What is a Document Manager without Version History?

By Joe Miller



Document Manager and Version History

In previous articles I have discussed the usefulness of a document manager, such as groupware, in organizing document sharing. I have also discussed the role that a Version History plays in a good document manager. In this article I wish to elaborate on Version History and its ability to make or break your document manager. The reason a document manager benefits so much from Version History is that Version History presents a visual flow chart of the editorial process any document has gone through. The who, what, when, where, and how are all answered.

Having Version History as one of your document manager tools creates a three-point advantage in document collaboration, advantages that take businesses to a higher level of efficiency, organization, and communication.

Ad Hoc Management

Business communication and document collaboration move too quickly with the ease of Microsoft Outlook and other email communication, where any presentation or document can be shot back and forth between any number of parties any number of times. Because of the simplicity of this process, it is difficult for a document manager to track all of the editorial changes made to documents without Version History. In other words, the jumble of unordered, chronologically challenged changes are difficult, if not impossible to organize without Version History. Version History helps to present a chronological order of ad hoc business. A document manager that uses Version History will be able to work the way your business does.

Reference

As I mentioned before, as document versions are sent back and forth in no particular order, a document manager can only do so much without the help of Version History. Eventually deadlines fall due, and the various document versions need to be organized before they are brought together into one final draft. The most common process for organizing attached drafts is to dig through your email box and hard drive to collect all of the drafts and to sort them by date. Then, you ask everyone else to do the same and send them to you. Once all of the information comes back to you, you have to go over the same process again, this time deleting duplicate files. Already, too much time has been spent referencing all of the document changes. Version History references documents immediately upon request, displaying exactly where documents were sent, when they were sent, and how versions relate to each other. Version History helps to create a document manager that works for you.

Digital Thread Technology

Every tool a document manager utilizes has its own tricks. Version History is no exception. What is its trick? Digital Thread Technology. As a document is created, whether a budget plan, a marketing presentation, or a legal contract, Digital Thread Technology inserts tracking information into the metadata of the electronic document. This allows the document to be tracked over various email boxes and drives, even if the document has been sent to individuals who do not use your document manager. Digital Thread Technology literally threads each draft together like beads on a necklace, enabling Version History to create a simple and informative flow chart of your document’s draft genealogy.



About the author:
Joe Miller is an author of informational articles and online advertisements on business software. Read more about a Document Manager and Version History at www.NextPage.com



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Groupware and Version History: Collaboration Series #1

By Joe Miller



This article is the first of a series of articles exploring specific aspects of groupware. The brief informational articles in this series discuss some of the technologies associated with groupware, as well as some of the characteristics of groupware. Some of these characteristics may go hand in hand with business collaborative needs. Other characteristics go beyond what some groupware providers have to offer. The purpose of these articles is to equip the groupware user or investigator with helpful knowledge about the product in order to enable more effective use or to lead the investigator to the groupware service he or she is looking for. This first article explores Version History, a service that can be provided in groupware in order to simplify version tracking.

What is Groupware?

I have already mentioned that groupware helps businesses meet their collaborative needs, but groupware is not simply software used by businesses to organize documents and their drafts. Groupware deals specifically with the ad hoc nature of much of the document collaboration in today’s fast-paced business. But, in order to provide the document tracking and management necessary to run effective document collaboration, even in an ad hoc setting, groupware must have the ability to track documents and their versions across multiple email boxes, hard drives, and servers.

What does Version History do for Groupware?

Version History utilizes Digital Thread technology to complete its tracking across email boxes, hard drives, and servers. The Digital Thread inserts tracking code into the meta data of any Word, PowerPoint, or Excel document and keeps track of the who, what, when, where, and how of each change made, even with multiple users. The information is literally threaded together like beads on a string, and displayed in a flow chart through the Version History option.

As deadlines draw near and it comes time to merge the document changes, questions will inevitably arise as to who made certain changes and why. Using Version History as a reference, users know exactly who to ask. The questions left in the wake of ad hoc document collaboration are gathered together and sorted out by Version History until all businesses see in front of them are answers.

