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Make Money Online – Find Ideas and Tools For a Profitable Internet Business

For anyone who has thought about running a business now is a great time to begin. The internet and digital technology have made it easier than ever before to begin earning money for yourself. Technology has undergone many changes over the last decade and the pase of innovation is only increasing.

It makes no difference if you would like to launch a business or just want to earn a few dollars as a part time gig the web can be an income source for all entrepreneurs. It is not unheard of entrepreneurs who start out with small sites online to be surprised at how fast they can grow and become large scale endeavors. The speed of change with internet bases is significantly faster than other business sectors.

Many experts believe one of the main explanations digital communications has enabled individuals to realize their dream of self employment is the extremely affordable beginning requirements. Normal start ups usually necessitate substantial initial investment but entrepreneurs can find digital business systems than could be launched for just about free. Capital is a very limiting factor for most new business ideas fortunately business ideas can be extablished online for very little.

Internet sites, the foundation of a number of internet fortunes, can currently be launched for virtually no money with many free development aids and tools which will serve to reduce the costs of getting off the ground. There are even free shared hosts that are perfect for individuals looking to open a business but unaware of how to proceed. Here are a couple basic business models to begun earning some cash on the web.

For online sites content is important and well written articles are a primary source of content for lots of successful web sites. There are countless sites online and they all need new and high quality articles. Not many web site owners have the time or ability to craft much of their articles alone and are often obligated to buy their content from others. Writers who can put together good pieces have the opportunity to earn lots of money providing site content.

AdSense is a contextual ad network operated by Google. AdSense is extremely simple to set up and one of the main revenue channels for many bloggers. The AdSense program generates appropriate ads on online properties, advertisements that relate to the articles on the page. Site owners are credited money each time an advertisement is visited and due that the fact that the AdSense program makes sure all ads are targeted the click through ratios are usually high. Google makes it a snap for you to generate revenue.

SEO techniques for building sites and planning promotion initiatives so that it is listed in search results. Local SEO is identical but with a focus on local niches. Search portals such as Yahoo list different results for local searches, such as health club, and people that know how to get prominent rankings can earn lots of money.

Most people with sites are constantly looking for new content and some of the most popular types of content on the web is video content. If you have a recording device and basic video software you are able to make videos to place on the web. Uploading video content in the internet can provide the opportunity to earn revenue by advertising. If the content you produce is good you may have the chance to market them to site owners looking for video content.

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Bad Credit Loans – Easier Approvals and Better Terms

While applying for loans is usually a stress for people with limited credit histories or past credit problems, most of it arises from fears of rejection. As brick-and-mortar financing institutions try to stay away from risky lending portfolios, they tend to decline most of applications made by bad credit consumers. This, however, does not mean that there are no options available for people with blemished credit. Borrowers with past credit problems are able to secure personal loans, auto loans, and mortgages.

Personal Loans For Poor Credit

Personal loans usually come in two varieties: unsecured and secured. Unsecured loans are historically most sought after, as they combine the ease of application, having no collateral requirements, and a freedom to spend the money any way a borrowers desires. Unsecured personal loans are credit-based, as nothing but the signature of the borrower is required to get one. While qualifying for unsecured loans may be somewhat more difficult than securing a car loan or a mortgage, all credit grades are eligible to apply. An easy application made with several lenders may reveal whether you are a good candidate for a loan, and, in case of success, help to choose the best terms from several lender offerings. People who are found ineligible for unsecured loans are often approached with collateral request, i.e. securing the loan with personal assets. Such loans are called secured loans. They are perfect for people who did not qualify for unsecured loans as well as to individuals who want to have lower payments and interest, as secured loans are considered safer than unsecured loans by lenders and commonly have better interest rates and larger loan amounts.

Bad Credit Car Loans

Car loans are often the most sought after lending products among bad credit borrowers, as having a reliable vehicle is a must for most people, especially the ones residing in suburban and rural areas where public transportation is deficient. Most lenders have no problems approving people even with serious credit issues; however, terms of such loans vary widely among lenders. Based on individual credit characteristics, some bad credit consumers may qualify for lower interest rates with little or no down payment, where others may be required to put a good chunk of money down.

