The Pit - IMI Trust

That would be a common sense play.  Who knows what will happen next?  Apart from a glut of Hedge Fund managers jumping off building tops because they didn’t know when to hold ‘em or when to fold ‘em.

Anyone have a spare $11bn?  Check down the back of the sofa.

The traditional benchmark companies use for success is financial. Money talks. Now, there seems to be a trend towards ‘Triple Bottom Line’ values. Triple bottom line is to achieve success on three levels - Economic, Social and Environmental.

The more cynical of us would think that it is a ploy from marketers to exploit fears over climate change and the lack of community currently pervading society. However, members of Generation X and Generation Y inherantly have a ‘greener’ social compass and a Triple Bottom Line agenda is effective in speaking directly to these groups.

Investors and consumers alike are actively looking for companies, products and opportunities with that fit within a Triple Bottom Line agenda. The focus is no longer just on achieving solid to spectacular earnings from quarter to quarter, just to keep shareholders and employees happy.

Government, and shadow government, are both using Triple Bottom Line metrics to shape policy. Corporates, such as Westpac Bank, are spending millions on advertising to align their brands with consumers who are socially and environmentally minded.

Countries are looking at carbon offsets, people are looking to be carbon neutral, businesses are looking at sustainable practices. And seemingly, for the first time, profit can be generated too from these scenarios. This is why Triple Bottom Line is an important change to the corporate landscape. Historically, companies have looked at social and environmental initiatives to occur at the expense of profits. Today, there can be success on all three fronts: economic, social and environmental.

For instance, governments are allocating resouces and grants to ideas with a triple bottom line bent, corporates are willing to sponsor these initiatives and investors are passionately seeking companies with triple bottom lines to invest in.

In the last few weeks we have come across two powerful companies with solid triple bottom line structures. Companies from isolated rural areas in Australia, in areas that have had it tough because of drought and natural disasters, in recent years. They have now captured the interests of companies and governments worldwide.

This will be interesting space to watch in the coming months as we lead up to a federal election and over the next few years as the impact of triple bottom line companies is felt by society.

Recently, the population of NSW witnessed what has to be one of the poorest marketing pitches in history.

For all the brain power behind these campaigns, this is the best slogan the NSW Liberals could come up with.

Are you ready? Drum-roll please!!!! This is it…

“Don’t Vote Labor”

That was their campaign slogan. Here is my personal tip for the NSW Liberals…

‘Sack your entire marketing team.’

This slogan would be about as effective as the military recruitment campaign slogan being “Don’t think about bullets flying past your head and potentially being blown up.”

Here are some more reasons the NSW Liberals want to sack their marketing team tomorrow…

• “Don’t look down”
• “Don’t think of the colour blue”
• “Don’t think of a tree”
• “Don’t think of the TV”
• “Don’t think of Morris Iemma being re-elected”

Ever watched kids? Have you ever noticed how whenever you say “Dont do…”, they do it? As adults… we are not that different!

Yes, NSW Liberal Party. You GAVE the election campaign to the NSW Labor Government with your poor attempt at marketing.

Now obviously this is being targeted at a Government, but the truth is… I see businesses doing this every day. In fact, one company I spoke with recently were looking at a campaign which would have people mentally connect fraud and their company name.

So if there is anyone from the NSW Government reading this blog, here is my last tip for you, “Don’t think about hiring our company to consult to you on your next campaign. Don’t entertain the idea. Please… don’t think about the possibilities of hiring IMI Trust to assist you!”

Capital Raising, Venture Capital, Business Angels and Private Equity have become flavour of the month in Australia.

The reality is, for businesses looking to raise capital, it can become a nightmare for the unsuspecting owner. You always read about the successful ventures but rarely do you hear of about the challenges associated with raising capital for your business. For other business, who utilise business factoring services, it is their opportunity to utilise an alternative solution. 

When it comes to capital raising, most business owners believe they have 3 places to go: Banks, Angels and Venture Capitalists. Few people realise there is a 4th way to go if you want to raise between $250,000 and $5m (without a prospectus).

Below is a snapshot of some of the issues related to each.

