Moneyclips Featured

9:39am EDT July 22, 2002
Are you working?

The monthly jobs report is the most significant economic indicator for the U.S. government. It is among the first data released about any given month, it looks at the most important sector of the economy, it is conceptually sound and is based on surveys of thousands of businesses and households.

The Labor Department gives a more detailed look at total compensation costs in the quarterly employment cost index, which includes wages and benefits.

Other indicators also give snapshots of the labor market. Every week, the Labor Department reports on unemployment claims. Private sources, such as the monthly survey of the manufacturing sector by the National Association of Purchasing Management, the Conference Board’s Help Wanted Index and the Challenger report on mass layoffs, help paint a complete picture of the labor market.

Psst, stock tip here

Volume percentage changes — increases and decreases — are gaining popularity as indicators of coming events that might change a stock’s performance. Typically, a share that is trading at 2,000 percent of its average trading volume is likely to make a move in price at some point, if it hasn’t already.

That can indicate accumulation, if the stock is poised to rise, or distribution, if the stock is poised to fall.

Do you IPO?

One of the the best ways to invest in an IPO is to buy shares from one of the banks managing the deal at the offering price, before the stock starts trading. New issues are usually reasonably priced by the lead underwriter, which typically hopes for a 15 percent premium above the offering price when the stock starts trading.

For your average retail investor, buying shares at the offering price before the stock starts trading is a difficult task. But it’s a bit easier now that banks have made an effort to reach out to the retail investor community through alliances and mergers.

To buy an IPO at the offering price, you’ll need an account with a broker that has access to that deal, meaning one of the banks that is part of the selling syndicate. These will be brokers that also have corporate finance divisions, such as Merrill Lynch, Wit Capital or Salomon Smith Barney, or discount brokers that have signed a distribution alliance with a traditional investment bank, such as E-Trade, Schwab or DLJDirect. The names of the banks on the syndicate for any deal can be found by looking at the “Underwriting” section in a company’s SEC registration. Source: CBS Marketwatch

Online trading explodes

According to Forrester Research, online investors had 3 million accounts at Internet brokerages by the end of 1997. That number is expected to grow to 14.4 million by 2002.

Who cares why the robot talks

If you’re pitching your business to potential investors, don’t drone on about technology. Entrepreneurs who are scientists or engineers are prone to making this error. Once you lose an investor’s attention, it can be hard to get it back. The technical aspects of your company’s product or service are important — inasmuch as they deliver competitive advantages, open new markets or change the balance of power in an existing market — but to investors, technology is not important in and of itself.

Spend no more than three to five minutes discussing technology.

Also, have audio/visual support. Making a presentation with no visual support is difficult for all but the most gifted of speakers. Without a visual outline, if investors get distracted for even a moment, they may lose the context of the speaker’s remarks.

The most effective presentations are accompanied by 10 to 15 slides, overhead projections or handouts that punctuate your remarks and give the listener a constant source of context. Don’t get too obsessed with visual aids, though. While slides or handouts provide the basic outline for an investor presentation, entrepreneurs must be prepared to deviate from the script when necessary. Investors want a chief executive who is fast on his or her feet and not tied to a piece of paper. You’ve got to show you can dance. Source: CBS Marketwatch

Step one: Create a business

Here are the steps to take before you even think of calling on investors:

1. Write a business plan. Most investors report they never read them, but they still want to see that you’ve done the work. It’s through writing a business plan that you gain the ability to present your deal and answer questions with the kind of conviction that gets investors to reach for their checkbooks. Once you’ve put the plan together, write a two-page executive summary. You’ll need it when investors ask you to send them “a quick write-up.”

2. Have an accountant prepare historical financial statements. You can’t talk about the future without accounting for the past. Internally generated statements are OK, but investors want the comfort of knowing an independent expert has verified the information. In addition, if you’re taking less salary than you think you deserve, historical financial statements are the best way to document the company’s accrued liability to you.

3. Line up references. An investor may want to talk to your suppliers, customers, potential partners or your team of professionals, among others. When an investor asks for permission to contact references, promptly answer with names and numbers; don’t leave him or her waiting for a week.

4. Figure out your sizzle. Investors will ask what you do. Give them a memorable answer that they can repeat to other investors. The founders of Xyplex Networks, a Littleton, Mass., company with a difficult name and an even more difficult-to-understand technology, said to investors, “We are the company that turbocharges your DEC computer.”

5. Get warm-body introductions. You must decide what kind of investors are right for you. But once you’ve made this decision and isolated your prospects, get personal introductions to as many as possible. Cold calling is the most difficult way to go.

You pay them

Outsourcing your payroll? Consider these tips from Entrepreneur.com:

1. Check out the payroll service company’s reputation. Ask for references, including current clients, accountants and bankers.

2. Ask about regulatory compliance. Good services will have brochures and other information indicating their knowledge of government regulations and requirements, such as the Electronic Federal Tax Payment System (EFTPS) and various state requirements — important if you have employees in more than one state.

3. Confirm the service’s financial stability. Be sure the company can maintain up-to-date processing abilities and regulatory compliance.

4. Consider the features and services available. In addition to calculating taxes and preparing checks, payroll services offer a wide range of services, including payroll deductions, direct deposit and automated time clocks, which collect data that is fed electronically into the payroll system to calculate wages and provide additional labor reports.

Do you work here?

To keep your independent contractors from being considered employees:

  • Don’t provide employee benefits or withhold taxes for independent contractors.

  • Pay independent contractors on a per-project basis, rather than hourly, and have your contractor bill you with an invoice.

  • It’s helpful if independent contractors have an entrepreneurial stake in their business — for example, they (rather than you) pay their expenses. Keep copies of paperwork with their company logo to show the contractor is an independent business.

  • Have a contract documenting their independent contractor status; be careful about termination and exclusivity provisions that may be more suitable to an employee contract.

  • Watch your language: Say “retained” and “discontinued” instead of “hired” and “fired.” You are the “principal” instead of “employer.” Contractors are paid fees, not salaries or wages.

  • If you run a newspaper ad for a contractor, place it in the “Business Opportunities” section and keep a copy for your records.

Give me credit

A typical credit policy will address the following points:

Credit limits. Establish dollar figures for the amount of credit you are willing to extend, and define the parameters or circumstances.

Credit terms. If you agree to bill a customer, when will payment be due? Your terms may also include early payment discounts and late payment penalties.

Deposits. You may require customers to pay a portion of the amount due in advance.

Credit cards and personal checks. Your bank is a good resource for credit card merchant status and for setting policies regarding the acceptance of personal checks.

Customer information. What do you want to know about a customer before making a credit decision? Typical points include years in business, length of time at present location, financial data, credit rating with other vendors and credit reporting agencies, information about the individual principals of the company and how much they expect to purchase from you.

Documentation. This includes credit applications, sales agreements, contracts, purchase orders, bills of lading, delivery receipts, invoices, correspondence, etc.