Assess your options for growth in business

After you have completed a full assessment of your business in its current state and you feel confident that you have all departments and areas working efficiently and under control, it is time to look to the future.

1. What is your vision for the future?
2. Does your business plan offer a realistic guide as to your future direction?
3. Do you just want to consolidate your current position or do you want to find ways to make the business grow?

Starting a business can involve lots of hard work, courageous decisions, and not a few risks, and it may seem a good idea to just sit back, relax, and enjoy the benefits of all your efforts.

1. Can you afford to do nothing?
2. While you do nothing, your competitors will be growing and taking your market share - this will seriously damage your business's future.
3. To ensure that your business remains a success, it is time to identify your options for growth.

Growth options can be divided into two categories, internal and external.

1.  Internal growth or growth that can be achieved within your own business will involve

• increasing market share or
• diversification.

2.  External growth will involve joining forces with another business, either

• by merging with or acquiring another company or
• by forming a partnership or joint venture with another business.

Gathering Information to create the budget

Once you have identified your objectives, you need to turn to the important process of gathering key information to enable you to create the budget.


ESTIMATING SALES AND REVENUE

As sales of products and services are the lifeblood of most companies, you will inevitably start with a projection of sales and revenue.  This can be a tricky process because it involves guessing the future, but there are certain actions you can take to make a forecast easier. 

• USE PAST SALES
• DISTINGUISH BETWEEN PRODUCTS
• LOOK AT THE COMPETITION
• ASK SUPPLIERS
• READ SECTOR REPORTS
• STUDY INNOVATIVE PRODUCTS
• MONITOR CASH FLOW

ESTIMATING EXPENDITURE

The next part of your budget should include all the costs of operation involved in producing and delivering the product or service to customers.  These are factors that need to be considered:

• DEFINE EXPENDITURE TYPES:  4 main types:-

CAPITAL COSTS
SPECIFIC PRODUCT COSTS
ONGOING COSTS
START-UP COSTS

• DEFINE EXPENDITURE TIMING
• ESTIMATE PROFITS/LOSS

CHALLENGING THE FIGURES

At this stage, you may feel confident about stating some figures (more typically expenditure because these are easier to predict) and more nervous about sales and profit figures, mainly because these are subject to

• a number of variables such as the action of competitors or
• changes in the economy that you have not foreseen. 

The following approaches may be helpful in allowing you to challenge the figures that you have initially compiled.

• "WHAT-IF" SCENARIOS:  by working on the assumption that the final result is not as favourable to the company as you had hoped.  To avoid becoming too negative, you could include two sets of figures, underlying which you place your initial set of projected figures.
• ZERO-BASED BUDGETING:  the process whereby a company decides what target it wants to achieve, how this can be achieved, and what resources it needs to implement the result; also known as bottom-down budgeting.
• ACTIVITY-BASED COSTING:  costing by activities that define any actions that a company takes regularly as part of its day-to-day operations.

Creating a cash budget

Planning for a final (commonly called master) budget will be incomplete without a cash budget.  This will show how money will be mvoed to and from the business account to make it possible to finance the company's activities.

BENEFITS

1.  PLANNING TOOL
A cash budget shows the cash effect of all plans made in the budget.  If the cash flow is negative, the company knows it either

• has to put more pressure on debtors or
• seek further sources of finance. 

For instance, disbursements are lumped together, and you need to spread your payments to creditors more evenly throughout the year.  This will lower bank credit and interest costs. 

2.  WARNING SIGNAL

A cash budget may also give management a sign of the potential problems that could emerge and gives them time to take action to avoid such problems.