Once again, the best way to find out what loan terms you may face is to submit an auto loan application among several bad credit auto lenders. There are a number of online services that allow submitting one application to be disbursed among multiple lenders, allowing collecting multiple lender quotes within a short time span. Most lenders have relaxed qualification requirements for auto loans coming down to having a steady job and some leftover income to cover loan payments.

Poor Credit Mortgages

Most people want to have their own home. People with bad credit are no exception. While getting a mortgage entails many technicalities, it is fairly easy to qualify for even with bad credit, as mortgages are treated by lenders as one of the safest investments. Unlike other loan products, a sufficient amount of money is required in order to cover down payments, closing costs, points, and so forth, no matter how good or bad your credit may be. Therefore, before even considering a mortgage, you should have some savings set aside. In addition, getting a mortgage is a paperwork-heavy process, requiring a lot of effort on the part of the borrower. Despite all above, the pride of owning a home easily offsets all of the hassle.

Borrowing Solutions For Poor Credit Borrowers

All loans have one great convenience to potential borrowers – quick and easy online applications and expedited reviews. As banks try to compete in saturating lending market, they offer increasingly better solutions to bad credit borrowers, resulting in more bad credit loan applications being approved. What was not possible only yesterday is quite feasible today.

The Best Ideas For Paying Off Your Credit Card Debt

You’ve done a great job in getting your credit cards but like a lot of people, you may find yourself in a bit over your head because life has a way of throwing obstacles in your path and those obstacles generally cost money. It is a good idea to have a low interest and no fee credit card for emergencies.

Sudden loss of a job and then needing to make car repairs can put a real dent in your bank account. The way people get in over their heads is when they start living off their credit cards. If you’re buying your groceries or paying your bills using your personal credit cards, it is time to look at your household finances and create a budget that you can live on.

Rules To Live By

A good rule of thumb for drawing the line about when to use your credit cards is never use your cards for anything you can pay cash for.

Credit card companies basically don’t want you to pay your balance in full every month. They prefer that you pay a minimum payment every month and keep the interest rolling in on your account.

There are some companies that charge their cardholders yearly fees, interest on their balance and a fee for managing their accounts. If you have one of these types of credit cards, it’s time to look at paying off your credit cards and getting a budget that you can live on together that will allow you to pay off your credit card debt.

Let’s assume that your payment is set up to pay back the very minimum balance each month. The minimum balance is around 2% each month. This means that the bulk of your payment is going towards payment on the interest. This is why it seems so long to pay off the debt. For example, if you purchased goods that originally cost $2000, at an 18% interest rate, you’ll end up paying back over $7000. That should motivate you to pay off your credit card debt!

What You Can Do

You can jump off the merry-go-round any time you want. Don’t get any further in debt than you already are. Make an honest budget. Calculate your bring home pay and deduct your true amounts you average for bills and utilities. Then cut corners where you can.

Ways To Trim The Fat Out Of Your Budget

* Take your lunch to work.
* Stop watching the Home Shopping Network and most of all…….
* leave all but one of your credit cards home!

This will eliminate spur of the moment shopping.

Staying Motivated

Calculate how much you owe on your credit cards. Pay off the cards with lowest balances first and split that money you were using to make those payments among your other cards and give the largest payments to the next lowest credit card balance. This will allow you to see results more quickly and keep you motivated in paying off your credit card debt.

It’s not a bad idea to keep in your possession the budget that you created. This allows you to be objective about frivolous purchases you want to make. Use your savings if you can to pay down debt. The most that the average savings account pays is 4.5% interest on the balance.

Why keep money in that account if you’re paying on an account charging you 17-18% interest?

Another direction to take if you find you are so in debt you cannot meet your monthly obligations is finding a good credit counseling service or debt consolidation service. These services help you negotiate a debt down to a workable solution. Be careful in this area as well though, you may want to consider that the money spent here can also be spent on paying off existing debt, read the fine print to see if there are fees and if you are already past due on your credit cards, your cards will continue to be reported to the credit bureaus as “past due” until the balance is paid in full.

