The 45-Minute MBA

The 45-Minute MBA This eBook is free and does contain affiliate links.
Share it with the world under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License Copyright 2012 Scott Mackes Edited by Ray Elderd
Table of Contents
What Youll Learn in the Next 45 Minutes.....................................................................4 How to Make Money Without a Job ...............................................................................5 Purpose of an Income Statement...................................................................................9 How to Read a Balance Sheet ...................................................................................... 11 Advantages of a Cash-Flow Statement ........................................................................ 14 The $40 Self-Directed MBA Finance Course ............................................................... 17 Bond Basics .................................................................................................................. 21 How to Pick Winning Stocks........................................................................................24 The Secret Every Millionaire Knows ............................................................................27 How to Destroy the Competition (Without Competing) .............................................28 5 Ways to Make Loads of Sales (And Create Massive Opportunity) ...........................30 Business Law ................................................................................................................ 33 What Do Jesus, Mike Krzyzewski, and Jimmy Buffett Have in Common? .................36 The One Year Self-Directed MBA Program .................................................................39
What Youll Learn in the Next 45 Minutes

You can get help from teachers, but you are going to have to learn a lot by yourself, sitting alone in a room. Dr. Seuss Thank you for your interest in The 45-Minute MBA. This eBook contains a collection of articles that I wrote on my blog Margin of Excellence in pursuit of teaching you everything I learned in business school (in less than 45 minutes of reading). With the cost of formal education skyrocketing, I want to provide you with a self-directed alternative that will cost you less money and provide you better results. The eBook contains 13 articles on topics ranging from accounting to leadership. In each of the articles, I provide a unique perspective on the subject matter and show you how to apply the concepts to real life. In the last article, The One Year Self-Directed MBA Program, I leave you with a series of action steps you can take to acquire the important business skills you need to survive as a business leader and entrepreneur. This program will cost you much less time and money than a formal MBA, yet leave you with tangible assets and experience that you cant get in the classroom. I created this guide to serve as a roadmap for your business success. I spent a lot of time and money on my formal business education only to realize that my real learning, development, and growth occurred outside the classroom. I hope my ideas open your mind and help you realize that true business success is well within your reach. You dont need a burden of debt and a fancy title to get it. In the next 45 minutes, I hope Im able to make a difference in your life. Expect Excellence,
Scott Mackes Margin of Excellence www.marginofexcellence.com Easton, Massachusetts USA
How to Make Money Without a Job

How to Make Money Without a Job If this was an MBA course title, would you sign up? There are many reasons you might enroll in an MBA program. I just Googled why should I get an MBA and the common theme I found was that you want to get an MBA to Advance your career and make more money. Unfortunately, MBA programs dont offer a class on how to make money. Youll learn fundamentals like how to read financial statements, calculate return on investment, understand supply and demand, etc. But its up to you to apply those fundamentals in the real world to advance and make more money. Since most people attend business school to learn how to make money and because business schools fall short on teaching this, I figured it would make sense to start the series by answering the question that most of you want to know: How do I make money? Two Necessary Conditions for Making Money Two things are necessary in order for you to make money. The first isleverage. Forms of leverage include financial loans, employees, and the internet. These are resources that help you scale. You cant do it all yourself. For example, youre not reading this article because I printed it out and hand-delivered it to your house, are you? The internet enables me to reach thousands of people at once by publishing an article on my website. Thats how leverage works. Your second necessity is to operate in anun-capped earning environment. At work, you may have leverage in the form of employees that report to you and help you achieve goals you set. However, your earning potential is limited by your salary (which is an expense). The owners make more when you make less. You need tooperatein an environment where there arentfinancial limits. Now that you know the 2 conditions necessary to make more money, let me discuss 3 money-making vehicles. 1.Start a Business. There are a million types of businesses you can start. Im going to focus on a few that Im familiar with and show you how to get started. If you own a business, you build equity every day in an asset you own. It allows you to leverage the work of others (your employees) to build your brand and your customer base. You can also use financial leverage to fund your business and the internet to create your website and distribute your message. The best part is thatthe profit is yours. How do I start a business? Some companies choose to grow by offering you their business system and their brand in return for a royalty fee.This is calleda franchise. A franchise is a great investment vehicle because the concept has already been tested and proven in the marketplace. You dont have to start from scratch. Banks will be more willing to lend you money since the business has already been successful in other markets.
Franchise investments range anywhere from $50,000 to $5,000,000. There are many different types of franchises ranging from hair salons to restaurants and beyond. If you can think of it, somebody has franchised it. If youre interested in buying a franchise, I highly recommend you check outhttp://www.entrepreneur.com/franchises/ Entrepreneur.com provides a wealth of information on many available franchise opportunities. What if I dont have the money to invest in a franchise? OK so what if you dont have the money to invest in a franchise business? What if you dont want to take the financial risk? Let me give youa risk-free idea that you can pursueright nowso that you can start your own business. If you look aroundmy website you can see that Imcreating a communityby writing articles about what I do every day leadership. Im an employee of a company (an expense) but Im building equity by converting the knowledge and experience I have into articles that are readable by thousands of people. The articles are here to stay and Im attracting new visitors, followers, and subscribers each day. I even converted my articles into this eBook youre reading today. You can do the exact same thing right now with yourunique talent. You just have toidentify your interest,create content, and thendistribute your contentto the world from your website. You can do this for a minimal investment and you dont have to know a lot about technology to get started. You can buy your domain and have your site hosted for less than $10/month. I useBluehostand Im extremely happy with their service. After you create your domain you can downloadWordPressto build your site. You literally dont have to know anything technical to get started. *For more information about how to build a website check out my Blog Building Kit. How do you turn your website into a business? You can make money from your website by advertising, affiliate marketing, and selling your products and services. The opportunities will present themselves once you establish yourself as an expert in your field and build your online community. Even if you dont make money directly from your site,youll opendoorsto opportunities that willhelp you advance your career. *The $100 Startup by Chris Guillebeau is an excellent book about creating a business from a modest investment ($100 or less in most cases). *Pat FlynnsSmart Passive Income blog is a great resource for learning how to build a profitable website. 2.Invest in Real Estate. Real Estate has made more people millionaires than any other type of investment. As my favorite real estate guru William Nickerson said, the road to riches is paved with borrowed money. People will always need homes to live in and companies will always need offices and storefronts for their businesses. Banks will eagerly lend you money to invest in real estate because its an asset that stands the test of time.
6 | The 45 - Minute MBA
Think about what youre able to do when you purchase real estate. You literally borrow money from other peoples savings accounts so that you canbuy a property for yourself. How about that for leverage? The bank will lend you money for real estate any day of the week as long as youre financially qualified and have 20% to invest in the property. How do you make money from real estate? You buy it. You rent it. You fix it up. You sell it. Repeat. As a real estate investor, you also have Uncle Sam on your side. He wantsyou to invest inreal estate and will let you defer taxes on your capital gains as long as you follow the guidelines. This is called a1031 exchange. For more information on real estate investing I highly recommend: How I turned $1000 into Five Million in Real Estate in My Spare Time by William Nickerson Iveread at least a dozen books on real estate investing and this by far is the most informative. In the book, the author walks you step-by-step through the real estate investing process and teaches you how to build a million-dollar real estate enterprise.He offers nogimmicks, no nothing down strategies,no get-rich quick schemes - just a proven method that stands the test of time.Read the reviews on Amazon, they speak for themselves. 3.Invest in Stocks. Every day, people buy and sell shares of companieson the stock exchange. Some days the deals are great and some days theyre not. Every day youhave the opportunity tobecome a shareholder of a company. When youbuy a stock you become a partial owner of that company. As the companys earnings grow, the stock price follows. You dont have to create products, attend meetings, or even report to work. You just sit back and let the hard work of others pay you dividends. Not a bad deal at all. The downside is that it takes a long time to build wealth in stocks because youre missing out on one of the important necessities of making money -leverage. A bank will not lend you money to purchase stocks. You can still make money from stocks; it just takes longer because you cannot leverage your capital. Stocks are a great place to park the money youmake from your business and your real estate. Stock market investing is a subject Im passionate about. Ive been managing my money for the last 10 years using strategies I learned in these books: The Intelligent Investor If youown one book on stock market investing, it should be this one.This was originally writtenin 1949 by Benjamin Graham, who was Warren Buffetts teacher and mentor. Security Analysis This was also written by Ben Graham and provides amore detailed analysis on stock selection. It reads more like an encyclopedia but its a good book to read if youre serious about investing. The Little Book that Beats the Market In this book,Joel Greenblatt provides you asystematic way to selectstocks. Ive followed this strategy for the past6 years. You Can Be a Stock Market Genius- Joel Greenblatt discusses how to make money in stocks by investing in special situations mergers, spin-offs, bankruptcies, etc which can be aprofitable niche.
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One Up On Wall Street This is one of the first books I read about stock market investing. It was written by Peter Lynch whos one of the greatest mutual fund managers of all-time. Other great resources areWarren Buffetts annual letters to shareholdersandJeremy Granthams quarterly letters(you must sign up for a free subscription). I readthese letters religiously astheyre released.These investors offergreat insight as to what isgoing on in theeconomy, they shoot straight, and theyrenot in it to sell books. It has taken me many years, many mistakes, and a lot of reading toprovide you with the advice and resources listed in this article. Its my greatest hope youll learn something that will make a positive difference in your life. Let me end by saying theres no easy way to make money. There areno shortcuts. Like anything, it takes hard work, persistence, and a good strategy to become a skilled money-maker.
Purpose of an Income Statement

