business planning

New Year’s Small Business Booster Plan

Justine Grey — Sun, 11 Dec 2011 23:54:20 +0000

Link:

http://www.openforum.com/articles/new-years-small-business-booster-plan

It’s almost upon us. Can you feel it? The New Year, that is. This time of year brings more than those dreaded resolutions. It provides entrepreneurs with the chance to re-evaluate business and to plan ahead. Luckily, each month of 2012 allows you the opportunity to put real steps into action; consider your next free calendar a chance to build a business boosting plan for the New Year!

January: Evaluate the Good & the Bad

When the calendar flips to January 1^st, you get a shiny new year to fill up with business excitement. Before you start selling in the new year, however, take a peek at the year just left behind.

What sold well and what didn’t? Now is the time to weed out the dead-weight products that didn’t pull in enough sales. Focus, instead, on what did sell well, and brainstorm ways to build on those best-sellers.

February: Create a Product Plan

Every business needs a big dollop of fresh offerings from time to time. Now that you know what your best selling products are, think of fresh new products to add that will compliment what already sells well. What can you add to your business that is new and exciting? Consider products and services that pique the interest of repeat customers and new ones, as well.

March: Perfect Your Marketing

Your 2011 marketing efforts deserve a good going-over, too. Consider all of the marketing you did in 2011, both free and paid, and see what netted the best results. If you’ve decided to change up your product line a bit, think about new avenues of marketing to reflect the changes you’ve made. Make a list. What marketing will you stop doing? What will you try again, and what new marketing efforts will you participate in?

April: Arm Yourself for Summer

The summer months can be lean for some businesses. If yours is one of them, now is the time to figure out how you’ll keep your business afloat. Take a look at your financials for the upcoming year and see what changes you can make to keep more money for slow-selling times. Consider cutting expenses or finding lower-priced (but still effective) service providers, like internet services or suppliers.

May: Pitch the Press

Spring and summer are great times to start talking to the press about your business. Many magazines and blogs are looking for products and businesses to feature in winter editions—namely, holiday editions! Grab your list of marketing musts for 2012 (that list you made in March) and start pitching the media on your list. Don’t forget to include radio and television media if they apply to you, as well as print and online magazines and blogs.

June: Search Engine Optimization Time!

Search engine optimization, as you know, is time consuming to implement. And it also takes time for any SEO changes you’ve made to show up in search engines. Go ahead and tweak your SEO now; change keywords or add new ones and start building back-links with other related websites and blogs. By the time the busy winter shopping season begins, your SEO changes should be in effect!

July: Fine Tuning

Six months of the New Year have already passed! Can you believe it? Take a peek back and see how the changes you’ve made are working. Have you found any major glitches or mistakes that need to be fixed? With the winter shopping season coming up, make any needed business tweaks or changes now.

August: Get Ready for the Holidays

Only three months to go until the busy holiday shopping season! Now is the time to roll out any additional new products you may be adding to your mix. In addition, start preparing to build inventory on best-selling items so you have a good stockpile for holiday shopping.

September: Social Media Month

Have you been keeping up with your social media circles?

Social media can take a lot of your time, but it’s a wonderful promotional tool not to be overlooked. Immerse yourself in your social media groups, like Facebook and Twitter, with intention. Have great content and ideas to share, to keep your followers engaged. Make time each day to work on social media, but don’t waste time (stick to your social media time budget!) If you blog, be sure to update frequently and increase your reader following.

October: More Holiday Preparations

Alright. Now holiday shopping really is right around the corner. Prepare your business by stocking up on essentials, like packaging materials, business cards, office supplies, and any inventory you haven’t ordered yet. If you sell handmade products, boost your production to finalize your inventory if possible.

November: Get Help

If your business typically experiences a surge in sales during the holiday rush, now is the time to consider getting some help. Each year is different for holiday sales; however, if you’ve experienced a rush in the past or expect to in the coming year, it’s time to hire an assistant. Consider getting help with packaging and shipping, emails, phone calls, or any other tasks that can quickly get out of control.

December: Tidy Up

Your business year has come full circle! As the month of December winds down along with the holiday buying rush, take time to finish loose ends and restock your store. Don’t forget to breathe and take time to relax. December brings the chance to look back on 2012 and see the results of your changes and efforts. Then, you can start the circle over again by looking ahead once more.

This article is from Justine Grey of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How To Take Risks Without Losing Your Shirt

James Clear — Wed, 07 Dec 2011 22:25:07 +0000

Link:

http://www.openforum.com/articles/how-to-take-risks-without-losing-your-shirt

"Entrepreneurs are natural risk-takers." I've heard that phrase more times than I can count ... and it is one of the great myths of entrepreneurship.

In fact, I've noticed that entrepreneurs—and business professionals in general—are usually terrible risk takers.

Now don't get me wrong, entrepreneurs are certainly courageous. They are willing to try a way of life that others are not, and I think that's why people assume that they are risk takers. However, risk isn't really the right word. Just because someone does something outside of the norm doesn't mean that they are doing something risky. And it certainly doesn't mean that they are good at taking risks.

Regardless of the situation, most risks share one thing in common: it's rarely the initial decision that dooms a business. Instead, our irrational responses after the initial decision are what turn regular risks into big failures.

In hopes of helping you avoid the pitfalls of risk taking, here are three suggestions for taking risks without going out of business.

1. Take a Long Term View

If you look back on many reckless decisions in business, they are often made because someone didn't want to miss out on an opportunity. The idea of a vanishing window of opportunity often drives us to make decisions we wouldn't usually make. For example, think about your typical bidding war. Often, we pay more than we want because we convince ourselves that "this is our only chance."

As the famous golfer Jack Nicklaus said, "Extremes never work for long." It doesn't matter whether you're talking about a golf swing or a business move, don't put yourself in an extreme situation because you took the short term view.

Opportunities have a way of presenting themselves over and over again. If you're patient enough to pass on the bad deals in the short term, then you'll usually find some excellent ones in the long term.

Of course, that's easier said than done because we often convince ourselves that the deal we see, or the risk we are about to take, is worth it. Which brings me to my next point...

2. Stop Fooling Yourself

Poor risk taking is often the result of irrational behavior.

We see an opportunity, and because we don't want to miss it, we convince ourselves that we should take the risk. We agree to bad terms, we convince ourselves to make excessive purchases, we choose a poor strategic direction ... often because we get wrapped up in the idea of one possibility and search for reasons to convince ourselves that we are making the right move. This can be especially true for entrepreneurs, who often become enamored with new ideas and possibilities.

Rather than getting wrapped up in the new idea or opportunity, you can avoid poor risks by viewing a range of possibilities for each and every situation. When you're leaning one way, stop for a moment and consider the other view point. What if you did the complete opposite? What would happen? Why would a smart business person not make the same move?

By considering a range of alternatives, you can help prevent yourself from making poor decisions because of irrational reasons.

3. Evaluate the Situation as It Currently Is

Just because something was the right decision three months ago, doesn't mean that it's the right decision today. Of course, that doesn't mean it's easy to change course.

Making the right decision in the moment often requires you to check your ego, ignore the previous time and effort that went into a project, and eliminate your emotional connection to the business. That may sound hard, but the results of unbiased decision making can be excellent.

Here is an example. As the story goes, former Intel CEO Andy Grove was debating with current CEO Gordon Moore about the future direction of the company. At the time, Intel was a company that primarily produced memory chips. They also built a small amount of microprocessors. The problem was that Intel was losing money because of Japanese competitors who were building high-quality memory chips at a fraction of the price.

