Drawbacks To Working At Home

Working at home is one of the fastest growing trends in careers today. However, many people jump on the freelancer bandwagon without considering all of the drawbacks to working at home. While some people are naturally inclined to work at home, others find the transition more difficult to make. There are many benefits to working at home, but the drawbacks need to be considered before you make the choice.

The first drawback to looking for a work at home career is that your current career may not easily transfer to a work at home situation. If you work in the medical field or are a police officer, being a freelancer might not be an easy transition unless you are willing to change careers entirely. Sales and administrative positions transfer well, as do creative jobs like design and writing. For those in jobs that can't make the work at home switch, you'll have to think carefully about what you want to do when start working at home and start investigating that field. Cost is another important factor in deciding if working at home is right for you. Although many mothers start working at home to save on childcare, there are added costs to being a freelancer.

If you need health insurance, it will have to come out of your pocket instead of being paid by your employers. There are also many taxes that you will have to pay. Your record keeping must be excellent in order to keep track of your income and expenses, and to fill out your income tax return at the end of the year. Working at home with children is not always as easy as it seems. If you have young children that aren't in school yet, it may be difficult to work when they are awake.

This can mean lots of busy nap times and late nights to get your projects done when they are sleeping. Family members can help take care of your children from time to time, but the responsibility of both your children and your job will be firmly in your hands. With older children, it is sometimes easier to work from home. But you will still have to start and maintain a fairly balanced schedule in order to get everything done. Freelancers have to be very self-motivated and disciplined in order to get their work done on time and correctly. If you are the type of person that is motivated by outside factors (such as a supervisor), then working at home may not be your cup of tea.

When you work at home, there is no one there to look over your shoulder and make sure that you are still working. Distractions like the television, Internet and housework can be hindrances to your work at home success. Isolation is another problem for freelancers. Working at home alone can get frustrating and lonely. Make sure you are comfortable with spending time alone, and that you take steps to combat isolation.

If you are especially prone to being depressed, then the isolation that comes with working at home may make you feel withdrawn and sad. Taking steps to combat loneliness is an important part of any freelancer's success. After considering these factors, you may decide that working at home is not right for you. However, thousands of people deal with these drawbacks and still have successful work at home careers. These reasons should not stop you from becoming a freelancer if that is really what you want to do.

Just make sure you understand the realities of the work at home lifestyle before you commit to it.

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Introduction to Life Insurance

Life insurance is a means for providing financial protection for your family in the event of your death. A life insurance contract is relatively straightforward. You agree to pay a premium at regular intervals, and the insurance company agrees to pay a certain sum of money to your beneficiary upon your death.

There are three parties to a life insurance contract. First, there is the insured. This is the person whose life is being insured under the policy. Next, there is the insurer. The insurer is the insurance company who underwrites the risk. And third, there is the owner.

The owner and insured are not necessarily one and the same. Someone can buy a life insurance policy to insure the life of someone else, such as their spouse. The person who buys the policy is the owner, and the person whose life the policy is based on is the insured. When the owner and the insured are different people, premium payments are the responsibility of the owner. Every life insurance contract also has a beneficiary. This is the person who receives the proceeds from the policy in the event of the death of the insured, and is assigned by the owner.

There are two types. An irrevocable beneficiary can not be changed unless the beneficiary gives his or her permission. If it is revocable, the owner can change it at any time. The policy is subject to certain terms and conditions. There are usually certain exclusions that apply, depending on the person being insured.

But with almost every policy, death as the result of suicide during the first two years of the policy term is excluded from coverage. often referred to as the contestable period, during the first two years of the policy, Also, the insurance company retains the right to not immediately pay out, even if the death is caused by a condition that is covered in the policy. The company can order an investigation into the death of the insured, to make sure that the death was not deliberate or the result of homicide. The amount paid to the beneficiary is called the face amount. The maturity date is reached upon either the date when the insured deceases or reaches a certain age. Life insurance is most often used to provide income protection to the spouse of the deceased. Regardless of the reason for buying the insurance, the owner (if not the same person as the insured), must have an insurable interest.