In the next 3 articles, Ill teach you how to read financial statements. As a leader, its important for you to have astrong understanding of how your business is performing financially. I have the opportunityto see how a company performs from two perspectives from both the inside and the outside. As an investor, Im on the outside looking in. Isee if the company is financially sound, I learn about the business, I punch some numbers into my calculator and then I make an investment decision. As a business manager, Im involved in the daily operations of my company. I feel the pain when we dont collect our receivables, when our costs go up, and when our competition slashes prices. Those things force me to make decisions that affect the financial performance of my company. As a manager, Im in the fight rather than watching the fight like an investor.
The Income Statement

The first financial statement were going to look at is the income statement. The income statement is a report that allows you to see the profitability of your company. Listed below is an income statement for Apple, Inc (AAPL).
(Yahoo Financeis an excellent resource to get afinancial overview ofa company. If yourelooking for more detailed information, visitSEC.govto look up a companysquarterly and annual reports)
Definitions for income statement terms :

Gross Sales: The total amount of sales a company had during the specified timeframe, aka the topline(the term sales is used for products and revenue is used for services).
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Apple sold over $108 billion worth of products in 2011. As youre probably aware, they have multiple product lines that they sell worldwide. What do you think their best performing product is? Cost of Sales: Your inventory cost of the items that you sell, aka Cost of Goods Sold (COGS). This is the cost of the materials and direct labor required to produce a product. This doesnt include any selling or distribution expenses. Gross Margin: Lets you know if youre selling your products for a profit. Gross Margin = Gross Sales COGS. Operating Expenses: The cost to run the normal business operations of your company. These are all theother expenses that your business incurs outside of any costs related to physically building a product. These costs include R&D and SGA. Operating Income: Your profitability before you deduct any finance or tax-related expenses. This is how you gauge the health of your core business. Operating Income = Gross Margin Operating Expenses. Net Income: What your company earns after all expenses.This isthe bottom line. Take Charge of Your Money Itsimportant for you to spend some time with the financial statements of your company and ofthose companies you invest in. Have you ever bought a stock without looking at the companysincome statement?I have. Sometimes we put too much faith in the recommendations of our friends and advisors.Its your money; take charge of it.Dont be afraid to dig in and get your hands dirty. Thats how youmake and protectyour money. How many managers out there spend their day running around in circles and not focusing on their companys profit?
My Success Story
Ive told this story several times already on my blog but Im going to tell it again, because its important. Earlier this year I was struggling to get results at my company. I was working hard but I was spinning my tires.I decided to dig deeper into why I wasnt achieving results, which is a large part of why I created this website. After studying the subject of time-management, I decided to change the way I spent my day. I eliminateddistractions anddedicated a few hours each month to focus on my companys financial statements. What happened? I came up with two ideas that significantlyincreased our net-income. When its all said and done, my ideas will increase our profitability by hundreds of thousands of dollars. Thats the direct result of understanding how to read an income statement and how to manage my time effectively. I guarantee you thatthe same types of opportunities existat your company. Its up to you, as the decision maker, to focus whats important and to deliver the results to your company.
How to Read a Balance Sheet

In the previous article we looked at the income statement of Apple, Inc (AAPL). Now were going to look at their balance sheet. The balance sheet displays a companys financial position at a given point in time. It shows the companys assets, liabilities, and owners equity. Assets are the economic resources of a firm such as cash, inventory, and equipment. Liabilities are the firms debts. Equity is a claim by the owners on the assets of a firm. The relationship between assets, liabilities, and equity is: Assets = Liabilities + Owners Equity Heres Applesbalance sheet from September, 2011 (in thousands):
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Definitions of balance sheet terms : Since its extremely time-consuming for you to look up each of these definitions individually, I organized them onone page for quick and easy future reference. I streamlined the process so you can focus on what matters most making decisions to capitalize on the information. Assets: The economic resources of a firm. Assets are divided into two categories current and noncurrent. Current Assets: All assets expected to convert to cash within 1 year.
Cash: Physical cash on hand. Short Term Investments: Investments that expire within 1 year. Net Receivables: The amount customers owe you. Inventory: Raw materials, work in progress, and completed saleable goods.
Non-Current Assets: Assets not expected to convert to cash within 1 year.

Long Term Investments: Investments your company plans to keep for more than 1 year such as
stocks, bonds, real estate, and cash set aside for specific projects.
Property Plant and Equipment: Assets that cannot be liquidated easily such as buildings,
furniture, office equipment, vehicles, and machinery.

Goodwill: The difference between the price paid for a company minus its net assets. Typically
comes into play after an acquisition.

Intangible Assets: Assets that cannot be seen, touched, or physically measured. Includes
copyrights, patents, and trademarks. Liabilities:The claims by creditors on the assets of the firm. Current Liabilities: Debts or obligations due within 1 year.
Accounts Payable: How much your company owes your suppliers. Short-Term Debt: Loans due within 1 year.
Non-Current Liabilities: Debts or obligations not due within the present year.
Long Term Debt: Loans and financial obligations lasting over 1 year. Deferred Long Term Liability Charges: Tax liabilities to be paid after this year. Can also include
forward contract obligations like swaps and derivatives. Its best to look at the footnotes in the financial report to better understand their composition. Stock Holders Equity: The owners claim on the assets of the firm. For a publicly traded company like Apple, its the amount of cash received in return for shares of the company. It also includes retained
earnings (defined below) a company is able to accumulate over time.

Preferred Stock: A class of stock having a higher claim than common stock on the firms assets in
the event of liquidation. Preferred stock pays a dividend, however the price doesnt appreciate as fast as common stock. Preferred shareholders do not have voting rights.
Common Stock: Common stock has the lowest priority level claim on the assets of a firm. The
common stock price typically appreciates faster than preferred stocks and bonds. You probably own common stock in your investment portfolio.
Retained Earnings: Earnings that are reinvested back into the business. Treasury Stock: Shares of stock that a company keeps in its own treasury. Often from a buyback
or never issued to the public.