An example of a cash budget
http://spreadsheets.google.com/pub?key=thlpxQ9A0KkLx27yOw9nvBQ&output=html

Start-up Budget Objectives

For start-ups, it may be useful to try to answer the following set of questions to help you make some reaonable assumptions about your business and its early days of operating and trading:

1. How many products/services do you expect to sell in the first year?
2. Can you predict a rate of sales growth for the next three years?
3. How will you price your products/services?
4. What will be the cost of producing your product/service?
5. What will your operating expenses be?
6. How many employees do you intend to hire and how much will you pay them?
7. Have you established whether your business will be a proprietorship, a partnership, or a corporatin?  The tax consequences of each form will vary considerably.
8. Will you be leasing/renting/buying an office?  What will the costs be?
9. How much finance will you need to raise?  What is the interest rate on funds that you are borrowing?
10. Will you sell on credit?  Have you established what payment terms you will get from suppliers and what you will offer customers?

Market strategy: Moving from recovery to expansion

The cyclical run in the market remains firmly intact throughout 1H2010 on three counts below:

• Market performance historically strongest when GDP accelerates
• Earnings-driven re-rating cycle never been shorter than 12 months from trough.
• Risk to earnings on upside, as economic growth accelerates.

Our economist expects GDP to expand by a robust 5.3% in 1Q10, and by 4.2% in 2Q10.  The macro growth momentum, however, is expected to decelerate, with GDP expanding by only 2.5% in 3Q10 and 2.1% in 4Q10 as the low base effect tapers off moving towards the second-half of the year.

The present rally is now coming to 10 months from lows seen in March 2009. 

Cyclicals are expected to deliver the strongest earnings rebound as end-demand and margin recovery kick in to accentuate the growth trajectory off a low base in 2009 where earnings were diluted by writeoffs and pre-emptive loss provisions.

Overweight stance maintained on the Glove sector, with buys on both Top Glove and Kossan

Despite meteoric share price appreciation for glove manufacturer stocks, valuation remains undemanding given robust earnings performance.  At current share prices, both Top Glove and Kossan are trading at PE of 11x and 10x FY10F earnings, well below its respective peaks of 30x and 18x.

Solid earnings growth as supplanted by

• capacity expansion, and
• positive newsflow

should lead to further expansion in PE multiples.

Key risks include

• a sudden surge in latex price,
• energy input costs or
• an unfavourable ringgit/US$ foregin exchange rate movement.

Benny Chew
AmResearch
Published in the Edge Jan 18, 2010

Monitoring the budget

After a budget has been written and approved, the task of monitoring the budget begins.  Inevitably, actual events will produce results that vary from the budget.  These are recommended steps to monitor the results.

1.  SET A TIME PERIOD
With an annual budget, you will have to wait a couple of months after the end of the yar.  However, most budgets allow for quarterly, if not monthly, observations based on monthly projections.

2.  REGISTER ACTUAL RESULTS
The first step is to write down the results achieved by the company and compare them with projections.  Any discrepancies are typically called variances.  When the variances are over 10 percent, it is worth looking into the reasons.

3.  CATEGORISE VARIANCES
It is easier to assess the variances that concern you by categorizing them into price, volume and timing.

4.  ANALYSE VARIANCES
With each variance, ask what could have led to the miscalculation.  The causes are usuallly budget errors, the result of poor preparation, or changes that result from external factors such as economic change.

5.  TAKE CAUTIOUS ACTION
Sometimes it's better not to take swift action.  Blaming staff for not forecasting an event, when in reality they had a few ways of predicting a result, can damage morale.  Be cautious.  If you can make amends, look at the expense and find out if there are ways of reducing overhead.

6.  REVIEW TARGETS
Some variances may be the result of overly optimistic revenue projections.  Were the sales targets unattainable?  Study performance of competitors and analyze whether targets were realistic.

7.  REVIEW PROCESS
You should review the way the budget was put together.  Were the objectives set by top management in a top-down fashion? Were middle and lower ranking directors encouraged to provide their opinions on the company goals?

Defining budget objectives

Budget are made primarily to help meet objectives. 

As a result, the type of budget you devise will vary considerably depending on the ultimate purpose of the plan.  The following steps will help you define your objectives:

1.  UNDERSTAND YOUR COMPANY
Identify your company's Strength, Weaknesses, Opportunities and Threats ( a particular technique known as SWOT) can help you amass valuable facts that will help you identify necessary action to take:

• STRENGTH:  What advantages does your company have over rivals?
• WEAKNESSES:  Where is the company underperforming and what are competitors doing better and why?
• OPPORTUNITIES:  Where are the biggest chances for growth?
• THREATS:  What are the biggest obstacles facing you:  for example, competition, or shortage of investment capital?

