May 31, 2016

The Decentralized Autonomous Organization has captured the imagination of the cryptocurrency community and the investing world more generally. It’s promise to create people-less companies through the use of smart contracts has vaulted the blockchain-based currency ethereum to a market capitalization of $1 billion—second only to bitcoin’s—and made the project the largest crowdfunded venture in history This organization exists entirely on the blockchain. There are two forms of crypto currencies that you may be familiar with and they are bitcoin and ethereum. The Decentralized Autonomous Organization—and the organizations it will invest in—functions based on smart contracts, or protocols written into the blockchain that govern how they do business. The next question is how to invest in the DAO? First get some bitcoin, and the author used a service at Coinbase, convert it to ethereum, then you can use it to get a DAO token which will allow you to vote on proposals. This review is very brief and I recommend reading the article if you’re interested in learning more about investing in cryptocurrency. In my opinion, the introduction of this form of currency is one step closer to a one world currency. As technology becomes more advanced, I believe a person needs to stand firm in his beliefs. The culture will change but your internal principles should remain the same.

As of May 4, 2016, the Standard & Poor’s (S&P) 500 was up 1.9% year-to-date. An S&P 500 gain posted in 2016 means the eighth straight year of positive returns for the index. Naturally, many investors are wondering if the stock market is due for a pullback given that the market has continued rising for so long. Several factors go into determining the overall health of the economy and the stock market. Interest rates, unemployment, economic growth, productivity, the relative valuation of equities and investor sentiment all come into play. There are currently signs that China and Europe are slipping into a recession, and there are concerns that     this weakness may spread into the US. In times of uncertainty, investors often exhibit a “flight to quality,” the behavior characterized by selling riskier assets and investing in safer securities such as Treasury bills. Also keep in mind that lower interest rates will cause investors to look for securities that offer higher yields. Loans and other forms of borrowing become cheaper, encouraging economic growth through business expansion and increased spending. In theory, this activity should increase revenues and earnings, helping to push equity prices higher. A few ratios you should use when choosing a stock are: price to earnings ratio, price to sales ratio, price to book ratio, and enterprise value to earnings before interest, taxes, depreciation, and amortization ratio. Index funds are one of the best ways to achieve broad stock market diversification at minimal cost. They are generally meant to be held for several years or longer in order to ride out some of the market’s inevitable ups and downs. If your time frame of investing in paper assets is five years or longer then it would be good to have some index funds in your portfolio.

New startups should fully understand that running out of money is one of the primary reasons that businesses fold shortly after a launch. This scenario is a proven statistic, but startups can avoid joining the ranks of failed businesses by being smart about how they spend their startup capital. Here are ten tips that will help you manage your startup capital: know when you’ll break even, keep your eye on cash-flow management, always maintain a cash reserve, manage funds better, collect receivables immediately, offer discounts to collect payments earlier, extend payables when you can, spend only on essentials, be smart about hiring, and make the best use of technology. Knowing when you’ll break-even will force you to set milestones, and plan a budget accordingly. The best way to ensure you will break even is to take the habits you do in your personal life and apply them to your business and vice versa. If you don’t have a budget, and you’re not in the habit of sticking to a budget, how are you going to properly manage your cash flow? Who will hold you accountable, and will you do what they advise you to do? Keep an eye on your cash flow management, and make sure you’re not spending too much. “Every month isn’t enough,” says Derek Flanzraich of Greatist. “Nearly every week I’m checking both my personal and business finances.” Every business will experience shortfalls so it is essential to have a cash reserve to help cushion the lean times of business operation. In order to manage your funds better, a business owner should not be the one managing the money. I believe that the owner should have a basic financial literacy in order to understand the verbiage that a CFO or accountant will use. Also if his or her hands are off the money, then the person will be less likely to misuse the funds. Ideally you want to collect on your invoices immediately, and if not the author recommends no longer than 15 day terms. Obviously as you run a more commercial and industrial type business those receivable times will extend out longer. Keep in mind your working capital cycle and make sure it is always turning. Another way to collect payables faster is to offer discounts, but if you offer a discount then you must enforce the collection very strictly. On payables if possible you want to be able to extend it to 60 days or longer. The more time you have to pay your vendors, the more time you have to allocate funds and use funds in areas where it may be needed. I do have a word of caution. I do not recommend this type of behavior with any lender. Most banks will let you have a 10-day grace period, but if you are habitually 30 days late, then don’t be surprised if the bank is unwilling to lend more money or makes you amortize your debt if you have a working capital line of credit. Outside of the most essential purchases, you want to minimize spending and eliminate costs that aren’t essential to your operation until you’re profitable. “The secret to successful hiring is this,” says Marc Benioff, CEO of Salesforce. “Look for the people who want to change the world,” From personal experience, I’ve seen a business be really successful, because they know what type of clientele to serve and offer their products to, and they hired highly motivated and skilled employees. These employees have an established good reputation in their community and an existing book of business. This particular business model has helped this business have success in its competitive industry. Finally, with technology becoming more affordable, take advantage of cloud technology, or even back-up hard drives to store your essential financial and company data. If you’re uncomfortable with cash flow management, then I suggest letting me do a financial check-up in which I will take a financial pulse and examine your personal finances for any areas of weakness. “Walk with the wise and become wise, for a companion of fools suffers harm.” Proverbs 13:20 NIV.

If you need agreement in prayer, or if you’re in need of a financial checkup you can reach me in the contact me section.

“But those who want the best for me, Let them have the last word—a glad shout!— and say, over and over and over, ” GOD is great—everything works together for good for his servant.” I’ll tell the world how great and good you are, I’ll shout Hallelujah all day, every day.”

Psalm 35:27-28 MSG


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