Grove looked at Moore and said, "If we got kicked out and the board brought in a new CEO, what do you think he would do?" Moore answered by saying, "He would get us out of memories." That was the moment Intel decided to abandon the memory chip business and start making microprocessors. The rest, as they say, is history. Hidden in that small conversation is a very powerful message.

It took a remarkable amount of courage for Moore and Grove to abandon Intel's identity as a company. Despite the difficulty, the two men made the decision that was best for the company at that moment in time. That's the secret to successful risk taking.

Risky decisions can be made as long as they focus on what is best for your business right now. Conversely, if you jump at opportunities and convince yourself of their worth for irrational reasons, then you'll chase one bad decision into the ground ... and your business will come along with you.

This article is from James Clear of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Things You Can Stop Obsessing About

Annie Mueller — Fri, 02 Dec 2011 21:08:52 +0000

Link:

http://www.openforum.com/articles/5-things-you-can-stop-obsessing-about

There's plenty to worry about in small business. Here are a few items you can safely remove from your anxiety list.

1. How Clever You are on Twitter

Twitter is a format that lends itself to witty statements and clever one-liners, but you don't have to be clever to use Twitter successfully as a marketing tool. Because, while your customers may appreciate humor and snark, they appreciate other things more: discounts, coupons, helpful information, and relevant links.

If witty isn't your strong suit, don't worry. Witty is nice, and it is also forgettable. Real help and real value can make a more lasting impression.

2. Your Business Plan

While the MBAs around the world cover their faces in horror, let's think for a moment about the function of a business plan. Oh, wait, does it actually have one? Let's poll the crowd.

From MJ DeMarco, author and self-made millionaire, in his book The Millionaire Fastlane: "Business plans are useless. Yes, I said it. Business plans are useless because they're ideas jacked-up on steroids."

From Mike Michalowicz, entrepreneur and author of The Toilet Paper Entrepreneur, writes "If you have a good product, service or idea, don’t worry about a business plan. You have what you need, which is the salable idea. All you need to do is put the wheels in motion to start capitalizing on that idea."

3. Your Schedule, in Fifteen-minute Increments

Yes, it's great to have a handle on your schedule, to plan things out, and to commit your time to what is most important. But flexibility is key for a small business owner, and tying yourself to a micro-managed schedule is, most likely, just going to drive you crazy.

If micro-managing your employees doesn't work, why do you think micro-managing yourself is a good idea?

As Mihaly Csikszentmihalyi writes in his book Finding Flow, "Time stress has become one of the most popular complaints of the day. But more often than not, it is an excuse for not taking control of our lives. How many of the things that we do are really necessary?"

Instead of trying to cram more into your days by dividing them into ever smaller and more disparate segments, cut out all but the most important activities of your business. There are smart ways to regain control of your time, they don't involve buying a thicker planner or a more detailed calendar.

4. Your Chance of Failure

Failure is a normal part of life and business. If you have a hundred ideas, not all of them are going to be wins. Nobody has a 100 percent success rate. Think about each failure as a course in how to succeed next time.

James Allen writes of failure as "one of the pathways to attainment." MJ DeMarco calls it "the sweat of success."

5. Almost Anything Below Item #3 on Your To-Do List

There's always a long list of things to do in running a small business, whether yours is an operation of one or 100 or 1000. But putting item after item on your daily to-do list isn't going to help you be more productive. In fact, it may have the opposite effect.

Time and productivity expert Laura Vanderkam postulates that a shorter to-do list helps you focus and accomplish. "And when you aim to do only 3 things, you're highly likely to get them done—and then move on," says Vanderkam. "That beats shuffling the same 20 things from one day's list to the next."

Less is, in fact, more, both on your to-do list and in your mental obsession box. So let some things go, and start getting more things that matter done.

This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Future Ain’t What It Used to Be: Are You Ready to Change?

Tom Harnish — Fri, 18 Nov 2011 21:13:56 +0000

Link:

http://www.openforum.com/articles/the-future-aint-what-it-used-to-be-are-you-rea...

When was the last time you licked a stamp or sent a telegram? Used a folded map to find a scenic overlook and then took a picture with a Polaroid camera? Looked up a number in a phone book and made a call at a pay phone? Stuck a 3 ¼ inch diskette in your computer or a cassette tape in a Walkman?

All those products used to be made by companies that today either sell a whole new line of products or they’re out of business.

Employees are changing too, as baby-boomers retire in droves and younger workers—with very different values and aspirations—take their place. Consumerization, as it’s called, is changing the IT landscape thanks to laptops and iPads that exceed the capabilities of office computers and put new demands on infrastructure. Even customers are changing as they adopt social networks, expect customization, and demand green responsibility.

Managing change is the biggest challenge facing business owners today.

What Business Are You Really In?

“The railroads did not stop growing because the need for passenger and freight transportation declined,” Harvard professor Theodore Levitt famously wrote in Marketing Myopia. “They let others take customers away from them because they assumed themselves to be in the railroad business rather than the transportation business.”

So what’s the railroad equivalent today? The music business comes to mind. Napster was a wake-up call, and iTunes change everything. The movie and television industry is next in line. Consider, for example, that the top-grossing 2011 movie, Harry Potter and the Deathly Hallows: Part II, made about $380 million in four months. The electronic game, Call of Duty: Modern Warfare 3, made over $400 million within 24 hours of release.

If Hollywood understands that it’s in the entertainment business, not simply the movie business, before long we won’t watch films, we will interact with them, defining the story line based on our game playing skills as a gunfighter or car driver. If instead, they bury their collective heads in the proverbial sand, they’ll find themselves on an express train to nowhere.

The same is true for small business owners. If you don’t understand what business you’re really in, you can’t predict where your market is headed—much less get there ahead of the competition.

Can You Predict the Future?

Physicist and science fiction writer Arthur Clarke wrote, “When a distinguished but elderly scientist states that something is possible, he is almost certainly right. When he states that something is impossible, he is very probably wrong.” What’s more, he wrote, we tend to under-predict the near future and over-predict the more distant future.

For over a hundred years, Eastman Kodak was the name in photography. Could they have foreseen the demise of film? As a matter of fact, yes.

Twenty-five years ago they hired my wife to do a series of international lectures to alert photo processing companies that the end was nigh (of parking lot film drop kiosks). Although they saw it coming, Kodak failed to change. Today, with billions and billions of photos captured on iPhones and digital cameras, the name Kodak is seldom seen. Ironically, some of the most popular iPhone apps are designed to make iPhone pictures look like they were taken by old film cameras using Kodachrome film.

Eric Schmidt, Google's founder and chairman, said it concisely when he recently wrote to a U.S. Senate subcommittee, “...history shows that popular technology is often supplanted by entirely new models.” He ought to know. His company didn’t even exist in 1998. Now Twitter, created in 2006, is threatening Google by handling 1.6 billion searches a day and providing on-the-spot news.

What Can You Do About It?

If change is inevitable—and accelerating—how can you manage it? Alan Kay, 40 years ago said, “The best way to predict the future is to invent it.”

Unquestionably, agility and innovativeness are the most important capabilities for a company in a rapidly changing world. What you’re doing today is not what you’re going to be doing five years from now. Which raises the question, why in the world is Apple building a new corporate headquarters that will be bigger than the Pentagon?

