: volume, premium, and branding expenditure. Correct management on the three fronts will maximize the brand's economic potential for the company, thus creating value for both the company and the consumer.

The product and its characteristics are fundamental to creating high brand equity. Comparisons cannot be drawn between products and services provided in a saturated market to those in "blue oceans," which can grow much more and for which the consumer will pay much greater premiums. Therefore, brand equity is not only a function of the brand itself, but is also influenced by market characteristics such as regulation, entry barriers, and steadiness of demand.

The company usually cannot affect these external parameters, but should be aware of them. There are three main factors which can be influenced and can increase brand equity: volume, premium, and branding expenditure.

Volume

Naturally, the three parameters affect one another. Product volume is affected by the premium charged from the consumer, which in turn is affected by the investment in marketing the brand.

There are many ways to stimulate volume demand for a product, such as stretching the brand or approaching new consumer segments. Adjusting the value offering of the brand to changing market needs is critical to maintaining sales.

Let's take the example of Ford and Toyota, which were measured using the Interbrand global brands model. In 2003 both companies had roughly the same brand value ($17 billion for Ford and $20 billion for Toyota). By 2007, however, Toyota had a brand value of $32 billion while Ford's had shrunk to $9 billion. The Globes-Tefen "brands index," an annual study of the 100 leading brands in Israel, likewise showed that Toyota's brand value in Israel increased by 32% from 2002 to 2007, while Ford's dropped in real terms, losing 2% in the five years.

How does a thing like that happen? Toyota identified rising demand for economic and environmentally friendly cars, while Ford continued to make gas guzzlers and SUVs. The Detroit giant misread the future of the market and lost miles to their rival from Japan. Toyota recognized the market's yearning for "green" and adjusted its model, offering perceived added value to the consumer in the form of more efficient cars.

The success of the Toyota Prius and the good press the model received showed that identifying and meeting existing demand required lower investment on the brand than the standard models launched by the other car companies.

Premium

The premium charged for the brand is the difference between the price of the branded products and the price of comparable products lacking branding. The premium positions the brand, and determines its profitability.

Setting the premium lower forces the manufacturer to drive heavy demand for the product in order to achieve high brand value. Drumming up demand of that magnitude requires heavy investment in branding, which in and of itself, diminishes the brand value. On the other hand, setting the premium too high can hurt sales and stunt growth.

To properly set the premium the brand can collect, the manufacturer must know the market inside and out: the competition and consumers. It also depends on the positioning of the brand itself - is it a luxury brand? Does the added value that it brings the client justify a high premium? What is the highest possible premium under prevailing market conditions?

Luxury brands are the best example of charging a high premium in exchange for added value, for the feeling of exclusiveness and perceived quality. If a mass market brand can command a premium of up to 30%, then for a luxury brand the premium could reach more than 90%. The Interbrand index of 100 global brands includes three luxury brands of Louis Vuitton - Moet & Chandon, Louis Vuitton, and Hennessy. Louis Vuitton has a brand equity of more than $20 billion.

Another area where brands command high premiums is sports. The Tefen-Globes-Giza brands model places Nike Israel and Toyota Israel side by side, with a negligible difference of 2.5% between their brand values. However, Toyota Israel's sales turnover is much greater than that of Nike Israel. The reason for their practically identical brand value is the premium that Nike charges, meaning the percent of the price that the customer is paying for the pleasure of the brand. It can be more than 50% of the final price. Toyota, which is considered expensive for a non-luxury brand, charges a premium of less than half that of Nike.

Brand expenditure

This front includes all the direct expenditure on branding your product, from studying the market to designing the product to marketing -whether the branding is above or below it. This does not include actual product development costs, but focuses on expenditure that advances the product as a brand.

The company's goal is to optimize these expenses while preserving the values of the brand, whether at the level of design or experience. Ideally, the product and the value that the consumer derives from it, should speak for itself. Positive buzz, or word of mouth, can be major marketing tools.

Our index of the 100 leading brands in Israel placed Google Israel in 21st place, and immediately following it was the Danone dairy brand. The brand value of the two brands was practically identical, even though Danone's local branch makes more than double the revenue of Google Israel. How is this possible? Danone spends terrific sums of money in marketing and promotion, while Google relies on the good name of its parent company and the strength of its products. Compared with peer enterprises, it invests relatively little on branding itself, which inflates its brand equity to beyond that of heavy-spending Danone.

A Juggling Act

Balancing between volume, the premium, and branding expenditure is a perpetual juggling act by the brand manager throughout the brand's lifetime. The manager's purpose is to maximize the value of the brand for the company and the consumer. Maximizing the brand's economic value should be a basic goal of strategic planning, alongside the company's desire to maximize shareholder value. Management should ask whether the brand is realizing its full financial potential.

Volume, the premium, and branding expenditure are interlinked. Change one and you change the rest, directly affecting brand value. Measuring these components is not trivial, but it is necessary to keep track of brand value and to design a strategy to maximize it. A company that wants to maximize value must keep constant track of these parameters, and define goals and work plans, which should all be a part of its corporate marketing strategy.

http://www.tefen.com/Strategy.aspx

http://www.tefen.com/TheTefenTribune.aspx

Valuing/Appraising Your IRA Account - What Are the IRS Rules?

What is a Self Directed IRA?

An IRA account that requires that the account owner to make all of the investment decisions is called a "Self Directed" IRA. A "Custodian" is required to hold the investments in the account and to do the record keeping and the governmental reporting. There are two types of IRA accounts; one type is known as a "Traditional IRA"; the other is know as a "Self-Directed" IRA. They both have the same governing rules and regulations. With a Self Directed IRA there are very few limitations as to what types of investments are allowed. The Traditional IRA is generally limited to investing in listed securities-stock, bonds, mutual funds, etc.

Investing in Promissory Notes/Mortgage Notes

Many private mortgage notes are funded through Self-Directed IRAs. Real estate investing and business investing can also be done in a Self-Directed IRA account.

IRS Reports Required

Section 408(i) of the Internal Revenue Code of 1986 requires that the Custodian of an IRA account make certain reports regarding such account to the Secretary of the Treasury and to the individual for whom such account is maintained.

Section 1.408-5 of the Income Tax Regulations provides that the Custodian of an IRA account shall make annual calendar year reports concerning the status of the account. The information required in the reports include: the amount of contributions, the amount of distributions, the value of the account, and such other information as the Commissioner of the IRS may require. IRS Form 5498 is the form used to satisfy Section 408(i).

Question:

Is the IRA required to value "hard to value" assets---promissory notes, partnership interests, real estate, closely-held stock, collectables, etc.?

Answer:

Yes, annually. These types of assets, that do not trade on a public market, must be valued annually. A written appraisal valuation report prepared by a recognized third-party expert is usually required to establish the fair market value of the asset.

Question:

Who is responsible for insuring that the IRA's assets are properly valued?

Answer:

The Custodian is responsible. The Custodian can order an appraisal valuation report, at the expense of the IRA account owner, to satisfy the annual reporting requirement.

