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Creating financials for your business

Sales plan

The sales plan is designed to reach new customers. The plan is the process used to close the deals that the marketing plan opens. The sales plan explains how salespersons are rewarded or commissioned, how orders are processed and tracked, and how the business keeps in contact with the customer throughout the sales process.

Revenue forecast

Lists major products, services, and other revenue streams. Organizes them into sensible higher-level groups as appropriate. Revenue forecast can also be used as a comparison against actual results.

Budget

This section includes estimated expenses for the creation, development, and distribution of materials. The budget plan includes the estimated purchase cost of raw materials, printing and postage. Additionally, it analyzes the budget of taking part in trade shows, travel costs, booth fees, setup costs, and any other particular expenses.

Cash Flow Assumptions

Managing cash flow is one of the most important aspects of business. In the planning phase, the business can radically change its cash outlook by adjusting a few basic assumptions about when it pays and gets paid. This section, which is a required part of a detailed forecast, walks through those assumptions.

Responding to Reviews

With the popularity of social media and the internet, customers have come to expect businesses to engage and respond quickly to questions and complaints. A primary marketing objective is to always to leave customers with a positive feeling about your business and the services provided. It is necessary to know how to engage with customers to influence positive feedback and relationships. Developing effective correspondence is the first step in accomplishing brand loyalty and supports the development of positive relationships with customers. An internal and external support staff tasked with monitoring your website, social media sites, twitter, and the like is beneficial in helping you to identify customer reviews, especially negative reviews, and in helping you work through any conflicts by addressing the reviewer and resolving their concerns.

When responding to customer reviews, the objective is to make certain the message is positive, the matter is resolved, and the customer is satisfied with the outcome. Considering most customer reviews are on social media networks, the individual responsible for responding to customer reviews should have cognitive writing skills and a good compass for creating appropriate responses. Researchers found that 72% of customers wrote negative reviews with the expectation that businesses would respond and take responsibility.[1] Empathy, compassion, and having the ability to relate are the primary characteristics needed of an effective review responder. Responses should be prepared in advance to prevent your business from scrambling for a response at the last minute.

How to respond to a review is dependent on the type of review received. If the response is negative, in addition to replying, you should communicate with the reviewer via phone or e-mail to quickly resolve the issue. The best course of action is to respond tactfully, and in a timely manner, and then work with the customer to prevent future problems or concerns from occurring. When a customer writes a review, you should respond promptly with a quality resolution to the customer’s concern. Furthermore, you should respond promptly to negative reviews to prevent customers from posting the review elsewhere and sharing it with other customers. In addition to empathy, compassion, and problem solving you should have the ability to investigate and satisfy the customer’s issues.

 

[1] Gurău, C. (2012). Solving customer complaints: A study of multiple commercial settings. Annals of the University of Oradea, Economic Science Series, 21, 827-833. Retrieved from http://anale.steconomiceuoradea.ro

Customer Behavior

Customer behavior refers to the study of the purchasing tendencies of customers. Understanding the buying behaviors of customers will help you better market and sell your products or services to your targeted customers. It’s important that you understand what prompts your customers to purchase a particular product as well as what keeps them from making a purchase. Understanding the behaviors of your customers will additionally assist in comprehending the decision-making stages your customers go through before making a purchase. Generally, there are several stages your customer goes through before they finally make a purchase. Other factors, be they cultural, social, personal, or psychological, also influence the buying decision.

To help understand customer behaviors in an online environment, a study consisting of 350 customers concluded that customers’ attitudes and behaviors toward businesses depended on their perceptions of the business, the product, ease of use, and convenience.[1] Establishing an understanding of the behaviors of your customers is central to developing successful marketing strategies. Analyzing customer behavior is vital for exploring opportunities that help in the development of successful strategies that influence customer decisions and expand brand awareness. Moreover, attempting to offer a product without understanding customer behavior could cause a loss of both revenue and time.