Capital Surplus: Equity that cannot be categorized as stock or retained earnings. Typically stock
that was issued at a premium over par value. There are a lot of pieces to the balance sheet and you may bea little overwhelmed as you read through each definition. Dont worry; were only going to focus on a few of these items when we analyze a business for investment.With that said, itis important you understanda businesss financial organization.
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Advantages of a Cash-Flow Statement

So far weve looked at the income statement and balance sheet for Apple, Inc. The last financial statement Im going to discuss is the cash flow statement. Cash flow is the change in a companys cash balance during a particular time period. Examining the cash flow statement is the most important way to gauge the health of a business. The cash flow statement shows you where the cash is coming from and where its going. The cash flow statement breaks down your cash transactions into three separate categories: Operating, Investing, and Financing Activities. Heres Apples Cash Flow Statement from Sept, 24th2011 (amounts in thousands):
Apples cash flow statement was compiled using the indirect method. With the indirect method, you start with net income, make adjustments for non-cash transactions (depreciation), and then make adjustments for all cash transactions. *Take a moment to compare Apples net income (at the top) with free cash flow (at the bottom). These are two significantlydifferent numbers. Despite having earned nearly $26B in 2011, their cash balance
dropped almost $1.5B from the previous year. As an investor, this would pique my interest and prompt me to take a closer look.
Cash Flow From Operating Activities

The best way to explain cash flow from operating activities is to show you how its calculated: 1. Start with net income 2. Add depreciation 3. Add deferred income (the cash received up front for a sale that hasnt billed yet) 4. Subtract the increase in accounts receivables and inventory (if receivables and inventory go up, cash goes down and vice versa) 5. Add the increase in accounts payable (if payables go up, so does cash balance) This calculation will provide you with the cash flow from operating activities.
Cash Flow From Investing Activities

The capital expenditures and investments that Apple made are accountedfor under cash flow from investing activities. Capital expenditures are payments for property, plant, and equipment. Investments include the purchase and sale of marketable securities. *After closer examination, it appearsthat Apple has negative cash flow this period because they invested a significant amount of cash in marketable securities. According to their annual report onSEC. gov, they purchased $102Bof marketable securities and received $70Bin proceeds from sales, resulting in a net difference of $32B in negative cash flow for activities related to investing. This provides me with some comfort as an investor. Id much rather this be the reason for negative cash flow vs. not collecting receivables or selling inventory.
Cash Flow From Financing Activities

Financing activities include the payment ofdividends, sale or purchase of company stock, and borrowing activity. Apple issued $831M shares of its own stock and paid a $520M finance charge in 2011. They dont pay a dividend to shareholders. As you can see from above, Apple finished the year with negative cash flow of $1.446B. According to the balance sheet, their cash balance dropped from $11.261B in 2010 to $9.815B in 2011. After taking a closer look, we realize Apple invested a significant amount of cash in marketable securities which resulted in negative cash flow for the year. Despite having a negative cash flow, Apple still finished the year with a nearly $10B cash balance. *If youd like to view the actualfinancial statements of a publiclytraded company like Apple check outSEC.gov. Just type in the company name or ticker symbol and click on the report youd like to view (the annual report is filed as 10-K).
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Learning to read financial statements was one of the most important subjects in my MBA program. Hopefully, in the 9 minutes or so that it took you to read my 3 articles on financial statements, I was able toteach you how to do this.
Quick Story
Before I sign off, Id like to leave you with a quick story. About 10 years ago, before my formal business education, I bought my first stock Sirius Satellite Radio (SIRI). This was prior tothe merger with XM Satellite Radio. A friend of mine recommended that I check it out, so I did. My research involved reading a few paragraphs about the company and thinking it over for about 30 minutes before I made the purchase. I bought 2000 shares. After all, this stock was going to make me rich. I held the stock for a few years until I attended my first business school class on how to read financial statements. I distinctly remember going home one night after class and looking up the financial statements for Sirius Satellite Radio for the first time. My heart sunk as I scrolled through their financial information. After reviewing the statements, I realized that I invested most of my life savings in a company that had never made a profit! It was a horrible investment. I immediately signed on to my online brokerage account and sold the stock. Icouldntwait for the market to open the next day so that I could find some poor soulto buy my shares. Thankfully, I liquidated my position and walked away without losing my shirt. It was a close one. The reason why I tell this story is because you may bein a similar position as I was. You may rely on your friends and advisors for financial advice. Do yourself a favor: after you read this article, take a look at the stocks you own. What are the names of the companies? Do they have a history of positive earnings and cash flow? Do they have an excessive amount of debt? If you see any red flags, I encourage you to pick up the phone and contact your trusted friends and advisors and ask them these same questions. Chances are they wont have the answers.
The $40 Self-Directed MBA Finance Course

Today Im offering you an exclusive opportunity: Ill teach you everything I learned in my $2000 semesterlong MBA Finance class for just $40 and a few minutes of your time. There are 2 parts of Finance: calculations and analysis. In this article Im going to focus on calculations.Ill discuss analysis stuff in my next article. Before I teach you about financial calculations, Im going to tell you about the most important business tool you need to have in your arsenal.
The Financial Calculator

The financial calculator is critical to your success in applying MBA knowledge. This was the first thing I bought on the way to business school. There are all sorts of makes and models, but they all do the same thing. A decent calculator will cost about $40. I was able to download an app for my iPhone thats a mirror image of the financial calculator I bought in the store,theHP 10BII, from iTunes for $5.99. Its so convenient I rarely use anything else! There are also many free online resources that can help you make financial calculations. Most of them are designedto provide a specific output such as return on investment, mortgage payment, or car loan payment.Bankrate.comanddinkytown.netare excellent resources for these types of calculators.
The Most Important Financial Calculation

99% of the time youll use the financial calculator to calculate thetime value of money. Thisis the most important and most practical financial calculation. You can calculate everything from mortgage payments if youre buying a home to the future value of your retirement account. I use this calculation almost daily to make financial decisions. Now Im going to teach you how to calculate the time value of money using a standard financial calculator. Please referencethe picture below if you dont have a financial calculator. This is a picture of the keypad on the HP 10BIIcalculator iPhone app.
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There are 5 variables associated with the time value of money calculation and theyre listed on the top row of the calculator in the picture above. They are: N Number of time periods I Interest rate for time period PV Present value of your account PMT Payment made each time period FV Future value of your account The easiest way to explain this calculation is to give you a few examples
Time Value of Money Examples

First Ill show you how to calculate the future value of your retirement account. Lets say that the present value of your retirement account is $10,000 and you plan to invest $1000 per year until you retire in 30 years. You expect an annual return of 8%. How much will you have when you retire? To find the future value (FV) of your retirement account, you enter the following information into the calculator: N= 30 I=8 PV = 10,000
PMT = 1000 FV = ? After entering the values into the calculator, you can see that the future value (FV) of your retirement account will be $213,909.78 after30 years. Now lets say that you want to retire in 30 years with an account balance of $500,000. What would you need to invest each year to reach your goal? N= 30 I=8 PV = 10,000 PMT = ? FV = -500,000 (you must enter this as a negative amount) The answer is $3525.44. See how it works?
More Time Value of Money Problems and Solutions

Heres another example:lets say you want to buy a new home and youre trying to figure out how much monthly payment you can afford. You like a house that requires you to borrow $300,000 for 30 years at 6% interest. How much is your monthly payment? In this problem, since we pay the mortgage monthly, were going to convert all time periods to months. N = 360 (30 x 12) I = .5 (6/12) PV = 300,000 PMT = ? FV = 0 After entering this information into the calculator we find out that our monthly payment will be $1798.65. What if your budget is $2500/ month, how much can you afford? N = 360 I = .5 PV = ? PMT = -2500 (you must enter asa negative amount)
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FV = 0 Youll be able to borrow $416,979 to say within your budget. I prefer using a physical financial calculator vs. a specialized online calculator because I can use that single equation for any type of time value of money calculation. I can calculate everything from auto loan payments to investment return by using the 5 key variables on the top row of the keypad. I can also create what if scenarios to help me make better financial decisions.
OKready to learn about that $40 course? Here you go!