You can also click on any two documents in a version history and click “compare”. That runs Microsoft Compare of the two document versions. It makes it easy to see differences between any two document versions.

Narrowing Down Your Search

In B to B searching, Google has the reputation of the most relevant searches. However, groupware is not only used in B to B communication. In B to C communication, Yahoo may be your best bet. MSN is also in the “big three” of search engines for the most relevant searches. Whichever index you choose to use, you will still need to sift through millions of indexed pages to find groupware that works for your business.

This article has explored one way of narrowing your search, and that is by looking for groupware that uses the Digital Thread empowered Version History option.



About the author:
Joe Miller is an online advertiser and author of informational articles on business software. More information on Groupware and Version History can be found at NextPage.com



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Maximizing The Time of Your Life

By Cheryl Vallejos


How to Get More Done in Less Time than You Ever Thought Possible
Cheryl Vallejos

Setting goals
Setting personal and business goals are a must if you want to experience the benefit of time management. Setting goals outlines your intentions for what you plan to do and makes it real to you.

Goals are not results!
Many people are afraid to set goals because they are afraid of what happens if they "fail" to achieve them. They believe that it negatively affects their self-image.
Nothing could be further from the truth.
One of the most positive aspects of setting personal and professional goals is what not achieving a goal teaches you. If you don't achieve a goal, there can be any number of reasons why, some of which are beyond your control. However, examining why it was not achieved will yield valuable insights into your beliefs, attitudes and emotions.

Goal setting and motivation
You need to feel desire about your goal. Motivation is desire. Do something because you really want to. You can use all the best techniques for goal setting and planning, but if the desire is not there then:
·You’re less likely to achieve the goal
·You feel a sense of emptiness about it if you do

Write your goals down!
Write your goals down (or draw, paint them, etc). It helps to make them real where you can see them, rather than swirling about endlessly in your head, where they have no outlet. This will also help to keep you on track. The phrasing of goals is also very important. Phrase them in the present, so you can act as if they're already happening. This programs your brain to start working towards it. Use "I am...." instead of "I will...". The latter refers to some indeterminate time in the future, which may never happen. The former keeps you firmly focused in the here and now, while keeping the future in sight. Also remember that just because a goal is written down, doesn't mean that it is set in stone! You are always free to change and modify your goals as your circumstances change.

Focus on the results you expect to gain
Your job is to learn how to direct this power by consciously focusing to get the outcomes you want. First, you have to discover all the things you focus on that you do not want and I’m willing to bet there are quite a few, way more than you think. Then, you have to get very clear about what you DO want. You have to examine each of the things you want and be sure that they are not just something you do NOT want in disguise. For instance, saying: “I want my business to make over $100,000/year” would no longer be an issue if you had not had previous businesses that did not do that well, and so even in making this seemingly positive statement, you are focusing on not wanting to be unsuccessful. Saying “I want a reliable car” wouldn’t even come up if you weren’t focusing on the fact that you don’t want a car that breaks down and needs a lot of repairs. Remember, focus on positive results and drop the history of former experiences that were negative.

The Solution? Practice, Persistence, Practice
It’s a good idea to write down what you want specifically. Read what you have written to yourself, preferably aloud, several times a day, while seeing yourself, in your mind, already having what you want. A good example of this would be: “I get things done timely,” “I get things done timely,” “I get things done timely.” It could also be something like: “I am the best organizer around,” “I am the best organizer around,” “I am the best organizer around.” Then, take whatever action is available to begin moving towards what you want. A good time to do this reading and visualizing is when you first wake up and right before you go to bed.


About the author:
Want more success in your life and business? Contact Cheryl Vallejos, Author, Motivational Speaker, Certified Business Coach and Consultant at Cheryl@PrimeLeaders.com and sign up for the free "Monthly Leadership Tips” e-zine and the bonus FREE 37-page leadership guide eBook by clicking here: Monthly Leadership Tips 2005 © Cheryl Vallejos


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HomebuilderStocks.com Reports: Commerce Department Announces Record Levels of Single Family Home Sales in June

By Dawn Van Zant



US Department Of Commerce Report States That Single Family Home Sales for June Increased By 1.4% over May

POINT ROBERTS, WA. July 28, 2005 - www.HomebuilderStocks.com, (HBS) a global investment news and research portal for the homebuilder sector, reports upon the release of a Commerce Department report, stating that single family home sales for June increased by 1.4% over the month of May. Both analysts and market participants remain firmly bullish in their forecasts for the coming year.

