Most businesses start out thinking the first thing they need is a great business plan. The popular myth is that potential lenders will place great stock in your business plan as a major consideration for approving the financing you need.
While a well written business plan will assist you when you are seeking financing, it is far down on the lender’s list behind things such as your business management team’s experience, your past business successes and your “lending character “. Having a plan for accessing the business capital you need to execute your business plan is what is required to bring your business success. Not having a viable business financing plan is the direct cause of why 90% of all new businesses fail.
Your lending character means the lender sees you having the ability and stability to repay the loan. They also ask how far they believe you can take the business to maximize the potential earnings and therefore their chances of getting repaid.
The first thing a lender is going to look at is how did you structure the business and were you responsible and knowledgeable in that. Are you Incorporated or an LLC? If not you are declined for a business loan and everything becomes based solely on you as an individual. Did you do your EIN, State, business licenses and bank filings correctly? If not, you are declined because lender’s require attention to detail.
A simple business credit report check by a lender will quickly show whether or not you are even in the ballpark for getting approved for financing. If the lender finds that you haven’t bothered to insure that your business has active reports with all three major business credit reporting agencies, then of course you are immediately declined.
Next, the lender will look at the character of your business credit reports. What do they say about your business? What kind of payment histories have you had with debts that are easy to get such as vendor trade lines, small business credit cards, equipment leases, etc? If your business has no credit history or very minimal history then no lender will even consider your business for a larger loan when you have no track record of paying smaller debts.
If you pass these simple tests, now a lender will get to the heart of you business loan application and it is only at this point that you even get the opportunity to present your funding request. Unfortunately as high as 90% of all business loan applications never get to this point, because most business owners never take the time to complete the initial steps.
So you have made it this far, The next question you need to ask is what is a lender going to want to see? Debt service! Here is where the lender finally looks at your business plan (or at least the financial pat of it) to determine if your business can debt service the loan. To make this determination a lender will test the reality of your numbers. Basically this means do your numbers add up and do they make sense.
If you don’t know anything about accounting you had better get help. When a lender looks at your projected financial statement and finds simple accounting errors, then in most cases you will again be declined. They don’t want to lend money to someone who cannot produce a simple proof and loss statement; or someone that can’t balance a balance sheet. There is a lot of help out there, get some.
Next, a lender will look at the market niche section of your business plan. While most business owners think that this is the place that sets them apart from the competition, it actually is the part where lenders will compare you to your competition. Here is where lenders must see that you have done you market research. Can the revenue claims that you are making in your financial projections be backed up by the actual market demographics for your specific business industry, location, customer base, etc.? It essentially comes down to the need for your product or service.
All of this can seem overwhelming and in truth it can be. It is the reason that 97% of all business loan applications get declined. The overriding reason is that business owners are not taught this in school and typically only gain this knowledge through years of brutal experience that normally includes having one or two failed businesses under their belts.
This will give you plenty of information to get you started on putting together a business funding request. In my next article I will cover some of the other aspects of your business plan. For a full version of an excellent business funding guide do a search on Google, Yahoo, or MSN for “Business Funding Workbook”.
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The following is the most comprehensive ever explanation to the most mysterious phenomenon of Capitalism – the Business Cycles. In order to ensure that the article can be read by any well educated reader, I have minimized the economics jargon and have added a short and simple introduction to the structure of the economy. Each and every one of us would be interested to know as to why we cannot have a paradise on earth. Why is it that we are often besieged by such painful downslides of economic activity such as Great Depression or the nerve wracking periods such as Stagflations? Why can’t we all be always happy with hundred percent employment all the time, with each and every one of us employed? The following article provides simple and complete Business Cycle explanations to Depressions before 1930s, Recessions after 1940s, Stagflations of 70s and Continuous Booms of 80s and 90s.
The income that we earn is normally divided into two portions, Consumption and Savings. We normally consume a large portion of the income we earn for our day to day necessities as well as irregular buys. Regular necessities include food, clothing, toothpastes, soaps and other daily necessities. Irregular buys include bikes, cars, books, movies, music and so on. After we spend most of our incomes on Consumption, we save a small portion of our income and invest it in shares, bonds, fixed deposits and other long term investments.