One firm, you know who it is, that gets it is offering $100 million to the start-ups that will help it transition from being a credit card company into a financial services company. Credit cards will soon be a thing of the past. When your smart phone allows you buy anything from a soft-drink at a vending machine to expensive jewelry in a hoity-toity store, plastic is useless. In fact, you can already use your iPhone to buy merchandise and check yourself out in Apple stores.

The Moral of the Story

Most companies can survive, in some way, just as the homeless manage to survive in some way. But is that good enough for you? If you aspire to do something great, can you make it happen? You have to believe in it, invest in it, even tweak the universe to make it happen. Can you do that?

You can’t simply deliver a product or service. To be more than a survivor, to succeed, your company needs to do one thing—it needs to satisfy the needs of its customers.

As Theodore Levitt put it, “In short, the organization must learn to think of itself not as producing goods or services but buying customers, as doing the things that make people want to do business with it.”

Are you doing that now? Will you be doing that tomorrow?

This article is from Tom Harnish of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How To Identify And Eliminate Waste In Your Budget

Kentin Waits — Wed, 09 Nov 2011 20:18:41 +0000

Link:

http://www.openforum.com/articles/how-to-identify-and-eliminate-waste-in-your-bu...

It’s never been more important for small and medium-sized business to know how every dollar is spent. Identifying and plugging those small drips and big leaks help every business stay afloat when competition is tight. But what are the most efficient strategies to target waste in a complex business budget? Let’s explore how to get started:

1. Understand the ROI for Each Expenditure

Return on Investment—ROI—isn’t just for the big stuff like marketing and technology. It’s time to rethink the return on investment for every expense your business incurs.

For this step, it often helps to think of your business as a brand new enterprise. If you were launching your business today, what would you change? What long-term commitments or contracts are working against you and is there room to renegotiate or reinvent a few things and save some dollars in the process? What would you lease instead of buy, buy instead of lease?

2. Get Granular

Avoid death by a thousand cuts.

Take a look at all levels of your business in your effort to reduce waste. Can you refine your marketing strategies to reach a more targeted audience? Are you communicating with your customers too much and not optimizing each message? How can you deliver your product more efficiently? Are you paying too much for office space or paying for space you don’t maximize? This soup-to-nuts approach can help reduce incremental expenses and catch operational inefficiencies that add up to big dollars over time.

3. Look for Repetition, Redundancies and Communication Gaps

Examine the entire lifecycle of your operations to see if there redundancies or unnecessary repetition and replication of duties.

Often, the view from ten thousand feet can reveal clear opportunities to streamline workflow, better divide tasks, eliminate unproductive steps and ultimately save money. Pay close attention to what consumes the largest amount of time in your business, like sourcing products, manufacturing, sales, fulfillment, or customer service. Take a critical look at each phase independently to see what can be done better and then examine how each phase works together. Is customer service missing opportunities to communicate upsell opportunities to the sales team? Are delays in fulfillment creating double work for customer service?

4. Tap Your Resources

Often, it’s the people closest to the day-to-day operation of a business that can be your best waste-reducing advocates.

Regardless of the size of your business, seek input from staff at all levels as you work to refine your budget and reduce unnecessary expenses. Reward employees who have the best suggestions for streamlining processes.

5. Formalize Efficiency Reviews

Businesses are constantly changing and evolving.

A review of how things are done and how things can be done better, smarter, and faster is a continuous process. Consider scheduling a periodic efficiency audit or creating a permanent team that is tasked with identifying and reducing waste on an ongoing basis. But watch out that your efficiency committee doesn’t become a source of inefficiency itself. Look for concrete results and empower committee members to review and vet each new opportunity to waste and bring only the best options to you for approval.

Today’s smartest companies realize that waste isn’t just a drag on budgets—it can mean the difference between surviving and thriving. A holistic, process-focused, employee-driven review of inefficiencies and budgetary waste can free up capital for new ventures, help reward loyal employees, and speed new ideas to market. Companies that have a close eye on reducing waste are ultimately leaner and able to respond to the vagaries of the market—scaling up or scaling back to meet shifts in demand or respond to new economic challenges. Identifying and reducing waste becomes an opportunity for growth and can be the competitive advantage a company needs to stay ahead of the curve.

This article is from Kentin Waits of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Why You Should Reconsider Your Business Forecasting Strategy

Ken Kaufman — Sat, 05 Nov 2011 21:22:20 +0000

Link:

http://www.openforum.com/articles/why-you-should-reconsider-your-business-foreca...

A standard best-practice for decades, the annual planning and resultant budget have become familiar strategic tools for businesses large and small. Yet small businesses and entrepreneurial ventures often struggle to find value in the process, with too much variability in their month-to-month performance to really project performance with any degree of accuracy.

Why the Static Budget Fails

Here’s an example. A three-year-old company has struggled to generate a few hundred sales per month. They have carefully planned an annual budget, organized month-by-month, that reflects how they will utilize the resources from these sales to pay their staff, run their business, and have a little left over to invest in future products.

Then, almost overnight, their monthly sales break 1,000 units and they never have a three-digit unit sales month again…ever. This company’s annual budget became obsolete overnight, yet most businesses refuse to update their budget and try to analyze variances between their actual and budgeted performance. After one attempt, they realize this effort is futile and they abandon it altogether.

Although this example is extreme, it highlights the point that forecasting the future of small and entrepreneurial companies is usually more difficult than forecasting much larger companies with more predictable sales. So, is there a way to make the budgeting process more meaningful for entrepreneurs?

Rolling Twelve-Month Budget

Rather than a static, locked-down twelve-month plan, what if business owners adjusted their forecast monthly based on everything they learned during the prior months? Some assumptions were likely validated, like the cost per lead. Other assumptions were likely invalidated, like the percentage of the leads that actually turned into paying customers. One important element of a rolling budget is the ability to change assumptions and outcomes along the way rather than be stuck with bad assumptions for an entire year.

Add a New Month as Each Old Month Passes

Another great feature of a rolling budget is that you always have twelve months forecasted with your most recent and valid assumptions, plans, strategies, and tactics. When most companies use a static budget, the forward-looking nature of their predictions get shorter as the year transpires. A calendar-year company, therefore, only has three months budgeted in October—not much of a forecast.

As you update your budget each month, you also add another month on the end, meaning you always have at least twelve months planned into the future. It forces you and your team to constantly be thinking about the future implications of your actions today, how your products/services are accepted by paying customers, what competitive pressures will do to your sales, how you should staff your business, and so much more.

Once-a-Month Rather than Once-per-Year

So, does adding a new month to your budget every 30 days take more or less time than a once-per-year budgeting process? I haven’t seen any empirical evidence to answer this specific question, but there are plenty of examples that cite improved results, meaning if any extra time is required, it will likely generate a desirable return.

A Note About Software & Drivers

Regardless of how you keep track of your budget, a monthly variance analysis is the catalyst to keeping the next rolling twelve months dynamic, relevant, and as accurate as possible. Many accounting and financial planning software packages exist, and this entire process can even be accomplished in a spreadsheet. No matter what tool you use, the basis for your month-by-month plan should be the key drivers in your business.

A key business driver is an assumption about how different parts of the business will be affected by one factor. For example, a driver of business performance may be sales. Since sales determines the amount of variable costs, the assumptions we make about sales is a key driver for many of the expenses in the business. Other examples of key drivers include employee headcount, leads generated, attrition rates, working capital days, among others.

