4 Types of Business; Which One Is for You?

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4 Types of Business; Which One Is for You?

I was 35 years old. Three years into my married life. I was ready to start my first food business—a squidball food cart franchise. The franchise fee was P250,000. Saying a prayer, I withdrew my hard-earned money from the bank and plunked it down for my entrepreneurial dream.

I parked the squidball cart near a drugstore, hired two workers, and felt wonderful when the first sale was made. It was an exhilarating feeling owning something!

FishBall

Even before I could find out if my food cart was profitable, I wanted to put up another business. I couldn’t help it. Once the entrepreneurial bug bit me, I couldn’t stop. So I bought a hotdog stand and an ice cream scooper cart for P500,000, rented two stalls in a foodcourt in a new mall and hired more workers.

But as the days went by, I was alarmed that my daily expenses were bigger than my daily sales. I began to panic. The longer I operated, the more I lost money. I felt devastated. After six months, I had to face the music. I closed them down before I lost all my money. Years later, I realized I went into business with my eyes closed. In other words, I didn’t know what I was getting into.

I also didn’t know that there were four kinds of businesses. A retail business was just one of them. No one told me! (But that’s because I didn’t ask. I entered into business without seeking wisdom.)

There are 4 kinds of businesses:

1.Retail Business

2.Service Business

3.Distribution Business

4.Manufacturing Business

I’ll discuss it one by one. Find out which one is for you…

1. Retail Business

A restaurant is a retail business. A bookstore, water station, beauty parlor, drugstore, school supplies store, and a gasoline station are all retail businesses.

A retail business seems like fun. But in reality, it’s like a glorified job. It’s glorified because your job title is “Owner”. It feels good to be the Owner. But many times, you’re tied down to your physical store, sometimes every day. Your job title sounds nice: “Owner/General Manager/CEO/President.” But your job description is “Driver, Delivery Boy, Messenger, Collector, Janitor, Waiter, Dishwasher, Salesperson, Purchaser, and All Around-Slave.”

Retail Business

Obviously, you can hire people for these tasks. But even this is not easy. Hiring, training, and managing staff is a skill that you need to learn. Quickly. And I must remind you. In any retail business, it’s all about location. If you choose a bad location, say goodbye to your money.

Sometimes, you chose a great location, but the city decides to repair your street for six months. While jackhammers pound away at the road and clouds of dust swirl around your store, customers shy away. But you still have to pay for the rent, utilities, salaries…

Here’s the truth: Usually, a retail business can give you income but not wealth. It’s very difficult to become rich in retail. Unless you SHIFT to retailing in multiple locations. Such as putting up 10, or 20, or 50 or 100 stores or 1000 stores. But when you do that, you’re no longer in retail. Your focus is now in the marketing, distribution, and wholesale business. (More on this later.)

My friend and fellow-preacher Obet Cabrillas and his wife Joie love to put up small businesses. So far, they’ve put up a laundry service, a beauty parlor, a drug store, and a pizza stand. I’m amazed by this couple’s hard work. Unlike me, Joie has done a better job managing these small businesses—and all of their small businesses have been earning money. Not a lot. But steady. It won’t make them a fortune. But it’s enough to make them a living.

I’m sure Obet’s earnings as a corporate speaker will be bigger than all the profits from his small retail businesses.

Which brings me to the second kind of business…

2. Service

I encourage our Feast Builders to be entrepreneurs. (For those who are new to my writings: The Feast is our weekly prayer gathering at my spiritual family called Light of Jesus. And Builders are those who lead and preach at these Feasts.) So that when they preach, they can share from their experiences. A business makes their feet grounded in real life. A business also gives them practical wisdom to lead their Feasts.

Service Business

Obviously, because of their fantastic ability to speak, most of them are corporate speakers. And they do an excellent job doing that. Without a doubt, I dare say that we’ve got the best team of Corporate Speakers in the country.

We achieve two goals. First, they impact companies with God’s love in non-religious places; second, they earn additional income—which means they can serve their Feast with greater abandon.

A corporate speaker is a service business. A doctor, lawyer, and dentist are all service businesses. A carpenter, plumber, electrician, landscape artist, events planner, accountant, and executive coach are all service businesses.

