The Smart way to run a business

An interesting article from the Businesstimes.com.sg. The are thousands of people write about their way to run a business. Well, this could just another one. Anyway, the article is from local author, therefore, the praticality may be higher as compare to non-local authors?!

Here is the article:

WITH the current uncertain economic climate in Singapore expected to last at least another year, is this an opportune time to think about starting your own small business?

The answer is a resounding yes. There is still money to be made as a small business owner if you adhere to a few simple rules. The following are five tips - aptly called Smart - that you can use if you are thinking about starting your own small business.

S - Sources of funds

The initial funds needed to start your small business are likely to come from either equity or debt. During this 'credit crunch' period, banks are cautious about lending, particularly to small business owners. You are likely to encounter difficulty in getting financing even if you put up collateral.

The plummeting real estate market does not help either as the collateral is likely to be your home - where value has fallen considerably in the past year.

That leaves only equity - your own savings. You may not wish to put up all the money yourself. Spread the risks by getting other people to invest in your business. The key is to work hard and smart, make a good profit and then reward your investors by paying dividends.

Another source of funds that people tend to ignore or are ignorant of is the government. Do spend time checking out the numerous financial assistance schemes offered by various government agencies such as the Business Angels Scheme or Start-Up Enterprise Development Scheme by Spring Singapore.

The management of funds is just as important as the sources of funds. Remember that cash flow is the lifeblood of your business. Prepare a cash budget to give a projection of the cash inflows and outflows of your business. While you can reliably predict when you will have to pay your bills, it will take some skill and a lot of faith to reliably predict the cash inflows. Your customers will most certainly delay making payments as long as possible, especially in this tough business climate.

M - Macro-environmental scanning and mentor

Study carefully the emerging trends in the demographic, economic, social/cultural, technological and political environments.

Emerging environmental trends create tremendous opportunities if you manage to spot these early enough. For example, shifts in demographics in the last ten years have created opportunities for small businesses to market their products and services to the elderly, foreign workers and residents living in the new townships of Punggol, Sembawang, Sengkang and so on.

Nowadays, many teenagers work part-time and have sizeable disposal incomes and specific needs. The current economic downturn also means that consumers are looking for value-for-money products that will allow them to stretch their dollar. These are lucrative markets that any small business owner cannot ignore.

M also stands for 'mentor'. It is important to have one, more so if you are starting your maiden business venture. A mentor is a valuable source of information, especially when you are writing your first business plan.

He or she can also offer fresh perspectives on problems, act as a 'sparring partner' or just to give emotional support. Have someone that you admire and trust to be your mentor. Your mentor can be another entrepreneur or a friend who is older, more experienced and who has been through the school of hard knocks.

A - Analyse competitors and suppliers

Are you aware of what your competitors are doing to draw away your customers?

A US study has shown that most business owners are clueless about the competition, leading to lost customers and market share. Spend time observing and determining which businesses are likely to compete with you for the same group of customers, study their business strategies and observe how they run their day-to-day operations.

Understanding the competition will allow you to develop effective business strategies to overcome your rivals and to capture market share.

Your competitive advantage could be the product itself, level of service offered, the location or a combination of all three.

While it may be relatively common for small business owners to analyse the competition, they tend to ignore the suppliers. This is a mistake that all entrepreneurs should avoid.

Whether you are producing the goods yourself or outsourcing the production to another party, analyse your suppliers carefully and select those that are reliable, have good track records, and deliver quality goods and services at competitive prices to allow you to earn a reasonable margin for your efforts.

R - Research your customers

You have to conduct market research to determine whether there is a genuine need for your products and services as well as to understand better the buying behaviour of potential customers.

Good and relevant market research data will enable you to write a business plan that really works for you. Conducting market research need not be an expensive exercise. Not many entrepreneurs are aware that they can engage business studies students of Singapore Polytechnic's School of Business to conduct market research for a token fee.

Working under the supervision of the SP Centre for Enterprise & Executive Development and Research, these business studies students have conducted over 200 market research projects for more than 100 small and medium enterprises over the past 10 years.

T - Timing and the right marketing strategy

There is no better time than the present to start your own business. Take the plunge now. There are several advantages if you start your small business during an economic downturn.