Venture Capitalists
There is a reason they are called Vulture Capitalists. They generally look for small to mid size companies and traditionally Venture Capitalists will value your company on its current value (prior to growth following funding), and then look to take a stake based on that value. Some Venture Capitalists, will also look to play a role in the management of the business. It is a coin toss whether this becomes an asset or a liability.

This path is fraught with problems especially if you are looking to retain control of your business. With one business we worked with after funds were raised through a Venture Capitalist, personal attitudes and business differences surfaced and the owner was forced to leave the very organisation they started.

Business Angels
Business Angels could be ideal for your business if the Angel brings a wealth of experience, contact or resources to the table but again the problems you face with Venture Capitalist’s, you are likely to face with Business Angels. You lose control and possibly a lot more.

Banks -
Although the most common option for people, you should only really go to a bank if you a desperate. This is why…

1. Do you enjoy putting your own personal assets at risk?
2. Do you enjoy paying interest for the life of the loan?

Of course not. When raising capital the questions you want to be asking are…

1. What percentage of the company am I willing to offer? How are the shares going to be split up between the current owners and stakeholders.
2. Is your business structure investor friendly, as well as business owner friendly
3. If you are utilising the banks, are you willing to put your personal assets on the line
4. Do you want to retain control of your business, or are you happy for a 3rd party to have an influence?
5. Have you put in place a strong management team?
6. How unique is your offering, and what is your realistic potential for growth?

All of these questions are important, and you should definitely know the answers before you approach any organisation to assist you in funding the growth of your business.

These are the questions you need to answer when looking at the 4th way for you to Raise Capital for your business

This path offers some unique benefits…

1. The capital raised is interest free
2. Doesn’t require you to put your home up as security
3. Allows you to maintain the majority shareholding in your business… allowing you to retain control of the future direction of your company.
4. Allows you to crystalise the value of your business, which is recognised by the markets and considered as an asset on your balance sheet
5. Provides an investor-friendly environment allowing your investors the opportunity to sell their holding if they desire
6. Ensures that you are compliant with ASIC’s rules and regulations. Most people dont realise the legal mine field and potential issues if you try and do this yourself… and get it wrong. Let me provide some insight… a $20,000 fine, 5 years jail, the company wound up… and then it starts to get ugly from there.

Our focus is to help entrepreneurs realise the aspirations they have for their business!
What this means for you is that IMI Trust is able to facilitate debt and equity funding for your business growth, expansion and acquisitions.

To explore the commercial potential of raising capital for your business click here.

Lack of sales?  Lack of stock?  Market is too niche?  Too much competition? 

Companies can go broke because of one or all of these issues.

However, how many fail because of middle-management with a can’t-do attitude?  Many we suspect… 

Some good news, that may cause a dent in the multi-billion dollar diet industry forever. In Sydney last week, I discovered an amazing weight loss formula. As I researched this formula, it amazed me that it had been around since the dawn of time. From personal experience, I can say with absolute certainty…
If you a looking to…

• Lose weight fast
• Lose weight without having to exercise
• Lose weight in such a powerful way that you can do it whilst sitting in front of the TV or even while you sleep
• Lose weight with a time-tested and proven method, which your boss will even want to give yourself the day off
• Won’t cost you a single cent
• And best of all, it has an amazing ability to supress your appetite completely. Chocolate, beer, meat pies and all the temptations you face on a daily basis will seem like hell on earth.

Well I have the solution for you. *drum-roll*

Gastroenteritis

All around you, people will be amazed at how they saw you 4 days ago and you magically look 10kg lighter.

Now, I do have to provide a brief warning and few tips for anyone looking to choose this path.

1. People will think you are highly irrational for the amount of times you will be going to the bathroom
2. At times it will feel like your insides are having their own internal nuclear war
3. You will find you are not the life of the party, and in fact you dont really want to speak to anyone… unless it is to get you something. Others refer to this as the ’selfish approach’
4. But If discomfort persists, please, please, please see your doctor

“I lost 10kg in 4 days!”

Let’s see if Jenny Craig, can beat that offer!

