Money talks or advice?

Getting sound advice before making key decisions will help reduce losses. Most young entrepreneurs do not realise the importance of money until they run out of it. Money makes money!

AS a parent, I do miss my two boys when they are studying overseas.

Always worried whether they have sufficient money to spend and sufficient memory to store all the good advice given.

Whenever they do whatsApp me, it will most likely be on issues concerning money and occasionally seeking advice.

At times asking for money to pay for tuition fees and sometimes giving me a heads up on some supplementary credit card charges coming my way. When it comes to money matters, my two boys are extremely polite and write beautifully as if their livelihood depends on it.

Once in a while, they ask for advice. Like choice of subjects, universities and internship. Maybe just to make this old man feel needed. Well, definitely no complaints from me as advice is free.

And it gives me an opportunity to connect with them. Which means an excuse to Skype. Having a face to face chat on anything and everything which inevitably ends with me asking them whether they have enough money left in their bank account.

Just a gentle reminder that they can always depend on their old man whenever they need advice. And money.

So when you are on your own, what do you really need at this juncture of your business cycle? Money or advice?

For a new startup, my advice to you is to get proper advice from sincere people with relevant and preferably substantial experience. The older the person, the better.

Business people who have been cheated before and survived through business failures, partnership break ups and financial crisis.

Let the devil's advocate honestly tear your business plan to shreds, telling you all the possible pitfalls that you will encounter and watch your beautifully crafted dream evaporate before your misty eyes.

If you are able to take all these harsh and negative comments objectively, revisit your business plan, discard the potential pitfalls and insert positive corrective steps into your new business plan. You now have a fighting chance that your new startup will survive its formative years.

Then you start worrying about money.

So what happens when you have nobody to turn to for advice? Are you gungho enough to still proceed and take the risk, gangnam style? Putting all your energy and money into that one song and dance and hope for it to be a big hit?

Should you dance by yourself or should you get back up dancers? If you need partners, what do you want from your partners? Money or advice? Or complementary skills?

My favourite example of a wildly successful partnership has got to be the Tony and Din duo act of Tune and AirAsia fame.

One, the consummate showman with charismatic leadership. The other, an actuary, brilliant in crunching big numbers and an astute statistician.

Both started with little money, lots of guts and a perfect blend of complementary skills needed for the low cost airline business. Massive capital expenditure to be paid for by massive sales of low cost tickets which requires accurate forecasting and inspirational marketing to convince the masses to fly. In this case, two big heads better than one.

There will be instances when you need partners with money and easy access to more money. Partners who can help you leverage for growth and have the trust of bankers.

Are you prepared to give up a big chunk of your business? Partners with skills and no money will not be demanding as advice is cheap.

If you are involved in serious money talk, be prepared to let your new partners have a bigger share of profits just as you expect him to contribute a bigger share of financing.

A smaller share of big profits is still better than 100% share of zero profits. Just bury your big ego and get your business going.

Most young entrepreneurs do not realise the importance of money... until they run out of it. Money makes money. Small investments make small money and big investments make big big money. Cash is king and Talk is cheap. But absorbing relevant sound advice before making key decisions will help you to reduce losses or hopefully make more money. So learn to listen. Attentively.

There are no statistics available as to how many new startups actually survive the initial years. And how many more actually survive and win big at the finish line. My gut feel is one big success story out of a thousand.

If all of them received solid sound advice before they start, 500 of them will probably not start, the 499 stubborn startups will probably survive and there will still be only one big winner at the end.

At least, there will be 500 less casualties of empty wallets and broken dreams.

Bringing up your children to become productive and upright citizens involves huge capital investment with a lifetime dosages of advice and love.

With no monetary returns expected. All you can hope for are the occasional moments of being needed when they need advice. Or money.

If they shower you with love and kindness in your twilight years, consider yourself blessed and your investment justified. May all parents be blessed.

ON YOUR OWN By TAN THIAM HOCK

To access earlier articles of On Your Own, log on to www.thiamhock.com. Honest comments welcomed and approved

America's Highest-Paying Office Jobs

If you want to keep getting raises, get promoted to senior management. As tough as the economy has been, people in executive positions saw their paychecks increase by an average of 6.6% this year, to $108,800. That’s according to data just released by Compdata Surveys, a national compensation survey and consulting firm in Olathe, Kan.

Compdata looked at base salaries for 26 senior management jobs below C-level. For the eighth consecutive year, commercial lending directors take the top spot, with the highest average paychecks. They are earning $143,700, on average, in 2012, up from $139,000 last year.

In Pictures: America’s 10 Highest-Paying Office Jobs

“Commercial lending directors hold the top spot again this year and have for many years. Although their salary did take a slight hit during the recession, it was minor compared to other senior management positions,” says Amy Kaminski, a vice president at Compdata Surveys. “This is likely because of the nature of their work.”