2.  LISTEN TO COMPANY SECTIONS
If you are a small company, it will be easier for you to identify the core strengths, weaknesses, opportunities, and threats but in a larger company, these may vary significantly. 

• You need to gather information from different deparments to ensure their needs are met by the budget. 
• For instance, marketing and advertising may be understaffed, and this could negatively affect overall sales, no matter how much time you've put into improving the core product.

3.  SUMMARIZE CORE AIMS
Summaries of the core objectives of the company and the different departments, or mission statements, could include

• "We are trying to increase revenue."
• "We want to raise market share by xx."
• "We need to focus on cutting costs."
• "We need to research new product lines."

4. SET FINANCIAL TARGETS
Make sure you have taken into account the financial targets of every department, including

• marketing and advertising
• purchasing/inventory
• personnel
• administration
• finance department
• sales
• customer service

TIMING OF A BUDGET

TIMING OF A BUDGET

1. There are no fixed time periods a budget should cover. The longest range budgets can cover a period of between three and five years, although the most typical period is one year, to coincide with the company's financial year. This is called a fixed budget.

2. Even an annual budget is typically split into quarterly or monthly statements to make the process more manageable and easier to follow. A fixed bduget that is regularly updated to keep up with rapid changes in the company's particular sector is sometimes called a rolling budget.

3. Some businesses budget on a 1-4 week cycle, but these are most effective when they work within a longer time framework.

4. For a one-year cycle, it is best to set the next budget at least three months before the end of the current budget. For a shorter-term budget (one month, for instance), the process should have started at least by the third week of the current budget.

Why budget?

The key to successful financing of daily operations is to budget.

These are some of the key benefits of a well-planned budget:

1. ANTICIPATE PROBLEMS
2. PERSUADE BACKERS
3. MEASURE RESULTS
4. IDENTIFY PROBLEMS
5. IMPROVE DECISION MAKING
6. MOTIVATE STAFF
7. SAVE TIME
8. CREATE STRATEGY

1.  ANTICIPATE PROBLEMS
The process of budgeting forces you to anticipate and prevent problems.  It demands that you estimte how much capital you are going to need for your daily operations and how you will meet these financial obligations without facing a cash flow crisis.

2.  PERSUADE BACKERS
With a budget that anticipates potential bottlenecks in your operations and delays in cash flows, you will be in a better position to make a case for a loan from your bank or investment fund.

3.  MEASURE RESULTS
A budget or plan helps you keep score:  effectively you are meeting your objectives because you have a concrete list of landmarks or targets against which you can measure results.

4.  IDENTIFY PROBLEMS
Budgets try to create the most ideal scenario for your business to follow, but they can also throw up any potential challenges or obstacles that you might otherwise have ignored in your pursuit of preferred results.

5.  IMPROVE DECISION MAKING
When you lay out a template of what the company can achieve and how much it will cost, you are in a better position to make some tricky decisions such as dropping a favourite project because the figures won't add up or to pursue a strategy that you had written off initially.

6.  MOTIVATE STAFF
A budget helps staff to understand what direction the company is going and the parameters in which it is working.  Workers can follow targets, such as sales figures or number of new customers recruited, and measure how well they are performing.

7.  SAVE TIME
While many managers feel that the research and paperwork involved in preparing a budget can cause unnecessary delays to the core operations of the business, the opposite is in fact true.  Lack of planning will inevitably lead to stalled projects while directors grapple with problems that could have been anticipated at an earlier stage.

8.  CREATE STRATEGY
You may have a clear idea of what the business needs to achieve in the short term, but you may have overlooked how the company and the sector you are working in may change in 12 months' time.  A budget can help develop a picture of the future and force you to implement relevant strategies to cope with any adverse conditions.

