Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More.

Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More.

“In the chronicles of American financial history,” writes David Clark in The Tao of Charlie Munger: A Compilation of Quotes from Berkshire Hathaway’s Vice Chairman on Life, Business, and the Pursuit of Wealth, “Charlie Munger will be seen as the proverbial enigma wrapped in a paradox—he is both a mystery and a contradiction at the same time.”

On one hand, Munger received an elite education and it shows: He went to Cal Tech to train as a meteorologist for the Second World War and then attended Harvard Law School and eventually opened his own law firm. That part of his success makes sense.
Yet here’s a man who never took a single course in economics, business, marketing, finance, psychology, or accounting, and managed to become one of the greatest, most admired, and most honorable businessmen of our age. He was noted by essentially all observers for the originality of his thoughts, especially about business and human behavior. You don’t learn that in law school, at Harvard or anywhere else.
Bill Gates said of him: “He is truly the broadest thinker I have ever encountered.” His business partner Warren Buffett put it another way: “He comes equipped for rationality… I would say that to try and typecast Charlie in terms of any other human that I can think of, no one would fit. He’s got his own mold.”
How does such an extreme result happen? How is such an original and unduly capable mind formed? In the case of Munger, it’s clearly a combination of unusual genetics and an unusual approach to learning and life.
While we can’t have his genetics, we can try to steal his approach to rationality. There’s almost no limit to the amount one could learn from studying the Munger mind, so let’s at least start with a rundown of some of his best ideas.


Wisdom and Circles of Competence.
“Knowing what you don’t know is more useful than being brilliant.”
“Acknowledging what you don’t know is the dawning of wisdom.”
Identify your circle of competence and use your knowledge, when possible, to stay away from things you don’t understand. There are no points for difficulty at work or in life.  Avoiding stupidity is easier than seeking brilliance.
Of course this principle relates to another of Munger’s sayings: “People are trying to be smart—all I am trying to do is not to be idiotic, but it’s harder than most people think.”
And this reminds me of perhaps my favorite Mungerism of all time, the very quote that sits right beside my desk:
“It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent.”

Divergence.
“Mimicking the herd invites regression to the mean.”
Here’s a simple axiom to live by: If you do what everyone else does, you’re going to get the same results that everyone else gets. This means that, taking out luck (good or bad), if you act average, you’re going to be average. If you want to move away from average, you must diverge. You must be different. And if you want to outperform others, you must be different and correct. As Munger would say, “How could it be otherwise?”

Know When to Fold ’Em.
“Life, in part, is like a poker game, wherein you have to learn to quit sometimes when holding a much-loved hand—you must learn to handle mistakes and new facts that change the odds.”
Mistakes are an opportunity to grow. How we handle adversity is up to us. This is how we become personally antifragile.

False Models.
Echoing Einstein, who said that “Not everything that counts can be counted, and not everything that can be counted counts,” Munger said this about his and Buffett’s shift to acquiring high-quality businesses for Berkshire Hathaway:
“Once we’d gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses.”

Being Lazy.
“Sit on your ass. You’re paying less to brokers, you’re listening to less nonsense, and if it works, the tax system gives you an extra one, two, or three percentage points per annum.”
Time is a friend to a good business and the enemy of the poor business. It’s also the friend of knowledge and the enemy of the new and novel. As Seneca said, “Time discovers truth.”

Investing Is a Perimutuel System.
“You’re looking for a mispriced gamble,” says Munger. “That’s what investing is. And you have to know enough to know whether the gamble is mispriced. That’s value investing.”  At another time, he added: “You should remember that good ideas are rare— when the odds are greatly in your favor, bet heavily.”
May the odds forever be in your favor. Actually, learning properly is one way you can tilt the odds in your favor.

Focus.
When asked about his success, Munger says, “I succeeded because I have a long attention span.”
Long attention spans allow for a deep understanding of subjects. When combined with deliberate practice, focus allows you to increase your skills and get out of your rut. The Art of Focus is a divergent and correct strategy that can help you identify where the leverage points are and apply your efforts toward them.

Fake Knowledge.
“Smart people aren’t exempt from professional disasters from overconfidence.”
We’re so used to outsourcing our thinking to others that we’ve forgotten what it’s like to really understand something from all perspectives. We’ve forgotten just how much work that takes. The path of least resistance, however, is just a click away. Fake knowledge, which comes from reading headlines and skimming the news, seems harmless, but it’s not. It makes us overconfident. It’s better to remember a simple trick: anything you’re getting easily through Google or Twitter is likely to be widely known and should not be given undue weight.
However, Munger adds, “If people weren’t wrong so often, we wouldn’t be so rich.”

Sit Quietly.
Echoing Pascal, who said some version of “All of humanity’s problems stem from man’s inability to sit quietly in a room alone,” Munger adds an investing twist: “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait.”
The ability to be alone with your thoughts and turn ideas over and over, without giving in to Do Something syndrome, affects so many of us. A perfectly reasonable option is to hold your ground and await more information.

Deal With Reality.
“I think that one should recognize reality even when one doesn’t like it; indeed, especially when one doesn’t like it.”
Munger clearly learned from Joseph Tussman’s wisdom. This means facing harsh truths that you might prefer to ignore. It means meeting the world on the world’s terms, not according to how you wish it would be. If this causes temporary pain, so be it. “Your pain,” writes Kahil Gibran in The Prophet, “is the breaking of the shell that encloses your understanding.”

There Is No Free Lunch.
We like quick solutions that don’t require a lot of effort. We’re drawn to the modern equivalent of an old hustler selling an all-curing tonic. However, the world does not work that way. Munger expands:
“There isn’t a single formula. You need to know a lot about business and human nature and the numbers… It is unreasonable to expect that there is a magic system that will do it for you.”
Acquiring knowledge is hard work. It’s reading and adding to your knowledge so it compounds. It’s going deep and developing fluency, something Darwin knew well.

Maximization/Minimization.
“In business we often find that the winning system goes almost ridiculously far in maximizing and or minimizing one or a few variables—like the discount warehouses of Costco.”
When everything is a priority, nothing is a priority. Attempting to maximize competing variables is a recipe for disaster. Picking one variable and relentlessly focusing on it, which is an effective strategy, diverges from the norm. It’s hard to compete with businesses that have correctly identified the right variables to maximize or minimize. When you focus on one variable, you’ll increase the odds that you’re quick and nimble — and can respond to changes in the terrain.

Map and Terrain.
“At Berkshire there has never been a master plan. Anyone who wanted to do it, we fired because it takes on a life of its own and doesn’t cover new reality. We want people taking into account new information.”
Plans are maps that we become attached to. Once we’ve told everyone there is a plan and what that plan is, especially multi-year plans, we’re psychologically more likely to stick to it because coming out and changing it would be admitting we were wrong. This makes it harder for us to change our strategies when we need to, so we’re stacking the odds against ourselves. Detailed five-year plans (that will clearly be wrong) are as disastrous as overly general five-year plans (which can never be wrong).
Scrap the plan, isolate the key variables that you need to maximize and minimize, and follow the agile path blazed by Henry Singleton and followed by Buffett and Munger.

The Keys to Good Government.
There are three keys: honesty, effectiveness, and efficiency. Munger says:
“In a democracy, everyone takes turns. But if you really want a lot of wisdom, it’s better to concentrate decisions and process in one person. It’s no accident that Singapore has a much better record, given where it started, than the United States. There, power was concentrated in an enormously talented person, Lee Kuan Yew, who was the Warren Buffett of Singapore.”
Lee Kuan Yew put it this way: “With few exceptions, democracy has not brought good government to new developing countries. … What Asians value may not necessarily be what Americans or Europeans value. Westerners value the freedoms and liberties of the individual. As an Asian of Chinese cultural background, my values are for a government which is honest, effective, and efficient.”

One Step At a Time.
“Spend each day trying to be a little wiser than you were when you woke up. Discharge your duties faithfully and well. Slug it out one inch at a time, day by day. At the end of the day—if you live long enough—most people get what they deserve.”
An incremental approach to life reminds one of the nature of compounding. There will always be someone going faster than you, but you can learn from the Darwinian guide to overachieving your natural IQ. In order for this approach to be effective, you need a long axis of time as well as continuous incremental progress.

Getting Rich.
“The desire to get rich fast is pretty dangerous.”
Getting rich is a function of being happy with what you have, spending less than you make, and time.

Mental Models.
“Know the big ideas in the big disciplines and use them routinely—all of them, not just a few.”
Mental models are the big ideas from multiple disciplines. While most people agree that these are worth knowing, they often think they can identify which models will add the most value, and in so doing they miss something important. There is a reason that the “know-nothing” index fund almost always beats the investors who think they know. Understanding this idea in greater detail will change a lot of things, including how you read. Acquiring the big ideas — without selectivity — is the way to mimic a know-nothing index fund.

Know-it-alls.
“I try to get rid of people who always confidently answer questions about which they don’t have any real knowledge.”
Few things have made as much of a difference in my life as systemically removing (and when that’s not possible, reducing the importance of) people who think they know the answer to everything.

Stoic Resolve.
“There’s no way that you can live an adequate life without many mistakes. In fact, one trick in life is to get so you can handle mistakes. Failure to handle psychological denial is a common way for people to go broke.”
While we all make mistakes, it’s how we respond to failure that defines us.


Thinking.
“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.”
“It’s bad to have an opinion you’re proud of if you can’t state the arguments for the other side better than your opponents. This is a great mental discipline.”
Thinking is a lot of work. “My first thought,” William Deresiewicz said in one of my favorite speeches, “is never my best thought. My first thought is always someone else’s; it’s always what I’ve already heard about the subject, always the conventional wisdom.”

Choose Your Associates Wisely.
“Oh, it’s just so useful dealing with people you can trust and getting all the others the hell out of your life. It ought to be taught as a catechism. … [W]ise people want to avoid other people who are just total rat poison, and there are a lot of them.”

August 07, 2020

Ten Ways to Create Shareholder Value (part 3).

Ten Ways to Create Shareholder Value (part 3).

by Alfred Rappaport.

Principle 8.

Reward middle managers and frontline employees for delivering superior performance on the key value drivers that they influence directly.
Although sales growth, operating margins, and capital expenditures are useful financial indicators for tracking operating-unit SVA, they are too broad to provide much day-to-day guidance for middle managers and frontline employees, who need to know what specific actions they should take to increase SVA. For more specific measures, companies can develop leading indicators of value, which are quantifiable, easily communicated current accomplishments that frontline employees can influence directly and that significantly affect the long-term value of the business in a positive way. Examples might include time to market for new product launches, employee turnover rate, customer retention rate, and the timely opening of new stores or manufacturing facilities.