Commercial lending directors are responsible for the development, administration and oversight of commercial lending policies. “Since a large number of new businesses fail within the first five years, a lot of pressure is put on commercial lending directors to ensure the loans they are granting are sound,” Kaminski adds. “The recession only amplified the difficulty of this position as the qualifications to obtain any type of loan became more rigid.”

Ranking second on the list, engineering directors are making an average of $131,300 this year, up 7.4% from 2011.

“Engineering directors have always been one of the higher paid senior management positions,” Kaminski says. “Engineers are in great demand, and finding a person with the right combination of education, experience and leadership skills to oversee a company’s engineering activities can be difficult. Now, with speculation of an engineering shortage looming, compounded with an increased emphasis on growing the manufacturing industry in the United States, engineering directors have become a valuable asset.”

In the No. 3 position, general managers are earning $131,200, up slightly from $127,900 last year, while No. 4 finance directors are making $125,000, which is 9.5% more than they made in 2011.

The biggest winners over a five-year period are material management directors, who are earning 18% more this year than in 2007, and accounting directors, whose paychecks have grown 17.8% in the same period.

“Over the past several years, an emphasis has been placed on lean manufacturing practices, with these practices even inching their way into other industries,” Kaminski says. “Keeping tight control over inventory levels or materials needed for businesses to function is a big element of implementing lean practices – and that is where materials management directors come in.”

They control, measure, and regulate efficient inventory levels, making sure to have enough materials on hand to conduct business. “The recession reinforced this practice, as budgets were slashed and employers demanded that no dollar be wasted,” she says. “Keeping the proper amount of materials on hand while trying to ensure minimal or no overstock is a balancing act at which material management directors need to excel.”

Of the 26 jobs included in the survey, only one—controller assistant—is earning less in 2012 than last year. These professionals manage the accounting functions under the general direction of the controller, including establishing and maintaining accounting principles, practices, and procedures. To hold this position, you need a Bachelor’s degree and six years of experience. They’re earning $81,400 this year, down 2.2% from 2011.

“We would not consider this a large enough decrease to show a trend, especially since this position did experience a higher than expected increase in 2011,” Kaminski says. When you look at the overall results of the past five years, this position is still trending upward.

So, why are some employers compensating their managers so well right now?

“It’s no secret that having the most talented and experienced individuals on staff are going to be the key for most businesses to successfully begin moving forward after the recession. However, some studies suggest as the economy continues to improve, more individuals will be looking to change employment,” Kaminski says. “Companies cannot afford to lose those needed to lead their workers towards economic growth.”

Providing competitive compensation plans is an important element in retaining those individuals. Although the unemployment rate is just under 8%, the pool of qualified leadership candidates is significantly smaller, “making the need to retain your successful leaders that much more important,” she concludes.

Salary Data for All 26 Management Jobs:

Commercial Lending Director – $143,700 a year, on average
Engineering Director – $131,300 a year, on average
General Manager – $131,200 a year, on average
Finance Director – $125,000
Information Systems Director – $121,500
Accounting Director – $118,600

Development Officer – $118,200
Marketing Director – $118,100
Information Security Director – $116,600
Human Resources Director – $116,000
Operations Director – $115,200
Controller – $114,800
Materials Management Director – $113,000
Plant Manager – $112,000
Mortgage Lending Director – $111,100
Nursing Services Director – $109,600
Senior Manufacturing Manager – $108,000
National Sales Manager – $106,300

Systems and Programming Manager – $100,600
Plant Engineering Manager – $98,900
Distribution Manager – $86,500
Quality Control Manager – $83,600
General Accounting Manager – $83,300
Advertising and Public Relations Manager – $82,500
Human Resources Manager – $82,000
Assistant Controller – $81,400

America's 10 Highest-Paying Office Jobs

If you want to keep getting raises, get promoted to senior management. As tough as the economy has been, people in executive positions saw their paychecks increase by an average of 6.6% this year, to $108,800. That's according to data just released by Compdata Surveys, a national compensation survey and consulting firm in Olathe, Kan.Here are the 10 highest-paying senior management jobs below C-level.

This is an update of a piece that ran previously.

Jacquelyn Smith, Forbes Staff

 

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Facebook Tries to Monetize By Annoying; LinkedIn Adds to Value of its Site

In the span of 24 hours this week, the two most important (for now) publicly traded social networking companies in the world, Facebook (FB) and LinkedIn (LNKD), each made fairly minor strategic moves that did a magnificent job of highlighting the major differences not only in their corporate identities but why investors have thus far embraced one and abjectly shunned the other.