Social Behaviors. Understanding customers’ social behaviors are valuable for gaining insights into human motivations and how customers allocate resources in various circumstances when making purchasing decisions. Your business could benefit from learning about the social behaviors of your customers as a means to direct marketing correspondence and impact customer behavioral attitudes.

Personal Values. In the context of business marketing, personal values are defined as an underlying determinant of the attitudes and behaviors of customers. In addition to social behaviors, personal values were found to have a significant influence on customer behaviors. However, personal values were noted to have a more significant effect on customer behavior compared to other psychographics considering personal values link centrally to an individual’s cognitive system.

 

[1] Lim, W. M. (2013). Toward a theory of online buyer behavior using structural equation modeling. Modern Applied Science, 7, 34. doi:10.5539/mas.v7n10p34

The Customer Trigger Point

While working on my bachelor degree, I was employed as a student recruiter for a local college in Dallas, Texas. During sales training, I learned lessons that remain current in all my customer relationships: Never ruin a hot lead and know the customer’s trigger point. Finding the trigger point is as simple as asking “Why are you calling or meeting with me today?” Every customer has a reason for the decision to do business with you, at your particular location, with your price, and on that singular day. In education, reasons adult students chose to go back to school included that they wanted to do it for their family or kids, they wanted to change the world, or they wanted to go to school to prove to someone who said or believed they couldn’t achieve a higher education.

In relationships, you wouldn’t marry someone you just met. You date for a short while and get to know their likes, dislikes, and interests. It’s the same with customers. When you have found the customer’s decision-making trigger, you can easily put together a strategy that helps you get to the next stage of satisfying them. The goal of sales is to find and finesse your customers’ trigger point. If a customer wants to purchase your product or service because it would make them more productive, it is your responsibility to continually integrate that productivity trigger in conversations by noting how your product or service could help with their productivity. Once the trigger point is outlined, the sale becomes much easier. Your customer has a reason for doing business with you, and it is your responsibility to figure out what that reason is and make that trigger point your key to developing a successful selling strategy.

Trends and Innovation

For innovation to be advantageous within your business, you must have a strategy for informing customers on the specific benefits of the trend or innovation in relation to your product or service. Trends affected by customer choices, the internet, social media, and technology have a greater influence on customer behavior than conventional advertising. As a leader, you should develop strategies incorporating a knowledge of trends and areas identifying with technology, internet, innovation, and social media.

Technology Trends. Technology influences customers regarding business sustainability and corporate responsibility. Emerging innovative technology can propel your business to growth by providing a medium for evaluating choice patterns of your customers. The advancement of technology can additionally influence the value of your products and services. Moreover, by using technology, you could develop strategies that decidedly enhance your perceived product value. You can additionally utilize innovative technology to improve marketing research knowledge. For technology to remain beneficial within your markets, your business must have a system for effectively using technology to train and educate customers on the benefits of your product or service.

Technology in Marketing. Marketing is not shaped by what technology can do but instead centers on what the customer will accept, understand, and want. There are three changes that you must consider when creating successful marketing strategies using technology. The first is to move away from market research and instead look toward being able to interpret information extracted from your customers through databases of information. The second change is to move away from traditional advertising and placing more attention on social media for communication. The final stage is to stop looking at marketing as a means of mass markets and move toward building a personal relationship with customers through media outlets.

Market Research Methods

Marketing research knowledge has significantly increased in response to growth in disruptive innovations including the internet and technology development. In my experience, I have found that market research has been essential when repositioning my business to support product advancement, and in helping discover marketing opportunities and expanding market shares through various conveyance channels. Additionally, marketing research has helped influence the performance and effectiveness of my marketing strategies by helping to find my ideal customer with little error and without wasting time and resources on customers that were never going to purchase.

To help with analyzing markets, there are two useful forms of marketing research; primary and secondary.