My own experience suggests that most businesses can focus on three to five leading indicators and capture an important part of their long-term value-creation potential. The process of identifying leading indicators can be challenging, but improving leading-indicator performance is the foundation for achieving superior SVA, which in turn serves to increase long-term shareholder returns.

Principle 9.

Require senior executives to bear the risks of ownership just as shareholders do.
For the most part, option grants have not successfully aligned the long-term interests of senior executives and shareholders because the former routinely cash out vested options. The ability to sell shares early may in fact motivate them to focus on near-term earnings results rather than on long-term value in order to boost the current stock price.

To better align these interests, many companies have adopted stock ownership guidelines for senior management. Minimum ownership is usually expressed as a multiple of base salary, which is then converted to a specified number of shares. For example, eBay’s guidelines require the CEO to own stock in the company equivalent to five times annual base salary. For other executives, the corresponding number is three times salary. Top managers are further required to retain a percentage of shares resulting from the exercise of stock options until they amass the stipulated number of shares.
But in most cases, stock ownership plans fail to expose executives to the same levels of risk that shareholders bear. One reason is that some companies forgive stock purchase loans when shares underperform, claiming that the arrangement no longer provides an incentive for top management. Such companies, just as those that reprice options, risk institutionalizing a pay delivery system that subverts the spirit and objectives of the incentive compensation program. Another reason is that outright grants of restricted stock, which are essentially options with an exercise price of $0, typically count as shares toward satisfaction of minimum ownership levels. Stock grants motivate key executives to stay with the company until the restrictions lapse, typically within three or four years, and they can cash in their shares. These grants create a strong incentive for CEOs and other top managers to play it safe, protect existing value, and avoid getting fired. Not surprisingly, restricted stock plans are commonly referred to as “pay for pulse,” rather than pay for performance.

In an effort to deflect the criticism that restricted stock plans are a giveaway, many companies offer performance shares that require not only that the executive remain on the payroll but also that the company achieve predetermined performance goals tied to EPS growth, revenue targets, or return-on-capital-employed thresholds. While performance shares do demand performance, it’s generally not the right kind of performance for delivering long-term value because the metrics are usually not closely linked to value.

Companies need to balance the benefits of requiring senior executives to hold continuing ownership stakes and the resulting restrictions on their liquidity and diversification.

Companies seeking to better align the interests of executives and shareholders need to find a proper balance between the benefits of requiring senior executives to have meaningful and continuing ownership stakes and the resulting restrictions on their liquidity and diversification. Without equity-based incentives, executives may become excessively risk averse to avoid failure and possible dismissal. If they own too much equity, however, they may also eschew risk to preserve the value of their largely undiversified portfolios. Extending the period before executives can unload shares from the exercise of options and not counting restricted stock grants as shares toward minimum ownership levels would certainly help equalize executives’ and shareholders’ risks.

Principle 10.

Provide investors with value-relevant information.
The final principle governs investor communications, such as a company’s financial reports. Better disclosure not only offers an antidote to short-term earnings obsession but also serves to lessen investor uncertainty and so potentially reduce the cost of capital and increase the share price.

One way to do this, as described in my article “The Economics of Short-Term Performance Obsession” in the May–June 2005 issue of Financial Analysts Journal, is to prepare a corporate performance statement. (See the exhibit “The Corporate Performance Statement” for a template.) This statement:

separates out cash flows and accruals, providing a historical baseline for estimating a company’s cash flow prospects and enabling analysts to evaluate how reasonable accrual estimates are;
classifies accruals with long cash-conversion cycles into medium and high levels of uncertainty;
provides a range and the most likely estimate for each accrual rather than traditional single-point estimates that ignore the wide variability of possible outcomes;
excludes arbitrary, value-irrelevant accruals, such as depreciation and amortization; and
details assumptions and risks for each line item while presenting key performance indicators that drive the company’s value.

Could such specific disclosure prove too costly? The reality is that executives in well-managed companies already use the type of information contained in a corporate performance statement. Indeed, the absence of such information should cause shareholders to question whether management has a comprehensive grasp of the business and whether the board is properly exercising its oversight responsibility. In the present unforgiving climate for accounting shenanigans, value-driven companies have an unprecedented opportunity to create value simply by improving the form and content of corporate reports.

The Rewards—and the Risks.
The crucial question, of course, is whether following these ten principles serves the long-term interests of shareholders. For most companies, the answer is a resounding yes. Just eliminating the practice of delaying or forgoing value-creating investments to meet quarterly earnings targets can make a significant difference. Further, exiting the earnings-management game of accelerating revenues into the current period and deferring expenses to future periods reduces the risk that, over time, a company will be unable to meet market expectations and trigger a meltdown in its stock. But the real payoff comes in the difference that a true shareholder-value orientation makes to a company’s long-term growth strategy.

For most organizations, value-creating growth is the strategic challenge, and to succeed, companies must be good at developing new, potentially disruptive businesses. Here’s why. The bulk of the typical company’s share price reflects expectations for the growth of current businesses. If companies meet those expectations, shareholders will earn only a normal return. But to deliver superior long-term returns—that is, to grow the share price faster than competitors’ share prices—management must either repeatedly exceed market expectations for its current businesses or develop new value-creating businesses. It’s almost impossible to repeatedly beat expectations for current businesses, because if you do, investors simply raise the bar. So the only reasonable way to deliver superior long-term returns is to focus on new business opportunities. (Of course, if a company’s stock price already reflects expectations with regard to new businesses—which it may do if management has a track record of delivering such value-creating growth—then the task of generating superior returns becomes daunting; it’s all managers can do to meet the expectations that exist.)

Value-creating growth is the strategic challenge, and to succeed, companies must be good at developing new, potentially disruptive businesses.

Companies focused on short-term performance measures are doomed to fail in delivering on a value-creating growth strategy because they are forced to concentrate on existing businesses rather than on developing new ones for the longer term. When managers spend too much time on core businesses, they end up with no new opportunities in the pipeline. And when they get into trouble—as they inevitably do—they have little choice but to try to pull a rabbit out of the hat. The dynamic of this failure has been very accurately described by Clay Christensen and Michael Raynor in their book The Innovator’s Solution: Creating and Sustaining Successful Growth (Harvard Business School Press, 2003). With a little adaptation, it plays out like this:

Despite a slowdown in growth and margin erosion in the company’s maturing core business, management continues to focus on developing it at the expense of launching new growth businesses.
Eventually, investments in the core can no longer produce the growth that investors expect, and the stock price takes a hit.
To revitalize the stock price, management announces a targeted growth rate that is well beyond what the core can deliver, thus introducing a larger growth gap.
Confronted with this gap, the company limits funding to projects that promise very large, very fast growth. Accordingly, the company refuses to fund new growth businesses that could ultimately fuel the company’s expansion but couldn’t get big enough fast enough.
Managers then respond with overly optimistic projections to gain funding for initiatives in large existing markets that are potentially capable of generating sufficient revenue quickly enough to satisfy investor expectations.
To meet the planned timetable for rollout, the company puts a sizable cost structure in place before realizing any revenues.
As revenue increases fall short and losses persist, the market again hammers the stock price and a new CEO is brought in to shore it up.
Seeing that the new growth business pipeline is virtually empty, the incoming CEO tries to quickly stem losses by approving only expenditures that bolster the mature core.
The company has now come full circle and has lost substantial shareholder value.
Companies that take shareholder value seriously avoid this self-reinforcing pattern of behavior. Because they do not dwell on the market’s near-term expectations, they don’t wait for the core to deteriorate before they invest in new growth opportunities. They are, therefore, more likely to become first movers in a market and erect formidable barriers to entry through scale or learning economies, positive network effects, or reputational advantages. Their management teams are forward-looking and sensitive to strategic opportunities. Over time, they get better than their competitors at seizing opportunities to achieve competitive advantage.
Although applying the ten principles will improve long-term prospects for many companies, a few will still experience problems if investors remain fixated on near-term earnings, because in certain situations a weak stock price can actually affect operating performance. The risk is particularly acute for companies such as high-tech start-ups, which depend heavily on a healthy stock price to finance growth and send positive signals to employees, customers, and suppliers. When share prices are depressed, selling new shares either prohibitively dilutes current shareholders’ stakes or, in some cases, makes the company unattractive to prospective investors. As a consequence, management may have to defer or scrap its value-creating growth plans. Then, as investors become aware of the situation, the stock price continues to slide, possibly leading to a takeover at a fire-sale price or to bankruptcy.

Severely capital-constrained companies can also be vulnerable, especially if labor markets are tight, customers are few, or suppliers are particularly powerful. A low share price means that these organizations cannot offer credible prospects of large stock-option or restricted-stock gains, which makes it difficult to attract and retain the talent whose knowledge, ideas, and skills have increasingly become a dominant source of value. From the perspective of customers, a low valuation raises doubts about the company’s competitive and financial strength as well as its ability to continue producing high-quality, leading-edge products and reliable postsale support. Suppliers and distributors may also react by offering less favorable contractual terms, or, if they sense an unacceptable probability of financial distress, they may simply refuse to do business with the company. In all cases, the company’s woes are compounded when lenders consider the performance risks arising from a weak stock price and demand higher interest rates and more restrictive loan terms.

Clearly, if a company is vulnerable in these respects, then responsible managers cannot afford to ignore market pressures for short-term performance, and adoption of the ten principles needs to be somewhat tempered. But the reality is that these extreme conditions do not apply to most established, publicly traded companies. Few rely on equity issues to finance growth. Most generate enough cash to pay their top employees well without resorting to equity incentives. Most also have a large universe of customers and suppliers to deal with, and there are plenty of banks after their business.

It’s time, therefore, for boards and CEOs to step up and seize the moment. The sooner you make your firm a level 10 company, the more you and your shareholders stand to gain. And what better moment than now for institutional investors to act on behalf of the shareholders and beneficiaries they represent and insist that long-term shareholder value become the governing principle for all the companies in their portfolios?

July 25, 2020

5 Things Every Entrepreneur Must Do to Be Successful, According to Richard BransonIf

5 Things Every Entrepreneur Must Do to Be Successful, According to Richard BransonIf.

You don't get these fundamentals right, you don't stand a chance.

Building a successful business is hard, and no one has ever done it the same way twice. Each entrepreneur must puzzle through their own series of tough tradeoffs and competing priorities. There's lots of advice out there to guide you, but no one can tell you exactly how to make your business successful.

There are, however, a handful of ways to pretty much guarantee you're going to fail. Get these things wrong, and no amount of cleverness or hard work can save you. And if anyone out there has nailed getting the basics right, it's Sir Richard Branson.