HBS does not make stock recommendations but offers a unique free information portal for investors to explore news, articles, and recent research. The site is currently compensated by featured companies International Barrier Technology Inc. (IBTGF: OTCBB; IBH: TSXV) and Cyberlux Corporation (OTCBB: CYBL).

Commerce Department Reports Record Levels of Home Sales in June
www.HomeBuilderStocks.com, Washington, July 27, 2005 – A report released yesterday by the Commerce Department stated that the sale of single-family homes had hit an all time high as of June 2005. June saw a 4% increase over the month of May, hitting a high of 1.37 million units per annum. The report also stated that orders for big ticket manufactured items rose by 1.4% over May. This news was taken by market analysts as a further sign of an economy that is gaining ground fast, with the Federal Reserve calling the economic expansion “solid”.

To Read Full HS Report Click Here:
http://www.HomebuilderStocks.com/Companies/HomebuilderStocks/Articles/HomeSales.asp

Our current list of public companies in the sector includes: Toll Brothers, Beazer Homes USA, Inc., Ryland Group, Brookfield Homes, Centex, Inc., Home Depot, Homestore, Inc., KB Home, Lennar Corporation, Lowe’s, Monterey Homes, Orleans Homebuilders, Inc., Pulte Homes and numerous others.

For the complete list, click here: http://www.homebuilderstocks.com/Companies/HomebuilderStocks/HomebuilderStockList.asp

Featured Companies:
International Barrier Technology Inc. (IBTGF: OTCBB; IBH: TSXV) develops, manufactures, and markets proprietary fire resistant building materials branded as Blazeguard®. Barrier’s award-winning Blazeguard® wood panels use a patented, non-toxic, non-combustible coating with an extraordinary capability: it releases water in the heat of fire. The panels exceed “model” building code requirements in every targeted fire test and application, and are unique in combining properties that increase panel strength and minimize environmental and human impact. Blazeguard® provides Barrier’s customers a premium material choice meeting an increasingly challenging combination of requirements in residential and commercial building construction. Blazeguard® customers include four of the five top homebuilders! www.intlbarrier.com

Cyberlux Corporation (OTCBB: CYBL) has created breakthrough lighting technology that provides the most energy efficient and cost effective lighting solutions available today. Several products are designed to address emergencies such as power outages or critical security lighting needs and others which bring newly developed heatless light into the home for use in closets, cabinet interiors and under cabinet lighting for kitchen counters. Cyberlux uses solid-state semiconductors, trademarked as its diodal(tm) lighting elements, which consume 92 percent less energy than incandescent elements and perform for over 20 years in contrast to 750 hours for traditional bulbs.

The Insiders Corner
Read the exclusive InvestorIdeas.com Feature “The Insiders Corner,” a weekly feature by well-known financial writer and author Michael Brush. http://investorideas.com/insiderscorner/

Investor Incite Newsletter
InvestorIdeas.com free "Investor Incite" Newsletter consists of company and industry updates, investment research and developing trends in key areas such as Homeland Security, Renewable Energy, Nanotechnology and more.
TO SIGN UP, click here: www.InvestorIdeas.com/Resources/Newsletter.asp

ECON is a privately owned corporate communications company specializing in: media relations, investor relations, and research on public companies and industry sectors, for the investment community. Nothing on our sites should be construed as an offer or solicitation to buy or sell any specific products or securities. All investments involve risk. Past performance does not guarantee future results, therefore investigate before you invest! Although we attempt to research thoroughly, we offer no guarantees as to the accuracy of any information presented. We encourage all investors to use our sites only as a resource to further their own research. The site is compensated by its "Featured Companies,” as outlined in our on-line disclaimer at www.InvestorIdeas.com/About/Disclaimer.asp. HomebuilderStocks.com/ECON is compensated by Featured Companies: IBH and CYBL. IBH pays ECON a fee of Eight thousand seven hundred dollars per month, plus 100,000 stock options. Cyberlux Corporation - Three thousand dollars per month. Featured Company on HomelandDefenseStocks.com and HomebuilderStocks.com

SOURCE: ECON Investor Relations Inc., which owns the domain www.HomebuilderStocks.com.