You will probably pay lower rental for your business premises in a better location, have greater bargaining power with your suppliers and a greater chance of getting talented people to work for you.

Besides timing, another critical success factor is to have a coherent marketing strategy. Align your product strategy with your strategies for pricing, promotions and how you will make your products and services easily available to your customers.

Spend sufficient time to develop a cost-effective action plan to deliver your products and services and pass on the cost savings to your customers.

Offer products of good value and treat your customers with respect, and your customers will keep coming back to buy from you. So forget about spending money on 'above the line' or 'below the line' advertising.

The most important line for your small business is the bottom line.

Recovery? Short term blip?

While everyone is worried losing their job; the market recession; cutting costs... There are a group of people who had spent big bucks.

Is it a sign of recovery or a short term blip?

Business Times - 17 Mar 2009

Developer home sales hit 18-month high

By ARTHUR SIM

(SINGAPORE) Developers sold 1,323 new housing units in February - eleven times more than in January.

Urban Redevelopment Authority figures show sales hit their highest level since the previous peak of 1,723 units in August 2007, leading some to say that market momentum has returned.

Colliers International's director for research and advisory Tay Huey Ying said that if developers stick with current pricing and product strategies, 'this trend will stay'.

'We have always said there are buyers waiting to buy,' she said, adding that smaller units at lower prices 'are within a buyer's risk appetite'.

DTZ senior director Chua Chor Hoon said: 'Despite the credit crunch there is still plenty of liquidity in the market. Many people have not committed to purchases in the past two years, and savings interest rates are so low now.'

Barclays Capital economist Leong Wai Ho also reckons low interest rates could be a factor in the sales spike, saying 'abysmally low loan and deposit rates remove the incentive to keep idle balances in cash'.

Still Mr Leong does not think February's momentum is sustainable. 'The risk going forward is that HDB upgrader demand is likely to unravel as the pain from rising joblessness and lower wage payouts starts to bite,' he said.

He also noted that two new launches accounted for the spike in February. 'Take those two projects out and you have a good idea what is happening in the broader market,' he said.

The two projects are the 712-unit Caspian at Jurong and the 293-unit Alexis @ Alexandra, which sold 517 and 293 units at median prices of $603 and $1,083 psf respectively.

Other significant transactions in February were at the 625-unit The Quartz, with 168 units sold at a median price of $591 psf; the 38-unit Palmeria Residence with 22 units sold at a median price of $775 psf; and the 31-unit D'Chateau @ Shelford with 21 units sold at a median price of $1,000 psf.

PropNex CEO Mohamed Ismail believes more than 50 per cent of February's sales involved HDB upgraders, as 70 per cent of the units sold were under $1,000 psf.

'Developers have slashed prices, accepting minimal profits,' he said. 'This makes it irresistible for serious buyers, be they investors or HDB upgraders.'

Jones Lang LaSalle's local director and head of research (South-east Asia) Chua Yang Liang said all regions registered strong take-up rates, with 102 units sold in the Core Central Region, 840 sold in the Outside Central Region and 381 units sold in the Rest of Central region.

But he doubts the rally can be sustained. 'The strong market showing in February is likely to be a short-term blip in the overall larger scheme of things,' he said.

While February sales were healthy, returned units from speculators without the means to hold could become a dampener. Already, classified advertisements have appeared for sub-sales at Caspian and Alexis.

DMG Research analyst Brandon Lee thinks speculation is still 'subdued', with most buyers either Singaporeans or permanent residents purchasing units to occupy.

'Volume in the sub-sale market remains tepid, at less than 100 units transacted in February,' he said.

Selling 1,000 units a month will be hard to achieve, he feels. 'A more reasonable figure would be 500-600 units for the next three months. After that, the picture would possibly revert back to a normal 200-300 units as the economy worsens and the HDB resale market softens.'

March sales have already hit about 300 units, with 210 sold at the 646-unit Double Bay at Simei, as well as about 25 at the 104-unit Domus in Novena. It is also understood that the 60-unit Kembangan Suites project is fully sold.

Knight Frank's director of research and consultancy Nicholas Mak said that leaving aside Caspian and Alexis, February's sales of 513 units were the strongest in seven months.

