Investment by way of private equity or venture capital

When a small business is looking to grow itself, the best way for it to do so is to either opt for private equity investment or look at venture capital firms. Both have their own benefits and downsides, and these should be taken into account when looking to secure either. Getting the wrong one for your business situation could be disastrous, so do your homework before stepping out with your big plans in hand. The one similarity private equity investment and venture capital firms share is that venture capital is invested as equity as well, and both are invested in businesses with high growth potential.

Both look to try and get hold of companies with solid future prospects and they also look for management teams that are capable of envisioning and then carrying out a proper business plan. There are fundamental differences to be found between the two vehicles of investment though. Historically, venture capitalists have been earlier to get onto the bandwagon while private equity only really comes into play down the line, like a second wave of attack. Private equity is more often than not offered to companies that are far further along in their life cycle as compared to venture capital offerings.

But venture capital firms take their pound of flesh for stepping in so early in the process; they will make businesses jump through more hurdles and be more cutthroat in their valuations of businesses. They might place restrictions on business in the way they can be managed while private equity firms will try to have less of a say by way of comparison. These are the technicalities that everyone will dish out when asked about private equity investment and venture capitalists, but competition has served to make this divide very unclear.

If anything, the boundaries between two investment classes have now been blurred thanks to robust competition. With capital markets as active as they are today, there is a lot of capital that is after some very lucrative businesses. And so it is that investors no longer hold all the aces. There is so much pressure on money managers, investment advisors, fund managers and capital providers to invest that never before deals are now being cracked. Money supply has suddenly come along in a gush and it has created sever competition from investors, all of this resulting in crazy valuations (by businesses) and lower yields (for investors).

This competition has now seen private equity firms try to catch companies earlier in the corporate life cycle while venture capitalists have now softened their demands. As an entrepreneur, this is a fantastic situation to be in and you should look at all your options before settling on any one source of capital. 

Desc: When a small business is looking to grow itself, the best way for it to do so is to either opt for private equity investment or look at venture capital firms.

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Cross cultural management in a new global order

As businesses start to go global, it becomes importance to understand the role cross cultural management has to play in the handling of personnel across continents. For example, with the biggest firms starting to move their manufacturing to China, firms should understand how to bridge any cultural bridges that are there to be crossed. Surprisingly though, many organizations are either ill informed or choose to ignore such issues. Continuing with the Chinese example, factors such as the national religion, local customs and way of life need to be taken into account. And that’s before you even consider such massive factors as legal structures and language barriers.

Failing to take into account these simple factors will result in poor communication and cultural struggles and conflicts. All of this will end up affecting efficiency and will doubtlessly raise costs and risks. What’s more, at worst it could result in failure of the entire project. When committing to any overseas projects, business failure can at many times be put down to a lack of cultural sensitivity. Not sharing a common cultural context and background, behavioral patterns can emerge that pits one ethos and sets of customs against another. And that is not the best of situations to be in.

All of these cultural differences make it difficult to objectively evaluate information that flows out of any given location. Moreover, it becomes very difficult to understand meanings and intentions when cultural nuances are misunderstood. For example, saying “nega” in China is the Chinese equivalent of “um”, but you can understand why an African American or any Black person would be incensed to hear a Chinese national saying “Nega…nega” while pondering something as simple as a work schedule or what went wrong. Little things like this are where cross cultural management comes into play, educating both sets of workers and sensitizing them to the peculiarities that epitomize the other set of people. All of this done so that there comes a sense of understanding across the workforce and things start to flow more smoothly from top to bottom of the organization.

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Technology transfer plays a key role for businesses

In the broadest of terms, technology transfer is nothing more than process of transference of technological know-how. It doesn’t matter whether the technology transfer is that of something created by an individual or any larger entity, everything counts towards the cause. The transference of facilities, expertise and know-how cumulatively referred to constitutes the transfer of technology. Effectively done, it results in the commercialization of a new product or service and even in the improvement of existing products, services or processes.

