Year: 2009

Categories
Business Ideas

Future Leaders Training

Scott Adams writes some of his business ideas on his blog, and he says people react in one of two ways, they tell him either: it’ll never work dumbass or someone’s already doing it dumbass (and they provide a link). Both are valid reactions to any of my business ideas :-) .

A few years ago MBA programs were all the rage (they’re still popular today, but the market has been flooded with MBAs).  They’ve introduced a variety of flavours (executive MBA, part-time MBA, etc)  to cater to the needs / desires of various workers.  In every case the value proposition is the same:  this program will improve your business skills (and from this improvement, make it easier to find work and move up the ranks at a company).  Businesses were convinced of the value enough that they have sometimes paid to send top employees.

One problem, for the school, is that students take the course and leave (no repeat business).  You hope that students are happy enough with what they’ve learned that they recommend the program to others (and evangelize it in their workplace), but a school is unlikely to get the same student a second time.

This idea would be a program, put together at a school offering an MBA, that runs for a pool of employees for a short period (perhaps for one week) annually.  The school would put together a variety of classes and events, designed for employees at a specific level in an organization.  Each year would have SOME tailoring to the current business climate, challenges facing the companies industry and company specific problems, but would also focus on fundamental business skills (it wouldn’t be a week of learning how to attach cover pages to TPS reports).  Kinda like summer camp for business people (with catered lunches replacing hot dogs, and lectures on how the subprime meltdown or stimulus payments will affect their industry replacing canoeing).

The value to the employee should be obvious that they’ll learn some specific skills, make them better at their current job, and potentially get some “bullet points” to add to their resume

The value to the company is, in part, that they’re strengthening their work force without losing employees for months like they would to a standard MBA (it also “protects” them from meeting people who will work at other organizations and may try to hire them away).  The other value is that a group within the organization will all be exposed to the same ideas, and ideally would then be able to reinforce each other if they tried to enact change within the company based on what they’d learned.

The real (hidden) value would be employee retention.  Such a program would be useful for identifying the future leaders within a company and making it clear who they are (the ones sent to this every year).  This would be useful for the employees themselves (to show them the company recognizes their future potential and is investing in them and grooming them for greater responsibility), for their co-workers (to learn who they might be working with after future promotions and start getting to know them) and for these people’s supervisors (the company is signalling that they’re an important resource and not to mess with them).

For a large organization, multiple groups at different levels could be sent at different times.  For a smaller company (that wouldn’t have enough employees to fill out this sort of program), they’d probably be better focusing on this type of thing in-house.

For the school itself the clear benefit would be that the programs would continue indefinitely, with potentially multiple groups going through every year if the school could convince the company of its value.  The school should be able to reuse its faculty, facilities and resources to pull together a curriculum cheaper and faster than the organization itself could do in house.

For this post, or any other of the wacky business ideas I post, obviously I’m releasing any ownership claims I may have over these ideas. If you like something I post and feel like you can make money from it, please feel free to do so! Let me know when you’re opening and we’ll do a post on it to give you some free advertising.

Categories
Personal Finance

When Do You Buy New Items Or Just Replace Parts?

roller-bladesI’m a big fan of inline skating – or “roller blading” as I like to call it.  I got my first pair of skates which were the original Rollerblades back in the mid-80s.  Rollerblade was the original inline skate company and I had to order them from somewhere in Quebec.  It wasn’t until probably the 90’s when they became more mainstream and other sporting good companies got in on the act.

I tend to run my sporting equipment into the ground before replacing it.  This has nothing to do with being frugal or environmentally conscious but rather it’s just easier to keep using what you have as long as it still works.  Laziness is also a factor as well.

My first pair of roller blades I used until the wheels literally stopped turning.  Then about 10 years ago I bought a new pair which are still in good shape but unfortunately I never rotated the wheels and the front left wheels got worn down to the point of falling apart.  I was still able to use the blades without that front wheel but I figured I should get new wheels or blades.

I ended up going to Sporting Life and buying a new set of wheels for $100 which compared to $260 for the blades I considered buying.  One of the main reasons for this decision was that I liked the bindings on my old blades better than the “new” style of bindings which you see in the photo.  My skates are more like downhill ski boots.  Plus of course, it was a lot cheaper.

I’ve had situations in the past where I just replaced a part and the final results didn’t work out very well.  Hockey skate blade replacement, buying used tires for my car (really dumb) are some things that I would recommend avoiding.

Do you have any examples of where you where able to just replace a part and it was successful or not?  Are there some things you would just automatically buy a new item?

