After a series of applications, an interview and a long waiting period, you finally receive a letter or an email offering you a job. Of course your first reaction would be that of utmost joy and excitement. But, before you jump the gun and accept that job, take a few minutes to answer the questions below and to know when it is ideal to accept a job offer .
When the excitement wears out, you find out that the job offer isn’t actually as great as it seemed at first. This is the point where so many people make mistakes. Having searched for a job for a long time, they become desperate enough to settle for much less than they are worth strongly believing that they do not have a choice. Our economy doesn’t in anyway lighten this burden either.
Just as the company had you go through thorough screening to see if you’ll be fit for their ‘long list of requirements’, you should also conduct a discreet screening of the company in question and find out if it will be a good fit for your personal needs, your relationships as well as your career.
These questions should set the pace for conclusive screening of your potential boss;
- How well do you know your ‘soon-to-be’ boss and the company?
- Would you be proud to say you work at that company in future?
- Do they observe any practices that are against your values and principles?
- How will the cost of commuting to work cost you?
- Is the salary being offered commiserate with your qualifications?
- How would working in this company affect your career?
- Do you have a clear understanding of your role and responsibilities?
- Are there any exciting perks and benefits that come with your job?
- What are your working hours?
Bottom-line is that you need to take a deep breath, read the offer again and make up your mind at a slow pace. There’s no harm in politely asking for time to think about a job offer. Be in charge of making logical decisions so that you don’t end up with ‘what-ifs’ or worse stuck in a job you don’t want.
If you had $100,000 in cash, where would you invest it in US markets?
What an American investor would do if he had to invest $100,000.
America is a nation of options. Take water for example, you can buy bottled water, water with mineral salts, water without salts, carbonated water, fruit-flavored water, or even water that is infused with oxygen. This example holds true when it comes to investing.
You may walk into your financial adviser’s office with a clear idea of what you want to do. Let’s say you want to save for retirement, and then you are presented with options — do you want long-term investment options? Should you buy bonds? Okay… what kind of bond; interest-paying or non-interest paying? Inflation-indexed? Real Estate backed bonds? Convertible bond? 100-year bonds? The options are endless.
How would an American invest $100,000?
Let us start from a plain vanilla bank savings account. I got Fig 1 below from a J. P. Morgan Asset Management (JPMAM) presentation, and it tracks savings account return from 1994 to 2020. If that investor had put $100,000 into a savings account in 2000, those funds would have earned 6%. Today, however, those same funds put in the same account will only return 0.28% per annum. Keep in mind that inflation in the United States is currently at 0.3%. So, the investors are just barely hanging on in terms of earning a yield.
More questions to consider…
- What if the investor decides to earn a return that is higher than US inflation?
- How can the investor beat inflation?
- What about bonds?
Well, the US Treasury Bonds are quite safe. The US dollar is also very strong. Can a dollar bond beat inflation? The simple answer is no. Take the 10-year bond yield in Figure 2; the yield has fallen from a high of nearly 5.5% in 2007 to just about 0.74 in 2020. Bond yields move in the opposite direction as interest rates. So, as interest rates in the US fall, bond prices rise, thus yields fall.
Investing in bonds does get the US investor a real rate, but certainly no daylight. How else can the US investor boost his returns to real gains? Keep in mind this desire for yields will necessitate having to expose the portfolio to more volatility (risk). What about equities?
Investing in US equities
In 2020, the US stock market has been essentially flat, as Figure 3 shows. However, 2020 is an outlier and can be attributed to the economic malaise caused by the COVID-19 shutdown. The annualized return of the S&P 500 index between 1919 and 2019 is 10.47% (dividends included). So, whilst we cannot predict future earning, we can use the average returns as a guide.
So, if that investor was looking at a fixed guaranteed return, with lower risk, the US Treasury Bonds will be the way to go. If, however, the investor wanted to take more risk and potentially grow his capital, investing in the capital market is the way to.
Figure 4. shows the relationship in terms of yield between both asset classes. From 1901 to 1958, the dividend yield earned on US equities exceeds that paid by US bonds. From 1959 to 2008 however, the dividend yield on US Government bonds surpassed that from Equities.
What is happening is simple —as stock prices rise, their dividend yield falls. This is because there is an inverse relationship between the two. Thus, in the earlier part of the century, bonds did not pay a lot in terms of coupons. Therefore, dividend yield from equities outperformed bonds. However, as America raised interest rates in the 1970s to combat inflation, bond yields rose and overtook stock yields. Fast-forward to the year 2007 when the Federal Reserve dropped rates to combat the global financial crises, equity yields again started to do better than bonds.
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The lesson from this analysis is clear, and that is the need for investors to know what exactly they seek: returns or yields. While stocks may have outperformed bonds by returns, bonds have beaten stocks in terms of yield earned.