What is a budget?

A budget is a tool for converting plans into reality.

It covers the process of

• defining objectives;
• forecasting expectations of sales, profits, and expenses of every sort;
• deciding what actions will best help the company achieve these targets;
• determining how much money will be needed to support these actions; and,
• finally, providing a way to monitor whether the actions chosen are the most appropriate at the current time, or whether they need to be modified in some way.,

FEATURES OF A BUDGET

A budget should include the following components to be effective:

1. Clearly defined objectives, both short- and long-term.
2. Estimates of revenue amounts.
3. An analysis of revenue payments:  how far do they lag behind payment of expenses?
4. Estimates of expense amounts and timing of expense payments.
5. A list of ongoing direct and indirect costs.
6. A cash budget to predict cash flow over time.
7. Procedures to monitor the progress of the budget.

Budgeting for Future Success

Why budget?

Budgeting forces companies to anticpate and prevent problems, create strategy, measure results, motivate staff, and save time.

What is it?

A budget covers the process of :

• defining objectives;
• forecasting expectations of sales, profits, and expenses of every sort;
• deciding what actions will best help the company achieve these targets;
• deciding how much money will be needed to support these actions; and
• finally, providing a way to monitor whether the actions chosen are appropriate or whether they need to be modified.

When should a budget be created?

There are no fixed time periods a budget should cover.  The longest range budgets can cover a period of between three and five years.  A more typical period is one year, to coincide with the company's financial year.

How should a budget be created?

DEFINE OBJECTIVES by

• understanding your company,
• listening to company sections,
• summarizing core aims,
• setting financial targets, and
• defining strart-up objectives.

GATHERING INFORMATION by

• estimating sales and revenue,
• estimating expenditure,
• estimating profits/loss, and
• challenging the figures.

CREATE A CASH BUDGET.  No final (or master) budget can be complete without a cash budget that will

• show how money will be moved to and from the business bank account.

How should a budget be monitored?

SET A TIME PERIOD.  Although some companies operate on an annual budget, most allow for quarterly, if not monthly, observations.

REGISTER ACTUAL RESULTS.  Write down the results achieved by the company and compare them with projections.

CATEGORIZE VARIANCES.  Divide into price, volume, and timing.

ANALYZE VARIANCES.  Ask yourself in each of the categories, what could have led to the miscalculation.

REVIEW PROCESS.  Finally, review the way the budget was put together.  It may be that the objectives were unrealistic or not defined specifically enough.

Facing threats from market forces

Consider a small-town five-and-dime store that saw its business start to erode when the first Wal-Mart moved to town 40 years ago.  Think of the 75 year old family bookstore that started to see fewer customers when the first Barnes & Noble superstore opened at a nearby shopping center.

Even for multigenerational businesses, times change.  Most importantly, the players change, too. All business owners must keep valuation in the back of their minds when they sense that a game-changing company has moved into their marketplace.

But competitors aren't the only market forces that change a company's fortunes.  Look at what outsourcing and more modern technologies have done to established companies.  If they haven't kept up, they have three choices:

• modernise (often though for smaller companies to afford),
• put themselves up for sale (to a market that may not be ready to buy), or
• simply fade away.

Many business owners may not see the end coming, whereas the best valuation professionals do.  Valuation is not all about that final dollar figure; it's about measuring a business's short- and long-term viability as well.  A valuation expert with knowledge of your industry - or access to outsider experts who have that knowledge - is as much a central business advisor as your accountant or attorney.

Main principles of business valuation

The concept of value and some of the main principles of business valuation.

1.  Value differs from price

"Price is what you pay.  Value is what you get."  Buffett once said.

But, only if you do your homework.

Getting to the right price in any deal involves understanding what business assets are truly worth and then structuring a deal around financing and tax realities.

2.  Planning drives value

Creating value involves business planning and execution.

Creating value - long term growth in asset value in a company you've built - is something you need to focus on, because a company is the sum of real and tangible assets, investments, ideas and management talent.