But at the end of the day, unless you SHIFT your service business, you won’t get rich. Why? Because in the service business, you exchange your time for money. Believe me, you’ll never get seriously rich exchanging your time for money. Not all lawyers, doctors, and dentists are rich. The average lawyer earns P575,000 per year. The average doctor earns P355,000 per year. The average dentist earns P195,000/year.

What SHIFT am I talking about? As your business grows, you need to hire other great people to work for you. You no longer do all the services (as doctor, lawyer, accountant, speaker…), but focus on getting new customers for the people you hire. The moment you STOP exchanging time for money, that’s when you can become seriously rich.

Which brings me to the third kind of business…

3. Distribution

My corporate seminars business is a distribution business. Why? Because 95 percent of our seminars are now given by other great speakers. (My ministry work prevents me from accepting many corporate seminars.) Most of my work is really marketing our seminars to companies.

Bangus

Let me give you another example.

My fellow-preacher Pio Espanol distributes bangus products. His friend in Dagupan delivers all the products to him. Once upon a time, Pio had a little bangus store in Marikina. He rented commercial space, bought a huge freezer, hired one saleslady, and sold bangus products to walk-in customers. It did okay. Not great. Just okay.

Well, that store is closed. And Pio is richer. Why? Because Pio has decided to distribute the bangus products to other distributors, supermarkets, and restaurant chains all over Metro Manila and beyond. Instead of selling piece-by-piece to individual customers in Marikina City, he now ships his bangus “wholesale” to distributors as far as Davao and Singapore!

And the great thing about this? He doesn’t need to rent commercial space. He operates his entire business from his own home.

That’s the power of distribution. As you can see, I prefer a distribution business over a retail business. Running a restaurant or a beauty parlor is a romantic idea.

Running a boutique store or a bookstore is a very charming idea. But in reality, it’s a lot of work with meager returns. (There are exceptions.)

When people think of starting a business, very few people think of distribution. Because it’s not very obvious. All we see are retail stores. We don’t see the distribution network behind those stores.

I’m challenging you now to LOOK at those distribution networks. Ride one of them. Create them!

Other examples:

An MLM or multilevel company is a distribution business. You’re not only selling products, you’re recruiting distributors. A franchisee is in a retail business. But a franchisor is in a distribution business. Obviously, you cannot be a franchisor if you don’t first build a number of successful retail stores.

An insurance agent is in a retail business. But an agency owner is in a distribution business. Again, it’s quite impossible for an agency owner to be one without first being a great sales person.

In other words, retail can be a great stepping stone to distribution. 

4. Manufacturing

Normally, manufacturing is highly capital intensive. In plain English, your pockets are deep and they’re overflowing with cash.

Titanium Member Ronnie Siasoyco is the biggest distributor of electric meters in the country outside Meralco. He imports electric meters and lightbulbs from China, but slowly, he’s biting into the manufacturing process by creating his quality control laboratory here—so that all his electric meters have excellent quality.

Titanium Member Junie Toreja builds roads. Sometimes, he has 300 road projects happening at the same time. Recently, he bought his own asphalt plant for P150 million—so that he can be sure of his supply of raw material for his projects.

I repeat: You need a lot of money to get into manufacturing. Unless of course you’re in my business: Wisdom-Giving. An infopreneur is in the manufacturing business, but because his product is non-tangible, it doesn’t cost a lot of money.

Especially because of the internet. For example, imagine an author who writes his ideas on his computer, creates an eBook, publishes it over the internet, and sells it to the world using Amazon and other websites. If you notice, this author is in the retail, distribution, and manufacturing business at the same time. The great thing about it? No inventory necessary. No warehousing necessary. No delivery trucks necessary. No big manpower requirement necessary. No high capital necessary.

As you can tell, I’m very biased. But with this broader perspective, I hope you can think deeper about what’s the best business for you.

Source: Wrote by Bo Sanchez, EntrepCircle, TrulyRichClub Wealthstrategy 

P.S.

Two years ago, I joined the TrulyRichClub. It was one of the best decisions of my life. Founded by Bo Sanchez, its purpose is to “help good people become rich”.Because of the guidance I get from the Club, I’m now investing in the Stock Market (and mutual funds, bonds, UITF’s) each month! It’s amazing how I’m personally growing in my finances.