Question:

What is the impact of declining property values on note values?

Answer:

IT IS HUGE! The historical value that you are carrying the note at in your IRA account may be overstating the fair market value of the note today by 15%, 25%, 50% or more.

Many promissory notes that were originated between 2002 and 2006 are now valued at a discount of 15% to 50% of their unpaid balance. That means that you are paying fees based on too high a value. Getting a current value appraisal may save you money on fees year after year.

Remember, "You can't do today's investing with yesterday's methods and be in business as an investor tomorrow" Unknown author

Lawrence Tepper specializes in: PROMISSORY NOTE SERVICES, VALUATIONS AND BROKERING
EXPERT WITNESS AND EXPERT CONSULTING SERVICES NATIONALLY

EDUCATION AND TRAINING- 1956 Law Degree /Accounting Minor from University of Denver
1961 to Present Colorado Real Estate Broker Specializing in Promissory Notes
1984 Certified Commercial Investment Member Designation From National Assoc. Realtors

PRACTICAL EXPERIENCE- Over 45 years of buying, selling, exchanging, brokering, and structuring promissory notes. Detailed, documented professional valuation reports for attorneys, CPA's, estates, and financial planners.

http://www.promissorynoteappraisers.com

Have Values Lost Their Value?

Values, everyone has them whether they're written down or not. Some are negative and some are positive. It's belief in them that gives them credibility and establishes their value. Where a mission statement defines a company's purpose, it is the values that help define the behaviours it wants exhibited in order to achieve the mission. Companies can spend ridiculously large sums of money defining, documenting and displaying their values. They're often quick to capitalise both internally to staff and externally to their market, when they (usually senior management or executives) are displaying those carefully crafted values. Yet it's interesting to observe how much faster they are to minimise, possibly even ignore, when they're not. Dare I suggest these often very expensive values only have value when it suits?

Some readers may be quick to point out a touch of cynicism and I'm not about to deny that may be the case, just as I always say 'No' as my starting position when negotiating a scope change to a project. Seriously though, how many times have you seen a list of values so lovingly laminated and proudly displayed in the corridors, inconsistently applied? What of those unwritten and unacknowledged values? Those that support 'when it suits me' or 'subject to my agenda being satisfied'. Why aren't they included on the list? If values are, and I quote "judgements about what is important" and "along with worldview and personality, they generate behaviour", then surely along with the positive we should also include the more negative or perhaps controversial ones. After all one persons negative could be another's positive and not everything can be fabulous all the time.

A recent discussion about a company that changed one of their value statements from openness and integrity to honesty with integrity suggested a need to change behaviours. Basically everyone was being far too open and there was potential for people to know too much. I can see how this can be a bit dangerous for a company, particularly when it comes to moles or leaks who like nothing better than to pass information on to those who shouldn't have it. The change they made may have meant 'we'll be honest about the stuff we do say, we just won't say everything'. Well, at least that's honest and tells everyone where things stand.

Values are about creating a culture and environment of desired behaviours and the value comes when they are believed by those on the receiving end. Rosabeth Moss Kanter writes in her blog post " Ten Essentials for Getting Value from Values" for the Harvard Business Review, "it's not the words that make a difference; it's the conversation". The behaviours experienced consistently every single day without exception must support a company's defined values, be part of all conversations and generate belief.

If that leads to values being listed along the lines of:

Keeping everyone in the dark, ie: Fear
Expecting loyalty while giving none in return, ie: Selfishness
Following the 'do as I say' model, not the 'do as I do' one, ie: Double-standards
Always being unavailable particularly when difficult decisions are required, ie: Invisible

at least be honest about it. Look at what is on the values list and challenge it. Make the list real. If an organisation wants to:

Change the culture
Be a great place to work
Develop loyal customers

spending mega-bucks to refresh the values list is probably not the answer and will likely cost a packet. Far more can be achieved by simply matching the spoken and written word with everyday actions. Take a leaf out of The Undercover Boss TV program - get out of the office, mix with the troops on the ground, and find out how those beautifully branded and laminated lists are really being applied. Whether the experience results in personnel changes, training, coaching, or the type of wobbly only a 4 year old in a supermarket can have, it'd be worth it. Employees are the ones who will vote with their feet when a company's values don't match their own. They lose faith, stop believing and feel they're compromising their personal values.

Don't run the risk of losing excellent, dedicated, knowledgeable employees. Value the values and whatever makes the list, be honest about them and in action with them at all times!

Deanne Earle is a global business consultant and program/project manager specialising in organisational change and IT-led projects that are complex in nature or in a state of crisis. She has authored the e-Books "10 Tips for Effective Change", and "Ignite the Possibility! How to Create the Outcomes You Want". Visit the Unlike Before website ( http://www.unlikebefore.com ) and Change Through Action blog ( http://www.unlikebefore.blogspot.com ) for more details, downloads, and free newsletters.

Texas Auto Insurance Requirements

Before you decide to put that key into that ignition, as a responsible driver you should make sure that you are adequately protected with the proper insurance coverages. There is a lot of information out there about insurance, and you know what they say about too much info? Well, if you have too much information it can get to a point where it's just too confusing to process.

A good insurance agent should take the time to explain to you about the insurance policy you just purchased. That agent should not let you leave his or her office until you are comfortable with your purchase and you understand the coverages of your policy. As a prudent seeker of insurance, you should familiarize yourself with the different options that are available to you.

Here is a brief synopsis of a typical Texas auto insurance policy:

Bodily Injury - provides liability protection if you are found liable of causing personal injury to a driver and/or passengers in the other vehicle/s that were involved in the accident. Medical expenses can accumulate rather quickly, so having this coverage will pay for reasonable medical costs and rehabilitative services.

Property Damage - insures you against claims of causing damage to the personal property of others that were involved in the accident. Property is defined as something physical in nature that is owned by a person or group. So for insurance purposes, property may include a vehicle, house, building, or fence, etc. So if you are found to have caused damage to someone's property, this portion of the auto insurance policy should cover it.

Texas limits of liability is:

$25,0000 per person for bodily injuries

$50,000 per accident for bodily injuries

$25,000 per accident for property damages

Now keep in mind that these are the bare minimum liability coverages that you must carry in order to operate a motor vehicle in the state of Texas. Also keep in mind that cars are more expensive to repair and replace, so make sure that you have enough coverage in the event that you hit one of those expensive vehicles. Your insurance policy will cover up to the amount that you selected on the declaration page of your policy, you will be responsible for the excess amount.

Collision - pays for the damages to the insured vehicle that were involved in a motor vehicle accident. If your vehicle is "totaled", you will be paid the actual cash value ( market value - less appreciation).

Comprehensive - pays for damages to the insured vehicle in which the incident was not cause by a auto accident (collision). Examples of other than collision incidents are: theft, flood, riots, and fire, etc.

Personal Injury Protection (PIP) - this is a no-fault coverage that will pay for medical expense regardless of whom is found to be liable for the accident.