If you can look at all those working parts of a business through the prism of value, the desire to determine and create value in a company can become a much more important driving force in its growth than simple profits and losses.


3.  No two valuations are exactly alike

No two businesses are exactly alike; neither are the goals and circumstances of business owners.

Valuation isn't an exact science for another reason as well:  "The risk inherent in any business situation is far from static.  Depending on the economy and the state of the industry the business operates in, the company may be under tremendous prssure to stay afloat, or it may have great opportunities for growth.  Any time the economy goes through a major convulsion, people take a fresh look at what value means and at the realities of any deal.  In 2008, US was in the grip of a worldwide credit crisis - an economic slowdown that is redefining the values of a host of assets, from companies to private homes.

Proper business valuation takes a lot of practice.  People with finance degrees and long experience in accounting or other numbers-related fields aren't always natural at valuation, either. You should learn the ins and outs of business valuation and know the areas in which you can handle valuation on your own - and those for which you should hire some help.

4.  Valuation isn't a one-time deal

Most tax, business, and personal finance experts say that even if you're years away from retirement - or years away from your next business idea - keeping your valuation numbers current is a good idea.  This way, you can make changes and investments in the business so you can leave the business with the highest valuation possible.

How often should you run valuation numbers?  It varies based on need. 

If you're working with a business or tax planner, discuss the creation of a valuation system for your business, whether it's something you access yourself or have an expert handle at regular intervals.

Everything has a value.

Everything has a value.  Putting value in dollar terms is the cornerstone not only of running a business but also of investing in almost any form.  Knowing how to arrive at a value for the physical and intrinsic characteristics of a business is essential to building wealth of all kinds.

People who invest in companies need to look beyond the current state of the business they own (or want to own) and consider what decisions they need to make to boost value.  People who have experience in those industries are often best equipped to make those decisions, but it often helps to engage a business valuation expert for guidance. 

Why Now's the Time to Get Defensive

Why Now's the Time to Get Defensive
By Todd Wenning
January 13, 2010

Do you hear that?

 

To steal a phrase from Simon and Garfunkel, it's the sound of silence in the market. And it's making me nervous.

 

Remember just 12 months ago, when the CBOE Volatility Index, the "VIX," was comfortably over 40, implying significant investor uncertainty? Those were indeed scary times, a few months after Lehman Brothers collapsed in September 2008, but as an investor I was actually more comfortable then than I am right now. There were a lot of great stocks on sale!

 

You haven't heard about the "VIX" for a while now because, guess what, it's back below 20 -- implying investor complacency. We haven't been this low since (gulp!) August 2008, before the Lehman Brothers debacle.

 

Scared yet?
Even though the stock market has charted a steady upward course since last March, I have a hard time believing that all is well enough in the global economy to justify complacency.

 

That's why now is the time to get defensive. That means:

 

• Having cash available to invest.
• Considering options strategies to protect your gains.
• Building a watch list of stocks you'd want to buy at 10%-15% below current prices.

Traditional defensive maneuvers would typically include increasing your bond exposure, though with yields so low and interest rates inching higher, I don't think this is a great place to put new money right now.

 

My best friends call me "Cash"
Thanks to the government's policy of low interest rates and quantitative easing, there's been (by design) little reason to hold a lot of cash. That's helped fuel both the bond and stock markets, as investors looking for even a tiny profit needed to put their cash to work somewhere.

 

Still, cash isn't trash and there's simply no substitute for quickly seizing opportunities in the market. If you're 100% invested and the market loses value, you need to sell something (at a lower price, of course) before you can buy anything else. That's a tough position to be in when stock values become much more attractive.

 

In our Motley Fool Pro portfolio, for instance, we took advantage of last year's market downturn by using our cash to pick up solid companies like Intel (Nasdaq: INTC) and Autodesk (Nasdaq: ADSK) at very attractive prices. Today, we've strategically left a large cash balance in the portfolio to grab future bargains the market may throw our way.