The serial entrepreneur has succeeded big in everything from banking to space tourism, and on his blog recently he shared his five-part formula for entrepreneurial success, no matter what type of business you're building.

1. Make something useful.
This seems obvious, but Branson's not the only one warning would-be entrepreneurs that their most likely mistake is making something no one actually needs. Y Combinator founder Paul Graham, for instance, advises against sitting around brainstorming startup ideas for the sake of making it big. The result, he says, is usually "sitcom startup ideas."

"Imagine one of the characters on a TV show was starting a startup. The writers would have to invent something for it to do. But coming up with good startup ideas is hard. It's not something you can do for the asking. So, unless they got amazingly lucky, the writers would come up with an idea that sounded plausible, but was actually bad," he has written.

Have "I want to build a startup" as your starting point, and you'll probably end up doing the same. Branson tries to steer would-be entrepreneurs around the same pitfall by suggesting they focus on impact, not success.

"Above all else, you should not go into business purely for financial reasons. Running a company involves long hours and hard decisions; if you don't have a better reason than money to keep going, your business will more than likely fail, as many new businesses do."

"So, it's important to create something of use that is going to benefit society as a whole. If you do something you truly care about, you will be in a much better position to find customers, connect with them, and keep them coming back."

2. Have a dead simple message.
Marketing strategy can get complicated, but Branson insists that, at its core, your brand's pitch must be dead simple.

"Customers don't just shop for a brand and its products, but also identify with its core values. Ask yourself, why did I start my business? Be honest -- this will help you establish an authentic value and voice. Then break your message into something simple," he writes.

For instance, Virgin stands for "great customer service, good value, and innovative alternatives to our competitors' offerings," he explains.

3. Market yourself.
Know your message? Great, now you have to get out there and trumpet it to the world. This isn't Field of Dreams. If you build it, they will not come. Not without adequate marketing, at least. That doesn't necessarily mean spending a fortune, but it does require a willingness to put yourself out there for the world to see (and potentially laugh at).

"My mentor, Sir Freddie Laker, a man who had started a company to challenge British Airways on their home turf, gave me some invaluable advice when I was starting up Virgin Atlantic," Branson recalls. "Knowing that we couldn't match the more established airlines in terms of marketing budget, he encouraged me to drive the publicity myself: 'Use yourself. Make a fool of yourself. Otherwise you won't survive.' I took his advice, and I've been thinking up fun ways to stand out from the crowd and draw the media's attention to our company ever since."

Hot-air balloon flights and cross-dressing might not be your thing, and that's fine. You don't have to be as outlandish in courting publicity as Branson, but you do have to be willing to put yourself out there in a brave, authentic way.

4. Embrace social media.
Making a spectacle of yourself might be as old as the first market barker who out-shouted her neighbor to sell more vegetables, but these days this sort of hustle is best done through more high-tech means.

"Social media is not only more cost-efficient than advertising, but it also offers great opportunities for innovative engagement with your customers," Branson claims. Only if you do social right, however.

"In my experience, selling a product through social media doesn't always work -- it's better to simply communicate with your customers in an authentic way and have fun. As you build an online profile that people can identify with and trust, you'll find that they will soon become customers," he instructs.

5. Enjoy what you do.
Liking your work is, of course, important for happiness. But Branson and science agree that you're also far more likely to succeed professionally if you enjoy your time at the office every day. "If you genuinely love and believe in what you do, others will take notice and share your enthusiasm," he believes.

Which is why he also states that, "If you find your interest flagging, it's time to make a change -- switch from operations to management, move on, expand into new territories, anything that interests you. To find success, you need to be fully committed or your work will show it," a sentiment with which many other icons agree.

July 22, 2020

How to Be a Successful Business Owner

How to Be a Successful Business Owner.

Most business owners will tell you that starting a business is both one of the most challenging and most rewarding ways to earn a living. Being a successful business owner requires a large amount of hard work and dedication, but also generally relies on a set of personal qualities and business practices that are common characteristics of successful entrepreneurs. These characteristics lie as much in a business's founding principles as in its day-to-day operations and dictate every decision the entrepreneur makes. By following these guidelines, you can up your chances of founding a successful business or getting your existing business back on track.

Part 1 Finding the Right Mindset.
1. Do what you know. That is, you should start a business that focuses on what you have experience in. That experience can be either prior work experience or a personal hobby that you're ready to turn into a career. Even if a business idea seems highly profitable in theory, don't start that business unless your heart is in it. While profit is important, it likely won't keep you coming in early every day and driving growth.
For example, imagine you have experience making coffee as a barista or waiter and want to turn your passion for good coffee into a small business. You would already know a good amount about the industry and be able to apply not only your knowledge but your passion to your work.
2. Start with a well-defined purpose. While the financial benefits of business ownership can be great, most successful business owners don't start with money in mind. To get your business off the ground, you'll need a clear purpose. This purpose should be something more intangible than money, like giving back to your community by creating jobs, solving a problem that you see in your daily life, or pursuing a passion. This doesn't mean that you shouldn't also strive for profitability, just that your primary goal should be the achievement of a greater purpose.
For our coffee shop example, your purpose would be serving the perfect cup of coffee to every customer. Alternately, it could be to form a community in your coffee shop where people can meet and spend time with friends.
3. Understand your customer. Before you get started, take some time to do market research and get to know your customers and your industry. The U.S. Small Business Administration provides a great deal of information on which services and products are in demand. You will also want to think about who will be buying your product or using your service and learn the best way to appeal to this population.
With the coffee shop, ask yourself: Am I trying to appeal to "coffee snobs" who don't mind waiting five minutes for their pour-over? Or is my focus on the people who are on their way to work and want to grab a cup and run? Or both? Understanding the people you plan to serve can help you serve them better.
4. Find a first step instead of a destination. You should always start with a business model that can be up and running quickly on a low budget. Too many small businesses start with grandiose goals that will require a large amount of startup capital and investors. However, successful businesses will have a model that can be used on a smaller scale. This proves to potential investors that your idea is a valid way of making money, and increases your odds of ever getting investment money (if that's what you're looking for).
For example, imagine that in our example, you want to start a large operation that sources, imports, roasts, and packages its own coffee beans that are then either sold or served to customers at its coffee shops. Rather than seeking huge contributions from investors to buy all of this equipment, you should start with a small coffee shop first, then maybe try sourcing and importing beans, and work up from there to build a brand.
5. Create a support network. One of the most important parts of successful business ownership is getting over your own ego and seeking help. Your biggest sources of advice are going to be your group of business associates and other professionals that share your goals. Surround yourself with knowledgeable and successful people and feed off of their ideas and enthusiasm.
Also seek general small business tips online; the web is a goldmine of information. Just be sure your information is from a reliable source.
6. Find a mentor. A good mentor in this case is someone who has already run or is running a successful business of their own. A good example would be a family member or family friend that has been successful in business. This mentor can help you with anything from knowing how to manage your employees to properly filing your taxes. Because their knowledge comes from direct experience, they're able to help you more personally than any other source could.
While your mentor doesn't have to have founded the same type of business you are starting, it would help. For example, another coffee shop founder would be the best source of information in our coffee shop example, but a restaurateur  could also be of significant help.

Part 2 Running Your Business Efficiently.
1. Focus only on your primary operations at first. That is, avoid being caught up in every business opportunity that comes your way. It's better to be perfect at one thing than mediocre at five. This applies as much to making decisions to diversify your business as it does to deciding to take on additional projects for yourself outside of your primary business. Focusing on one thing will allow you to commit all of your resources there and be more productive in that endeavor.
Continuing with our example, imagine that you see another coffee shop making money by selling customized coffee-related merchandise. This may make you want to jump into this market as well. However, doing so before establishing your primary objective, making coffee, would introduce significant risk, and may detract from your ability to focus on coffee quality.
2. Focus on cash flow, not profit. While making a profit should certainly be one of your goals, it should not be your main focus when you are starting out. Cash flow is far more important — many small businesses run out of money before they have even been around long enough to generate a profit, and must close their doors. Pay careful attention to your overhead costs and sales during the first years, and let profit take a backseat.
3. Keep detailed records. In order to be successful, you'll have to make a habit of recording each and every expense and revenue that your company has, as well as every dollar that flows through it. By knowing where exactly your money is coming in and where it's going, you're more capable of recognizing financial difficulties before they arise. In addition, doing this will give you a better idea of where exactly you can make cuts to expenses or increases to revenues.
For example, in our example, you would keep detailed records of how much coffee you bought and sold in a given month and what you paid for it. This could you help you identify if, for example, the price of coffee beans was steadily increasing and help you plan whether or not to raise your own prices or consider switching suppliers.
4. Limit expenses as much as possible. While this may seem obvious, just try to think of areas where you could generate the same effect by spending less money. Consider using pre-owned equipment, finding cheaper forms of advertising (for example, fliers rather than newspaper ads), or negotiating better payment terms with suppliers or customers to save a few dollars here and there. Try to maintain very low spending habits and only spent money when and where you absolutely have to.
In our example, this could mean starting out with used coffee grinders (as long as they still functioned well) and trying to get as many supplies as possible from the same supplier (cups, lids, straws, etc.).
5. Consider supply chain efficiency. Your costs, and therefore your profits, depend on a successful supply chain organization. By fostering good relationships with your suppliers, organizing deliveries, and consistently providing customers with timely service, you can increase your profitability and reputation. Successful supply chain management can also help you eliminate any part of your business with wasted resources, like raw materials or labor.
For example, our example coffee shop would want to be on good terms with its coffee bean supplier and have an organized supply chain structure for a number of reasons. This is especially crucial for ensuring that you never run out of coffee, but could also mean that you could get more consistent deliveries, try new types of coffee bean when they become available, or negotiate lower prices.
6. Consider finding strategic partners. Much like a good mentor, a strategic partner can provide you the boost you need to grow your business. Foster strategic partnerships by reaching out to businesses you think could benefit yours, whether they are suppliers, technology providers, or complementary businesses. A good relationship with another company can provide you both free advertising, lower your costs of doing business, or allow you to expand to new markets, depending on the partners you choose.
For example, your coffee shop could benefit from a strategic relationship with a supplier that gives you access to discounts or new products. Alternately, a strategic partner in a complementary business, such as a pastry shop, could help you both reach new customers and increase your revenues. This could be done either through recommending each other or by offering product's from your partner's business and vice-versa.
7. Be responsible when it comes to debt. It's very important that you realistically assess your ability to pay back any debt that you take on. While starting and running a business is always risk, try to minimize your liabilities by only taking out as much as you absolutely need. And when you do take on debt, be sure to structure your cash flows such that you are paying it off as quickly as possible. Prioritize debt repayment before you do anything else.
For example, if you took out $20,000 to get your coffee shop started, don't think about expanding your product offerings or upgrading your coffee grinders until you've paid that loan back.