But he cautions that there is a 'limited' pool of buyers for small units, and says HDB upgraders could become more discerning. 'If an HDB upgrader moves from a four or five-room HDB flat to a one or two-bedroom condo, it's not really upgrading,' he said.

AIG's fading hope of AIA sale pinned on 3 parties

Update on insurance industry. Seriously, I can differentiate a good news and bad news now. But, one thing i am sure... It is a good time to 'invest' if you have excess of dollars. Spend you money wisely.

Reuters - Thursday, February 26

* 3 potential bidders remain for AIA - sources

* Bank of China, HSBC dropped out

* Bids due on Friday; no formal offers yet

By Michael Flaherty

HONG KONG, Feb 25 - Three potential bidders remain interested in the sale of a large stake in American International Group's $20 billion Asian life insurance unit, people close to the matter said on Wednesday.

Bids are due on Friday, but hopes for the auction are fading fast, as economic conditions have worsened since the sale began, causing several major suitors to drop out.

UK insurer Prudential Plc , Canadian insurer Manulife and Singapore sovereign wealth fund Temasek Holdings [TEM.UL] are still considering offers for the roughly $20 billion unit, the sources said, although no formal bids have been submitted.

Bids are due on Friday, said the sources, who declined to be identified because they were not authorised to speak on the record about the process.

Prudential is still considering whether it will bid or not, but is unlikely to make an offer by then, a person familiar with the matter said, because it needs more time for due diligence.

Prudential declined to comment.

A Hong Kong-based spokesperson for Manulife did not return calls seeking comment. A Temasek spokeswoman said the company did not comment on market speculation.

Plans to sell up to 49 percent of AIA, considered AIG's crown jewel in Asia, were put in place last fall shortly after the U.S. government saved AIG from bankruptcy with a rescue that has since ballooned to around $150 billion.

Prudential Plc has engaged Credit Suisse to advise it on the AIA process, while Manulife has hired UBS AG , said the sources.

Both UBS and Credit Suisse declined to comment. It was not clear who is advising Temasek, if in fact they have engaged a bank.

PAYBACK TIME

AIG has embarked on a series of asset sales across the globe to help pay back the U.S. government. In addition to auctioning off part of AIA, AIG is selling stakes in insurance divisions in Japan, the Philippines and other units in Asia.

The sale of AIG's American Life Insurance Co, a unit that generates more than half its revenue from Japan, could fetch more than $10 billion. Bids for all AIG units under auction are due on Friday, sources say.

Like its other assets, the auction of Hong Kong-based AIA has been hampered by AIG's worsening financial state and a drop in markets globally, limiting the number of potential buyers.

Bank of China <601988.ss> dropped out of the process last month, dealing a big blow to the auction as AIG hoped the cash-rich bank would submit an attractive offer and become a front-runner, according to sources.

Global banking group HSBC <0005.hk> considered making a bid but decided not to, the sources said.

Like any auction, deadlines could move, new bidders could emerge, or the auction could be pulled due to lack of offers or low valuations.

"We continue to work with the U.S. government to evaluate potential new alternatives for addressing AIG's financial challenges," said AIG's Hong Kong-based spokeswoman Patricia Chua. "We will provide a complete update when we report financial results in the near future."

AIG plans to ask the U.S. government for more aid and is bracing for a fourth-quarter loss of roughly $60 billion, the largest quarterly loss in corporate history. [ID:nN23359818]

Reuters reported on Tuesday that AIG was willing to give up control of the prized Asian division, known formally as American International Assurance Company Ltd, to any buyer willing to pay the right price. [ID:nLO307447]

AIG hoped it could generate a relatively quick chunk of cash by putting an AIA stake on the block, but the process has fallen victim to several factors, including the drop in Asia's economy since late last year.

Still, sources close to the matter say that the auction is not dead yet, with all eyes on Friday's bidding deadline.

If the auction does not pan out, AIG would consider an IPO of AIA, the sources said.

FINANCING ISSUES

Citigroup and Goldman Sachs are advising AIG on its Asia asset sales. Both declined to comment on Wednesday.

AIA has more than 2 million policies in force according to its website, with branches and affiliates in most major countries throughout Asia outside of Japan. It has 3,800 financial services consultants and 800 staff.

