Be Prepared for Slower Growth

It sounds strange but positive thinking may not always be the best course of action. This is true most recently when many businesses have had to weather the storms of the current economic recession.

A recent survey by a major American consulting firm concluded that many businesses have failed to adequately prepare for further slow growth on the economy. While they may have taken measures to keep afloat in the current economic climate, they have assumed that better times are down the road. However, as many current indicators project that the "better times" are still at least two years away, if not more, the fear is that companies may not be prepared.

One of the problems is that preparation for long range financial problems differs from the short term. In order to balance the books presently, some businesses have trimmed administrative overhead and tried to curb spending. But, long term would mean trimming the payroll and restructuring debts. In an era when executives are trying to be optimistic about the future, these "hard-line" steps are far more difficult to make. Business executives realize that profits will be down for awhile but they truly do not expect the downturn to last that much longer. They would rather gamble on a few positive signs as indicators of sunshine rather than admit that the storm may not be over. For many companies, that outlook may be perilous.

Economists feel that we are not yet out of hot water. Cautious optimism may be the best idea but the emphasis is on caution, not optimism. It would be wise for the business community to take precautions in advance of any further problems. Be prepared to handle the economy based on reality, not predictions.

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How to Talk to Your Board

Knowing how to manage a large corporation is not enough for a top executive. It is also crucial to know how to work with your board.

Before entering the boardroom, know who is sitting there and what their expectations are. The way board members think or grasp a particular situation may differ from yours. When you live a company daily, your appreciation of its subtleties, or your comprehension of its needs, will differ from those of someone who knows the company from afar. Therefore, learn who your board members are and present reports to them in the way that they want to hear them. Meet them on their terms.

Don't try to impress the board with fancy numbers, terms, and analyses. They know that you know all this. They want to know the bottom line without a lot of hype. However, don't underestimate their expectations. Present the risks and challenges that the company faces. Your job, after all, is to guide the company through these. They want to know how and how much.

Presenting confidence is vital. You are their person at the helm. When you exude confidence, the board feels comfortable that the company is in strong hands. When possible, don't go into the boardroom "cold turkey." Plan your presentation in advance. Know what you want to say and how to say it best. Also, prepare yourself for tough questions. The board expects you to have all the answers at your fingertips. Therefore, the more you prepare, the better you will appear.

As you make your presentation, keep an eye on your audience. Learn to read body language. Whatever it takes, avoid a bored board. If attention starts waning, it is time to switch gears and get their attention back. Work with them and they will work with you.

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When Your Employee is Too Ambitious

It's a classic business tale that happens all too often. The CEO trains an underling to become a loyal second-in-command and then, one day, the underling attempts to unseat the CEO in order to gain the number one position. The automatic response of the boss is to show number two the door. Should that be the appropriate response?

Truth be told, every situation has to be judged by itself. Certainly, a person who feels threatened will respond in a defensive manner. But let's examine the situation a little more closely.

There are several reasons for training the underling. First of all, one role of a manager is to train employees. Secondly, ambition in senior employees is healthy for the organization. You want the people with drive to be in leadership roles. They help inspire others. A central question is whether that ambition is good for the organization or just for the individual.

Healthy ambition should be channeled appropriately. In fact, helping an employee – even a top level one – chart their career is important. Working toward a career goal can add to the person's drive. However, open communication is all part of the process. Just as a CEO should share visions with the staff, so the staff should be encouraged to reciprocate.

On the other hand, one does not want to be naïve. True that none of us remains at the job forever. An eventual successor will be necessary at some point. However, you should choose that point in time, not the successor. Therefore, it makes good sense to keep your eyes open. A common tactic to usurp power is to "make the boss look bad." Therefore, keep detailed records of meetings and conversations. Don't reveal all the secrets to your trusted aides. A few trump cards in your pocket may be necessary to help maintain order and stability. Remember that trust is mutual. If one side destroys that trust, the rules of the game change and you're the one in charge.

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The Right Staff

Remember the movie, "The Right Stuff?" It depicted the U.S. efforts to find the perfect people for its manned space program. Well, staffing your business requires the same diligence and detail. In order for your business to succeed and grow, your staff should match your needs perfectly.

If you're operating a business, chances are your business will reflect your own personality to a certain degree. After all, you work hard to build an entity and a part of you is in that business. You believe in it! You have the drive and vision to see where this venture should go. Doesn't it make perfect sense that your staff should share the same values as you?

It is important to remember that most people spend the better part of their waking hours at work. Therefore, they expect that their place of employment will be more than merely a source of income. In fact, surveys have been conducted showing that salary levels are only part of most employees' expectations.

