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Finance

Why Entrepreneurs Often Fail

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Entrepreneur is an interesting word. It conjures up thoughts of bravery and superior business wisdom. It’s a person who sees in something what most of us fail to see.

Take that idea, develop it and in turn found a business on it. When it works, it’s pure genius, and we’re in awe of their aptitude. However most businesses fail so most Entrepreneurs are less skilled than we give them credit for.

Bravery in launching a new business is really just a higher level of risk taking and with good debt it’s more acceptable. Good debt is a loan that used to create a revenue, i.e. it’s an investment used to generate and grow an income. Here’s a more extensive definition of good debt.

So the Entrepreneur or business will increase its borrowings via a line of credit, or even a home loan to invest in its products or people with the objective of earning more revenue.

The risky part of borrowing is the end goal is speculative i.e. its usually a well thought out plan but it’s not actually happened and numbers have to work out, i.e. the increase in revenue due to the loan, far exceeds the costs of the loan and other additional expenses, like more staff or systems.

Entrepreneurs have an appetite for risk and as mentioned it sometimes works out but mostly it doesn’t so it’s important to understand the pros and cons of business loans.

Once the good debt options run out, then the only way to go is bad debt loans and this is when it can all spiral downwards for businesses. Bad debt loans are essentially non income producing so they’re a liability. The loans can not be leveraged to make money. They can be written off against taxes and there is also bad debt recovery which is another subject altogether.

Startups fail for many of the same reasons including:

  • Lack of working capital – affecting operations
  • Liquidity issues with cash flow – struggling to pay staff, suppliers
  • Business growing too quickly – not enough resources to deliver on orders
  • Ego – too big to fail

Often it’s not just one thing either but a combo of challenges that just become too much to handle alone. The smart operators don’t go it alone though they have mentors.

Entrepreneurs Need Mentors Too

Behind every good Entrepreneur is a mentor. Yes this is not the adage you were expecting but it works.

Mentors keep us in check. They’re our sounding boards, listening to our rants and raves. Offering an objective viewpoint and advice on the direction we should take.

Of course no one person can be trusted to do the lot so more than one mentor is recommended. The experience and trusted authority from mentorship is recognised in just about all great leaders. Think of the big names in business today and they’ll say they have amazing mentors.

Facebook’s Mark Zuckerberg had Steve Jobs, and Bill Gate had Warren Buffett.

Maybe this is where some Entrepreneurs go wrong? They either don’t have mentors or they don’t use them enough.

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Finance

Young Money: How To Fund A Startup

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Have you got a great idea for a business and now you want to make it happen? You’re not alone. While every business with the idea, commercialising it is a whole new site of skills. Getting a startup business up and running is a challenge for anyone who has not done it before.

Entrepreneurs don’t usually have the ideas, i.e. they’re not the creative talent. They’re the people, the ideas creators turn to, when they want to see how far they can take the idea and turn it into a viable business.

The start up phase of any business involves a lot of working hard, but not exclusively, it also requires investment. Seed money can come from various sources. Without the money, to get started and provide ongoing investment as the business shows promise, your venture may take too long to mature and a competitor takes your place in the eye of the consumer. So where can the investment come from?

What’s Available?

There are a lot of different funding options available for small businesses, and they all offer their benefits. You can find some examples of the most popular methods below, along with some additional information to help you choose which route might be best for you.

Personal Finance/Loans

You will need to invest in yourself, i.e. put some of your own money in. If you have not got savings, consider other options, like your home loan. This is a hugely popular option for start ups that fail to get funding from other sources. Caveat Emptor: Always seek professional advice from your accountant, lawyer etc before taking on debt.

So if you have money saved up or can get a loan from a bank, funding your business will be a fast process. As aforementioned, there will be a personal risk here, but you won’t have to prove to anyone that your business will work, making it great for those who can’t get further than a concept without some capital.

Business Loans

Some banks and governments will offer loans to new businesses. In most cases, you will have to have existing cash flow to make this work, limiting the successful startups will have with it.

Angel Investors

If you can convince an investor with the money to back your idea, you won’t have to look at other types of funding for business, as you will have both money and support. This isn’t always easy to find, and you will have to prove that your idea is worth their time, making it hard for those with nothing but a concept.

Personal Risk vs. Sacrificing Freedom

The choice you make when you’re choosing how your company will be funded largely rests on what is more important to you.

If you are willing to take on personal risk, using your own money can be a great way to go, as it will give you all the freedom you need to build the business you’ve been dreaming about.

For those who would rather keep their money safe, making a couple of compromises along the way can be a small price to pay for an investor or venture capital. This is a very personal decision to make.

Why Isn’t The Bank An Option?

A lot of startups find disappointment when they approach a bank for a loan to get themselves off the ground.

Unfortunately, history has shown that being too willing to offer new businesses money can result in heavy losses, and banks have learned for their mistakes. Before you can convince a company like this to support your venture, you will need to prove that it can make enough to pay it back, and most startups just don’t have the income.

Choosing the funding option which you use for your startup has always been a challenge. It’s becoming more common to find businesses which cost nearly nothing to get started, opening the doors to another idea for you to consider.

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Finance

Best Cryptocurrency to Buy – Which Is Best?

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A lot of people might say that cryptocurrency’s big moment has ended. After the sharp rise and precipitous fall of bitcoin, many strait laced investors soured on the idea of crypto investment. Crypto’s 15 minutes of fame were over, the thinking was, and it was time to move your money back to safer, and more standard commodities.

This, however, is just not true. Cryptocurrency continues to be a sound investment, if you know the best cryptocurrency to invest in. We’ve compiled a list of four great picks below.