I’m inviting you to join the Club too.

If you’re interested, then join the TrulyRichClub NOW!

Buy ex-dividend or cum-dividend?

Should an investor buy a stock on the cum-dividend or ex-dividend day?

Will the stock price fall more than or less than the dividend amount on the ex-dividend day?

According to the Federal Reserve Bank of Minnepolis Research Department Staff Report 229, the stock price will fall by an amount less than expected on the ex-dividend day due to the behavior of investors. Under certain conditions, rational investors who have decided to buy would prefer to do so on the ex-dividend day instead of on the cum dividend day. They would rather postpone their trade by a day. Those who have decided to sell, on the other hand, would prefer to advance their sale and do so on the cum-day. Hence, on the ex-day the stock price would rise by a small amount relative to what would otherwise have been expected, ceteris paribus.

This indeed reflect my personal behavior when buying stocks as I would prefer buying on the ex-dividend date. However, we have to take note that there are many other variables and this model of investor behavior does not take into account of the general market sentiment and stock market trend.

Lose a Little to Gain a Lot

Lose a Little to Gain a Lot

TrulyRichClub Stocks Update from Bo Sanchez..

More Fun Inveting

Two days ago, my friend Roy said, with a little sadness in his voice, “Brother Bo, if I sell my CEB (Cebu Pacific), I will lose P20,000+.” I told him, “Don’t worry about that loss. In the stock market, sometimes, you have to lose a little to gain a lot.” It’s a principle that’s applicable not only in the stock market but in every other area of life. “Switch it now to the companies I told you to buy…”

Roy told me he already has P1.4 million in the stock market (he’s been investing for a few years), but a P20,000 loss is still disturbing. I totally understand how he felt. We always want to win. But life is not perfect. No matter how ultra-safe and conservative our SAM (Strategic Averaging Method) program is, we can’t control everything around us—such as global oil prices—or the perception of foreigners that the airline industry is not a good investment.

A few years ago, I remember selling my first loss. I was selling at 40 percent loss! (It was global recession then.) It was painful. Especially because it happened seven months after entering into the stock market, so I had very little money then. I wondered if I made a big mistake getting into stocks! But I just followed my mentor and SWITCHED everything to other stocks. And in less than a year, I earned everything I lost + MORE.

So what’s the key? SWITCH. It’s not really selling. It’s switching. When you understand that simple concept, you’ll be a winner. Today, I thank God I didn’t stop. That was five years ago and my total investments is now MANY times more. So let me encourage you. If you’re like my friend above who’s taking a loss because you’re selling CEB, don’t worry. You’ll gain it ALL BACK + MORE! By now, I hope you already followed my instructions: You’ve sold CEB and switched the money to SMPH and/or MEG and/or MBT.

By the way, if you want to ask me or Mike any questions on the stock market, email us at support@bosanchezmembers.com.

May your dreams come true,

Bo Sanchez

PS. By the way, the TrulyRichClub isn’t just about Stock Market investing. That’s only one part. In the TrulyRichClub, aside from teaching people how to grow in their financial life, I also teach people how to grow in their spiritual life.

For what’s the use of growing in your finances if you lose your soul? 

To know more about the TrulyRichClub, click the link below:  

Yes Bo, teach me how to grow my money! 

Tell me more about the TrulyRichClub

Profile of the Filipino Stock Market Investor (INFOGRAPHIC)

Profile of the Filipino Stock Market Investor (INFOGRAPHIC)

The Filipino Stock Market Investor

Majority of local stock market investors are males aged 30-59 years old, residing in Metro Manila, and earning an annual income of less than P500,000.

This is according to a 2011 report on the “Profile of Filipino Stock Market Investors” published by the Philippine Stock Exchange (PSE).

Here is a summary of the basic demographic traits of Filipino stock investors. The visual infographic is available below.

Gender

The Philippine stock market is still dominated by male investors. More than 58.5% of total retail stock investors are males, while females account for only 41.5%.

Age

Investing in the stock market requires a certain level of maturity, both emotional and economic. This maturity goes with age, which explains why almost 3/4 of total retail accounts, or 71.4%, are owned by investors between the ages of 30 and 59 years old. The senior or retiring population, aged 60 and above, comprise about 18.5% of total stock market accounts. Young stock investors less than 30 years old are also starting to go into stock market investing, comprising 10.1% of total retail accounts.