Contracts For Difference, or CFDs as they are known, have had a major impact in the Australian trading and investment landscape.  Just 3 years ago they were virtually unheard of and today they are the most heavily traded derivative in Australia.

Why the phenomonal rise in CFD trading? Why are education providers ready to give their left elbow to teach people how do trade CFDs

Firstly, we have jumped the gun.  Apologies.  Most of you out there probably are keen on managed funds or just trade shares (that’s uncool nowadays by the way) so you may not know what CFDs are.

A contract for difference is a contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time. Thank you Wikipedia for that accurate CFD definition. 

It still may have not made any sense to you but here are some reasons why CFD trading in Australia has become popular…

1. CFDs are a leveraged trading instrument. As an example, for a $10,000 trade, the margin required is usually $1000 (10%). Some companies offer margin rates as low as 3% on Stock CFDs
2. CFD pricing movements are tied to the share price. This means if the share price is worth $10 and it increase to $10.10 (a 1% movement), you actually experienced a 10% growth on your margin invested. A CFD is not like an option, where the price of the option is NOT directly tied to the movements of the stock price. Obviously this is also reflected on the downside of a CFD movement.  (Special Note To Optimistic Traders:  CFDs Do Have A Downside.  Yes, They Really Do)
3. You also receive the dividends on the total investment, not just the portion of the holding you own. 
4. CFDs offer traders the opportunity to place Long CFD trades or Short CFD trades. So you can profit from rising or falling share prices. (Special Note To Optimistic Traders:  You Still Have To Position Yourself Correctly And The Market Must Respond Accordingly For You To Profit.  Making A Profit In A Falling Market Is Not A Right)
5. Trade Indices CFDs are available.  This means you can take advantage of the movements and stability of indices such as the ASX 200, Dow Jones Index, Nasdaq and S&P 500.
6. Margin is comparatively priced. The interest rate on the capital borrowed (the other 90% of the stock you don’t own) is relatively inexpensive and comparable to real estate loans.
7. Trading CFDs internationally has been made a lot easier with online trading platforms offering traders and investors international Stock CFDs. Some platforms make the process complex. Other online trading platforms like the SMC Trader, make international CFD trading as simple as trading Australian Stock CFDs.  We know.  We designed the support system that ensures you can trade CFDs in under a minute.
8. Americans can’t trade them. Sorry Americans!
9. Ability to hedge current stock holdings. Some CFD Traders, have used CFDs to hedge their stock holding in times of uncertainty, or when Alan Greenspan is talking (Sorry? What’s that Mr Greenspan? You did what?)

I hope this provides you with some more information about CFDs. Recent estimates of online trading in the UK show that 50% of all trading are CFD trades. With CFDs representing such a small segment of the Australian market, industry experts forecast more volume traded on CFDs in the upcoming months.  As the returns offered can be so attractive, CFDs seem like they are here to stay but traders should tread carefully.  Downsides can be painful is your CFD isn’t adequately hedged.  Did you hear us Optimistic Traders?!!?

NO NO NO NO!  It is incredibly frustrating to see how people compete on price.

The number one reason companies compete on price is because they are poor at marketing.  It is the worst way to try and grow a business, as your marketing plan seeks to eliminate your own profits and the more aggressive you market the slimmer your margins are.

If your marketing appeals to your target market correctly then it is unneccesary to compete on price.  A well-known Australian Bank split-test a marketing campaign recently.  To a sample of 10,000 people they sent two separate credit card offers.

1. One offer with an interest rate of 12.5%
2. One offer with an interest rate of 16.5%

Clearly, credit cards that have the lower interest rate should be more popular.  Which offer do you think would be the most successful? Remember this was the same company, going to the same client client base.

To their sample, the interest rate of 16.5% was easily the most successful.  So what was the difference?

On the 16.5% offer there was a photograph of an attractive, healthy, female on the letter. Marketing and appealing to your target market wins over low prices.  In this case, just one photo encouraged credit card prospects to take an offer 33% more expensive.

There is so many frontlines in business in which the war can be won.  If you are trying to win it on price… ask yourself if this is really your best strategy

FON.  If you haven’t heard of them yet then you soon will.  They are backed by some of the most powerful organisations on the internet, Skype and Google as well as the venture capital companies behind these giants, Sequoia Capital and Index Ventures are all investor partners in FON.  So why has FON done so well to capture the attention of these giants?