Do you share your goals and dreams with your employees? Try letting them see the business as you do. Encourage them to be a part of the essence of the business. The more they believe, the better they will perform.

Also, how do you face your "team?" Do you have a sunny disposition? It's not always easy, especially when problems are on the horizon. But, encouraging a positive attitude goes a long way. Smiles are contagious! In the workplace, a smile makes a person feel good. Feeling good translates into a positive attitude. Positive attitude means productivity.

The bottom line is when employees want to come to work because they enjoy being there, and realize that they truly are important to the success of the business, the result is a business that really has the right stuff.

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Positive Cashflow Critical to Small Business

If you're in business for yourself, you know that maintaining the status quo is not nearly enough. You must continually think of ways to spur growth in your business. While there is no specific recipe for success, there are several helpful tips that can be considered.

Positive cash flow is critical to any business. As such, it is vital to know your financial standing at any given point in time. Looking at the books at the end of month is simply inadequate. Keep your records as current as possible, updating them daily if you can. After all, shouldn't you be in constant control?

Often, business owners ponder how to improve sales. One suggestion is to truly focus on your clients. Research their needs and problems and provide the solutions. A proven path to success is to give the client exactly what they need, rather than convince them to settle for less. Build a bond based on mutual need.

As important as sales may be, they are worthless if the customers don't pay. Collections are often a major stumbling block for businesses. Some experts suggest that working with the clients is better than dictating terms. Try to mutually agree on terms of payment. Sometimes, it may advantageous for the top executive to personally collect serious debts. After all, the same money pays all salaries.

Stability in business is also vital. Retaining good employees is often no less important than holding on to key customers. Of course, what's to stop the competition from luring your top employees? Building a strong bond with your staff can help with retention. Employees keenly involved with the company, who appreciate how they contribute to the company's success, are far less likely to be recruited elsewhere.

Finally, look for the best people to work for you. Don't just rely on resumes. Almost anybody can write a creative one. Use interviews to seek out true potential and look for potential personal chemistry.
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$170 Billion Charged to Visa and MasterCard

Once upon a time, there was the Chargex card. Some received it from their bank but most Canadians lived without it. Today, more than 40 years after Canada's first charge card, there are more than 74 million credit cards in circulation, roughly 3.1 cards for every Canadian over age 18. The last available statistics indicate that Canadians charge more than $170 billion to Visa and MasterCard.

Studies show that the average person spends 112 percent more on a credit card as opposed to cash payments. In real terms, this means that Canadians are living well beyond their means. Many are juggling several credit cards and paying minimum monthly payments as low as 2 per cent of the balance, rather than paying the entire balance. In fact, more than 50 per cent of credit card holders opt for not paying the balance. Putting this into perspective, if your balance was $5,000 at 18 per cent interest, and you opt to pay only the minimum monthly, it would take almost 30 years to pay the balance, assuming you did not add to it.

Part of the problem is that credit cards are a basic necessity of today's society. Some cards also provide benefits that can be quite worthwhile. The trick is to be in control.

There is no reason to carry a different credit card for each store and each bank. One all-purpose card should suffice for virtually every need. (It is wise, though, to have separate cards for personal and business expenses). Check the interest rates as they vary greatly from card to card. Avoid temptation! Use the card for what you need, not what you want! Using a credit card as opposed to not carrying cash makes sense. Using it instead of cash that you don't have can lead to problems.

If credit card debt starts taking over your existence, don't be afraid to seek help from a credit counselor before it's too late.


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The End of Low Interest Rates

The period of low interest rates is coming to an end. According to current forecasts, the rates will start rising midway through 2010. For many Canadians who went on holiday shopping sprees, stretching their credit limits to the max, the rise could spell sudden difficulty or disaster.

The Bank of Canada has warned that the biggest risk to the country's financial system is record household debt. Canadian households spent an average $71,360 last year, two per cent more than 2007. Approximately 20 per cent represented housing expenses.

As many Canadians wish to unload their mortgages as soon as possible, they are struggling to meet payments due to accelerated pay-downs on principal. Combining these high payments with other debts has put a stranglehold on many consumers.

It is crucial to take control of your debts before they control you. Experts suggest developing a plan of action to tackle your debts before problems arise.

It may be wise to suspend accelerated pay-downs on your mortgage. Use the extra cash from the lower mortgage payments to tackle the credit cards and other debts. Refrain from adding debts to your cards while you reduce the balances. Remember that higher unpaid balances carry higher rates of interest. It may also be advisable to take a consolidation loan at a lower rate of interest and pay off the cards. Also, try not to use more than one or two credit cards.