Photo credit: Oh Barcelona

Categories
Personal Finance

Scams During Tough Economic Times

During tough economic times, you might hope that scammers would lay low.  Since people are having hard times, they might have a more suspicious attitude (and scammers would do something worthwhile with their time).  Sadly, the scam artists are hurting just like the rest of us and hustling to take advantage of the desperation of others.

Advance Fee Fraud

One scam that is popular during tough times is the advance fee fraud (which we’ve touched on before).  After trying to get a loan, maybe you have the “good fortune” to run into someone who has the inside track on getting all the cash you might need (and at a very attractive interest rate no less).  The details can be whatever convoluted story the scammer dreams up, but the end result is that the loan is yours if you just pay a small “application fee” or “service charge”.  This small fee is all the scammer is after, and once he’s got it, he’s gone (along with the imaginary  loan).

The famous Nigerian Bank Scam is a variant on this. Instead of a loan, a portion of a fortune is yours for the taking, just say that you’ll accept!  Without fail, a string of “roadblocks” will crop up, each requiring you to send a “relatively minor” sum of money.  They will string you along as far as possible, bleeding you dry (and trying to get you to embezzle money “temporarily” from any other sources of funds you have access to).

It’s definitely not something you want to try at home, but Silicon.com and 419 Eater have hilarious records of exchanges where they respond to Nigerian scammers and mess with them (the ULTIMATE is when they convince the scammer to send embarrassing pictures, or to send the “victim” money first, an advance fee for the advance fee if you will).

I loved a blogger’s reaction piece (unfortunately I’ve lost the link) when a scammer called him up offering him free grant money from the government.  He just had to pay them a $50 processing fee.  He tried the obvious and said, “Ok, take the $50 out of my free money” and the woman said they couldn’t do that.  He said he wasn’t interested then, and she kept pestering him why he “didn’t want free money?”  He had to tell her forcefully that it’s not free money if he has to pay for it.  There are a large number of posts detailing that there is no free money for the taking (not even stimulus money) and the books and CDs promising to tell you how to quickly and easily get it are scams.

Employment Scams

Also related to advance fee fraud, an employment scam preys on someone’s desperation to find work.  The service posts in a variety of places (newspaper classifieds, on-line job boards, etc) that they’ll help you find a job, guaranteed or your money back!!!  You go for a meeting, and the “recruiter” spends his time chatting you up and convincing you to write him a big check for the services he’s about to provide.  You’ll be told that there’s no effort on your part, just pay the money, they’ll do all the work, and you’ll have a high paying new career in the near future.  Nothing happens (of course), and they keep stalling you.  Eventually you get angry and their tune changes (NOW they say all that they offered was resume advice and career coaching, and it’s far too late to take advantage of their money back guarantee).

I actually encountered this years ago.  I was job hunting, came across a job that looked like a fit and had an appointment scheduled.  The day of the interview, I was reading up on the company ahead of time, and almost immediate found a string of complaints that had been posted that they don’t actually offer jobs, just try to talk you into paying them money for worthless services.  I called to cancel the interview, and when the woman asked why, I told her I’d done a Google search on their company and after reading about them I didn’t want to have anything to do with them.  She started saying that I couldn’t believe everything I read on the Internet, at which point I politely got off the phone with her.

A host of similar scams prey on job hunter anxiety, like resume services.  They offer a free “proof reading” of your resume, which will result in their identifying “major problems”, and selling you a brand new resume (that they’ve just plugged your information into their standard template, something that will be obvious to the hiring manager or HR department).

At the end of the day, as rough as it is job hunting, you have to do the legwork yourself.  There’s no “hidden job market” you can buy your way into.  While it’s certainly worth getting help with your resume, talking to friends who are good writers, reading resume advice online, going to an Ontario Employment Center, or going to a university’s career services (often they’re happy to help non-students) would be far more effective (in addition to being free).

Have you encountered any scams recently trying to take advantage of people’s desperation in the current economy?

Categories
Opinion

Friends and Family as a Form of Insurance

I mentioned in a recent post how stories influence public policy. Social supports are sold on the idea of a poor downtrodden individual who has a run of bad luck, and putting a system in place to catch them before they hit bottom. It may be a woman with children trying to escape a cycle of abuse at the hands of her husband, a family just scraping by when a child is diagnosed with leukemia, or an immigrant family who runs a convenience store and one of the members is shot in a robbery (and they don’t have emotional support to deal with the aftermath).

You’d have to be pretty hard-hearted to say “screw them!” to people in any of these situations, and I think it’s VERY rare that anyone actually has that reaction. Most people I’ve known, from across the political spectrum, genuinely want to help people who are in a tough place. They often just differ on the best way to help them.

