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November 1, 2011

Written by Bob Meyer, Editor of BarterNews

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From the desk of Bob Meyer... 11/01/2011

Nation’s Households Are Deleveraging

The Federal Reserve Bank of New York reports that total U.S. household debt fell by $1.1 trillion or 8.6%, from mid-2008 through the first half of 2011. The national belt-tightening comes as the U.S. economy struggles to fend off a double-dip recession.

Manufacturers Are Not The Answer

U.S. manufacturers have increased their productivity dramatically over several decades, according to the National Federation of Independent Businesses. In fact, it now takes less than a fifth (1/5) as many workers to produce the same output as it did in 1950. That’s why the manufacturing sector cannot be expected to solve the nation’s unemployment problem.

Global Wealth Rising

The world is getting wealthier, but Americans are not. Total global wealth grew 14% to $231 trillion from January 2010 through June 2011, according to the Global Wealth Report. However, in the U.S. total net worth remains below 2006 levels.

Current/Changed U.S. Listing Information ...

TradeSmart Inc.
PO Box 538
Conyers, GA 30012
Phone: (678) 342-4141
Fax: (270) 342-4140
E-mail: eacarr@bellsouth.net
www.tradesmartbarter.com

All back issues of "From the Desk...” can be accessed by clicking here.

(Please feel free to forward our newsletter to your friends and colleagues. We have a “box” at the end of the newsletter for your convenience. See you next week. . .)


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Commercial Barter Industry Faced With Unique Opportunity In Changing Times

Monetary expert Thomas Greco Jr., author of several books (latest is “The End of Money and the Future of Civilization”), sees exciting possibilities ahead for the barter industry. Greco believes the barter industry has an unusual opportunity to play a large role in our changing economy/society. Here’s a quick look at his thoughts on the subject in a recent e-mail regarding the “Occupy Wall Street” movement.

“I've been watching with great interest the OWS movement and am encouraged to see that so many people are no longer willing to tolerate the status quo. I've posted a few items about it recently on http://beyondmoney.net. This may be the surge that begins the kind of real change that people have been looking for.

“Demonstrations and other expressions of discontent can help to inspire people and encourage them to act, but that energy must be applied in ways that can effect real change. I'm generally optimistic about the prospects for a successful metamorphic change in civilization, but it will require us to learn radical ways of sharing, cooperation, and organization.

“If we are to make the necessary shift of power away from Wall Street and Washington, we will need to reduce our dependence upon their systems and structures (like political money and banks) and organize new structures that empower people. Let’s work together to provide the direction this movement needs.”

Is Your Trade Exchange Missing Out On Valuable New Business?

If your barter company’s listing on BarterNews.com isn’t current, you are definitely missing out on new business. The web site BarterNews.com receives heavy traffic — with over 150,000 page-views every month. Entrepreneurs and corporate executives check the thousands of articles, the weekly “Tuesday Report,” and the “Contacts Section” of our site. They use the latter to find barter companies with which to do business.

Is your barter company’s listing up-to-date?

To keep your listing current is very easy. See the links below to (A) update any changes to your company’s listing, such as new location, phone number, web site or other information, and (B) if your company has not been listed.

Here’s how to get on board:

To make changes to your listing click here.

For new listings click here.


Now That The Economy Is Picking Up, What’s To Do?

With good news on the economic front (GNP growth of 2.5% last quarter), plus learning that growth is actually present and consumers are spending … many are asking, “Now what?” How will I capitalize on this news, assuming it continues in 2012?

First, be sure your price is right. Because when the issue of pricing arises, anticipation often follows that the topic will bring bad news. Avoiding the subject until the last minute makes that outcome even more likely for firms that are sitting on a pricing bulls-eye, targeted by their competitors and their customers’ supply chain managers.

While it is a daunting topic, firms that proactively manage pricing strategy with the right tools in place can produce significant top- and bottom-line results. Even a point gain in realized prices can yield a many-fold improvement in profits.

George Brown, and his team at Blue Canyon Partners, have seen four lessons emerge from their work with national and international clients:

Understand that not every price challenge is real. We use a graphic of a bulls-eye with arrows missing the target to illustrate the fact that many of your customers make their purchase decisions because of superior products, services, or relationships rather than price. Remembering – and, more importantly, reinforcing – the non-price advantages that won your firm business in the first place can allow you to avoid unnecessary participation in the vicious cycle of price-based competition.

Build a strong analytics foundation to assess the business environment. Knowing where and when pricing pressures are likely to be intense can enable you to make the correct decisions on price increases and determine the right responses to competitive challenges. A “one size fits all” pricing strategy is likely to be correct on average, but wrong in every application.