It’s going to take some discipline to pay off all of your credit card bills but if you work hard enough at it and have a commitment to stay with your budget, there’s light at the end of the tunnel.

The Regulation Of Financial Markets In The Southern African Region – Current Status And Developments

The success of the financial sector is a key component for economic development

The financial markets sector is one important area of public concern in Africa. The need for adequate regulation and supervision of Financial Markets as an important mechanism for the promotion of economic development in African countries cannot be overemphasized. Financial markets regulation remains a very sensitive and complex activity when it comes to governmental policy development, with relation to defining strategic options pertaining to financial regulation. This article reviews the current status of financial farkets, the legal and regulatory frameworks in the Southern African region, with a special focus on selected countries.

The topic under investigation relates to the regulation of financial markets by governments within the Southern African countries both at national and international levels. It attempts to grasp its rationale, objectives, approaches and the practical ways of defining a regulatory framework for a modern African financial market and system. At a time many experts are calling for liberalization of financial services in Africa, it is important to analyze what are the rationale, advantages and implications of financial markets regulation for Southern African countries under the light of new international instruments and standards, such as the Basle II Framework and the WTO Agreement on Financial Services of 1994, whose operational modalities are is still under negotiations on various key aspects.

This paper attempts to examine the institutional and regulatory framework for the financial markets operations in order to understand the underlying principles of financial markets regulation development; to develop a concise outline of financial markets regulation framework within the South African countries; and provide as much as possible a clear understanding of policy development, key issues and challenges relating to the regulation of financial markets in the Southern African region.
The terminology used in the financial markets jargon is considered to be highly technical and can some times be confusing. While we attempt to keep a non technical language through out this paper, it is quite impossible to avoid the specific concepts used in the financial profession. For some key concepts, a concise glossary of most of the technical words is provided at request by the author.

The Southern African region: geographic coverage and scope

The broad Southern African Region considered under the present study is defined with reference to the SADC membership, currently comprising 14 countries, i.e. Angola, Botswana, Congo (the Democratic Republic of), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. However, our scope is limited by the criteria of readily available data, and the level of financial markets development in the countries under investigation. Angola and the Democratic Republic of Congo are emerging from long wars and are still rebuilding their economies and financial systems. Both have no formal financial market. Accurate and reliable data is very limited on their systems. The study covers a period of 10 years (1994-2004).

Background overview on Financial Markets

The regulation of Financial Markets, taken as a broad concept, is the process that encompasses regulation, (i.e. the establishment of specific rules of behaviour), the monitoring (i.e. observing whether the rules are respected) , the supervision (a more general observation of the behaviour of financial institutions and operators), and the enforcement (ensuring that the rules are complied with) of the established laws.

The ultimate economic function of financial markets is to mobilize and allocate resources through financial intermediation in order to accelerate the process of economic growth. This function is performed through two distinct but interrelated components of the financial markets, i.e. the money market and the capital market. It provides channels for transferring the excess funds of surplus units to deficits ones. They constitute the mechanism that link surplus and deficit units, attracting funds from savers in the surplus sector and channeling these to borrowers for the purposes of profitable investment.

For the purpose of providing a clear understanding of this topic, it is profitable to present a wide overview of a typical financial system and the place of the financial markets holds within this framework. As a practical illustration, we provide in a table of Annex I, the Conceptual Framework of a typical financial market system (the Case of South Africa).

Financial Systems and Financial Markets development

The financial system in the Southern African region consists of providers and users of financial services. The typical financial system consists of a variety of institutions, instruments and markets that facilitate the flow of financial resources between borrowers and lenders. The financial institutions include moneylenders, banks, insurance companies, leasing companies, venture capital funds, mutual funds and pension funds, brokerage houses, investment trusts and stock exchanges.

Financial instruments involved range from currency notes and coins, cheques, mortgages, corporate bills, bonds and stocks to futures, swaps and other complex derivatives. The markets for these instruments may be organized or may be informal. The users of the markets may be households, businesses and the government. Compared to those of developed countries (Europe, Asia and America), the typical financial markets in the Southern African region are characterized by the absence or a limited number and quality of the financial services providers, the absence of many of the instruments and the lack of depth in the markets.