The whole process itself cannot be defined as straightforward or complex though; that depends on the type of technology being transferred and the capacity of the recipient in question, so this definition varies from case to case. Generally though it is collaborative and never straightforward simply because such a transference might necessitate the learning of new skills or the change of old behaviors. As such, the process of transference is not limited to the technology itself. The idea of ‘fit’ and optimizing performance must also be considered when talking about the simplicity or complexity of the process.

A technology transfer might happen from one country to another or it might happen from one industry to another, or even from a business research laboratories to another location. The creation of these technologies and, perhaps more importantly, the absorption of this technology has become a key part of businesses looking to be competitive. It is a big part of the competitive advantages they enjoy over their closest rivals.

If a business has a competitive advantage that is purely price based, technology can be used to refine the processes that dictate this price, driving costs down and improving competitiveness. But that is not the only use of technology transfer. Technology can also be utilized to improve products or change the processes and structure of the organization. In particular, technology can play a key role in sectors where innovation is the need of the hour. As market needs and trends evolve continuously, companies that embrace will always flourish as opposed to companies that are more reluctant when it comes to taking on technology.

Desc: In the broadest of terms, technology transfer is nothing more than process of transference of technological know-how, and it will always play a key role in businesses.

For more details: SuperCFO.

Never look at filing for bankruptcy unless you absolutely have to

Sometimes, crushed by a giant figure of debt, we end up feeling overwhelmed and of the opinion that there is no way out other than simply filing for bankruptcy. But you’d be wrong. Of course, bankruptcy is a way out of debt. But as with any decision, there are long term consequences that must always be kept in mind. If you are considering filing for bankruptcy, there are two things that you must keep in mind. The first thing is that filing for bankruptcy under any statute is not a ‘get out jail free’ card. It doesn’t just wipe your slate clean and let you walk away. The damage that has been done cannot be undone. The second thing is that you should try to pay off as much of your debt as you can, meaning a payment plan must be adhered to.

Yes, bankruptcy does have its “benefits” if you wish to put it that way, but it mangles your credit rating so badly that you are basically ineligible for most loans. And even if you do get a loan it will be at such an exorbitant rate as to make it seem like daylight robbery. And the worst part of it all? Your credit rating will be damaged by bankruptcy for a period as long as ten years. Sure, you can try to fix that credit score one way or another. But it’ll be almost like trying to scale Mount Everest using nothing more than two ice picks; it’s an almost impossible (and wholly unenviable) task.

Thus, using bankruptcy as a backup plan would be absolutely fool-hardy. Just filing for bankruptcy and believing everything will vanish away as if it were a bad dream is plain stupid, because that’s not how it works. Instead of simply filing for bankruptcy, try to restructure your debts so that it can be repaid to as great an extent as possible. Talk to your lenders and let them of your financial difficulties and willingness to try and reach some final settlement by way of compromise. You’d be surprised by how agreeable they are to your request, but the fact is they’d rather lose only some of their money as opposed to losing all of their money to your bankruptcy claim.

For more information: SuperCFO.

Reducing the tax burden on your small business

It is perhaps the most fundamental idea of business that they will look to spend as little money while making the most money they can while governments will look to earn as much tax money as they can with as little effort exerted as possible. As someone once quipped, a fine is a tax you pay for getting things wrong while a tax is a fine you pay for getting things right. But jokes and frippery aside, reducing the tax burden on your small business is of the utmost importance. No matter how badly or how well you’re doing, it always helps to save money one way or another.

Funding retirement accounts are the first way in which you can set about reducing the tax burden that is levied on your small business. But that is just one of several avenues that you can choose to go down and so it certainly pays to reduce the tax burden that you have to take on your shoulders as a business owner. When investing money beyond any tax-sheltered retirement options, be wary of the consequences. That’s because there are capital gains taxes that you will have to pay for any appreciation in the investment and this taxation is also true of all interest and dividends that will be paid out.  So consider tax-free money market funds as an alternative instead. Tax-free bonds too are a better option as opposed to putting your money in taxable bonds.