I often wonder how much the reality of the populations being served by these programs match the image they are sold on. I also wonder why none of these people have friends or family that can help them.

My personal “safety net” in order of desirability is: self-insurance, insurance, friends and family, and government programs. I’m fortunate that self-insurance takes care of most of the risks in my life (I’m single, so I don’t need life insurance, and as a grubby grad student disability insurance would be close to useless). The biggest risk for me currently would be liability involving my condo, and I have insurance that covers that (with a very high deductible).

If I ran into problems in my life that neither of these would take care of (say a prolonged serious illness that depleted my savings or that prevented me from taking care of myself) friends and family would be the next place I’d look for help. I have one friend I know for sure would take me in no matter what happened, and within my family there are two homes that would also put me up. Two other friends would certainly give me a place to stay for a short period (say a couple of months) while I got back on my feet from a temporary setback. When we talked about this once Mike jokingly said I could move in with him if I was willing to change dirty diapers.

So that gives me 5 homes I could potential depend on before I’d throw myself on the mercy of the state (and one place I could exchange diaper duty for rent). If an unpleasant person like me has that many options (I’d do the same for any of them, heck maybe *I’d* start wearing diapers if Mike moved in with me to give him something to do 😉 ) who I can count on if I fell into real trouble, who are these people who don’t have anyone? What kind of a SOB would you have to be to not have anyone to help you if you were living with abuse, an illness or the consequences of a criminal attack?

The purpose of this post isn’t to argue against government programs to help people in trouble. I often wish there was more transparency about who was being helped and how. The real point I’m getting at here is that your social network is one of the most valuable safety nets most of us have (and often we don’t considered it when thinking about “worst case scenarios”).

How many people in your life could you count on to take care of you if you fell into real trouble? How many people would you be willing to take care of?

Categories
Announcements

Linkstuff For Aug 19

The Toronto Star had a great post on the US financial institutions that benefited greatly from bailouts but for some reason aren’t returning the favor.

Nancy Zimmerman (Money Coach) is thinking of buying a house on impulse – go and give her some advice!

Remodeling This Life wonders where time went now that her kids are about to start school. Very nice post.

One of the more amusing and clever posts I’ve read in a while was from WiseBread – Remember where you parked your car and 35 more practical uses of a digital camera.

The Financial Highway had some tips to keep emotions out of investing.

The Bag Lady had an interesting take on the Cash for Clunkers program – she says let’s burn down houses.

Million Dollar Journey had a great post by staff writer Kathryn about whether to buy or rent a house when she moves to Toronto. Tons of great comments.

Canadian Capitalist is finally getting around to starting a TFSA.

ABCs of Investing wrote about investment real return.

Carnivals

Carnival of Everything About Personal Finance

1031 Exchange August Edition

Categories
Opinion

You CAN Argue With Results!

swingersMike and Trent are in Las Vegas and Mike has just lost a hand of blackjack after Trent advised him to double down.

TRENT: I’m telling you, baby, you always double down on an eleven.

MIKE: Yeah? Well obviously not always!

TRENT: Always, baby.

MIKE: I’m just saying, not in this particular case.

TRENT: Always.

MIKE: But I lost! How can you say always?!?

Swingers (1996)

I’ve always been interested in how people learn and decide what is “truth”.  Often people use the wrong approach to determining what is correct and incorrect.

With social or science issues, often people are swayed by anecdotal evidence. If we’re looking to shape public policy or understand how people function as a group, we need to consider them at the group level.  It’s problematic for people, as we automatically relate to stories about individuals far more than statistics (that’s why McCain and Obama debated about “Joe the Plumber” and not about small businesses or the middle class).  However, as enticing as stories are, it’s incredibly misleading to allow ourselves to be swayed by this.

With philosophy or religion, we are often swayed by a charismatic person shaping our early views.  This is why children disproportionately share the religion of their parents:  our parents have a VERY large impact on us during our early years (and often for the rest of our lives).

With investments, they’re often judged by their results, which is also the wrong way to think about them.  In the lead in quote the characters Mike and Trent (from the movie “Swingers”) are arguing about this.  Trent is talking about the optimal strategy to play blackjack (based on probability), while Mike is talking about what actually just happened in the hand they played (the results).

“Decisions can only be evaluated based on what the decisionmaker knew at the time, not on results.” – John T. Reed

In “Landlording on Auto-pilot” the author suggests an investment strategy where you buy one property per month until you’ve bought 100 properties.  You allow these to appreciate for 4 years, then sell off 80 of the properties, pay off the mortgages on the remaining 20, then live off their income for the rest of your life.  It’s a great strategy, provided you can:

  • guarantee strong real-estate appreciation during the 12 years it would take to execute
  • have each property cover ALL its monthly expenses completely
  • not have any surprise emergency expenses (such as a roof leak or a water heart burst)

Any of these three is pretty close to impossible to pull off consistently (and would make you filthy rich if you could do so),  so to manage all 3 for 100 properties would be pretty damn impressive.