Financial Markets typology and structure

The financial markets play a very important part in the economy of a country and the well-being of every person. They interact with other markets and have an influence on issues such as wealth, inflation and economic stability in a country. The financial markets have their own characteristics and to be able to regulate them or operate in them, it is important to comprehend these characteristics.

Classification of Financial Markets

Financial Markets can be classified into different categories depending on the characteristic of the market or instrument used to create categories. There exist two ultimate distinctions of financial markets. The primary market, i.e. for the sale of new markets, and the secondary market for already existing securities. The capital market, which is the market for the issue and trade of long-term securities, on one hand and the money market, i.e. the one of short-term securities, on the other hand,
In general terms, the money market is the market where liquid and short-term borrowing and lending take place. The lending of funds in this market constitutes short-term investments. In a certain sense all bank notes, current accounts, cheque accounts, etc. belong to the money market.
In financial market terms, the money market exists for the purpose of issuing and trading of short-term instruments, that is, instruments where the term remaining from the date when trading takes place to the date of redemption of the loan represented by die instrument (commonly referred to as the “term to maturity”), is of a short-term nature. In theory, this term for classification as a money market instrument is given as one year. In practice, however (especially in South Africa), instruments with a term to maturity of three years or less are normally classified as money market instruments although this is not a hard and fast rule.
For the purpose of regulation, the classical typology of Financial Markets recognizes the following major distinctions :

  • the inter-bank and credit markets
  • the Money Market ;
  • the Equity Market ;
  • the Foreign Exchange Market ;
  • the Bond Market (for Government bonds, Corporate bonds, Eurobond market, structured bonds, etc.) ;
  • the Derivatives Market: ( for Futures, Swaps and Options)

Apart from the above mentioned categories, an other important distinction is established between the domestic financial markets and the international financial markets.

The institutional framework for the regulation of Financial Markets.

A financial system cannot be effective without an adequate regulatory framework. For a financial system to be effective and promote healthy economic development, it is important to put in place a sound legal and institutional framework. Various strategies and approaches are generally considered by experts for the development of financial systems. Two major strategies commonly considered are the “evolutionary” and the “proactive” approaches. Other experts have made a distinction between the “go slow” versus the “big bang” approach.
The pro-active strategy provides legal, regulatory and prudential framework which accelerates financial market development through mechanisms, institutions and financial instruments set up for this purpose. This strategy is considered as the appropriate approach for African and other developing countries for three main reasons:

  • Inadequate neutral incentive environment and market forces that are insufficiently strong for financial markets to develop by themselves.
  • Lack of institution-building capacity to determine the pace and strength of financial markets development.
  • Need for flexibility to allow for the use of the most efficient institutional set-up, required training infrastructure and choice of technology that is most suited to the local conditions and level of development.

The Rationale, Principles and Objectives of Financial Markets Regulation

1. The necessity for a Financial Market Regulation

    Why regulate Financial markets? This question is central to the subject under investigation in this paper and before we attempt to grasp the rationale and objectives of financial markets regulation, it is important to understand why such regulation should exist in the first place. The necessity for a financial market regulation finds its basis in the same principles applied to the financial sector in general. Borrowing and lending of money create certain risks, namely :
    • That the borrower will not be able to repay the money ;
    • That the lender is receiving a fixed rate on his investment while market rates fluctuate in such a way that the yield on his initial investment is now below current market related rates ;
    • That the value of the capital invested could decrease due to movements in the market. In order to clearly define the rights and obligations of investors, borrowers, operators and intermediaries involved in a financial system and who operate under contractual relationship, it is of the highest importance to develop a cohesive and comprehensive legal and regulatory framework.

    The stakes involved in the running of a country’s financial markets are very high and it would be deeply irresponsible to apply the rule of “laisser-faire” in this very sensitive sector. In case some thing would go wrong or the financial system could undergo a serious crisis, it would result into a total collapse of the entire economy.