In other otherwise the contract is void, the owner of the contract must have a reason for wanting to insure the life of that person, words. When the person covered by the policy dies, the insurance company requires proof of death before paying the claim. A notarized death certificate is the most commonly accepted form of proof. The benefit is paid out either as a lump sum or as an annuity that is paid out over time. Any annuity can be a good way to receive the benefits. It is possible for the beneficiary to set up a lifetime annuity, which would guarantee that person a certain amount of monthly income for the rest of his or her life.

There are two basic types of life insurance, temporary and permanent. Temporary insurance is known as term life. An example of a term policy would be a 20-year term life, which means that the policy will pay a death benefit if the person dies within the next twenty years. Permanent insurance includes whole life and universal life. Whole life provides for a payout no matter when the person usually right up until the insured reaches the age of Universal policies are somewhat similar, but premiums have to continue to be paid, dies, but they allow for greater premium flexibility. Universal insurance is somewhat complicated.

You should talk to an agent before buying it. I hope this information has helped you become acquainted with life insurance. You should sit down with your spouse and talk about buying a policy. Then, call an agent who works for an insurance company with a strong financial rating and make an appointment to discuss your objectives. Use the information that was presented here to help you make intelligent choices so your family will be protected in the event that something happens to you.

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Sanity Check - Buying a Business

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

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

The Sanity check requires two mathematical formulas, which require dollar amounts or other numbers to be entered in each formula. The math is calculated and then the results are compared against the purchase price. If it doesn’t work out the way you wanted, you have the option of then going back and change some of the numbers and do the calculation a second time. The two formulas are: SP + WC – BF = CRSale Price + Working Capital - Borrowed Funds = Cash Requirement SDE – FMW (FO) – DS - ROI = Extra Profit/LossSellers Discretionary Earnings - Fair Market Wage (for the owner) - Debt Service - Return on Investment (Cash Requirement x Interest rate -Stated as a Percentage) = Extra Profit/Loss Since each item in the formula needs to have a dollar amount determined, we will define the terms and then discuss how the dollar amount is derived at. Terms Definition: Sale Price: The price that is being asked for the business or the price the buyer is thinking of offering.

Depending on when you do this analysis. If you are trying to determine an asking price you would calculate all the other numbers in these two formulas to determine what should be your offering price. We will do examples to make this clear later in this article. Working Capital: The short-term assets minus the short-term liabilities are the accounting definition. The simple explanation would be the amount of money necessary to be invested by the buyer to run the daily operations of the business, once purchased. This would include monies tied up in inventory, and accounts receivables.

Money invested to pay the landlord’s or utility company’s deposits. Also included is the money spent on the business purchase to cover the loan origination costs and purchase escrow fees when buying the business. It is the total funds invested into the business to keep it running. The down payment given to the seller is not part of this number, since it is included as a separate item. Calculation notes: Cost of inventory: $_________________ (+) Accounts receivable: $_________________ (+) Landlord deposit: $_________________ (+) Utility Deposits: $_________________ (+) Escrow fees to purchase: $_________________ (+) Loan origination costs: $_________________ (+) Short term liabilities $ _________________ (-) Total Working Capital $_________________ Short-term liabilities are defined as liabilities that are to be paid off within 1 year – accounts payables and the part of any notes payable that are to be paid within 1 year. Borrowed Funds: The loan made for a business purchase from a bank or private party.

