External Risks

All external risks are considered uncontrollable or limited in control by the owner of a small business. External risks include regulatory issues such as changes in the law or in compliance requirements for your business.  Others include acts of God, competition and costs of capital.

What Startup Owners Can Learn from Expert Traders

When it comes to managing a successful business, expert traders can teach entrepreneurs a thing or two about how to gain from a competitive market. It may not be too obvious, but trading and entrepreneurship have much in common. In fact, some of the most successful investors and traders have started their own profitable companies, such as Warren Buffett who believes that entrepreneurs can learn a lot from investing.

Vertical Integration in Business

Vertical Integration

Vertical integration in business refers to the process of gaining control over more steps of the product production stream.  Whenever a business obtains or can greatly influence any one of these steps along the process of producing and selling a product, it is referred to as vertical integration.  

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Internal Rate of Return (IRR)

Internal Rate of Return (IRR)

Internal Rate of Return or IRR is the value rate earned on investment made by the company with its working capital.  In the small business world, this form of financial investment evaluation has little to no value.  Allow me to restate this: ‘IRR has limited to NO value in the small business world’.

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How Much is a Fair Profit? Part III of V – Risk

A third factor in determining a fair profit percentage is risk.  Risk is divided into two types.  The first is insurable and the second is uninsurable risks.  Insurable risks are mitigated and have very little to no effect on the profit formula due to transferring the risk to a third party known as the insurance underwriter.  Uninsurable risks are non-transferable and therefore the profit must be adjusted to compensate for this type of risk.

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