Uninsured/Underinsured Motorist Protection - an inexpensive endorsement (optional addition) to your policy that will pay for your damages if you are hit by an at-fault driver that: (a) does not have any liability protection or (b) does not have enough liability coverage.

Again, there is a lot of information out there on auto insurance coverages, now you should be aware of the required liability limits in Texas and have a working knowledge of the major portions of an auto insurance policy. Feel better?

Rico Henderson is the owner Henderson Insurance Agency, providing Affordable Texas Auto Insurance. To learn more, visit his site at All-AboutInsurance.net.

Rico Henderson
Henderson Insurance Agency
3960 Broadway Blvd., Ste 111
Garland, TX 75043

Value Creation Model - Built to Sell

Valuing a company is the easy part; creating that value in the first place so you can measure it is a more formidable task. Create a Value Equation to build Worth into your company.

Determining value is more art form than science. True value can only be established at the time of a transaction, where willing buyer tenders payment and willing seller accepts it in exchange.

Buyers and sellers look at the component make-up of a company differently, and therefore, place different values on these ingredients and on the whole. To enhance the real company value, analyze company components as they relate to worth in the mind of potential buyers. Value to one buyer often does not necessarily hold the same value for another. Establish multiple buyer profiles depending upon the circumstances and prepare to build value each would be willing to pay for.

There are essentially two kinds of buyers - Strategic and Annuity Buyers, both with different motives. Yet, both demand returns for their shareholders.

The Strategic Buyer purchases for reasons that fit into their strategic plan. They benefit through synergies like acquiring customer base in expanded territories, new products, added capacity, and reduced costs, et cetera. This type of buyer may place some value in the first line management team, but will see added value in the ability to place their own managers into key positions.

The Annuity or Financial Buyer, on the other hand, sees value in the stand-alone entity's ability to generate cash flow from profits year after year. The institutional buyer places the highest value on how motivated and incentivized the existing management team is, and their receptiveness to remain to generate cash and profits. The owner/operator conversely will look at 'buying a job'.

Typically, strategic buyers of closely held companies purchase at six to 10 times earnings and/or cash flow, while annuity buyers pay two to six times cash flow. The ultimate worth of the company depends upon who the buyer will be. These multiples are usually considerably higher in public companies, but the concepts of building value are the same.

The essential, is to look at what is valuable and understand how to exploit and preserve this value. From the start, plan to sell the business and put value creation into perspective.

Free cash flow and the continued ability to produce it with reliable probability creates the greatest value. This is not as easy as it sounds. In fact, it can be complicated, is often misunderstood, and frequently is bungled. Look at the elements in the Value Creation Equation to see how each brings forth value and how together they compound the effect.

Value Creation = Net Asset Value + Future Revenue Stream + Going Concern Value + Incentive to Purchase

Net Asset Value (NAV)

Sometimes referred to as Orderly Liquidation Value, it is the cash net worth of assets less encumbrances if you were to liquidate these assets at a fair market price under orderly disposition conditions when liquidation is not necessary. This NAV can equal Net Worth on the Balance Sheet, but is often adjusted for the value of intangibles.

Simply stated: Tangible Unencumbered Book Value + Intangible Assets + Adjustments to Market Value (Over-amortized/depreciated/expensed assets, or usable Inventory written down lower than market value) - Obsolete Inventory and Bad Debts - Outstanding Obligations on open contracts = market value. Build a strong, healthy balance sheet with adequate reserves and proper statement of asset value, because this is a fundamental on which to expand a company and increase its worth.

Tangible assets can be appraised to establish their worth. On the other hand, intangible assets are harder to value because they are subject to interpretation. If you sell a machine you realize cash for the transaction; but if you lose a customer, no one pays you for it, they're just gone. Intellectual property is also hard to value, but filing more patents will generate value, particularly to those who can afford to protect them from infringement.

The real opportunity lies not in building asset base, but in building maximum return on those assets and deployed capital. Assets don't generate worth by themselves, they can only be used to generate worth. If the asset sits idle, it is actually losing value, but if volume causes the asset to work to produce output production, value is being created.

The closer the relationship of assets to realize $1 for each $1 dollar on the balance sheet the better. Cash and Securities fit this description. Accounts Receivable will be discounted as they age; focus on keeping the days outstanding as low as possible. Utilize percentage completion contracts when possible to keep receivables low and cash flowing.

Utilize just-in-time and consignment agreements to keep raw materials at the lowest levels possible to minimize obsolescence. Produce in-process work expediently to cover short-term needs. Build finished goods for firm orders or reasonable short-term expectations of sale, don't overproduce. If in a seasonable business cover production levels over the off-season with contracts for sale of goods just before the season, cover the risk with orders for goods. It may be better to have less than market demand if projections were off, compared to interest and carrying costs to hold artificial Christmas trees until next year.

Customer Lists, contacts, name recognition, trademarks, reputation, Web distribution channels and Internet presence are often not considered in asset valuation because they are not carried on the balance sheet. These assets, however, are often worth considerable value in the market place. The reasoning for this theory is that these assets can be turned into cash; therefore, should equal the related value they could generate in return for their sale. These intangible assets can produce future sales, profits, and cash.

Future Revenue Stream

A real value in any company starts with its revenue stream; the more you can count on it occurring, the more value it has. The value becomes the net present value of the after tax free cash flow stream of revenue under contract, plus repeat customer base. Contract backlog is worth much more than revenue that you must locate every year. The cost to re-create the sale each year is high in terms of time and human energy. Locate customers where multiple year contract environments can be set up. The government often awards contracts for multiple year periods. Many larger companies favor contract relationships with vendors to reduce the overall cost of screening vendors again and again.

While not as quantifiable as backlog, there is value in a customer base that's been maintained for a long period of time. The longer customers remain with a company, the more likely they will be loyal in the future. When customers stay with an organization, this is an indication of the value, which they receive from that organization. Conversely, customer turnover indicates their dissatisfaction in the company's ability to provide services. For example, software companies retain customers and repeat sales with product upgrades and gain new customers with import utilities for easy conversion.

Clearly growth in revenue volume is an indicator of valuation in a company that investors are willing to pay for. If customers flock at above industry levels to a company for the services that they provide, this is a good indication of the company's ability to perform at above expected levels. A motivated sales force with the ability to generate new revenues year after year has more value than a company who has a poor selling reputation. A lack of growth indicates that the company does not have an ability to increase its value over time.

When a company has a great, and believable, prospectus for the future, the buyer will often plan additional capital investment to fuel growth. If this case, the buyer could be motivated to pay a higher valuation for the company and then invest on top of it.

Going Concern Value (GCV)

Here is where the fun begins in all transactions. The going concern value and goodwill, or soft assets, will always draw the most controversy and discussion in terms of their valuation. These elements are most prone to differing interpretation by buyer and seller.