The private party can be the seller or some friend or relative who might be willing to make a loan. This is borrowed money that must be paid back to someone at some time in the future. Cash Requirement: This is the invested cash required to both buy a business, and working capital-to run the business. The amount of cash needed to make the business purchase and run the operations of the business after deducting all borrowed funds, regardless of source. Sellers Discretionary Earnings / Owners Total Benefits: This is the total of all the non-business related benefits going to a business owner or his family on an annual basis that have been paid for, by the business. Included in this is definition are taxable profit from owners salary, unreported cash income, operations, salaries to non-working family family auto expenses, any amount over the fair market value of salaries paid to working family members, members, family health and life insurance for any or all family members, family office expenses, telephone, pension plan/ profit sharing contributions paid for the benefit of family members.

This can also be stated as the reason why most people go to work everyday. They get family support for working. Calculation notes: Taxable profit from operation $_________________ (+) Cash $_________________ (+) Owners Salary $_________________ (+) Salaries of non-working family members $_________________ (+) Amount over the fair market value of wages of working Family members $_________________ (+) Family Auto Expenses $_________________ (+) Family Telephone Expense $_________________ (+) Family Office Expense $_________________ (+) Health and Life insurance ofAny/all family members $_________________ (+) Pension plan/profit share family members $_________________ (+) Total Seller Discretionary Earnings: $_________________ Return on Investment: We need to have this stated as a dollar amount in Formula two. ROI is calculated as follows: Cash Requirement X “a Percent” - the greater the risk, the higher the percent First we must determine what the interest rate return we wish on our investment. This is a very subjective percentage and a change in this number can change the whole result of this analysis.

If it is of any help, many financial investors in “Corporate America” feels they need to get a 20% return on their invested capital. Companies do not always make money and therefore the possible loses are built into the ROI. Some of the reasons are: companies are bought and go and lastly government regulations periodically close whole industries, overseas competitions causing expectations of growth and income not to be met, broke. These are just some of the many risks involved in owning a business. Putting your money in a bank has little risk, because the Federal Government insures your deposits in the bank. The stock market has a lot of risk that many people do not fully understand, causing them to accept a long term ROI of 10-13% from mutual fund investments. A 95% drop in stock prices like the dot. com stocks or what happened when we had the oil embargo in 1992 are indications that the stock market can be a much higher risk than people realize.

I personally feel that owning your own business and buying real estate are much lower risks, providing a much higher return. The proof of this can be found in the number of people who got rich in real estate and the over 25 million small business owners across this country. Figure out what ROI you want and insert this number as. 20 amount to represent 20% or. 06 to represent 6% ROI. This is an annual return on invested money. Once you have a percentage return on your investment we need to multiply it by the Cash requirement in order to come up with a dollar amount return needed. This restated is Dollars invested x percentage (stated as a decimal) = Dollar return on investment. Examples: Investment of $50, 00 @ 6% Return on Investment (ROI) would be calculated as follows: $50, 00 X. 06 = $3, 000 (Dollars return on investment) Investment of $50, 00 @ 20% Return on Investment (ROI) would be calculated as follows: $50, 00 X. 20 = $10, 00 (Dollars return on investment) Debt Service: The reason we need this number is because this is a financial expense of owning a business.

It is not an operating expense of the daily business operations but if you have you must be able to make the payments, in your business, debt, out of the business operations profit. Usually this payment is mostly interest and a smaller portion is the principal reduction of the loan balance. Most professionals deduct the whole payment when doing this analysis, because the business must generate enough profit to make the whole payment. My personal preference is to just deduct the interest portion and to add the principal portion of the payment to working capital amount needed. This counts as more money being put into the business just like financing inventory and/or accounts receivables. For simple one-hour analyses it is not worth splitting up the payment.

In the case of a very large principal reduction payment it could be unreasonable to not split it up. It is up to you. You can always try it both not to come up with a fixed answer of, since this is a process to raise your understanding, ways, yes! It is a buy or no! It is not a buy. Fair Market Wages: This is an amount that the new or old owner would be paid, if he were an employee not the owner.