Head over to Staples, buy yourself a financial calculator ($40), and read the instruction book (30 min). I guarantee youll learn just as much as I did in the 50+ hours I spent in my $2000 professional MBA course.
Bond Basics
In my previousarticle I discussedthe importance ofhaving a financial calculator. I taught you how to compute thetime value of moneyand walked you through a few examples. Today Ill teach you about bonds and how to analyze them using your financial calculator.
3 Ways Organizations Raise Money

Before we get into the technical details about bonds, lets discuss what they are. When organizations (like companies and governments) need to raise money, they have a few options. The first is to get traditional financing from a bank by taking out a loan like you or I would to buy a car or a house. Organizations can also raise money in the public marketplace. They do this by issuing bonds and/or stock to public investors in return for cash. Stocks are an equity security (a piece of the company) and give the investors ownership and voting rights. Bonds are a debt security enabling investors to become a creditor to the organization (the company owes the investor that debt plus interest).
4 Types of Bonds
The 4 types of bonds are: Treasury, Corporate, Municipal, and Foreign. Although some of these bonds have common characteristics, the differences in the contractual features and underlying strength of the organizations backing them result in major differences in levels of risk.
Corporate Bond Ratings

Corporate bonds are independently rated toshowthe level of risk to the investor. A lower bond rating means a higher risk anda higher interest rate for the investor. The 3 major independent rating organizations are Moodys, Standard & Poors (S&P), and Fitch. The table below shows the different bond ratings.
To better understand bonds, its important that you become familiar with the following terms: Par Value The amount of money the investor will get back when the bond matures. Corporate bonds typically have a par value of $1000. Coupon Interest Rate The bonds interest rate when issued. Maturity Date The date the bond matures and the holders principal is repaid. Yield to Maturity The rate of return an investor will receive from thepurchasedate to the maturity date.
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We can calculate these values with a financial calculator using the same variables we used to calculate the time value of money: N, I, PV,PMT, and FV. Here is a picture of theHP 10BII financial calculator app I have on my iPhone. The top row contains the functions you will need to calculate bond values.
N = Number of payment periods until the bond reaches its maturity date I = The bonds Interest rate PV = The bonds Current (Present) Value PMT= The Payment issued to thebondholderbased on the coupon interest rate (coupon rate * par value) FV = Par (Future) value of the bond
Lets do a calculation.
On January 1, 2012, Caterpillar, Inc. issued a series of bonds at par ($1000) that pay 10% interest and mature in 30 years. What will the price of the bonds be in 5 years assuming the interest rate falls to 8%? Heres the information you enter into your financial calculator to get the answer: N= 25 (30-5) years I = 8% (Current interest rate) PV = ? (Present Value in 5 years) PMT= $100 ($1000 Par Value * 10% interest) FV = $1000 (Par Value) After entering the information into your financial calculator, you find that the current price of the bonds (on January 1, 2017) is $1213.50.
Lets try another one.

Its 2020 and Caterpillars bonds have 12 years remaining until maturity. The bonds have a $1000 Par Value and a coupon interest rate of 10% paid annually. If the bonds sell at $850, what is their current yield to maturity? N = 12 (years remaining) I=? PV = -$850 (current price, expressed negative because the cash is an investors outflow) PMT= $100 ($1000 Par Value * 10%) FV = $1000 (Par Value) After entering the numbers in our financial calculator, we find that the current yield to maturity is 12.48%.
Why would you buy a bond?

Compared to stocks, bonds offer less risk because they have a higher priority claim on a companys assets. If a companyhas to liquidate its assets, the bondholders will get paid before the stockholders. Bonds also offer a steady payout (interest) to investors.
How do you buy a bond?

The best way to buy a bond is through a brokerage company. I have an online brokerage account withScottradewhere I can buy and sell bonds. Scottradeprovides useful information that helps me make better investment decisions. Here is a Moodys bond report for Caterpillarthat I downloaded from theScottradewebsite. Treasury Directis a good resource if you want to buy treasury bonds (bonds invested in US government debt). The website allows you to buy bonds directly from the government (no middle man!). Treasury bonds are a good place to park your money if you wantlittle-to-no risk. Your return will belowerthan if you invest in corporate bonds or stocks, but your moneywill be guaranteedby the US government (which carries lower risk). If youre looking fora higher rate of return then you might invest in corporate bonds and stocks. These are good investments forpeoplewith a longer investing horizon that allows them to ride out the ups and downs of the market.
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How to Pick Winning Stocks

Theres a lot of information out there about investing in the stock market. There are books, news articles, websites, even Jim Cramer screaming at you through the television camerawhom do you trust?
My advice is to trust yourself.

In this article, I will teach you how to pick winning stocks and offer you a few simple straightforward tips that will help you become a better investor.
What is a stock?
A stock is an equity security that gives investors fractional ownership in a company. Since 1871, the stock market has returned an average of 8.88% annually. If you invested $1 in the stock market in 1871, that dollar would be worth $161,302 today. Despite solid average returns over extended periods of time, stocks are extremely volatile. In the past 17 years, the Dow Jones Industrial Average surged from4,000in 1995 to11,723in 2000. It then dropped to7,286in early 2002 (after the terrorist attacks of 9/11) and rose to14,164in 2007. In early 2009, the Dow fell to6,547after the mortgage crisis. Today the Dow is at12,862 (February 2012). What a roller coaster ride! The good news is that these stock market fluctuations offer great opportunities to capitalize on the temporary mis-pricingsof companies. With the ups and downs in the market, there is no way companies are always priced efficiently. But, in order tocapitalize on these opportunities, you must first identify the criteria for your investment decisions.
Choosing individual stocks without any idea of what youre looking for is like running through a dynamite factory with a lit match. You may live, but youre still an idiot. Joel Greenblatt
Im here tohelpyou turn that match into cash. First Id like to share with you my 3 personal investing guidelines. #1 Invest with a Margin of Safety In investing, I value aMargin of Safetyabove all else. This phrase was coinedby Ben Graham, Warren Buffetts mentor. It means leaving enough room for error to minimize the chances of loss. Always look at the downside and protect yourself from it. #2 Only invest money you wont need for the next 5 years
A volatile stock market meansthere is a good chance you couldlose a significant amount of money in the short-term. Give yourself enough breathing room to stay strong during the down times and recoup any losses you might incur. The best investors actually look forward to down markets the same way you might look forward to a sale at your favorite department store. This is a great time to play offense and buy your favorite companies on sale while everyone else is running for cover.
#3 Diversify in Numbers
There are 2 types of risks when investing in stocks: Market risk and non-market risk. Market risk is the risk associated with market volatility (ups and downs). The only way to avoid this is to keep your money in your pocket when the odds arent in your favor. Non-market risk iscompany-specific and is prevalent when a companys products dont sell, workers strike, or costs increase. As an investor, its impossible to know everything about a company. To protect yourself from these risks you need todiversify in numbers. In his bookYou Can Be a Stock Market Genius, Joel Greenblatt says owning 2 different stocks eliminates 46% of your non-market risk. Owning 4 stocks eliminates 72% of the risk. Owning 8 stocks eliminates 81%; 16 stocks eliminate93%; 32 stocks eliminate96%; 500 stocks eliminate99%. The more stocks you own, the lesseffectthe performance ofany individual company will have on your overall return.
How many stocks should you own?

My rule of thumb is to own between 6-8 stocks at a time. There isnt much to gain by owning more. Instead, your portfolio will likely become watered down if you own too many stocks. Why incur the trading costs of owning 50+ stocks when you can own anExchange Traded Fund(ETF) and get a similar return? Now that you understand the basics, here are a fewsteps to help you get started.
Step #1 Determine the Price

As easy as it sounds, youd be surprised how many people stumble on this. Most people think about stocks in terms of share price: Apple is trading at $460/share; Ford is trading at $12.80/share. Share price doesnt meanmuch unless you know how many sharesa company has outstanding. When you think about Apple or Ford, you should ask:What is the price (market capitalization) of the entire company? A companys market capitalizationis its share price times the number of outstanding shares. The current price of Apple is $428B, the Ford corporation is selling for $48.6B. This is where you begin.
Step #2 Analyze the Investment

Once you know the price of a company, there are all sorts of metrics that you can evaluateto decideif a
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company is a suitable investment. These metrics are derived by comparing the price of the company to the data obtained in the companys financial statements. Remember these earlier articles? Purpose of an Income Statement How to Read a Balance Sheet Advantages of a Cash Flow Statement Ah, there is a method to my madness! Dont worry; you dont have to do all the calculations yourself. There are a ton of online resources that publish these financial calculations for you.Yahoo! Financeis a good place to find this information.
Here are the top 5 things I evaluate before I buy a stock:

Price/Earnings (P/E) This is Market Capitalization divided by Net Income. The average P/E ratio in the stock universe is about 15. I shoot for a number below that. Price/Average Earnings for the past 7 years To better understand a companys earning ability, I like to look at its record for the past 7 years. I take the companys current market capitalization and divide it by its average earnings for the past 7 years. You can look up historical earnings onYahoo! Financeand in past annual reports filed atSEC.gov. I prefer this number to be less than 25. Return on Equity Calculated by dividing Net Income by Shareholder Equity (which is Assets Liabilities). This will tell you how much profit a company generates compared tothe shareholders investment. This indicates how good a company is. I prefer anRoEthat is at least +30%. Debt vs. Cash I prefer a company have more cash than debt. Both of these items are easily found on the Balance Sheet. Free Cash Flow I requirethis number be positive. You will find a companys Free Cash Flowin the Cash Flow Statement. Using this information I determine pretty quickly if I think a company is cheap, good,stable, and suitable for investment. If a company doesnt meet these criteria, I move on. Theres no need to make this complicated.You dont need a super high IQ or any crazy charts to pick winning stocks. You just need to define good metrics and be consistent. If you invest with a margin of safety in 6-8 stocks for a minimum of 5 years, chances are youll outperform most professional money managers. Trust yourself; nobody cares more about your money than you.
What if you have no interest in picking stocks?