Ethereum

Ethereum is sometimes thought of as bitcoin’s chief rival, which perhaps makes it the second-most famous cryptocurrency. Ethereum is also commonly thought of as an expansion of blockchain technology beyond bitcoin. It is traded as a cryptocurrency, but it also has value as a decentralized computing platform.

Ethereum includes a programming language that runs on blockchain. So, it is used by developers to create apps, including health and security infrastructure, music licensing services, and even anonymous browsers. Ownership of an Ethereum token is recorded on the shared blockchain ledger, as it would be on any cryptocurrency.

However, Ethereum expands this practice to record the ownership of copyrights, music, documents, financial instruments: anything imaginable. By purchasing Ethereum, you are investing in this network, rather than the security as such. For this reason, Ethereum is an excellent investment and one that the savvy investor should be scoping out.

Bitcoin

For fame and notoriety among the cryptocurrencies, none can match bitcoin, the original cryptocurrency in many people’s minds. Now more than a decade old (the mysterious Satoshi Nakamoto published the bitcoin white paper in 2008), bitcoin has had its share of ups and downs.

For the savvy investor, though, bitcoin can still be a sound investment. After the massive — and massively famous — December 2017 peak, the price of bitcoin has held steady between $3,000 and $6,000 per coin. As bitcoin matures as a security, it is looking more and more like a place to park your money, rather than the white-hot investment it was two years ago. This is not a downside, because investors need (and will take) both options.

Dogecoin

It started as a joke — a play on the classic “doge” meme. But since its inception in 2013, Dogecoin has grown to a market cap of over $312 million dollars in April 2019, with values soaring as high as $2 billion in January of 2018. Dogecoin’s value fluctuations will be familiar to anybody who has traded in penny stocks. It maintains a steady mean value, punctuated by regular spikes in its price.

The trick, as it were, is to buy it just after a spike in its price, and to sell it during the next spike. While Dogecoins are not a strong long-term investment, they can be a decent swing investment if you have the time and energy to monitor them. The origins may be silly, but the money is very real.

Litecoin

Litecoin is a cryptocurrency specifically developed for zero-cost payments. Litecoin was developed to have a faster transaction confirmation than Bitcoin. This emphasis on fast, secure transactions has made Litecoin one of the most popular coins with businesses interested in security.

For this reason, the value of a single Litecoin has risen from $30 to $78 in the past six months, well below the mean value. This is the perfect opportunity for an investor to swoop in. As security becomes increasingly important to businesses across the board, Litecoin begins to look like a better opportunity than ever.

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Finance

How to double business profits and pay no federal tax

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Increasing profits and paying nothing in federal tax may sound like a pipe dream. Surely it’s impossible, right? Wrong, a company is already leading the way here and has provided proof that this is possible. Indeed, the richest man in the world pays nothing in federal tax. It’s shocking, it’s perplexing and it’s completely true. We’re of course referring to Amazon and the recent news that the business pays $0.

How on earth does this work and what can you learn from this? Let’s start with the definition of ‘Federal Tax’ as there are many different types of taxes.

Federal Tax

Federal Tax is a tax on income to pay for the resources used by the country. Individuals, business, trusts, and other legal structures aka entities incur the marginal tax rate depending on earnings in a financial year, the rate is applied to every dollar you earn.

Individuals are taxed at source and at a minimum of 10% or as much as 39.6% depending on, which income bracket your total income sits.

Businesses have more flexibility and their rate could be somewhere between 21% and 35%. More on Federal Tax here.  However as we’ve alluded to, there are ways to end up paying $0 tax just like Amazon, so here’s how they’ve managed it in 2019.

The Success Of The Company

Amazon’s record is incredibly impressive, regardless of which way you slice it. Between 2017 and 2018 the profits of the business actually doubled from $5.6 billion to $11.2 billion! The company is also currently valued at a total of $1 trillion. So, you would think that the business pays a fair level of tax right? Well, not exactly.

The Tax Break

According to the Institute on Taxation and Economic policy Amazon reported with $129 million for a federal income tax rebate. This equalled a tax rate of -1%. To compare this, the federal corporate income tax rate is 21%.

As such, it seems that part of the reason why Amazon is profitable is because they claim various tax credits and gain tax breaks for stock options from executives.

How Is This Possible?

In 2017, the Tax Cuts and Jobs Act was put forward to encourage more corporate citizenship and corporate tax was reduced from 35% to 21%. Luckily for Amazon and various other companies, it left a variety of tax loopholes in place that could be used to cut down the level of tax paid. Essentially, companies could avoid paying state income and federal taxes on about half of their profits.

Does Amazon Pay No Taxes?

Despite claims to the contrary, Amazon does pay taxes and is not a ‘no tax’ company. Indeed, through 2017, the company paid $412 million in total taxes. This included charges consumer sales taxes where applicable.

That said, it’s true that through 2017 and 2018 the company was searching for new tax breaks. They were able to claim billions through performance-based incentives by carefully selecting where to set up their headquarters.

As such, it is unlikely that Amazon will pay any federal tax this year. At the very least, they will see a massive level of savings. While people ask why Amazon would need to go to such lengths to save money regardless of how successful your business is, higher profits are always worth striving for.

There’s a lesson to be learned here too because Amazon and other companies avoid taxes in a way that is completely legally and fits regulations. They are not breaking the law, they won’t sink their business and they will grow their profits. As such, if you are running a business, you too should be pursuing tax breaks each year and cut down what you owe as much as possible. After all, if Amazon is taking these steps why shouldn’t you?

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