I don’t think the author is being intentionally misleading when he recommends this.  He’s probably had reasonably good luck during his accumulation phase and based on his results he recommends a VERY aggressive strategy (which is far more likely to ruin someone following it than lead them to riches).  Casey Serin was doing something along these lines and managed to get himself over 2 million dollars in debt and headed for bankruptcy.

I like Derek Foster, his books and his investing strategy.  HOWEVER, the justification he provides for his strategy is very much based on results.  He bought certain companies over a certain period of time and managed to retire at a very young age.  Would the same strategy work today?  Would it have worked then with a different set of stocks?  Will it work indefinitely into the future?  These aren’t easy questions, and a number of commentators have questioned this.  Again, I believe Derek Foster is sincere in his confidence in his investing strategy and is honestly trying to help fellow Canadians become better investors.  I think there’s a fair bit of good stuff in his books, and they helped me get the (limited) understanding I have of equities.  I also think bloggers and journalists have asked him some good questions (that haven’t all been answered).  The biggest danger would be if he got lucky picking the right strategy for the market we were in and his results may not be easy to repeat.

Some may ask “well, if their strategies don’t work why did these two guys make a lot of money doing it?”  The simplest answer is that the people whose strategies didn’t work aren’t writing books about it (surviorship bias – we’re only hearing about lucky ones).

The ultimate example of this may be the lottery winner who advocates winning the lottery as a retirement plan, since he made $30 million!  It’s true that it worked out for him, but what if it hadn’t?  Is it a good idea for the rest of us to try and follow in his footsteps?

One of my bonehead uncles (as always, I’ll point out that we’re only related by marriage) once made the assertion that after world war 2, Britain invested in rebuilding houses and in consumer goods, while post-war Germany was forced to invest in its industry (while the population continued to suffer from war damages).  He claims that the strong modern economy in Germany, compared to Britain, proves that this was the superior policy.  While I’d be willing to discuss the policy and it’s impact, it is an utterly IDIOTIC assertion to make that the relative strengths of their modern economies “prove” this point.  The two countries have radically different populations and geography, and have gone through over 60 years of a HUGE variety of differing policies.  If all we use to evaluate these policies is the current state of their economies, that would imply that EVERY SINGLE economic decision Germany has made since the war was correct (and EVERY SINGLE economic decision Britain has made was incorrect), since “Germany has the stronger modern economy”.  This is foolish.  Their economies were impacted (positively and negatively) by ALL these decisions (and a large number of other factors thrown in).

Similarly, with anything we want to judge “by its results”, we must consider not just the philosophy or general approach but the specific execution of the strategy, and the environment it worked in.

Categories
Business Ideas

Small Businesses Destined for Failure

Confucius says “Man without smiling face should not open store”

When I lived at Bathurst and St. Clair, in Toronto years ago, there was a steady stream of new businesses opening and closing.  It was great for me, as I loved to try new restaurants, but it got to the point where I could tell when a small restaurant or independent retail store was going to fail.  I wish there was some way to make money off of betting on a small company’s failure, but I was never able to think of a way to do so.

The common factor in the businesses destined to fail was that the owners were pretty sour.  One Turkish restaurant opened up and I ate there once or twice a week for months.  Every time I came in, one of the family members would take my order stone faced while other family members gave me malevolent looks.  The food was decent, and they did it to everyone so I didn’t take it personally, but I couldn’t understand how they expected to build a business treating customers that way.

Another family tried to open a Dollar-store style liquidation store.  Similarly, they’d act like they were doing people a favour selling cheap junk.  They used to always post misleading signs (like “1/2 price off everything”, and when you got to the cash it turns out whatever you were buying wasn’t part of “everything”).

In both cases I’m sure the families lost a ton of money on their business ventures, and probably console themselves with the old chestnut “most businesses fail in the first 5 years” (which apparently isn’t true).  I feel bad for anyone who fails at starting a business (I think it’s great when people try to start a business), but I really think they could have had a much higher chance at success if they’d been nice to their customers (it’s a wild and crazy concept, I agree).