    Such a framework should encourage discipline and timely enforcement of contracts, fostering responsibilities and prudent behaviour on both sides of the financial transaction. For a country’s market to develop and operate efficiently, the legislative and regulatory framework should incorporate rules on trading, intermediation, information disclosure as well as strict sanctions against defaulters and cheaters.

2. The Rationale of Financial Markets Regulation

    The rationale underlying the financial market regulation is the general philosophy and ideological background pertaining to a specific country’s economic orientation, and the type of economic system adopted by the country’s leadership. At present, most of the countries covered by the study are characterized by a “market oriented ” economy. However, some of these countries have been under a centrally planned economy until the 1990s when they dramatically changed their economic orientation. It is the case of Tanzania, Mozambique and Angola. The changes were particularly due to persistent deficits in public budget and their inability to support the considerable burden of state owned companies unable to achieve the target economic performance. This new orientation facilitated the development of more diversified and active financial systems, leading to the creation of Financial markets in Tanzania and Mozambique. Financial Markets have their own unique characteristics and financial operators differ from one country to an other. The financial market framework should facilitate rather than impede the efficient operation of the financial system.

The Principles of Regulation

In theory, there is a distinction between general and specific principles. The following general principles are widely recognized for the formulation of an effective regulatory process:

  • Every regulatory arrangement should be related explicitly to one or more objectives identified;
  • All regulatory arrangements should be justified with respect to their cost-efficiency;
  • The cost of regulatory arrangements should be distributed equitably ;
  • All regulatory arrangements should be sufficiently flexible, in the sense of being amenable to changes in markets, competition and the evolution of the financial system ;
  • Regulatory arrangements should be practitioners- based.

Specific principles are identified as follows:

    a. Principles related to the regulatory structure:
      What is the adequate structure for financial markets regulation. One major issue in Financial markets regulation relates to the number of regulatory and supervisory agencies involved. The issue of the choice between a single regulatory authority or multiple specialized agencies is generally resolved according to the following principles:
      • there is a need to adopt a “functional” as well as an “institutional” approach ;
      • the coordination of regulation by different authorities and agencies will help to achieve consistency ;
      • there should be a presumption in favour of a limited number of regulatory agencies /authorities.

      In practice, the institutional and functional approaches need to be employed in parallel because regulatory authorities are concerned with the soundness of institutions, as well as the way in which services are provided.

    b. Principles related to the market efficiency :

      These are principles designed to contribute to the promotion of a high level of efficiency in the provision of financial services. They are :
        (a) the promotion of a maximum level of competition among market participants in the financial system, and (b) the securing of competitive neutrality between actual or potential suppliers of financial services. Competitiveness is likely to enhance market efficiency, which in turn causes the removal of restrictive practices that could impair trading in financial assets and the rationalization of market activity.

    c. Principles related to market stability :

      These principles are expected to contribute to the promotion of a high measure of stability in the financial system and an appropriate degree of safety and soundness in the financial institutions. There should be incentives for proper assessment and management of risk. It is necessary to impose acceptable minimum prudential standards to be observed in respect of risk management by all financial market participants.

    d. Principles related to conflict conciliation :

      Conflict conciliatory principles are designed to resolve potential conflicts arising between regulatory principles themselves. They would involve an integrated approach, aiming at the simultaneous achievement of regulatory objectives, and a target-instrument procedure for the selection of key regulatory instruments in order to facilitate the implementation of an integrated approach.

The Objectives of Financial Markets Regulation

For a Financial Markets system to perform to its highest capacity and level, regulation need to be both effective (i.e. to achieve its objectives) and efficient (i.e. to be cost effective in the use of its resources).

The economic dimension of a financial markets system requires that regulation should not impose unwarranted costs on the economy and consumers, nor impair the efficiency of financial markets. It is therefore necessary to consider a cost-benefits analysis exercise to assess the regulatory requirements.

The more complex a financial market is and more business operators increase, the regulatory process becomes more demanding and requires more specific objectives. Efficient financial regulation requires a multi-dimensional approach and a more optimizing process.

