REAL Assets...

[Alta Murray]

Hi Yvonne,

Back in the old days Stellenbosch Uni did the stats on the different industries, and you could get a good grip and what net prof % you could look at. Unfortunately they don't get a gov. grant anymore, but here are some average net prof % for you:

Construction & Building 3.19
Short Term Insurance 9.75 with latest year set at 16.20
Pharmaceuticals 20.15 and we all know the mark-up on that
Food comes in at a mere 1.87 see why we don't like to cook?
General Retailers 5.17
Media 13.84 (latest) see why we like to gossip?
Travel & Leisure 11.46 and holding steady since 97
Real Estate 31.96 average but 6.15 on latest
General Financial 39.65 on latest showing strong growth
Venture Capital -0.87 latest

I am a bit weary of these stats, and at SETA they also asked me what industry ratios I use as barometer on my graphs, but that is all we have right now, and historical performance must also be looked at.

But it can be a bit misleading in that the % might look low, but a % of what turnover? 10% of a R100.00 Turnover is way lower than 10% on R 10 000.00. So essentially you have to look at the whole picture afore you can determine what % one can look at for a SMME.

I did an analysis for a college last year, and I advised them to close down, to cut their losses and close the doors. Did they listen? No, so it was closed down for them. Rent can kill your venture even before you start off, and boy, in this country people can invest in assets like there is no tomorrow!! The latter is one of the biggest problems. There is only one criteria in investing in a Fixed Asset -- how much money will it bring in, and what will my turnover ratio be on my Fixed Assets? I am not even talking about Total Assets and all the rest of the ratios.

But yes, just had a discussion today on what business owners do -- you and your business are not one entity, so don;t tell me that you are making x per month, when you are using all of x just to make a living for yourself and your family. Then you enter into the survivalist scenario for a business.

If you like, I will help you do an analysis on your business for free, and you can check out the end result and see what it looks like. Just let me know.

When it comes to a service industry, I like to see a net profit margin of at least 30%.
And it can go up to 49% if you know what you are doing.

[Alta Murray]

Jip, I would look at that one too afore I buy, however there are a lot of things to consider, and sometimes one graph may bite, but the rest will give you a good idea of the problem areas and whether it will be an easy fix.

Fixed Assets are a huge headache, and even when evaluating this, people tend to forget about the lifespan of the fixed assets as well. You can get a good graph, feel happy, but what about replacement cost if it is nearing the end of its life cycle? Seen this happen, where people bought a company and never checked this little critter out. And up went the Long-Term Liabilities.....

RONA fits in with your cash cycle, and a lenghtening cash cycle is a bad deal too. So I want to sort of see how many days I get on my Inventory Period, AR period etc. and I want to know exactly how many days I don't have cash if I have a cash flow problem.

Operating Cycle is another one you will have to look at, but I am getting too much into this

[Alta Murray]

Don't think me funny but a speed dating venue would bring you a good return if you advertise properly. There is a huge need out there for that, and you can hire a venue, and sit back and relax. Payment is made beforehand, so you will have the capital to pay for the venue, no riks. I am a low risk, high return girl.

There is nothing crummy about this, just a lot of people who don;t have time to go out there and meet people, this is a well known fact. Listen to Yvonne, find the need.

I will try and think of some more ideas, but I am not big on ideas for get rich quick schemes, I believe that you have to find your passion, and just go for it. Universal Laws will take care of the rest, and you can find many, many an example. But keep on studying......that is your key out!!

Also anything to do with a health or organic prefix is seen as a need today.

Good luck!

[Dave A]

Food comes in at a mere 1.87 see why we don't like to cook?
General Retailers 5.17

That makes you wonder about the rental structure on malls and the like.

Who is really making the money?

[Alta Murray]

Your developers of said malls by far, and check out who they are! Rent is and remains a huge drain on business, and our local mall, which by now is a landmark, can cost anything from R 60 000.00 per month and I am talking a teeny wee spot of space. Also you are forced to revamp your space every 24 months go keep up with the general ambiance of the mall. Now I don't claim to be the smartest person on the planet, but if you add running cost of any business to the rent, it sends you to yer very knees.

Every time I check out rent, i tend to think of the old Victorian landlords, and I can only shake my head. But you are the first person I know to be vocal about this, the rest of the business people I know just shrug. I think it is because everyone else is paying the same rent, and to say anything make you seem like a loser? I don't know, I just know that it is an issue that we will need to address... and boy are they arrogant! Some of them, I have checked, don't even consider sub-letting if a business in a mall goes bust, which is another sign they are making tons of money.

The barriers to enter are huge, the initial investment is phenomenal, so it remains a game open to only those who really, really have money!

[IanF]

Every time I check out rent, i tend to think of the old Victorian landlords, and I can only shake my head. But you are the first person I know to be vocal about this,

Alta
I have dealt with 2 landlords since being in business and both don't think about renting as a long term partnership. They just try to screw the tenant for every last cent. My long term plan is to own my own business premises. Which is also a nice retirement fund.
I struggle with the 10% escalation demands and have offered CPI +1% I got nowhere a they were scared of inflation going into deflation. I try to explain the standard 15% they got in the eighties was fine as inflation was 25% if remember correctly so you got an effective 10% decrease yearly.
How do others see owning their own business premises.

[Norri]

Don't think me funny but a speed dating venue would bring you a good return if you advertise properly. There is a huge need out there for that, and you can hire a venue, and sit back and relax. Payment is made beforehand, so you will have the capital to pay for the venue, no riks. I am a low risk, high return girl.

There is nothing crummy about this, just a lot of people who don;t have time to go out there and meet people, this is a well known fact. Listen to Yvonne, find the need.