If you have absolutely no interest in picking stocks you can buy an Exchange Traded Fund (ETF) that tracks the S&P 500 or most any other index. This allows you to take advantage of the longtermperformance of the stock market without having to do a lot of work and calculations. ETFs are not actively managed like a mutual fund which means you pay minimal fees.SPYis an example of an ETF that tracks the S&P500 index.
The Secret Every Millionaire Knows

It amazes me how much we value our money. We argue about it, fight for it, heck, wars are even started over it. We hoard and protect the little money we have because we dont understand how to create it. In this article I will break down the money creation process and show you how to use the process to your advantage. This is an Economics lesson you dont want to miss.
The Goldsmiths.
Early traders used gold to pay for goods and services. After years of lugging it around and weighing it before each transaction they realized this system was very inconvenient. So, they smartened up and in the 16thCentury began depositing their gold with goldsmiths who stored their gold in a vault for a fee. In return, the goldsmiths would issue the trader a paper receipt showing the amount of gold on deposit. The traders used these receipts as credit when conducting transactions with other traders in the marketplace. Hence, paper currencywas born. Initially, the goldsmiths only issued paper receipts equal to the amount of gold physically deposited in the vault. One day an observant goldsmith realized that the owners rarely redeemed their receipt. In fact, the amount of gold deposited far outweighed the amount of gold withdrawn. Then they changed the economic system forever! The goldsmiths got clever and started issuing paper receipts in excess of the amount of gold physically in their vaults. The goldsmiths would put these receipts (which were redeemable for gold) into circulation by making interest bearing loans to the traders. The borrowers were willing to accept the loans because the receipts were a credible form of payment in the marketplace. The goldsmiths found a way to create money. Now fast forward 500 years The only difference between the goldsmiths of yesterday and the banks of today is the actual currency. Today, our money is not backed by gold, but rather by our faith in the monetary system we have created. Banks lend money in a fashion similar to the goldsmiths, by keeping on reserve only a percentage of the money they lend. Thissounds a bit scarybut think of the opportunity? If banks can create money, why not take advantage of it? Every day banks create money and lend it to people with ideas. These people present their ideas to the banks along with a plan for repayment.If the bank approves,the personsigns a promissory note (a glorified IOU) in return for the money (plus interest). Thats it. All you need is an idea and a plan for repayment and the bank will create the money for you. But what if your idea doesnt require a significant amount of capital? Or what if you dont like the idea of leverage? Thats fine too. You can skip the bank and take your idea straight to the marketplace. My point here is thatmoney need not be a limited resource. Its printed in machines and distributed to the people with the best ideas. What is your idea?
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How to Destroy the Competition (Without Competing)

Lets face it; competing is tiresome. It wears on you. It always results in a win-lose situation. But you have to compete to survive right? The marketplace depends on competition; competition provides consumers with choices. Without competition our economic system would be inefficient.
But as a leader, should you focus on competing?

As human beings, its our natural tendency to worry about what everyone else is doing. Case in point: how many times have you checked your Facebook page today? At work, we worry about our competitors. What are they doing? What is their pricing? Have they launched any new products? Theres a saying in golf: Play the course, not your opponent. While you certainly want to beaware of how your opponent is playing, its important to avoid the trap of being swept upby the emotion ofthe match. The same holds true in business. The key is to concentrate onyour situationandyour competitive advantagetoachieveyour desired results.When you focus internally, you come up with new and different ideas. You create. Leaders focus on creating.Leaders create new products, services, production methods, and marketing strategies that change the way we dobusiness. Leaders change the way we think. And along the way, they destroy the competition. *Creative Destruction: The creation ofnew products and production methods that completely destroy the market positions of firms that are wedded to existing products and older ways of doing business. Creating is fun, exhilarating, and provides you with a sense of accomplishment. Creative actions lead to breakthroughs that lead to windfalls of opportunity.
How do you create?

You might be thinking you dont have a creative bone in your body. Maybe your work situation hasnt afforded you the opportunity to think outside the box. Maybe you came up with a new idea and someone shot it down, along with your confidence. The good news is: thats not true. We were all born to create. The better news is: when you create, awesome (I mean AWESOME!) things happen. To help jump-start your creative mind, I came up with 5 action steps you can take right now to help unleash your creativity.
5 Action Steps to Unleash Your Creativity

1. Simplify. Reduce your objectiveto one sentence. For example: I want to make more sales, I want to write a book, or I want to start a business. When your objectiveis clear, it is easier to create ways to achieve it.
2. Write. Every time you write (or type) an original thought you are creating. Writing enables you to clarify your thoughts and express yourself. Oftentimes while writing, I find holes in my reasoning that cause me to research my topic more thoroughly. As I research my topic I discover new ways of thinking. 3. Focus. In order to create, you must eliminatethe distractions around you and focus. Turn off your music, cell phone, and email alerts and focus on what you want to achieve. 4. Think. I recommend dedicating 30 minutes a day to think. Think about where youre going and what you want to accomplish. Think about your craft. You will create your best ideas during this time. 5. Give yourself a deadline. Theres nothing like inducing a bit of fear in yourself to spark creativity. Every Friday, before I leave for work, I have to publish an article on my blog. Period. Friday is my deadline. Without this deadline, my work would linger on and go unfinished. This deadline forces me to find the time to create the content I deliver to you. The deadline induces creativity. Remember that an idea without action is just an idea. Start with Step #1 and write down one goal you want to achieveand spend a few quiet minutes thinking about it. Thats an action step you can take right now to start down the path of creativity. When you create, people will follow you (including your competitors). You will become the leader that everyone looks up to and will never be short of opportunity again.
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5 Ways to Make Loads of Sales (And Create Massive Opportunity)