The main point to remember is this—once you determine your key business drivers, or the best way to make assumptions about what will happen in your business in the future, allow the drivers to determine the outcomes. So, whatever software you use, make sure it will support your use of drivers to create and update your rolling forecast.

Bottom Line

Different versions of rolling forecasts have been around for quite some time in large organizations, but they are becoming more popular in small and medium-sized business (SMBs). Why? Because they are actually more valuable in companies with less predictable revenue streams and cost containment efforts. The rolling forecast is a powerful, forward-looking solution to help entrepreneurs spot key trends, make critical pivots, and maximize their performance and results.

This article is from Ken Kaufman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Turn Your Business Into a Money Machine

James Clear — Thu, 03 Nov 2011 18:37:37 +0000

Link:

http://www.openforum.com/articles/turn-your-business-into-a-money-machine

Wildly successful businesses often find one process that works and then repeat it as many times as possible. If you can figure out what this process for your business, then you can grow at an alarming rate. For example, if you know that for every $1 you put in, you will get $2 out, then you can grow without fear. Some people call this achieving scale. Some people call it a money machine. Some people just call it good business.

Regardless of what you call it, I'm assuming you would like your business to be a money machine. Here are three ideas that should help you do just that.

1. Know Your Customer Lifetime Value

Your Customer Lifetime Value is simply the amount of value that the average customer brings to your business over a given time span (usually one year).

If you’re interested in calculating your Customer Lifetime Value, you can find a great explanation of the concept and an Excel spreadsheet that should help you on Occam's Razor.

Long story short, once you know how much each customer is worth to you, then you know with certainty how much you can spend to get a new customer. For example, if you make $15 of profit with each customer, then you can spend $14 bringing a new one in the door and still stay in business.

2. Be Willing to Pay for Customers

To some of you, this will seem like a no-brainer, but you would be surprised how many business owners are hesitant to spend money to make money.

Instead, they tell themselves things like...

"I'll start an email list and do some SEO. Then everyone will sign up and I can pitch them products."

"I want to create the next Facebook for motorcycle enthusiasts. All of the bikers and gear heads will come join my community for free and then I can make money on advertising."

"The foundation of my business is referrals. After all, that's the best strategy right? Happy customers will always bring you more customers."

Now, there is nothing "wrong" with the above statements. And I certainly don't suggest recklessly spending your money (more on that in a moment). But it is important to understand that successful businesses pay to bring quality customers in the door.

3. Create a Closed Feedback Loop

If you want to create a money machine and not waste your precious cash in the process, then you need to have a way to track what works and what doesn't. You need a feedback loop for each marketing and advertising activity you do.

Feedback loop is just a fancy way of saying, "track where your sales come from." You should know exactly which advertising campaigns, marketing initiatives, and actions bring in the most customers.

Yes, it will take some effort to set this up, but it will be well worth it.

Once this feedback loop has been created, then you know for sure where your profits are being generated. That's when you have a money machine on your hands. You know how much your customers are worth to you. You know how much you can spend to acquire them. You know which actions generate the most profit.

Business is good when you know that you can put $1 into the machine and get $3 out the other end.

AMEX Blurb:

This is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

This article is from James Clear of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How To Keep Your Business Headed In The Right Direction

Tom Harnish — Wed, 02 Nov 2011 18:19:41 +0000

Link:

http://www.openforum.com/articles/how-to-keep-your-business-headed-in-the-right-...

How do you know you aren’t working harder and harder to do better and better at something you shouldn’t be doing at all?

Part of the answer is to make sure you know where you’re going. The other part of the answer is to make sure you're making good progress getting there.

Charting a Business Voyage

Contrary to popular opinion, Christopher Columbus—an entrepreneur in every respect—had a very good idea where he was headed and no fear of falling off the edge of the earth. Earlier sailors hinted at a route to the Orient, and mariners and landlubbers alike had known the world was round for over 1700 years before his historic voyage.

But in a sea of business uncertainty, how do you figure out where you want to go and how to get there? The answer is to have a plan and track your progress.

Strategic planning isn't just for large businesses. You don't need a Plans Division or a formal document that could double as an anchor. In a few hours you can create a useful working document that will set you on course.

In a fast moving environment, such as smart phone app development, a five-year plan doesn't make sense; nobody knows what the iPhone 10 will be able to do. Anyway, the plan isn't the point. Its value is in the thought process and the strategy you develop.

1. Know Why You're Going

Knowing the purpose of your business sounds easy enough, but under the surface you’ll find a variety of alternatives.

Do you want to build a nice little Mom and Pop business that allows you to take out, say, $150,000 year after taxes? That’s a common and noble objective that requires one kind of strategy.

But maybe you’ve already been doing that for 20 years and have decided it’s time to cash out so you can pay more attention to your hobby, go into politics, or sail to the South Pacific. That requires an entirely different course.

Do you have a bright idea for a web-based business that you hope will go viral and let you sell out in five years for megabucks? A strategy designed to produce rapid growth obviously has to be different from one designed to produce a steady income stream.

2. Know Where You're Going

To make sure Mom & Pop Inc. is successful, you might want to focus on controlling costs, and set a goal to cap your fixed costs at, say, 30 percent of sales.

If the goal is to sell your company, three years of profitable growth and consistent or increasing margins should guide your efforts.

The web business will be easy to copy, so you’ll need to get in quick, buy market share if you have too, and demonstrate potential even if you never make a profit.

3. Plan Your Course

Once you know where you're going, you have to plan how you're going to get there.

A SWOT analysis (strengths, weaknesses, opportunities, threats) is a great way to take a look at your own, your competitor’s, and your industry’s situation.

When you’re sailing, if you’re thinking about what’s happening right now, you’re already in trouble, even if nothing bad is going on. You need to be thinking about what’s going to happen next, and a SWOT analysis can help you do that. The result of your efforts will be a list of objectives to help you reach your goals.

Ma & Pa Inc. might have as one objective to reduce real estate costs, or perhaps find a way to reduce shipping costs on the products they order for resale.

But if you’re trying to sell your business you might add an objective to also maximize gross profit by making sure to keep your prices as high as possible. Every extra dollar you generate will be worth $3 to $5 when you sell. And raising prices won’t hurt sales as much as you might think. In fact, you might actually make more money, and work less.

If you’re developing bleeding edge software an objective might be to have a prototype working for display at an important trade show.

4. Watch Where You’re Going

If you don’t track your progress through good times and bad you won’t know if you’re meeting your objectives and goals designed to achieve your company’s purpose.

Tracking your progress alerts you to changes in market currents or economic winds that can blow off course. Telltale signs offer an early warning that it’s time to do something. Over and over business people (and sailors) either decide to wait and see if things get better (they inevitably will change, but not necessarily for the better), or people are paralyzed into indecision.

Chart Your Course

To sum up, a strategic plan will help you navigate the rough waters of change if you:

take the time to understand where you’re trying to go;
chart a course to get you there;
track your progress against your plan; and
take action when you’re off course.

This article is from Tom Harnish of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Ability To Execute Is Your Most Valuable Asset

Annie Mueller — Tue, 01 Nov 2011 18:06:04 +0000

Link:

http://www.openforum.com/articles/the-ability-to-execute-is-your-most-valuable-a...

Ideas are cheap, but action is rare. Execution, from start to finish, is the most valuable item in business, any business. Here's why it matters and how to make more of it happen in your business.