Part 3 Growing Your Business.
1. Perfect your business pitch. Have a 30-second speech ready that explains your business as briefly and efficiently as possible, including information about your purpose, your service/products, and your goals. Having a practiced pitch that you can rattle off to anyone can help you in situations where you're trying to make a sale to a customer as well as it can when you're trying to bring an investor on board. If you can't explain your business in this short time, your business plan needs refining.
For your coffee shop, you'd want to explain what you do (sell coffee), your services (the drinks you offer), what makes you special (maybe the coffee you serve is rare or locally roasted), and what you plan to do next (expand to another location, new products, etc.).
2. Earn a reputation for good service. Earning a positive reputation is like free advertising; your customers will spread the word of your business to friends and come back frequently. Treat each and every sale like the success or failure of your business depends on it. This also means that you should be consistent with every action your business takes and every interaction with customers.
For your coffee shop, this may mean throwing out a burnt batch of coffee so that your customers are always served the absolutely best product you can offer.
3. Watch your competition closely. You should always look to your competitors for ideas, especially when you're starting out. Chances are, they're doing something right. If you can figure out what that is, you can implement it in your own business and avoid the trial-and-error they probably went through to get there.
One of the best ways to do this when you're starting out is to examine your competitors' pricing strategies. In our coffee shop example, it would be much simpler to price your coffee similarly to competitors rather than to experiment with different prices on your own.
4. Always be looking for growth opportunities. Once you've gotten established, you should always be on the lookout for places you can expand. Whether that means moving to a larger storefront, increasing manufacturing space, or opening a new location will depend on your business and goals. Successful business owners realize that one of the primary opponents to long-term growth is remaining stagnant. This means taking the risk of expansion rather than resting on your laurels at one, original location.
For our coffee example, maybe there is a nearby area that you find is underserved by coffee shops. Once your primary location is up and running smoothly, you should investigate opening a new shop in that area. This could also mean moving up from a small stand to a full coffee shop, depending on your circumstances.
5. Diversify your income streams. Another way to increase the value of your business is by seeking out other areas where you can make money. Assuming you've already established your primary business, look around and see where you could offer a different service or product. Maybe your customers frequently visit your store for one item and then immediately go to another store for a different item. Find out what that other item is and offer it.
Some easy diversification options for your coffee shop would be offering pastries, sandwiches, or books for purchase.

Community Q&A.

Question : How can I be successful in business generally?
Answer : Read a lot of books on business management and take all the information you can take. Then try to apply it practically. This article may be of use to you: how to become a successful businessman.
Question : How do I make myself CEO of my business?
Answer : If you start a business as a corporation, you (as the founder) can give yourself the responsibilities and title of CEO.

Tips.

Be prepared with 6 months worth of working capital in your business.
This article serves primarily as a guide for the business owner in getting the most out of their business. For more detailed guides that cover the minute details of starting a business, see how to start a small business and how to run a small business.
Pay all insurances up for the year, (I.e., liability, etc.) as soon as possible.

Warnings.
You can lose money if you are personally invested in your company.

June 04, 2020

How to Prepare for Economic Collapse

How to Prepare for Economic Collapse.

An economic collapse means a breakdown of the national economy. It would be characterized by a long-term downturn in economic activity, increased poverty and a disruption of the social order, including protests, riots and possibly violence. In some cases, this collapse would be akin to a deep recession, with society still functioning basically as normal (just with more poverty). However, it could be much worse. You should prepare for the worst, but adjust your actions to the actual severity of the collapse. You can prepare for an economic collapse by preparing financially, stocking up on the essentials, and monitoring the economic indicators.

Method 1 Preparing Your Finances.
1. Start an emergency fund. If you are living paycheck to paycheck and you lose your job during an economic collapse, you are at risk for losing your home and living in poverty. It won’t be easy to find another job and replace your income. Your goal should be to save up enough to cover six months of expenses in your emergency fund.
If you are trying to get out of debt, save up an emergency fund of $1,000 and then apply all of your extra income to your debt. Once your debt is paid off, you can divert more money into your emergency fund.
Keep your emergency fund separate from your checking account so that you are not tempted to use the money. Put it in a low-risk, interest-bearing account such as a savings account, money market account or certificate of deposit (CD).
On the other hand, a complete economic collapse would leave you unable to access your bank account, because of the crash of the financial system. Additionally, your money may become useless or extremely devalued. Consider stocking other commodities that you could barter with in an economic collapse, like alcohol, precious metals (gold and silver), and fuel.
2. Have cash on hand. Depending on where you have it, money in your emergency fund might be hard to liquidate. Bonds, for example, must be sold, and other investments like CD’s might charge fees for early withdrawal. Also, if you have a savings account with an online bank instead of a brick-and-mortar institution, it might take several days to withdraw your money. It’s important to have cash that you can access easily, either from a savings account or a cash box in your home. This can tide you over in an emergency until you can access money in your emergency fund.
3. Generate an additional source of income. Start a home business as a second source of income. If you lose your job because of an economic collapse, it might be difficult or even impossible to find another job. Having an alternative source of income can help you to keep your home and avoid poverty. Choose your business idea based on skills that you have and things that you enjoy doing. In addition, think about how likely it will be that people will require these services in an economic collapse; people may need basic necessities like clean water or food more than they need an interior decorator.
Provide services to people in their homes, such as house cleaning, home organization, meal preparation, or interior decorating.
Sell goods you produce, such as baked goods, custom clothing or jewelry.
4. Get out of debt. In a financial collapse, many people are going to lose their jobs and their homes. To prepare for this possibility, you should make a plan to get out of debt as quickly as possible. This way, if you do lose your job, you don’t have to worry about finding a way to pay these bills. The worst kind of debt to have is credit card debt. Because of the high interest rates that many people have, carrying a balance on a credit card can cost you a great deal of money.
Create a budget in order to track your income and expenses. Make a plan to have a surplus of money left over at the end of the month to apply towards your debt. This means reducing your expenses and possibly finding additional work to supplement your income.
Organize your debt so you can make a plan to pay it off. You can choose from a few different methods for planning how to pay off your debt. Whichever method you choose, it is important to stick with it.
One method is to order your debts from smallest to biggest, regardless of the interest rate, and pay off the smallest debts first. This helps you build momentum.
Another method is laddering, which means paying off the debt with the highest interest rates first. This makes the most sense mathematically because it reduces the amount of interest expense you pay in the long-term.
That said, in a true economic collapse, your creditors would likely have other things to worry about than just finding you and recovering your debts. Additionally, currency may be greatly devalued or completely useless, meaning that the amount stated on your debt balance would be equally depressed or meaningless.

Method 2 Storing the Essentials.
1. Store emergency water. In the event of an economic collapse, it is possible that your power and water supply might be interrupted, or that you will not be able to pay for these things. You will need a supply of clean water for drinking, cooking and hygiene. You can purchase bottles of water or store water in your own containers. If you run out of water, you can take steps to sanitize contaminated water.
Store at least one gallon of water per person for a minimum of three days or for up to two weeks. Don’t forget to include pets in this equation.
If you are storing water in your own containers, wash them first with dish soap and water and sanitize them with a solution of 1 teaspoon of liquid chlorine bleach to a quart of water.
To make water safe, you can boil it and filter it through a clean cloth, paper towel or coffee filter.
2. Stockpile food. The kind of food you store up for an emergency is different from the groceries you purchase each week. You need to get food that is non-perishable, does not have to be refrigerated and will provide you with the nutrition you need to survive. It may be very different from the food you are used to eating, but you will be glad you have it if you ever need it.
Purchase food that does not have to be refrigerated or frozen so you don’t have to worry about power outages. These foods include canned goods, peanut butter and beef or turkey jerky.
Include foods highly nutritious foods that are easy to store, such as dried foods, nuts, beans, canned meat and vegetables and powdered milk.
For comfort foods, avoid snack foods that will quickly expire. Instead, stock up on spaghetti and spaghetti sauce, soups, sugar and honey for canning and baking, dried fruit, coffee and tea and hard candy.
If necessary, stock pile baby food and formula, Don’t forget to include pet food if you have pets.
Keep a manual can opener with your stockpile.
3. Start a garden. A garden allows you to continually have fresh, nutritious food to supplement your emergency food supply. Also, in an economic crisis the cost of living might skyrocket. Having a garden will help you to save money on your grocery bills. It will also allow you to be self-sufficient should a food shortage result from the financial collapse.
If you don’t have a lot of space, consider starting a container garden.
If you don’t have good soil, purchase humus soil or top soil. Add peat moss, composted manure and plant fertilizers.
Choose vegetables and herbs that are easy to grow, including beans and peas, carrots, greens like lettuce, cabbage, spinach and kale, potatoes and sweet potatoes, squash, tomatoes, broccoli, berries and melons.
4. Create an emergency kit. This is a collection of household items you might need in an emergency. In the event of an economic collapse, you may not be able to shop for these supplies, so it’s important to have them on hand. Keep your supplies in a container that’s easy to carry in case you have to evacuate for some reason.
Include an extra set of car keys, blankets, matches, a multi-use tool, maps of the area, a flashlight, a battery-powered or hand-cranked radio, extra batteries, matches and a cell phone and chargers.
Have some household liquid bleach on hand for disinfecting.
Make copies of all important documents, such as proof of address, deed/lease to home, passports, birth certificates and insurance policies.
Have a list of family and emergency contact numbers, Include baby supplies such as baby food, formula, diapers and bottles.
Remember pet supplies like food, collars, leashes and food bowls.
5. Gather first aid and medical supplies. You can purchase a first aid kit or put one together yourself. Either way, make sure it has all of the necessary supplies. Include personal items such as medications for yourself and members of your family. Check the kit regularly to make sure nobody has used any of the supplies. Also, check the expiration dates and replace expired items.
Keep a first aid manual with your first aid kit.
Include dressings and bandages, such as adhesive bandages in various sizes, sterile gauze pads and a gauze roll, adhesive tape, elastic bandages and sterile cotton balls.
Add equipment and other supplies, like latex or non-latex gloves, instant cold packs, a thermometer, safety pins to fasten splints or bandages, tweezers, scissors and hand sanitizer.
Have medicines for cuts and injuries, such as antiseptic solution like hydrogen peroxide, antibiotic ointment, calamine lotion for stings or poison ivy, hydrocortisone cream for itching and an eyewash solution.
Include contact lens solution if necessary.
Other medicines to have include pain and fever medicines like aspirin, acetaminophen or ibuprofen, antihistamines for allergies, decongestants for colds, anti-nausea medicine, anti-diarrhea medicine, antacids and laxatives.