 

Yes, you have options
Market volatility plays a major role in the pricing of options (calls and puts). This is because investors perceive "risk" as volatility and when volatility is low there's simply less demand from options buyers (who have the right to buy and sell a stock) who seek to improve returns with big moves in stock prices.

 

All of this is to say that when options prices are low and the market's been rallying, consider protective puts on stocks and exchange-traded funds that have made you big money.

 

Let's say you bought 100 shares of SPDR Gold Trust (GLD) ETF in November 2008 for $75 -- a $7,500 investment. The ETF currently trades for about $113 -- a nice 50% gain for you. By purchasing a March $110 put for $2.75, you can lock in a sales price of $110 for your 100 shares through March 19, 2010, for $275 per contract.

 

One scenario: The ETF doesn't fall below $110 by March 19 and you're out $275 (4% of your original investment). But hey, you can still enjoy any upside left in the ETF. The other scenario: The ETF falls well below $110, but you can still sell for $110 (minus the $2.75 per-share cost) thanks to the protective put you bought.

 

Think of buying protective puts on your big winners as insurance against the chance of losing those gains in a market downturn. Even though you may grumble when you pay the premium for the put, just as with your auto insurance, you'll be glad you did if something bad happens. At the very least, it can give you some peace of mind in an uncertain market.

 

Make a list, check it twice
U.S. stocks have made a huge recovery from their March 2009 lows, and while I don't think they're anywhere near bubble territory, good values have become harder to find. That doesn't mean you should stop researching, though.

 

Here are five S&P 500 stocks with returns on equity over 15%, price-to-free cash flow ratios below 20, and manageable debt levels -- in other words, strong companies worth buying if the market does take a downturn.

 

Company
Price-to-FCF
Return on Equity
Total Debt to Equity

 

Coach (NYSE: COH)
15.9
38.7%
1.37%

 

Gilead Sciences (Nasdaq: GILD)
16.0
49.4%
24.40%

 

Cisco Systems (Nasdaq: CSCO)
18.0
15.2%
25.70%

 

Stryker (NYSE: SYK)
18.3
17.7%
0.30%

 

Automatic Data Processing (NYSE: ADP)
17.1
25.4%
0.70%

 

 

Data provided by Capital IQ, as of Jan. 12, 2010.

 

 

Great companies don't always make great investments -- they still need to be bought at the right price.

 

Cisco Systems, for instance, has doubled its net income over the past decade, but remains 50% off its January 2000 prices. That's because investors were paying too dearly for Cisco's prospects during the dot-com bubble and, even though Cisco is a much better company today than it was in 2000, its 10-year stock chart doesn't reflect this progress.

 

That's why it's so critical to buy great companies only at the right prices. Another market dip could give us that opportunity, so prepare yourself now with a good watch list.

 

Get started now
When the market grows complacent, you need to get defensive -- no matter where you think it's going. It's only a matter of time before something spooks the herd and volatility once again ensues. By having adequate cash on hand to buy solid stocks at good prices and using options strategies to protect your gains, you can set yourself up for better long-term investment success.

 

That's our aim at Motley Fool Pro, where we use stocks, ETFs, and options to help investors make money in all types of markets. If you'd like to learn more about Pro, simply enter your email address in the box below.

 

http://www.fool.com/investing/general/2010/01/13/why-nows-the-time-to-get-defensive.aspx

Feud over family company is better avoided through careful planning

Saturday January 16, 2010
Feud over Syed Kechik’s millions goes to High Court
By NURBAITI HAMDAN


KUALA LUMPUR: The children of the late Tan Sri Syed Kechik Syed Mohamed Al-Bukhary have gone to court to fight over the RM400mil estate he left behind.

The High Court granted an injunction applied by his two daughters – Sharifah Zarah and Sharifah Munira – to prevent their half-brother Syed Gamal from interfering in Syed Kechik Holdings Sdn Bhd’s affairs yesterday.

Syed Gamal, 45, who is Syed Kechik’s only son from his first marriage, is not allowed to intervene in the administration, enter the premises and access the records and accounts of the company.

He is also barred from interfering in the duties of the company directors.