Location

Retail stock market investors are still primarily based in Metro Manila, accounting for the biggest chunk of 76.8%. Investors from the rest of Luzon are next, comprising 13% of total accounts. Around 6.1% of investors are from the Visayas while 2.3% are from Mindanao. Filipinos abroad, primarily composed of Overseas Filipino Workers, also invest in the stock market representing 1.9% of total stock market accounts.

Income

Contrary to common notion, bulk of local stock market investors are not the super-rich but your average-earning Filipino. More than 37.4% of accounts are owned by Filipinos earning an annual income of less than P500,000 (less than $12,000 annually). This shows a growing risk appetite of the average Filipino investor who, despite relatively low incomes, still decide to venture into the stock market. People earning more than P1 million per year represent 34.5% of total accounts while those earning between P500,000 and P1 million annually comprise 28.1% of total retail stock market accounts.

Profession

The occupation or source of income of the Filipino stock market investor is diverse. Almost 1/3 or 30.4% of accounts are owned by Filipinos in the Services sector. Around 1/4 or 24.7% are owned by Professionals such as lawyers, doctors, accountants, engineers, and the like. Close to 20% of stock market accounts are owned by Self-employed Filipinos, while the rest of accounts are owned by those who are Retired or working in the Finance, Industry, Government, or Agriculture sectors.

According to the PSE, there are a total of 478,362 retail stock trading accounts owned by Filipinos. This represents barely 1% of the Philippine population.

Stock market investors in Singapore, Japan, Australia, and other Asian countries

In contrast, other Asian nations have higher percentages of their population invested in stocks — signaling either a higher risk appetite or a more financially mature population or both.

In Singapore, more than 33% of their population invest in the stock market. In Japan and Australia, around 25% of their population are invested in stocks; in Malaysia, 18%; in Hong Kong, 17%; and in Korea, 10%.

The “Filipino Stock Market Investor Profile” report is based on a survey conducted by the PSE among 133 active trading participants in the Philippines as of the end of December 2011.

Source: 

www.pinoymoneytalk.com

Next step: Sell commodities, Buy Biosensors

The first investment decision I made in my life was to invest $15,000 in a commodities fund back in 2007. It was a bad decision as I lacked investment knowledge and was unaware of the charges involved. My next step is to cut loss and sell the fund once its value reaches $13,000.

Also, Biosensors meets all the requirements stated in my previous post - Stockpiling Strategy by Phil Town. It is also about 40% below its sticker price, offering a substantial margin of safety. Biosensors seems undervalued with strong earnings growth and a healthy balance sheet. Current price is near its 52 week low and PE is much lower than industry and sector average. The company has low debt and flushed with cash. The recent price correction is due to pricing pressures in China and Japan and ASP drop in stent. One drawback of this stock is that it does not pay dividends. In my opinion, the potential capital gain outweighs the dividends and it might pay dividends in future as Biosensors is still in the expansion phase. I will monitor the next few days and probably buy 3 lots of Biosensors at a target price of $1.18. 

Updated Stock Watchlist

Common Stocks
Vicom Limited
Boustead Sp
ST Engineering
Biosensors
OCBC
Singtel

Reits
Ascendasreit
Capitamall Trust
SuntecReit

The Psychology of the Stock Market

The Psychology of the Stock Market 

The Psychology of the Stock Market

As we know that the stock market goes through cycles just like the weather goes through Summer and rainy season here in the Philippines. When the market goes up during a rally, it will always go down during a correction. Similarly, after every correction, it will go back up again. Although stock markets go up and down, it goes higher over time. Over time, it makes higher highs and higher lows, leading to a long term uptrend. 

As the stock market goes through its cycle, investors ride a roller-coaster of emotions; from Excitement to depression. By feeling the emotional pulse of the market, you can roughly guess where you are in the market cycle. The point of maximum investment opportunity is when the market is feeling ‘Panic’ and ‘Disbelief’.