The Herd Man vs. the Individual Man

“There are two kinds of men, the kind that lives in the herd and the kind that has strong individuality that needs room to grow. The herd man exists in infinitely greater numbers than the individual man.” —William Crosbie Hunter

Moo.

All those who don't like being crammed in a cattle chute, stand up and be counted. Ahem. There are lots of you. Lots of hands. Lots of people standing.

Let's narrow this down.

All those who like taking full responsibility for their choices, making the best use of their time, working way too hard and way too long, setting impossibly high expectations for themselves and then meeting them, trying a lot of things that fail in order to find the ones that succeed… you folks stand up and be counted.

Hm. Small crowd this time. Just a few of you. It was that "working hard and long" that got most of those hands down, I'll bet.

At any rate, you folks, the ones still standing: yes, you. You're the anti-herd. It's true, there aren't many of you. That's why you often feel like the world doesn't understand you, or, at any rate, your parents/friends/significant others don't understand you.

Oh, there are plenty of people around who will nod and reiterate their own grand passions, but at the end of the day, they're chilling with a beer and the latest reality show, and you're cranking out the hours of more work, more work, and more work. They're talking about creating something, but you, anti-herd dude or gal? You're actually creating something.

And that's the secret.

The most valuable item in a business, any business, is the ability to execute. Anybody can have an idea or plan out a project. What separates the individuals and businesses who succeed from the herd is action.

It's not just any action that makes the difference, though.

Getting It Done

Whatever it is, doing a thing, from start to finish, and doing it in a timely, professional matter… that's the key. Not just to know what to do, but to discipline yourself and get it done. What do you wish most for in your employees? How about that they would simply do their jobs?

How about you? Do you make it a habit to take each task from start to finish, then move to the next? Or are you prone to distraction, bouts of procrastination, and a constant feeling of being a few steps behind? Do you feel like you start each day racing to catch up?

This is not the way a business has to be run, and it's not the way you have to work or live. There are no magic pills or formulas, but there are some tools you should be carrying in your toolbox.

Tool 1: The Habit of Starting

Beginning something is half the battle, because it's at the point of starting that we encounter the most resistance. We put off starting a task because we think we don't have enough time, or we don't have all the resources, or we need some important feedback.

Get into the habit of starting before you feel ready, before you have enough time, before you have all your ducks in a row. Start anyway. The thing about being “ready” is that, even if you feel ready, things rarely work exactly according to plan. You're going to have to improvise along the way, so go ahead and start now.

Instead of trusting your preparation, trust your ability to analyze, adapt, and act along the way.

Tool 2: The Habit of Focus

Most of us spend too much time trying to minimize interruptions in order to get some work done. It's great to minimize the interruptions you can control, but most of them are out of your control.

Accept that interruptions and distractions are part of life. Quit denying their existence or fighting a battle that is futile. Instead, cultivate the habit of focus. If you can learn to concentrate, you can learn to get stuff done despite the interruptions that will happen.

Tool 3: The Habit of Daily Progress

Big projects scare us because we really don't see how we can make significant progress on them. But small steps add up. If you figure out the actions you need to take to reach your goal, and then make a small version of those actions a daily habit, you'll get there.

Daily, habitual action will get the biggest project done.

Create a daily checklist of the actions you need to complete for your current project. Focus on only one or two big projects at a time. Keep that daily checklist front and center, check it off daily, and keep track of the progress you're making toward your goal.

Tool 4: The Habit of Finishing

You start. You focus. You act daily. And you get there, sooner than you might think. The final tool is the ability to call the thing done.

Perfection has its place, but it needs to be something that serves you in the quest for quality, not something that controls you. Choose which parts of your project need to be perfect. Give them more time. But don't place the standard of perfection on the project as a whole.

Instead, let done be done. Wrap it up, ship it out, and then focus on the next project. Take one task, one idea, or one project all the way to completion.

This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

5 Ways You're Sabotaging Your Business

Annie Mueller — Wed, 11 May 2011 20:44:31 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/5-ways-you-are-sabotag...

You worry about how best to advertise. You worry about marketing. You worry about getting the right employees, paying the bills, paying the vendors, producing something great, getting new customers, keeping old customers happy, and not letting work take over your life.

You worry that your competitors, or a changing market, or some unforeseen technological advancement, or some slow but steady trend of change, will render your business obsolete before you've had time to figure out what to do.

While you're worrying about all those things beyond your control, you might be missing some definite damage you're doing to your own business. See if you're unconsciously sabotaging your business and take action to change it.

Sabotage #1: Focusing on long-term goals at the expense of short-term movement

Procrastination often masquerades as planning. Don't be taken in. Yes, you need a business vision. You need long-term goals. You need to know where you're headed. But don't let the planning take the place of what is happening in the present. Neglect the present, and you have no future.

Successful business managers and owners, freelancers, and entrepreneurs must not only have long-term goals but must also advance steadily toward short-term goals with daily action. And of the two, short-term goals are more important. If you have to choose between steadily pursuing long-term and short-term goals, focus on the short-term; if you have a coherent business plan, those short-term goals will line up with a long-term plan, and you'll be moving in the right direction. But the key is that you'll be moving.

Sabotage #2: Failing to systematize

Dear One-Man-Shop Jack of All Trades:

You cannot do it all. If you do not learn how to systematize what you are doing, you won't be able to delegate. If you aren't able to delegate, you will fail.

Systems keep you from needing to do everything yourself. Systems enable you to transfer responsibility to your employee, your consultant, or your outsourced professional. Systems allow you to check in and see that things are being done as you want them to be done, but without needing you to do them.

Take a look at what Peter Drucker calls "conditions for survival"; these "four entrepreneurial activities that run in parallel" can be paraphrased as:

Organization for systematic abandonment of what is no longer optimal;
Organization for "systematic, continuing improvement";
Organization for "systematic and continuous exploitation" of what is successful;
Organization for "systematic innovation".

Notice any keywords in there?

Turning procedures and processes into a system, training your people in those systems, and then seeing that those systems are followed are among the chief responsibilities of a business leader.

Sabotage #3: Keeping dead-weight on board

Drucker's first condition for survival is organized abandonment "of products, services, processes, markets, distribution channels, and so on that are no longer an optimal allocation of resources." By forcing your business to hang on to old methods, old products, and old ways of conducting business that are no longer working optimally, you force your business to maintain itself at a level of survival when it could be moving up in growth and profitability.

Notice that there are two conditions understood here. One is, you don't abandon anything at the drop of a hat just because it doesn't work once. If you have a consistently positive return from some method or product, and one freak failure in the bunch, you don't cut it off. You figure out why, you move on, you keep tracking.

The second condition is just as important. Most methods, products, services, etc., that need to be dropped won't stop working altogether. A distribution channel, for example, may still get the product distributed, but it won't be the best way to get the work done. You've got to analyze not only what you have, and how well it is working, but how much better things could work with some newness thrown in the mix. Then you have to drop the old stuff, the dead-weight, and move on to what works better.

Sabotage #4: Failing to build innovation into your business

This (bad) habit goes hand-in-hand with Sabotage #3. If you aren't constantly looking for ways to improve your business, you won't be aware of how much your business could improve. New things will scare you, rather than cause you to see the possibilities for profitability, growth, and sustainable practices. Just as you need to systematize your day-to-day work, you need to build innovation systematically into your business.

"As counterintuitive as it sounds, I think you can innovate methodically. You can force innovation. There is a process you can follow to improve both the number and the quality of ideas you can come up with." – Kevin O'Connor, The Map of Innovation

Sabotage #5: Taking things personally.