For more information contact:
Dawn Van Zant / Brian Noer
Toll free: 800-665-0411
Email: dvanzant@investorideas.com or bnoer@investorideas.com
Web Site: http://www.InvestorIdeas.com




About the author:
HBS does not make stock recommendations but offers a unique free information portal for investors to explore news, articles, and recent research. The site is currently compensated by featured companies International Barrier Technology Inc. (IBTGF: OTCBB; IBH: TSXV) and Cyberlux Corporation (OTCBB: CYBL).



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Minding Your Global Manners

By Lydia Ramsey

To say that today's business environment is becoming increasingly more global is to state the obvious. Meetings, phone calls and conferences are held all over the world and attendees can come from any point on the globe. On any given business day you can find yourself dealing face-to-face, over the phone, by e-mail and, on rare occasions, by postal letter with people whose customs and cultures differ your own. You may never have to leave home to interact on an international level.

While the old adage "When in Rome, do as the Romans do" still holds true, business clients and colleagues who are visiting this country should be treated with sensitivity and with an awareness of their unique culture. Not to do your homework and put your best international foot forward can cost you relationships and future business. One small misstep such as using first names inappropriately, not observing the rules of timing or sending the wrong color flower in the welcome bouquet can be costly.

There is no one set of rules that applies to all international visitors so do the research for each country that your clients represent. That may sound like a daunting task, but taken in small steps, it is manageable and the rewards are worth the effort. Keeping in mind that there are as many ways to do business as there are countries to do business with, here are a few tips for minding your global P's and Q's.

Building relationships: Few other people are as eager to get down to business as we Americans. So take time to get to know your international clients and build rapport before you rush to the bottom line. Business relationships are built on trust that is developed over time, especially with people from Asia and Latin America.

Dressing conservatively: Americans like to dress for fashion and comfort, but people from other parts of the world are generally more conservative. Your choice of business attire is a signal of your respect for the other person or organization. Leave your trendy clothes in the closet on the days that you meet with your foreign guests.

Observe the hierarchy: It is not always a simple matter to know who is the highest-ranking member when you are dealing with a group. To avoid embarrassment, err on the side of age and masculine gender, only if you are unable to discover the protocol with research. If you are interacting with the Japanese, it is important to understand that they make decisions by consensus, starting with the younger members of the group. By contrast, Latin people have a clear hierarchy that defers to age.

Understanding the handshake: With a few exceptions, business people around the world use the handshake for meeting and greeting. However, the American style handshake with a firm grip, two quick pumps, eye contact and a smile is not universal. Variations in handshakes are based on cultural differences, not on personality or values. The Japanese give a light handshake. Germans offer a firm shake with one pump, and the French grip is light with a quick pump. Middle Eastern people will continue shaking your hand throughout the greeting. Don't be surprised if you are occasionally met with a kiss, a hug, or a bow somewhere along the way.

Using titles and correct forms of address: We are very informal in the United States and are quick to call people by their first name. Approach first names with caution when dealing with people from other cultures. Use titles and last names until you have been invited to use the person's first name. In some cases, this may never occur. Use of first names is reserved for family and close friends in some cultures.

Titles are given more significance around the world than in the United States and are another important aspect of addressing business people. Earned academic degrees are acknowledged. For example, a German engineer is addressed as "Herr Ingenieur" and a professor as "Herr Professor". Listen carefully when you are introduced to someone and pay attention to business cards when you receive them.