Method 3 Preserving Food.
1. Preserve meat and fish. In an economic collapse, food stores could become dangerously low. If you are going to stock up on meat and fish ahead of time, you will need to know how to cure it. This will allow it stay fresh and edible much longer. Also, it can be stored at room temperature. This will be helpful in the event of a power outage.
2. Salt cure meat. Salt curing means using salt to kill the microbes that would spoil it. For every 100 pounds of meat, you need 8 pounds of salt, 2 ounces of saltpeter and 3 pounds of sugar. Apply the cure mixture directly to the meat. For bacon, allow the meat to cure for 7 days per inch of thickness. For ham, leave the mixture on for a day and a half per pound. After curing, rub off the salt under running water and allow it to dry.
If the outdoor temperature is expected to rise above 40 degrees Fahrenheit, you will need to allow the meat to cure in a meat locker.
If the outdoor temperature is below freezing, allow an extra day for curing.
3. Smoke cure meat. Wood smoking meat not only adds flavor, but it also protects your meat from pests and spoilage. Cold smoking smokes the meat without cooking it. Hang the meat in a smoke house, light the fire and allow the meat to smoke for 10 to 20 hours. You can purchase a ready-made smoke house or plans to build your own.
Use aromatic woods to add flavor, such as hickory, mesquite, apple, cherry, pear or cranberry-apple.
Woods to avoid include all conifers, crape myrtle, hackberry, sycamore and holly.
4. Jerky meat. To make meat jerky, you can use a store-bought dehydrator. However, if you do not have one of those, you can do it in your oven by cooking it at a low temperature for several hours. Choose an inexpensive cut of meat, such as brisket. Trim the fat and slice thin strips against the grain. Season the meat with salt and pepper, and if desired, marinate it overnight with diluted barbecue sauce. Arrange the slices on a cooking grate, and put them in the oven at 170 degrees Fahrenheit for two to six hours.
Line your oven with foil for easy cleanup, Prop the oven door open with a wooden spoon to allow air to circulate.
Partially freeze meat before slicing to make it easier to slice.
5. Can fruits and vegetables. Canning involves heating food in a glass jar to remove the air and prevent spoilage. Choose from two methods to can food: water bath and pressure canning. The method you choose depends on the kind of food you want to can. Water bath canning is for jams, jellies and for acidic foods such as tomatoes, berries or cucumbers in vinegar. For main meal foods such as meat, beans and other vegetables, use pressure canning. To ensure safety, always use tried and true recipes.
6. Can with the water bath method. Gather a deep pot with a lid, a rack that fits into the pot, glass preserving jars, lids and bands and a jar lifter. Check the jars and lids for nicks and scratches which would prevent proper canning and allow spoilage to occur. Heat the jars in a pot of boiling water or in the dishwasher. Prepare your recipe and fill the hot jars with the food. Place the lids on the jars and immerse them in boiling water. Make sure the water covers the jars by 1 to 2 inches. Leave them in the water for the amount of time stated in the recipe. Remove the jars with a jar lifter and allow them to sit for 12 to 24 hours.
The lids should not flex up and down when pressed. If they do flex or if you can easily remove the lid, then the jar did not seal properly.
7. Can with pressure canning. You will need a store-bought pressure canner. As with water bath canning, check the jars for nicks and scratches, and heat them in boiling water or the dishwasher. Prepare the food according to your recipe and fill hot jars with the food. Place the jars in the canner and lock it in place. Vent the steam according to the manufacturer’s directions. Process the jars at the recommended pounds pressure stated in your recipe. Adjust for altitude. When done, remove the jars, allow them to sit for 12 to 24 hours and check the seals.

Method 4 Securing Your Home.
1. Choose your shelter type. A standalone shelter is a separate building that is designed to withstand natural disasters or man-made weapons or attacks. An internal shelter is a room within your home that has been designed to protect you from the elements or other hazards. In an economic collapse, power systems may fail and looters and scavengers may threaten your home. Take precautions to protect yourself.
2. Create two sources of electricity. One source could be solar. Hook it up to your home and then run the system discretely underground. The second source might be an underground generator. You will use this in the event of a total loss of power. Keep your energy sources hidden underground to protect them.
3. Choose the size of your shelter. The size of your shelter depends on how many people you need to protect and the size of your food stockpile. An adult needs 10 cups of water and 1,200 calories per day. In addition, each adult needs 10 cubic feet of natural atmosphere to have enough air to breathe, so you will need an air system that lets in and filters fresh air. If you are planning to stay in the shelter long-term, invest now in making it large and comfortable enough for everyone. If it is only going to be a short-term living space, you don’t have to make it as comfortable.
4. Keep the location of your shelter secret. Protect yourself from others who were not prepared and may want to take what you have. Don’t let your neighbors see you creating a shelter. You can choose a remote location, but it may be difficult to access it later. If you choose to make a safe room in your home, create a secret entrance from within your house. This way others will not be alerted to your shelter.
5. Purchase self-defense tools. Self-defense tools are generally non-lethal. They are used to fend off an attack by rendering the attacker ineffective. You can use everyday objects, such as baseball bats or keys. But these may not be as effective as tools designed for your protection.
Mace and pepper spray can be sprayed into an attacker’s face to give you time to get away.
Hand-held stun guns deliver a large electrical shock to stun the attacker.
Taser devices shoot two small probes a distance of up to 15 feet that transmit an electrical charge to the attacker.
Sonic alarms create a loud noise to let others know that you are in trouble.
6. Set up an alarm system in your home. Wireless security systems are easy and inexpensive to install and maintain. Home alert alarm systems notify you if an intruder is approaching your home. Hidden cameras allow you to see internal and exterior areas in your home where an intruder may be present. Phone dialing alarms can be installed inside or outside your home and allow you to contact authorities with the push of a button. Child monitoring alarms notify you if your child goes beyond a certain perimeter of your home.
7. Purchase weapons. Weapons can be used for either self-defense or for hunting. A crossbow is easy to shoot and aim. It’s also quiet, so it doesn’t alert people or animals to your presence. A long-range rifle allows you to hunt game from a distance. A machete can clear brush or fend off a dangerous animal. A slingshot is good for hunting small animals. Have pistols on hand and teach others to shoot, reload, shoot from cover and work as a team for protection. If you plan to have lethal weapons, be sure to train everyone who has access to them in the proper use of these weapons.
Stockpile appropriate ammunition and arrows for your weapons.
8. Gather necessary tools. Having the right tools on hand can make the difference between surviving and not surviving during any kind of disaster. You not only want to be able to protect your home, but you also need to be able to build anything you might need.
Have a bolt-cutter on hand to cut through fences and wire.
Picks, shovels, axes, chain saws and bow saws allow you dig and gather and cut wood.
Rope and paracords are essential for assembling simple and complex survival systems.
Tarps are necessary as ground covers or for weather-proofing, Stock pile nails and plywood for building and repairs.
Keep large trash bags for waste disposal, Have gasoline for fuel or a fire starter, Get a propane stove for cooking, Have a fishing rod for catching fish.

Method 5 Preparing Your Family.
1. Make sure everyone is aware of the situation. In order to prepare for economic collapse, you will have to make sure that your whole family is on board with your preparations. This means informing them in honest terms what is about to happen and telling them what they should be doing. Make sure everyone takes the situation seriously. Otherwise, they will not be mentally prepared in the event that economic collapse actually occurs.
2. Check that each family member is individually prepared. Inform each other family member of the steps you have taken to prepare your finances, essential supplies, food, and shelter. Instruct them on doing the same. Make sure each family member has also packed a bag of essentials that they can grab if they are forced to leave the house without notice. This bag should contain enough survival essentials to last between 72 hours and a week.
3. Train family members in survival skills. Your immediate family members should be aware of how to handle weapons safely, perform basic first aid, hunt or grow food, and maintain your shelter. If they don't already have these skills, take the time to instruct them thoroughly. You never know when you might have to depend on them.
4. Work with another family or group. In addition to your immediate family, consider including other family members, neighbors, or a community group (like a church group) in your preparations. Make sure that these are people who are reliable and will put in work for the benefit of the group. You will be safer and work more efficiently if you can increase the size of your group.

Method 6 Anticipating a Financial Crisis.
1. Monitor the financial markets. Calm markets tend to go up. But if the market gets choppy, meaning prices swing up and down considerably, it will likely decline. Don’t be fooled if he market soars for one day. Big ups and downs in the markets are a red flag signaling an overall decline.
2. Keep an eye on global 10 year bond yields. Global bonds are bonds that are issued in several countries at once by governments or large multi-national companies. When 10 year global bond yields drop, it is in indicator that investors are withdrawing their money to put it in safer investments. This happened before the financial crisis that happened in 2008. A significant drop in 10 year global bond yields means that investors think a financial crisis is coming.
3. Pay attention to oil prices. The fluctuation of oil prices has a macroeconomic impact. When oil prices increase, the Gross Domestic Product (GDP) goes up too. The GDP is a quantitative measure of the nation’s total activity. If it is increasing, then the value of goods and services is also going up. If periods of high oil prices signal good times for the world economy, then the opposite is also true. If oil prices are on the decline, expect the GDP and the financial markets to also decline.
4. Understand the relationship between inflation and economic growth. Economic growth tends to lead to inflation. As demand increases, prices are driven up and unemployment falls. As unemployment falls, wages increase. As wages increase, people spend more, which leads to inflation of prices. Conversely, when economic activity slows down, so does inflation. Therefore, if the price of goods and services slows dramatically, it could signal a major downturn in the economy.
5. Monitor the price of commercial commodities. Commercial commodities are goods exchanged during commerce, such as gold, lumber, beef or natural gas. Changes in the prices of commodities affect the United States economy and the value of the U.S. dollar. An increase in commodity prices is correlated with an increase in inflation. Increased inflation correlates with economic growth. However, if commodity prices drop, inflation slows, which indicates economic decline.

Community Q&A.

