This third in a series-of-three articles on entrepreneurship was written in order to give those who have little experience or even just familiarity with concepts and ideas they need in order to convince them of the virtues of helping others through value creation, meaning by creating companies or projects whose fallouts can be used to help others or communities in a meaningful way than by almost any other means.

In the first two articles, the first (Business Plans) showed how to present ventures in a way that make them attractive to sources of capital, without whose money almost no meaningful ventures or projects can be put together. Remember, when you want to set up real ventures that have the potential to make lots of money, the fist test they would have to satisfy are the requirements of those who will fund it - in terms of organization, risk attenuation and returns. There is a set way and format by which these requirements are evaluated and assessed, and they all comprise what is called the business plan (not poject study). Without a real busienss plan you will just waste their time because they cannot customize their search in order to fit your situation, no matter how viable or profitable you think your project is. When you submit your project for consideration of funding by people other than your friends. you are actually competing against all such ideas everywhere, even in far away places like India, or China, or Vietnam. This why, despite capitalism being despised for being heartless or greedy nothing can compare with it when it comes to the speed and decisiveness in making projects real, and through that make dreams come true. You just have to prove that your ideas are the best and that you are the best of the best, and most people do not like to do that, and that is why their projects languish if they can even make them take off without funders.

The second article explained the concept of cashflows, which is the heart of the business plan, because it tells how much money investors came make if they trust your busienss plan and competence. Cashflow models tell them if what the project proponent is doable and whether he is just going to make an ass of himself once he gets the funding. Show me the quality of the thinking that goes into the making of a cashflow statement and i can almost tell you if you are wasting your time or mine. Therefore it is very critical that you master this concept, how it is constructed and what it can be used for, because unless you do this right, you are almost guaranteed to end up without anything.

Cashflows actually can do three things for funders or investors:

a). Tell how much money is needed, and whether the proponent knows that he needs to have that amount, type of money and its timing if he knows what he is really doing.

b). Tell them whether the project or venture is creating enough value over the lifetime of their investment to make it likely to deliver what they promise. An experienced capitalist can see if the proponent can manage cash properly and allow for the venture to grow without need for more investment (that only dilutes their share) or, if necessary to get second round capital, to see if the terms and timing of that future fund raising is optimal for the project and past investors. This is a very subtle point that not too many project proponents appreciate - that once they get investors to back them up they cannot just quash their interest in the project once the project misfires. Once they see that that issue is not properly addressed, that the proponent is sort of cavalier about what happens to money previous investors have put in, they shun that project or, more likely, they will never back his future projects (like the way Obama quashed the interest of Chrysler creditors so he could give more of Chrysler to the labor unions, a very crass decision which is now coming to haunt his policies - investors don't trust him with their money or funding government projects and this is part of the reasons why the US is stuck in this recession).

c). And third, whether they (investors) can really exit, at the promised risk and return. This last is very crucial, because investors do not invest in projects because they like the proponents, or that they do it to help the economy, or the country. No, they do it because they need the returns for whoever it is they need to help with the profits made from investing their money - the widows, the orphans, their children, themselves. Indeed, the cashfow must tell investors whether they can exit at the time and returns they were promised. If the cashflow cannot show this conclusively, they will likely no invest and the proponent can dream all he wants about helping the country, it just won't happen.

So, how exactly does a cashflow statement show this? Look at the second file (Cashflow model.xls) that was emailed in the previous posting. Scroll all the way down and you will see the cell called Economic Value with a value of $ 37,000 or something. Make sure you understand how that is arrived at, before you challenge the validty or reality of the assumptions which I cal always explain IF YOU CARE TO ASK OR RESPOND TO THIS EMAIL.

In reality, the valuation will not be as intricate as this if only because some of the assumptions will not apply to ventures at your levels or found in countries like the Philippines, but challenge them only when you have understood this most basic of valuation models because you wouldn't know which assumptions are relevant or not unless you have gone through the model from A to Z. I will explain more relevant ways to value businesses or projects once I see your actual projects.

Conclusion. This series of emails are the undersigned's attempt to transfer certain skills that he believes serious project proponents need to know if they really want to set up projects that can do what they want them to do. If these principlas are not understood, it simply means you don't really want to help using these methods. You will end up like how most Filipinos do deals - using connections with politicians, or padrinos, most of whom end up screwing the projects with their unrealistic impositions of lagays and grease moneys, which in turn tells me that all they want is how to make money the fastest way, without the hard work, which is exactly why the country is so "fupped uck" because few people want to work hard or even think hard which is crucial to making real money. And all because they didn't want to spend time going through how cashflows, they close their eyes to the poverty around them, hoping to make a ton of money they can take abroad and leave the poor behind.

Does knowing this concept of cashflows really deliver the kinds of rewards being stated here? Let's put it this way - I who came from nowhere in Oas - have more ability to make money than I can make use of over ten lifetimes, even if I do not show any of it using the customary ways that Pinoys want to perceive people who have made money - luxurious cars, homes and all the trappings of faux wealth. Well, what if the undersigned is somebody who DOES NOT WANT ANY OF THOSE THINGS because he thinks they are just distractions and of use to nobody because there is no need to impress people if they are the types who need to be impressed? Not only do I not need them because they mean nothing, but they can only cause aggravations like taxes and even harm if one is not careful. And above all, to have so much of those things only reduces one's ability to live properly, and at the end of one's life, to give them away properly. After all, I am quite comfortable wearing shoes and clothes I have worn for the last ten years, and outside of sleep and good food, crave for nothing else? Once more let me warn those who still ask for proof before acting on this esay: you won't need it because if you get to know it it will not be able to make sense of why things have done that way. You could end up just envying, because you didn't see what some have to go through in order to reach these situations. Just do it before it goes away. 

But if you really think you need those things whether or not you believe, come up with a very good project and I will help you make tons of money out of them even if you don't see I have done it for myself. Just do your homework, the rest is just not a big deal for me.