Exchanging business cards: The key to giving out business cards in any culture is to show respect for the other person. Present your card so that the other person does not have to turn it over to read your information. Use both hands to present your card to visitors from Japan, China, Singapore, or Hong Kong. When you receive someone else's business card, always look at it and acknowledge it. When you put it away, place it carefully in your card case or with your business documents. Sticking it haphazardly in your pocket is demeaning to the giver. In most cases, wait until you have been introduced to give someone your card.

Valuing time. Not everyone in the world is as time conscious as Americans. Don't take it personally if someone from a more relaxed culture keeps you waiting or spends more of that commodity than you normally would in meetings or over meals. Stick to the rules of punctuality, but be understanding when your contact from another country seems unconcerned.

Honoring space issues: Americans have a particular value for their own physical space and are uncomfortable when other people get in their realm. If the international visitor seems to want to be close, accept it. Backing away can send the wrong message. So can touching. You shouldn't risk violating someone else's space by touching them in any way other than with a handshake.

Whether the world comes to you or you go out to it, the greatest compliment you can pay your international clients is to learn about their country and their customs. Understand differences in behavior and honor them with your actions. Don't take offense when visitors behave according to their norms. People from other cultures will appreciate your efforts to accommodate them and you will find yourself building your international clientele.

(c)2005, Lydia Ramsey. All rights in all media reserved. Reprint rights granted so long as the article and by-line are reproduced intact and all links are made live.

About the author:
Lydia Ramsey is a business etiquette expert, professional speaker, corporate trainer and author of MANNERS THAT SELL - ADDING THE POLISH THAT BUILDS PROFITS. She has been quoted or featured in The New York Times, Investors' Business Daily, Entrepreneur, Inc., Real Simple and Woman's Day. For more information about her programs, products and services, e-mail her at lydia@mannersthatsell.com or visit her web site http://www.mannersthatsell.com


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Lance Has What It Takes

By Jim Meisenheimer

and then some.

Did you know . . .

Lance looks at every single detail.

He weighs his food every day to maintain proper nutrition.

He trains, he does research, and he pays attention to the appropriate technique.

He seeks out the best and the brightest when he needs help with anything - anything.

In winning the Tour de France a record and consecutive seven times he cycled over 15,000 miles.

Some say what he accomplished (each race) is the equivalent of running 21 marathons in a row.

He studies the best including Tiger Woods, Michael Jordan, and Wayne Gretzky for inspiration.

He greets every morning with enthusiasm.

He almost retired in 1998. He almost retired in 1998. He almost did, but obviously he didn't.

He believes anything can be done with hard work.

He is 33 years old and out cycled a bunch of 20-something competitors.

He has talent and brings a single minded commitment to work every day.

To say he's pretty good is an understatement of course. His approach to his sport can be applied to your approach to sales. Yeah - sure it can. The fact that it can, won't necessarily make it happen.

This is where the hard work kicks in. Take a gander at these questions.

1. What training are you doing to improve your sales performance?

2. What research are you doing to get better at what you do?

3. Who do you seek out when you want to improve a particular business skill?

4. Who are your business heroes and are you studying how they achieved greatness?

5. What do you routinely prepare and practice to gain competitive advantage in your sales work?

6. Do you possess a single minded commitment to your sales position?

These are tough questions and sad to say only the 5% club (The tough guys/gals) will work their way through them. There's nothing special about Lance. What he does is special. How he thinks is special. His attitude is special. His focus is special. His preparation is legendary and of course special. His training is special. His technique is special. His results are also extremely special.

Red Barber once said, "There is no one in the world quite like you. So don't water your wine."

So here's a sale tip for you. Buckle up and "step up to the plate" called life. Make every day count and make ever day a masterpiece.

Lance Armstrong has what it takes. I know you have what it takes - I hope you do too!