This is fairly widespread, when I moved to Pape and Danforth I tried out a new Caribbean restaurant that was opening right as I moved in.  I ordered a meal, paid, and when he brought it out there wasn’t any coleslaw (which was listed on the menu).  I asked if I could have some coleslaw, and the guy (who I *think* was the owner) told me “Sorry, we’re all out.  I’ll get you next time!”.  There wasn’t a next time.  If you’re going to list something on your menu, charge full price then not give the person part of their meal, you aren’t going to get repeat business from Mr. Cheap.  I haven’t checked since I moved away, but I’m sure he’s shut down by now.

It’s painful to admit as a techie, but businesses need to be sales driven, especially at the beginning.  It’s crazy to do your initial marketing, have people from the neighbourhood coming into your store out of curiosity, then treating them badly and making sure they don’t come back.

Some people might object to forced friendliness to all their customers and say “I’m opening a business to be my *OWN* boss, not to suck up to everyone who walks through my door!”  If this is someone’s attitidue (viewing being friendly as “sucking up”) they definitely shouldn’t try to run a restaurant or retail business (and should probably have someone else deal with customers if they open another type of business).

Categories
Personal Finance

Calculating The True Cost Of Your Vacations

Everyone loves a nice vacation – whether it involves driving a short distance to visit family for a couple of days or flying to the other side of the globe to go snowboarding.  The big problem with vacations however is the cost – most of us have budgets that are limited in some way and we want to get the best value for our vacation dollar.   Nobody wants to go into debt for a vacation.

Is it better to do a 3 week trip to Europe once every 2 years or go on 1 or 2 more modest vacations per year?

One trick which I have done in the past when trying to determine the costs of a trip is to figure out the “net” cost of the vacation.  Everyone knows that when you go on a trip that there will be quite a few costs such as airfare, gasoline, rentals (cars, accomodation), food, tourist attractions etc.  What some people don’t realize is that when they leave their normal life for a while that they are also saving some money which should be subtracted from the cost of your vacation.

Go on vacation and save money?  I don’t think so!

It’s true – and I’ll give you an example.  If your family normally spends $200 per week on groceries and household items then if you go on vacation for 1 week you will save $200 on groceries and household items.  When you calculate how much a trip is going to cost (or has already cost) you should factor in these “savings” to get the net amount of the trip.

For example if a family goes on a vacation and spends $2000, most people would to say the trip cost $2,000.  But if they factor in money that they didn’t spend when at home (let’s say $400) then the trip only cost a net amount of $1,600 which is significantly less.

Obviously you would need to have a very frugal trip to have an overall net saving by going on vacation but if the trip is reasonably modest then netting out your “normal” expenses could make the trip quite cheap.

Why do this?

One reason is that you like to know exactly how much things cost – I have always calculated the net costs for big trips and it makes me feel better to know that a trip was a bit cheaper than the gross costs.

Another good reason is that if you are trying to make decisions about future vacations, it’s good to have the proper cost information to make an informed decision.

Lastly – it might allow you do longer or more expensive vacations.  If you budget $2,500 for a trip and don’t subtract the $500 you would normally spend during that time then you will actually end up spending $2,000.  This isn’t a bad thing but it’s better to make that choice ahead of time.

How to do it?

Add up your expenses that result from you being at home.  Food, some utilities, gasoline, commuting expenses are good examples.
Don’t include any fixed costs – things like car insurance are going to happen even if you don’t use your car.  You don’t have to be exact with your figures – estimates are fine.

Some factors to think about

The two biggest factors which will influence the effectiveness of this “accounting” are:
1)  Daily cost of trip – The more expensive the trip then the less the “netting” will have an effect.  If you are spending $5,000/week in Hawaii then the fact that you are saving $350éweek by not being at home isn’t going to be all that significant.
2)  Daily costs of “nettable” home expenses – If your regular daily expenses are very low then removing them from the vacation cost won’t be as significant as it will for someone who eats out a lot and burns a lot of cash on a regular basis.

In the example noted in the first paragraph it’s likely that the cost of a 3 week trip to Europe won’t be reduced by a whole lot by netting the home expenses so it will still be an expensive trip.  However, if the alternative trips are cheap enough (the 2 weeks per year trips) then it’s possible that the cheaper trips might be very cheap in comparison to the Europe trip after netting.

This is significant because it the decision between doing shorter more expensive trips or longer cheaper trips (or more cheaper trips) might point more towards doing the cheaper trips since you will get a lot more bang for your buck especially after netting the costs.  Most people who are working don’t have a lot of vacation so for them – netting out the expenses will just let them budget more accurately for their trips.  People who have more time for vacations ie teachers, retirees can use this method to decide between the higher budget short trip or lower budget longer trip.

Summary

When going on vacation, subtract any expenses which you would normally incur while living at home but that won’t occur if  you are away.  This could alter your thinking on the type and length of trips you take.