FON is the world’s largest WiFi community. Started in Spain by Martin Varsavsky, FON is built on the idea of creating a community of people who get more out of their internet connection through sharing. Every router purchased by a user enables that user to become a mini-ISP.  The beauty is they can choose to charge for the service or give it away for free if they so wish. Any amount they charge is split down the middle with FON.

Clearly, this is the best home-based business idea in a long time.  Have an internet connection and resell the bandwidth to people in your local area.  Be your own ISP and profit.  Or be chartiable and give it away. 

We love the idea here at IMI Trust but we are not alone.  There are over 300,000 ‘hotspots’, or router portals worldwide and FON want to grow that to 1m by 2010.

When FON finally hits Australia, it will cause a massive shake up in a stagnant and relatively service-free industry.  Large Internet Service Providers are getting fat on the easy profits made by broadband users.  Wireless service is poor in Australia and worse still, fees for usage are ridiculous compared our international counterparts.

So FON sound ambitious.  You are not wrong.  To kickstart their success in the US, they have have just offered 10,000 people who live near Starbucks, or any cafe with any existing WiFi hotspot, the opportunity to receive their FON WiFi router for free. A bold move considering Starbucks has its own service it provides, but when you have Google, Skype and Sequoia Capital backing you, bold moves come with the territory.  Since there are over 13,000 Starbucks stores worldwide, this initiative is only the beginning of a large scale, long term plan.

Forbes Magazine have listed them as one of THE companies to watch this year. Not bad for a company which only had its first birthday this February.

The question on Australian lips is surely when is FON coming to Australia? We need your service sooner rather than later. 

Also, on a more self-interested note, when is the IPO? And where can we sign up?

In a week where we thought the biggest news would be Martin Scorcese finally winning the Best Director Oscar he deserves, the wily old man, formerly of the Federal Reserve, Dr Alan Greenspan manages to contribute to the largest drop in Wall Street prices since September 11.

Over the last 24 hours tens of billions, potentially hundreds of billions of dollars, of value was wiped from stock markets worldwide. $632 billion dollars in value was erased from the U.S. stock markets alone.
In this one day period, the Shanghai Stock Exchange, the main index in China, lost nearly 10%. The US markets reacted to this initially with the Dow Jones Index being down 1%. Doesn’t sound that much, buy 1% on over $10 Trillion means taking a bath on Wall St. Then throughout the day, that 1% turned into 3% plus.

The sequence of events give weight to one mans words and not facts produced.

On Monday, Alan Greenspan spoke at a conference in Hong Kong. During that conference he made a single statement which would greatly impact markets aound the world…

Greenspan said, “It is possible we can get a recession in the latter months of 2007, and we are seeing signs of that already.”

Now what is interesting he said this on Monday. The Monday trading in the US has no reaction to these comments what so ever. Record private equities were being announced and it was business as usual.

So when did the reaction take place. Bring on China. Although China’s economy is surging, it is largely due to the purchasing habits of the American consumers. China’s stock exchange is trading at 38 times earnings, so any poor economic news from the US, has a massive impact on China. Volatility… your best friend and your worst nightmare.

The markets knew this and they reacted extraordinarily. The sell of resulted in the largest 1 day drop in 10 years.

Now Greenspan’s comments suddenly had the attention of the world and more significantly the US markets. The US Markets had been waiting for a correction, with the longest bull run in many years. With no poor economic data coming out, the bull were still in there swinging… until today.

When the US Markets opened, the CNBC and Bloomberg commentators looked very distressed. Then mid trading session, the Dow Jones and Nasdaq went through the floor.

Billions and billions of dollars gone, because of a statement made by Alan Greenspan. What I find interesting is that he didn’t provide any numbers or stats to support his claim and yet… there was such a strong reaction. It just shows the power and respect that his words have in the markets.

These kind of days on the markets are rare, exciting and horrifying.

The question lingers… “Is this a great buying opportunity” or “Is there worse to come?”