PS - Hey if you want to get a leg up on your competition and willing to do some light reading that won't break your budget, it's less than ten bucks, take 23 seconds to see what's NEW on this link.

http://www.meisenheimer.com/products/memcards.htm

About the author:
Use this link to sign-up for Jim's F-R-E-E No-Brainer Selling Tips Newsletter and to get your copy of his Special Report titled, "The 12 Dumbest Things Salespeople Do."
http://www.meisenheimer.com



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Sanity Check - Buying a Business

By Willard Michlin

In the business broker community there is a review process that helps a buyer determine if a business purchase makes sense or not. This check can be done by a Fortune 500 company where everything is figured down to the penny and takes 1000 hours of research or it can be done by a small main street shop buyer who figures it out in 1 hour. Each item in this review process requires a decision. This decision can be based on extensive research or just on a reasonable guess.

The beauty of this process is; how long you want to spend on doing this activity is totally up to you. As we review this process, I will explain the variables of this system so you can make the necessary decisions where needed. Remember, this is only a tool to help you make decisions about a business purchase; it is not a sure-fire foolproof system. I will just lay it out for you and you make your own decision as to the validity of this formula for analyzing a business purchase that you may want to make.

The Sanity check requires two mathematical formulas, which require dollar amounts or other numbers to be entered in each formula. The math is calculated and then the results are compared against the purchase price. If it doesn’t work out the way you wanted, you have the option of then going back and change some of the numbers and do the calculation a second time.

The two formulas are:

1. SP + WC – BF = CR
Sale Price + Working Capital - Borrowed Funds = Cash Requirement

2. SDE – FMW (FO) – DS - ROI = Extra Profit/Loss
Sellers Discretionary Earnings - Fair Market Wage (for the owner) - Debt Service - Return on Investment (Cash Requirement x Interest rate -Stated as a Percentage) = Extra Profit/Loss

Since each item in the formula needs to have a dollar amount determined, we will define the terms and then discuss how the dollar amount is derived at.

Terms Definition:

Sale Price: The price that is being asked for the business or the price the buyer is thinking of offering. Depending on when you do this analysis. If you are trying to determine an asking price you would calculate all the other numbers in these two formulas to determine what should be your offering price. We will do examples to make this clear later in this article.

Working Capital: The short-term assets minus the short-term liabilities is the accounting definition. The simple explanation would be the amount of money necessary to be invested by the buyer to run the daily operations of the business, once purchased. This would include monies tied up in inventory, and accounts receivables. Money invested to pay the landlord’s or utility company’s deposits. Also included is the money spent on the business purchase to cover the loan origination costs and purchase escrow fees when buying the business. It is the total funds invested into the business to keep it running. The down payment given to the seller is not part of this number, since it is included as a separate item.

Calculation notes:
1. Cost of inventory: $_________________ (+)
2. Accounts receivable: $_________________ (+)
3. Landlord deposit: $_________________ (+)
4. Utility Deposits: $_________________ (+)
5. Escrow fees to purchase: $_________________ (+)
6. Loan origination costs: $_________________ (+)
7. Short term liabilities* $ _________________ (--)
Total Working Capital $_________________

* Short-term liabilities are defined as liabilities that are to be paid off within 1 year – accounts payables and the part of any notes payable that are to be paid within 1 year.

Borrowed Funds: The loan made for a business purchase from a bank or private party. The private party can be the seller or some friend or relative who might be willing to make a loan. This is borrowed money that must be paid back to someone at some time in the future.

Cash Requirement: This is the invested cash required to both buy a business, and working capital-to run the business. The amount of cash needed to make the business purchase and run the operations of the business after deducting all borrowed funds, regardless of source.

Sellers Discretionary Earnings / Owners Total Benefits: This is the total of all the non-business related benefits going to a business owner or his family on an annual basis that have been paid for, by the business. Included in this is definition are taxable profit from operations, unreported cash income, owners salary, salaries to non-working family members, any amount over the fair market value of salaries paid to working family members, family auto expenses, family telephone, family office expenses, health and life insurance for any or all family members, pension plan/ profit sharing contributions paid for the benefit of family members. This can also be stated as the reason why most people go to work everyday; they get family support for working.