Here to is where you can build the most value into a company. Transaction value is only at a point in time. Buyers and investors look more to the company's ability to create additional value to enhance returns on invested capital as they hold their investment. Impart the elements that Future Buyers look for:

Businesses that create value. Consistency is the key. You must demonstrate growth in revenue, profit, and cash flow. Do everything in your power to eliminate and manage 'hick-ups' along the way. Audited statements go a long way toward verifying results, in spite of some recent press.

High probability of future cash flows. A history of positive cash flow at increasing levels is very important. True annuity buyers purchase cash flow not the business. Strategic buyers will value cash flow plus what could happen if additional capital is provided. After all, free cash flow determines the periodic return on investment and increases the potential for a much higher purchase price in the future.

Management team and human capital. Attract and motivate a marketing oriented management team with the ability to produce recurring profits, return on capital, and free cash flow as an annuity for the owners. Develop an in-place; stable, well-trained workforce to implement operating processes on an ongoing basis. This is the most valuable off-balance sheet asset. When the owner of a privately held business has transitioned out and is collecting the net profit and cash without participating in an active management role, the value increases dramatically.

The ability to sell, compete, distribute, produce, develop products and thrive. This stand-alone entity track record demonstrates the viability of the market relationship between the products/services offered to meet customer demand and need, ability of the company to compete, and company reputation in the marketplace. The more unique a product is the more value it contributes to the deal. The company must be able to differentiate its products and services from the competition, even if this is based mainly on perception. Remember, products do have a life cycle and require improvements to remain in demand.

The directors' and management's role must be to build Going Concern Value! The GCV can be best maximized with stable leadership, setting and following sound strategies to consistently bring products and services to market, all the while nurturing resources and implementing processes to manage the company. Here is where the greatest value resides.

Incentive to Purchase

Create reasons for a buyer to want to consider your company as an acquisition candidate. Buyers want a Fair Entry Valuation so that they can expect a realistic return potential. There must be Exit Options so that the buyer who buys your business can realize high ROI at the time they resell.

The better the company is at creating stakeholder value and shareholder return, the more interest there will be in buying some or all of the stock. While investors often buy on hope and promise, the dot com market sector collapse clearly indicates a need to ultimately produce returns to substantiate investment. Think for a moment, had many of the dot com managers built GCV to support their promising technologies, they might still be around today. Those that have built GCV have strong balance sheets, can weather the storm, and will undoubtedly find opportunities to gobble up assets from those who didn't.

Build on any one element in the Equation and you increase its individual value. Build up all elements in the Equation and you realize an exponential creation of value to the right buyer. The buyer looking for a standalone entity to produce an annuity stream will place the highest value on the company when all components are strong and it operates with little owner intervention. Buyers looking only for parts of a business to augment their own, will want to invest less and only place value on some components, regardless of how strong they are. For example, if you build a strong senior management team, but the buyer wants to run the business, they will place no value in your senior manager(s) that will be replaced.

Remember, as in Field of Dreams: "If you build it, they will come."

John M. Collard is Chairman of Strategic Management Partners, Inc, an Annapolis, Maryland-based turnaround management firm specializing in interim executive CEO leadership in small and mid-sized business, asset and investment recovery, investing in distressed troubled companies, and equity capital advisory. He is an inductee into the Turnaround Management, Restructuring, and Distressed Investing Industry Hall of Fame. He is Past Chairman of the Turnaround Management Association, a frequent author and speaker. (410) 263-9100 http://www.StrategicMgtPartners.com

Concerned with the Bottom Line? Consider Expense Management Automation - Part I

In Most organizations, travel and entertainment (T&E) expenses are often overlooked as insignificant or inevitable. Because of that, they do not immediately come to mind in the context of traditional supply chains. According to the Aberdeen Group, "Employee-initiated travel and entertainment (T&E) can account for one in five operational dollars a company spends (with even higher percentages at service firms)." Following is a discussion of expense management automation (EMA) as a part of total cost management (TCM).

Expense reimbursement mixed in manual paper-based procedures, lack policy enforcement resulting in lengthy and costly process cycles with no reporting or analysis capability. However, times have changed, and the tough economic conditions of the past few years have forced organizations to curb expenses and scrutinize travel policies. As a result, business T&E expenses are virtually untapped areas for process automation and cost savings in all companies.

Organizations all over the world are cutting direct costs, which make up 30-60% of most companies overall expenditures. Employee-initiated expenses, such as T&E contribute up to 20% to these costs. However, traditional expense management systems are time consuming, labor intensive, and lack a policy enforcement mechanism. They also require significant staff resources, including managers and accounting personnel.

Over the last decade companies have invested in electronic enterprise resource planning (ERP), building a sophisticated TCM infrastructure or better manage direct and indirect costs. However, little attention paid to automating and optimizing employee-initiated expenses. According to the Aberdeen Group, "EMA offers as much opportunity, if not more, as e-procurement in reining in costs."

Understanding Expenses

Many leading global companies with the most sophisticated ERP systems can provide detail such as the exact quantity, location and price of the smallest component of a commodity in their products supply chain. However, these systems fail to track how much employees spend on hotels, where they stay, and/or how much they pay per night.

According to the Aberdeen Group survey, despite million-dollar travel budgets and 100% manual auditing of all expense reports for policy compliance, in most companies support of the T&E functions for employees is non-existent or neglected. For example, top sales executives could spend hours each week preparing expense forms, finding receipts, and sending the paper packet (via overnight mail) to a manager for approval. Any problem with the report means several rounds of phone calls, which wastes employee and administration time. Additionally, if any out-of-policy expenses identified, managers usually view them with indifference. According to Aberdeen Group, many companies use employee reimbursement as a loophole to circumvent the accounting department, policies, and/or systems.

Overall, manual expense reporting has proven to be an inefficient, frustrating, and expensive process for all involved - an area ripe for automation.

The Power of EMA

As is true with any automated process, EMA is about enhancing collaboration, streamlining processes, controlling costs, and enhancing the information exchange within and across organizational boundaries. EMA helps companies focus on the bottom line and reduce costs by quickly and consistently collecting expense information, enforcing company policies, and gaining efficiency. The automation of expense management is no different than automating any internal process, and considered as a strategic tool in TCM.

Besides the manual method, there are other EMA methods, available in the marketplace, including outsourcing and licensed software. However, the most cost-effective method is a 100% Web-Based application service provider. Web-Based EMA solution providers target companies that push the envelope in business process automation and supply chain efficiencies using the Internet. "The companies that have embraced Web Based EMA solutions are reaping significant rewards ... and are also prepared themselves for when the market begins to grow again, as they can do more with fewer A/P employees.

Many companies promised that expense management process could simply be addressed using financial or sophisticated ERP system modules. However, according to the analysts, many best-practice companies have found themselves turning to Web-Based providers for ease-of-use and ease-of-implementation. Solution provider like iEmployee are addressing and solving real business issues, and the companies deploying Web-Based solutions are gaining significant and rapid business value -value that translates into business advantages that were unattainable before the advent of Internet technology. Key advantage of Web-based EMA:

In Most organizations, travel and entertainment (T&E) expenses are often overlooked as insignificant or inevitable. Because of that, they do not immediately come to mind in the context of traditional supply chains. According to the Aberdeen Group, "Employee-initiated travel and entertainment (T&E) can account for one in five operational dollars a company spends (with even higher percentages at service firms)." Following is a discussion of expense management automation (EMA) as a part of total cost management (TCM).