Question : Where can I join a survival group to prepare for the potential economic collapse?
Answer : Facebook groups are the best place to start. Search for survival groups.
Question : Why would I pay off my debt first? If the economy collapses, my creditors' well being will take a backseat to my family's well being.
Answer : If you owe money to creditors, you would be putting your family at risk during such a time if you failed to keep paying back debts. Creditors are enabled by law to come and claim some of your assets if you have stopped paying them in order to protect your family's well being. In a time like this, assets are everything.
Question : Is an investment in gold and/or silver appropriate? If so, what are your recommendations, and why?
Answer : While gold used to be the standard for currency, it is still very valuable during recessions. Purchasing gold or silver can be a great way to diversify your investments.
Question : If I have a high car payment, and my IRA is large enough to pay off the vehicle, should I close the IRA and pay off the car?
Answer : Sell your expensive car and purchase an older, reliable vehicle with cash. One should never finance an item that depreciates in value, and keep your IRA.
Question : When is the economic collapse expected? In 2018 when bond yields drop?
Answer : No one really knows, but we can predict certain fluctuations (presidential elections or new terms, corporations moving out of the country, major world events, etc.) It's just best to be prepared for it with at minimum a month's supply of essentials.
Question : Should I get out of all stocks if preparing for economic collapse? Should I pay off my mortgage if I have the stock to do so?
Answer : No. Hedge your bets by keeping your portfolio 60% in stock index funds and 40% in bond index funds. I recommend Vanguard because of the low fees. Also, do not pay off your mortgage. You need cash flow. In a collapse, you will have the moral authority to defend your home with violence if necessary.
Question : With a low fixed rate mortgage, should I have my house paid off when the U.S. dollar crashes?
Answer : If you can, hold onto the cash needed to pay off your mortgage. When the dollar crashes, it won't be worth much for buying anything, but the bank still has to take it for your mortgage.
Question : What is the best way to reduce my losses on a savings account if the currency is devalued?
Answer : The best way is to not have a savings account at all. You have more liquidity keeping your money in your checking account. So take that money out of your savings account and open up another checking account with a debit card. Do not use it.

June 02, 2020

How to Fundraise

How to Fundraise.

There's no question that charities, nonprofits, PTAs, clubs and many other groups need to raise funds. The question is, how to do it effectively. This article introduces several ways that your group can raise funds for its projects.

Method 1 Preparing to Fundraise.
1. Define your needs. This is the most important first step in fundraising. To effectively raise money, you have to know what you're fundraising for in the first place. Take the time to figure out your group's needs and budget the costs to meet them.
2. Develop the language. Now that you have identified your needs, you need to articulate them. Develop some language describing what you need, why you need it, how it will help the community you serve, and how much it will cost. You may not need all of this written language for every fundraising effort, but you'll appreciate having it on hand when it's required.
3. Develop a method to track donations and donor information. For legal, accounting and internal tracking purposes, you will need the capacity to record and track donations and donor information. Your method can be a simple spreadsheet, or a complex, custom database, but you must have a usable tool.
4. Get staff or volunteers to do the work. Fundraising is work, no doubt about it. You will need capable, reliable people to manage records, staff events, stuff envelopes, solicit donations, write emails, update websites and more. Your board should definitely be involved in fundraising. You can also recruit volunteers from your constituency, from local service organizations, colleges and universities, or from online services like Volunteer Match.

Method 2 Legal Issues.
The intricate legal issues surrounding fundraising are governed by the IRS code and individual state laws. Here is an overview of the most critical issues.
1. Understand tax deductibility. Many donations to charity are tax deductible, but not all are. In order to do so you must be a 501 c 3 or have the right to use another group's 501 c 3 to process your donations.
2. Disclose whether goods or services were provided in exchange for the donation. If your organization provided anything in exchange for the donation, you must say that in your acknowledgement letter. This is called a quid pro quo contribution. An example of a quid pro quo contribution would be if you made a donation of $100 and got a cookbook valued at $30 in exchange. Only $70 of this contribution is deductible.
You usually need not worry about very small items like a refrigerator magnet or a pen.
For quid pro quo contributions, you must provide an acknowledgement if the cash donation is $75 or greater, even if the deductible part is less than $75.
3. Provide acknowledgement letters. Acknowledgement letters are important for a few reasons. They are the right thing to do, of course, but they also provide the donor with a record of their donation for tax purposes. The IRS requires that an acknowledgement letter be provided for any gift of $250 or more.
Acknowledgements must be written, but can be electronic or printed.
Although the threshold is $250, it's good practice to acknowledge every gift you receive, even if it's $5.
4. Register your charity (optional). 40 states in the U.S. require charities to register with a state agency in order to solicit donations from residents of those states. Solicitation can include any type of request, whether by mail, online or by phone. Check online to see whether you are required to register.
5. Talk to a professional. The best way to understand the legal issues in fundraising is to get professional advice. Check with your financial staff, an attorney or an accountant who specializes in nonprofit finance if you have any questions at all about the law.

Method 3 Fundraising Events.
1. Understand the method. A fundraising event is a party or gathering intended to raise money for an organization, ranging from formal NGOs to informal clubs. Typically, revenue comes in through ticket sales, and in some cases, corporate sponsorships. Although events are notorious for being expensive, time consuming and not terribly cost effective, they don't have to be that way. Here are some ideas for simple fundraising events that don't require a lot of money or energy.
2. Hold a house party. House parties are a tried and true method of fundraising. A house party is a small event hosted at the home of someone close to your organization. The host invites friends and contacts whom he or she believes might be interested in donating to your program. After mingling and refreshments, the president or director of your organization makes a short presentation about your group. Guests have an opportunity to ask questions, then, the host invites them make a donation. Some tips on house parties.
A house party does not have to be fancy. It can be a dinner party or a cocktail party. It can have 20 guests or 6. Refreshments can be catered, or as simple as coffee and cake.
Make sure that the host of the party directly asks guests to donate.
Have staff and board members on hand to mingle and answer questions.
If appropriate, consider asking a program participant to attend. It can be very powerful and compelling for donors to meet and speak with someone who has received your organization's services.
3. Make a booth. If you go to the manager of a store, like Walmart, the you can ask to make a booth in front of the store. This can be very successful.
4. Hold a restaurant fundraiser. Many restaurants have established fundraising programs whereby nonprofits can receive a percentage of sales on a designated day. These programs are very common among big chain restaurants, but smaller establishments offer them too. Search online to find out what restaurants in your area offer this fundraising tool. Once you've identified a restaurant, follow these tips.
Understand the terms. Restaurants have different guidelines and rules for fundraisers. Some donate a percentage of the entire bill; some exclude alcohol sales. Some require that customers present a coupon or other document for your group to receive a donation, others don't. Make sure you are clear on what's expected so you can take full advantage of the event.
Get the word out. Make sure your constituents and everyone in your group knows about your event. Encourage them to invite their friends too.
Provide materials. Set out brochures, postcards or other items to let diners know that their purchases are supporting your organization.
5. Hold a dessert party. A dessert party is a fun, simple and inexpensive event. Hold the party at the home of a board member or other friend of your organization. Ask volunteers to make desserts in single serving sizes. Provide coffee, tea and soft drinks. Sell tickets at a modest price. Enjoy the sweets!
6. Hold a craft fair. A craft fair is an easy and very inexpensive fundraising event. Your organization rents table space to vendors to display and sell their products. If you like, you can also ask vendors to donate a percentage of their sales to your group. If you have a facility you'd like to show off, a craft fair is a great way to get the community to visit.
Add to the fun and interest of the event by scheduling performances, speakers or other entertainment throughout the day.
Make sure there are opportunities for customers and visitors to learn about and make a donation to your organization during the event.
Consider holding a raffle as an additional way to generate revenue at the craft fair.
7. Sell your passion. If you want a fun and passionate fundraiser that doesn't take a lot of planning, consider using LoveMyHeart.org. It's simple, fun, and everyone loves the Love My Heart shirts you sell! Not to mention there are no out of pocket costs like the other events listed here!

Method 4 Fundraising Online.
1. Understand the method. In some ways, fundraising online is not much different than fundraising in the physical world. You still need to be able to effectively communicate your needs, tell stories that illustrate your work, and motivate people to make a donation to your cause. The difference is that while in the physical world you may have time to build a relationship with a potential donor, that isn't always the case online. They may only come across your website once, so you may only have one shot at convincing them to give. Therefore, it's even more important to communicate your message in a compelling way. Here are some ways to do it.
2. Set up a web page. The most basic way to raise funds online is to set up a webpage for donations, then let people know to go to that page to make a contribution. Include the link in written and electronic communications you send to your members or constituents. Make sure it's accessible from your home page, and other pages of your website. Keep these tips in mind.
Most donations made online are done by credit card transaction. If you are not already set up to accept credit cards, there are a number of companies that provide credit card donation processing services for a fee.
Offer the option of recurring donations. Recurring donations can benefit your organization in a few ways. Many donors find it easier to make a larger donation if its split up into quarterly or monthly payments; some very committed donors may want to make an annual donation to you. Make this as easy as possible by setting up recurring payments. Ask your online donation processing service how to offer this to your donors.
Some organizations opt to accept online donations through PayPal. Visit PayPal's website to learn more.
3. Sign up with an affiliate program. Fundraising with an affiliate program is a lot like making commissions off sales. An online merchant or shopping portal provides the charity with a unique affiliate link. Shoppers use the link to access the merchant, make purchases, and the charity receives a percentage of the sales. Here are some tips for affiliate fundraising.
There are dozens of merchants and portals that offer this fundraising tool. You can sign up for more than one to maximize your potential donations.
Consider your constituents. When you select a merchant, consider where your constituents are likely to shop online. It might be a good idea to do a survey or ask a few key players to make sure you're choosing well.
Get the word out. Most affiliate programs offer widgets or banners that are easy to drop into your website. Include these on your website and in electronic communications to let your supporters know how they can help.
4. Consider crowdfunding. Crowdfunding combines online fundraising with social media to help individuals and organizations raise funds. it's a way for many individuals to pool their resources and donations to get projects funded. Donors can typically contribute as little as $1.00, making it easy for lots of people to participate. There are several websites set up for crowdfunding. Funds-seekers create a campaign page describing their project or organization, and explain how the funds will be used and what, if any, benefit donors will receive for participating. Here are some tips on fundraising using crowdfunding.
Crowdfunding is particularly well suited for funding discrete projects. Rather than launch a campaign asking for all the money you need to operate a program, consider how you can break it up a bit. For example, a school music program could launch a campaign to purchase 10 instruments for low income students.
Articulate your needs and your project clearly. The clearer you can be about why you need the money and how you will use it, the better.
Get creative. Add media to your campaign page to increase readers' interest. Videos, images and success stories are great for telling your story, so use them to your advantage.

Community Q&A.

Question : How old do I have to be to start a fundraiser?
Community Answer : You can do a lot of these fundraising activities at any age, but you'll probably want an adult around to help you manage the money and make sure it goes where it is supposed to. The crowdfunding websites may require you to be 18.
Question : What other types of fundraising are there?
Community Answer : Bottle drives, bake sales, car washes, donation jars at local stores, yard sales, an action of donated goods from local stores, etc.
Question : My church has to gather funds (about 9-10 thousand) to be able to pay for a youth mission trip. They rely mostly on donations, and other methods may be wrong. Do you have any suggestions for this situation?
Community Answer : You can always advertise your fundraising idea as a way to create fellowship and bring new members into the church. Have a community potluck where your church members bring in dishes to feed a large group and outsiders make donations to eat.
Question : How do I fundraise in an apartment?
Community Answer : You can ask your landlord or super if you can use some space in the lobby. You can also organize a fundraiser outside or at a nearby park or other facility.

