Posts Tagged ‘methodology’
Monday, September 7th, 2009
Cautious investors often place stop-loss orders on their account. These orders sell out your shares should they decline by the amount of pain you anticipate you are willing to endure. Stop-loss orders are supposed to make an unmanageable situation manageable. Brokers encourage this as stock fluctuations inevitably trigger sales creating more commissions and spreads.
In a market break, the sell point may be much lower than the level you specify. For example, on a surprising corporate announcement, it is common for prices to gap down by $10 or more. Your stop loss may have only been down $2, but you will be sold out at the next trade, $10 lower. Of course, you always have the opportunity to buy back in again for more commissions and increasingly wide spreads. Stop-loss orders often lead to anger and frustration as an attempt to bring order to an unmanageable situation fails for you, yet enriches your broker.
Brokerage accounts also offer you a “parking place” for your cash. These are sweep accounts: money market funds that collect dividends and the change leftover from trades. In the old days, dividend checks and change were sent to your home and you had the onerous task of depositing them in your checking account. The sweep accounts are marketed as a great convenience to you. In fact, they are a great convenience to your broker as they gather your funds within short distance of the trading desk. Again, particularly optimistic types should have the dividends sent home. Maybe there is only $1,000 at stake, but would you rather have a new couch to lie on during the bear market or would you prefer to whittle it away in commissions, spreads, and poor stock picks?
Tags: fiscal problems, interests, manufacturers, methodology, mortgage, preserving cash
Posted in banking, budget analysis, business goals | Comments Off
Monday, August 3rd, 2009
The best business plans tend to look like a truck ran them over. They are well-thumbed, heavily annotated, and popping their staples or bursting their bindings. That means they’re being used. The worst plans are clean, pristine documents that went straight from the printer into the file cabinet. That means they’re not being used. That may mean that nobody needs them, which might suggest that the company is continuing to follow the same old routes to get to the same destinations. Or it might mean the business plan isn’t worth the paper it’s printed on for those who should be following it. Either way, the company may be in serious trouble.
Tags: business plans, documents, marketing schedule, methodology, sales
Posted in companies, funds, innovative marketing, management, stocks | Comments Off
Monday, August 3rd, 2009
A business plan helps you achieve your goals. It also helps discipline the way you think about what you’re doing. But business plans have another important purpose.
Companies need business plans to apply for loans, grants, or other forms of funding to start or expand the business. Lenders and financial managers like to see something in writing that shows a firm is committed to its objectives and knows how it’s going to accomplish those objectives. Without a plan, serious outside funding—or any funding, for that matter— might not be available. After all, if you were in the business of investing money, how would you select the companies that would be the best risks?
But that means you need to write your business plan in different ways for different financial participants:
Plans used to attract equity investors—financial partners who will prosper as the business prospers—must be written to show how investors will gain from the company’s success. Investors expect a high rate of return, so they will be looking at growth and profit projections. Plans that project a successful profile are what equity investors are seeking.
Plans designed to appeal to lenders must demonstrate methodologies for repaying loans. At the risk of being simplistic, lenders have little financial stake in the success or failure of the company. They’re interested in how the company plans to repay the principle and its interest. And lenders are more likely than equity investors to be
concerned about cash flow. Your business plan should provide a timetable with repayment amounts the lenders believe your company will be able to make.
Tags: benchmark, business plans, marketing schedule, methodology, sales
Posted in developers, equity, expenses, innovative marketing, loans, online bank | Comments Off