Expense reimbursement mixed in manual paper-based procedures, lack policy enforcement resulting in lengthy and costly process cycles with no reporting or analysis capability. However, times have changed, and the tough economic conditions of the past few years have forced organizations to curb expenses and scrutinize travel policies. As a result, business T&E expenses are virtually untapped areas for process automation and cost savings in all companies.

Organizations all over the world are cutting direct costs, which make up 30-60% of most companies overall expenditures. Employee-initiated expenses, such as T&E contribute up to 20% to these costs. However, traditional expense management systems are time consuming, labor intensive, and lack a policy enforcement mechanism. They also require significant staff resources, including managers and accounting personnel.

Over the last decade companies have invested in electronic enterprise resource planning (ERP), building a sophisticated TCM infrastructure or better manage direct and indirect costs. However, little attention paid to automating and optimizing employee-initiated expenses. According to the Aberdeen Group, "EMA offers as much opportunity, if not more, as e-procurement in reining in costs."

Understanding Expenses

Many leading global companies with the most sophisticated ERP systems can provide detail such as the exact quantity, location and price of the smallest component of a commodity in their products supply chain. However, these systems fail to track how much employees spend on hotels, where they stay, and/or how much they pay per night.

According to the Aberdeen Group survey, despite million-dollar travel budgets and 100% manual auditing of all expense reports for policy compliance, in most companies support of the T&E functions for employees is non-existent or neglected. For example, top sales executives could spend hours each week preparing expense forms, finding receipts, and sending the paper packet (via overnight mail) to a manager for approval. Any problem with the report means several rounds of phone calls, which wastes employee and administration time. Additionally, if any out-of-policy expenses identified, managers usually view them with indifference. According to Aberdeen Group, many companies use employee reimbursement as a loophole to circumvent the accounting department, policies, and/or systems.

Overall, manual expense reporting has proven to be an inefficient, frustrating, and expensive process for all involved - an area ripe for automation.

The Power of EMA

As is true with any automated process, EMA is about enhancing collaboration, streamlining processes, controlling costs, and enhancing the information exchange within and across organizational boundaries. EMA helps companies focus on the bottom line and reduce costs by quickly and consistently collecting expense information, enforcing company policies, and gaining efficiency. The automation of expense management is no different than automating any internal process, and considered as a strategic tool in TCM.

Besides the manual method, there are other EMA methods, available in the marketplace, including outsourcing and licensed software. However, the most cost-effective method is a 100% Web-Based application service provider. Web-Based EMA solution providers target companies that push the envelope in business process automation and supply chain efficiencies using the Internet. "The companies that have embraced Web Based EMA solutions are reaping significant rewards ... and are also prepared themselves for when the market begins to grow again, as they can do more with fewer A/P employees.

Many companies promised that expense management process could simply be addressed using financial or sophisticated ERP system modules. However, according to the analysts, many best-practice companies have found themselves turning to Web-Based providers for ease-of-use and ease-of-implementation. Solution provider like iEmployee are addressing and solving real business issues, and the companies deploying Web-Based solutions are gaining significant and rapid business value -value that translates into business advantages that were unattainable before the advent of Internet technology. Key advantage of Web-based EMA:

Quick to implement and easy-to-use


No Need to purchase equipment

No requirement for new software

No Special support needed from your information technology (IT) staff.

Pay-per-use

Low Start-up costs

Rapid return of investment (ROI)In Part II we have:

Functions of Expense Management Automation

Making Decisions

EMA yields Quick ROI

Fenil Shah is CEO of iEmployee a provider of Web-native, online time & attendance and HR/Benefit self-service solutions.

Resources:
Web Online Workforce Management Software
Online Employee Expense Management Software Solution

What Are the FHA Loan Requirements?

If you are planning on buying a home, then it is to your benefit to look at what FHA offers and what are the FHA loan requirements. Many people in America have benefited by owning their own homes thanks to FHA home loans. They have been instrumental in providing housing especially for middle income and low income families and the elderly.

First of all what is FHA? The Federal Housing Authority (FHA) is a government agency created to provide insurance protection to lenders who provide mortgages to homeowners.

Their insurance helps individuals who might not meet the mainstream lenders loan requirements, qualify for a home loan. FHA is designed mostly for first time buyer home loans.

The basic requirements are:

You must have a valid Social Security Number (SSN)

You must be a legal resident of the USA

Must be of legal age to sign the mortgage in your state.

To qualify for this type of loan you will need to fulfill the following FHA loan requirements before you can be considered:

Credit History

Unlike the traditional lenders, under FHA loan the lenders can build a credit history based on utility payments, rental payments, auto insurance payments, and other payments that don't appear in credit files.

The bottom line is that you may be able to buy your home with a low credit score which currently stands at 580.

They expect you to have at least a good history of timely payments within the last two years and have no arrears in your payments. You will not qualify for a FHA loan if you are in default on your student loan.

Income

The loan amount will depend on your income and the ability to make the installments.

They require that your mortgage, property tax and insurance should not exceed 31% of your monthly income with your total debt payments not exceeding 43%. They are very observant of the ratio of your income and monthly expenses.

Deposit

You will require a minimum of 3% cash on hand for the deposit and closing costs.

Collateral

Your home which will be the collateral should be valued at least 3% more than the loan amount.

FHA loan requirements are more generous than conventional loans however you must meet their criteria to qualify for a home loan.

It is important to take note that all lenders are not necessarily FHA approved. They have to be approved to offer the FHA option.

As you interview prospecting lenders ask if they are FHA approved before you start negotiating and discussing the FHA loan requirements.

With the FHA loan requirements which are generous you can easily own your dream home. Visit http://www.countrywidehomeloanssite.info and learn how to get your first time buyer home loans.

Customers Define Value

In the old world, we defined value for our customers. We typically left the customer out of the equation, while we defined and pre-packed the value. We then set out to persuade and convince the customer it was right for them.

Solutions vs. Products

In the new world, this approach is no longer effective. In the new world, the customer defines value. Customers want solutions. Solutions must be created dynamically for each customer. We can no longer afford to push "one-size-fits-all" or pre-packaged products. Although we've come a long way from Henry Ford's "they can have any colour they like as long as it's black.", we still expect our customers to make sacrifices in order make our products or services work for them. Idiosyncratic preferences are inconvenient to us. Changing preferences are inconvenient to us. If we had things our way, we would design algorithms for every aspect of production and set up assembly lines and cheap labour to turn out lots of product. Every time an important customer's preferences change, we need to modify our assembly line. Every time an algorithm is challenged, we need to hire expensive, thinking labour. Just as we find our stride, the pace or direction of the race changes. As it changes, those who can't deal with complexity, put their head in the sand. Those who can, keep their head up and pick up the pace.