Selling is one of the most important skills a business leader must master. Selling can also be extremely difficult. Lets face it:rejection sucks. To become an effective salesperson, you have to overcome the fear of rejection. You also have to know how to conduct a sales call. First you prepare. Then you meet with the prospect and build rapport, present your product or service, handle objections, and finally ask for the business. Its not easy. It takes a lot of time and effort to make an effective sales call. It also takes a special skill-set. But Im not a salesperson, why should I care about selling? Maybe you dont have a product or a service to sellper sebut have you ever interviewed for a job? That was a sales call. Anyways This post isnt about overcoming rejection or making an effective sales call (although those would be great topics). To be honest, Im not great at either of those things. When it comes down to it, sales success is directly linked to the number of interactions you have with decision makers.More interactions = More success. Period. Todays post is about how tomassively increase your interactionsandjump straight to order taking. Because thats what matters, right?
Remarkable Selling
What separates anaverage salespersonfrom aremarkable salespersonis marketing. By marketing, I dont mean handing out flyers and business cards. I mean establishing yourself as an industry expert and creating powerful systems that generate a lifetime of leads and opportunity. The good news is: anyone can create these systems. It just takes time, perseverance, and a bitof hustle. These systems will give youthe necessary leverage to interact with massive amounts of people. By massive, Im talking about 100s to 1000s of people daily. Here are5 ways to make loads of sales (and create massive opportunity): 1. Teach a Class. Teach a class to your co-workers. Teach a class to your customers. Teach a class at your local trade association and/or local university. Teach, teach, teach! This is a great way to become an expert, connect with others, and providevalue all at the same time. Want to teach a class to 1000 people? Conduct a Webinar!GoToWebinarenables you to hold a live webinar for up to1000 peopleat the same time. Identify a topic, create a lesson plan, and invite everyone on your mailing list to attend. This, my friends, is leverage.
For more information on conducting a webinar, check out: How to Conduct (and Master) a Webinar with Lewis Howes from LewisHowes.comby Pat Flynn. Ive mentioned Pat before on my blog, primarily because hes such a valuable resource. Above is a link to an article on his blog that offers some great tips on conducting webinars. 2. Deliver a Speech. Most people attend local networking meetings and trolll for leads. If you follow this strategy, you will be lucky to collect 5-10 business cards that offer little to no value to you or the people you interact with. But, if you are the guest speaker, deliver value, and become the main attraction, business will follow. Organizations are always looking for guest speakers. Volunteer to be the guest speaker at your next Rotary meeting or trade show. When I was a senior in college I was fortunate enough to bethe guest speaker at the annual Boys & Girls Club awards banquet in my hometown. I spoke for about 30 minutes toabout 500 people. I was even mentioned in a local newspaper article the next day. The speech took 3 hours to write and 30 minutes to deliver. My total reach was in the thousands. Not bad for a 3.5 hour investment of my time. Here are some great resources to help you become a better public speaker. I have read and recommend both these books: Stand and Deliver: How to Become a Masterful Communicator and Public Speakerby Dale Carnegie Training. The Quick and Easy Way to Effective Speakingby Dale Carnegie. 3. Create a Blog.A blog is a great tool for a number ofreasons. You can create and share helpful information with thousands of people. A blog also forces you to create. As I mentioned inmy last article, magical things happen when you create. It takes me a few hours to write a blog post, but it never goes away once I publish it. I can go off and do other things while my content remains viewable to anyone wanting to read it. Its a great form of leverage. For more information about creating a blog check out my Blog Building Kit. 4. Create a YouTube Channel or Podcast.These are some other ways to deliver content to your audience. YouTube is the #2 search engine in the world. Video allows your audience to see and hear you which adds a personal touch to your work. It also provides your viewers a deeper connection to you. Video brings you to life! A Podcast is a way for you to deliver an audio recording to your audience. Its like having your own personal on-demand radio station! Many people listen to podcasts while driving to work or exercising in the gym. iTunes makes it super-easy for your audience to subscribe to your podcast. If youre interested in creating a podcast, check out this helpful link: http://podcastanswerman.com/learn-how-to-podcast/
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5. Dominate Social Media. Create a Facebook page for your business. If you dont own a business, create a page anyway. If youre a Financial Planner your page could be Joe Smith Financial Planner; if youre a realtor: Jim Johnson Realtor; if youre a manager: Henry Brown Leadership. Get the idea? Heres a helpful link to learn how to set up your own Facebook page: http://www.facebook.com/pages/create.php You can set one up in 5 minutes. Theres no excuse for not doing this. Next, create a Twitter account. Twitter is another outlet to connect and distribute your content with others. In todays business world, its important for you to have a presence here. Want to get Twitter followers fast? Check out Tweet Adder. This is a program I use and endorse. After that, create a LinkedIn page. LinkedIn is the #1 business network in the world. I share every article I publish to various groups on LinkedInand its where my highest quality traffic comes from. Some other great social media tools areRapportiveandHootsuite. Rapportive displays everything about your email contacts right inside your inbox. You can see what social networks they belong to and you can connect with them instantly. Its pretty slick. Hootsuiteis a program that enables you to schedule message delivery to your various social media profiles. Write a message, schedule a time for it to post and BAM! Hootsuitetakes care of the rest. No need to loginto your various accounts to communicate with your followers. You can schedule your entire social media campaign in one sitting.
Take Action!
If you take action on any one of thesehigh value activities, your life will change. You will become an expert in your field, connect with a massive amount of people, and make loads of sales (as long as you have a way to get paid). Imagine what can happen if you take action on multiple ideas? As powerful as these systems are, none of it matters unless you build trust with your audience. At the end of the day, its not about how many sales you make, but rather, how many people you help. Its about relationships. Teach a class, give a speech, create a blog put yourself out there. Help someone. Good things will happen. I promise.
Business Law
As a business leader, its important to become familiar with the different types of business entities. You probably dont need to bea legal expert, but you should know the different types of businesses and their advantages (and disadvantages). In this article, I will discuss the various types of business entities and provide an overview of each. Before I continue, a quick disclaimer:Im not a lawyer or certified public accountant and nothing I say or write should be considered professional legal advice. If youre looking for such advice, I recommend consulting with a lawyer or CPA. Thanks!
SoWhy start a business?

1. Liability Protection. A business (with the exception ofa sole proprietorship) offers its owners liability protection. If the business is sued or goes bankrupt, the owner is not personally liable for the loss. 2. Tax Advantage. Businesses are allowedtowrite off expenses. Your business can pay many everyday expenses as business expenses so long as theyare needed to run the business. 3. Professionalism. A business provides a professional image.Your customers will take you more seriously if you operate as a business.Banks are more likely to loan money to a business. Lets look at the different types of businesses.
Sole Proprietorship
The simplest form of business is the sole proprietorship. In this form, there is no legal distinction between the owner and the business. Anyone who has a business without having created a separate business entity with the state is operating as a sole proprietorship by default. The primary advantage of a sole proprietorship is the ease of set up. Sole proprietorships require very few legal formalities. You just have to register your business name (DBA) with your state. Another advantage is the owner receives all the profits. There are no partners to split profits with and no corporate taxes to pay. A sole proprietor only pays personal income taxes on the business profits. A major disadvantage of a sole proprietorship is that the owner is not protected from lawsuits or financial losses incurred by the business; he or she assumesunlimited liability. The owners personal assets are at stake when operating as a sole proprietorship. Another disadvantage is the sole proprietors limited ability to raise capital. It is more difficult for an investor to formalize a loan to an individual than to a business entity such as a corporation or LLC. Sole proprietorshipsare most advantageous to entrepreneurs such as freelancers (writers, web designers, photographers, etc.) who have limited exposure to potentialliability and a limited need for capital. Upfront costs and legal obligations (such as shareholder meetings and annual reports) are minimal. Its the cheapest and easiest type of business to start.
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Corporations (C-Corporation, S-Corporation)

A corporation is a distinct legal entity that can open a bank account, borrow capital, buy property, and conduct business, all under its own name. The board of directors (who are elected by the shareholders) chooses a team of officers responsible for running the day-to-day operations of the company. The primary advantage of a corporation is the owners are not personally responsible for its debts and liabilities. If the corporation goes bankrupt, the creditors cannot (in most cases) recover the loss from the shareholders, directors, or officers. Corporations can also provide benefits such as retirement plans andmedical insurance. They havegreater limits for retirement and life insurance contributions than the other types of business entities. They also have greater access to capital from banks because they are a widely recognized type of legal entity.
C-Corporation vs. S-Corporation

There are two types of corporations: C-Corporations and S-Corporations. The difference between the C-Corp and S-Corp is the tax structures. The C-Corp facesdouble taxationmeaning the corporation itself pays taxesbefore dividends are distributed to the shareholders. The shareholders then have to pay personal income tax on the dividends (this is a double taxation). In an S-Corp the profits pass through the business to the shareholder directly without being taxed (i.e. there is no corporate tax). The shareholder only pays personal income tax on the dividend received. An advantage of the C-Corp over the S-Corp is the ability for the owner toincome shift. If the owner of the corporation pays a higher personal income tax rate than the companys corporate tax rate, he can choose to retain the earnings in the corporation and pay the lower corporate tax on the business earnings. This strategy isrelevant to smaller companies that pay a low corporate tax rate.
Limited Liability Company (LLC)

Like a corporation, an LLCis a legal entity offering its owners protection from the potential liabilities of doing business. LLCshave become extremely popular because of their hybrid structure. They combine the personal liability protection of a corporation and the tax advantages of a sole proprietorship, S-Corp, and partnership. An LLC is taxed as a pass-through entity meaning that the profits only get taxed once (there is no corporate tax).
Advantages of an LLC (over a corporation):