Use best practice approaches to pricing strategy. We recently heard a case study about a company that successfully introduced a premium price product into a challenging market by implementing a strategy that “gave customers an option that they could refuse.” This, and other best practice initiatives, can yield some major gains for your company.

Create value to capture value. While this message applies more to 2013 and beyond than to 2012, it underlies all successful pricing strategies. If you are delivering value to your customers, you can be rewarded for it, through a price premium or otherwise. If you aren’t, any success you can achieve is likely to be short-lived. Asking the question, “How can I deliver more value to my customers?” in 2012, and taking action consistent with the answers, can make the discussion of pricing much more pleasant in future years.

Blue Canyon Partners will be hosting a free webinar on pricing and the competitive environment on Thursday, December 8, 2011. For more information click here.  


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Four Forces of Cash Flow & How Not to Stress Out Your Cash Cow

By Greg Crabtree

The problem with cash flow is that it lags behind profit for most businesses. Unless your customers pay you and you pay your vendors at exactly the same moment, there will always be a time lag. If you understand the correct order of priority for cash flow, you will avoid the disconnect.

If you are profitable, you must understand that there are four forces that demand satisfaction out of your cash flow — and I can also assume they are in opposite order to what you would prefer:

·         Taxes – You must either set aside money or pay chunks of taxes as you go along, to avoid the April surprise (or October surprise if you extend how long you stick your head in the sand).

·         Debt – Lines of credit are crack cocaine for entrepreneurs. Get off the drug as soon as you can.

·         Core Capital – Retain after-tax profits until you reach your core capital target, which is generally defined as two-months of operating costs in cash with nothing drawn on the line of credit and your anticipated taxes set aside.

·         Distributions – Reap your reward and finally take after tax profits to diversify your wealth outside of the business.

Taxes:

If you did not pay any taxes, you either didn’t make any money or you cheated: both are bad. The biggest hindrance to paying taxes is the complexity of the tax code; the second is not planning to set aside cash for paying the taxes. That is why you should monitor your profitability each quarter and determine how much to set aside or pay in, depending on the rules.

Try to pay only what is required at the last possible moment to not incur a penalty, but that also means you have to know to set taxes aside as profit is earned. Get your tax advisor to do this for you each quarter — it will be worth it.

Debt:

Poor management of debt has killed many good businesses. It is like a drug in that it allows you to postpone the hard decisions long before you are forced to make them ... when you run out of credit. I do not recommend funding losses with line of credit financing. It is OK to use lines of credit to fund profitable growth, but the moment you use a line to cover a monthly loss, you have started down a slope that too often ends badly. Make the hard decisions sooner!

The other key about debt is knowing that you can only repay debt with after-tax profits, with very few exceptions. This is a big hit to most entrepreneurs who have a great year and think they can use 100% of all their pre-tax income to pay off debt.

As for term debt, only use this debt when you are purchasing a necessary asset and the payments truly reflect the cost of using that asset over its useful life.

Core Capital:

Somewhere along the way, it is important to find out the simple calculation that lets you know what a healthy business is. Your business may be profitable, but if you are pulling all of your cash out of the business for the wrong reasons, you will find your cash-cow is out of milk when a downturn happens. The deepest downstroke in operating cash flows for most businesses is equal to two-months of operating expenses.

In turn, I recommend setting the “core capital target” at two-months of operating expenses in cash, in addition to owing nothing on the line of credit and setting aside any tax amount currently due. You may want to set the target higher, but you would never set it lower.

Distributions:

Once you have taken care of the first three cash flow forces, you get to enjoy the fruit of your labor. You can now use those after tax profits, that the business does not need, to diversify (not consume) your wealth. The moment you are looking to the profits of your business to meet your consumption needs, you have headed down a dangerous path. This is why it is important to pay yourself a market-based wage for the “job” you do in your business, and live off your salary. When your business has profits to distribute, you should first use it to eliminate personal debt and to build assets outside of the business.

In summary, once you are profitable, it is taxes, debt, core capital and then you can have a distribution. It is a great formula for building lasting wealth from your entrepreneurial efforts, and keeping your cash flow healthy for years to come.

Greg Crabtree has worked in the financial industry for more than thirty years and founded Crabtree, Rowe & Berger, a CPA firm dedicated to helping entrepreneurs build their business. He is the author of “Simple Numbers, Straight Talk, Big Profits!”

For more information click here.   

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The Growth and Use of Secondary Capital (New Money) Creates Unprecedented Wealth In Today’s New Age Of Possibility

There are many forms of secondary capital—which can be defined as any financial instrument that measures and communicates value in a common language. Would you like to see and learn more about the many forms of secondary capital?

 We have 70 free, informative and inspiring, articles for you in our “Secondary Capital Section.”

Check it out... www.barternews.com/secondary_capital.htm.


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