If the owner were the company salesman and also the company bookkeeper working a total 60 hours a week, a reasonable salary would have to be determined for each job. As an example only, let’s say that an outside could make , in your industry, salesman$40, 000 per year. And a bookkeeper usually charges $15 per hour. The salesman might very well work 50 hours at this job to earn this salary. If a bookkeeper would work 10 hours per week doing the bookkeeping that would mean 520 hours per year (10 hours x times $15. 00 per hour which comes to $7800 per year for the bookkeeper. The two Fair Market Salaries would come to $47, 800 ($40, 000 + $7, . Sometimes the market salaries are not so easy to figure.

Let’s take an owner who owns a 99-cent discount type store. This shopkeeper works 70 hours per week behind a counter in the store. You can hire a counter person for $7. 00 per hour so this becomes (70 hrs x $7. 00 per hour x 52 weeks). Then you start discussing that this $7. 00 per hour counter person would not be able to do the buying. You might want to figure a purchasing agent's salary. This can be done or you can just do simple numbers, leaving the salary only based on a counter person’s wages.

DOING THE MATHBy now you have the information to come up with numbers to put into the formula. Let us create a scenario. This was a transmission shop. The customers pay COD-upon pick up of the car. The parts inventory is from old transmissions and show on the books as worth nothing.

The seller-owner is asking $75, 000 for this business that he is able to takes out $50, 000 in profit or benefits. In an interview, the owner mentioned that if a buyer will put $40, 000 as a down payment he would carry the $35, 000 balance at 5% interest for 5 years. By orders parts and makes bank deposits, we can see that the current owner sits in the office and does the bookkeeping, observation. He has a manager who bids jobs and handles production. No one is going out and calling on prospective but he is not doing, which is one thing the owner should be doing with his time, business. Let’s go through what the numbers are with this example.

Math Formula #1: Sale Price + Working Capital - Borrowed Funds = Cash Requirement Sales Price: $75, 000Working Capital: The business requires $mostly to pay the landlords deposits and start a new marketing campaign, 000 cash infusion upon close of escrow, 10. Borrowed Funds: $the calculation for formula , 000So, 35#1 looks like this: Sales Price: $75, 000Working Capital (+) $10, 000Borrowed Funds (-) $35, 000 =Cash Requirement: $50, 00Math Formula #2: Sellers Discretionary Earnings - Fair Market Wages For Owner - Debt Service - Return on Investment (Cash Requirement x Percentage) = Extra Profit/Loss Seller Discretionary Earnings in this case is, let us say, $50, 00. Fair Market Wage: You can calculate what you consider fair or you can put all of the other numbers into the equation and see what is left for salary. If you like the salary you buy the business, if not you do not. If we were to calculate what the owner’s salary should be I would not pay much for what he does. Even though he puts in 50 hours a week he really only works 15 hours a week of true production. I am figuring 5 hours for bookkeeping and banking and 10 hours for ordering parts and answering phone calls.

At $15. 00 per hour he is earning $225. 00 a week ($15. 00 x 15 hours) and that multiplied times 52 weeks comes to $11, 700 per year. Debt Service: My financial calculator says that if you borrow $40, 000 for 5 years (60 months) at 5% and the balance at the end of the 60-month is zero, the monthly payments come to $660. Since the formula requires yearly figures we multiply by 12 and get $7, 92. Most of this payment is principal reduction but we are going to just deduct all of the payment as is generally accepted in the industry. Return on Investment: We are going to use the 20% figure we discussed above. Formula one determined that $50, 000 was needed as an investment which is multiplied by 20% (. = $10, 000 per year return on investment. Formula #2 (Sellers Discretionary Earnings - Fair Market Wages (For Owner) - Debt Service - Return on Investment (Cash Requirement x Percentage) = Extra Profit/Loss) would the look like this: Seller Discretionary Earnings: $50, 00- Fair Market Wages: $11, 00 (-) - Debt Service: $ 7, 00 (-) - Return on investment: $10, 00 (-) = Extra Profit/Loss: $wages, 00 This means that after deducting from the income, 20, financing costs and a return on your cash investment the business still generates $20, 375 more profit. Now would you buy this business under these circumstances?