Primary Research. This is a research methodology where you interact with your customers and gather as much information as you can directly from them. The information is generally collected through surveys, questionnaires, feedback forms, and interviews.

Secondary Research. This research relies on information which has been collected by others (blogs, previous researchers, data channels). You should conduct this type of research by collecting and analyzing articles, web pages, and books as references for the collected research data.

Phenomenology. A phenomenology research method uses analysis to capture individual customer experiences. This method is used for unfolding customer experiences by examining the uniqueness and commonalities of events and circumstances. The data collection techniques used in phenomenology research include in-depth analysis, documentary, and observation.

Quantitative, Qualitative, and Mixed Methods

When conducting research, you should first decide the method of research you intend to use. Research study methodologies are characterized as either qualitative, quantitative, or a combination of both, which is referred to as mixed methods. Of these methods, none can be considered the best method without factoring in the goals and objectives of your research.

I know it may seem a bit overwhelming, but understanding research methods are critical if you desire a certain outcome for your marketing efforts. For example, when I’m putting together an AdWords campaign, I would rather put together my campaign based on data collected from a quantitative method versus a qualitative method. Otherwise, I would waste time and money guessing what to do based on trial and error. A quantitative research method is better for helping to pinpoint your customer and develop a more effective marketing campaign.

Quantitative. A quantitative research method is beneficial for collecting data in the form of tests, reliance, probability theory, and surveys for analyzing statistical hypotheses that relate to your business, marketing goal, or research questions. A quantitative research method is best used when you want to analyze numbers. For example, you could use a quantitative approach when sending out a survey where you expect to get the survey results in numerical format, or if the survey has multiple choice questions.

Qualitative. Qualitative research consists of using real-world experiences and interpreting the phenomena. Unlike quantitative research, a qualitative examination is non-measurable. This research method can be used to help you understand and discover experiences, perspectives, and insight of your customers. An advantage of a qualitative approach is that the study participants are not constrained to a predetermined set of responses such as those in multiple choice or numerical questions. Meaning, through qualitative research, the participants would give their broad perception versus clicking a checkbox or radio button like in surveys.

Unlike a quantitative method, a qualitative examination technique can help to assess why customers behave a certain way. The method also helps in discovering boundaries that influence thought by breaking down points of interest and gathering information from in-depth sources. A quantitative method often makes the assumption that there is a singular truth that exists, which does not include human perception. A drawback of using a quantitative approach to collect data is that it is expensive considering the amount of time needed to collect and analyze the data.

Mixed Methods. Mixed methods are useful when you want to combine qualitative and quantitative methods by linking their differences. The key principle of mixed methods is that various forms of data can be collected by using multiple strategies and methods. Mixed methods can assist in reflecting complementary strengths and weaknesses of qualitative and quantitative methods, and produce opportunities for approaches with weaknesses by correcting method biases.

Determining whether to use a qualitative or quantitative method is dependent upon the importance of how you desire to collect your data. Simply stated, qualitative techniques define and describe while quantitative techniques estimate and quantify. When creating a new marketing strategy, neither qualitative nor quantitative measures are more important than the other when determining value and sales. If you are confused on which method to use, testing both measures will help you find the best outcomes.

Mobile Optimization

Some businesses have websites but don’t have a properly built website that is optimized for mobile devices. Even if you do have a mobile website, customers may complain that the website doesn’t look as good or that the website’s performance on mobile devices is sluggish. When you’re building your mobile website keep in mind that it’s on a phone, or device smaller than a computer monitor, meaning your buttons need to be bigger, some content needs to be moved, and some content needs to be removed or blocked from being seen on the mobile version of the website. A mobile website should be a watered-down version of your main website and should include only key selling points and a call to action. Keep in mind that most mobile users aren’t on your website to view your special graphics or large photo gallery. If your site is not built or optimized specifically for mobile users, your bounce rate will skyrocket and you’ll lose a potential customer over a fixable problem.

