CENAK Consulting - News and Views

Business Plans - Part 1

The following quote from an article in the Wall Street Journal on 9 September 2003 pretty much sums up our thoughts on why every business should have a business plan:

"Years ago I was talking with a mentor about a start-up I was running. He asked to see my business plan  and I proudly told him that I didn't have one. Full of youthful arrogance I said, "I'm doing fine just by the seat of my pants." He replied, "If you think you're doing well using your bottom, imagine what you can do using your brain"

There are countless places on the web where business owners can get free advise on how to structure a business plan and what to write.  Where most business plans lack is when it comes to the financial implications of executing the business model that is presented in the business plan.  That is where we at CENAK Consulting come in and develop, together with the company and owner, a multi-year financial forecast based on the presented business plan and model.  These financial models can be used to test the business model under various conditions, which gives the business owner a much better understanding of the what-ifs of certain business decisions.  It frequently also results in changes to the underlying business model.  In this series about business plans we will write about experiences we've had with business plans that illustrate why it is so important to have one.

Rate Freeze

So government decided to step in and announce a program to help homeowners that entered into ARMs with a rate freeze.  This move has to be seen as a purely political maneuver considering the upcoming elections.  In our view, it is the wrong signal and it might prolong the workout process for the housing market.  Further, for all those people that made sure they understood what they signed and that they could actually pay their mortgages, this is a slap in the face.  If anything, the government should take an active role in educating people early on in school so that they understand how this market works.  21 year old college kids who never saved a dime are buying houses these days.  Most of them have no clue about how to manage personal finances.  Start there and tackle the problem at its roots, the lack of financial education. Don't intervene in the market.  That sends the wrong signal to the markets and the people who might get the idea that the government will bail them out again in the future. 

25 or 50 basis points?

After todays ADP employment data and other indicators the jury is still out if te Fed next week is going to lower the Fed rate by 25 or 50 basis points.  As of today, my prediction is 25 bps.  But then again, we are waiting for important employment data on Friday.  If there is a weakness in the data, 50 bps might be more likely.  We shall see, for now my money is on 25 bps.