This is when stock prices are near the bottom or at early recovery. The worst time to invest (maximum risk) is when the market is feeling ‘optimism’ and ‘Excitement’. This is when stock prices are high and ready for the big fall. So, where do you think we are right now in the cycle?

Target Singapore Stock Portfolio

My target Singapore stock portfolio will consist of:

STI ETF

Singpost

Starhub/Singtel
SMRT

ST Engineering

Boustead

Ascendas Reit
OCBC/DBS/UOB
Keppel Corp

10 Stock Selection Criteria by Benjamin Graham

1. An earnings-to-price yield at least twice the AAA bond rate

2. P/E ratio less than 40% of the highest P/E ratio the stock had over the past 5 years

3. Dividend yield of at least 2/3 the AAA bond yield

4. Stock price below 2/3 of tangible book value per share

5. Stock price below 2/3 of Net Current Asset Value (NCAV)

6. Total debt less than book value

7. Current ratio great than 2

8. Total debt less than 2 times Net Current Asset Value (NCAV)

9. Earnings growth of prior 10 years at least at a 7% annual compound rate

10. Stability of growth of earnings in that no more than 2 declines of 5% or more in year end earnings in the prior 10 years are permissible.

Commodities or SMRT?

Should I sell my schroders commodities fund to buy SMRT at $1.73? I have about $11,000 in the commodities fund, a $4000 loss since 2009. SMRT's dividend yield is currently at 5% while my schroders fund does not pay any dividend. In hindsight, I really should have sold off my fund when it was worth $13,000 half a year ago.

Dividends from Singpost and STI ETF

Received $62.50 of dividends from Singpost and $110 from STI ETF last month. If these 2 stocks maintain their dividend payout, I should receive $312.50 from Singpost and $200 from STI ETF every year.

Also, I am currently accumulating more cash while awaiting the next financial crisis. My next goal is to accumulate at least $20,000 in cash before July 2012. When the next crisis strike, I will most likely invest in stable dividend stocks such as SMRT, SPH, Singtel or Starhub in order to build up a solid base before venturing into growth stocks such as Boustead, Biosensors etc.

Break even misconception in Stock Market

Break even misconception in Stock Market

Investing Break even misconception

Last time I post an article about first thing to know before investing in the Philippines Stock Market. I cite the rule of Warren Buffet to be considered and follow before going into stock market because I know and I'm sure many people losses money in there. Despite the fact that this rule is not easy to be follow and apply in real life sometimes wrong decision can lead and result of losing money so it is much better to determine how much money are we willing to loss in the stock market. If we can't avoid of losing our money then we must manage to minimize the loses.

Why many people losses their money in the stock market? I believe the causes are lack of knowledge in investing in the stock market, short term plan investing or no plan/strategy at all and the worse is the breakeven misconception creating confusion to many investor in the stock market.

Many people often believe that if their shares of stocks turn into negative many don't even react or do something or most of all don't have plan/strategy on how to lessen their losses because of hoping their returns will come back soon while waiting. They believe that if their stocks loss 10% within one year it takes 10% also to break even while patiently waiting and do nothing which isn't true.

In my example last time if you have Php. 10,000.00 place in the stock market and loss 20% in first year become Php. 8,000.00, it loss Php. 2,000.00. In order to gain back the loss of Php. 2,000.00 or to breakeven to Php. 10,000.00 without doing and just patiently waiting the market to go up again, it needs 25% gain not 20% to recover the losses. 5% higher compare to recent loss of 20%. This is the misconception of many people in the stock market that's why they end up losing their money. Often they don't have plan/strategy to what to do in order to protect their money and to avoid losing. 

For me to avoid this if it happen, we must have a plan/strategy either sell the stocks and take/cut the losses or buy more stocks and do peso cost averaging. From other blogs I read they suggest, set a plan of what percentage of drop/losses to reach before make an action either take/cut the losses or buy more stocks.

The reason we should take/cut losses quickly if our stock drops even more is the ability to recover from losses. If a stock drops 10% from the purchase price, we can make it back with an 11% gain. If it drops 20% we can make it back with a 25% gain. But if it drops 50%, our stock must gain 100% just to breakeven and recover which is takes time to make it happen! Check out the table below for the sobering numbers.