It would appear, yes! Of course this is based on a few assumptions, which might not be true. Let’s look at them again. The owner is only working 15 hours a week or he is only doing 15 hours of real work even though he is sitting around all day. The other assumption is that a 20% return on your investment is a sufficient return for the risk.

We can also consider that if the new owner puts in an extra 25 hours a week doing productive sales the business should be able to afford to pay him another $20, 375 for the first year. It would appear that if the sales work was done then the profit should greatly increase in the second year or maybe even the second month. Conclusion: This is a tool to help you analyze a business. It is not the end-all of a business appraisal or evaluation. This is just a tool to help increase your understanding of a business’s value that you may be seeking to purchase.

Have fun with it.

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How Do You Measure The Risks And Rewards That Are Associated With Your Business?

Entrepreneurs are risk takers by nature. Whether it is the formation of a new venture or the expansion of existing business, entrepreneurs face different types and degrees of risk before any rewards can be realized. In pursuit of their dreams, entrepreneurs come to realize the delicate balance that exists between risks and rewards. It’s a given fact that starting and running your own business is inherently risky.

In the risk of failure is extraordinarily high for entrepreneurs starting new ventures, according to the Small Business Administration, fact. Nearly 10% of all firms fail each year and nearly 61% of manufacturing firms close their doors within the first five years of operation. The small business failures are sobering statistics. So, before you “bet the farm” on that new business venture or the expansion of your existing business, calculate and understand the potential risks and rewards. First, it’s critical that you understand and assess how much risk you can tolerate in your new venture or the expansion of your existing business. Make sure you have a realistic view of your business opportunity and the upsides and downsides associated with pursuing it.

The rewards for launching a new business or expanding an existing can be great, however, business. Studies show that entrepreneurs account for a large proportion of the country's wealth and entrepreneurs have higher savings rates than that of traditional workers. It is important to determine how much risk you can withstand in a new venture or the expansion of an existing business. Before you even consider launching or expanding an existing business, you need to have strategies in place to offset potential losses or unforeseen challenges. As you assess your potential risk factors, be brutally honest and consider these questions: How many years can you go without making a profit? Can you tolerate possible financial loss?

Can you survive the loss of all your invested capital? Have you taken steps to mitigate risk with insurance? Are you sharing personal risk with investors? Have you set aside savings to cover potential losses or dry spells? Do you have a contingency plan if you lose a key client or employee?

Can you afford to risk your and reputation? A feasibility study is a great tool that can help you to assess risk and reward, services, capital. It provides a detailed investigation and an analysis of factors that influence your project to determine whether or not the project is viable. The study examines the technical, marketing, economic, managerial, and financial aspects of your proposed business idea. The feasibility study is based on a cost benefit analysis of your actual business, and the study is used to support your decision-making process.

A feasibility study is an effective way to safeguard against the waste of resources of or money that may be exhausted before an idea or project is deemed viable, people, time. Whether you are applying for a SBA business or deciding which steps come next in growing your business, seeking funds for expansion or plant modernization, loan, a detailed feasibility study will give you the professional support that you need to make your case. A thorough feasibility analysis investigates the impact that each of following issues can have on your idea or project: Economic (transportation, utilities, labor, economic impact, etc. ) Marketing (competition, plans, availability, targets and potential, etc. ) Technical (modernization, equipment, site, constraints, etc. ) Financial (cash flow, costs) Managerial (training, recruiting, assessments, and development) The result of the feasibility study is a thorough analysis of the feasibility of your proposed business idea or project. If your idea or project is deemed feasible from the results of the study, then the next step is to proceed with a formal business plan. Copyright © 2007 Terry H. Hill You may reprint this article free of charge in your or on your website, magazine, newsletter, provided that the article is author, and that the copyright, unedited's bio, and contact information below appears with each article. Articles appearing on the web must provide a hyperlink to the author's web site.

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