Sometimes, debts can get the best of us. Don't be afraid to seek help from credit counselors, if you feel that you are beginning to drown in debt. These professionals can help you before you panic and assist you in gaining control of your financial situation.
 
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Good Debt Versus Bad Debt

How many of us have been to our physician and received an explanation about good cholesterol and bad cholesterol? Much has been written about it, as well. But, how many have heard explanations about good debt versus bad debt? Probably very few, as financial education is sorely lacking in society.

Personal debt is on the rise, partly because obtaining credit today is relatively easy. If you breathe, you can probably obtain a credit card from your bank or a retail store. And, more often than not, the only one who benefits is the one who issues the card and charges interest rates that can exceed 20 percent.

Far too many consumers confuse credit cards and cash. If you are prepared to pay off your monthly balance and merely use the card for convenience, you're in the responsible minority. However, far too many people freely use their credit cards and neglect the fact that the bill eventually has to be paid. Paying only a minimum at the end of the month only digs a deeper hole. And, truthfully, most people don't keep track of how much they spend on their cards.

On the other hand, not all debt is bad. Taking a mortgage to purchase a home is a wise investment. As the house appreciates, the value will exceed what you paid on the loan. Another example of good debt is securing a loan to purchase high return stocks or bonds. When the return exceeds the interest paid, your debt has accrued value.

Experts suggest that your debt-to-income ratio should not exceed 20 per cent. Higher than that looks bad on credit reports and can lead to difficulties. Better to keep debt to a manageable level and avoid the temptations of living on credit. Even when times are good, don't forget to prepare for the eventual rainy day as well.

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Survey: National Salary Increases Less Than 3%

Ever the employee's question, the issue has achieved far more relevance in the current economic climate. No longer is the annual salary increase a matter of form. In fact, many employees were relieved at year's end to learn that they would still be employed for the coming year, let alone expect a raise from the boss.

The truth is that, owing to a negligible inflation rate, even the slightest salary increase will, in reality, contribute to a gain in living standards. Nonetheless, this is not to say that salaries in Canada will not rise this year. The question on many lips is how much?

According to surveys conducted recently across Canada, encompassing a broad spectrum of more than 700,000 employers, Canadians should not expect large increases this year. Estimates average between 2.3 to 2.8 per cent nationally. Although the national average was 2.2 per cent in 2009, caution in the business community is keeping the numbers down, at least for the foreseeable future.

Employees in Saskatchewan are projected to earn 4.1 per cent more this year, due to the province's energy boom. Ontario and British Columbia bring down the national average, as estimates are increases of 2.6 and 2.7 per cent respectively, due to low performance in manufacturing and forestry.

In actuality, many companies across the country have projected zero salary growth for 2010. While this is not set in stone, many employers are waiting to see how the economy reacts over the next few months before making new financial commitments.

Another factor to be considered is the number of employees pulling double workloads to compensate for reduced workforces. Easing these conditions could also be considered to be a benefit.

In this recession, every little bit will help.

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Corporate Financial Planning: Mutual Funds and Fees

How much do you really know about your financial planner? Here is an individual that you have entrusted with the care and well-being of your financial portfolio. Are you truly getting the best value for your hard-earned money?

Let's begin by examining the role of the financial planner. Do you actually need an expert to advise you where to best invest your money? The truth is that financial experts can predict the future as well as you. If you're like most Canadians, you invest primarily in mutual funds. However, nobody can accurately predict how a mutual fund will react. Perhaps a crystal ball will tell you about the future activity of a particular stock. True, the financial planners spend a good deal of time and energy studying trends, monitoring market activity, and keeping an eye on the financial world. But, predicting the future is not a human trait.

When you pay an advisor to direct you to the best mutual fund, you're actually paying twice. The average Canadian annually pays the mutual fund roughly $2,000 for every $100,000 invested. You don't notice the fee because it's deducted by the fund before their report to you of the fund's results. In real terms, this "fee" amounts to anywhere between a quarter to a half of the after inflation gains on your invested funds.

Returning to your planner, most planners are paid on a commission basis – the more they sell you, the more they earn. Thus, you're paying percentages to both the mutual fund and the person who directed you there. Aren't the majority of the gains supposed to stay in your pocket? One suggestion is to hire a planner on an hourly basis. This removes any conflict of interest. The planner will help you get the most for your money, especially if you have complicated tax issues to address.