I will try and think of some more ideas, but I am not big on ideas for get rich quick schemes, I believe that you have to find your passion, and just go for it. Universal Laws will take care of the rest, and you can find many, many an example. But keep on studying......that is your key out!!

Also anything to do with a health or organic prefix is seen as a need today.

Good luck!

I think that's a great idea, Alta Thanks for the suggestion! And for bringing the thread back on-topic!

It's little things like that that we might never have thought of on our own that brainstorming in a community like this can really help bring out.

I don't see these things as a get-rich quick scheme but rather a get-rich-slow scheme, providing cashflow for larger investments and business developments.

Following Kiyosaki's Cashflow 101 game -- my idea is to counter my expenses with money-making assets until such time as I'm out of the "rat race" and can invest without fear of not eating next month

[Alta Murray]

Well, for one I think Ian, do the math! If you can find the property in the right area, you pay off your loan at a cheaper rate than your rent!! And there is something else -- the time value of money to take into account when it comes to owning your own business premises, it might seem terribly expensive at first, but as time value increases the monatory value decreases, and the value of the property increases. If you can sub-let you are in.

In my area you see this happening a lot, but it is in answer to landlords who don't give a fig. They do nothing to market the complex, and they are supposed to do that, as most of them charge you for it anyway -- its there hidden in the rent. They think that you are dependand on the 'feet', so you will cough up.

In our area, all the Accountants,attorneys, dr, dentists, and software people refuse to give in, so you will not find us near the complexes. People buy up small holdings, one bit is for the business and you have your home right next to it, or attached to your business premises. So we turn the tables on them, our businesses are situated just off the landmark complexes, so directions are a breeze, and they are not seeing a cent off it.

If you then go off on pension, which I don't believe in by the way, you have rent coming in as a latent income. You see, the great big old buzz with rich dad poor dad was that it is only when you own a second property that you are creating income. Duh! We all knew that. We only had to look at all the Jewish and Indian business people, and it remains my dream to have my business downstairs and living upstairs. Just like the old Dutch clockmakers

So if you can do it, go for it, even if it means selling your current home ouch, and getting a new property which can serve a dual if not multiple purpose. We are living in the age of 'The Feminine' by lack of a better word, so you must have one thing that can perform multiple functions, see all the trends today.

Oh, and I checked out your accounting package, though I couldn't see what it looks like, apart from the fact that it seems to be for a small business, I can tell you this : If you are happy, and it does what you want it to do, you are set. The price is very reasonable, so I hope you stay happy!

As for numbering accounts -- you just click on a button and you can be on names only, but it is a very bad practise, and I will break any student or programmer working for me if they dare go without unique numbers.

Anyway, subtract the rent from your financial figures, and just look at the picture you get from your business, then start adding a rent figure, and see when the business is screaming at you. That is the rent you can afford, and you can use that figure to work out the repayment you can make on a new home *and* business premise. Trust yourself Ian, people with financial skills always make it seem so difficult, but we all can count, so rest easy, you can do this!

By the way, we have printing bus. in our area operating from their homes, even art galleries, and it is not a common cheap area. If you have any other questions, just fire away!!

[Alta Murray]

Ooh, Norri, let me share this lesson with you -- as part of my father's studies they had to play the stock market, just play, and at the end of the year, they compared notes. Now if there is one thing my father taught me it is this, and i gladly share it with you -- never ever give your power away, and that is what you do when you 'invest' and you have no power over your money. Providing cashflow for the big ouks? I worked 3 jobs at one stage, so you can do it too, but give your power away to someone whom you have no control over? If you are willing to do that Norri, I have the best deal for you -- a lovely game farm in Zim

Seriously, the fact that you are a *thinking* individual, out there trying to find new ways, hats off to you, you are a minority my friend. Most people don't get it, they sit on their butts and complain. You are doing something, and that is wonderful, and don;'t you dare give up.

The second lesson from my father -- never compromise your freedom. So don;t do that either. What is good advise is to sow in the morning and in the evening, for you never know which one will bring you the harvest. But YOU sow, not someone else, they work for you and you remain in control. If you are not in control, you have no freedom, therefore you can not make choices.

Answer me this -- what is your passion? What grabs you? And don;t tell me money, it's the currency of this world, we all want money. What makes you forget about time? What makes you feel alive and in sync? For me it is analysis and diagnostics, for me a business is a live entity and I can actually hear and feel it speak to me, sounds crazy, but it is my passion. It's what I am good at, I don;t need to strain to make it happen, it just does, so what is that something for you?

Americans are successful for two reasons 1) they follow their passion whatever it is 2) they are extreme optimists. Now they might not be the smartest people on this planet, trust me, but see what a difference it made for them?

If you try to make choices for your life based on a poverty foundation, ie. I need the money, you are screwed. Hard work alone will not do it for you either. I have known many a hard working poor person. So what is your passion?

But onto ideas -- the other thread we had going was about how hard it is to follow a healthy diet, so I was hankering for healthy lunch deliveries.

Also I think we should start doing an analysis on what people need today -- you have the mom's taxi services springing up all over the show, picking kids up from school and then driving them to extra-mural act. etc. You have students for ex math students going out to homes and tuitoring kids with math problems in their homes in the afternoons.

The greatest success story of our times -- Virgin -- al he ever did was to go through a day and see what was lacking, then he started a bus. that supplied the lack. For the next few days I will make notes of what I find lacking and perhaps we can sompare? But I need the answer to your real passion first

[Alta Murray]

Oh, and your expense should be on your *own* asset that then brings in a return for *you*