Calculation notes:
1. Taxable profit from operation $_________________ (+)
2. Cash $_________________ (+)
3. Owners Salary $_________________ (+)
4. Salaries of non-working family members $_________________ (+)
5. Amount over the fair market value of wages
of working Family members $_________________ (+)
6. Family Auto Expenses $_________________ (+)
7. Family Telephone Expense $_________________ (+)
8. Family Office Expense $_________________ (+)
9. Health and Life insurance of
Any/all family members $_________________ (+)
10. Pension plan/profit share family members $_________________ (+)
Total Seller Discretionary Earnings: $_________________

Return on Investment: We need to have this stated as a dollar amount in Formula two. ROI is calculated as follows:

Cash Requirement X “a Percent” - the greater the risk, the higher the percent

First we must determine what the interest rate return we wish on our investment. This is a very subjective percentage and a change in this number can change the whole result of this analysis. If it is of any help, many financial investors in “Corporate America” feels they need to get a 20% return on their invested capital. Companies do not always make money and therefore the possible loses are built into the ROI. Some of the reasons are: companies are bought and go broke, overseas competition causing expectations of growth and income not to be met, and lastly government regulations periodically close whole industries. These are just some of the many risks involved in owning a business.

Putting your money in a bank has little risk, because the Federal Government insures your deposits in the bank. The stock market has a lot of risk that many people do not fully understand, causing them to accept a long term ROI of 10-13% from mutual fund investments. A 95% drop in stock prices like the dot.com stocks or what happened when we had the oil embargo in 1992 are indications that the stock market can be a much higher risk than people realize.

I personally feel that owning your own business and buying real estate are much lower risks, providing a much higher return. The proof of this can be found in the number of people who got rich in real estate and the over 25 million small business owners across this country.

Figure out what ROI you want and insert this number as .20 amount to represent 20% or .06 to represent 6% ROI. This is an annual return on invested money.

Once you have a percentage return on your investment we need to multiply it by the Cash requirement in order to come up with a dollar amount return needed. This restated is Dollars invested x percentage (stated as a decimal) = Dollar return on investment.

Examples:

1) Investment of $50,000.00 @ 6% Return On Investment (ROI) would be calculated as follows: $50,000.00 X .06 = $3,000.000 (Dollars return on investment)

2) Investment of $50,000.00 @ 20% Return On Investment (ROI) would be calculated as follows: $50,000.00 X .20 = $10,000.00 (Dollars return on investment)

Debt Service: The reason we need this number is because this is a financial expense of owning a business. It is not an operating expense of the daily business operations but if you have debt, in your business, you must be able to make the payments, out of the business operations profit. Usually this payment is mostly interest and a smaller portion is the principal reduction of the loan balance.

Most professionals deduct the whole payment when doing this analysis, because the business must generate enough profit to make the whole payment. My personal preference is to just deduct the interest portion and to add the principal portion of the payment to working capital amount needed. This counts as more money being put into the business just like financing inventory and/or accounts receivables.

For simple one-hour analyses it is not worth splitting up the payment. In the case of a very large principal reduction payment it could be unreasonable to not split it up. It is up to you. You can always try it both ways, since this is a process to raise your understanding, not to come up with a fixed answer of, yes! it is a buy or no! it is not a buy.

Fair Market Wages: This is an amount that the new or old owner would be paid, if he were an employee not the owner. If the owner were the company salesman and also the company bookkeeper working a total 60 hours a week, a reasonable salary would have to be determined for each job. As an example only, lets say that an outside salesman, in your industry, could make $40,000 per year. And a bookkeeper usually charges $15 per hour. The salesman might very well work 50 hours at this job to earn this salary. If a bookkeeper would work 10 hours per week doing the bookkeeping that would mean 520 hours per year (10 hours x 52) times $15.00 per hour which comes to $7800 per year for the bookkeeper. The two Fair Market Salaries would come to $47,800 ($40,000 + $7,800).

Sometimes the market salaries are not so easy to figure. Lets take an owner who owns a 99-cent discount type store. This shopkeeper works 70 hours per week behind a counter in the store. You can hire a counter person for $7.00 per hour so this becomes (70 hrs x $7.00 per hour x 52 weeks).


