Three Types of Activities

Three types of activities are keeping you busy:

Type 1: Bad

These are the things you should not be doing. They are wasting your time but still you do them. Stop it! For example, I just received a message from someone who never received the package I sent her. Now I have to spend my valuable time sending her another package. This sucks. I’m a writer and speaker, not a fulfillment agency. This is not how I want to spend my time. The challenge here is to figure out how to get rid of the bad activities.

Type 2: Good, But…

These are the things you should be doing, but they take too long. They are also wasting your time because you’re being inefficient. For example, I received a message from someone asking me about pricing for my keynote talks and I spent a few minutes answering it. This is silly, because I work with standard fees. The request is great but my response is slow. The challenge here is to figure out how to be more efficient.

Type 3: Good, And…

These are the things you should be doing, and you’re not doing them well enough, probably because you’re wasting your time with type 1 and type 2 activities. For example, I received a message from someone offering me to collaborate with Happy Melly. Wonderful! Sadly, I hardly have time to schedule a call with him. I merely sent a brief note (for now) while he deserves a deeper conversation. The challenge here is to figure out how to be more effective.

Which types of activities are sucking up your time?

Source: http://www.noop.nl/2014/08/three-types-of-activities.html

A Goal Without A Plan Is Just A Wish

"A goal without a plan is just a wish," is something Antoine de Saint-Exupéry said a long time ago. But, goals and plans were top of mind this past weekend.

When 2013 started, I set a goal of running in 30 5K races during the year. Because of good weather on most weekends, minimal injury setbacks, and a lot of races to select from in the Kansas City area each weekend, I reached my goal in October of that year.

I would not have reached my goal without also having a plan in place of how I would train, schedule runs, and adjust for setbacks and unforeseen challenges.


Also last year,, my then 49-year-old sister-in-law set a goal to run her first-ever 10K race. She embarked on an even more specific plan by following a strict, time-tested, eight-week training plan to take her from couch to fully prepared to run her first 10K. She reached her goal and then ran a second 10K a few weeks afterward. I am so proud of her.

The same day I finished my 30th 5K race, a proud fellow racer shared with me that he had just completed his first-ever 5K, having spent the past year losing 40 pounds and setting a goal to complete a 5K by the fall of 2013. He was on cloud nine, and rightly so.

These three experiences reminded me of Antoine de Saint-Exupéry's wise statement about the importance of plans to reach goals.

Too often, businesses don't have clearly defined goals and even less often specific plans to reach those goals.

When you set a goal for your business, be sure it is:

• Specific
• Measurable
• Attainable
• Relevant
• Time-related

Share that goal with your employees, so they understand all of the five attributes of the goal.

And then for your plan (sometimes called "program"), keep these tips in mind:

Realistically assess the obstacles and resources involved and then create a strategy for navigating that reality. For me this year, that meant adjusting my race schedule this summer to accommodate a nagging hamstring injury.
Plan for more than just willpower. Instead, plan by taking into consideration your business environment, your employees' schedules and workload, and everyone's accountability so that all these factors will work together to support you to achieve your goal.

Source: http://ericjacobsononmanagement.blogspot.com/2014/08/a-goal-without-plan-is-just-wish.html

How to Measure Risk

Investing in stocks is a risky business. There are some risks you have some control over and other that you can only guard against. Thoughtful investment securities selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

However, other risks inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

There are two ways to measure risk. One is by using modern portfolio theory and the capital asset pricing model and the second is to look at the various risk factors which affect a business.

Capital Asset Pricing Model

We will not discuss in detail this theory of asset pricing as it requires you to have a working knowledge of first or second year university level statistics and finance. Since this is an introductory article, readers who are interested to learn more about the CAPM and Modern portfolio theory are encouraged to attend a course in finance or seek advice from a qualified advisor.

Basically, the CAPM makes some major assumptions about investors and their preferences. In order to use the CAPM to find the proper discount rate, one must know three things: a stock's beta, the nominal risk free rate, and the expected return on the market. Stock's with betas greater than one are more risky than the market and betas of less than one are less risky. For example, a stock with a beta of 1.5 is expected to gain 1.5% when the market rises 1%.

Modern portfolio theory is also where the main ideas about diversification come from. We will look at this concept in more detail later. For now, we can define a diversified portfolio as containing securities which have little or no correlation to other securities in a portfolio or the market. These securities are then placed in a portfolio in such a way as to minimize the volatility of the portfolio.

You may be scratching your head by now but this is essentially the basic concept of diversification and minimizing risk. There are a lot of disadvantages and advantages to using the CAPM and MPT. One assumption of the CAPM I will mention is that there are two types of risk. Market risk and firm specific risk. The CAPM assumes that investors only get a premium return for taking on market risk because the firm specific risk can be entirely eliminated through diversification. Thus, beta only measures market or nondiversifiable risk.

Second Way to Measure Risk

The second way to measure risk is to start by taking a nominal risk free rate. How do you do this? Well you take the yield that is currently offered on US Government bonds that match your investment horizon. For example, if you plan to invest for 5 years, you should use the yield on 5yr U.S. bonds. Now add to this the premium for risk and voila-you have your required return or discount rate. You may be asking, what makes up the risk premium? Well, remember from lesson one there are five things: financial, business, liquidity, foreign exchange, and political risk.

Financial Risk:

Financial risk involves a company's capital structure. What is their debt/equity? What is their current ratio? etc. We will look into how to assess financial risk in greater detail later in lessons on accounting and financial statements analysis.

Business Risk:

This involves the economics of the firm you are looking at. Ask yourself, how will this company look ten years from now? Do they have barriers to entry? (ie patents, economies of scale etc. more on this in the economics lessons).

Liquidity Risk:

It has been shown through various studies that firms which are private or thinly traded are sold at a significant discount to their value compared with similar firms with active markets. Firm's which can be easily bought or sold with little transaction costs are called liquid or marketable. The lack of liquidity can occur if the stock you are researching is not widely followed. It can also happen if you plan to liquidate a large block of stock. Your transaction could bring down the price significantly.

Foreign Exchange/Political Risk:

This involves firms which derive significant portions of their sales overseas. For example, many exporters to Asia have been affected by weaker demand for their goods. Foreign Exchange/Political risk can also happen because the company you are looking into is heavily restricted by the government. Finally, different countries have different accounting rules so you should be aware of this when investing in foreign stocks.

When investing in foreign stocks, you also run the risk of the U.S. appreciating. To adjust for this, you should restate your foreign returns to U.S. returns.

Source: http://www.everythingaboutinvestment.com/2012/01/how-to-measure-risk.html

Real Estate Still UK's Largest Investment Asset Class

As a result of budgetary changes in March 2014, more pensioners are investing in residential property as part of their pension pot than ever before.
Drawn to the asset by the fact that real estate has shown to be the best performing asset over the past 30 years, pensioners are exercising their freedom to choose investments that will generate the healthiest income in later retirement.
With life expectancy in the UK at an all-time high and rising annually, pension pots have been running out prematurely and not providing the income expected which has made retirement financially difficult for some.

