It seems that for years we have assumed that we know what makes our employees loyal to the organization. All of the polls taken over the last twenty years point to the same thing -- what type of management climate was in the organization. You remember the old "Does the company value me?" and "Am I an integral part of the organization?" concepts. We were all told that money was down the list in the sixth or seventh spot depending on what survey was quoted. We all worked under the assumption that the management climate and the working relationship with the supervisor were numbers one and two respectively.
A recent study places financial compensation as number two on the list with healthcare and other benefits first and growth and earnings potential as number three. Business executives including the Human Resource Management ranked the financial issue as number seven. This could be due to the level of these individuals' salaries that provides them with the ability to weather some of the increased costs associated with gasoline, heating fuels and the cost of food.
The original two that I mentioned in the opening paragraph, employees ranked management climate as number four and the relationship with the supervisor as number seven. These changes came from a recent study of 3000 working adults conducted by Harris Interactive for the Spherion Corporation.
So what happened? How could things change so fast?
One of the major issues is that the method of gaining the information from the employee is faulty in many companies. An executive, HR Manager or other upper level person asks individual employees what their feelings are on various topics. Because there is no anonymity in answering, the employee rarely will answer truthfully. This is especially true when an immediate supervisor asks the questions. Written surveys will provide some help with the anonymity as long as the employee does not have to write any comments. Too often supervisors will look to se who wrote particular comments based on the handwriting on the form. So often the information that we receive from our staff is inaccurate to say the least.
In today's business climate regardless of the area of the country, job security is the real issue employee's are concerned with. When you look at the record number of home foreclosures and the daily news of companies cutting more jobs, the employees are nervous and wondering if this could happen to them. Many have already seen friends or family suffer through job loss and foreclosure. The continued uncertainty will only exacerbate the situation for many employers.
So what are some possible solutions to obtain the information that you want and be able to know that it is relatively accurate?
There are several different approaches to gathering the information that you could use. The first is to provide a written survey that does not ask for any comments that has the employee rank how well they agree or disagree with the statement by filling in a box. For example:
"Do you feel that you are satisfied with the current level of compensation that you receive?"
One note about the design of the question is that it should deal with feelings, not thinking. Intellectual thought is not what you are looking for. You want the emotional side of how people feel about issues and topics.
If your results show too many responses in the "no opinion" area, you have a problem with credibility and will have to consider a different way to gather the information.
The second approach is to find someone or an organization to administer and to complete an analysis of the information. Check with your CPA first; s/he may be able to do the administration and tabulation for you. If not, check with any business or professional organizations that you may be a member of. Your Chamber of Commerce or other business association may provide the service. Third, contact a company that specializes in preparing and administering employee surveys. They will provide you with a detailed analysis of the responses and in many cases will have comparative information for you from a broad base of studies that have been completed previously. The most important aspect of deciding which of these methods to use is which will provide you with the most accurate picture of what your employees feel about the company. The second most important consideration is where do you find comparative information on the same issues and topics that you have selected for your survey.
The comparative information can usually be found at your business associations, Chamber of Commerce, commercial sources such as Hay Group or Harris Interactive, employer associations, staffing firms that are national in scope and permanent placement companies that you may have worked with in the past. National data may be too broad so ask for a regional data break down if possible.
Two final considerations are: one, are you going to share the information from the survey with your employees and two, are you prepared to take action on the results.
If, for example, your survey showed that 65% of your employees were strongly dissatisfied with the working environment, are you prepared to share this information and are you prepared to take some action to improve the environment? If you are not going to do anything about the information that you have received, then the question becomes why are you conducting the survey? You probably would be better off to leave things alone and continue doing business the way you always have until it becomes a major issue with your staff and you are loosing people over it -- which is what you have at 65%.
You must be prepared to check your ego at the door if you are going to conduct employee surveys. It will provide you with important information that can make you more competitive and better prepared to adjust to the changing business climate.
Thursday, December 6, 2007
Should You Stay or Should You Go?
What criteria should be used to determine if you have been with the same company too long?-- Jason Morrow, Salt Lake City
Your question reminds us of a friend of ours, an investment manager at a highly regarded company in the Midwest, who drove to work one morning, parked his car in the usual spot, and then found he simply could not bring himself to get out of the car. "I guess I stayed on the farm one day too long," he joked later. When we asked him what went wrong, he answered, "It wasn't one thing. It was everything." No wonder he drove home and called in his resignation.
Obviously, most people don't decide they've over-stayed at their companies in such a dramatic fashion. Usually, angst about work creeps in, and then builds until it consumes you. And that can happen early or late in a career. Gone are the days when, after graduation, you took the best available job and stayed for as many years as you could possibly stand, frustration be damned. These days, it is not unusual to hear of perfectly legitimate careers built on multiple job stints.
More from BusinessWeek Online:
• Ten Tips for Negotiating Pay and Perks
• How to Field the Headhunter's Call
• Wacky Ways to Land a Job
So, to your question, how can you tell when it's time to move on? We wouldn't set out specific criteria as much as offer four questions to help sort out an answer.
The first is so simple it almost goes without saying, but the fact that a lot of people don't confront it, including our friend who ended up stuck in his car -- a Harvard MBA, by the way -- suggests we should go ahead and put it out there: Do you want to go to work every morning?
This is not a matter to be over-brained. Does the prospect of going in each day excite you or fill you with dread? Does the work feel interesting and meaningful or are you just going through motions to pull a paycheck? Are you still learning and growing?
We know of a woman who worked in consulting for seven years. She loved her firm and had originally planned a career with it, but suddenly started noticing that she wished every weekend was five days long. "Basically, I felt like we were putting together massive books in order to make recommendations to people who knew more than we did," she said. "Every day at the office, I felt a little bit more of a hypocrite." She now happily works on the "front lines," to use her phrase, in the marketing department of a retail company.
Second, do you enjoy spending time with your co-workers or do they generally bug the living daylights out of you? We're not saying you should only stay at your company if you want to barbecue with your team every weekend, but if you don't sincerely enjoy and respect the people you spend 10 hours a day with, you can be sure you will eventually decide to leave your organization. Why not make the break sooner rather than later and start cultivating relationships at a company where you might actually plant roots?
Third, does your company help you fulfill your personal mission? Essentially, this question asks whether your company jibes with your life's goals and values. Does it require you, for instance, to travel more than you'd like, given your chosen work-life balance? Does it offer enough upward mobility, given your level of ambition? There are no right or wrong answers to such questions, only a sense of whether you are investing your time at the right or wrong company for you.
Fourth and finally, can you picture yourself at your company in a year? We use that time frame because that's how long it usually takes to find a new, better job once you decide to move on. So peer, as best you can, into the future, and predict where you'll be in the organization, what work you'll be doing, whom you will be managing, and who will be managing you. If that scenario strikes you with anything short of excitement, then you're spinning your wheels. Or put another way, you're just about to stay too long.
To be clear: We're not suggesting people quit at the first inkling of discontent. No matter where you work, at some point you will have to endure difficult times, and even a deadly dull assignment, to survive a crisis or move up. But it makes little sense to stay and stay at a company because of inertia. Unlock your door and get out.
Copyrighted, Business Week. All rights reserved.
Your question reminds us of a friend of ours, an investment manager at a highly regarded company in the Midwest, who drove to work one morning, parked his car in the usual spot, and then found he simply could not bring himself to get out of the car. "I guess I stayed on the farm one day too long," he joked later. When we asked him what went wrong, he answered, "It wasn't one thing. It was everything." No wonder he drove home and called in his resignation.