Tips

There are many ways to raise funds, but some ways are far better than others. If you want a quick, free fundraiser that doesn't take a lot of planning, your options are limited.
You can host a sports match between two teams and charge an entrance fee. That way you can ask for donations from the guests.

May 07, 2020

How to Use the Rule of 72

How to Use the Rule of 72.

The Rule of 72 is a handy tool used in finance to estimate the number of years it would take to double a sum of money through interest payments, given a particular interest rate. The rule can also estimate the annual interest rate required to double a sum of money in a specified number of years. The rule states that the interest rate multiplied by the time period required to double an amount of money is approximately equal to 72.
The Rule of 72 is applicable in cases of exponential growth, (as in compound interest) or in exponential "decay," as in the loss of purchasing power caused by monetary inflation.

Method 1 Estimating "Doubling" Time.
1. Let R x T = 72. R is the rate of growth (the annual interest rate), and T is the time (in years) it takes for the amount of money to double.
2. Insert a value for R. For example, how long does it take to turn $100 into $200 at a yearly interest rate of 5%? Letting R = 5, we get 5 x T = 72.
3. Solve for the unknown variable. In this example, divide both sides of the above equation by R (that is, 5) to get T = 72 ÷ 5 = 14.4. So it takes 14.4 years for $100 to double at an interest rate of 5% per annum. (The initial amount of money doesn't matter. It will take the same amount of time to double no matter what the beginning amount is.)
4. Study these additional examples:
How long does it take to double an amount of money at a rate of 10% per annum? 10 x T = 72. Divide both sides of the equation by 10, so that T = 7.2 years.
How long does it take to turn $100 into $1600 at a rate of 7.2% per annum? Recognize that 100 must double four times to reach 1600 ($100 → $200, $200 → $400, $400 → $800, $800 → $1600). For each doubling, 7.2 x T = 72, so T = 10. So, as each doubling takes ten years, the total time required (to change $100 into $1,600) is 40 years.

Method 2 Estimating the Growth Rate.
1. Let R x T = 72. R is the rate of growth (the interest rate), and T is the time (in years) it takes to double any amount of money.
2. Enter the value of T. For example, let's say you want to double your money in ten years. What interest rate would you need in order to do that? Enter 10 for T in the equation. R x 10 = 72.
3. Solve for R. Divide both sides by 10 to get R = 72 ÷ 10 = 7.2. So you will need an annual interest rate of 7.2% in order to double your money in ten years.

Method 3 Estimating Exponential "Decay" (Loss).
1. Estimate the time it would take to lose half of your money (or its purchasing power in the wake of inflation). Let T = 72 ÷ R. This is the same equation as above, just slightly rearranged. Now enter a value for R. An example.
How long will it take for $100 to assume the purchasing power of $50, given an inflation rate of 5% per year?
Let 5 x T = 72, so that T = 72 ÷ 5 = 14.4. That's how many years it would take for money to lose half its buying power in a period of 5% inflation. (If the inflation rate were to change from year to year, you would have to use the average inflation rate that existed over the full time period.)
2. Estimate the rate of decay (R) over a given time span: R = 72 ÷ T. Enter a value for T, and solve for R. For example.
If the buying power of $100 becomes $50 in ten years, what is the inflation rate during that time?
R x 10 = 72, where T = 10. Then R = 72 ÷ 10 = 7.2%.
3. Ignore any unusual data. If you can detect a general trend, don't worry about temporary numbers that are wildly out of range. Drop them from consideration.

Method 4 Derivation.
1. Understand how the derivation works for periodic compounding.
For periodic compounding, FV = PV (1 + r)^T, where FV = future value, PV = present value, r = growth rate, T = time.
If money has doubled, FV = 2*PV, so 2PV = PV (1 + r)^T, or 2 = (1 + r)^T, assuming the present value is not zero.
Solve for T by taking the natural logs on both sides, and rearranging, to get T = ln(2) / ln(1 + r).
The Taylor series for ln(1 + r) around 0 is r - r2/2 + r3/3 - ... For low values of r, the contributions from the higher power terms are small, and the expression approximates r, so that t = ln(2) / r.
Note that ln(2) ~ 0.693, so that T ~ 0.693 / r (or T = 69.3 / R, expressing the interest rate as a percentage R from 0-100%), which is the rule of 69.3. Other numbers such as 69, 70, and 72 are used for easier calculations.
2. Understand how the derivation works for continuous compounding. For periodic compounding with multiple compounding per year, the future value is given by FV = PV (1 + r/n)^nT, where FV = future value, PV = present value, r = growth rate, T = time, and n = number of compounding periods per year. For continuous compounding, n approaches infinity. Using the definition of e = lim (1 + 1/n)^n as n approaches infinity, the expression becomes FV = PV e^(rT).
If money has doubled, FV = 2*PV, so 2PV = PV e^(rT), or 2 = e^(rT), assuming the present value is not zero.
Solve for T by taking natural logs on both sides, and rearranging, to get T = ln(2)/r = 69.3/R (where R = 100r to express the growth rate as a percentage). This is the rule of 69.3.
For continuous compounding, 69.3 (or approximately 69) gives more accurate results, since ln(2) is approximately 69.3%, and R * T = ln(2), where R = growth (or decay) rate, T = the doubling (or halving) time, and ln(2) is the natural log of 2. 70 may also be used as an approximation for continuous or daily (which is close to continuous) compounding, for ease of calculation. These variations are known as rule of 69.3, rule of 69, or rule of 70.
A similar accuracy adjustment for the rule of 69.3 is used for high rates with daily compounding: T = (69.3 + R/3) / R.
The Eckart-McHale second order rule, or E-M rule, gives a multiplicative correction to the Rule of 69.3 or 70 (but not 72), for better accuracy for higher interest rate ranges. To compute the E-M approximation, multiply the Rule of 69.3 (or 70) result by 200/(200-R), i.e., T = (69.3/R) * (200/(200-R)). For example, if the interest rate is 18%, the Rule of 69.3 says t = 3.85 years. The E-M Rule multiplies this by 200/(200-18), giving a doubling time of 4.23 years, which better approximates the actual doubling time 4.19 years at this rate.
The third-order Padé approximant gives even better approximation, using the correction factor (600 + 4R) / (600 + R), i.e., T = (69.3/R) * ((600 + 4R) / (600 + R)). If the interest rate is 18%, the third-order Padé approximant gives T = 4.19 years.
To estimate doubling time for higher rates, adjust 72 by adding 1 for every 3 percentages greater than 8%. That is, T = [72 + (R - 8%)/3] / R. For example, if the interest rate is 32%, the time it takes to double a given amount of money is T = [72 + (32 - 8)/3] / 32 = 2.5 years. Note that 80 is used here instead of 72, which would have given 2.25 years for the doubling time.


FAQ.
Question : When would I need to use the rule of 72?
Answer : It's a handy shortcut when considering compounded, monetary gains or losses. For example, you might want to know how long it would take for invested money to double in value, given a specific rate of interest.
Question : How do I calculate compound interest?
Answer : The formula for annual compound interest (A) is: P [1 + (r / n)]^(nt), where P=principal amount, r = the annual interest rate as a decimal, n = the number of times the interest is compounded per year, and t = the number of years of the loan or investment.
Question : What is APY for an APR of 3.5% compounded?
Answer : It depends on how often the interest compounds: annually, semi-annually, quarterly, monthly or daily.

Tips.

Let the Rule of 72 work for you by starting to save now. At a growth rate of 8% a year (the approximate rate of return in the stock market), you would double your money in nine years (72 ÷ 8 = 9), quadruple your money in 18 years, and have 16 times your money in 36 years.
The value of 72 was chosen as a convenient numerator in the above equation. 72 is easily divisible by several small numbers: 1,2,3,4,6,8,9, and 12. It provides a good approximation for annual compounding at typical rates (from 6% to 10%). The approximations are less exact at higher interest rates.
You can use Felix's Corollary to the Rule of 72 to calculate the "future value" of an annuity (that is, what the annuity's face value will be at a specified future time). You can read about the corollary on various financial and investing websites.

Warnings.
Let the rule of 72 convince you not to take on high-interest debt (as is typical with credit cards). At an average interest rate of 18%, semiretired credit card debt doubles in just four years (72 ÷ 18 = 4), quadruples in eight years, and becomes completely unmanageable after that.

April 10, 2020

How to Write a Proposal Letter

How to Write a Proposal Letter.

A proposal letter is a professional letter that states, in an abbreviated form, why an organization, institution, or company should support a professional venture of yours. You might write a proposal letter for a number of reasons—for example, to request a grant, a business loan, or that a publisher accept your book idea. There are general formats, details, and arguments you should make in each instance, although the specifics will vary based on the recipient’s requirements. In all cases, however, you must be succinct, informative, and persuasive.

Method 1 Writing a Grant Proposal Letter.
1. Review the eligibility guidelines so you can offer proof throughout the letter. Most public and private organizations that issue grants for research or other projects have a detailed list of eligibility requirements. You must meet these requirements to be eligible, and you must confirm to the organization that you meet these requirements.
Check the organization’s website or call or email them to get complete and up-to-date eligibility guidelines.
Instead of dedicating an entire paragraph to explaining how you meet each requirement, weave this information into the body of your letter as you write it. For instance, if the organization has certain requirements concerning the types of projects the money can be used for and separate requirements for how that money will be allotted, describe these issues in separate paragraphs instead of trying to cram all the information into one.
2. Introduce your organization to an appropriate degree in the first paragraph. If you are not in regular contact with the grant organization, you should introduce your organization in fairly substantial detail in the first body paragraph of your letter. For instance, provide the name of your organization, what it does, why it does it, and who benefits from your organization's work.
If you have had previous contact with the grant agency or organization, don’t rehash basic information the recipient already knows. Instead, mention any changes or developments your organization has made since you were last in contact.
3. Explain your need for the grant and its importance to your organization. Make this the central focus of the second body paragraph. Tell the recipient what your organization hopes to accomplish and what group or groups in society are the focus for your efforts. Also explain why your research, charitable effort, or venture is important and what sort of outcome you are expecting to have.
Balance optimism and realism in this section and throughout the letter. Don’t make outlandish claims like “ending poverty” with this grant. Instead, explain how the grant will help “alleviate food insecurity for at-risk children both before and after school hours.”
4. Provide a timeline and other practical details on how the grant will be used. In the third paragraph, include realistic content about the timeline your project will require, the locations you will operate in and/or impact, and similar information.
State when the project will begin and how long you expect it to run. Be as precise as possible: “If the grant is approved, we intend to operate the program from August 25, 2020 through August 24, 2021.”
Some grants are location-specific. If this is true of the grant you apply for, you will need to indicate where your organization is based, the geographic area that will be studied during your project, or the geographic area that will benefit from the project.
5. Mention how much the project will cost and how much grant money you are requesting. Be as specific as possible so that the grant organization can get an idea of how crucial its funding is. Provide this information in its own paragraph or integrated into the prior paragraph on grant use details.
Particularly if you are applying for a grant without a pre-determined funding amount, be sure to state precisely how much money you are requesting.
Be precise in your cost estimates and provide supporting documentation as enclosures in your application packet, as per the organization’s application instructions.
6. Include any additional information requested in the application instructions. The grant agency or organization may require additional information that should be included in your proposal letter, or it may require separate documents as enclosures in your packet. Refer to the application instructions carefully and frequently, and contact the organization whenever you have questions or need clarification.
Additional documents may include financial budgets, past financial records, and past records indicating the success of similar projects performed by your organization in the past.
Make sure your grant request isn’t delayed or even rejected because you failed to provide a required piece of information.