Real Estate Out-Performs Other Asset Classes Year-on-Year

However, since the changes increasing numbers of savers have been seeking alternative forms of investment to fund their retirement. Property investment has provided many retirees with a secure source of regular income and has removed the risk of funds running out during retirement.
Residential property has proven to be an asset that out-performs every other asset class consistently year-on-year. Property also grows in value over time and as such, makes the perfect investment to hold on to for as long as possible. An asset like residential property will provide a much stronger, more secure income over the course of retirement.
British pensioners have also been increasingly turning towards equity release which allows them to raise funds on their property without moving home, freeing up capital to re-invest in residential property and increase their income during retirement.

Property Prices Driven by Owner-Occupier Market

A key attraction of residential property to long-term investors is that the income stream from housing is linked to wage growth and can offer investors an even better hedge to their liabilities than commercial property which is more closely linked to the slower growing retail price growth (RPI) and other property market indicators.
There are also more bargains to be had with residential investments as they are generally sold at a discount to vacant possession value. This represents the amount that would be achieved if the property were sold vacant on the open market to an owner-occupier.
In other words, residential property prices are driven by the owner-occupier market and do not correlate to demand from residential property investors. If at the point of purchase the property is let on an assured short-hold tenancy, the value of the asset will be discounted.

More Value for Money with Residential Property Investment

Reduced affordability in the UK has also impacted the residential property investment sector as increasing numbers of pensioners purchase properties specifically to rent out to their offspring or assist in the purchase of their first home to get them on the property ladder.
Although there has been widespread criticism, it is much easier to raise mortgage finance on a property that is not going to be owner-occupied. Loan to Value (LTV) is also at a higher level for buy-to-let mortgages with lower deposits payable.
This makes the market a very cost-effective way of providing homes to younger family members while generating an income and increasing capital values for an existing pension pot.

Source: http://www.ipinglobal.com/ipin-live/407289/real-estate-still-uks-largest-investment-asset-class

"Success comes in many shapes and sizes"

4 Ways to Systematically Replace Your Limiting Habits with Empowering Habits

Imagine this scenario…

What if you could systematically break down all of the bad habits that are currently holding you back from achieving your goals?

What if you could then re engineer those habits so that they actually supported your goals?

There are some habits that move us closer towards our goals in life, we’ll call those empowering habits. Then, there are some that move us further away from the achievement of those goals, we’ll call those limiting habits.

Your goal should be to constantly reduce the limiting habits, and maximize the empowering habits.

How do you accomplish this?

Step 1: Identify Your Limiting Habits

The first step is to simply identify which habits are limiting your success.

You identify these limiting habits by first knowing what goals you’re currently trying to accomplish. After you know your goals, ask yourself which actions you perform on a regular basis that are holding you back from achieving that goal.

For instance, say you have a goal of losing weight, but you also have a bad habit of eating unhealthy fast food. That habit is limiting the achievement of your goal.

Step 2: Identify The Cue for Your Limiting Habit

Once you know your limiting habit, the next step is to identify the cue for that bad habit. What is the trigger that sets your bad habit in motion?

Cues can come in many different forms, so it helps to narrow your focus on a few areas:

• Time – What time is it?
• Location – Where are you?
• Emotion – How are you feeling?
• Other People – Who are you with?
• Preceding Action – What did you just do?

The next time you catch yourself performing that limiting habit, take quick second and look at these 5 areas. You’ll eventually start to notice a trend.

Maybe your bad habit shows up every day at 2:00pm. Or maybe every time you’re with you one of your buddies, that bad habit shows up. Or maybe whenever you get upset or sad you fall into your limiting habit.

Pay close enough attention, for a long enough time, and you’ll eventually see the pattern.

Step 3: Identify the Reward for Your Limiting Habit

Once you’ve recognized the pattern and found the cue that’s setting your limiting habit in motion, you want to identify the reward you’re receiving from the habit. What’s the big, positive thing you get from performing that habit?

I know, this may seem a little confusing. I told you that limiting habits are moving you away from your goals, but now I’m saying they provide you with a reward?

Let me explain.

A reward is anything that brings pleasure. But just because something brings pleasure, doesn’t always mean it provides a positive outcome.

For instance, overeating is limiting habit many people deal with. It provides the pleasure of eating delicious food and filling up your body, but then there are also negative consequences, like gaining weight, and destroying your health.

The reward for your limiting habit could be social, like someone telling you “Good Job!” The reward could be something tangible like getting paid. And some rewards occur naturally as a result of habit. For instance, if you walk on the treadmill for 30 minutes, you’ll burn 300 calories.

Do quick “pulse check” on your limiting habit and see what reward it’s providing you with. What’s the good feeling coming from that limiting habit? Why do you keep doing it?

Step 4: Find a New Action

Once you’ve found your cue and your reward, the only step left is to then replace the negative action, with a positive one.

But there’s one caveat, whatever new action you choose, must provide the same reward and be triggered by the same cue.

Putting It All Together

So let’s look at an example that ties everything together.

I had a goal of increasing my health, but I also had a bad habit of snacking on junk food. Every time I caught myself slipping into the bad habit, I began to pay close attention to those five areas (time, location, emotion, other people, preceding action).

I eventually found the pattern. Every time I was hungry and tired, I opted for junk food instead of a healthier alternative.

So my cue was being hungry and tired at mealtime, and my reward was getting something quick and easy to eat.

I replaced that limiting habit of snacking on junk food, with a different, empowering habit, of eating a smaller, healthier snack that would hold me over until I actually cooked something healthy. I used the same cue, and the same reward. I just replaced the action I was performing.

Source: http://addicted2success.com/success-advice/4-ways-to-systematically-replace-your-limiting-habits-with-empowering-habits

5 things you MUST do to start your own business

Trying to start your own business can be exciting, but it’s also really scary. It’s a whole bunch of mixed emotions and sometimes those emotions can be so overwhelming that you never even start!

We have dreams when we’re young and as we get older, those dreams change. We start out wanting to take on the world.

Singers, actors, astronauts and doctors, soon become public servants, office workers and tradesman.

While there’s certainly nobility in ANY workplace, the question remains, when did our dreams change?

For some, the dreams is simply to start your own business, but at some point in time, you deviate from this plan.Maybe it was the risk involved, or your circumstances changed. Or maybe you’re thinking about starting a business but haven’t really pushed yourself over the edge yet?

Well starting a business isn’t hard and doesn’t have to be any more complicated than you make it out to be.

Here’s 5  simple things that might give you enough push to start your own business.

1. Follow your dreams

If there’s one thing that’s guaranteed for an entrepreneur, it’s failure. But with failure, comes strength and knowledge.

It takes failure to reach success, because of the many lessons you’ll learn along the way, but unfortunately we’re not built to accept failure easily.

It’s not easy to get back on the horse after you’ve fallen off. In fact it’s very tough! Entrepreneurial spirit is strongest now than it ever has been, but many dreams are never realised because we aren’t confident of our own abilities.

Trying to start your own business can be overwhelming but there’s always someone who can talk you through the obstacles and challenges you might face.