In closing, the asset class with the best return in the US for the last decade has been Real Estate Investment Trusts (REITS).
5 things you can do to attract equity funding for your business
Equity financing is a reliable funding option.
One challenge that is peculiar to all Micro Small and Medium Enterprises (MSMEs) is that of funding. Of course, the level of challenge depends on the size of the business and the plan that needs to be executed. It is even more so for start-ups looking for funds to bring their business ideas to life.
To solve this challenge, entrepreneurs and business managers explore several sources including applying for loans, grants, partnerships and so on.
Equity financing is a reliable funding option. It basically involves giving out some equity or ownership in your business, in exchange for capital. This could come from friends, family members or potential business partners, and it is often aimed at raising money to pay short-term bills or financing long-term expansion plans.
Recently on the weekly Nairametrics “Business Half Hour” with Ugodre, Tokunboh Ishmael, Co-Founder and Managing Director of Alitheia Capital, discussed the topic “Private Equity Funding for SMEs” in detail.
Among other things, Tokunbo gave some pointers as to how business owners could attract the right equity financing for their business options. The points summarized below tell you what potential equity finance partners (individuals or partners) look out for.
Management (Who is the manager?)
Any company or individual who puts up money for your business, in exchange for equity, is definitely concerned about the management.
They want to know if the manager of the business has had any experience managing a similar business before. This is considered a form of apprenticeship and it is expected that whatever knowledge gained would help make you more efficient in dealing with issues that may arise in the course of the business.
Does he have the requisite educational background? It does not always take someone with a Masters in Business Administration (MBA) to grow a successful business. But that MBA degree could suffice, especially when you do not possess any other relevant experience.
Do you have the relevant track record? What happens if you have overseen a business which eventually went bankrupt or crashed due to management problems? Does this make the Equity fund partner more or less willing to put money into the business? Obviously not!
Some people can wake up and be successful entrepreneurs at first try, but this is not usually the case. Most will go through years of rising and falling, or working under others to gain the relevant experience of running a business.
Management is a critical point that any company or individual will look at, when you approach them with the offer of equity in exchange for funding.
Opportunities (What opportunities does it bring to the investor?)
Every business idea is an attempt to solve a problem. But what separates successful business ideas from others is that there is something unique about your solution.
First identify and understand the problem you want to solve, and from there work out a sustainable business solution. Every equity investor will be concerned with the uniqueness of your solution. Is it peculiar to you? Or is it something that everyone else is doing?
If your business idea has an easy entry point, meaning your idea is not unique to you, it would be difficult to get equity funding. Why? The potential investors already understand that you would soon have to deal with serious competitors who might end up doing what you do even better.
If your business idea shows a potential to make investors part of something big and unique, then you are more likely to get the funds you need. No company or individual wants to invest money in a business idea that will soon be drowned by competition.
You may get some sympathy funds from family members and maybe friends, but not any significant sum that will take you far.
ROI (How soon can investors get returns?)
Returns on Investment (ROI) are a key consideration for any investor (except perhaps charity organisations).
An investor’s concern with returns can best be likened to a retiree’s concern with pension. It is a most sacred topic and in fact, one of the first things they want to find out before putting in their money.
Based on your business idea and model, do I have to wait a year, two or three years before getting any returns?
A quarter may be too short to expect returns, but maybe three years would also be too long to wait. It all depends on your business venture, and of course, the investor’s plans. If he has plans to start channeling the returns into other ventures within six months, then a two-year wait would not be for that investor.
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Returns are not always financial, they could also be social. If the equity company is one that is more disposed towards a certain sector of the economy, say tech or agriculture, then the success of the company brings not only financial returns, but social returns to the company.
This is something you should also look out for before approaching any company for equity funding. You do not want to approach a company with an agricultural business idea, when the company is more disposed towards technology or education.
Ability to scale (Is the business expandable and replicable?)
A private equity partner is also concerned about how soon your business can expand, and how replicable your strategy is. Can it scale up?
Do you have a business idea that is so built around you, that it cannot function without you? Do you have a business idea or structure that will likely crumble if you die? Do you have a process that can be replicated?
The investor wants to know for sure that there are growth and expansion potentials. There is a need to be sure that the business idea you have is not one that can only remain confined to your bedroom. They want to know that you can move from offering your services in one state to serving several states and even the global community.
Why is this even necessary?
Because, it affects how attractive the business will become to the next level of investors who will take over from the private equity investors. This leads us to the next point they consider.
Exit potential (How can they sell out their equity and exit the company?)
Private equity investors are often not interested in taking over your business from you. Their aim is to bring in money for you when you are starting up, provide you advice and partnership, and sell out when it grows. They are not interested in having investments in different sectors of the economy. This explains why they are often concerned about the exit potential in your business.