First, LinkedIn on Tuesday unveiled a new feature that will let its 175 million-plus users easily follow a panel of 150 or so “influencers” including the likes of President Obama, Richard Branson, a slew of other business leaders, entrepreneurs, bloggers and even LinkedIn CEO Jeff Weiner himself.

The idea is that because LinkedIn users generally skew older and more “professional” than the 950 million-plus Facebook devotees, giving them convenient access to these prominent thought leaders’ will encourage longer and more frequent visits to the site which, in turn, will generate more advertising revenue and that elusive “stickiness” that all online operations crave.

LinkedIn is still working out the “Who” and “How” and “Why” of this evolving reservoir of deep thinkers but the overall idea would seem a logical fit for its audience of professionals who mainly use the site for job-seeking purposes or to inundate their networks with links to their various professional endeavors. Users can pick and choose which influencers they do and don’t want to hear from. Bottom line: it’s free and potentially adds to the value of the site for users.

And while LinkedIn has been trading for almost exactly one year longer than Facebook, it’s still very, very early. That said, the stock’s performance (on the stodgy, old NYSE) has been nothing less than spectacular as you can see here:

LNKD data by YCharts

Meanwhile, Facebook on Wednesday countered (indirectly) with news of its own, announcing a new feature that will let U.S. members pay to promote their posts to friends in the same way that advertisers do now. Having a blowout Halloween party or garage sale or conniption fit that you want everyone in your network to know about? Pay the piper.

The company didn’t detail the exact price it would charge users to bump up their posts in all their friends’ news feeds but this potential new revenue stream has been in dress rehearsal in 20-some other countries and, apparently, is something that Facebook thinks its younger, more socially obsessed users would be willing to punch in their credit card numbers to leverage. It costs users money and, quite certainly, will be an annoyance to users who receive the “favored” posts. The move further cements the view here that Facebook is a great service, if sharing is your thing, but not such a great business. If you have to pay to get your ramblings noticed on Facebook, isn’t that a little sad? Perhaps Aunt Sally has already hidden your posts.

As you can see from this chart, Facebook’s post-IPO run has actually been worse than advertised when juxtaposed against the sharp performance of the “younger, hipper” NASDAQ as a whole:

^IXIC data by YCharts

Time will tell if either of these new initiatives will make much, if any, impact on the short- and long-term financial performances of both of these social networking giants. But at least they’re trying.

LNKD Revenue Growth data by YCharts

On the surface, LinkedIn’s new feature smacks of a snoozefest waiting to happen and probably not particularly engrossing to the majority of its users who are either too busy working or looking for work to nestle in for Richard Branson’s musings on whatever.

Likewise, Facebook’s pay-to-display scheme probably will find some takers — depending on the price — among the child-photo-sharing and Spring-Break-updating crowd. But then again, chances are most of the people who would actually consider paying to barnstorm their “friends’” news feeds probably are long on time but short on the expendable cash required to sustain an extended self-promotion campaign.

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LinkedIn is not Facebook: Earnings/Revenue Up 89% 

Downside of Facebook

Yuan Trade Settlement Seen Reaching $1 Trillion

Cross-border trade settled in Chinese renminbi will triple to 6.5 trillion ($1.03 trillion) yuan within three years as relations with the world’s second largest economy grow, Royal Bank of Scotland Group Plc. said.

Settlement will grow from 12 to 20 percent this year, reaching $1.03 trillion in two years, up from $330.8 billion in 2011, Janet Ming, head of the China desk for RBS in Europe, Middle East and Africa, said in a Oct. 9 interview in Dubai.

“We’re seeing a lot more customers starting to practice in renminbi,” Ming said. “For most companies and banks, China and India is where the growth is. If you’re dealing with China, ignoring renminbi is not the right thing to do.”

The Euro and U.S. dollar are the top two settlement currencies with market share of 41 percent and 33 percent, according to the bank.

RBS also expects a growing number of foreign companies and governments to issue bonds in the Chinese currency as they become “more confident” with the renminbi as an international currency, Ming said.

“Different Asian governments are investing into the renminbi to use it as a reserve currency,” she said.

Hong Kong is currently the global hub for renminbi trade settlement. RBS, along with Industrial & Commercial Bank of China (601398) Ltd., HSBC Holdings Plc (HSBA), Standard Chartered Plc (STAN), JP Morgan Chase & Co., Barclays Plc and Deutsche Bank AG (DBK), is lobbying to make London another offshore hub for the currency. Singapore, Taipei and Paris are also being considered.

“London has many competitive advantages such as timezone, robust legal frameworks and efficient markets,” Ming said.

Global issuers accounted for a record share of yuan- denominated bond sales in Hong Kong last quarter as it became more attractive to raise Chinese currency and swap the proceeds into dollars.