As an entrepreneur, business owner, or freelancer, you invest much of yourself into each new venture, or into each day's work, or into each new client or project. Your personal identity is often wrapped up in your business, and that isn't a bad thing unless you allow your personal reactions to color your business sense.

Can you respond to a customer's complaints, or an employee's criticism, without being personally offended? Can you listen to a new idea without shutting it down because you didn't come up with it? Can you consider a failed project as a way to learn rather than a personal chasm of despair? If you can't, time to start learning. You may still feel strongly about what happens in your business; that's okay. But you've got to respond with dignity, open-mindedness, and the ability to see the value in each experience or critique rather than allowing those personal feelings to put you into shut-down mode.

Self-sabotage, in the way I've described here, is hardly ever deliberate. In fact, it's hardly ever done consciously. It's most often a matter of you doing the same things you've done, following those old habits, without considering how your habits could debilitate or even destroy your business. The simple solution is to identify and destroy those habits, and then focus on building new habits that help build your business.

This article is from Annie Mueller of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Business Model Pivots to Improve Cash Flow

Ken Kaufman — Sat, 26 Feb 2011 00:38:58 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/10-business-model-pivots-...

When someone tells me they want to start a business, and if they are open to a little advice, I usually say something like this: “I know you are good at what you do, and I’m sure your product or service will solve real needs in the market, but you need to know that business ownership is about a lot more than that. You’re going to need to become an expert in cash flow.” Cash flow needs to be one of the major influencing factors when developing the most effective business model in the early stages of any company.

For years we've been told that there is really only one constant in business model creation -- change. But recently there has a been a movement away from the word "change" and toward another word: "pivot". Pivot helps us focus on the critical decision points of testing, trying, tweaking, and sometimes overhauling the business model.

The underlying theme of a business model is to find the most scalable and repeatable way to offer your products and services, and there are many pivots that need to happen to maximize the life-blood, or cash flow, of the business. Here are the ten most common cash flow pivots I have seen deployed in the ever-pivoting world of business model creation, design, and implementation.

Pivot 1 - Master Marketing

Becoming a master of something takes time and experience. Marketing is all about pivots, testing and trying different things until the most effective methods are found. But all too often marketing chews up vital cash flow before anyone realizes the money was being wasted. If you master marketing, your marketing will generate more cash flow, not just use up the cash you started with.

Pivot 2 - Maximize CPA

No, I’m not talking about your tax CPA, I’m talking about Cost Per Acquisition, or the amount of money it costs you to acquire a new customer. Pivots that include reducing the CPA will help cash flow and contribute toward growth capital as well.

Pivot 3 - Invoice Timing & Terms

Invoice your customers as early as possible. For example, one company would charge their customers every month for the work they did the prior month. Through a few calculated pivots, they began invoicing their customers before they even started doing the work, buying them more than 30 days of extra cash flow. Don’t negotiate the terms. You set them, and your customers accept them. And if they go late, cut them off. A non-paying customer is more costly than no customer at all.

Pivot 4 - Invoice Frequency

How often do you charge customers? Is it predictable and does it bring the total amount the customer pays into a cost range that they perceive is acceptable? Are they incented to pay for several periods in advance?

Pivot 5 - Lean Inventory

Inventory on your shelves is cash not in your bank account. Any pivots that push inventory either up or down your supply chain will help your cash flow.

Pivot 6 - Variable Cost Reliance

Fixed costs make it difficult to pivot effectively. Building a business model around variable costs and pivoting to rely more upon them will help the cash flow of a start-up and growing business.

Pivot 7 - Subscription Structure

What is the lifetime value of a customer for your business, and what pivots can you make to enhance it? Business models with recurring, subscription-type pricing will generate the most short and long-term cash for your business. Almost every business can convert at least some of its products and/or services to a subscription pricing model, and banks and investors like to give money to steady cash flow businesses the most.

Pivot 8 - Recurring Contracts

Pivots that move customers toward contractual obligations to use your products and/or services for some period of time will drive the valuation of your business to its highest potential peak. The steady, predictable cash flow that comes from these contracts is the most attractive type of business in which a financial or strategic buyer would be interested.

Pivot 9 - Focus on Customers, not Products

All too often founders and inventors are infatuated with their product and not with understanding and solving the real problems of customers. Clay Christensen, Harvard Business School Professor, refers to this as knowing what job your customers hire your product or service to do for them. Peter Drucker wrote: “True marketing starts out…with the customer, his demographics, his realities, his needs, his values. It does not ask ‘What do you want to sell?’ It asks, ‘What does the customer want to buy?’” Pivot toward what customers want to buy and you’ll reach cash flow positive sooner than you may think.

Pivot 10 - Payment Options & Convenience

Any pivot in the business model that makes it more convenient or provides more options for your customers to pay you will help your cash flow. Your customers should never be given a chance to think about any inconvenience associated with paying you.

As you start and grow your business, look for opportunities to implement the cash-flow enhancing pivots mentioned above. If you do, you’ll improve your chances for long-term sustainability and become an expert in cash flow.

This article is from Ken Kaufman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Turn Your Annual Operating Plan into a Budget

JoAnne Berg — Sat, 19 Feb 2011 13:28:56 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/turn-your-annual-operatin...

If you are like many entrepreneurs, budgeting is an annual exercise that you may prefer to do without. However, your budget is a powerful tool for ensuring the success of your business, so it’s worth the time and effort to prepare one.

I’ve found that there is a different way of looking at the budgeting process that can help make it less painful while creating better results.

Your budget is essentially the numerical representation of your annual operating plan. So the trick is to create your annual plan first, then translate the written plan into a numerical budget. Some companies call this "profit planning" as opposed to budgeting.

Here are some tips for creating an annual plan and budget that will guide your business to enhanced profitability.

Always Start with Your Sales Plan for the Year

It’s not enough to just plan and budget your expenses. As any successful salesman will tell you, you also have to plan your sales!

Based upon what you know about your market, economic trends, and other influences, make some realistic assumptions in terms of units sold, customers served, and average sales prices for the next year. If you’ve been in business for a while, your historical numbers are a good starting point. If your business is newer, you’ll need to base this plan on your market research.

It’s important to plan in detail here. Don’t just set a dollar figure for total sales — it won’t give you the information you need to prepare the rest of your plan. You will want to answer the following questions:

What is your goal for total number of customers?
What amount do you expect each customer will purchase of each of your products or services?
What price will each customer pay?

You can then compute the expected sales dollars that the business will bring in when your sales goals are met.

Next, Create Your Manufacturing, Purchasing, or Service Provision Plan

Depending on what kind of business you are in, this is where you’ll likely spend most of your planning time. Based on the expected unit sales of each of your products and/or services, prepare a schedule of how many units you will need to manufacture, purchase, or provide to fulfill customer demand.

Then, calculate the expected unit cost for each sold “unit,” multiply, and you have your “Cost of Goods Sold” budget. This represents the direct cost of making those sales before general, sales, and administrative expenses. (This can get tricky if you’re paying employees to provide services. Be sure to allow for unbillable time in your cost calculations.)

Calculate and Analyze Gross Profit

It’s wise to pause at this point and verify that your gross profit percentage is projected to be where it should be for your industry:

Sales Dollars – Cost of Goods Sold = Gross Profit

Gross Profit divided by Sales Dollars = Gross Profit Percentage

If your gross profit percentage is low, you may need to revisit your pricing or figure out how to cut your costs of goods or services.

