Newsletter Archive

The Internet 800 Directory - http://www.inter800.com
The Internet 800 Directory Newsletter
This issue is for Friday, November 07, 2003
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Table of Contents
01. Voyager
02. SMEs And Cost Accounting
03. Tip Of The Week
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*01. Voyager

We humans are about to achieve a major milestone, an event as momentous
as Columbus finding North America or Magellan sailing around the world.
The amusing part is that this occasion will most likely pass with little
or no fanfare.

The event I’m talking about: Voyager 1 a spacecraft launched from earth
26 years ago is leaving our solar system. Right now, Voyager 1 is near
the outer limit of our solar system and about to enter a region called
"termination shock". This is an area where particles from the sun begin
to slow down and clash with atomic matter from deep space.  After
passing the termination shock boundary it will go through a region
called the heliopause, that marks the beginning of interstellar space.
Then it will become the first manmade object to leave our solar system,
not reaching another system for 40,000 years.

Once Voyager passes into uncharted deep space, scientists believe it may
actually outlive earth. Consequently, it seems like good planning that
Voyager has mounted to one of its sides a 12-inch gold-plated copper
disk. This disk has the sounds and images of Earth, designed to portray
the diversity of life and culture on our planet. The disk is encased in
a protective aluminum jacket along with a cartridge and a needle. There
are 115 images on the disk and sound selections (including greetings in
55 languages, 35 sounds, natural and man-made, and portions of 27
musical pieces), which are designed for playback at 1000 rpm.
Instructions explaining from where the spacecraft originated and how to
play the disk are engraved onto the jacket. Electroplated onto a 2 cm
area on the cover is also an ultra-pure source of uranium-238 (with a
radioactivity of about 0.26 nanocuries and a half-life of 4.51 billion
years), allowing the determination of the elapsed time since launch.

Right now Voyager I is still functioning 8.4 billion miles from the sun,
or 90 times the distance separating the Earth from the sun.  This just
shows me that we can accomplish remarkable things, things that just a
few hundred years ago would have been impossible. How sad it will be to
see this achievement pass unnoticed by the individuals alive when it
happened.

Chuck Arning -chuck@inter800.com
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*02 SMEs AND COST ACCOUNTING


What The heck is an SME and what is Cost Accounting?

I hate acronyms, yet I use them all the time.  Most SMEs do not know
that that is what they're called.  SME = Small to Medium Enterprise.
The U.S. Chamber of Commerce defines them as companies ranging from $0
annual revenues to $35 million in annual revenues.  In fact, the SBA
(aka The Small Business Association) defines Small business as: "The
Small Business Act states that a small business concern is "one that is
independently owned and operated and which is not dominant in its field
of operation."  The law also states that, “in determining what
constitutes a small business, the definition will vary from industry to
industry to reflect industry differences accurately". and gives you a
table of costs per item as how to define your small business.  In effect
it's anything under $30 million per year.  As for the "medium", I don't
really know, but it's higher.

Now, let's assume that you are within the parameters of the $0 -30
million per year range, or that you are a start-up company, or
contemplating one.  My first advice is "Don't do it."  97% of all
start-ups fail.

That being said, let's turn our attention as to why.

One of the main reasons is that most SMEs do not know the cost of being
in business.  A valuable tool is called, "Cost Accounting."  Another
major reason that SMEs fail is because they do not understand costs nor
accounting, but they are essential in understanding how one's business
works, regardless of what type of business.

Cost Accounting 101:

First, the simplicity of cost accounting often leads the entrepreneur to
disregard it.  The first step is to add up ALL of one's basic costs.
And when I say ALL, I mean ALL, but no one ever does ALL.  This includes
executive salaries, employees, office rent, supplies, state and local
taxes, gas and oil, parking, meals, telephone, utilities, commissions,
accounting, legal, and I can name you more then 100 more line items of
my own.

Now, let's assume that you have added up all of the above.  Wow, does it
really make sense to go into business?

Secondly, those items are not just start-up, they're continuous.

So one must simply say that my line-item expense are, say, $5,000.00 per
month.  Obviously, one needs $5,000.00 in NET revenues to break-even.

Net revenues are herein defined as revenues after "Costs of Goods Sold."
Simplistically, that means you sell a widget for $1.00.  After your
supplier bills you $.50 for the widget and $.05 for shipping and
handling, your net revenue = $.45. Got it?

Now, since your "nut" is $5,000.00, you need to sell 11,111 of these
widgets to just break-even.  On paper, that is.  You will actually lose
money on a break-even proposition, because there are always costs that
you didn't even consider.  The first of which is the amount of time and
effort it takes to sell those 11,111 widgets.  It's the hidden costs of
customer service, or being in business.

If you work 50 hours per week, then your costs equal (5000/50/4) =
$25.00 per hour.  If you spend 1 hour to sell a widget, then that
product should have sold for a net of $25.00.  If you spend 1.0001 hour
to sell that product, then you just lost money.

Fun, ain't it?

Many SMEs simply do not understand why they don't make money. If one
just applies his actual costs as it relates to his actual income, then
it starts to make some sense. Where one goes from there is what's called
an "Executive Decision".

Good luck on that part.

Steven Jackson - sjackson@inter800.com
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Tip of the Week

Quick Translation

Because the Internet is worldwide in nature, occasionally I will receive
e-mail in a language other than English. Here are a couple of web sites
you can visit for a quick translation.
Babelfish
http://babelfish.altavista.com
Google
http://translate.google.com
Systran
http://www.systranbox.com

If you get a lot of this type of e-mails and would like a program
running on your own machine, try Cliptrans. It’s free and you will find
it at: http://www.snowbay.de/cliptrans/DesktopDefault.aspx


If you have any tips or shortcuts that you think the readers of this
Newsletter will find useful, send them to sjackson@inter800.com

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