"AIA is very well managed and it has dominant market share in 10 of the 12 markets it's in," said a source close to the process, who estimated AIA's average annual operating profit at around $2 billion.

One of the remaining questions surrounding the auction is how a bidder is going to pay for a more than $10 billion purchase. Most major banks have pulled back on lending. Prudential and Manulife's market capitalisations are around $10 billion and $16 billion, respectively.

Money could be raised outside of bank loans, but in this market, a buyer faces major challenges for a deal this size.

As a sovereign wealth fund, however, Temasek faces less financing hurdles. (Additional reporting by Victoria Howley in London, Saeed Azhar in Singapore; Editing by Lincoln Feast and Hans Peters)

UK's Prudential to sell most Taiwan insurance business

Is there anymore candidates queuing?

(Source: Businesstimes.com.sg)

UK's Prudential to sell most Taiwan insurance business
TAIPEI - Taiwan's China Life will buy the bulk of British insurer Prudential Plc's business in Taiwan, in the latest pullback by a foreign insurer from the island, the companies said on Friday.

Prudential will get about 10 per cent of China Life in exchange for the bulk of its PCA Life Assurance Co unit, said China Life, which would issue 145.5 million new shares and sell them to Prudential for T$15 per share, valuing the stake Prudential will get at T$2.18 billion (US$64 million).

Under the deal, China Life will take over most of Prudential's Taiwan insurance business, but the British company will retain its banking channels and telemarketing business.

'Taiwan is the best place in Asia to do business for insurance companies, and we'll continue to be here,' said Barry Stowe, chief executive of Prudential Asia.
The sale by Prudential, the No. 2 British insurer, comes as big global giants are trying to raise cash to shore up their positions at home amid the global financial storm.
ING Groep recently closed the US$600 million sale of its Taiwan insurance unit to Fubon Financial, four months after announcing the deal.

Dutch insurer Aegon is also planning to dispose its Taiwan unit for an initial asking price of T$4 billion, according to local media reports.

And AIG is also trying to find a bidder for its Taiwan life insurance business, Nan Shan Life, though sources have said potential buyers consider the asking price was too high.

Prudential, with a 2.76 per cent share by total premium in the Taiwan market, posted losses there in three of the four years since 2005.

The firm had a T$4.0 billion net loss in the nine months to last September, following a loss of T$3.1 billion in 2007 and a T$882 million loss in 2005. It posted a T$2.2 billion net profit in 2006, according to the website of its Taiwan unit.

On Friday, shares of China Life ended down 4.62 per cent at T$11.35, lagging the broader market, which fell 2.03 per cent. -- REUTERS

New Monetisation Option For Elderly With Lease Buyback Scheme (LBS)

This one of the effort our Gov put in to help the elderly, taking care of their after retirement life. By looking at the eligibility conditions at the first glance, I though the plan is a bit… but, think twice, it is a fair deal.

I am wondering how many of you out there has met someone who is renting a HDB flat from Gov. I met one, yesterday.

(Source from www.hdb.gov.sg)
Eligibility Conditions
LBS is available to Singapore citizens owning 3-room or smaller flats where the outstanding mortgage loan is $5,000 or lower. They must also meet the following criteria:
• Age of youngest lessee is 62 years or older;
• Household income of $3,000 or less;
• Have not previously owned a 4-room or larger flat or private property;
• Have only enjoyed one housing subsidy;
• Have owned the existing flat for 5 years or more.

Numerical Example Of How LBS Works (an example is better than a thousand words)

Take the example of a 3-room flat with a remaining lease of 70 years, and a market value of $236,000. The lessees sell to HDB 40 years of the lease, and continue to stay in the same flat which is left with a 30-year lease.

HDB bought the 40 years of lease at about $104,000 (I do not how they derive the figure, some formula involved, I believe.), and provide a top-up of $10,000 in Government subsidy, i.e. a total of $114,000. Out of this $114,000:
a) The lessees will receive $5,000 upfront

b) The remaining $109,000 will be used to purchase an Immediate Annuity from CPF Board that yields a monthly payout for life. The indicative monthly payout is:
• $530 if a male is the sole lessee who joins the LBS at age 62
• $490 if a female is the sole lessee who joins the LBS at age 62
• a combined figure of $510 if the flat is jointly owned by an elderly couple both aged 62

What kinds of insurance plan should i buy?