Plan for Selling, General, and Administrative Activities

Selling, general, and administrative activities (S, G & A) form the infrastructure that your business requires to succeed.

I suggest you start with sales and marketing activities, since without those, nothing else really matters. Plan what needs to happen to achieve your sales goals and who needs to do it; don’t use dollars yet.

Then do the same exercise with the other “back office” functions of your business such as accounting, insurance, legal, office space, phone and internet requirements, and all of the other activities and supplies that you’ll need — again, not in dollars, but in a more descriptive way using organization charts, job descriptions, and whatever else is necessary to understand what needs to happen behind the scenes to support the level of sales you are expecting.

Once your analysis is complete, you can prepare a schedule of necessary employee and overhead costs based on your operating plan. Break this down into two sections: sales and marketing, and general and administrative. Don’t forget your own salary!

Now ask yourself this question: What percentage of sales are you projecting to spend on each of these two overall categories? Is it in line with your industry? Are you spending enough on sales and marketing, for example?

Pulling It All Together

At this point you’ll have a sales forecast; a manufacturing, purchasing, or service provision plan; an S, G, & A plan that is sufficient to support the business; and financial budgets to support each of them. If you’ve worked through this correctly, hopefully you’re projecting a profit.

Congratulations! You have written an operating plan, determined that it can be profitable, and produced sound budget numbers which, when you compare them to your actual results, will guide you in the decisions you need to make to ensure your business meets its sales goals and runs profitably.

This article is from JoAnne Berg of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

6 Essential Plans Every Business Needs

Scott Allen — Sat, 05 Feb 2011 20:42:17 +0000

Link:

http://www.openforum.com/idea-hub/topics/managing/article/6-essential-plans-ever...

Business-planning advocates will tell you that every business needs a full-fledged business plan, and you certainly must have one if you’re going to seek outside investors or a small business loan. While it’s beneficial to have one even if you never seek outside funding, the reality is that many successful businesses launch and grow without a full, formal business plan. However, few businesses succeed without any planning whatsoever.

Planning isn’t something you do just to say you’ve done it and have paper proof. Done properly, planning is an absolutely essential part of business operations. Below are some of the plans every business owner should have, even if informal, and some quick instructions on how to create them. I also recommend you do them in this order, as each one builds on the one before.

1. SWOT Analysis

The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is where vision meets reality. It puts your company in the context of the marketplace — customers and competitors. It’s a tool to make sure that there’s a good alignment between your company’s capabilities and the opportunities you’re pursuing.

It’s not a long and complicated process. Just answer a few simple questions:

What do we do best?
What do we not do best?
What resources do we have available — physical assets, intellectual property, and people?
What are our current operational capabilities?
What external political, social, and industry trends and events will likely affect our company?
What are the driving forces behind sales trends in our industry?
Which are our most profitable markets or market segments?
What potential markets might we explore?
What are the strengths and weaknesses of each of our major competitors?

Don’t dwell on it. You and your leadership team should be able to knock it out in a couple of hours if everyone comes to the meeting prepared. Plan to revise it at least quarterly.

2. Revenue Plan

Simply put, where’s your money going to come from? Saying that you want to make $1 million in revenue this year is a target, not a plan. Start with your revenue target and work backwards, taking it down to the operational level. If you only have one product and it sells for $100, that’s $1,000,000/$100 = 10,000 units. Divide that by roughly 250 selling days per year = 40 units per day. Can you realistically hit that? What will it take to do so? If you have more products and are currently in the growth stage, you may need to set up a simple spreadsheet to lay out the numbers for the year.

Break it down to the day and to the employee. You have four salespeople who each need to sell 10 you units per day. Can they realistically do that? Can you realistically deliver that many every day? You may find you have to adjust your revenue target. Or you may see that you need more sales staff, more marketing automation, or increased production capacity. You’ll never know that, though, until you look at this level of detail.

3. Sales Funnel Plan

Now let’s continue that same concept on up the sales funnel. To do this, you’re going to need to know two essential numbers:

Lead conversion, the percentage of raw contacts that become prospects
Sales conversion, the percentage of prospects that become customers

Note that in some businesses, such as web retail, these may actually be the same number, while in other businesses with a more complex sales process, you may have additional stages. For most businesses, though, these are the two essentials.

Continuing our example above, let’s say that you know that 40% of qualified prospects become customers, and 20% of leads become qualified prospects. In order to hit 40 sales per day, you need 100 qualified prospects (40% of 100 = 40), and 500 leads (20% of 500 = 100). Now, just as with the revenue plan, break that down by source, e.g., 100 will come from pay-per-click advertising, 100 from search engines, 100 from other web referrals, 100 via phone based on other marketing, and 100 from cold-calling. Again, make sure the numbers make sense — do you have the budget and resources in place to drive each piece at the level it needs to be?

4. Marketing Calendar

Marketing requires a gestation period. Campaigns take time to start generating contacts, contacts take time to turn into leads, leads take time to turn into prospects, and prospects take time to turn into sales. You need to know your sales cycle — how long does it take, on average, for a contact to become a sale?

Work backwards from your revenue plan and sales funnel plan. If you want to sell 1,000 units in December, and you know that it takes a month, on average, for a contact to become a prospect and another month to close the sale, then you need your marketing push to start in September or even August. Why not October? First of all, you want the sales to peak at the beginning of the month, not the end. Secondly, remember that the marketing campaign itself has a gestation period. Most people aren’t going to come sign up for your newsletter or want to receive more information the very first time they see or hear your message. Put everything marketing-related on the calendar — newsletter publication dates, webinars, teleseminars, trade shows, and, importantly, the internal deadlines leading up to those events.

5. Resource Plan

Executing everything described above takes people — skilled people. You now know how many leads you need to generate when, how many of those you need to turn into sales, and what and when you’ll have to deliver on those sales. You have the basis for figuring out how many people you need and what skills they need to have. Again, you generally can’t find the right people instantly when you need them — you need to start the hiring process well in advance of the need.

In your resource plan, also include training and development for current staff — you may not have to hire or outsource certain needs if you can get your people the skills they need in advance.

6. Cash Flow Plan

Your cash flow plan is very much like a budget, except that it only looks at actual cash inflows and outflows, such as when you get paid, not when the sale is made; or when you have to make a payment, not when it is purchased. Unanticipated cash flow shortages can kill a business in a matter of weeks or even days. How long can you go without paying payroll? Or rent? Or a key supplier? They don’t care about your overdue collections, accounts receivable, pipeline, or even that huge deal that you just signed the contract on but haven’t gotten paid for yet.

There are basically three ways to deal with a cash-flow shortage: cash reserves, credit, and slow pay (certainly the option of last resort). How much cash reserves do you need? Generally, 90 days operating expenses is considered a good starting point. Depending on the stability or volatility of your cash flow, you may need more or less than that. If you have less than that, or if you have highly volatile cash-flow needs, you probably want to look into establishing a business line of credit with your bank. You should also establish vendor credit in advance of needing it.

The key is early warning. Even an emergency bridge loan takes time to obtain, whether it’s from the bank or current investors. You can’t wait until you’re actually out of money to start figuring out what you’re going to do.

