| It has been said you can lift the Rock of Gibraltar if | | | | franchise holders. Get a portion of the set-up charges |
| you have a fulcrum point and long enough lever. When | | | | for each area plus a continuing percentage of gross |
| we refer to "financial leverage" we are talking about | | | | business from each operating unit. |
| the same principle. If you buy a business building for | | | | |
| $100,000 with $5,000 down, this is using leverage of 20 | | | | 3 IN THE STOCK MARKET |
| to 1. For a mere 1/20th of the purchase price, you | | | | |
| actually own and control property that is 20 times | | | | *BONDS |
| more valuable than your cash investment. | | | | |
| | | | You can earn interest on non-existent money and buy |
| If the income of the building is only sufficient to make | | | | bonds on a regular basis without ever paying for any |
| the payments and expenses and you don't gain any | | | | of them except the first five bonds. You will need |
| cash flow, you are still getting the building paid for and | | | | $500 in cash and a brokerage account in both the U.S. |
| perhaps in 5 years or so, with continuing inflation, you | | | | and Canada. Open an account with a canadian |
| can sell the building for $200,000... a gain of $95,000 on | | | | brokerage House and deposit a &500 check with |
| a $5,000 investment. This is the potential result of | | | | them. On the same day, before your check clears, |
| proper use of leverage. | | | | open a brokerage account in your home town. This |
| | | | one may be opened without any money. |
| A good rule to follow in applying leverage, relevant to | | | | |
| any business venture for that matter, is always | | | | You buy new issue bonds through your American |
| provide a reserve. Hold back some cash for | | | | Broker and state that they MUST be delivered to your |
| emergencies. Hold back additional capital so if you go | | | | Canadian Broker for payment. The very day that you |
| under you will have a nest egg to start a new venture. | | | | purchase the bonds, you will start drawing interest. It |
| | | | will take 5 or 6 weeks for the bonds to be delivered, |
| Sometimes when things go sour and there is no way | | | | and all the time you will be earning interest. |
| out it is better to take the least loss possible, save | | | | |
| what you can and get out...NOW! Use the remainder to | | | | With this plan, you can space your order so that you |
| again find financing, margin leases, mortgages, | | | | can have $1000,000 or more in bonds on order. and |
| franchises and all the other manners of using money | | | | when they arrive at your Canadian Broker, it works like |
| belonging to others for both their profits and yours. | | | | this: |
| | | | |
| Selling your property for cash then leasing back on a | | | | The Broker accept the first five bonds of $1,000 each |
| long term lease is an other form of leverage. If you sell | | | | and place them in your account. When the second |
| for one million dollars cash and lease back at $10,000 | | | | $5,000 worth arrives, (you must always order in $5,000 |
| per month, you have generated tremendous leverage. | | | | units), he then sells the first bonds to pay for the third, |
| You now have $1,000,000 each with 10% down for | | | | etc... |
| each property, you now control 10 millions dollars worth | | | | |
| of income producing properties. Sometimes it is | | | | The results are BIG profits for non-cash existing |
| possible to use options to hold property, with very little | | | | money. You can actually earn up to 80% interest on |
| cash down, until you can obtain title and take | | | | money you don't even have. |
| possession. This can produce fantastic leverage if | | | | |
| planned property. | | | | Often the new bonds will have an increase in resale |
| | | | value to add to the interest earned. Thus a $5,000 |
| Going public is an other method used to gain leverage | | | | bond at 8% interest rate that takes 60 days to deliver |
| by using other people's money. You receive money | | | | would earn $67.00 interest. If they go up in value, you |
| from the public for shares of your corporate stock | | | | may pick up an additional $200 to $500 or even more |
| and at the same time establish a market value for | | | | when they are sold. |
| your unissued stock. | | | | |
| | | | * PENNY STOCK |
| Before you apply leverage on any proposition, be sure | | | | |
| know just what your are doing. There must be a | | | | Periodically a great deal of money has been made |
| continuous favorable cash flow to service your debt, | | | | dealing in Penny Stock but it is highly speculative and is |
| pay all your costs and expenses and give you a | | | | perhaps once in a lifetime that one is able to hit it right |
| reasonable profit. If weakness occurs in any one or | | | | to cash in with a spectacularly high yield. |
| several of your business entities, it could drag down | | | | |
| your entire organization. | | | | To take some of the speculation out of it, many |
| | | | investors purchase only 100 shares or so, of a number |
| 2. IN FRANCHISES | | | | of different company's stock. In this way they may |
| | | | only $50 to $100 invested in each of 40 to 50 firms. |
| Franchising your business operation packet is another | | | | This is one of the best ways to go when getting |
| form of leverage. You are selling others your | | | | acquainted with this kind of investment. |
| know-how and the right to use your system and/or | | | | |
| product for a price, either a share of the profits, a bulk | | | | The stock of one of the Nation's larger firms, which |
| payment or a combination of both. | | | | now has outlets in about every city in the United |
| | | | States, was selling at 60 cents a share in 1963. 100 |
| It is not as simple as it used to be to become a | | | | shares at that time for a total of $60 is now valued at |
| franchiser, due to controls and red tape established by | | | | over $75,000! |
| the various state and governmental agencies. In some | | | | |
| states it is just about impossible for the layman to | | | | $9,000 invested in 1948 in stock of what was then a |
| proceed to wade through all the red tape required to | | | | small timber firm, was worth over $1,000,000 a few |
| satisfy the laws. However, if it were easy to do, it | | | | years ago, and in addition would have proceed |
| probably would not be profitable anyway. | | | | average dividends over the years sufficient to equal a |
| | | | top salary each year. A person who invested at that |
| When you have met all the requirements of the | | | | time would have been able to "goof off" from that |
| various agencies, you will have an operating manual | | | | time forward, receive more money than working for a |
| and pro-forma accounting statement...You will have | | | | living and still have over a million dollars in the bank or |
| developed a turn-key package for your franchise | | | | for other investments. |
| offering | | | | |
| | | | There are various newsletters covering low priced |
| To get started right get revised statutes of the state | | | | stock. One should subscribe to several and analyse |
| from the Secretary of State and study the | | | | the information before investing. |
| requirements for establishing and selling franchises. | | | | ---------------------------------------------------------Julia Tang |
| | | | publishes Smart Online Business Tips, a fresh and |
| As your franchises become better known and after | | | | informative newsletter dedicated to supporting |
| you have a few locations, instead of selling one | | | | peoplelike you! |
| franchise at a time, offer area franchise to "master" | | | | |