The sisters, who are directors of the company, were not present but were represented by laywer Datuk Vijay Kumar.

This is the second injunction granted by a court in the family saga that started after Syed Kechik’s death last year.

Syed Gamal had obtained an ex-parte injunction at the Syariah Court on Sept 14 to stop his 44% stake in the company from being sold or liquidated.

Justice K. Anantham, who presided over the High Court case in his chambers at the Jalan Duta court complex here, ruled that the Syariah Court had no jurisdiction over the company because it is a corporate entity.

Syed Gamal, who was with his cousin Syed Azman Syed Mansor Al-Bukhary, said his lawyers would appeal against the decision.

“I will continue with my struggle to pursue my rights according to Faraid law. My rights have been denied almost all my life. This is not a struggle for myself but also for my family,” he said when met outside the courtroom.

Syed Gamal was represented by his three lawyers – Atan Mustaffa Yussof Ahmad, Az-mi Tan Sri Dr Mohd Rais and Zulkifli B.C. Yong. Syed Kechik died at the age of 81 on April 10 last year.

His son-in-law is Al-Bukhary Foundation chairman Tan Sri Syed Mokhtar Al-Bukhary.

http://thestar.com.my/news/story.asp?file=/2010/1/16/nation/5483928&sec=nation

This Is What a Real Growth Opportunity Looks Like

This Is What a Real Growth Opportunity Looks Like
By Tim Hanson
January 15, 2010

If you wanted to add some growth to your portfolio, you might consider the Vanguard Growth Equity fund. After all, it's an "aggressive" fund that seeks "long-term capital appreciation." And yes, its top holdings do seem like they'd be good ways to get growth:

Stock
Weight Within Fund

Baxter International
3.2%

Cisco Systems (Nasdaq: CSCO)
3.1%

PepsiCo (NYSE: PEP)
2.6%

Walgreen
2.6%

Berkshire Hathaway
2.5%

Progressive
2.4%

Google (Nasdaq: GOOG)
2.4%

Johnson & Johnson (NYSE: JNJ)
2.3%

Oracle (Nasdaq: ORCL)
2.3%

Apple (Nasdaq: AAPL)
2.1%



Data from Vanguard.
(My Comment:  Only good quality stocks)

But now let's take a look at just how much growth analysts actually expect from these companies:

Stock
Analyst 5-Year Growth Estimate

Baxter International
11.5%

Cisco Systems
11.25%

PepsiCo
10.75%

Walgreen
14.22%

Berkshire Hathaway
5%

Progressive
6.53%

Google
21.34%

Johnson & Johnson
7.54%

Oracle
12.19%

Apple
18.16%

Average
11.85%


Data from Yahoo! Finance.

Now, we all know that securities analysts are notoriously off in their projections, but let's assume that when we average together dozens of forecasts for these high-profile stocks, we at least end up in the ballpark. Assuming that, is 11.85% really the magnitude of growth you'd like to get out of your aggressive growth stocks?

If you're happy with 11.85%, then you can stop reading and stick with your high-profile "growth" stocks. But if you're looking for more, I recommend you read on.

Still with me?
The recipe for truly high growth has a handful of necessary ingredients. They are:

• A small company
• A wide market opportunity
• Meaningful macroeconomic tailwinds.

Think, for example, of Amazon.com (Nasdaq: AMZN) when it launched in 1995. It was a tiny company, one of the first e-tailers, and it had the rising tide of the Internet -- merely the greatest development of the past 25 years -- helping it along. Now ask yourself: Do any of the companies or industry opportunities in the table above fit that profile at all?

Let me introduce you to one that does
Now consider something like the pharmaceutical industry in India. Today, on average, Indians spend $10 per person per year on drugs. Americans, on the other spend, more than $750! That means the Indian pharmaceutical market needs to grow some 7,400% in order to be as big as the U.S. market is today.