Export-Import Bank of Korea led 10.7 billion yuan ($1.69 billion) of so-called dim sum offerings by non-Chinese companies, whose share of the market rose to 49 percent, excluding certificates of deposit, according to data compiled by Bloomberg.   

By Stefania Bianchi

World banking is gloomy, McKinsey consulting report

Banks worldwide remain scarred by the 2007-2009 financial crisis and are years away from developing new business models that will produce sustainable profits, according to a new study.

Despite progress in meeting regulators’ requirements to build capital, revenue growth is slow, costs are rising and new competitors exploiting digital technologies are emerging, McKinsey & Co said in a report.

The consulting firm prescribes a rigorous mix of cost cutting, business simplification models adapted from the auto industry and image repair that requires fundamental changes in employee culture and respect for societal values.

“It’s the banks’ game to lose,” Toos Daruvala, a McKinsey director who helped write the report, told Reuters.

The challenges are so great, though, that the consultant expects a host of large and small US banks over the next five years to throw in the towel and merge.

In the United States, where almost two-thirds of U.S. banks are earning less than their cost of capital. Reuters

“You will see significant consolidation, particularly among banks with less diversified income streams that are highly dependent on net interest margins,” Daruvala said. “They will be troubled and forced to sell.”

The report also sends an ominous message about banks’ central role in the global economy.

A 30-year trend in which national average bank revenue has grown faster than countries’ gross domestic products “is likely now being broken,” the study says. “In both emerging and developed markets, banking revenues are expected to flatline at around 5 percent of GDP for the foreseeable future.”

In the United States, where almost two-thirds of U.S. banks are earning less than their cost of capital, investors will have to wait three to five years for returns on equity (ROE) to return to historical averages of 10 to 12 percent, Daruvala said.

Banks cannot control central bank interest rate cuts that are squeezing their net interest margins but have only themselves to blame for outdated business models and internal cultures that fall short of customer needs and perceived societal values, the report says.

“MASSIVE” COST CUTS

Banks that rely heavily on trading and other capital markets activities are particularly challenged because of regulatory changes eradicating their proprietary trading models, according to the report. It prescribes “massive cost cutting” to supplement what has already occurred at the capital markets giants.

Retail banks, however, face decreasing customer loyalty and business banks “no longer enjoy structurally lower funding costs than many of their large corporate clients,” the study says.

Compounding banks’ problems are technologies that make it much easier for new competitors to steal customers. Wal-Mart Stores Inc  and American Express Co  on Monday announced a joint venture to provide financial services through a prepaid debit card aimed primarily at low-income customers.

US banks had an average ROE of 7 percent last year, up from 6.2 percent in 2010 as credit quality gradually improved, but “are still far from earning their cost of equity,” McKinsey said. Even if interest rates rise and banks reprice their services upward, they are “unlikely to return ROE to acceptable levels” any time soon, the report said.

Expenses for US  banks last year exploded to 68 percent of total income from 60 percent in 2010 while revenue grew just one percent, according to the study.

Bank revenue globally rose 3 percent to $3.4 trillion in 2011 from the previous year, slowing from a 9 percent rise from 2009 to 2010. Returns on equity last year fell to an average of 7.6 percent from the low double-digits and profit fell by 2 percent.

INVESTORS CHOKE

Investors’ doubts remain strong.

More than two-thirds of publicly traded banks in developed markets now trade “significantly” below book value, according to McKinsey, and the average price of insurance against bond defaults for 124 banks sampled by McKinsey rose to the highest level on record last year.

Bank stock prices globally last year traded at 11 times earnings, down from 15 in 2007.

Some analysts challenged the dire report. Focusing on conventional double-digit returns to shareholders when interest rates and funding costs are at historic lows is irrational, said Richard Bove, an analyst at Rochdale Securities.

“Anyone who says that banks should be making traditional returns on equity today when the ten-year Treasury is around 1.6 percent has got to explain themselves,” he said.

Bove said he was excluding the outlook for banks that are heavily involved in capital markets such as Goldman Sachs Group and Morgan Stanley.

Sanford Bernstein analyst Brad Hintz, in a note to clients last week, said few trading units anywhere are generating returns and echoed McKinsey’s pessimism about the outlook for their profitability. “Simply cutting compensation ratios and implementing technological improvements may not be enough to reach a target ROE,” he wrote.

The good news is that banks that adapt can prosper by financing infrastructure projects that are expected to grow 60 percent by 2020, the report says, and by selling advice and retirement products to aging populations in developed nations and core banking services to new customers in emerging markets.

The study was based on a review of financial data at the world’s 30 largest banks, with some data extending to over 2,400 banks in the 69 countries followed by McKinsey. - Reuters