Obviously, most people don't decide they've over-stayed at their companies in such a dramatic fashion. Usually, angst about work creeps in, and then builds until it consumes you. And that can happen early or late in a career. Gone are the days when, after graduation, you took the best available job and stayed for as many years as you could possibly stand, frustration be damned. These days, it is not unusual to hear of perfectly legitimate careers built on multiple job stints.
More from BusinessWeek Online:
• Ten Tips for Negotiating Pay and Perks
• How to Field the Headhunter's Call
• Wacky Ways to Land a Job
So, to your question, how can you tell when it's time to move on? We wouldn't set out specific criteria as much as offer four questions to help sort out an answer.
The first is so simple it almost goes without saying, but the fact that a lot of people don't confront it, including our friend who ended up stuck in his car -- a Harvard MBA, by the way -- suggests we should go ahead and put it out there: Do you want to go to work every morning?
This is not a matter to be over-brained. Does the prospect of going in each day excite you or fill you with dread? Does the work feel interesting and meaningful or are you just going through motions to pull a paycheck? Are you still learning and growing?
We know of a woman who worked in consulting for seven years. She loved her firm and had originally planned a career with it, but suddenly started noticing that she wished every weekend was five days long. "Basically, I felt like we were putting together massive books in order to make recommendations to people who knew more than we did," she said. "Every day at the office, I felt a little bit more of a hypocrite." She now happily works on the "front lines," to use her phrase, in the marketing department of a retail company.
Second, do you enjoy spending time with your co-workers or do they generally bug the living daylights out of you? We're not saying you should only stay at your company if you want to barbecue with your team every weekend, but if you don't sincerely enjoy and respect the people you spend 10 hours a day with, you can be sure you will eventually decide to leave your organization. Why not make the break sooner rather than later and start cultivating relationships at a company where you might actually plant roots?
Third, does your company help you fulfill your personal mission? Essentially, this question asks whether your company jibes with your life's goals and values. Does it require you, for instance, to travel more than you'd like, given your chosen work-life balance? Does it offer enough upward mobility, given your level of ambition? There are no right or wrong answers to such questions, only a sense of whether you are investing your time at the right or wrong company for you.
Fourth and finally, can you picture yourself at your company in a year? We use that time frame because that's how long it usually takes to find a new, better job once you decide to move on. So peer, as best you can, into the future, and predict where you'll be in the organization, what work you'll be doing, whom you will be managing, and who will be managing you. If that scenario strikes you with anything short of excitement, then you're spinning your wheels. Or put another way, you're just about to stay too long.
To be clear: We're not suggesting people quit at the first inkling of discontent. No matter where you work, at some point you will have to endure difficult times, and even a deadly dull assignment, to survive a crisis or move up. But it makes little sense to stay and stay at a company because of inertia. Unlock your door and get out.
Copyrighted, Business Week. All rights reserved.
Small-Business Financing: Debt vs. Equity
Small-Business Financing: Debt vs. EquitySmall-business owners can choose from two basic types of financing -- debt and equity. This article looks at the advantages and disadvantages of each type and how they may be used for different purposes.
Before You StartGather your company's most recent financial records (balance sheet, income statement, etc.).Speak with business partners or family members about how comfortable you would be handing over partial control of the company to outside investors.Request copies of your personal and business credit reports.How-To GuidesYour Retirement Checklist Using Credit Wisely Buying Your First Home Financing a New Car View more how-to guides CalculatorsComprehensive mortgage calculator How much am I spending? How will payroll adjustments affect my take-home pay? How much will college cost? How much will I need to save for retirement? View more calculators TopicsSmall-Business Financing: Debt vs. EquityDebtEquityStriking a Balance1Small-Business FinancingBusiness owners who seek financing face a fundamental choice: Should they borrow funds or take in new investment capital? Since debt and equity are accounted for differently, each has a different impact on earnings, cash flow, and taxes. Each also has a different effect on leverage, dilution, and a host of other metrics by which businesses are measured. The planned use of funds will also affect the choice of financing, with one option more appropriate for certain uses than the other.Back to top
2DebtDebt can be a loan, line of credit, bond, or even an IOU -- any promise to repay borrowed amounts over a certain time with a specified interest rate and other terms. Debt is accounted for as a liability of the company, and interest payments are deductible business expenses. In the event of bankruptcy or insolvency, debt holders take priority over equity holders.
For a small business, debt financing has both advantages and disadvantages. On the plus side, debt can be relatively simple to secure through a bank or other financial institution and is available with a broad range of terms, allowing you to customize the debt to meet your specific needs. Whether you are seeking a three-month bridge loan or a long-term commitment, you can usually find an institution that's willing to work with you. And since most debt entails regularly scheduled payments of interest and often principal as well, debt is easy to plan around. Perhaps most important, debt, unlike equity, will not dilute your ownership interest in your company.
On the minus side, however, financing with debt can be more expensive, and you will have to meet scheduled interest and principal payments regardless of your cash flow. Although loan terms can be negotiated to build in flexibility, ultimately the money must be paid back.
Debt is most often used to fund a specific project or initiative that has an identifiable implementation time frame. It's also used as a cash flow backup in the form of a revolving line of credit. To attract lenders, you will need to have a good personal and business credit history, sufficient cash flow to repay the loan, and/or sufficient collateral to offer as a second source of loan repayment. In smaller businesses, personal guarantees are likely to be required on most debt instruments. You should also not be carrying significant debt already.
DEBT-TO-CAPITAL RATIOS FOR SELECTED INDUSTRIES
Publishing 34% Homebuilding 37% Advertising & Marketing 37% Lodging & Gaming 56% General Retailing 24% Supermarkets & Drugstores 33% Commercial Transportation 18% Packaged Foods 27% Restaurants 23% Health Care: Managed Care 20% Movies & Home Entertainment 17% Source: Standard & Poor's.
3EquityEquity differs from debt in that it represents a permanent ownership stake in the company. When you finance with equity, you are giving up a portion of your ownership interest in -- and control of -- the company in exchange for cash. Equity investors may demand dividends or a portion of annual profits. But most investors in small businesses seek long-term capital gains on their investment, meaning that at some point these investors may look to opt out. This can mean the eventual sale of the business or the need to bring in replacement investors in the future.
The most common sources of equity financing for small businesses are personal savings or contributions from family, friends, and business associates. Venture or seed capital companies can also be sources of new capital, although they generally deal in larger financings. If your business is incorporated, anyone contributing equity capital would receive shares in the business. If it is a sole proprietorship or a partnership, they would receive an ownership share of the business.
While equity financing can be used for many different purposes, it is usually used for long-term general funding and not tied to specific projects or time frames. The major disadvantage to equity financing is the dilution of your ownership interest and the possible loss of control. Moreover, equity investors in smaller businesses generally look for high returns over time to compensate for the risk. Back to top
4Striking a BalanceIn practice, most businesses use a combination of debt and equity financing. The trick is getting the right balance. If you have too much debt, you may overextend your ability to service the debt and can be vulnerable to business downturns and changes in interest rates. On the other hand, too much equity dilutes your ownership interest and can expose you to outside control. The mix that best suits your company will depend on the type of business, its age, and a number of other factors. For a small business, a local community bank will consider an acceptable debt-to-equity ratio to be between 1:2 and 1:1, although debt ratios vary significantly from industry to industry. Startups and newly launched firms will likely be heavily weighted toward equity since they have not had time to establish a credit history and may face negative cash flow in the early years. Whatever your mix, keep in mind that you can often negotiate terms with both lenders and investors, making debt more like equity and equity more like debt.
SummarySince debt and equity are accounted for differently, each has a different impact on earnings, cash flow and taxes, and each also has a different effect on leverage, dilution and a host of other metrics.Debt can be a loan, line of credit, bond or even an IOU -- any promise to repay borrowed amounts over a certain time with a specified interest rate and other terms.When you finance with equity, you are giving up a portion of your ownership interest in -- and control of -- the company in exchange for cash.While equity financing can be used for many different purposes, it is usually used for long-term general funding and not tied to specific projects or time frames.The mix of debt and equity that best suits your company will depend on the type of business, its age, and a number of other factors
Before You StartGather your company's most recent financial records (balance sheet, income statement, etc.).Speak with business partners or family members about how comfortable you would be handing over partial control of the company to outside investors.Request copies of your personal and business credit reports.How-To GuidesYour Retirement Checklist Using Credit Wisely Buying Your First Home Financing a New Car View more how-to guides CalculatorsComprehensive mortgage calculator How much am I spending? How will payroll adjustments affect my take-home pay? How much will college cost? How much will I need to save for retirement? View more calculators TopicsSmall-Business Financing: Debt vs. EquityDebtEquityStriking a Balance1Small-Business FinancingBusiness owners who seek financing face a fundamental choice: Should they borrow funds or take in new investment capital? Since debt and equity are accounted for differently, each has a different impact on earnings, cash flow, and taxes. Each also has a different effect on leverage, dilution, and a host of other metrics by which businesses are measured. The planned use of funds will also affect the choice of financing, with one option more appropriate for certain uses than the other.Back to top
2DebtDebt can be a loan, line of credit, bond, or even an IOU -- any promise to repay borrowed amounts over a certain time with a specified interest rate and other terms. Debt is accounted for as a liability of the company, and interest payments are deductible business expenses. In the event of bankruptcy or insolvency, debt holders take priority over equity holders.
For a small business, debt financing has both advantages and disadvantages. On the plus side, debt can be relatively simple to secure through a bank or other financial institution and is available with a broad range of terms, allowing you to customize the debt to meet your specific needs. Whether you are seeking a three-month bridge loan or a long-term commitment, you can usually find an institution that's willing to work with you. And since most debt entails regularly scheduled payments of interest and often principal as well, debt is easy to plan around. Perhaps most important, debt, unlike equity, will not dilute your ownership interest in your company.
On the minus side, however, financing with debt can be more expensive, and you will have to meet scheduled interest and principal payments regardless of your cash flow. Although loan terms can be negotiated to build in flexibility, ultimately the money must be paid back.
Debt is most often used to fund a specific project or initiative that has an identifiable implementation time frame. It's also used as a cash flow backup in the form of a revolving line of credit. To attract lenders, you will need to have a good personal and business credit history, sufficient cash flow to repay the loan, and/or sufficient collateral to offer as a second source of loan repayment. In smaller businesses, personal guarantees are likely to be required on most debt instruments. You should also not be carrying significant debt already.
DEBT-TO-CAPITAL RATIOS FOR SELECTED INDUSTRIES
Publishing 34% Homebuilding 37% Advertising & Marketing 37% Lodging & Gaming 56% General Retailing 24% Supermarkets & Drugstores 33% Commercial Transportation 18% Packaged Foods 27% Restaurants 23% Health Care: Managed Care 20% Movies & Home Entertainment 17% Source: Standard & Poor's.
3EquityEquity differs from debt in that it represents a permanent ownership stake in the company. When you finance with equity, you are giving up a portion of your ownership interest in -- and control of -- the company in exchange for cash. Equity investors may demand dividends or a portion of annual profits. But most investors in small businesses seek long-term capital gains on their investment, meaning that at some point these investors may look to opt out. This can mean the eventual sale of the business or the need to bring in replacement investors in the future.
The most common sources of equity financing for small businesses are personal savings or contributions from family, friends, and business associates. Venture or seed capital companies can also be sources of new capital, although they generally deal in larger financings. If your business is incorporated, anyone contributing equity capital would receive shares in the business. If it is a sole proprietorship or a partnership, they would receive an ownership share of the business.
While equity financing can be used for many different purposes, it is usually used for long-term general funding and not tied to specific projects or time frames. The major disadvantage to equity financing is the dilution of your ownership interest and the possible loss of control. Moreover, equity investors in smaller businesses generally look for high returns over time to compensate for the risk. Back to top
4Striking a BalanceIn practice, most businesses use a combination of debt and equity financing. The trick is getting the right balance. If you have too much debt, you may overextend your ability to service the debt and can be vulnerable to business downturns and changes in interest rates. On the other hand, too much equity dilutes your ownership interest and can expose you to outside control. The mix that best suits your company will depend on the type of business, its age, and a number of other factors. For a small business, a local community bank will consider an acceptable debt-to-equity ratio to be between 1:2 and 1:1, although debt ratios vary significantly from industry to industry. Startups and newly launched firms will likely be heavily weighted toward equity since they have not had time to establish a credit history and may face negative cash flow in the early years. Whatever your mix, keep in mind that you can often negotiate terms with both lenders and investors, making debt more like equity and equity more like debt.
SummarySince debt and equity are accounted for differently, each has a different impact on earnings, cash flow and taxes, and each also has a different effect on leverage, dilution and a host of other metrics.Debt can be a loan, line of credit, bond or even an IOU -- any promise to repay borrowed amounts over a certain time with a specified interest rate and other terms.When you finance with equity, you are giving up a portion of your ownership interest in -- and control of -- the company in exchange for cash.While equity financing can be used for many different purposes, it is usually used for long-term general funding and not tied to specific projects or time frames.The mix of debt and equity that best suits your company will depend on the type of business, its age, and a number of other factors
Your Finance in the Festive Season
With the excitement, spending spree and pressures on personal income that come with festive seasons, financial experts recommend that they be treated as a budget period.
By 'budget period', it means that though the individual has been running a budget (maybe the yearly plan), he has to make a review or adjustment to accommodate the fresh demands of the festive season. Those demands most times were not anticipated in the master plan and so were not provided for. The exception will be where one is not part of the festivities and the excitements.
With the calendar almost in mid November, many people are beginning to think about the year-end, or Christmas festivities. At the community and family levels, various cultural activities might have been lined up, which were not anticipated and so bound to task your pockets. You may have also discovered that your family or loved ones need a holiday or special treat, because you have made money, beyond what you initially projected. To most people, it is just natural to run a deficit budget at year-end, or in festivities. In as much as the bloated financial demands of the season have to be accommodated, experts advise that they be confined to the original financial goals, set by the individual for the year.
A worker could have been ridden in debt the previous year and had set out in January to end the New Year with a positive net worth. That is a lofty goal that has to be kept, not affected by festivities or the season.
This week's cover is done with the intention of guiding readers facing the challenges of bloated needs that come naturally at year- end or in the festive season. The cover has the features of a 'module, intended to help individuals stick to their financial goals and come out of the season a financially healthier person. It starts with proper budgeting and control.
Why The Budget?
The budget is a comprehensive and coordinated income and expenditure plan. The process of budgeting is setting up and using budgets for planning and control with the ultimate objective to accomplish goals.
The goal is that purpose for which one sets out to work. For most people, the goal transcends the provision of the basic necessities of life for oneself, family and dependants, to all the things that guarantee quality living for today and tomorrow. Budgeting permits constant and periodic comparison of current financial position with the stated goals. The moment there is a budget, the individual can control his expenditure and will, more likely, achieve objectives.
"Though one has to meet the financial demands of the festive season, one has to guide against waste. Spending in the season on a scale of preference, the ordering of wants in their order of priority is very handy," said Edwin Madunagu, managing director of Target Investments, based in Lagos.
Madunagu said "adequate cost and benefit analysis should: go into preparing the festival budget, so that one does not waste in a second what one has taken an age and fortune to build.
"The cost of buying should always be weighed against the benefit of spending on that item. If the leisure of buying a car for Christmas, for instance, can be quantified to N100,000 in one month, while the alternative cost is the loss of N500,000, one would have realised taking advantage of investment opportunities in the season, then it does not make economic sense to embark on the former. "Opportunity cost in terms of foregone alternative should always be compared to the money cost when budgeting for the season," he added.
Not minding the heavy expenditure commitments that come with the festive period, when people have to travel to long distance places, spend on the extended family and community projects, financial management experts still advise that about 10 per cent of total earnings within the period should as usual go into savings and investments. But where that is impossible, such as in an emergency situation, it is understandable."
On a general note, whenever planning, spending or saving during the season, the following tips, experts say, should be considered and adhered to.
• Make a spending plan before making financial commitments for the season. Once you have put a Naira figure on what you will spend, it is recommended that you stick to them. It is important that every expenditure corresponds, with the plan. All forms of incidental expenses on the spur of the moment should be avoided by all means.
• After the budget has been made, the individual might get a windfall (large income that was not expected or not worked for). It is advisable to still stick to the original spending plan and put the extra in savings.
• In making the spending plan, it is recommended that the individual factors in core expenses that might surface later, such as mortgage or rent payments, utilities, food and nutrition, child care, insurance premium, pension commitments and so on.
• Ta ensure you come out of the season with your packets unhurt, consider trade-offs (that is shifting money to higher priorities, such as saving for personal or children's education or providing for retirement). Overspending on areas that are not readily important far survival or personal well being such as outdoor entertainment, travels, luxury fashion and accessories do not seem to pay.
• Make a total of the expenditure projections far the festive period and compare the figures with the total income expected far the period. If the expenses are in excess of the income, it might be necessary to make adjustments (particularly when fuelled by discretionary expenses). It is not financial commonsense to consume everything that is earned within a period.
• If the festive budget is too large that cutting expenses appear very difficult, buying some items on lease or through consumer finance may help to save money.
• As you implement the seasonal plan, always compare what you planned to spend and what was actually spent, and endeavour to make corrections where necessary before the curtain is drawn.
• Believe it as matter .of religion that if you intend to live in robust financial health, guide your money properly to go where it is intended.
• The amount .of money or assets you have in future will depend on what you do with your resources today. Every individual is responsible for the amount of money he earns and for the amount of money he spends. Successful money managers central the way they spend. They use money to accomplish important things. Good money managers manage their money, rather than letting it dribble away.
·The festive period is not a time to waste all that one has laboured for in many years.
Remember Benjamin Asuquo in the book, The Truth About Money and Life. He said, the way you spend your money today will determine what you have months from now; a year from now, five years from now and in your lifetime.
By 'budget period', it means that though the individual has been running a budget (maybe the yearly plan), he has to make a review or adjustment to accommodate the fresh demands of the festive season. Those demands most times were not anticipated in the master plan and so were not provided for. The exception will be where one is not part of the festivities and the excitements.
With the calendar almost in mid November, many people are beginning to think about the year-end, or Christmas festivities. At the community and family levels, various cultural activities might have been lined up, which were not anticipated and so bound to task your pockets. You may have also discovered that your family or loved ones need a holiday or special treat, because you have made money, beyond what you initially projected. To most people, it is just natural to run a deficit budget at year-end, or in festivities. In as much as the bloated financial demands of the season have to be accommodated, experts advise that they be confined to the original financial goals, set by the individual for the year.
A worker could have been ridden in debt the previous year and had set out in January to end the New Year with a positive net worth. That is a lofty goal that has to be kept, not affected by festivities or the season.
This week's cover is done with the intention of guiding readers facing the challenges of bloated needs that come naturally at year- end or in the festive season. The cover has the features of a 'module, intended to help individuals stick to their financial goals and come out of the season a financially healthier person. It starts with proper budgeting and control.
Why The Budget?
The budget is a comprehensive and coordinated income and expenditure plan. The process of budgeting is setting up and using budgets for planning and control with the ultimate objective to accomplish goals.
The goal is that purpose for which one sets out to work. For most people, the goal transcends the provision of the basic necessities of life for oneself, family and dependants, to all the things that guarantee quality living for today and tomorrow. Budgeting permits constant and periodic comparison of current financial position with the stated goals. The moment there is a budget, the individual can control his expenditure and will, more likely, achieve objectives.
"Though one has to meet the financial demands of the festive season, one has to guide against waste. Spending in the season on a scale of preference, the ordering of wants in their order of priority is very handy," said Edwin Madunagu, managing director of Target Investments, based in Lagos.
Madunagu said "adequate cost and benefit analysis should: go into preparing the festival budget, so that one does not waste in a second what one has taken an age and fortune to build.
"The cost of buying should always be weighed against the benefit of spending on that item. If the leisure of buying a car for Christmas, for instance, can be quantified to N100,000 in one month, while the alternative cost is the loss of N500,000, one would have realised taking advantage of investment opportunities in the season, then it does not make economic sense to embark on the former. "Opportunity cost in terms of foregone alternative should always be compared to the money cost when budgeting for the season," he added.
Not minding the heavy expenditure commitments that come with the festive period, when people have to travel to long distance places, spend on the extended family and community projects, financial management experts still advise that about 10 per cent of total earnings within the period should as usual go into savings and investments. But where that is impossible, such as in an emergency situation, it is understandable."
On a general note, whenever planning, spending or saving during the season, the following tips, experts say, should be considered and adhered to.
• Make a spending plan before making financial commitments for the season. Once you have put a Naira figure on what you will spend, it is recommended that you stick to them. It is important that every expenditure corresponds, with the plan. All forms of incidental expenses on the spur of the moment should be avoided by all means.
• After the budget has been made, the individual might get a windfall (large income that was not expected or not worked for). It is advisable to still stick to the original spending plan and put the extra in savings.
• In making the spending plan, it is recommended that the individual factors in core expenses that might surface later, such as mortgage or rent payments, utilities, food and nutrition, child care, insurance premium, pension commitments and so on.
• Ta ensure you come out of the season with your packets unhurt, consider trade-offs (that is shifting money to higher priorities, such as saving for personal or children's education or providing for retirement). Overspending on areas that are not readily important far survival or personal well being such as outdoor entertainment, travels, luxury fashion and accessories do not seem to pay.
• Make a total of the expenditure projections far the festive period and compare the figures with the total income expected far the period. If the expenses are in excess of the income, it might be necessary to make adjustments (particularly when fuelled by discretionary expenses). It is not financial commonsense to consume everything that is earned within a period.
• If the festive budget is too large that cutting expenses appear very difficult, buying some items on lease or through consumer finance may help to save money.
• As you implement the seasonal plan, always compare what you planned to spend and what was actually spent, and endeavour to make corrections where necessary before the curtain is drawn.
• Believe it as matter .of religion that if you intend to live in robust financial health, guide your money properly to go where it is intended.
• The amount .of money or assets you have in future will depend on what you do with your resources today. Every individual is responsible for the amount of money he earns and for the amount of money he spends. Successful money managers central the way they spend. They use money to accomplish important things. Good money managers manage their money, rather than letting it dribble away.
·The festive period is not a time to waste all that one has laboured for in many years.
Remember Benjamin Asuquo in the book, The Truth About Money and Life. He said, the way you spend your money today will determine what you have months from now; a year from now, five years from now and in your lifetime.
The 11 Simple Secrets
Being an entrepreneur is simply living a business life as it should be led.
Mention the word entrepreneur and most folks conjure up an image of a wild dreamer who goes into business by the seat of his pants and risks all to make some elusive pipe dream come true. Nothing could be further from the truth.
The word entrepreneur was gifted to us by the French (along with wine, mayonnaise, and arrogance). It comes from the French word entreprendre, which simply means to undertake or to set out on a new mission or venture. As you can see, nothing in that description harkens any visions of high-stakes gambling or wild-eyed schemes to turn a buck.
Sure, there are those over-the-top entrepreneurs who perpetuate that swashbuckling image. Guys like Sir Richard Branson exude the sort of swaggering, risk-taking conduct that the term entrepreneur usually evokes. Branson, of course, is the founder of Virgin Records and an eclectic stable of pubescent virgins: Virgin Atlantic Airways, Virgin Mobil, Virgin Blue, Virgin Cola, Virgin Express, Virgin America, and so on.
One minute Branson's risking millions of dollars founding a new company, and the next he's risking life and limb setting a world powerboat record or attempting a transglobal hot-air balloon flight. I can almost see Brad Pitt reprising the Branson role now.
Will the Real Entrepreneur Please Stand?
The image of the entrepreneur as a daring adventurer who recklessly gambles with his life and fortune is grossly inaccurate. Historically, we think of such luminaries as Henry Ford, Thomas Edison, and J. Pierpont Morgan as the epitome of the entrepreneur. More contemporary figures include Steve Jobs, the Apple entrepreneur; Bill Gates, the tycoon of computer operating systems; or Fred Smith, the founder of FedEx. These are the kind of entrepreneurs that management consultant and author Peter Drucker had in mind when he said "an entrepreneur always searches for change, responds to it, and exploits it as an opportunity" (Innovation and Entrepreneurship, New York, NY: Harper Collins, 1993).
These business entrepreneurs and others like them had strong beliefs about a market opportunity and were willing to accept what others viewed as a high level of personal, professional, or financial risk to pursue that opportunity. They all understood that the real risk for a true entrepreneur is in not taking the risk of success because the true risk is in not risking. It would be a mistake to limit our concept of the entrepreneur to these business giants. The true entrepreneur is not defined by the size of the empire, but by the style of the emperor. By that I mean that you can be an entrepreneur by running a mail room just as much as by starting a FedEx. An individual managing a computer department can be just as entrepreneurial as Bill Gates. The guy who owns a gas station can be just as much of an entrepreneur as the guy who started Ford Motors.
A true entrepreneur is not determined by the measure of his or her results, but by how those results were attained. Being an entrepreneur is more about attitude than aptitude. There have been some very talented business managers who failed because they failed the test of entrepreneurialism. (We call them bureaucrats.) Likewise, there have been some people with very little apparent talent who achieve remarkable success as entrepreneurs. (These types are usually abysmal failures in a bureaucratic world.)
Entrepreneurialism is a way of living life, not a way of managing life. The real entrepreneur has a certain spirit, an élan and an approach to issues that is just different. And that is the key. In a system that demands sameness, the entrepreneur is willing to be different. Only by being different can things be made better. That is the philosophy at the heart of being an entrepreneur.
Taking this approach, a more useful definition of an entrepreneur might be this: "An entrepreneur is an individual with the experience to recognize an opportunity, the inherent instinct to visualize its fulfillment, and the courage to reach for it. An entrepreneur is, by nature, a leader who has the talent to clearly, simply, consistently, and relentlessly communicate his vision to employees and to others; one who can motivate others to be successful because they believe it is in their own best interest to do so. And it is." Although I used the masculine tense in this definition, an entrepreneur can be male or female, young or old.
Using this definition, then, "an entrepreneurial culture consists of a group of individuals who have suppressed individual interests in an effort to achieve group success because group success will advance their individual interests."
These are pretty solid definitions but the devil is in the details -- the actual practice of instituting an entrepreneurial culture in your job, your department, or your business. The good news is that entrepreneurs are made not born. The better news is that anyone with the right desire and commitment can achieve success as an entrepreneur. The secret to being a good entrepreneur lies in the simplicity of the concept. In reality, it is easier to be a successful entrepreneur than a bureaucrat. The entrepreneur acts with instinct and good common sense, while a bureaucrat has to know and follow the strict rules of the system.
The key to becoming an entrepreneur lies in the implementation of basic concepts and, as the title of this book suggests, there are only 11 simple secrets to learn to make it happen. But there is no need for you to carry out this task with the precision of a military field manual. The secrets are simple to learn, but don't let their simplicity fool you:
Secret 1: Build parallel interests. Secret 2: Be an architect of the future. Secret 3: Be decisive, multifaceted, and ethical to a fault. Secret 4: Know the risk -- measure the reward. Secret 5: Communication -- be a shower not a teller.Secret 6: Power to the people.Secret 7: Become a trust builder. Secret 8: Sharing wealth increases wealth. Secret 9: Be constant, consistent, and concise. Secret 10: Treat important people like important people.Secret 11: Do simple things -- simply do them.
Learning These Secrets
The important thing to remember in putting these 11 practical secrets to work in your life and in your business is to remember that together, they present a cohesive philosophy for being an entrepreneur. When I say philosophy, I mean that these secrets are a way to think and behave, and as such, it's extremely difficult to distill them into a series of steps the would-be entrepreneur can invoke like a some-assembly-required Christmas toy.
The reality is that these secrets do not stand alone. They are interdependent. It's not like you can accept five of the secrets and ignore the others. This really is an all-or-nothing proposition -- a little like constructing a building. Each of the beams used in a building are strong and, in and of themselves, important. However, no single beam or even several are enough to support the building. They all need to be used and put in their right place. When in place, they support each of the other beams. Using the secrets to build an entrepreneurial culture is much the same.
Mention the word entrepreneur and most folks conjure up an image of a wild dreamer who goes into business by the seat of his pants and risks all to make some elusive pipe dream come true. Nothing could be further from the truth.
The word entrepreneur was gifted to us by the French (along with wine, mayonnaise, and arrogance). It comes from the French word entreprendre, which simply means to undertake or to set out on a new mission or venture. As you can see, nothing in that description harkens any visions of high-stakes gambling or wild-eyed schemes to turn a buck.
Sure, there are those over-the-top entrepreneurs who perpetuate that swashbuckling image. Guys like Sir Richard Branson exude the sort of swaggering, risk-taking conduct that the term entrepreneur usually evokes. Branson, of course, is the founder of Virgin Records and an eclectic stable of pubescent virgins: Virgin Atlantic Airways, Virgin Mobil, Virgin Blue, Virgin Cola, Virgin Express, Virgin America, and so on.
One minute Branson's risking millions of dollars founding a new company, and the next he's risking life and limb setting a world powerboat record or attempting a transglobal hot-air balloon flight. I can almost see Brad Pitt reprising the Branson role now.
Will the Real Entrepreneur Please Stand?
The image of the entrepreneur as a daring adventurer who recklessly gambles with his life and fortune is grossly inaccurate. Historically, we think of such luminaries as Henry Ford, Thomas Edison, and J. Pierpont Morgan as the epitome of the entrepreneur. More contemporary figures include Steve Jobs, the Apple entrepreneur; Bill Gates, the tycoon of computer operating systems; or Fred Smith, the founder of FedEx. These are the kind of entrepreneurs that management consultant and author Peter Drucker had in mind when he said "an entrepreneur always searches for change, responds to it, and exploits it as an opportunity" (Innovation and Entrepreneurship, New York, NY: Harper Collins, 1993).
These business entrepreneurs and others like them had strong beliefs about a market opportunity and were willing to accept what others viewed as a high level of personal, professional, or financial risk to pursue that opportunity. They all understood that the real risk for a true entrepreneur is in not taking the risk of success because the true risk is in not risking. It would be a mistake to limit our concept of the entrepreneur to these business giants. The true entrepreneur is not defined by the size of the empire, but by the style of the emperor. By that I mean that you can be an entrepreneur by running a mail room just as much as by starting a FedEx. An individual managing a computer department can be just as entrepreneurial as Bill Gates. The guy who owns a gas station can be just as much of an entrepreneur as the guy who started Ford Motors.
A true entrepreneur is not determined by the measure of his or her results, but by how those results were attained. Being an entrepreneur is more about attitude than aptitude. There have been some very talented business managers who failed because they failed the test of entrepreneurialism. (We call them bureaucrats.) Likewise, there have been some people with very little apparent talent who achieve remarkable success as entrepreneurs. (These types are usually abysmal failures in a bureaucratic world.)
Entrepreneurialism is a way of living life, not a way of managing life. The real entrepreneur has a certain spirit, an élan and an approach to issues that is just different. And that is the key. In a system that demands sameness, the entrepreneur is willing to be different. Only by being different can things be made better. That is the philosophy at the heart of being an entrepreneur.
Taking this approach, a more useful definition of an entrepreneur might be this: "An entrepreneur is an individual with the experience to recognize an opportunity, the inherent instinct to visualize its fulfillment, and the courage to reach for it. An entrepreneur is, by nature, a leader who has the talent to clearly, simply, consistently, and relentlessly communicate his vision to employees and to others; one who can motivate others to be successful because they believe it is in their own best interest to do so. And it is." Although I used the masculine tense in this definition, an entrepreneur can be male or female, young or old.
Using this definition, then, "an entrepreneurial culture consists of a group of individuals who have suppressed individual interests in an effort to achieve group success because group success will advance their individual interests."
These are pretty solid definitions but the devil is in the details -- the actual practice of instituting an entrepreneurial culture in your job, your department, or your business. The good news is that entrepreneurs are made not born. The better news is that anyone with the right desire and commitment can achieve success as an entrepreneur. The secret to being a good entrepreneur lies in the simplicity of the concept. In reality, it is easier to be a successful entrepreneur than a bureaucrat. The entrepreneur acts with instinct and good common sense, while a bureaucrat has to know and follow the strict rules of the system.
The key to becoming an entrepreneur lies in the implementation of basic concepts and, as the title of this book suggests, there are only 11 simple secrets to learn to make it happen. But there is no need for you to carry out this task with the precision of a military field manual. The secrets are simple to learn, but don't let their simplicity fool you:
Secret 1: Build parallel interests. Secret 2: Be an architect of the future. Secret 3: Be decisive, multifaceted, and ethical to a fault. Secret 4: Know the risk -- measure the reward. Secret 5: Communication -- be a shower not a teller.Secret 6: Power to the people.Secret 7: Become a trust builder. Secret 8: Sharing wealth increases wealth. Secret 9: Be constant, consistent, and concise. Secret 10: Treat important people like important people.Secret 11: Do simple things -- simply do them.
Learning These Secrets
The important thing to remember in putting these 11 practical secrets to work in your life and in your business is to remember that together, they present a cohesive philosophy for being an entrepreneur. When I say philosophy, I mean that these secrets are a way to think and behave, and as such, it's extremely difficult to distill them into a series of steps the would-be entrepreneur can invoke like a some-assembly-required Christmas toy.
The reality is that these secrets do not stand alone. They are interdependent. It's not like you can accept five of the secrets and ignore the others. This really is an all-or-nothing proposition -- a little like constructing a building. Each of the beams used in a building are strong and, in and of themselves, important. However, no single beam or even several are enough to support the building. They all need to be used and put in their right place. When in place, they support each of the other beams. Using the secrets to build an entrepreneurial culture is much the same.
Passion can increase your sales
There are several ingredients that go into a winning business, including a great idea, a great team, great passion, and great leadership. All are important, but great passion can be the fire that helps fuel the success. It can also destroy the business when it is misguided.
Like all fires, passion can spark other flames and become contagious, igniting the passion of investors, business partners, and customers, as well as employees. If left uncontrolled, passion can consume, destroy, and leave a business with an empty dream. However, when controlled, directed, and focused, it can boost a business's chance for success. Nonetheless it isn't the only important ingredient. A great business idea alone will not make a business profitable, but a passionate team that has the vision and the ability to execute the idea, even if the idea is only pretty good; can help a company achieve success.
Therefore, in order to be successful in business, you don't have to come up with the most ingenious and creative business concept. However, you must have a solid concept that satisfies a need, and you must be able to properly funnel your passion to execute the plan. The failure to fuel your passion can cause you to skip or dismiss basic business principles. In fact, that's where you see really smart businesspeople with good intentions make fatal errors in judgment.
Passion can also be misdirected when you're caught up in the day-to-day activities of your business and don't take the opportunity to sit back and think about how to focus your energy. Joanna Alberti's business, is a good example of the importance of taking time to reflect on your business goals and where you want to direct your passion. PhiloSophie's is a successful start-up greeting card company launched by owner and entrepreneur Joanna Alberti. In 2005, at the age of 24, Joanna was recognized by BusinessWeek as one of the top five young entrepreneurs under 25. Known for her whimsical designs and her humorous illustrations depicting women and their interests, Joanna's style and creativity fueled her passion to launch a greeting card business just one year after receiving her college degree.
As a business mentor to Joanna, I had the opportunity to work with her as she developed philoSophie's. I also watched her struggle as she worked 20-hour days; often coming into my office covered in glitter from the greeting cards she had hand-embellished. She was doing it all, but was she doing too much?
Joanna was trying to launch her business in so many venues that she was not taking the time to determine who her customers were, why they were buying from her, and what needs she satisfied. She was trying to get into as many markets as possible without thinking about which of them made the most sense for her limited budget and time. She was clearly spread too thin and was unable to prioritize her marketing efforts.
Most business owners, like Joanna are so busy with the day-to-day management of their company that they don't realize the importance of focusing their business passion to reach their goals more rapidly, more efficiently, and with greater overall success. The following is a list of marketing techniques that I helped Joanna implement and always recommend to my students and clients. They are designed to ensure your passion fuels your success, not your demise.
1. Profile Your Customers. Who are your most valuable customers? Can you describe them succinctly, in 50 words or less? Profiles are descriptions of your customers' values, beliefs and decision-making processes. While it's important that you understand the products and services that you offer customers, it's even more significant to understand what your customers value and why so you can fulfill their needs. Don't assume you know, ask them.
2. Play 20 Questions With Your Clients. Imagine that your five most important customers are sitting in a room with you. What questions would you ask them about their purchases, their needs and interests, and the factors that influence their decision-making processes? Hopefully you already know how they found your company, what they have purchased, and why. If you don't, these should be among the first questions you ask. Compile a list of 20 questions that will help you define your customers. Then develop a framework that will allow you to obtain critical information, determine the methods you will use (i.e., surveys, market research) and define sources of this data.
3. Remember to Keep Your Friends Close but Your Enemies (i.e., Competitors) Closer. Identify several companies that offer competitive or substitute products or services. Discover what their benefits are to potential or current customers of yours. Now think about how you compete against them by comparing your message, value proposition and target audiences with theirs. Based on your assessment, develop at least three strategies that you will use to position yourself effectively against them and are prepared with this knowledge when prospects ask, "What sets you apart from ABC Company?"
4. Identify Partner Companies That Will Create Win-Win Relationships. What do you expect from a partner and how can it contribute to your company's growth? Can your potential partners' strengths be leveraged to empower your business? What does your ‘must have' list look like in order for your partnership to succeed? Do you each add value to mutual companies while not competing with each other? A strong marketing alliance offers many benefits, including reducing risk, sharing costs and improving time to market, so choose your partners carefully.
5. Find Out If Perception Is Reality. How do your customers and prospects perceive you? Branding is the impression you leave through every customer touch point and involves far more than a nice logo or cool tagline. Everything you do has to incorporate your message, because if you dilute it in any way, you won't be sending a clear definition of the value you provide customers. As the saying goes, "Perception is reality," so in order to ensure that your brand is strong, your message must be clear, focused and on target at every touch point.
6. Prepare a Strong Elevator Pitch. Ever find yourself in a room with a key prospect and you couldn't succinctly explain your business to her? Perhaps you rambled on for minutes, never getting to the point, or you froze up. Elevator pitches are designed to help you prepare a very brief pitch explaining clearly to anybody you meet why they would want to continue a dialogue with you at a future point in time. You don't want to tell them everything about your business, just enough to whet their appetite and get them interested in meeting with you again.
7. Align Marketing Programs to Meet Sales Goals. Sales and marketing have to work together to support business growth. Even if the same person wears the sales and marketing hats in your company, you must plan your marketing program based on how many sales leads you need to generate and what your cycle time is. For example, if you know you need 1,000 leads over a six-month period of time to attain the number of new customers required for business growth, proactively plan your marketing programs well in advance so they generate the desired results.
8. Harness Your Passion as a Strategy. Even the most successful companies have their share of business ups and downs. How will you use your passion to get through the rough patches and continue to grow? Consider your passion for your business. What do you love about it? Why are you starting or did you start it? List 10 reasons why you feel passionately about your business. Post this in your office or some place where you will see it every day to remind yourself why you're getting up each morning and going to work (even if that's just down the hall). These 10 reasons will keep you motivated on the good days as well as the bad ones!
Implementing many of these techniques allowed Joanna to candidly evaluate the effectiveness of her strategy for expanding philoSophie's and to successfully channel her passion in the optimal direction. Through hard work she identified her most valuable sales channels and developed more efficient ways of allocating her time, ultimately leading to critical growth in both new and existing markets.
Like all fires, passion can spark other flames and become contagious, igniting the passion of investors, business partners, and customers, as well as employees. If left uncontrolled, passion can consume, destroy, and leave a business with an empty dream. However, when controlled, directed, and focused, it can boost a business's chance for success. Nonetheless it isn't the only important ingredient. A great business idea alone will not make a business profitable, but a passionate team that has the vision and the ability to execute the idea, even if the idea is only pretty good; can help a company achieve success.
Therefore, in order to be successful in business, you don't have to come up with the most ingenious and creative business concept. However, you must have a solid concept that satisfies a need, and you must be able to properly funnel your passion to execute the plan. The failure to fuel your passion can cause you to skip or dismiss basic business principles. In fact, that's where you see really smart businesspeople with good intentions make fatal errors in judgment.
Passion can also be misdirected when you're caught up in the day-to-day activities of your business and don't take the opportunity to sit back and think about how to focus your energy. Joanna Alberti's business, is a good example of the importance of taking time to reflect on your business goals and where you want to direct your passion. PhiloSophie's is a successful start-up greeting card company launched by owner and entrepreneur Joanna Alberti. In 2005, at the age of 24, Joanna was recognized by BusinessWeek as one of the top five young entrepreneurs under 25. Known for her whimsical designs and her humorous illustrations depicting women and their interests, Joanna's style and creativity fueled her passion to launch a greeting card business just one year after receiving her college degree.
As a business mentor to Joanna, I had the opportunity to work with her as she developed philoSophie's. I also watched her struggle as she worked 20-hour days; often coming into my office covered in glitter from the greeting cards she had hand-embellished. She was doing it all, but was she doing too much?
Joanna was trying to launch her business in so many venues that she was not taking the time to determine who her customers were, why they were buying from her, and what needs she satisfied. She was trying to get into as many markets as possible without thinking about which of them made the most sense for her limited budget and time. She was clearly spread too thin and was unable to prioritize her marketing efforts.
Most business owners, like Joanna are so busy with the day-to-day management of their company that they don't realize the importance of focusing their business passion to reach their goals more rapidly, more efficiently, and with greater overall success. The following is a list of marketing techniques that I helped Joanna implement and always recommend to my students and clients. They are designed to ensure your passion fuels your success, not your demise.
1. Profile Your Customers. Who are your most valuable customers? Can you describe them succinctly, in 50 words or less? Profiles are descriptions of your customers' values, beliefs and decision-making processes. While it's important that you understand the products and services that you offer customers, it's even more significant to understand what your customers value and why so you can fulfill their needs. Don't assume you know, ask them.
2. Play 20 Questions With Your Clients. Imagine that your five most important customers are sitting in a room with you. What questions would you ask them about their purchases, their needs and interests, and the factors that influence their decision-making processes? Hopefully you already know how they found your company, what they have purchased, and why. If you don't, these should be among the first questions you ask. Compile a list of 20 questions that will help you define your customers. Then develop a framework that will allow you to obtain critical information, determine the methods you will use (i.e., surveys, market research) and define sources of this data.
3. Remember to Keep Your Friends Close but Your Enemies (i.e., Competitors) Closer. Identify several companies that offer competitive or substitute products or services. Discover what their benefits are to potential or current customers of yours. Now think about how you compete against them by comparing your message, value proposition and target audiences with theirs. Based on your assessment, develop at least three strategies that you will use to position yourself effectively against them and are prepared with this knowledge when prospects ask, "What sets you apart from ABC Company?"
4. Identify Partner Companies That Will Create Win-Win Relationships. What do you expect from a partner and how can it contribute to your company's growth? Can your potential partners' strengths be leveraged to empower your business? What does your ‘must have' list look like in order for your partnership to succeed? Do you each add value to mutual companies while not competing with each other? A strong marketing alliance offers many benefits, including reducing risk, sharing costs and improving time to market, so choose your partners carefully.
5. Find Out If Perception Is Reality. How do your customers and prospects perceive you? Branding is the impression you leave through every customer touch point and involves far more than a nice logo or cool tagline. Everything you do has to incorporate your message, because if you dilute it in any way, you won't be sending a clear definition of the value you provide customers. As the saying goes, "Perception is reality," so in order to ensure that your brand is strong, your message must be clear, focused and on target at every touch point.
6. Prepare a Strong Elevator Pitch. Ever find yourself in a room with a key prospect and you couldn't succinctly explain your business to her? Perhaps you rambled on for minutes, never getting to the point, or you froze up. Elevator pitches are designed to help you prepare a very brief pitch explaining clearly to anybody you meet why they would want to continue a dialogue with you at a future point in time. You don't want to tell them everything about your business, just enough to whet their appetite and get them interested in meeting with you again.
7. Align Marketing Programs to Meet Sales Goals. Sales and marketing have to work together to support business growth. Even if the same person wears the sales and marketing hats in your company, you must plan your marketing program based on how many sales leads you need to generate and what your cycle time is. For example, if you know you need 1,000 leads over a six-month period of time to attain the number of new customers required for business growth, proactively plan your marketing programs well in advance so they generate the desired results.
8. Harness Your Passion as a Strategy. Even the most successful companies have their share of business ups and downs. How will you use your passion to get through the rough patches and continue to grow? Consider your passion for your business. What do you love about it? Why are you starting or did you start it? List 10 reasons why you feel passionately about your business. Post this in your office or some place where you will see it every day to remind yourself why you're getting up each morning and going to work (even if that's just down the hall). These 10 reasons will keep you motivated on the good days as well as the bad ones!
Implementing many of these techniques allowed Joanna to candidly evaluate the effectiveness of her strategy for expanding philoSophie's and to successfully channel her passion in the optimal direction. Through hard work she identified her most valuable sales channels and developed more efficient ways of allocating her time, ultimately leading to critical growth in both new and existing markets.
Break-Even Analysis
The Break-even Analysis lets you determine what you need to sell, monthly or annually, to cover your costs of doing business--your break-even point.
The Break-even Analysis calculates a break-even point based on fixed costs, variable costs per unit of sales, and revenue per unit of sales.
Understanding Break-evenThe break-even analysis is not our favorite analysis because:
· It is frequently mistaken for the payback period, the time it takes to recover an investment. There are variations on break-even that make some people think we have it wrong. The one we do use is the most common, the most universally accepted, but not the only one possible.
· It depends on the concept of fixed costs, a hard idea to swallow. Technically, a break-even analysis defines fixed costs as those costs that would continue even if you went broke. Instead, you may want to use your regular running fixed costs, including payroll and normal expenses. This will give you a better insight on financial realities. We call that “burn rate” these post-Internet days.
· It depends on averaging your per-unit variable cost and per-unit revenue over the whole business. However, whether we like it or not, this table is a mainstay of financial analysis. You may choose to leave it out, but really, a business plan would not be complete without it. And, although there are some other ways to do a Break-even Analysis, this is the most standard.
The Break-even Analysis depends on three key assumptions:
1. Average per-unit sales price (per-unit revenue):This is the price that you receive per unit of sales. Take into account sales discounts and special offers. Get this number from your Sales Forecast. For non-unit based businesses, make the per-unit revenue $1 and enter your costs as a percent of a dollar. The most common questions about this input relate to averaging many different products into a single estimate. The analysis requires a single number, and if you build your Sales Forecast first, then you will have this number. You are not alone in this, the vast majority of businesses sell more than one item, and have to average for their Break-even Analysis.
2. Average per-unit cost:This is the incremental cost, or variable cost, of each unit of sales. If you buy goods for resale, this is what you paid, on average, for the goods you sell. If you sell a service, this is what it costs you, per dollar of revenue or unit of service delivered, to deliver that service. If you are using a Units-Based Sales Forecast table (for manufacturing and mixed business types), you can project unit costs from the Sales Forecast table. If you are using the basic Sales Forecast table for retail, service and distribution businesses, use a percentage estimate, e.g., a retail store running a 50% margin would have a per-unit cost of .5, and a per-unit revenue of 1.
3. Monthly fixed costs:Technically, a break-even analysis defines fixed costs as costs that would continue even if you went broke. Instead, we recommend that you use your regular running fixed costs, including payroll and normal expenses (total monthly Operating Expenses). This will give you a better insight on financial realities. If averaging and estimating is difficult, use your Profit and Loss table to calculate a working fixed cost estimate—it will be a rough estimate, but it will provide a useful input for a conservative Break-even Analysis.
Illustration 2 shows a Break-even chart. As sales increase, the profit line passes through the zero or break-even line at the break-even point.
The illustration shows that the company needs to sell approximately 1,222 units in order to cross the break-even line. This is a classic business chart that helps you consider your bottom-line financial realities. Can you sell enough to make your break-even volume?
The break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact. We recommend that you do the break-even table twice: first, with educated guesses for assumptions, as part of the initial assessment, and later on, using your detailed Sales Forecast and Profit and Loss numbers. Both are valid uses.
The Break-even Analysis calculates a break-even point based on fixed costs, variable costs per unit of sales, and revenue per unit of sales.
Understanding Break-evenThe break-even analysis is not our favorite analysis because:
· It is frequently mistaken for the payback period, the time it takes to recover an investment. There are variations on break-even that make some people think we have it wrong. The one we do use is the most common, the most universally accepted, but not the only one possible.
· It depends on the concept of fixed costs, a hard idea to swallow. Technically, a break-even analysis defines fixed costs as those costs that would continue even if you went broke. Instead, you may want to use your regular running fixed costs, including payroll and normal expenses. This will give you a better insight on financial realities. We call that “burn rate” these post-Internet days.
· It depends on averaging your per-unit variable cost and per-unit revenue over the whole business. However, whether we like it or not, this table is a mainstay of financial analysis. You may choose to leave it out, but really, a business plan would not be complete without it. And, although there are some other ways to do a Break-even Analysis, this is the most standard.
The Break-even Analysis depends on three key assumptions:
1. Average per-unit sales price (per-unit revenue):This is the price that you receive per unit of sales. Take into account sales discounts and special offers. Get this number from your Sales Forecast. For non-unit based businesses, make the per-unit revenue $1 and enter your costs as a percent of a dollar. The most common questions about this input relate to averaging many different products into a single estimate. The analysis requires a single number, and if you build your Sales Forecast first, then you will have this number. You are not alone in this, the vast majority of businesses sell more than one item, and have to average for their Break-even Analysis.
2. Average per-unit cost:This is the incremental cost, or variable cost, of each unit of sales. If you buy goods for resale, this is what you paid, on average, for the goods you sell. If you sell a service, this is what it costs you, per dollar of revenue or unit of service delivered, to deliver that service. If you are using a Units-Based Sales Forecast table (for manufacturing and mixed business types), you can project unit costs from the Sales Forecast table. If you are using the basic Sales Forecast table for retail, service and distribution businesses, use a percentage estimate, e.g., a retail store running a 50% margin would have a per-unit cost of .5, and a per-unit revenue of 1.
3. Monthly fixed costs:Technically, a break-even analysis defines fixed costs as costs that would continue even if you went broke. Instead, we recommend that you use your regular running fixed costs, including payroll and normal expenses (total monthly Operating Expenses). This will give you a better insight on financial realities. If averaging and estimating is difficult, use your Profit and Loss table to calculate a working fixed cost estimate—it will be a rough estimate, but it will provide a useful input for a conservative Break-even Analysis.
Illustration 2 shows a Break-even chart. As sales increase, the profit line passes through the zero or break-even line at the break-even point.
The illustration shows that the company needs to sell approximately 1,222 units in order to cross the break-even line. This is a classic business chart that helps you consider your bottom-line financial realities. Can you sell enough to make your break-even volume?
The break-even analysis depends on assumptions made for average per-unit revenue, average per-unit cost, and fixed costs. These are rarely exact. We recommend that you do the break-even table twice: first, with educated guesses for assumptions, as part of the initial assessment, and later on, using your detailed Sales Forecast and Profit and Loss numbers. Both are valid uses.
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