Change is Constant

Not only do we have the new dynamic of who defines value, but we also have rapidly changing perceptions of value. Where once we could create the right products and rest on our laurels, now we must constantly re-evaluate our value proposition. Value is just a perception and perceptions can change in an instant.

First, we have to accept that change is a constant. Then we need to figure out how to retain the entrepreneurial talent that exists in our organizations. As we systematize business and introduce necessary discipline, we often inadvertently create an environment, which is hostile to entrepreneurial individuals, but attractive to what I call the "professional managers".

Professional managers are great at implementing systems and enforcing compliance. This talent pre-supposes a known and understood environment. Professional managers flounder in complexity. Complexity and uncertainty is where entrepreneurs thrive.

In the new world, we need to manage our businesses as two separate businesses: OldCo - the part of our business which can be reduced to an algorithm and therefore can be systematized. And NewCo - the part of our business that responds to new challenges and opportunities.

The Knowledge Funnel

According to Roger Martin, Dean at the Rotman School of Business in Toronto, knowledge comes into our organizations through a funnel. At the top of the funnel, something is a mystery. It forces us to ask questions. As we begin to figure it out, we begin to form rules of thumb or heuristics. Once the rules of thumb become better understood, we are able to convert our knowledge into an algorithm. Algorithms allow us to hire cheap labour to do repetitive tasks. OldCo lives with algorithms. NewCo deals with mystery and heuristics. NewCo requires far greater cognitive faculties and never shies away from new data, no matter how disruptive it may be. OldCo managers must be great analysts. NewCo managers must be synthesists, possessing the ability to put information together in new and creative ways. This ability to synthesize is what enables them to spot and create opportunities before anyone else.

Once we understand that our business comprises OldCo and NewCo, we can become proactive about change. We can gather information about how the world of our key clients is changing and we can anticipate their emerging needs and changing priorities. We can then collaborate with them proactively to figure out how to address their new challenges. The OldCo part of our business is about following and repeating a known but rapidly aging success formula. The NewCo part of the business is more about "sense and respond" to our changing landscape. There is no algorithm because there are too many unknowns.

CRM as Digital Nervous System

In order to stay ahead of these changes, we must develop a digital nervous system that enables us to see and hear what's going on with our customers. OldCo must become adept at gathering customer information. NewCo must be adept at synthesizing and interpreting customer data.

Are your CRM and other supporting systems and processes set up to support both OldCo and NewCo?

Adrian Davis is a business strategist and trusted advisor for chief executives and business owners. He is a thought-provoking speaker and is frequently called upon to address senior management teams and sales groups on the subjects of corporate strategy, competitive advantage and sales excellence. To sign up for his monthly newsletter, please go to http://www.whetstoneinc.ca

Rules to Deduct Moving Expenses For Military Taxpayers

If you are a military taxpayer, you may be required to move from one place to another due to 'permanent change of station'. While moving, if some of the moving expenses are un-reimbursed, then you can deduct them from your income by filing Form 3903.

What is permanent change of station?

Moving from your home to first post of active duty
Moving from one permanent post of duty to another
Moving from your last post to your home in the United States. This must occur within a period of one year from the date of termination of your active duty.

If you are the spouse or dependent of a member of Armed Forces, who is imprisoned or dead, a permanent change of station means moving to your or the member's home on record or a nearer point in the US. If you are required to move to a different location than the location of the member, due to the decision of the military, then the move is also treated as a move towards your job location.

If the government provides storage services or reimburses you towards moving, then you need not include the value of such services in your income. If you receive any temporary lodging allowance, then such amounts are also not to be included in your income.

However if the total amount of allowances or reimbursements received from the government exceed your actual expenses of moving, such an excess is treated as your income and it appears on your Form W2. If any allowance or reimbursement is more than the actual cost of moving, and it is not included on your W2, it must be included on line 7 in form 1040 in your gross income.

You can use Form 3903 for deducting the expenses which exceed your allowances and reimbursements from the government. You should NOT deduct moving expenses which were provided by the government.

What consists of deductible moving expenses?

Generally moving expenses include expenses towards moving household goods and personal effects, related travel and un-reimbursed expenses. These expenses include hiring a trailer, packing, insurance etc. They also include the expenses of storing and insuring the personal effects and household goods incurred within 30 days from the date such goods are moved from your old home to your new home.

The expenses of travel from your old home to a new home including lodging expenses but excluding meals also qualify for deduction. That includes mainly actual air travel expenses. You can also use the standard mileage rate which is 20¢ a mile if you move by car. The expenses of all the members of your household who are staying with you in the old home as well as in the new home can be claimed as a deduction. Do not include expenses of moving the tenants!

If you are moving to a foreign country or from one foreign country to another, such expenses are eligible for deduction provided they are reasonable. You need to report such deduction towards moving expenses by carrying the amount to line 26 in Form 1040.

Chintamani Abhyankar is internet marketer, tax professional and freelance writer. He has done a lot of research on tax systems and is advising people internationally on various aspects of tax planning over last 25 years.

His masterpiece, Stop donating your money to IRS [http://www.planningyourtax.com] is an e-book on the tax secrets which only lucky people knew in the past. His easy to implement strategies can put thousands of dollars in your pocket. Grab a copy now!

How To Communicate Value Proposition and Return on Investment

As part of my continuing series on Value and Pricing, the following article shows you how to position your company's value contribution to support the highest value-for-value exchange.

Too many business owners, when asked about the value or ROI of their product or service, shrug their shoulders and say, "I can't really put a value on it." If you can't put a value on it, think how hard it is for your prospects and customers! And if they can't put a value on it, how likely is it for them to buy it?

We're going to give you a simple way to identify all the value elements of your product or service and articulate it in such a way that your customers will absolutely know in quantifiable terms what your value is to them. They will see so much ROI they'll be foolish not to want to buy from you.

The key idea here is that you communicate Return on Investment by looking at your value proposition through your customers' eyes. In other words, why should they spend their scarce money with you, versus using the funds in some other way?

Your customers want to know how long it will take them to get back their investment or make a profit. Many will want to see a recurring return.

There's an old marketing saying: "Make your product free". People will pay more when they think that "it doesn't cost them anything." You do this by building so much intrinsic value into your offering that it far exceeds the cost to the customer; do this correctly and in their perception, it's free.

Creating Value with Your Product or Service:

First, list all the ways that you create value for your customers.

Does your product or service...

--Help client's increase their revenues? Does your product/service increase their sales? Create more leads? Increase their competitiveness in their market? Shorten the sales cycle? Get more repeat and referral business?

--Allow them to raise prices, or at least hold prices level? Does the value you create allow your customer to charge higher prices for their offering?

--Reduce expenses? Does it reduce initial or ongoing cost? Does it reduce overhead such as utilities and rent or carrying charges? Does it save money on materials, equipment, staff, and outside services? Does it provide a more economical installation or a longer life span? Does it reduce error rate?

--Allow them to replace some existing expense at a lower cost?

--Enable staff headcount reductions? Does it allow your customer to make headcount reductions in staff or support personnel?

--Avoid impending or predicable expenses? Does it help avoid expenses altogether?

--Increase their products' and services' perceived value. Does it increase the perceived value of your customer's offering?

--Increase productivity? Does it increase your customer's productivity or the productivity of his staff? Does it increase manufacturing production or throughput?

--Give them greater control? Does it offer some way for your customer to track results, lead generation, sales, profitability, productivity, or any other key success factor?

Next, review the list and for each of the ways you create value, figure what each is worth. This could be in terms of absolute amounts of money, some percentage of revenues, or some percentage of expense reduction.

Create proof for each of your value assertions. Proof can be in the form of worksheets, testimonials, case studies, success stories, printed statements, even survey results.

Add up each of the value elements to come up with a total value, combining earnings and savings into one number. Again, the total value can be an absolute money number, such as $645,000, or it can be a percentage of sales.

Lastly, calculate your return on investment by comparing the total value to the cost of your product. You may come up with either an ROI (return on investment) or a "payback period." Either way, you've quantified your product's value in concrete terms, justified your price, and made it far, far easier for your prospects to make a buying decision.

Success Story

One of our clients sells enterprise software in the $150,000 to $250,000 zone. After 9/11 their sales cycle began to get longer and longer and stretched out as much as eighteen months, with most prospective deals ending in "no decision." Prospects knew they needed to replace their old software, but they simply couldn't justify the expense in a no-growth economic climate.

To accelerate the sales process we implemented a return on investment analysis using the exact steps described above.

First we itemized each of the ways the software saved or earned the client money, including replacing old software with a high maintenance cost, reducing the cost of computer leases, reducing materials waste, decreasing the number of customer service staff required, shortening their salesman's phone time, increasing the accuracy of sales quotes, thereby increasing the prospect's sales AND increasing overall sales profitability.

By assigning a dollar value to each value element, and offering proof for each one, our client was able to demonstrate a payback period of around 9 months, and a significant positive return on investment thereafter.

The first two prospects who heard this value presentation said the same thing: "We'd be fools not to buy this," resulting in the two shortest sales cycles, and coincidentally, the two largest individual sales in the company's history.

Paul Lemberg is the president of Quantum Growth Coaching, the world's only fully systemized business coaching program guaranteed to help entrepreneurs rapidly create More Profits and More Life™ for entrepreneurs. Guaranteed.

Visit Paul's Website for help with your Business Development Strategy?

Selling Jewelry for More Profit

What is a Sale?

A sale involves creativity, feeling, and imagination - as well as the service of design and exchange of money. Think about what you're really selling. Is it jewelry?

You're selling beauty and sex appeal - and the benefits these bring.

Profiting from custom jewelry is all about selling a BENEFIT.

Benefits

That necklace you took hours to craft and even longer to design, will make the wearer feel better. It may make them feel richer or boost their confidence. Because of this they might get a new job, make more money, sell more, attract a partner etc. Or the necklace may just make them more comfortable in a way a nice meal would. Whatever, the benefits have no relation to and far outweigh material cost.

The more style your design, brought about by good taste, creativity, and fashion sense: the greater the benefits, and so the higher the price.

Customers feel value for money in originality, rarity, and quality; not in price.

Many sellers think that if their prices were lower, customers would buy more. Business is a game of margin, not volume. Price reductions can create more problems than they solve:Decrease net profits.


Lead to the purchase of lower quality or unreliable suppliers.
Require even more sales to make up the difference in revenue.
Need extra stock and time to make more jewelry.
Increase customer demands to drop the price even lower.
Increase complaints - customers looking for the cheapest are usually trouble.

Sell Benefits, not Products

Look for the BENEFITS and hidden values to sell to your customers and prospects. Help them see how great their life will be with your jewelry, and you've got a customer. Set your prices high and hold fast. Don't be afraid to shout your price, believe in it. Remember how long it took you to create the piece.

You had to source the beads, buy them, design the jewelry, make it up - and all that's before the time and expense of selling. Most customers don't buy on price alone. If you're unlucky enough to attract this type of buyer - then they're likely to complain, pay slow, and waste your time. If you market correctly, customers will be anxious to do business with you.

Don't Copy Losers

There will always be someone selling cheaper. Someone willing to go out of business before you! Most ventures fail because they sell their products/service too low.

Customers Will Pay!

If you truly sell your jewelry, they'll purchase whatever the price. If a prospect doesn't buy because they claim it's too expensive, they probably wouldn't have purchased anyway. Selling has nothing to do with the price of the product.

By the time your customers finds out about the price, they should be determined to purchase no matter what the cost. Say how wonderful the piece is. Talk of aesthetic value: beauty, design, style, harmony, balance. Leave price until last.

Gain from the Competition

In times of recession it's easy to gain new customers from your competitor's mistakes. They will flock to you if you give them fast delivery, high quality, guarantees and after-sales service - whatever the price. Notice how smart businesses' raise their price in a recession.

This article is from the new book on selling bead jewelry How to Make a Killing Selling Bead Jewelry at http://www.easytofollowbooks.com/book100salespage.htm

By Nigel Hay Mckay
MrBead.com

Landscaping Adds Great Value to Real Estate And Helps You Sell

Over the years several of our clients have had professional landscaping done and it's amazing to me how little landscaping, can be done for $5-10,000, by a professional Landscaper, and how little value it can add to your home.

Small shrubs, trees, and plantings add almost nothing, or actually nothing at all, to your home value on the open market -- until they are several years older! There is another way!

Some savvy investors look for good homes that are poorly landscaped and after spending a couple of thousand dollars or less put the property right back on the market for much more money and sell it. In any given area there are seldom more than one of these folks who use the techniques described below.

Better landscaping can be done and it can be done less expensively. Yes... Bigger trees, shrubs, mature ground cover, and other plants are better, and far more valuable from the viewpoint of added property value in landscaping and they can be cheaper too! Even if you plan to purchase your personal Homestead and keep it forever -- it pays to plan ahead.

The COST of landscaping often has little if anything to do with the VALUE of it regarding added resale price of the property; this is especially applicable for trees, ground cover and larger bushes. A good mature looking lawn can be developed in a couple of years -- however, it takes far longer, perhaps decades, for the rest of the plantings to add more to the property value than what they cost!

New homes, when they are landscaped at all, are customarily "landscaped" with what the better landscape architects call "sprigs and twigs"; that is young shrubs, trees, etc. that will begin to really look good in a decade or two or three. Meanwhile the charge for these young plants and the planting can be quite high -- and much of the cost is for the design. Even a great design however, with immature plantings, takes years and decades to grow into a full added value asset.

Rather than devote yourself to years of nonstop pruning, you can choose plants whose mature size will be in keeping with their place in your landscape. Well-chosen trees and shrubs are more likely to succeed for you and to require less regular care -- when they are installed properly and kept watered well for the first year.