It's your money! Be in control by hiring professionals who work for your best interest.

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Risk Management: The Financial Safety Margin

Investing is a part of our culture. Many of us invest a portion of our income for our needs, present and future. However, investing carries with it an element of risk. Therefore, it makes good sense to build a safety margin into your personal investment plans.

Playing the stock market is virtually a national pastime. However, as recent history has proven, the value of stocks can plummet, sometimes quite rapidly. Therefore, some investors will attempt to pay the lowest possible price for stocks. If the floor should fall out from under that stock, you stand a good chance of recouping most of your money.

Even if your cash flow is healthy at present, always be prepared for the inevitable. Many jobs today are not 100% secure. Take a couple of months of living expenses and tuck the money away in a savings account or money market.

The dream of many newlyweds is the purchase of their first home. Many, though, make the mistake of sinking all their available cash into that purchase and further committing both their salaries to make the monthly mortgage payment. If you can't afford the mortgage on one salary, think twice! If one job should disappear, you could face serious problems.

At the other end of the spectrum are those heading into their retirement years. Is your investment portfolio secure? Will you be able to rely on it? If you assume that the portfolio will generate a double-digit annual return, you may be surprised. Markets have proven to be rather volatile. It would be wiser to assume a much lower rate of return. Also, when you calculate withdrawals from your initial portfolio, experts advise withdrawing no more than an inflation-adjusted 4% each year. This amount will allow you to remain in a fairly stable condition, however the market moves.

Remember that investments mean risks and a safety margin is your best insurance policy.

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Paying Down Debt vs. Savings

The great Canadian conundrum – live for today or tomorrow? In an era when money is tight and many families have to make tough financial decisions, the question of priorities arises. How much should one save for the future? How should one juggle his current needs with future needs?

Certainly, young couples face this dilemma. By trying to squirrel away retirement money and manage a young household, many couples begin to choke. Experts advise that the best strategy is to erase debts before saving money. Start by paying down credit card bills. The result is a guaranteed after-tax return of 18%. No RRSP will offer that rate of return! Try, as well, to whittle down the mortgage. Once these debts are out of the way, you can re-direct the money into your RRSP.

In addition to the debt-first strategy, the next step, once you're ready to invest, is to prepare yourself for the inevitable. Since you can't predict the future, try to be in control of your options as best as possible.

Plan your investments with some foresight. Rather than look for the best deal today, try and decide what your future needs will be and work backwards. Invest in ways that will best fit your needs. Try to find the best mix of stocks and bonds for you and stick to that mix. Markets shift but your long term consistency should work to your benefit. Also, try and limit your risk. Some is necessary but everything in moderation. Consider a 60-40 mix of stocks and bonds. Once a year, take some money from the more profitable side and bolster the lagging side. This way, you will always buy low and sell high.

Remember the sage advice – be in control of your money; don't let your money control you!

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Three Cheers for Canadian Finances

Let's face it – Canada's reputation is not one of the glitzy stars of the world. It is rather conservative, moderate, and perhaps even a bit dull at times. But, those exact qualities allowed the nation to remain strong and secure during the recent recession. At the same time that the U.S. economy has been floundering with no end yet in sight, Canada weathered the storm that lasted just eight months.

Canada's well managed banking sector was a key factor in saving the day. The country's strict regulatory system, combined with a conservative banking culture and superior credit conditions, paved the way for stability. The recession saw the loss of more than 122 banks in the U.S. Not a single Canadian bank closed and none needed bailouts.

Certainly there has been Canadian unemployment. But, our workforce shrinkage of 2.5% was half of our American neighbours.

Let's look at the GDP. Canada's fell 5.4% but that's far less than other nations like Germany's 14.4% fall or Japan that plummeted by a whopping 15.2%.

Sub-prime mortgages dealt a death blow to U.S. banks, comprising almost 20% of the mortgage market. Canadian banks were a lot more cautious and only 7% of the market was comprised of sub-prime mortgages. Furthermore, banks in Canada rarely sold their mortgages and kept a tight reign, thus reducing the risks of default.

Conservative Canadians are more reserved? Quite possibly so, if one considers personal finances. Canadian household debt measures approximately 102% of income while the U.S. ratio is 114%. When Americans had to start repaying their debts, Canadians were able to take advantage of low borrowing rates and boost consumer spending.

Do Canadians have the last laugh? Not really. The recession has hurt everyone and is far from over around the world. But, whereas the great credit bubble burst in other countries, and many are still reeling from the effects of the recession, Canada has shone brightly as a model of fiscal prudence and responsible financial management.
 
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