Another trick to reduce the tax burden that you’ll have to bar is to hold on to that investment for a period of 18 months or more and so make the capital gains long term. This is a wiser move since the income tax on long term capital gains is more reasonable. If you sell it within a period of 12 months, it will be taxed as per normal income tax rates and that is absolutely killer. Expenses such as medical expenses, local taxes, contributions to charity and retirement fund accounts and employee expenses can all be claimed as deductions. Understand the expenses that you will take on board as a business owner and you will be better prepared when it comes to reducing your tax burden.

You may want to read Straightening out your taxes in 2011 this article too.

Steps to successful debt consolidation

Successful debt consolidation is completely dependent on using the correct steps to identify and eliminate your debt load by consolidating it under one head before paying it off over time.  The first of these steps involves identifying what your debt load. Open those bills and statement and take in those number. If you have a mortgage, how much of your total debt does it represent? If it stands at 25%, it's fine. If a majority of your debt is consumer debt though, you have a problem. Also, how much is owed to friends and family and how much to creditors? Which has the highest interest rates? How much interest will you pay back over time? Figure these important questions out first.

The next step is to create a budget. Understand how much you need to maintain a decent lifestyle and then how much you need over and above that. Cut back on some unnecessary spending, like eating out and overly socializing. Once you've arrived at a compromise budget, apply for a debt consolidation loan. Make that appointment, hand over the documents requested and try and restructure your debt. If you have high interest unsecured debt (such as consumer or credit card debt) try and convert it into secured debt (such as a mortgage). This way, you will pay less by way of interest since the bank has security against the debt. 

Once that is done, stick to the plan and aggressively pay off your debt. Your lender might decide which loans get paid off first, but if some loan is causing you greater emotional stress (such as debt from a friend that has strained relations), pay those off first. Pay all of your debt off in a timely manner and once you're done stay debt free. Make payments as you would to a lender but now put it into savings or investments.  Don't overspend and don't try and keep up with the Jones'. It's a surefire way to fall further into the mire.

you may like to read another article how handle debt issues and debt management 101.

Reasons why you need life insurance

The reason we have insurance is plain and simple. It is designed to protect any family from a sudden and calamitous disaster and any financial demands that it might place on them. There are many variants of insurance on offer, but perhaps the most basic kind of insurance you can get is life insurance. Life insurance, as its name suggest, insures life and so the future of your dependents and loved ones will be protected in the event that anything happens to you. Just as you meet financial commitments throughout life and contribute in some way to the family income, you need to do so after passing on as well. You need to secure the home, help the family meet expenses for as long as you can possibly provide for and help the children and the spouse get by in tough times.

There are several financial obligations that pop up in life and beyond as well. Funeral expenses, for instance, can be quite significant as too outstanding medical bills. Then there are possibly mortgage payments, business payments, college expenses and so on to look after. How much life insurance you must take on depends on multiple factors. It is dependent on your lifestyle, your financial needs and your sources of income as also how many dependents you have. Most insurance agents would suggest that you take insurance totaling somewhere between five and ten times your annual income. Your needs for insurance are very particular to your circumstances ad according to them you need to come up with an insurance plan that suits your needs.

Correctly planned, life insurance will provide much needed funds to your dependents so that they can deal with expenses even after your death. It is a sense of protection that it provides and it serves as a cash cow to be milked for some time. This is tax free cash that has been provided solely to provide for your family. It can also have a savings or pension component that looks after you even during your retirement, and again that depends on your circumstances and needs. Less than an expense, a life insurance policy is a financial asset that can positively affect your credit rating if you need to take out a home loan or if you are seeking health insurance. The reasons for taking life insurance are compelling and many, and if you haven't done so till date, go get yourself insured right now.