1. LLCs have fewer corporate formalities. They are not required to hold regular meetings of the board of directors or shareholders, keep written minutes, or file annual reports with the state. 2. LLCsdont have ownership restrictions. S-Corps are limitedto 100 shareholders and each shareholder must be a U.S. resident or citizen. 3. Members of an LLC are able to place their membership interests in a living trust. 4. Deduction of losses. Members of an LLC can deduct their operating losses from their personal income (to the extent permitted by law).
5. Tax flexibility. An LLCis treatedas a pass-through entity meaning profits are only taxed once. Oran LLCcan betaxed like a C-Corp if that is more advantageous.
Disadvantages of an LLC:
1. Salaries and profits of an LLCare subject to Medicare and Social Security taxes, which today are a combined 15.3%. With a corporation, only salaries (not profits) are subject to these taxes. 2. Owners must immediately recognize profits. A C-Corp does not have to immediately distribute dividends to its shareholders. This means Corporations profits are not always taxed. 3. Unfavorable state taxes. In some states (like California and New York), an LLCmust pay higher taxes and fees than a corporation of the same size. 4. Fringe benefits. Employees of an LLC who receive fringe benefits such as health insurance must treat these benefits as taxable income; C-Corp employees do not.
LLC vs. Limited Liability Partnership (LLP)

LLCsand LLPshave many of the same characteristics. In terms of formation,LLCsand LLPsareessentially the same. Both LLCsand LLPsare createdby filing Articles of Organization with the appropriate state government agency, typically the Secretary of State. Both types of entities offer similar legal protection to the owners. Note: the owners of an LLCare called members and the owners of an LLPare called partners. The tax benefits are also similar for LLCsand LLPs. Profits pass through the entity to the owners without being taxed. So why form an LLP? In some states, local laws prevent some businesses from operatingas an LLC. One reason large law and accounting firms operateas LLPs is they can form this entity in any state. Are you ready to form a business? Legal Zoomis a service that enables you to easily form a business entityonline. I recently went through the process of setting up an LLCand it took about 15 minutes from start to finish. It was almost as easy as creating an email address (although a bit more expensive). Prices start at $99 (for the economy package) plus state filing fees.The only information you need is your company name, names of members, and business address. You fill out a questionnaireand Legalzoom takes care of the rest! This is a simple and straightforward way to set up your business quickly and efficiently. If youre interested in setting up an LLC (or any type of business)you can find out more here. I hope you find this information helpful. Setting up a business can be intimidating, but there are tons of resources available to help.
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What Do Jesus, Mike Krzyzewski, and Jimmy Buffett Have in Common?

As much as I enjoyed business school, I think many programs fall short in teaching leadership. Leadership is one of the most important skills you can have. Leaders set direction. Leaders change the way we think. Leaders change the world. Todays discussion is about 3 leaders and how they changed (are changing) the world. While these leaders are very different from one another, they share a common thread that has made their leadership journeys truly special. Jesus, Mike, and Jimmy Jesus, without question, is the most popular person who ever lived. Hes the central figure of Christianity and is regarded as an important prophet of God in Islam. During his life, he impacted thousands of lives through his ministry and teachings. He spread hope and inspired people to believe and have faith. He became such a popular leader during his time that he became a political threat and was eventually executed. Hes the main character in the Bible, themost popular book ever written. Mike Kryzyzewski(also known as Coach K) is the all-time winningest coach in Division I mens college basketball. To date he has coached Duke University to 4 NCAA championships, 11 Final Fours, and 12 conference titles. He was the coach and leader of the USAs gold medal-winning 2008 Summer Olympics mens basketball team. Jimmy Buffettis a singer-songwriter, film producer, and businessman. Hes best known for his musical talent and has released 30 albums: 8 gold and 9 platinum or multi-platinum. Buffett has written 3 best-selling books and he owns 2 successful restaurant chains: Margaritaville and Cheeseburger in Paradise. Besides having impressive resumes, what do these 3 leaders have in common? They built tribes. Tribes are groups of people united under a common purpose. They challenge authority and the way people think. Tribes change the world. Seth Godin, author of the best-selling bookTribes: We Need You to Lead Usoffers this definition:
A tribe is any group of people, large or small, who are connected to one another, a leader, and an idea.
Jesus, Coach K, and Jimmy Buffett connected people to an idea. They built tribes.
The Christians Jesus is the founding father of Christianity, a religion practiced by more than 2.2 billion people today. Every Sunday, people congregate in churches around the world to worship and spread the message he preached more than 2000 years ago. Jesus built his tribe one-by-one, from Galilee to Jerusalem, preaching to anyone who would listen. He challenged authority and spread hope throughout the land. He gave people something to believe in, gave them faith, and as a result built the largest tribe in history. The Cameron Crazies Coach K has a tribe too. While not quite as big as Jesuss, it is pretty sizeable nonetheless. In a college sports era marred by scandals and lacking a focus on education, Coach K built a basketball program based on fundamentals and sound principles. Although many of his players went on to have successful careers in the NBA, he coached 19 seasons before a player left school early to pursue a professional basketball career. 19 seasons! His dedication to excellence has garnered him manyawardsand a tribe! Duke University namedthe floor in their basketball arena Coach K Court in his honor. The grassy area outside the arena is titledKrzyzewskiville. Duke also named the new basketball practice facility after him: Michael W. Krzyzewski Center Dedicated to Academic and Athletic Excellence. His tribe members include the Cameron Crazies (members of the student body who organize cheers at the games), former players and staff members, and the alumni and fans of Duke Basketball. Nine of his former players and assistant coaches became head coaches at other schools. Three former players now work for him as assistants at Duke. His program has produced more leaders than any other college sports program. The Parrotheads Jimmy Buffett united his tribe under the concept of island escapism. He created Margaritaville, a place for his listeners to escape the hardships of everyday life. His tribe, the Parrotheads, comes together at his live performances to indulge in and celebrate the island lifestyle. Typical attire for a Parrotheadincludes a Hawaiian shirt, board shorts and flip-flopsfor men or a grass skirt and coconut , bra for ladies. Buffett built his tribe through his catchy tunes and magnetic personality. His idea has helped him sell over 20 million albums, sell out concert venues, and form the Parrothead tribe. Your Turn? Everybody has a story to tell, a movement to start, and a tribe to lead. However, very few people believe in themselves enough to speak up, organize the group, and lead. There are people out there, on the fringes, who share your beliefs about how to make the world a better place. They need you to speak up and lead them. They need you to form the tribe. How to Form a Tribe A group only needs 2 things to become a tribe: ashared interestand away to connect. Here are 3 steps to help you start a tribe:
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1.Determine your interest. Your interest is what you spend most of your day thinking about. Its what you read about. If youre not sure what your interest is, look at the books on your shelf. What are you reading about? They may showyou what your passion is. Pursue your interest, follow your passion, and get people excited! 2.Tell a story. Stories help connect people to your interest. They spark curiosity. People want to be part of a story. There aremanyways you can tell a story. One way is to write a book. Write about how you got where you are today. Another way is to start a blog. Come up with an idea, something you want to achieve, and write about how you are going to make it happen. 3.Share your story with the world. The internet is a fantastic (and low cost) way to share your story with the world. Publish articles on your blog. Write an e-book. Create a You-Tube channel. Create a podcast. These are great ways to connect others to your idea. Spread the word. I want to leave you with a speech that Seth Godin delivered at a TED conference a few years go. I hope this inspires you to take the next step, to speak up, andlead your tribe. Enjoy! Seth Godin: The Tribes We Lead
The One Year Self-Directed MBA Program

Pursuing an MBA requires a huge commitment of both time and money. I attended an evening program and struggled to balance my full-time work schedule and the programs requirements. I studied during my lunch breaks at work, attended 3-hour classroom lectures at night, and spent many Sunday afternoons inside doing homework. It was a huge challenge! I receive many emails from readers asking if they should pursue an MBA Is it worth it? I learned the most important lessons about business by applying what I was taught in the classroom (the same concepts I discussed in the series) to real life problems. You learn by doing and taking action. Theres no other way. Since you learn by doing, I thought it would be helpful to provide you with a series of action steps you can take to apply the concepts Idiscussedin the 45-Minute MBA series. Im certain that if you follow these actions, you will seetangible resultsin your business career. You may not get a diploma or a bullet for your rsum, but you will create something of lasting value for yourself.
The One Year Self-Directed MBA Program

-ReadThe 45-Minute MBA. Cost: $0, 45 minutes. -Read the Wall Street Journal every day. Cost: $150 annually, 30 minutes daily. -Become proficient at Microsoft Excel. Cost: $0, 10 hours. -ReadCompensationby Ralph Waldo Emerson. Cost: $0, 1 hour. -WatchWarren Buffetts MBA talk. Cost: $0, 90 minutes. -ReadWarren Buffetts letters to shareholders(1977- Current). Cost $0, 30 minutes weekly for 35 weeks. -ReadThe Intelligent Investorby Ben Graham (particularlychapters 8 and 20). Cost: $15, 10 hours. -Open an online brokerage account and invest $1000 in the stock market. Cost: $1000, 30 minutes. If youre looking for an investing strategy readThe Little Book that Beats the Marketby Joel Greenblatt. Cost: $15, 5 hours. -ReadHow I Turned $1000 into $5,000,000 in Real Estate in My Spare Timeby William Nickerson. Cost: $50, 10 hours. -Start a blog. Cost: $100 (for hosting and domain), 1 hour. Post 1 article per week. Cost: $0, 5 hours weekly. -Read the Blog Building Kit. Cost: $0, 15 minutes. -Buy the Empire Building Kit by Chris Guillebeau. Cost: $149, 15 minutes weekly.
Scott Mackes | 39
-Listen to the Internet Business Mastery Podcast. Cost: $0, 1 hour weekly. -Create a logo, Facebook page, Twitter account, and order business cards for your new online enterprise. Cost: $150 (for logo and business cards), 1 hour. -Create a product to give away for free. Then create a product to sell. Launch the products from your website. Cost $0, 20 hours. -Attend a weekly networking event (Chamber of Commerce, Rotary, Lions Club, BNI, etc). Cost: $500 annually, 1 hour weekly. -Create a business mastermind group and communicate weekly. Cost: $0, 1 hour weekly. -Take a millionaire to lunch. Cost: $50, 1 hour. -ReadThe Effective Executiveby Peter Drucker andTribesby Seth Godin. Cost: $30, 10 hours. -Sign up for Toastmastersand attend a meeting each month. Cost $100 annually, 2 hours monthly. -WatchSteve Jobs 2005 Stanford Commencement Address. Cost: $0, 15 minutes.
Total Cost:
Self-Directed MBA: Cost of my formal MBA: $2,309 / 2 hours daily for one year $25,000 / 2000 hours over 2+ years
The Difference
After completingthe self-directed program you will have a business, a financial strategy, and a strong professional network. You will also acquire important business skills that will help you survive as an entrepreneur. This will cost you much less timeand money than a formal MBA, yet leave you with tangible assets and experiencethat you cant get in the classroom.
Think About Your Goals

With the price of college education going through the roof, I urge you to think hard about your goals and what you want to do in your professional life. If your goal is to make more money and build long-term wealth, you do this by: 1. Owning a business, 2. Owning real estate, and 3. Owning stocks. If your goal is to get promoted at work and climb the corporate ladder, you do that by: 1. Delivering superior results to your current employer and 2. Building a strong professional network.
Im convinced that you dont need an MBA to meet any of these goals.
Avoid the Herd Mentality

Your counterparts are flocking to graduate programs because theyre scared. Theyre out of work or underemployed and afraid they dont have the skills to get a better job. Theyre spending tons of time and money to get the skillsthey thinkemployers are seeking. While your peers are stuck in the classroom, now is the perfect time for you to capitalize on this opportunity byfocusing on what mattersandhustling towards your goals.
How to Get Started

The 45-Minute MBA series is a great place to start. Read the articles at your leisure and follow the action steps in the self-directed program. Before you know it, youll have a routine that produces results and makes a differencein your life. If you need any help or would like an accountability partner as you pursue the self-directed course, please shoot me an email. Id be happy to answer your questions and assist you on your journey. I want to send a special thanks to Chris Guillebeau@chrisguillebeau, author ofThe Art of NonConformity and The $100 Start-Up for permission to re-work his original idea of self-directed graduate education. Chris is the founder of theWorld Domination Summitand can be found athttp:// chrisguillebeau.com/. I cant offer a higher recommendation for Chris and his work. I own nearly all of his products.
Scott Mackes | 41
Spread the Word This eBook is 100% free. The only thing I ask of you is to help me spread the message. Best ways to share this message: On Facebook. By far, the best tool for sharing this message is through Facebook. You can simply paste the URL straight onto your page with a message!
On Twitter. Tweet out the URL for this page. A short email. Think about the people in your life who may benefit from this message (or
appreciate helping to spread the message). Write a short note to them in an email!
Old fashioned word-of-mouth. Unplug the computer and your phone and just talk with people
in your lives about it! Few things beat a genuine, face-to-face conversation. :) Again, any way you can help - big or small - is deeply appreciated! The more conversations I can start about this concept... the better!
GET A HOLD OF ME ID LOVE TO HEAR FROM YOU!

Contact Scott Mackes:
scott@marginofexcellence.com(via email) @ScottMackes(on twitter)
Gratitude Thanks first and foremost to my amazing wife Michelle, who is always there to listen to my ideas (no matter how crazy they are). Thanks to my readers who have come along for the journey, especially those who comment on the site and provide feedback. Thanks to my editor, Ray Elderd, who makes me look much better than I really am. Final Thoughts Starting a business has been a dream of mine since I was a kid. But for some reason, I never got around to it. Instead-- I went to school, worked various jobs, and made excuses until I finally took action and created Margin of Excellence in April 2011. It was my first step towards realizing my dream. If your dream is to start a business, Remember these 2 things: 1) Believe in yourself. You can accomplish anything you put your mind to. 2) Make an offer. Someone just might say YES. Finally, if you enjoyed this eBook please leave me a comment. Id love to hear from you! Comment Section: http://www.marginofexcellence.com/2012/08/31/the-45-minute-mba/

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What Youll Learn in the Next 45 Minutes

Scott Mackes Margin of Excellence www.marginofexcellence.com Easton, Massachusetts USA

How to Make Money Without a Job

8 | The 45 - Minute MBA

Purpose of an Income Statement

The Income Statement

Definitions for income statement terms :

10 | The 45 - Minute MBA

How to Read a Balance Sheet

Non-Current Assets: Assets not expected to convert to cash within 1 year.

furniture, office equipment, vehicles, and machinery.

comes into play after an acquisition.

earnings (defined below) a company is able to accumulate over time.

or never issued to the public.

Advantages of a Cash-Flow Statement

Cash Flow From Operating Activities

Cash Flow From Investing Activities

Cash Flow From Financing Activities

16 | The 45 - Minute MBA

The $40 Self-Directed MBA Finance Course

The Financial Calculator

The Most Important Financial Calculation

Time Value of Money Examples

More Time Value of Money Problems and Solutions

OKready to learn about that $40 course? Here you go!

20 | The 45 - Minute MBA

3 Ways Organizations Raise Money

Corporate Bond Ratings

Lets try another one.

Why would you buy a bond?

How do you buy a bond?

How to Pick Winning Stocks

My advice is to trust yourself.

How many stocks should you own?

Step #1 Determine the Price

Step #2 Analyze the Investment

Here are the top 5 things I evaluate before I buy a stock:

What if you have no interest in picking stocks?

The Secret Every Millionaire Knows

How to Destroy the Competition (Without Competing)

But as a leader, should you focus on competing?

How do you create?

5 Action Steps to Unleash Your Creativity

28 | The 45 - Minute MBA

5 Ways to Make Loads of Sales (And Create Massive Opportunity)

32 | The 45 - Minute MBA

SoWhy start a business?

Corporations (C-Corporation, S-Corporation)

C-Corporation vs. S-Corporation

Limited Liability Company (LLC)

Advantages of an LLC (over a corporation):

34 | The 45 - Minute MBA

LLC vs. Limited Liability Partnership (LLP)

What Do Jesus, Mike Krzyzewski, and Jimmy Buffett Have in Common?

36 | The 45 - Minute MBA

38 | The 45 - Minute MBA

The One Year Self-Directed MBA Program

The One Year Self-Directed MBA Program

Think About Your Goals

Avoid the Herd Mentality

How to Get Started

GET A HOLD OF ME ID LOVE TO HEAR FROM YOU!

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