Method 2 Writing a Business Financing Proposal Letter.
1. Refer to any prior contact at the beginning of the letter. If your business is already established and has a previous relationship with the lender or funder you are contacting, be sure to mention that prior contact. This doesn’t guarantee success for your current request, of course, but it may strengthen your status as a “good bet.”
If you interacted with a specific contact at the company, mention that individual by name. For example: “Nearly seven years ago, I worked with Jane Goodson at your company to help secure the funding that got my business off the ground.”
2. Discuss the size, scope, and focus of your company. Include your mission statement and a short description of the products or services your company provides. To make your case for funding more convincing, also include details like the number of customers served, the number of employees, and information about any administrative boards.
Providing a brief summary of your business helps the funder get a better understanding of who you are, what you do, and why you are a good choice for funding.
Aim to spend 1 paragraph on this content, in most cases.
3. Pinpoint the amount of funding you need and why you need it. Take a paragraph to both identify precisely how much funding you are requesting and explain why you need financial help from the funder. Describe what, specifically, the funding will be used for.
For example: “The $50,000 loan we are requesting will enable us to expand production in our highest-profit product range and grow sales by an estimated 20% within 2 years.”
You may need to include budget data that spells out how funds have been used in the past and projections on how the funds will be used this time around. This additional data may need to be included as a separate attachment.
Regardless of how much information you include in the body of the letter itself, you should always state the total cost of the project and how much of that cost will be covered by the funder's support.
4. Explain how you will use the funding, specifically but succinctly. You need to provide enough information about how the provided funds will be used to make the prospective funder curious and excited by the prospect. Provide key highlights in a paragraph, mentioning specifics but not going into excessive detail.
This should only be a summary. With a full-scale proposal, this information can take pages. This information should take no more than a half page when writing a shorter proposal letter, however. Provide separate enclosures as needed.
5. Offer to provide additional details at the close of your letter. Since a proposal letter is shorter than a full proposal, make it clear that you are willing and able to provide additional details as requested. Do this instead of sending excessive amounts of information that has not been requested with your proposal letter.
For instance, you last sentences might read: “Should you need any further information, please feel free to contact me directly by phone or email. I would also be happy to meet with you at your offices.”
6. Include any necessary enclosures with your packet. Check over the application requirements again. If the prospective funder requires additional documentation along with your proposal letter, include it in the envelope as an enclosure. Note the enclosures in your proposal letter.
Possible documentation might include a list of board members, copies of your tax documents and financial documents, and resumes of key staff members.

Method 3 Writing a Book Proposal Letter.
1. Check the submission guidelines before starting the letter. Every publishing agency and publisher has its own set of submission guidelines. These can usually be found on the publisher's website—if not, call, email, or write to the company and request a copy of their guidelines before proceeding.
Submission guidelines outline the types of books a publisher or agent will accept, as well as the required format and content for the proposal letter.
2. Spend the first few paragraphs describing your book. Right from the start, you need to convince the agent or publisher that the book you want to submit will be successful in the marketplace. In the first paragraph, use around 300 words to write a brief but intriguing summary of your book. Write a second paragraph that describes the essentials of the book, such as genre, word count, and likely market.
If you’re writing fiction or creative non-fiction, outline your narrative and describe your main characters in the first or second paragraph.
State whether or not the book is finished at some point in these opening paragraphs. Note, however, that some publishers will not accept proposals for unfinished works.
3. Identify your expected target market and competitors. Use a paragraph to thoroughly describe the demographic your book is aimed at. If possible, provide provide statistics and make sure they address your target demographic in specific, rather than general, terms.
Perform a competitive analysis in this section. List a few main competitors to your book, explain how well these competitors do in the market, and describe why your book will offer something its competitors do not.
4. Provide biographical information, especially in relation to the book’s subject matter. Describe yourself and explain why you are the perfect person to write this book. Don’t fabricate or exaggerate details, but do put a positive spin on your personal bio.
Mention any writing experience and publishing experience you have.
Mention any experience you have with your book’s subject matter. For instance, if you’ve written a book about fashion and have experience as a fashion designer, include that in your letter.
5. Summarize your intended role in the marketing plan. Provide specific information about what your plans are concerning the promotion of your book once it gets published. Be specific, not general. Do not state what you are willing to do, but rather what you will do.
Instead of writing “I would be willing,” for example, go with “I will.”
Possible forms of marketing include professional blogs, book signings, and professional conferences.
6. Include a more detailed synopsis as a separate enclosure. You will usually need to include a 1-2 page synopsis that describes your book in fuller detail than your 300-word summary at the start of the proposal letter. Unless otherwise directed, include this as an enclosure, not as part of the main body of the letter.
Provide a full summary of the entire plot and purpose of your book. Include all the major details about the plot and significant sub-plots.
7. Enclose a sample table of contents and an extract, if requested. Some publishers expect you to send along a table of contents, an extract from the work, or both. Follow the specific submission guidelines provided by the publisher, and get clarification if needed.
If you do not yet have a table of contents, you may instead need to provide a brief summary of each chapter.
Some publishers and agents will request the first few pages or chapters of your book. Others may not specify which part of the book the extract needs to be pulled from. Regardless, the extract should be an example of your strongest writing.

Method 4 Formatting the Letter.
1. Start by placing your address at the top left of the letter. In the upper left corner of the letter, write your street address on the first line, then the remainder of your address (such as city, state, and ZIP code in the U.S.) on the second line. Left align the text (here and throughout the letter) and single space between lines.
You do not need to include your name or title in the return address, since this information is provided in the closing section.
Do not type out the return address at the top of the letter if you are using paper with a formal letterhead that already includes the address.
2. Include the current date below your address. Double-space after the return address and type the current date in "month-day-year" format in the U.S., or “day-month-year” in nations that typically use that format. The month should be spelled out, but the day and year should be represented by numerical values.[
For instance, write “October 8, 2019” (month-day-year) or “8 October 2019” (day-month-year).
If you are not using a return address because your paper has a formal letterhead, the date should be the first piece of information you add at the top left.
3. Type in the recipient's name, title, and address. Double-space after the date, then use a single-spaced line for each of the following: recipient name; recipient title (if applicable); recipient street address; recipient city, state, etc.
Alternatively, you can put the person’s name and title together on one line—for instance: “Mr. Thomas Jones, Director of Operations.”
Use the person’s personal title—Mr., Ms., Mrs., Dr., etc.—if you know their preference. It’s generally acceptable to assume “Mr.” for a male and “Ms.” for a female. However, you can instead choose to exclude the personal title and write “Thomas Jones” instead of “Mr. Thomas Jones.”
The entire block should be left-aligned and single-spaced.
It’s preferable to write to a specific individual at a company instead of writing a general letter to anyone who may read it.
4. Include an appropriate salutation to the recipient. Double-space after the recipient's address and type the salutation "Dear" followed by the recipient's personal title and last name. End the salutation with a colon, not a comma: “Dear Ms. Amy Watson:”
If you do not know the recipient's preferred personal title and prefer not to assume either “Mr.” or “Ms.”, skip the personal title and use the recipient's full name: “Dear Amy Watson:”
Double space after the salutation as well.
5. Write the body of your letter using single-spaced block paragraphs. The exact content and length of your proposal letter will of course vary depending on the type of proposal you’re writing. The format of the letter should remain the same for each type, though.
Single space and left justify each paragraph.
Do not indent the first line of your paragraphs.
Double space between paragraphs.
6. Use an appropriate closing and signature. Double-space after the final body paragraph and include a formal closing, followed by a comma. Hit the "Enter" key four times before typing your full name and personal title—this blank space is for your signature.
Capitalize only the first word of your formal closing—That is, “Thank you” instead of “Thank You.”
Common closing options include “Thank you,” “Sincerely,” “Regards,” “Best regards,” and “Best wishes.”
Add a comma after the formal closing.
7. Mention any enclosures below your signature and name and title line. If you send any enclosures with your proposal letter, like a resume with an employment proposal or financial information with a business proposal, indicate this by double-spacing after your typed name and title and typing "Enclosure” or “Enclosures.”
You also have the option of listing each document you are enclosing. Use the following format: “Enclosures: resume, writing sample, 3 letters of reference.”
8. Review the letter for spelling, grammar, and formatting errors. Run your finished letter through a spell-check program, but don't stop there. Read it out loud to check for any awkward phrasing or grammar errors. If possible, have someone else read through it as well, since they may spot errors that you've missed.
Don't let a silly spelling error or misplaced comma reduce the impact of an otherwise carefully-crafted letter. Proofreading is important!

FAQ.

Question : How do I write a proposal for a musical tour?
Answer : dentify the potential donors and outline your plans for the tour, including the bands involved, the venues where you will be playing, and an estimate of the upfront costs and potential profit. If this will be for charity, clearly identify the cause.
Question : How do I write a proposal letter to the ministry of safety, wanting to supply them with stop signs and police gear?
Answer : A proposal is generally understood to mean something the receiver has not yet thought of. "Dear city council, after reading your urban planning blueprints, I propose to plant more trees" rather than "I see you're looking for trees and I want to sell you some." Governments are typically bound by public tenders when they buy equipment, so if you want to sell signs and gear, you have to submit your offer when they issue a tender and hope yours is the best of all offers received.

Tips.
If someone else typed the letter for you, double space after the enclosures line and include their initials. For example, add “HU” if Hilary Underwood typed the letter for you.

April 07, 2020