1. The overall objective of financial markets regulation:

    The ultimate objective of financial markets regulation is to achieve the highest degree of economic efficiency and the best consumer protection in the economy.

2. Specific objectives:

    The following Specific objectives can also be highlighted:
    • to secure the stability of the financial system.
        It is important for a country’s economy to run smoothly and the financial sector must be protected against internal or external shocks which might be caused for instance by ineffective or inefficient trading clearing and settlement systems or a major lack of market liquidity ;
    • to ensure institutional safety and soundness.
        The regulatory framework should be extremely cautious and avoid to impose obstacles or barriers that would impair the safety and soundness of financial institutions, which need to be profitable and have sufficient capital to cover their risk exposure and face global competition ;
    • to promote consumers’ protection:

        It is crucial for a financial market to impose integrity, transparency and disclosure practices in the supply of financial services.

Concluding Remarks

In all Southern African countries, as it is in all countries of the world, the financial system is more regulated than any other industry. On the consumer protection grounds and others highlighted in this study, it is universally accepted that this should be so. Existing empirical evidence suggests that regulatory arrangements have a powerful impact on the size, structure and efficiency of financial systems, the business operations of financial institutions and markets, and on competitive conditions in the systems.

The success of a financial markets regulation depends basically on the capacity of the regulators to define the objectives of the regulation and also on the way the regulatory arrangements are related to their objectives.

Some of the countries in the Southern African Region which were able to promote a dynamic and effective regulatory framework, such as Botswana, Namibia, Mauritius, Zambia, Zimbabwe and in particular South Africa, are benefiting from the positive development of financial markets, with an unprecedented flow of capital from foreign investors.

However the financial systems in the region are still limited, in terms of the number of operators, quantity and quality of instruments and the depth of the systems. And there is still need to develop regulatory institutions, structures and mechanisms that can maximize the explicit objectives of regulation while minimizing the costs of services.

Business Plan Financial Projections: Stop Worrying About Being Right…

Business plan financial projections seem daunting because
they are so uncertain. This very uncertainty, however, is
what makes preparing them easy because you can’t possibly be
right. You can’t predict the future. None of us can. All you
can be is competent in the way you prepare your business plan
projections.

Before you finalize your business plan this year, consider
these six caveats to preparing your business plan financial
projections:

1. Don’t offer pull-out-of-the-air, “conservative”
guesstimates about getting some percentage of the overall
market demand or year-over-year growth.

It is a mistake to assume that business investors will
appreciate your being conservative with your business plan
financial projections in the early years of your business.
Don’t think for a Wall Street minute that presenting
“conservative” business plan financial projections indicates
“realism” to prospective business investors. Business investors
invest for one reason: to earn a return on their money. How
long the money is invested influences the amount of the return
earned. Let’s say a business investor wants to triple an
investment. Well, if that investment triples in 3 years, the
return is 44%. If it triples in five years, the return is
25%. Adding just two years to the investment period nearly
halves the return! Now do you see why time is so important
to a business investor? Here are a few other examples: let’s
say a business investor wants to:

Make 5 times an investment in 3 years = 71% return

Make 5 times an investment in 5 years = 38% return

Make 7 times an investment in 3 years = 91% return

Make 7 times an investment in 5 years = 48% return

Make 10 times an investment in 3 years = 115% return

Make 10 times an investment in 5 years = 59% return

So, while you may find it attractive to figure out how to
make “just a living” until the business venture proves
itself, you now understand why business investors want sales
and earnings to grow absolutely as fast as possible, without
being deceived, in your business plan financial projections.
On the whole, business investors are risk averse only to the
extent that they don’t want to lose their money or tie it up
in a low return investment. Typically when you make the claim
that your business plan financial projections are “conservative”,
it usually just means that you have no idea how and why you’ll
achieve a certain level of sales within a certain time frame.
Interesting, these kinds of estimates, provided that you’ve
done some good thinking about market segments and overall
demand, often turn out to be too low. Remember, it’s just as
bad to underestimate your sales, as it is to overestimate
them.