This won't happen next year, or even over the next 10 years. Furthermore, because of discrepancies in purchasing power, the Indian pharmaceutical market may never reach the size the U.S. market is today. But let's assume it takes 25 years for the Indian market to reach half the size of the U.S. market. That would mean industry tailwinds of 15.6% annual growth ... for 25 years!

As for who benefits, think about a company like Dr. Reddy's Laboratories (NYSE: RDY). Although this Indian company is earning most of its revenue today in Europe and the United States selling low-cost generics, it's positioned extremely well to benefit from sales in the Indian market as it grows. It's a domestic company, so it knows the market well, and it specializes in marketing the low-cost drugs that are likely to sell best in India.

This, in other words, is what a real growth opportunity looks like. Dr. Reddy's is a small company with a wide market opportunity that stands to benefit from meaningful macroeconomic tailwinds.

Looking for more?
At Motley Fool Global Gains, we believe that real growth opportunities are available over and over again in the world's emerging markets, simply because these markets are creating so many meaningful economic tailwinds these days.

http://www.fool.com/investing/international/2010/01/15/this-is-what-a-real-growth-opportunity-looks-like.aspx

Setting your family meeting structure

Nothing is wrong with the living room for an annual family business meeting if you're talking about your immediate family, but consider these guidelines as your business evolves:

- Always have a formal agenda that all participating memebrs contribute to in advance.  As in any business meeting, you should be prepared with facts and exhibits, if necessary.  Distribute this agenda before the meeting so everyone can review it.

- Designate a facilitator for the meeting - in small groups, the responsibility can move around (it's good training for the kids), but as the group gets larger, you may want to work with a professional facilitator or someone who can manage the event without a stake in it. 

- Appoint someone to act as the meeting secretary to keep a running history of discussion in these meetings.

- Make it a priority to increase the growth and value of the company, and devote at least part of the meeting to report on how that's going.

- Set ground rules about anger and conflict, in family businesses, emotions run high, and unchecked emotion in family meetings can derail other critical business.

- As more family memebrs join the business, consider neutral territory if doing so makes the crowd more comfortable and facilitates discussion.

So your kids are in grammar school? Plan anyway

Considering how the transfer of assets will go in a family can never start early enough. 

Your objective is to preserve the value of the business and personal assets you've created, no matter how old you and your kids are. 

The uncertainty over the estate tax exemption (US) in the next few years means that the best idea is to discuss strategy now rather than later.

Most financial experts advise that you revise your estate plan every five years or as lifestyle issues change.

Remember, the estate and valuation issues with your business don't exist in a vacuum.  To ensure that the value of your business will benefit your kids and future generations, you need to do some very prescient planning.

Succession conspiracy in family company

Does your business look like this?

Ivan Landsberg, a Yale University expert in family businesses, coined the term succession conspiracy - how business owners, their spouses, their family members, and non-family co-workers either consciously or unconsciously make damaging decisions that foil the effective succession of the busines to the next generation.

He described three general types of family business management structures back in the 1980s:

Controlling owner:  A single owner is involved in every aspect of the business and makes critical decisions.  Typically little or no planning occurs for this owner's departure.

Sibling partnership:  Siblings may share leadership, or a lead sibling may be designated - or designated by default - to make most of the business's key decisions.

Cousin consortium:  This structure is common among some of the biggest family fortunes in the world.  When the business has been passed on to the children of prior sibling owners, eventually several branches of the family share ownership, and coalitions may be formed to create blocks of stock that represent more voting power.

Aligning with any of these ownership structures doesn't mean your family company is necessary sliding off the rails.  But if you recognise yourself in any of these structures, ask yourself whether the following also applies:

• The owner has created a succession plan that not only sets benchmarks for who the next generation leadership will be but also comes with full buy-in from all family memebrs, young and old, with a stake in the business.
• The owner and top family officers have spoken with family members recently either separately or in a group about their feelings about the business and whether any conflicts or issues need to be worked out.  Better yet, is there a formal meeting structure?
• The owner has helped craft - with experienced legal and tax professionals - a quality transition plan that allows her the money and freedom to work in the family business if she's asked or to comfortably start retirement or a new phase of her career.