The Internet and Marketing

With the internet changing and advancing to web 2.0 technologies, your business has the opportunity to be marketed on broad online networks including social media platforms such as Facebook, Twitter, Instagram, and LinkedIn. To create success within the web 2.0 market, you need to join online social environments and create brand awareness in a positive way. With thousands of social networking sites, blogs, and forums across the internet, you have a great opportunity to build your brand. With the development of new website techniques and the growth of online networking, the internet has become the largest marketing tool to build and grow businesses. You can create success with the internet through a combination of online marketing, customer referrals, and through satisfied customers promoting your brand online through social media.

Internet marketing gives your business the advantage of appealing to customers in a medium that has the power to deliver results instantly. Internet marketing is the key to having your website found by customers. Without marketing, your website may randomly be found once everyone couple of days or months, but it will not generate high revenue. You need to create as much exposure as possible to gain more customers. Just like a great job resume, it’s no good if you don’t send it out to employers. The same goes for creating a great website and not marketing it. If you can’t be found, you will not gain new customers. Internet marketing is relatively inexpensive, and your business can reach a wide audience at a fraction of the cost of traditional advertising budgets.

Selling the Vision

A vision is common in most major leadership theories and it can be defined as an end-state or description of the future (Ilies, Judge, & Wagner, 2006). Visions are generally focused on building innovation and creating change (Ilies, Judge, & Wagner, 2006; James, & Lahti, 2011). Visions are considered to represent idealized future states of what is desired and not what currently is (James, & Lahti, 2011). A vision is said to represent shared values and can often have an ethical overtone (Ilies, Judge, & Wagner, 2006; James, & Lahti, 2011). An effective vision is based on organizational purpose (Mayfield, Mayfield, & Sharbrough, 2015). All visions must incorporate a goal, and many consider a vision paramount to strategies and processes (Ilies, Judge, & Wagner, 2006). An organizational vision is defined as an ideological goal that organizations, members, and leaders are morally satisfied in pursuing (James, & Lahti, 2011). A vision should translate the organizations strategies, which can then be translated into achievable goals (James, & Lahti, 2011).

Leaders with compelling visions can provide a sense of purpose and meaning to followers (James, & Lahti, 2011). A leaders’ vision can effect the goals of an organization, considering it has an effect on the direction of action, intensity of effort, and effort persistency (Mayfield, Mayfield, & Sharbrough, 2015). Leaders often use visions to motivate and persuade followers to pursue tasks goals with passion (James, & Lahti, 2011). Effective leaders with visions have been shown to significantly have an impact on followers’ creativity, inspiration, achievement, team innovation, and organizational performance (James, & Lahti, 2011; Mayfield, Mayfield, & Sharbrough, 2015). Furthermore, vision inspiration can promote positive organizational outcomes, change, and performance (James, & Lahti, 2011). Transformational leaders particularly may be best for motivating and appealing to followers’ common ideals and ethical values (Ilies, Judge, & Wagner, 2006). Transformational leaders may use emotional aspects and gestures to communicate their vision and build commitment (Ilies, Judge, & Wagner, 2006). Leaders can better achieve visions by engaging followers and creating a shared organizational vision with followers (Mayfield, Mayfield, & Sharbrough, 2015). Leaders can promote organizations change through articulating a clear vision and promoting a strong relationship between followers that influences them to accept the vision (Ilies, Judge, & Wagner, 2006; James, & Lahti, 2011; Mayfield, Mayfield, & Sharbrough, 2015).

Visions should be well communicated by leaders and are more likely to be consensually shared by leaders and followers when social exchange and agreement occurs (Mayfield, Mayfield, & Sharbrough, 2015). It is not enough for a leader to simply have a vision, they must also know how to bring the vision into fruition (Ilies, Judge, & Wagner, 2006; Mayfield, Mayfield, & Sharbrough, 2015). It is the leaders responsibility to provide followers with a road map to achieve goals that will fulfill visions. This can be done by motivation and creating challenging goals (Ilies, Judge, & Wagner, 2006).