Financial planning, or I should put it this way – If given a choice, how would you prioritize your insurance policies purchase sequence? It is personal.

As you speak with different people, you will find people prioritize they insurance policies differently. Some say life insurance is more important; some say term insurance is good as it provide high protection as a lower cost as compare to life insurance. Who is correct? I would say – no one is wrong.

I do have a prioritization chart for purchase of insurance policies are involved and I do share my views with my friend, some of them agree and some of then think otherwise. No matter what, I hope you will find this entry useful. This entry is purely my personal opinion. You may disagree with it.

In Singapore, I would strongly suggest the sequence for purchase of personal insurance coverage start from:

1. Hospitalization plan
Why hospitalization is the first to cover?
Answer this the following;
Where will you go if unfortunate events (accidents, serious illnesses) happen to you? And sorry to tell that your Critical illnesses (CI) coverage does not pay for your hospitalization bill.

As we know, all Singaporeans are covered with Medishield. But, Medishield only covers certain portion of your hospitalization bill. Moreover, there is a claim limit for claimable items . i.e. room and board limit, table limits and so on.

Therefore, you are advised to engage a third party insurance company to get a comprehensive (100% hospitalization bill cover) hospitalization cover. Almost all life insurance companies has ‘as charged’ hospitalization plan - shield plan which pay by medisave, but do bear in mind you need an additional rider (some companies name it as ‘plus’, ‘extra’) to cover the ‘deductable’ and ‘co-insurance’. For more detail please check with you financial consultant or you may click here to find out how ‘deductable’ and ‘co-insurance’ works.

2. Life insurance/Term plan
Once your hospitalization bill covered, then it is the time you look into life insurance.
At this stage, we are looking into coverage for – Death, Total Permanent Disability (TPD) and Critical illnesses.
Few basic factors to calculate your coverage needs:

Death
Your current liability
If you are the sole bread winner, your family annual basic expenses and how many years they need to be supported before they are able to sustain themselves

TPD
The medical costs (post hospitalization treatment)
The supporting equipment for you to move around
You and your family expenses before you can find an alterative source of income.

CI
The medical costs ( pre and post hospitalization treatment which is not covered by shield plan)
Health monitoring devices/ equipment
You and your family expenses before you can find an alterative source of income.

Now, what is your number? Of course, it is only a rough figure, you need a comprehensive analysis to find out the actual figures.

Also, various optional benefits can be added to life policies, depends on individual insurance companies.

3. Accident plan
This is the plan which most of people find it unnecessary, I was one of them.
TPD defines as - Loss of two of: eyes, arms or legs.
What happen you only loss one of your eye, arm, feet? Losing one of those are not categorize as TPD. Well, this is when accident plan kicks in.

4. Endowment plan
Share market is volatile for your; keep your money in a bank does not suit your appetite. Traditional endowment plan could an alternative for you. Low risk; generally 3-6 percent return.

It is an instrument that aid you to start saving habit!

Please bear in mind, endowment plan does not give you high return as compare to other high risk investment instrument, but it help to hedge your principle against inflation, at least.

That’s my prioritization for type of insurance purchase. Share with me yours.

Off Peak Car (OPC)

I am thinking of getting a second car, to be exact off peak car (OPC), for Journey to the north. There are quite a number of good buy due to current market situation and COE prices. After considering several factors (the main one none other than $$$), a few Korean cars are in my list.

Today, I’ve made a trip down a Korean car show room, requested a sales representative to do the sum for OPC car loan installment.

Surprisingly, I lean something new today - S$17,000 rebate for OPC come with a condition

Scenario 1
Assume COE open cat is S$8,000
Rebate – OMV = S$9,000 (more than S$8,000)
Yeah! You do not need to top up a single cent

Scenario 2
Assume COE open cat is S$8,000
Rebate – OMV = S$6,000 (lesser than S$8,000)
Sorry, you have to top up S$2,000 to make up S$8,000

See, there are always terms and conditions behind the scene.