- Friends

- Family

- Networking events

- Mentors

The obvious key to starting a business is to simply start. And if you don’t know where to begin, then look to the resources around you. If you can’t be resourcesful, how do you expect to succeed?

2. Be savvy and minimise costs

With technology advancing faster than it ever has before a lot of savvy small business owners are starting to look at low cost solutions to starting a business. Choosing to rent everything in the office from the reception (Outsourcing to another country or to a virtual office) is a great way to save on expensive overheads when you’re starting out.

It means you can stay up to date with technology without the high upfront costs associated with it. It also allows you better control of cashflow, which is the number one reason most businesses will fail in the first 12 months.

Think about ways to minimise costs, but dont cut costs. There’s a big difference.

- Try the Phillipines for a good quality, low cost, Virtual assistant. You can expect to pay between $5 – $7 per hour for a reliable outsourced worker and if you research the market, you can find one perfectly versed in english, with graphic design and IT skills to complement the service.

- Cross capitalize with another small business start up. Split office space with a non-competing start up business. Advertise in the local paper or online. You’ll not only limit your overheads, but also share a space with someone as motivated as you are

- Create strategic partnerships. Does your business, product or service offer something valuable? Trade that service with someone offering a product or service that YOU need. Bartering is a great way to minimise spend and save money for cash flow purposes. Cash is king

- Rent out un-used space. If you have space in your office, rent it out part time. Make the most out of any opportunity to increase your capital. Work smarter, not harder.

3. Get a good work-life balance

Starting a business takes a lot of work and it won’t stop once you’re up and running. If anything, it will get harder before it gets easier.

But this isn’t a reason to quit or to never even start at all!

It’s important for you to be happy, and if you spend all your time in the office, it’s very unlikely you will be. Even if you’re just starting out.

We’re in a position now where we can capitalise on tools to access our computers and work stations for anywhere we want. Invest in good, low cost internet solution and spend one day a week working from your favourite park.

Or take a spontaneous trip. Taking a break over the weekend doesn’t mean you have to completely forget about work – Keep you smart phone close and your laptop closer.

4. Think about your strategy online AND offline

Most small business owners are guilty of letting the ball drop online. They fail to realise the potential that’s out there for online businesses.

Social media allows you to compete alot more evenly with bigger corporations and businesses because you can reach your consumers directly. Sure it might take you a lot longer to develop such a large userbase, but that’s the only advantage they have.

You might spend hours obsessing about the layout of your store, but what about your online presence?

How are you going to build an audience, convert customers and keep engaging with these customers in the digital space? A good starting point to help you think about this are the online insights tools that you can find for free on the internet.

Whether your business is online OR offline, the most valuable thing to you are customers. Before you even think about beginning, you need to think about HOW you’re going to get customers and secondly, HOW you’ll be converting them.

5. Don’t give up

Not everyone will have as much faith in your business as you will.

There’s an old saying that says “Don’t listen to what anyone has to say about how silly your business idea is. Because right now, there’s some millionaire walking around who invented the pool noodle”.

And how true is this??

While it’s always important to heed the advice of others, (your critics can actually be the most helpful) if you think it’s a brilliant idea then you can make it work. What ever the mind can believe and concieve, it can achieve.

Success is about the journey, NOT the destination, and their are plenty of other routes available for you to take. If you find one road’s closed, then simply take another.

Success is about learning and consistently improving and growing. You’ll definitely get setbacks, but prepare yourself for them.

Source: http://thesuccesssoup.com/startups/start-your-own-business

How to Ask Friends to Invest in Your Business

I have always believed that the best way to finance a business is through self-financing. It has a number of advantages, if you can afford it. The most important one is that you have complete freedom to run your business as you see fit. You don’t owe anything to anyone.

As a matter of that, that is how I financed my startup a decade ago.

Unfortunately, this doesn’t always work for everyone. Sometimes, your business needs more money than you can afford to invest. Or, you simply have no money to invest whatsoever. Your only alternative is to look for outside financing.

Personally, I am not a big fan of asking friends and family to invest in your startup. It puts your relationships at risk – and that is too high a cost for me. However, if you are going to do as friends for money, might as well do it the right way. I am going to give you some tips on how do this effectively and in a way that tries to preserve the friendship.

The big question: Debt vs. Equity

This first question you want to ask yourself is whether you want to raise money by getting a loan or by selling equity. This is not an easy choice. Both have their pros and cons.

Getting a loan gives you money without having to give up any ownership in the business. Your friend lends you money, which you pay back according to a prearranged schedule. Since your friend doesn’t have an ownership stake in the business, they have no say on how it’s run – at least in theory. And, they have no right to future profits.

Loans can affect your cash flow due to the repayment schedule so consider them carefully. Also, they can encumber your personal assets. I like to think of a loan as being expensive upfront but cheap in the long run if your company succeeds.

Selling equity allows you to trade an ownership stake in your company for money that you don’t have to pay back. In exchange for their money, the investor now gets a share of the future profits and (usually) a say in the company. I view equity injections as cheap upfront and that is expensive in the long run if you succeed.

Assuming the business allows it, my preference is to use a loan rather than selling equity. Loans have a specific end date which gives you and your investors a clean exit.

Get advice beforehand

Before proceeding, consider getting advice from a CPA or an attorney – preferably both. This will be money well spent. They will give you specific advice on how to set up the loan or equity transaction in an effective way. Don’t avoid this step. Yes, it’s expensive but necessary.

Ask your colleagues or friends to refer you to a CPA / attorney that understands entrepreneurship. They all claim they do, but that is not always true.

How to ask friends to invest in your business

Raising money from friends should be no different than trying to get a stranger to invest in your company. Actually, you will have a better chance of succeeding if you treat your friends as you would treat a potential investor you have never met before.

1. Be professional

Above all, treat your friends the same way you would treat a professional or angel investor. It doesn’t matter if they are your drinking buddies or if you have known them since grade school. Separate your personal life from your business life.  And when it comes to business, treat them professionally without exception. This should set the tone for the rest of the professional relationship.

2. Be honest

Create an investors presentation and give them an honest appraisal of the business. Make sure they understand the benefits and the risks of investing in your business. This includes the risk that the business could fail and they could lose all their money. This last point is key. However, many entrepreneurs avoid saying it because it’s uncomfortable.

Take the time to develop an accurate business plan and show them realistic sales forecasts. Never lie to them. Lying will get you in trouble and will jeopardize your friendship for ever.

3. Choose investors wisely

Never ask for money from friends that cannot afford to invest in your business. If you don’t think they can afford it, don’t ask them. Period.

If you are selling equity, consider asking only friends that can bring something extra to the company. This could be management experience, industry contacts, ideas, or just plain work. The last thing you need is a co-owner who has no idea on how to operate a business and brings nothing else than money.

4. Create a compelling presentation

Just like regular investors, your friends don’t have the time or inclination to read a 50-page business plan. At least, not initially. Instead, create a compelling investors pitch that outlines all the important details of your business. Spend some time doing this and practice your presentation before showing it to your investors.

By the way, having a business plan may come in handy later on. Savvy investors will want to read it before investing.

5. Have a lawyer create documents

Hire a lawyer to help you draw up professional loan or equity sale documents. You may be able to save some money by downloading a template from the internet and having the attorney modify it to fit your needs. This may be expensive but will protect you and your friends. Do not skip this step.

6. Honor your commitments

Once you have an executed financing agreement, follow it to the dot without exception. Meet all contractual expectations and make all loan payments on time.

7. Provide regular updates

Consider providing your investors with a regular update on your business. You will have to keep them up to date anyways, so it’s best if you formalize this process.

Use a prearranged schedule, such as every quarter or twice a year. Formalizing this step will also help ensure that you give each and every investor the same information.

8. Give them a chance to say NO

Don’t pressure or guilt your friends into investing in your business. Give them the option to say no and exit gracefully. Don’t hold any grudges if they decline to invest.

How to take no for an answer gracefully

You can expect that some – or even all – of your friends will decline your investment offer. This can be a painful experience for many entrepreneurs.  You feel they are rejecting your dream, and therefore, you. Don’t take it personally. Your friends have their own reasons for not investing and you have to respect them. For example:

1. They may not be able to afford the investment
2. They may be saving money for something else
3. They may not be comfortable investing in startups
4. They may not be comfortable investing in your business
5. Their adviser may have told them not to invest

Respect your friends right to say no. If they decline the opportunity to invest, thank them for the chance to present the business to them and move on.

Are there better options?

Before asking your friends for an investment, consider other options that don’t have the risk of jeopardizing friendships. There are a number of alternatives that don’t require involving your friend in your business. Good luck!

Source: http://factor-this.com/financing/how-to-ask-friends-to-invest-in-your-startup

Top 10 Small Business Trends in 2014

R.E.M. once sang “Change Is What I believe in.”  That has to be the credo for small business owners.  Here’s what’s on tap for 2014.

1. Certain uncertainty

The economy is always in flux, and political changes overseas don’t help anything. Ripple effects from the Affordable Care Act only add to the uncertainty.

2. Increasing competition means more focus

Some of the major retailers, including Amazon and Wal-Mart, are adapting and offering an unprecedented battery convenient services such as increased personalization, same-day delivery. This means the table are turned and it is now small businesses that will have to adapt.  Here are some strategies: offer a highly-specialized or customized product or service, focusing on an tight niche, building an engaged community of customers, and cooperating with other local businesses to save expenses and cross-promote.

3. Using virtual assistants and contractual workers

 The small business community as a whole is hedging its hiring plans. According to the February 2014 Small Business Economic Trends survey, just 12% of respondents reported plans to hire in the early part of the year.  One reason for this is that respondents answered that the net economic conditions over the next six months would be worse.

When there isn’t the optimism to consistently hire at a growth rate, the demand for VA’s and contractual workers rises.

4. Difficulty attracting talented employees

There’s plenty of talent out there, but it’s hard to snag for small businesses.  Particularly in tech fields, the talent is going to big companies in a rich-get-richer scenario.  Talented employees have no more reason to be optmistic about the economy than business owners do, and signing up with a small company can appear risky.

5. Possible Raises of Minimum Wage

The city of Seattle just approved a hike of its minimum wage to a slightly dramatic $15.  This particular raise is actually good for small businesses, because it affects only owners of large businesses.  We’ve seen McDonald’s employees clamoring for raises in the minimum, usually involving an increase along the lines of $14 or $15 per hour.  Small business owners need to be up to date on laws in their state or city, even before the laws pass.  Some hikes will apply to them and some won’t, and planning accordingly, taking into account all the strategic factors, is key.

6. Need for Rep Control

Consumers are increasingly empowered to share their opinions, thanks to online product reviews, social media and viral video both good and bad, about the products and services they use. This means that small business owners must be vigilant in monitoring their online reputations.

7. Mobile business monopoly

The developing trends in mobile business include  mobile marketing, mobile payments, and mobile-friendly devices. These demand responses from small business owners–tools and services are out there and relatively affordable.

In addition to using these technologies, there’s the matter of linking them to customer interactions, by linking mobile payments, mobile marketing, and location-based services, to customer loyalty programs.

8. Skepticism Toward Social Media

Social media have been around for a while now.  Many small business owners are aware of tools and metrics for quantifying the ROI of particular social marketing campaigns.  In 2014, we’ll probably see small business owners mounting a backlash and getting rid of social marketing campaigns that don’t work.  Two to three years ago, you were a dinosaur if you weren’t using social media.  We’re now reaching the other end of that cycle, in which people are stepping forward and admitting to unacceptable ROI when these are the case.

9. Visually-simple web designs

You’ve probably noticed spare web designs, with few frames and many pictures.  We’re also seeing increasingly- sophisticated data visualization, the process of turning complex data sets into easy-to-understand visual material.

10. Growth of alternative finance

Scrappy small business owners will, in the last months of 2014, continue to turn to alternative financing, such as microloans, , peer-to-peer lending, accounts receivables factoring and crowd funding, to help regulate cash flow and sustain growth and expansion.

So, there you have the top trends for the balance of the year.

Source: http://frugalentrepreneur.com/2014/08/top-10-small-business-trends-in-2014

8 Tax Mistakes to Avoid

Here are some tips to help you avoid mistakes oft made by small business owners and others classified as self-employed.

Reality: small businesses owners and the self-employed are increasingly pressured to fully comply with tax legislation and reporting requirements. In order to bridge to so “tax gap” (tax dollars actually collected versus what is owed), the IRS has announced increased vigilance on this slice of the tax-paying pie.

If you want to increase your chances of avoiding an audit and of getting your return as quickly as possible, you need to make an extra effort to prevent some common reporting errors:

1. Not reporting all of your income

Part of the IRS’s new vigilance is a crackdown on pre-tax income reporting.  Be sure to archive any Form 1099-K’s that you receive. The new form records payments received in via credit card or through payment tools like PayPal. Be thorough and mistake-free here.

2. Not filing supporting documentation

Deductions are a big part of everyone’s tax returns.  They all need to be documented.   This means receipts or other documentation for medical expenses, property taxes, all brands of  interest and business expenses.

3. Not understanding tax changes

The U.S. tax code isn’t a model of simplicity, and it’s always changing. For this reason, it’s crucial to learn which tax legislation changes will affect you and your business. You can do this by consulting with a qualified tax professional or by using official government web sites with the relevant information.

4. Claiming too many deductions

One red flag to the IRS is a person claiming deductions that are a bit large for her or his income.  Similarly, claiming exorbitant business expenses for a side business that earns low revenue is likely to earn an audit.

5. Filing too quickly

Whatever the motivation for getting that return in fast, it’s a mistake to rush the process.  A likely outcome is missing out on tax savings, perhaps taking a standard tax deduction when you could benefit from some of the deductions mentioned above.

Although the filing deadline is April 15, you can leverage some extra time by filing for an extension with Form 4867, Of course, if you owe a taxes, you’ll have to send the payment by April 15 or face late-payment penalty charges.

6. Inaccurate information, miscalculations, and omissions.

Double check all your information to combat against these common miscalculations and omissions:

• Incorrect filing status or exemptions- This can be an innocent mistake encountered in situations such as unmarried taxpayers living together with children, parents living with their adult children, etc.
• Mistakes in figuring taxable income (make sure all your W-2s and 1099s are in your possession); withholding; estimated tax payments;  or Earned Income Tax Credit
• Entering incorrect account numbers If you are due a refund and requested direct deposit, review the routing and account numbers for your financial institution.
• Forgetting to sign the completed tax form This will, of course, slow down your return, and in worst-case scenarios can flag you for an audit, since sometimes purposely leave their return unsigned as a way of avoiding paying.

7. Ignoring AMT 

Sometimes, the amount you owe, the Alternative Minimum Tax, is actually more than you think you will if your deductions go through.  Find your AMT and calculate it, and be sure not to file a report that will get you a tax bill thinking you’re getting a refund.

8. Not working with a tax professional

You’re an entrepreneur so you know that skimping on necessary expenses isn’t the way to go.  If tax codes were simpler and static, you may be able to go it alone.  But this isn’t your E-Z form from your first job down at the Radio Shack.

All in all, it’s important to be informed, and perform your due diligence.  Always simplify, never making things more difficult than they need to be.

Source: http://frugalentrepreneur.com/2014/08/8-tax-mistakes-to-avoid

Even the Wealthy are Broke

Upper-middle income Americans aren’t saving much money says a report from the Federal Reserve. Only 45% of upper-middle-income Americans reported saving any money in 2012. This doesn’t come as such a surprise to anyone paying attention to the personal savings rate in America. The rate, while somewhat improved since 2005, is below its historical mean by 3.1 percentage points at only 5.3%.



 

Another sad statistic from the Fed report shows that 68.6% of Americans feel as though their financial well-being is about the same, worse, or much worse than in 2008. For those with cloudy memories, 2008 was the year the economy went belly-up. Again, for anyone paying attention to consumer sentiment, this isn’t so surprising. While sentiment has improved greatly from the days of deep recession, a quick look at the University of Michigan consumer sentiment survey shows readings still below historical mean. That’s not the picture of a strong recovery.

 Source: http://www.youngresearch.com/researchandanalysis/personal-finance/even-wealthy-broke

Why does Warren Buffett avoid technology stocks?

• Warren Buffett prefers to invest in companies which operate in fairly stable and certain environments. Technology sector is the last place to look for certainty.
• He values certainty of returns more than the potentially huge but risky returns.
• He believes predicting the economics of the fast paced technology sector is far beyond his competency, probably a strong reason for his avoidance of the sector.

Warren Buffett has often been in the news for avoiding investments in the technology sector, which has been viewed by many investors as a highly lucrative sector. The Oracle of Omaha has his reasons for this approach. We look into reasons for his avoidance of the hot stocks.

Warren Buffett has historically preferred investments in sectors or companies which are unlikely to experience major changes. In his 1996 letter to shareholders he stated,

“We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now.  A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.”

Warren Buffett loves to have certain but stable returns over potentially huge but risky returns.  In the same letter he also states:

“Obviously many companies in high-tech businesses or embryonic industries will grow much faster in percentage terms than will the inevitables.  But I would rather be certain of a good result than hopeful of a great one.”

It shouldn’t be assumed that Mr. Buffett despises change. He is only averse to change when evaluating as an investor. In his own words:

“Charlie and I welcome change: Fresh ideas, new products, innovative processes and the like cause our country's standard of living to rise, and that's clearly good.  As investors, however, our reaction to a fermenting industry is much like our attitude toward space exploration:  We applaud the endeavor but prefer to skip the ride.”

In his 1999 letter to Shareholder’s Mr. Buffett highlights the fact that he and his partner Charlie prefer to operate within their level of competence and identifying a durable competitive advantage in the technology space is beyond their combined expertise. In Buffett’s words,

“Our problem -- which we can't solve by studying up -- is that we have no insights into which participants in the tech field possess a truly durable competitive advantage. Our lack of tech insights, we should add, does not distress us. After all, there are a great many business areas in which Charlie and I have no special capital-allocation expertise.  If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter. Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter.”

Has Warren Buffett’s stay out of the technology sector impacted the returns of his investments? Well let’s look at the numbers over the last two decades.  The chart below compares the 20 year CAGR of the S&P 500, Berkshire Hathway’s (NYSE:BRK.A) book value per share and Berkshire Hathway’s Market value per share.

20 year CAGR in S&P 500 and Berkshire Hathaway share price and book value

Berkshire’s book value per share has grown at a CAGR of 14.6% over the last 20 years (1993-2013) while the Market price per share has grown at a CAGR of 12.7%. This growth has solidly beaten the S&P 500’s 20 year CAGR of 7.1%. It is clearly seen that Buffett’s decision to stay away from the technology world hasn’t hindered the performance of his investments. And what is the secret of the Oracle of Omaha?

Warren Buffett has this great quality which investors often call ‘Discipline.’ It is clearly evident in his avoidance of the technology sector, even during the boom of late 1990’s, when every other person was investing to set up a business which had something to do with internet. Though in hindsight Buffett had the last laugh, non-entry into what appeared to be a highly lucrative sector is a proof of the Oracle’s discipline. There are notable exceptions in the technology world, where stocks like Apple & Google have created tremendous value and returns for shareholders. Apple stock price has grown at a 10 year CAGR of 36.7% while Google stock has grown at a 10 year CAGR of 27%. While critics could view these as Buffett’s big misses, we view it as a proof of his disciplined approach to investing. Sticking to your rules is hard to do and that is something every wannabe successful investor needs to learn from the Oracle of Omaha.

In conclusion, Warren Buffett side stepped the tech boom for the following reasons: Buffett was uncomfortable investing in companies operating in rapidly changing environments; He could never find the competitive edge in any technology companies that he felt was durable; and as he admitted, forecasting the long term business economics of internet companies was beyond his competency.

We at Amigobulls live in the exciting world of technology stocks. While we salute the Oracle of Omaha for his discipline and wisdom, we will continue to make our humble attempts to apply his principles in the technology sector and pick value stocks from this sector. We invite our readers to let us know their experiences with technology stocks. Happy investing with Amigobulls.

Source: http://amigobulls.com/articles/why-does-warren-buffett-avoid-technology-stocks

App apathy

Earlier this week we wrote about the state of the app economy and the idea of how bundling and unbundling help define how software has progressed over time. Not only on the smartphone but on the PC before. Some additional data help demonstrate how the app economy has become somewhat satiated, or some might say stagnant over time.
Dan Frommer at Quartz citing a comScore report notes that nearly two-thirds of smartphone users don’t download any new applications in a month.

There are a number of explanations for this but it may simply be the case that most users have their needs met by the most used apps. Frommer writes:

"One possible explanation is that people just don’t need that many apps, and the apps people already have are more than suitable for most functions. Almost all smartphone owners use apps, and a “staggering 42% of all app time spent on smartphones occurs on the individual’s single most used app,” comScore reports. New apps come and go, especially games, but perhaps breakthrough apps will be increasingly rare. A look at the top 25 most-used apps reflects mostly mature companies, including Facebook, Google, Pandora, and Yahoo."

Facebook ($FB) has taken the approach to be a “mobile conglomerate” buying insurgent apps that might threaten their core services. Rather than integrating them Facebook has kept Instagram and WhatsApp separate for now. Google ($GOOG) has six different apps that show up on the list of the top 25 most-used apps. Yahoo ($YHOO) has three.
What we are seeing is “stealth bundling.” Companies buying services for strategic and competitive reasons but choosing not to explicitly bundle them together like happens in other markets. A company like Uber is taking a different tack opening up its API to third parties in order to increase its reach. Whether it is explicit or by stealth companies might take they are trying to increase their share of your mobile spending. So for now, bundling is on the rise.

Source: http://abnormalreturns.com/app-apathy

The Importance of Being a Genuine Person In Real Estate

Real Estate investing is a numbers game. For anyone that has ever thought about purchasing just one property, all it takes is a few quick calculations and you’ll begin to see the dollar signs $$$.

It’s pretty simple math too. I don’t know anyone that doesn’t enjoy cashing checks each month and really feeling their investments pay off. Just like with any investment vehicle, you need to weigh the risk and the more money you invest the higher the potential return!

People ask me all the time “How do you find such great deals? I also want to buy similar properties.” For this I ask “What are you looking to achieve and what is your end goal?” I mean, if all you want is a check each month there are many other investment opportunities that can provide just that. So many see Real Estate investing as an easy alternative to other financial products, for anyone who thinks this, I give a word of caution.

Warning!

Yes, it is simple math. Yes, you can make a lot of money.

Yes, it is the best thing I have ever done in my life and so rewarding AND I have made a lot of money. I emphatically ask: Do you like people? Not just people, but strangers? Are you committed to developing long term relationships? Do you enjoy being fully responsible (well mostly) for the conditions in which another family will be living? Would you get yourself out of bed at 2am to go fix someone else’s broken toilet only to find that they caused the problem and not even get a “Thank you”?

I have met so many investors that got into Real Estate only looking at the numbers and completely ignoring the people factor. Folks, people are responsible for making those numbers work. They pay each month so we can feel good about cashing the checks. Many of the great deals I find come from those same investors that didn’t think about building relationships with their tenants and where only focused on the figures. They couldn’t stand the interpersonal aspect side of the business. They provided little communication and where unresponsive to maintenance issues because they just didn’t care about the tenants, only the “return.”

When you have a property and accept a tenant you are assisting those individuals to provide for their basic need; shelter. Now don’t get me wrong, this IS a business and if they stop paying, you need to be firm and find the best solution for all parties. You’ll need to check your emotions at the door for some of the similar heart wrenching personal issues I have dealt with over the years, but even at those times you can only do so much.

In Conclusion

I have learned that the majority of people respect themselves and are prideful of their residence, even if they don’t own it, they pay up every month as long as you keep your end of the bargain. Part of that agreement is being able to communicate with them, at times help them out, and even sparing a few moments to share a laugh.

In Real Estate, you’re not required to be friends however, you are rewarded if you’re friendly! Above all, YOU MUST LIKE PEOPLE to build a sound and sustainable investment portfolio. A property is just a building, the people pay the rent.

Are you a people person? Do you focus on building trust and relationships?

I’d like to hear your comments below and thanks for reading!

Source: http://www.biggerpockets.com/renewsblog/2014/08/22/importance-genuine-person-real-estate

5 Risk Management Mistakes To Avoid

I’ve been mentoring a junior project manager and we were reviewing the risks on his project last week. We went through all the risks on the log and we talked about good practice and what he should be actively doing to manage the risks. Then he asked me a question. “What mistakes should I be looking out for?” he said. I thought this was a great question. Too often we focus on what we should be doing and forget about what we should avoid doing! That’s when mistakes creep in as we haven’t been focused on stopping them from happening. So here is my list of 5 mistakes to avoid when you are carrying out risk management on your project, which I shared with my colleague.

Mistake 1: No Risk Owner

Your notes in your risk management software should always include who is responsible for owning the risk. That means writing down the name of the person who will ensure that the risk management tasks are carried out. That individual doesn’t have to do all the work themselves, but they should coordinate the people who are actually doing the work and make sure that the risk log is updated with progress and that you get status reports as required.

Don’t be tempted to record your own name as the risk owner for every risk. Many risk management plans would be better off led by a subject matter expert and this can also be a useful development exercise for a more junior member of the team who wants to take responsibility for a small, manageable piece of work.

Mistake 2: No Action Plan

Each risk should have a documented action plan. This sets out exactly what is going to be done to prevent the risk from happening. Sometimes, of course, you will be taking no action and are prepared to accept the risk without doing anything about it. If this is the case, make sure that you record in your risk log that you have considered what actions are required and have actively decided to do nothing. And sometimes it will be a positive risk and you’ll want it to happen!

Whatever the approach you want to take, it should be documented so that you know exactly what is going to be done and can track progress against it. Remember to go back to your action plans regularly and update them with what actions have been completed and what new tasks have been identified.

Mistake 3: No Risk Analysis

When you’ve got a lot of risks it can be tempting to skip the analysis phase and not spend time working out which area of the project it will impact or how serious the problem will be if it happens. You shouldn’t do this – it isn’t appropriate to treat every risk in the same way and you’ll only know how much time and effort to invest in addressing it if you properly carry out some analysis to assess the impact and likelihood of each of the risks.

Review each risk and establish how likely it is to happen, and what impact it will have on the rest of the project if it does happen. Get the whole team involved as they will probably identify other impacts and have some useful information to feed into the analysis exercise. This will enable you to focus your risk management budget in the right places by targeting the most serious risks first.

Mistake 4: No Timescales

When do you need the risk resolved by? Or when will it stop being a problem if nothing happens? Risks don’t last forever, so you should also be recording a timescale for the risk in your log.

For example, if there is a risk of bad weather delaying the delivery of some equipment to your building site, then this will pass on a particular day – the day that the equipment is due to be delivered. If you don’t note down this date in your log and then update the risk entry once the date has passed you could be including the mitigation plans or reporting on this risk for far longer than you really need to. Also make sure that any actions related to your risk management plans have dates against them.

You’ll want to monitor that they are being dealt with in a timely manner so you can be sure that enough appropriate action has been taken in time to offset any impact should the risk occur. Otherwise you may be working on actions and find that you are too late!

Mistake 5: No Risk Priority

Use your risk analysis and timescale information to give each risk a priority. Those that are likely to have an impact quickly are obviously more important to deal with than those that may not cause any problems until next year. Those risks that will have a huge impact are more important than those that won’t cause many issues.

Each risk should be given a priority and then you can tailor your work plans to ensure that the important ones are dealt with first. You can also use risk priorities for reporting purposes as generally stakeholders will only be interested in knowing more about the high priority risks. You won’t bombard them with information about all risks if you can tailor your reports to only give them the most important data about the highest priority problems that the project is facing. “Thanks for these pointers,” my colleague said. He had made lots of notes and went away from our mentoring session feeling a bit more confident about handling risk management on his project (or at least, I hope he did).

What other mistakes have you encountered when it comes to managing risk? Let us know in the comments below if you are prepared to share your experiences!

Source: http://www.projectmanager.com/5-risk-management-mistakes-avoid.php

2 hours to make websites generate over $5,000 a month on autopilot...

It’s always refreshing to see new strategies to make money online. However, the majority of the time I’m pretty disappointed with the results.

When I was recommended to buy Google Sniper 2.0, I thought it would be another system that just left me disappointed, but the proof and success stories tipped me to buy it. A quick Google search for testimonials and by watching the sales video it was clear that this system has worked wonders for other people, and it’s actually generated the most online success stories than any other system/course to date. It was a no brainer to give it a shot personally.

At the time in my Internet marketing journey, I was pretty lost as to what road to head down. Google Sniper 2.0 really outlays the basics, from picking a niche, choosing keywords, buying a domain to setting up a wordpress website which will generate passive income online. It’s an extensive guide, but it’s easy to pick up (the walkthrough videos by George help also).

I studied the strategy pretty extensively to start with, and created my first “Sniper” site the next day. I was pretty excited due to the success stories, but still had that common doubt that it would be another blowout. I made my first bit of commission two weeks later after setting up the site completely. It wasn’t a huge amount but it was something, and that was the trigger to skim through the course once more to see if I could improve my site in anyway. The site in question started to generate me a tidy amount of commission, and still generates on average $375 a month (on autopilot).

As I’ve been recommended many times before, “if something works duplicate it...” And that’s what I did. I now have about 10 sniper sites, all generating commission each month. Each site differs in the amount of money I’m making, but I can’t squabble as I’m on the hunt for more...

The best thing about this course is alongside earning a nice income each month from this system on autopilot with no traffic generation, it’s also an extensive guide into niche research, finding products to promote and how to set up your own website. Yes, it may need to be read through a few times, but believe me... It’s worth it.

Check out Google Sniper 2.0 here

How Do I Choose My Mentor?

If you’ve considered getting a mentor to lead you on your path to management, leadership or business success, it’s fairly likely you’ve spent a good amount of timing thinking ‘how do I find the right person?’ Well, you’re not alone, I write and lecture about mentoring, and I’m often asked this question.

Finding the perfect mentor

Mentors can become life-long supporters, advocates and trusted advisors.  They can steer your path, help you form both good and bad habits, and influence your focus.  When you’re about to ask someone to be your mentor, think carefully: is this person someone I can work closely with? Do I admire them? Do they have the same values as me? Have they ever considered mentoring?

If you already know the mentor as a friend or work connection, consider the impact your new relationship will have on your current one.  There may be times when you don’t agree. Perhaps your new relationship as mentor and mentee may not work out? How will that affect your current friendship?

How to be realistic about a new mentoring relationship

Don’t forget a mentoring relationship isn’t like a marriage or partnership; you don’t have to be fully compatible to make it work.  It’s great if you can be friends, but it’s not a necessity for it to be a working relationship that achieves. That said, like a marriage or partnership, when it goes wrong it can leave bad feelings in both parties.

Don’t choose a mentor based on some romantic notion that being associated with them will bring you the same levels of success as they have achieved.  Mentoring relationships can indeed be very successful, but there are times when they are not so great. Achieve very little, and you will leave people disappointed.  I have also known people who felt let down by a mentor, but achieved great things despite the lack of support.

Here are 10 things you should consider when choosing your mentor:

1. Do you respect or admire them and their skills/success/achievement?
2. Do they understand what you are aiming to achieve?
3. Have they been there, seen it, done it, and able to offer real experiences to support your work?
4. How likely are they to give you a ‘leg up’?
5. Do they have a personal interest in you/your career/your business and is it for the right reason – to help you and not themselves?
6. Do you think you can be yourself with them? You need to be honest with them about your aims, your abilities, your fears and your failures.
7. Do they have similar values and morals as you? Or are their opinions likely to jar with your own and cause difficulties?
8. Can you image spending time with them and being able to share experiences and ideas?
9. Do you trust them to be professional, discreet and respect confidentiality?
10. Will they add value to your work and your personal development?

Be careful when choosing your mentor; don’t go out hunting for the right person. You often find someone will come along at the right time with the background and personality that will suit your needs.

This is by no means an exhaustive list of things to consider when choosing a mentor; I’d love to hear your experiences of choosing a mentor. What things do you feel should be considered?

Source: http://birdsontheblog.co.uk/choose-mentor

How To Flip Houses Like Steve Covey

Steven Covey is a well known self-improvement guru famous for writing “7 Habits of Highly Effective People”. He gave us seven simple principles that we can use to achieve success in life and business. Is it possible to apply his principles to house flipping?

His seven core habits are applicable to house flipping but one of these habits particularly stands out; “begin with the end in mind”. 

How The Begin With The End In Mind Habit Applies

It’s common knowledge that making a profit on house flipping is not easy but when you know exactly what it is you want to accomplish, you eventually end up having a laser-like focus that eventually concludes with you making a profit.

Numbers can break or make your house flips. Knowing how to do the math is not the hard part; the hard part is determining the correct numbers to use. In order for you to be able to accomplish this, you need to do a fair amount of research and assistance from your house flipping team.

The moment you learn how to flip houses with the end in mind, you will start making profits.

Is What You Pay For The House Important The Most Important Number In House Flipping?

While this is a very important number, what you pay for the house is not the most important number. Rehab costs are also not the most important.

The most important number is the After Repair Value (ARV) which drives all the other numbers. The After Repair Value is “the end” you should have in mind and you should use it to drive everything you do in house flipping.

Almost all the projections that you will make during the house flipping process will be based on the ARV. If the ARV is right, then every other single projection will also be right and your profit margin will be great.

Here’s How You Begin With The End In Mind In House Flipping

1. Find A Great Real Estate Agent

A great and qualified real estate agent can do a comprehensive market analysis and give you a more accurate ARV. Since we have already established that ARV is the most important number, you need to find a real estate agent that is good at their job.

A good real estate agent will look at properties in the area that have already been sold and not the ones that are for sale. This is because properties that have already been sold will help them determine how much your property can sell for.

2. Communicate Your Plans To Your Agent

Communication is important because it ensures everyone is rowing in the same direction. Finding a good agent is not good enough if you do not communicate effectively with them. They have to be 100% with you on the same page. Your house flipping team has to also be on the same page with you.

Don’t sit behind a computer and send out emails or communicate via phone alone. Get out there and talk to your house flipping team.

Other Tips On ARV

It Doesn’t Hurt To Get A Third Opinion

It doesn’t hurt to get a second or even third opinion from another agent. You can never be too careful when determining ARV.

Hire A Paid Appraiser

You might think this is another added expense but it doesn’t compare to the cost that you will incur when you gauge all your projection off a wrong ARV.

Research

Make Google your best friend and use it to double check after repair values. It’s not advisable to determine your final ARV off internet information but you can use it to double check. In addition, you can conduct a comparative market analysis.

Conclusion

Be wary of the broker who tries to inflate the ARV just to get your business. This is why it is important to get a second opinion from another expert broker. If you begin your house flipping process with the end in mind, you will be setting yourself up for success. If you use the above tips, you will have a highly successful house flipping career.

Source: http://houseflippingschool.com/flip-houses-like-steve-covey

Live in a multimillion-dollar home for $2,500

The Starres in front of their $1.3 million dollar
Showhome in Carlsbad, Calif.

The Starres aren't movie stars, but they live like it -- for a fraction of the cost.

As home managers, Calvenn and Crystena Starre rent a $1.3 million home in Carlsbad, Calif., for just $2,500 a month -- about a third of what it would cost normally.
They're "hired" by Showhomes, a Nashville company that helps sell high-end homes. It preps the homes to look "lived in"... by finding people to actually live in them, at a very discounted rate.
Currently, there are 200 home managers, who reside in the home until it's sold (it usually takes about three to six months). They watch for any maintenance issues and make the home look desirable (food in the fridge, clothes in the closet) for prospective buyers.
But not everyone can get the gig -- Showhomes' acceptance rate is about 40%. Residents must undergo online background checks, including criminal and rental histories. They're typically white-collar professionals who are in a city temporarily, newly divorced or, in the Starre's case, a family of five looking for a quick and easy rental.


With Showhomes, the Starres didn't need to make a long-term commitment -- they could leave their furniture in storage until they figured out where they wanted to live long term.
But what was a temporary move became a way of life. Over the past two years, they've lived in five different Showhomes -- ranging from $900,000 to $1.3 million in value -- all in the San Diego area. The amenities have included everything from tennis courts to pools.
"It's a way to live in a really inexpensive way," said Matt Kelton, chief operating officer of Showhomes, which has 58 franchises in 18 states.
But it's not all a walk in the park. Showhomes has a number of restrictions for home managers.
"You can't be a smoker, you can't have a bunch of pets, no religious items -- things that can deter [a buyer] one way or another," added Kelton.
Personal items like family photos, sports teams and political paraphernalia are also prohibited. And then there's the prospective buyers who could be surveying their home at a moment's notice.
"We give up certain parts of our lives [for] the reduced rent," said Calvenn.

They also have to move every time a place sells, with just about a month's notice, and maintain a spotless home in the meantime.
"You have to keep it clean and model home-ish," said Crystena Starre, a stay-at-home mom to her three kids. "We got to teach the kids, 'We need to put things away.'"
For homeowners, Showhomes is piece of mind that costs just .5% to 1.25% of the list price (this can vary and decreases the longer a home stays on the market).
Radiologist Bernie Schupbach first worked with Showhomes in Fox Valley, Ill., when he put his home on the market six years ago.
"I was living probably 20 miles away, and it was hard to get down to check on it," explained Schupbach. "There was always ongoing concern of a water pipe breaking or animal infestation or vandalism in the interim between visits."
Schupbach didn't have to worry about finding and vetting renters -- or about the state of his home before it sold.
"We only communicated with [the home managers] if there was a problem," said Schupbach.


Schupbach's home was on the market for several years during the recession. It ultimately sold for around $500,000, and he had such a good experience that he employed Showhomes to stage his new home for buyers (which is the other half of the company's business).
And while Kelton says one man was a home manager for 15 years, moving from home to home, the majority do it for a much shorter period of time because of the "nomadic lifestyle" it requires.
As for the Starres, the wealth of knowledge they've acquired from living in different San Diego neighborhoods has helped them narrow down where they want to put down roots. They soon plan to purchase their own home.

 Source: http://money.cnn.com/2014/08/11/smallbusiness/showhomes-rent/index.html

How to Get Higher Rents, the Hard Way!

If you are like most landlords or property managers, you are always looking for the highest rents, after all, no one I know shoots for the lowest rents.

But there comes an amount where the rent exceeds the value of the property.  Once that happens, you would think that you would not be able to find a renter.  This is not the case.

Economic theory states that as prices go up, demand decreases.  This is true.  If you do not believe it, cut your rent prices in half and see what happens.  You will have people lined up around the block to take your rental.

Solid renters know what they want in a rental.  They know what buildings in the area they want to live, and what amenities they want.  They will know the walk score of a place, how close it is to their work, how much arts and culture are close by.

Quality Renters Know Value

A solid renter picks their home based on location, and also on value.

The value is based on what they can afford, and the ‘substitution theory’ in that paying more or less will substitute different features and amenities.  Nowhere in their equation is any thought to the fact that their application for housing might get rejected.  They know they can throw a dart at the map and choose the closet apartment if they wanted to.

I define a solid renter as someone with at least 3.5x the rent in income.  This is someone with at least an average credit score, somewhere north of ~650.  Their last 10 years on the criminal side will only have a couple of parking tickets, and likely not even that.  They will not have any evictions.  All past landlord references, for what they are worth, are positive.

Low Quality Renters Have Less Choice

The low quality renter has a completely different attitude.

They need to live where they can.  They do not care about amenities; they care about move in date.  Something is making them move, and it is not their job, or the lack of an art gallery close by.  They need to move because they are probably being forced out.

As a landlord, you can specialize on these renters.  They are in a tight spot, just as many sellers are when investors scoop up foreclosure properties.  These are distressed renters.  They need to move, and say they are willing to pay.

Their criminal backgrounds might not be as good as you would like, and their credit score less than par, but they are not choosy.  They need a place, and generally need it fast.  They will move into a place that is not maintained, or cleaned.

Make no mistake; these are high risk class C or D tenants.  Like any investment, you need to get a return based on the extra risk these tenants present.  You need a higher rent than a typical class A or B tenant.  Even if your rent is 100% paid by a government authority, you are taking on more risk.

Does Higher Rent Mean More Profit?

A class C or D tenant will be more work, and you should get at least an additional 10% higher rent with them.

On a $1,000 a month rental, that’s an extra $100 that goes right to the bottom line.  All of your other expenses stay the same, except possibly maintenance and legal fees.

If you are looking to sell, higher rents mean a higher sales price.  Whether or not you will be more profitable is the $64,000 question.  Low quality tenants generally mean less profit.  Can you cover your increased maintenance costs and added expenses with the higher rent?

If you have a property manager, the lower quality renter is more wok for the PM.  It is more calls, more chasing down rent, more work to turn the unit.  But it is a higher commission for the PM. I often think that people hire a PM have so much trouble with renters because of this very reason.  The PM is maximizing their own revenue and getting a lower qualified renter to move in. It is more work to find the ‘sweet spot’ of the correct rental price than take in a less that qualified renter.  They make more, and you are probably making less.

So, if you really want higher rents and are OK with a higher risk for higher returns, raise your rents.  If you want the slow, steady and boring approach to profits, make sure your rents are aligned with the market, and you hold out for quality tenants.

Have you ever raised your rent too high, and saw a decline in tenant quality?  Have you ever seen a rental you wonder how the owner ever rented a dump like that?

Be sure to leave your comments below!

Source: http://www.biggerpockets.com/renewsblog/2014/08/17/get-higher-rents-hard-way