Amount of Stock Drops / losses	Gain needed to Break Even and recover
5%	5.26%
10%	11.1%
20%	25.0%
30%	42.86%
40%	66.67%
50%	100%
60%	150%
70%	233.33%
80%	400%
90%	900%

From the table we can clearly see what percentage of drops are we willing to accept depends on our time horizon. For short term plan it is better set a lower percentage of drop so that we can quickly do necessary action to recover the losses in time. The higher the losses you accept, the higher the gain to break even therefore the longer time horizon we must have to recover from losses.

Now, if you have done your plan/strategy on how you going to follow the rule of Mr. Warren Buffet. I think you are ready to go now in the Philippines Stock Market. Good Luck. Happy Investing.

The first thing to know about before investing in the Philippines Stock Market

The first thing to know about before investing in the Philippines Stock Market

Philippines Stock Market Investing

Before we get into Philippines stock market for investing we should take and considered some investing rule of the one world's richest stock market investor. Here's the rule:

"Rule No.1: Never lose money.

Rule No.2: Never forget rule No.1"

- Warren Buffett

This rule are very powerful to me, here's why:

Question: 

If you have Php. 10,000.00 invested in the Philippines stock market for 2 years, on first year you are 20% gain and after another year you are 20% loss, How much is your money now after 2 years?

A. > Php. 10K

B. < Php. 10K

C. Even

Same scenario, but -20% and then +20%:

A. >Php. 10K

B. <Php. 10K

C. Even

It's easy after I do the math, but I find it surprising that in both cases, I end up with Php. 9,600.00. I lose money in either scenario. It's a scary thought given the up and down annual returns of the stock market.

Now, it's up to you to decide and make a plan to protect and avoid losing money before getting into the Philippines stock market.

Philippines Stock Exchange (PSE) NEW TRADING HOURS

PSE NEW TRADING HOURS

The Philippines Stock Market, one of the few equities markets in Asia which has the shortest trading hours in the region, has been planning to extend trading hours as it prepares to link up with other Southeast Asian markets via a regional trading network to be launched in March 2012.

The stock markets of four Southeast Asian nations — the Philippines, Malaysia, Singapore and Thailand — have made plans to integrate their stock markets to groom the regional block into a stronger magnet for global portfolio investment.

By January 2, 2012, the trading hours will be extended further into the afternoon but with a lunch break in-between.  The morning session will be 9:30 a.m. to 12 noon while the afternoon session will be 1:30 p.m. to 3:30 p.m.

Below is the new trading schedule which will take effect on 02 January 2012:

IMPLEMENTATION DATE	January 1, 2012
National Anthem	08:45 a.m.
Pre-Open	09:00 a.m.
Market Open	09:30 a.m.
Market Recess	12:00 p.m.
Market Resumes	01:30 p.m.
Pre-Close	03:17 p.m.
Run-off/ Trading-at-Last	03:20 p.m.
Market Close	03:30 p.m.

Please take note of the adjusted time for the End of Day (EOD) reports:

1) 12:45 pm – TP’s Daily Transaction Report (DTR), ABC, and Consolidated Trade File (CTF) for the morning session (09:30 a.m. to 12:00 nn); 

2) 4:15 pm – TP’s Daily Transaction Report (DTR), ABC, Consolidated Trade File (CTF) and Price File (PF) for the whole trading session (09:30 a.m. to 03:30 p.m.); 

3) 5:00 pm – Daily Quotation Report (DQR) on the PSE Website.

Pesos and Sense Video Episode 2

Pesos and Sense Video Episode 2

Pesos and Sense

Another one great video that I would like to share with you from Pesos and Sense. In this Pesos and sense episode 2 they discussed what is mutual funds all about? They explained that, if you cannot directly participate, no time to monitor and check the stock price, little knowledge on trading and investing into stock market but would like to grow your money over time then they suggested get into mutual fund is the right for you.

On the other segment of Pesos and Sense, citiseconline.com staff explained how the peso cost averaging method is best method you can use to grow our money in stock market. For more detail you can watch the Pesos and Sense Videos below.

Pesos and Sense Video Part 1

Pesos and Sense Video Part 2

Pesos and Sense Video Part 3

Pesos and Sense Video Part 4

Happy viewing!!! I hope it can help a lot.

Pesos and Sense Video Episode 2

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