Then you start discussing that this $7.00 per hour counter person would not be able to do the buying. You might want to figure a purchasing agent's salary. This can be done or you can just do simple numbers, leaving the salary only based on a counter person’s wages.
DOING THE MATH
By now you have the information to come up with numbers to put into the formula. Let us create a scenario. This was a transmission shop. The customers pay COD-upon pick up of the car. The parts inventory is from old transmissions and show on the books as worth nothing. The seller-owner is asking $75,000 for this business that he is able to takes out $50,000 in profit or benefits. In an interview, the owner mentioned that if a buyer will put $40,000 as a down payment he would carry the $35,000 balance at 5% interest for 5 years. By observation, we can see that the current owner sits in the office and does the bookkeeping, orders parts and makes bank deposits. He has a manager who bids jobs and handles production. No one is going out and calling on prospective business, which is one thing the owner should be doing with his time, but he is not doing. Lets go through what the numbers are with this example.

Math Formula #1: Sale Price + Working Capital - Borrowed Funds = Cash Requirement

Sales Price: $75,000
Working Capital: The business requires $10,000 cash infusion upon close of escrow, mostly to pay the landlords deposits and start a new marketing campaign.
Borrowed Funds: $35,000
So, the calculation for formula #1 looks like this:

Sales Price: $75,000
Working Capital (+) $10,000
Borrowed Funds (-) $35,000
=Cash Requirement: $50,000.00
Math Formula #2: Sellers Discretionary Earnings - Fair Market Wages For Owner - Debt Service - Return on Investment (Cash Requirement x Percentage) = Extra Profit/Loss

Seller Discretionary Earnings in this case is, let us say, $50,000.00.

Fair Market Wage: You can calculate what you consider fair or you can put all of the other numbers into the equation and see what is left for salary. If you like the salary you buy the business, if not you do not. If we were to calculate what the owner’s salary should be I would not pay much for what he does. Even though he puts in 50 hours a week he really only works 15 hours a week of true production. I am figuring 5 hours for bookkeeping and banking and 10 hours for ordering parts and answering phone calls. At $15.00 per hour he is earning $225.00 a week ($15.00 x 15 hours) and that multiplied times 52 weeks comes to $11,700 per year.

Debt Service: My financial calculator says that if you borrow $40,000 for 5 years (60 months) at 5% and the balance at the end of the 60-month is zero, the monthly payments come to $660.49. Since the formula requires yearly figures we multiply by 12 and get $7,925.92. Most of this payment is principal reduction but we are going to just deduct all of the payment as is generally accepted in the industry.

Return on Investment: We are going to use the 20% figure we discussed above. Formula one determined that $50,000 was needed as an investment which is multiplied by 20% (.20) = $10,000 per year return on investment.
Formula #2 (Sellers Discretionary Earnings - Fair Market Wages (For Owner) - Debt Service - Return on Investment (Cash Requirement x Percentage) = Extra Profit/Loss) would the look like this:

Seller Discretionary Earnings: $50,000.00
- Fair Market Wages: $11,700.00 (-)
- Debt Service: $ 7,925.00 (-)
- Return on investment: $10,000.00 (-)
= Extra Profit/Loss: $20,375.00

This means that after deducting from the income, wages, financing costs and a return on your cash investment the business still generates $20,375 more profit. Now would you buy this business under these circumstances? It would appear, yes! Of course this is based on a few assumptions, which might not be true. Lets look at them again.

The owner is only working 15 hours a week or he is only doing 15 hours of real work even though he is sitting around all day. The other assumption is that a 20% return on your investment is a sufficient return for the risk.

We can also consider that if the new owner puts in an extra 25 hours a week doing productive sales the business should be able to afford to pay him another $20,375 for the first year. It would appear that if the sales work was done then the profit should greatly increase in the second year or maybe even the second month.

Conclusion:
This is a tool to help you analyze a business. It is not the end-all of a business appraisal or evaluation. Just a tool to help increase your understanding of a business’s value that you may be seeking to purchase. Have fun with it.


About the author:
Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetbusinessbrokers.com


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