Is there the likelihood that we can exit sometime in the future? Or do we just invest and get stuck? How attractive can this business become for the next level of investors – the institutional investors who will come in to own the business with you and stick to the end?
One of the most frightening possibilities to the private equity investor is that when he is ready to exit, there is no one to buy in and take over. So you need to answer the question – how attractive is your business idea to investors, and what is the exit potential?
If all five questions are dealt with satisfactorily, then you are well on your way to getting a good private equity partners to provide you financing for your business.
5 indispensable money advice for the 21st century working adult
Some excellent finance tips for the 21st-century adult to keep in mind.
A lot of people argue that the digital century has made it much easier to make money. With a simple tap on your phone screen, you could invest in global stocks and resell at a high price within a short period.
Some others are making money by simply entertaining the world on their YouTube channel, and some others have built a loyal community of followers on social media platforms like Twitter and Instagram, turned into ‘mini celebrities’ and brand influencers who now make serious money by helping to bring merchant’s products into the consciousness of their followers.
Now, whereas the ability to make money has become easier, managing one’s finances is, however, a different ballgame. As a matter of fact, it is guided by completely different laws from those of making money. We hereby bring you some important tips on how to manage your money.
Below are some excellent finance tips for the 21st-century adult to keep in mind. Why the 21st century? Well, this age has completely different trends and a whole different kind of financial challenge.
Never regard gambling or money doubling ventures as investments
Such ventures are ‘for-profit’, meaning that they are out to make more money than they payout. So what are the odds that you, out of the millions who play the game, will end up as winners? Probably less than 0.000001. That said, you are more likely to lose your money than win more.
Playing or not playing such games may completely be a thing of moral disposition. However, if you want to play the game, consider the money as one that many never come back, instead of as one that is expected to come back in multiples as return on investment.
Better still, find other pastimes or distractions if you enjoy playing games. Once again, these are not ‘investments’. It is gambling.
Understand what promotions and discounts really mean
Discounts and promotions often come across as saving some money. But of a truth, you are not saving, you are spending – maybe less, but you are still spending nonetheless.
It is not an unwise decision to take advantage of discounts and promotions, but if you do not already have the item listed in your budget, it is better to disregard it.
Unfortunately, this is not often the case as young adults continue to be overwhelmed by the sense of urgency when a merchant declares a 30% discount of sales of his products for a limited period.
The emotional pull is to cash in on this promo while it last, especially since the message says you can save a certain amount of money by buying it. However, the practical reality before you is that you are spending and not saving at the moment you make the purchase.
You are only actually saving some money when you already have the item in your list of expenses and end up spending a lesser amount to purchase the same item.
However, if a discount is being offered on a product you absolutely need, you can go ahead to make the purchase even if you have not planned for it, so long as you understand the difference between needs and luxuries.
This should not be a habit because it makes a mess of the financial discipline you have been trying to build on so, it’s something you should be mindful of.
Whenever you go shopping, go with a list and stick to it
Never go shopping without a market list. It probably seems like a weird thing to do but having a market list can and should prevent you from impulsive buying, where you buy items you do not need and forget the things you need.
Every Merchant is out to make sales and the result of this is that they try to make their products as appealing and captivating as possible.
No matter how few items you want to buy make a list and stick to it. You have no idea how much heartache it can save you.
Place a cap/limit on your weekly spending
Nothing truncates your financial goals like unplanned spending. Having understood what makes up your weekly budget, make some allowance for emergencies and place a weekly limit.
The attitude of ‘lets-see’how-it-goes’ is not the best for managing your finances. The choice to place a weekly limit is akin to checking your expenses, especially since you know that spending on unnecessary items could result in you sacrificing some of your actual needs till the next week.
Banks and financial institutions can help you activate this feature, thus preventing you from making any debit transaction on your card once you have reached your limit.
With this, you are compelled to postpone other expenses until the start of a new week.
Make buying decisions based on value and not cost
For the purpose of clarity, cost is what you pay for the product and value is what you get. The summary of this point is that you should know when an item actually costs more than it is sold, and make your buying decisions based on this knowledge.
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John and Francis both decide to get a car, but while John decides to buy a brand new car, Francis opts for a fairly used car at less than half the price.
Three months later, Francis’ car has spent more nights at the mechanic shop than in his garage, while John has only now remembered to take his car for the regular maintenance and check.
On the surface, John might have paid more but he got his money’s value, while Francis has come to discover that he paid more (cost) for less (value). For all the troubles it has given to him, he would probably have been better off going for the newer car or staying without a car at all.
When you want to make a buy, decipher the cost and the value and let this be your guide. You might spend much, but make sure it is right for the value you are getting.