2. Avoid calculating costs as a straight percentage of
revenues.

Sure it’s easier to do things this way, especially with
Excel and other business plan financial projection software.
Costs are real, however. You need to know what they are very
specifically. If you’ve done your homework in developing
your business plan, then you should already have this information,
or at least the basis of it. Just estimate and calculate your
costs on a product-by-product basis.

With these warnings in mind, use the following steps to
develop your business plan financial projections:

Think about what percentage of the overall market share your
competitors already own. Assume that they will continue
their present trends in growth. (Note: some competitors may
already be trending down and losing market share.) Temper
your market share estimates with some discussion of how your
entry into the market will affect these trends. Then,
estimate the percent of total, potential demand that remains
available to you.

Now, based on the limitations of your operations plans,
calculate how much of this remaining available demand you
can achieve. This is a very simple calculation. Start with
your overall productive unit capacity and factor it by the
expected yield of sellable product, then multiply these unit
sales by their respective selling prices and voila, you have
the revenue numbers for your business plan financial projections.

Let’s take an example.

Your research indicates that 2 out of every 10 females age
23 to 55 will under go some type of non-invasive cosmetic
treatment in your area. Your research also shows that this
number is expected to grow 20% each year over the next 5
years. There are 40,000 females in your target market. You
identified four competitors in your target market. These
four competitors currently handle on average 6 procedures a
day. You plan to start a non-invasive cosmetic treatment
center that uses the most advanced technology and is thus
capable of performing an average of 7 procedures a day.
Using this data you calculate the following statistics
about your market and market potential:

Total market 40,000 females x 20% = 8,000 procedures per
year

4 competitors x 6 procedures x 250 days = 6,000 procedures
per year

Available procedures: 8,000 less 6,000 = 2,000 per year

Your productive capacity: 7 procedures a day x 250 days =
1,750 or 21.875% of the total market. The average selling
price for a procedure is $400. Thus, the revenue for the first
year in your business plan financial projection would be 1,750
procedures times $400 or $700,000.

Now, let’s say you’re were projecting 2,200 procedures per
year. This would mean that you would have to alter your
operating plan to be able to perform 2,200 procedures. You
would also have to demonstrate how you would capture an
additional 200 procedures from your competitors.
Granted this is an over simplified example, but it should
give you a feel for how this process works.

Regarding price, in most cases you should have a clear idea
of how to price your product or service. There are usually
other, similar products or services out on the market.
Unless your competitive advantage is a cost reduction and/or
unless price is a critical basis of competition, just
estimate the value of your improvement and add it on to the
average price currently offered in the marketplace. In order
to make this estimate, you’ll have to be talking to
potential users. Find out what they pay now. Find out how
they feel about the current price. Ask them if they’d be
willing to pay more and how much more. If you ask enough
people, you’ll get a general idea.

3. Never determine price on the basis of a margin you think
is attractive.

The market will pay you only for the value you deliver,
which is determined by the consumer paying the final price.
It’s easy to make the mistake of thinking that a 20%, 40% or
even a 60% margin is great. Never considering that if the
product or service you’re offering provides a real
advantage. If you do this, you may be grossly
underestimating the price you can get in the marketplace and
underestimating your business plan financial projections.
Consumers don’t think in terms of margins. They could care
less about what you ought, “reasonably”, to get for your
product. That’s why you must find out the most that they’ll
pay. This is the value of your product or service. Come up
with some reasonable basis for determining this real value.
Keep in mind the obvious: If the consumer’s value on the
final product or service is less than your cost plus a
reasonable profit to keep your business growing, you’re in
trouble. Your business model will not be sustainable and your
business plan financial projections useless.

Now calculate the costs of manufacturing and distributing
your product. These costs flow directly from your revenues
estimates and operations plan. How much will it cost to
purchase what equipment and materials, hire what personnel,
engage in what selling efforts, pay what accountants and
lawyers, rent what kind of space and so forth, to achieve
the revenues you’re showing in your business plan financial
projections. You must be very specific. Project your costs
over time. Keep them tied to the units you need to sell to
achieve the revenues in your business plan financial
projections.

Obviously, costs and revenues work hand in hand.

4. Keep your fixed cost low.

Keep in mind that none of these revenues and the cost
estimates are going to be perfectly accurate, which means
the amount of profit or cash available to pay “fixed” cost
isn’t going to be accurate either. As a result, you can lose
your shirt trying to pay for equipment, a receptionist, or
other activities that don’t contribute to the sole objective
of making sales. Wherever possible, rent space, rent time on
equipment, answer your own phones, etc. To the extent that
you keep costs variable in your business plan financial
projections, you can cut back when sales are slower than
expected. It’s the worst situation to have a big,
well-furnished office with an expensive secretary who
needs the job, when the money isn’t coming in. High fixed
costs in your business plan financial projections also send
the wrong message to investors that you know more about the
“form” of doing business than about actually making money.

Now pull all your numbers together to prepare the financial
statements that summarize your business plan financial
projections. You need three basic statements: cash flow
analysis, income statements, and balance sheets. All of
these come directly from the above calculations. Your cash
flow analysis indicates when and what amounts of capital
infusion you’ll need to start and sustain your business plan.
Make your income and balance sheet projections on the
assumption that you’ll get the capital. For the first year
or two of your business plan financial projections, present
each of these statements on at least a quarterly basis.
Monthly is best. I suggest doing a 24- or 36-month projection
depending on your growth plans and changes in the industry that
you foresee. Follow these monthly or quarterly projections with
annual projections till you cover a span of 5 years.

Finally, run through some “what-if” scenarios or sensitivity
analysis. Though you business plan financial projections should
be based on your best, and best-supported estimates of costs
and revenues, you know you can’t be 100% right. That’s why it’s
important to identify those elements or assumptions of your
business plan financial projections that you feel are most
uncertain. Write out the nature of the uncertainty and the range
you think the estimates will fluctuate up or down. Then change
the estimates accordingly and re-run all your statements.
Pay close attention to how your business plan financial
projections, especially cash flows, change when you change
each assumption. This will help you determine how much
“cushion” you have available and, if business isn’t going
according to plan, at what point cash will become an issue.

5. Do not simply assume that costs and revenues may be
“off”, up or down, by some percentage.

Again, I know that Excel makes it easy to do this. For all
the same reasoning as above, stay focused on the assumptions
and details that make up your business plan financial projections.
It’s the details you need to examine for their sensitivity and
their impact on the bottom line. You only need to alter those
specific items that you’re most uncertain about. If it’s revenues
that you’re worried about, is it the price, the volume, or
both that concerns you most? How big a swing in the estimate
are you worried about, in what direction and why? If it’s
your cost projections that are keeping you awake at night,
which cost elements and why? Things like rents and labor
costs can be determined fairly accurately. But maybe you’re
unsure about materials or labor availability or how
efficiently you can produce your products or provide your
services. Maybe you’ll have to pay extra to ensure their
availability. This kind of thinking forms the basis for running
“what-if” or sensitivity analysis on your business plan financial
projections.

6.Do not include every possible business
plan financial projection scenario in your business plan.

Both you and your investors need to know what aspects of the
business plan financial projections are most uncertain,
represent the most risk, in what direction, why, and how
they affect the bottom line. Having hundreds of alternative
scenarios to sort through is like a man with two watches
showing two different times… he never knows what time it is.
Lots of alternative business plan financial projections also
indicate that you’re not too sure about anything. This is an
impossible way to communicate with business investors, manage
your business, or make important decisions. It’s much more
effective to identify the risky areas of your plan, tell why
and how they impact the bottom line and what actions you
plan to take if they occur. This helps you and your business
investors stay focused on the high impact areas and to think
clearly about whether other factors should be considered as
well. It also lends more credibility to your talents and
increases the likelihood of your plan’s success.

Finish this discussion with a summary of the critical
aspects of your plan and related contingency plans. If
you’ve followed all these steps, then you can figure out
what you’ll do if your actual performance turns out to be
different than your business plan financial projections.
Remember, you’re purpose is to demonstrate to business investors
that you’re competent; worrying about protecting their investment
and running a business, not just flying by the seat of your pants.