Knowledgeable staff at a nursery or garden center can help identify plants that will serve your purposes while doing well in your soil and climate conditions. They will likely tell you however, that purchasing the older or even full grown plants is not smart. If on the other hand you come to them matter-of-factly and ask for a tour of the nursery as you want to purchase some plants that are too large for them to sell -- and that you want an attractive price -- and that you will require no guarantee -- and that you will dig and remove and transport them... You may get some of the plants free and most of them almost so. Yes, that was a lot of ands... but that's what it takes to add twenty to fifty percent to your property value with a few thousand dollars of prudent landscaping investment! It is worth it? I think so!

When you select a tree or shrub, examine it carefully. Avoid plants with damaged bark or branches. Moist soil and healthy-looking leaves (not wilted, discolored, or easily dislodged) are some indication of adequate irrigation and earlier proper care at the nursery.

While most homeowners can plant small trees and shrubs with little difficulty, large balled-and burlapped plants pose considerable problems of transportation and planting. Nurseries selling these large plants will usually offer planting services or be able to recommend capable professionals. You will save half or more if you contact the recommended professional yourself in most cases.

Providing a regular and substantial supply of water is the most important factor in the first year, especially for mature plants, even for drought-tolerant plants. Proper installation of the plant includes a large enough planting hole, plenty of mulch around the plant to retain moisture and planting the plant at the exact right depth. Dry winters are especially hard on evergreens. Trees usually don't need fertilizer in the first year; in the second and subsequent years, sprinkle some granular fertilizer (10-10-10) on the soil in the early spring and then water thoroughly.

In today's world, many folks sell a new home in seven years or less. In our area, a resort area, new homes are resold on the average after only about three years. In three years those young plants (the ones the builder and landscaper put in to landscape the property) that may have cost you thousands of dollars are still worth somewhere between nothing and a few dollars as far as adding to the resale value of your home. A rule of thumb is that it takes at least ten years and usually fifteen for the young plants to reach the degree of maturity that adds any substantial value to the property.

An older home (30 to 100 years old or more) with accidental, opportunistic or even fairly unprofessional landscaping is often greatly enhanced in value -- because of the size and maturity of the plantings and lawn. It is usually more effective and profitable to prune, move, remove, or improve the design and surrounding features of existing mature plants on an older property you may purchase than to wait for what will likely be decades for the young plants to grow. Many savvy investors are ONLY looking for older homes to redo and the most savvy among them look for much older trees, shrubs and ground cover that can be groomed into instant added value for a resale or increased rental value.

Landscaping value is also determined by the choices made in the plantings and in the design and placement of those plants as well as surrounding accents. In addition to the plantings, there should be attractive and complimentary installations of mulching, stones, driveway, parking space, sidewalks, fencing, edging, feature lighting and even privacy accessories such as lattice, living window screens, or draping ivy.

Driveways and parking areas are great value enhancers or they can be value detractors! A freshly surfaced driveway of asphalt, stone, shells, gravel, brick, clay, concrete, tiles, open block and grass, even packed soil/concrete, rolled sand or any other material -- adds greatly to value if it's well maintained and aesthetically designed. However these things can even detract from value and enjoyment of the property if the drive and parking space is not maintained; potholes, ragged edges, heavy ridges, cracks, or any other functional or cosmetic blemishes -- and such things can REDUCE values of the overall property.

Whatever the reason for the landscaping; maturity, size, strength and structural integrity in your plantings are key factors for adding enjoyment and aesthetic value to the home, and in adding dollars should you want to resell the property.

I suggest that you can start with mature plants and mature accessories -- and it's usually less expensive too. Hence; starting with mature plants is obviously better and bigger but how could that be cheaper? There are ways. . .

First I suggest that you always purchase from a nursery. The nursery has likely kept the plants more disease free -- yes plants get diseases and they can spread them to other plants too. Also in the case of trees the nurseries usually root prune the trees for a few years after they are normally salable.

Only root pruned trees are likely to survive an old age transplant and such a transplant is what I recommend in this article. If the roots are not pruned they slowly grow well out from the tree and when the tree is dug for transplanting those spread roots are cut off and the tree is usually killed. Trees that have not been root pruned, such as those dug from a woods, will seldom live as the all-important root hairs are at or near the ends of the roots and are all usually far from the tree that has not been root pruned. Thus, a natural tree dug from the woods, will almost certainly die from root starvation and thirst.

Nurseries customarily grow certain types of plants and most often those that are in current fashion. Like fashions in clothing, home styles and cars -- landscape fashions change too. As landscape fashions change, some nurseries end up with too many plants at the end of the fashion's run and some of these plants are left to over-mature after the market for them is over. These are the plants I look for.

For instance; Blue Spruce trees were all the rage some decades ago and little ones were often planted at the very most expensive homes. In 1970 an eight foot high Blue Spruce was over $500 from a nursery. At that time a five foot high Blue Spruce with a "trunk" about one or two inches in diameter was sold for a few hundred dollars!!! In the late 1980s, I landscaped a big luxurious new home with a 16 foot high Blue Spruce at each front corner of the home.

We got the huge trees for $50 each from a nursery that had nearly forgotten they still had them (I found them when I asked the nursery manager for a guided tour of the older sections of the nursery). The two big trees had been root-pruned several times, so it was not dangerous to the trees to transplant them.

I had to move the big trees with TWO giant back hoes. The trees were about 14 feet in diameter -- the drivers could not see each other as they worked; so I stood away from each big tree, where the drivers could both see me and directed them (after they had dug around the trees) to lift each several ton tree and its' root ball simultaneously from opposite sides.

It cost me a couple of hundred dollars to dig and lift each tree; $50 each to bag them in heavy burlap for the trip; then a heavy truck with a special big trailer cost me another hundred to move them. It was another two hundred to plant the two 16 foot high trees. I had a total of about $800 in the two trees (about the same cost as a pair of planted seven foot trees would have been almost twenty years previous) and they really set the stage and tone for the rest of the landscaping.

A knowledgeable appraiser would have added several thousand dollars value to the home for the two Blue Spruce trees alone. More importantly they allowed me to design the entire landscaping package as though the new home had been in place for twenty or thirty years!!!

At that same home we added several tons of "too old to sell" juniper ground cover; several tons of "too old to sell" ground cover ivy. We also used a couple dozen tons of mulch: red cedar (nearly black in color); white cedar (a silvery white color like driftwood); oak mulch (dark gray color) and lots of pine mulch (dark brown). We got the mulch from several saw mills FREE as they would usually have had to pay to have it hauled away. Mulch is considered poisonous by some environmental agencies when it is stored in thousand ton piles at the lumber mill, so the mills will often let you have it free if you take a few tractor trailer loads at once.

I hope you will consider using mature landscaping if you decide to build a new home. Or better yet; find an older home and work with the established plantings to create an improved design. Either way -- if you find you want to sell the property in a few years you will greatly benefit in more salability and added value with mature landscaping.

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