Moving from Planning to Action

As I said before, this is not meant to be a comprehensive business plan. These are plans that you will use not only for big strategic decisions, but on a daily, weekly and monthly basis. When planning, ask yourself these questions:

Are we taking advantage of our strengths and acknowledging and working around our weaknesses?
Are we focusing our attention on the best opportunities and highest income-producing activities?
Are we meeting our daily/weekly sales quotas, and do we have the marketing activities in place to provide enough leads? And if not, where is the process breaking down?
What should the marketing team be doing today, and what does the rest of the company need to be doing to support them?
Do we have the right people with the right skills to execute our plan? And if not, when do we need them and how will we obtain them?
Do we have enough cash or credit available to meet our financial obligations this month?

These are questions every business owner struggles with at one time or another. If you have these plans in place, you’ll know the answers and can focus on executing the plan rather than stressing over the unknown.

This article is from Scott Allen of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

The Dilemma of Entrepreneurial Decision-Making

Ken Kaufman — Tue, 11 Jan 2011 17:56:07 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/the-dilemma-of-entreprene...

Informed decision-making is a critical element of entrepreneurial success. Yet all business owners face the challenge of weighing current opportunities against future potential each time they make a decision. First I will recount a quick story to illustrate this dilemma, and then I will discuss how to overcome the dilemma with informed decision-making.

The Dilemma

I watched my son’s eyes widen as the bowl of M&Ms was passed to him. Like a starving defensive lineman might attack a buffet line, he filled both hands with as many as he could, then nudged the bowl on to the next person. While grandma read a holiday story to all the grandkids, the family gathering quickly became a sugary feast.

Just two minutes later a plate of chocolate-covered pretzels was passed to the same son. He looked at his two hands, still mostly full of M&Ms, then back at the salty-sweet treats. I could tell he wanted the pretzels more, but he didn’t have much more capacity. Then he set the M&Ms down, grabbed a large handful of pretzels, and enjoyed both.

About thirty minutes later, three-layer chocolate cake and rich cookies-and-cream ice cream were served for dessert. With eyes bigger than his stomach, my son accepted a large helping of both. After just two bites, he handed me his plate and said he was full. Afterwards he admitted that the cake and ice cream would have been his preferred treat, had he been presented with all three options at the same time.

The dilemma, therefore, has to do with understanding as much about the future as possible without neglecting the present. The proverbial bird-in-a-hand cliché certainly applies, but sometimes that bird will keep you from getting the two birds that are just around the corner.

Entrepreneurial Decision Making

Entrepreneurship is about making lots of decisions — sometimes hundreds per day. Collectively they will determine the fate of your business. Your culture, your employees, your customers, your relationships, your software, your technology, and everything else in your business is a product of the decisions you make or delegate to someone else.

So when you make a decision do you only see the bowl of M&Ms? Or are you so captivated by the potential of something better in the future that you neglect your best opportunities today?

Include the Future in Decisions

To understand the importance of including the future in your decision-making process, consider this example. Software built in the 1990s is very frustrating for programmers and engineers today. It was built on closed, proprietary platforms in a day when an open API was unheard of, with developers afraid of giving away the secret sauce recipe. Not only does this archaic software not function in the cloud, it also does not play well with others, eliminating the endless possibilities that apps and other bolt-on, value-added solutions bring to more current technology.

Embattled with technology that is going to quickly become obsolete or will require significant capital to scrap and rebuild, software from the 1990s is struggling to survive. Understanding the future often empowers entrepreneurs to make better, more informed decisions.

Find the Balance Through Scoreboards

As a word of caution, I have seen some entrepreneurs who live so far in the future that they are not grounded in the present. These folks can’t ever seem to get traction. I’ve also worked with many who are so entrenched in the M&Ms right in front of them that they can’t even consider the cake and ice cream not too far in front of them. And, unfortunately, their competitors are passing them by.

The key to balancing your decision making between the present and future is to base your perspective in reality. Reality can only come if you honestly consider your present and future through the lens of business scoreboards — monthly, weekly, and daily reports of true performance and quarterly, annual, and five-year projections grounded in time-tested, valid assumptions. When properly applied to your decision-making process, business scoreboards will help you determine if you should fill up on M&Ms or if you should wait for the cake and ice cream.

The Key Takeaway

Before each decision, ask yourself this question: “How will my decision impact the business three months, one year, and five years from now?” Deriving a conclusion founded in a realistic perspective of your present and future will help you make the best decision possible.

This article is from Ken Kaufman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

How Anticipating the Worst Can Help You Succeed

Elaine Pofeldt — Thu, 07 Jan 2010 13:22:45 +0000

Link:

http://www.openforum.com/idea-hub/topics/money/article/how-anticipating-the-wors...

No one would recommend a Chicken Little approach to running a business. Successful entrepreneurs don’t generally spend all of their time obsessing about what might go wrong. But there’s a fine line between maintaining healthy optimism about your business’s future and wearing blinders that prevent you from seeing challenges down the road.

One of the most positive steps you can take to ensure that your business grows is looking ahead to potential challenges, say experts. If you plan ahead, you can act now to prevent them or come up with a rational plan to deal with them if they do happen. It’ll give you a real edge against the competition. “Most businesses don’t spend any time on risk assessment,” says Nat Wasserstein, who helps companies that need turnarounds as a crisis manager at Lindenwood Associates, based in New York City and Upper Nyack, N.Y. Here’s how to analyze your business’s risks — and come up with a plan to address them — in just one afternoon.

Let Your Imagination Run Wild

Power up the coffee maker, sit down with your senior team, and, on a whiteboard, jot down any disasters you can imagine disrupting your business — from a freak storm destroying your office to an embezzler raiding your bank account. “As insane as they may sound, just put them down,” advises Wasserstein. Once you get the more unlikely scenarios out of the way, you’ll be primed to move on to more realistic possibilities. Those might include losing a big customer, having a critical supplier go bankrupt, or losing a safety certification because of an unanticipated quality control issue.

Figure Out the Odds

Many entrepreneurs find that the 80-20 rule applies when it comes to potential risks, says Wasserstein. You’re likely to find that one or two scenarios make up 80% of the risk the business faces. For instance, you might find that the problem most likely to disrupt your business is losing a big customer. Ask your senior team to help you estimate the odds that such a problem will happen. If all agree that the odds are pretty high — say 25% or more — you’ll know where to direct your preventive efforts, says Wasserstein.

Encourage Debate

What if you don’t believe that a problem is a risk, but someone on your team does? Make your case to that person about why it isn’t a likely possibility and ask him to poke holes in your argument, advises Lawrence Polsky, managing partner of PeopleNRG, whose Princeton, N.J. consultancy has developed a Worst Case Scenario Tool to help clients plan ahead for potential challenges. Be prepared to revise your opinion. “Often you don’t know you have wishful thinking,” he says.

Create a Plan

After you’ve identified your major risks, come up with a creative strategy for reducing them with your team, advises Wasserstein. For instance, say you know you’ll have to lay off employees if you lose a client who contributes $500,000 a year in revenue. You may need to do more to retain that customer. Think about what missteps might cause you to lose the client and how you can prevent them from happening. For instance, says Wasserstein, you might ask: “If he wants deliveries in seven days and you’ve been delivering in eight to 10, what can you do to make sure you’re always under seven days?”

Once you have a plan in place, commit it to paper so your team knows who is responsible for each step, says Wasserstein. Then make sure your managers act on the plan. That way, instead of laying awake nights worrying about “what ifs?” you’ll be able to be able to free your mind to dream up growth strategies.

This article is from Elaine Pofeldt of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: