2007 Issue 10
Budgeting
– Putting Your Business Plan Into
Figures
Going Green Can Put You In
The Black
Follow Your Leads
20 (Offline) Ways To Drive
Traffic To Your Website
 
Budgeting –
Putting Your Business Plan Into Figures
The idea of working to a budget is foreign to
most small to medium size business owners –
that’s something that bigger companies do. Maybe
they'll need to develop one when their business
grows but meanwhile it’s altogether too time
consuming and would keep them away from the
"real" work. That thinking may need a little
revision. The fact is, businesses that don’t
operate to a budget are unlikely to grow.
Business owners who take the approach that
budgeting isn’t for them can be seen plugging
away week by week and month to month, working
out what they need to do with their revenue as
it comes in. Is it a pay period? Will it cover
the electricity bill? Is more inventory needed?
In developing a budget for your business, you
reverse this approach and take some control over
the whole process. Instead of working with
whatever amount happens to come in each month,
you start planning for just how much it will
cost to run the business the year ahead. Then
estimate how much revenue will be needed through
sales in order to cover those costs, pay
salaries and still have a bit of profit left
over. A budget has been described as a business
plan expressed in numbers. At its simplest, it
looks like this:
Estimated Sales minus Estimated Expenses = Profit (or loss)
In developing projections for a year ahead you
will be working in the dark to a certain degree,
but anyone who has been in business for a couple
of years will have the financial records to make
a reasonable forward prediction of their sales
and expenses based on averaging past years.
You might call this your ‘no-growth’ budget -
you have estimated just the minimum necessary to
keep the business operating.
If you are interested in growing the business
though, you start with working from the other
end of the equation and setting the profit
margin you would like to (realistically) obtain.
Once a profit margin figure for the year has
been decided, a whole series of planning
decisions cascade out: is extra inventory
required?; will you need to put on more
employees or move to a bigger building?; will
you need to put more resources into marketing?
All of these add to the Estimated Expenses part
of the equation. To cover them and achieve the
desired profit, there needs to be extra
Estimated Sales.
If your aim is business growth, the starting
point is to build a sound estimate of the extra
cost and of the extra sales revenue necessary to
cover those costs and reach the desired profit.
These things can’t be left unplanned. If costs
and sales are merely guessed, the whole growth
goal will operate haphazardly and you may
out-spend your revenue and put yourself out of
business.
Budgets are usually created for a 12 month
period with month by month estimates of sales
and costs. That provides for expenses that come
up only once or twice a year, such as insurance,
and spreading their cost out over several
months. In this way you can plan ahead for the
expense by trying to achieve enough sales each
month to have the amount available when payment
comes due.
As you conduct business during your budget year
you compare your actual figures to your budgeted
figures. This needs to be done month by month
and requires some discipline but the payback is
worth it. It will allow you to manage your
spending so that you don't over spend and cut
into or eliminate your profit. You will also be
able to see if sales have met projections and
will cover expenses. Where there are variances,
ask yourself why the numbers are different. If
some of your expenses, for instance, are higher
than you expected, do you need to look for ways
to cut them, or did business increase more than
was expected and so add to your variables? If
sales aren't on track, what has happened to
cause the difference and how can you improve
them? Or would it be more realistic to accept
they will remain low and trim future costs to
match?
Budget variances can be either warning signs or
opportunity signals and the information they
provide should be used constructively to decide
where changes need to be made in operations to
reach your budget goals. Alternatively, if you
regularly fail to reach your monthly estimates
your budget figures are a warning to pull in
spending and set more realistic income goals.
Having a budget means having some control of
your finances in advance. Setting the standard
for your spending against expected revenue and
having a tool to compare the expected figures
against the actuals each month will give you a
way of monitoring and changing plans so as to
stay profitable.
When you work to a budget you have one of the
most effective management tools of all - a
benchmark that you can use month by month to
check your progress towards your business goals.
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Going Green Can Put You In The Black
"Going green" may sound a little gimmicky but it
has some real benefits for small businesses.
Operating a green business is not only good for
the environment but good for your business'
bottom line because conserving resources and
cutting down on waste ultimately means money
savings for the business. For the imaginative
entrepreneur the move to thinking green also
opens up a wide vista of opportunity in
developing and marketing green products.
Developing Green Products
Growing concern about environmental issues has
opened up a wide variety of new markets related
to producing and selling green products that
answer to an increasing desire by consumers to
be ecologically friendly.
Established in 1995, Roots Biopack Limited
produces eco-friendly biodegradable food
containers and packaging products using
agricultural by-products, such as sugarcane
fiber and empty fruit receptacles. In their
factory the boiler's waste heat is used to heat
up water for office and staff housing. Roots’
clientele has grown to include many leading
international fast food restaurants and
supermarket chains.
Fried chicken and the environment might not seem
to have much in common but FiltaFry developed a
microfiltration process that significantly
extends the life of cooking oil, which means
much less waste is generated. FiltaFry will come
to a restaurant, hospital or hotel and clean the
cooking oil on location. And not only does the
oil last longer, but it's also cleaner, which
means the food is healthier too.
Saving Production Cost
Even companies whose line of work is more
traditional can benefit from using green
practices.
TerraCycle produces an organic plant food made
from worm castings but what is different about
their product is the packaging - used plastic
soda bottles. Not soda bottles that have been
melted down and remade into a different form,
but the actual used bottles themselves. The
company has repurposed over a million such
bottles which has meant savings in production
costs as well as a lot of good publicity.
Thomas Mott Bed & Breakfast phased in energy
efficient practices over a number of years to
reduce its electricity bill from its pre-program
level of $9362 to a post-program one of $1370.
How? The owners of the old farmhouse-turned-B&B
invested in wall space insulation, windows
designed to minimize heat loss, a
state-of-the-art boiler, highly efficient
compact fluorescent lamps, switched the kitchen
from electric to gas and planted trees to
provide shade and lower cooling costs in summer.
Common Sense Savings
While any one small to medium size business may
produce few direct greenhouse gas emissions,
their collective use of energy in the form of
electricity to heat and cool and drive
equipment, of oil and other chemicals and of
fuel to transport raw materials, distribute
product and remove waste, all add up to a
significant contribution to total emissions. By
optimizing energy use most small businesses
achieve significant savings on their utility
bills as well as reducing their carbon
footprint.
Most of the savings that green businesses make
result from nothing more than common sense
thinking. Laptops use less power than desktop
models; motion detectors in bathrooms, timers on
water heaters and coffee pots, and programmable
thermostats throughout the premises all cut back
on using electricity when people aren’t using
the facility; replacing equipment that performs
inefficiently, such as printers, refrigerators
and air conditioners with new, energy efficient
models reduces energy use and utility bills;
moving to email to deliver mail and accounts
reduces paper use. Look at your business
carefully and there is likely a lot of
low-hanging fruit to be picked when it comes to
saving energy. Added up, these will amount to
significant savings.
Coming Ready Or Not
In industrialized countries small businesses
consume from 50-55% of the oil and natural gas
resources, and so are responsible for a
significant amount of greenhouse gas emission.
It's only a matter of time before the impact of
global warming results in mandatory limits and
penalties for non-compliance and these will be
applied to SMEs no less than to large companies.
Yet while SME surveys regularly find that
increasing energy prices rate as a top concern,
only a minority report actually spending money
to increase energy efficiency. That's a
disconnect that needs to be addressed. Since one
of the quickest ways to cut greenhouse gasses is
for businesses to become more energy efficient
it seems that the most sensible solution for
SMEs is to kill the two birds (greenhouse gasses
and energy bills) with the one stone –
introducing more energy efficient production
methods.
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Follow Your Leads
Aside from impulse buys or necessary purchases,
sales typically take place over a period of time
as the customer works through the options and
alternatives to arrive at a final purchase
decision. That’s why following up with customers
who have discussed your product with you is an
important part of finally closing a sale.
It’s amazing how many businesses either neglect
to do this or do not have an established plan
for following up with their leads.
If you want to really appreciate the importance
of this point, put yourself in the shoes of a
consumer, let’s say a woman who is thinking of
adding a deck to her house. She contacts 5 firms
for an onsite inspection and quote. Statistics
suggest she’d be lucky if even 2 of those
followed up with a visit and later sent her a
quote. What if one of those two actually
followed through with a phone call to ask if the
information was what she wanted and could they
be of any further assistance. Which is likely to
get the job?
Why don't salespeople follow up?
There are a number of reasons commonly offered
by salespeople for not following up with leads.
Top of the list are:
- Not wanting to appear too pushy
- Didn’t get the impression the prospect was really interested in their offer
- Didn’t think the prospect was ready to buy yet
- They just simply forget!
None of these ‘reasons’ really hold water. They
are based on second guessing the situation and
losing the initiative by leaving it up to the
prospect to call back when they are ready. This
approach doesn’t exactly increase the chances of
making a sale. After spending time on the
initial appointment, maybe delivering a
presentation and supplying a quote, why let the
deal die from neglect by not following up?
See it from the prospect's point of view
A reminder call to a prospect will rarely be
considered as ‘too pushy’ by them. They will
more likely welcome the opportunity to discuss
things further or even to be given that little
prompt to decide the deal. It’s true that
following up too frequently will come across as
being pushy so you need to consider what might
be an appropriate interval between follow ups.
You can make follow-ups more palatable by
keeping them short and to the point. If it’s
possible to provide some additional value during
your follow-up call so much the better. This may
give your prospect a reason to choose you
instead of a competitor.
A good sales pitch is no guarantee that a
prospect will automatically call you back
either. People get busy, they have other
projects going or they forget. The more time
that goes by without a follow-up call the more
likely they are to get somebody else for the
job, or it may even slip off their list of
things to do.
Build follow-up into your sales process
Getting the most from follow-up contact depends
on building it into your normal plan of sales
activity. You can script it so it works smoothly
and without causing you any qualms by tackling
it this way:
- Always ask permission to follow up.
That’s good manners and it provides the
opportunity to check calendars and arrange a
time convenient for the prospect when they are
likely to be more receptive. Besides, you may
need to allow time for them to try out the
product or gather further information for them.
- Put the time and date details into your
planner. Now you won’t forget it or have to
place several annoying calls trying to settle a
mutually convenient time. It’s also a commitment
to making the follow-up so that the opportunity
isn’t lost because you find yourself too busy on
other things.
There aren’t too many things you should be
busier with than selling, so follow-up is a
process sales people really can’t afford to
leave out of their sales process.
To Top
20 (Offline) Ways To Drive Traffic To Your
Website
It’s one thing to get your website up and
running and quite another to get people visiting
it. All the tricks you read about generating
traffic through subject headings, keywords,
reciprocal links arrangements and even paying
for a high ranking on search engines are fine –
for attracting people already searching online.
The Internet is a great place to do business but
you have to make people aware of your ‘shop’
there. Many people still don’t know how to
search effectively or don’t want to bother with
it. That’s why, for the success of your
ebusiness it pays to promote your website both
online and offline. The more exposure your URL
receives, the more traffic will come directly to
your website.
Following is a list of places you can use to display your URL:
- Your email, under your signature
- Business stationery: business cards, letterhead, fax cover sheet, invoices and statements
- Telephone answering machine message
- Billboards
- Windows and awnings of your premises
- Catalogues
- Flyers and brochures
- Promotional giveaways: matchbooks, key chains, mugs, pens etc
- Menus, placemats
- T-shirts
- Coupons and gift certificates
- Yellow pages listing
- Press releases
- Company car: painted signs and promo plates
- Trade association directories and trade journals
- Word of mouth
- Print magazine and newspaper advertisements
- TV and radio ads
- Local TV guide
- Containers/packaging
On many occasions a website marketing budget can
be spent just as effectively using offline
methods, such as the ones above, as it can be
using online methods.
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