 

Credits

Ilies, R., Judge, T., & Wagner, D. (2006). Making Sense of Motivational Leadership: The Trail from Transformational Leaders to Motivated Followers. Journal Of Leadership & Organizational Studies (Baker College), 13(1), 1-22. doi: 10.1177/10717919070130010301

James, K., & Lahti, K. (2011). Organizational Vision and System Influences on Employee Inspiration and Organizational Performance. Creativity & Innovation Management, 20(2), 108-120. doi:10.1111/j.1467-8691.2011.00595.x

Mayfield, J., Mayfield, M., & Sharbrough, W. C. (2015). Strategic Vision and Values in Top Leaders’ Communications: Motivating Language at a Higher Level. Journal Of Business Communication, 52(1), 97-121. doi:10.1177/2329488414560282

Analyzing Project Feasibility

Making a Business Case
It is important to calculate the profit estimate when taking on new projects. Determining the net present value (NPV) of a project helps determine if a project should be accepted or rejected. The NPV is an important method to use in concluding the value of projects. The NPV formula determines the value of an investment based on its discounted cash flow. The NPV is calculated by subtracting the project cost from the present value (PV). The NPV capital budgeting rule suggest that projects with a positive NPV should be accepted and projects with a negative NPV should be rejected. According to the NPV capital budgeting rule, the firm could benefit from approving this project because of its positive NPV. Based on the positive NPV, this project can be assumed a valuable investment.

Project Risk
If there is concern regarding risk associated with the project, the firm could optionally use a cut-off threshold. A cut-off threshold prevents project budgets from going into the negative by using cut-off numbers that determine when and if a project should be shut down and abandoned. A project should be abandoned if the value is too low and the expected revenues do not justify further project investment. In addition, putting the project together in stages and with budgets for each stage can reduce risk. Upon each stage completion, the firm would invest into the next stage. Consequently, the financial risk would be minimized.

Decision Justification
Considering the NPV for this project is positive, it will likely generate positive cash flow and would not do any harm to the firms’ status quo. Having a positive NPV suggests the project will generate value for the shareholders’ wealth. If the NPV value is accurate and the project is successful, it could potentially have positive effects on the firms’ equity value.

In addition to the benefits, there are considerable risks and disadvantages of using NPVs. Considering NPVs are based on only assumptions, it does leave room for error. A small company could have a difficult time providing reliable estimates based on the NPV data. Minor changes in the interest rate could affect the projects discount rate, which could drastically affect the projects NPV. A concern of the NPV is its requirement to make calculated projections. In most scenarios, the formula will not be 100% reliable. Before deciding based solely on the NPV, a discounted cash flow analysis should first be analyzed. Although the NPV formula does present a feasible projection of cash flow, it does not present the projects actual return. Because of the difficulty of determining an exact valuation, there could be unforeseen cost, which could incur a negative cash flow rather than a positive one.

Something else to take into consideration when investing into a project is the IRR. Both NPV and IRR are tools used to evaluate potential project investments by measuring capital budgeting, which is the process used to determine significant business investments. While NPV examines cash flow value based on the discounted rate, the IRR defines the rate of return for a project based on the stream of cash flow. IRR is the discounted rate that converts the present value to zero by making the current value of cash flows equal to the present value of cash outflows. Disadvantages of using IRR is that it is not ideal for long-term projects considering the calculation does not evaluate discount rates. Another limitation of using the IRR is that the method does not consider the initial investment amount. This can present a problem when comparing two alternative investments based solely on the IRR. Businesses can use both NPV and IRR to assist with making investment decisions. However, there is no 100% method to use, which will guarantee a positive return on investment. When making an investment decision, the investor should take into account the IRR, NPV, and other investment indicators including risk, and alternative options.

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