In direct relation to our above mentioned activity, our economy is divided into two sectors – Consumption sector and Investment sector. If we exclude the government spending, Consumption sector constitutes roughly around 80% of the size of economy. It includes everything that we buy – food, clothing, cars, bikes, TVs and other durable goods, books – every thing. And around 20 percent of the size our economy is constituted by the Investment sector. Investment sector mainly includes activities such as installing new plants and capacities, and housing. A three sector model would also include government spending as well. However free markets have more to do with these sectors and less to do with Government Spending, so let us exclude governemnt spending. The figures given above are only approximate and can vary sizeably from economy to economy.
So how are profits made by the Consumption sector manufacturers? In any economy, Consumption sector always produces in excess of its requirements – it produces surplus. Consumption sector capitalists as well as households also save a certain portion of their income. Investors invest these Savings in the Investment sector. So these Savings turn into the earnings of the Investment sector capitalists and workers. The workers and capitalists of the Investment sector then spend their earnings on the consumption goods. So basically the surplus production of the Consumption sector is consumed by the workers and capitalists of the Investment sector. Therefore in a circular flow monetary economy, the income of the Investment sector becomes the profit or surplus of the Consumption sector firms. There is a small assumption that is made here on which I shall allude to at the end of the article.
So there are two things that we have to note here. First the size of the investment sector decides on the size of the profits of the Consumption sector. If there are huge Investments made, the Consumption sector capitalists make huge surpluses or profits and if the size of the Investment sector is on the lower side, the Consumption sector capitalists would make lower surpluses or profits. Also all of the Savings made should always be invested. If Savings are made but are not invested, then it would lead to a lower size of Investments and lower profits. Insufficient profits would force the producers to cut down on their production levels and this would directly lead to rising unemployment and recession! It is a long recognized economic thought that Savings made should be compulsorily invested fully so that the economy can be in equilibrium. If the Savings made are not invested fully, it can lead to disequilibrium between Supply and Demand and can lead to piling up of unsold stocks of inventories and a subsequent recession.
With the above short introduction to the structure of our economy, we are ready for a small journey into the fascinating world of Business Cycles.
Our economies are rarely ever static. They keep growing in size every year. Now in a growing economy Consumption also grows. Year on year more cars are purchased, more televisions are bought, more computers are installed and so on. It is natural that when Consumption grows by say 6%, the suppliers would expect their surplus also to grow by 6% because surplus, which is called profit in the business parlance, is obviously measured in percentage terms. However the surplus production has to be consumed by the workers of the Investment sector which obviously means that even Investment would have to grow by 6%. However this would mean that Savings, which is the fund for Investment, would also have to grow by 6%. What would happen if Consumption grows by 6% but Investment or Savings do not grow by an equivalent percentage? To the extent of the inequality, producers’ surplus would remain unsold and the economy would be in disequilibrium. So the equilibrium condition of the economy would be –
Periodic Growth percentage of Consumption = Periodic growth percentage of Investment = Periodic growth percentage of Savings.
Suppose during a particular period, there was a perfect equilibrium in which Consumption was C, Investment was I and Savings was S. Suppose during the next financial period C grows by a certain X percentage points. Then S and I would also have to grow by the same X percentage points. Suppose either I or S does not grow by X percentage points, the economy would be in disequilibrium even if Investment is equal to Savings!
Here in lies a blue print for different types of Business Cycles.
A normal characteristic of any recession is the presence of huge un-invested Savings. Investors hoard money without investing it because of lack of investor confidence. At the trough or the lowest point in a business cycle, Consumption is relatively low and Savings are relatively high, especially un-invested Savings. Then as economic activity picks up, all of the Savings are invested and the producers of the Consumption sector would be able to realize their expected surpluses. The size of Investment sector is equal to the surplus of the Consumption sector. Since Savings are high and are fully invested, the producers of the Consumption sector would be able to realize huge surpluses. Economic activity picks up a roaring speed.
As economic activity picks up, there starts a battle amongst the producers for market shares. For example, each car manufacturer wants to sell as many cars as possible. He would not think – let me produce less cars now, let me save and invest more for later. So as the battle for market share picks up, Consumption accelerates at the expense of Savings i.e. Consumption grows at a faster rate than Savings. Our above mentioned condition tells us that for equilibrium to exist, Consumption and Savings have to grow at an equal pace. So if Consumption grows at a faster pace than Savings, would this lead to disequilibrium immediately? This may not immediately lead to disequilibrium because producers would obviously not keep expecting to earn abnormally high profits the way they earned in the initial stages of the boom. Their expectations are also geared towards comparatively lower profits or what is called as normal profits as the boom progresses and therefore lower growth rate in Savings vis-à-vis Consumption would not immediately damage their expectations of surplus. This way the boom progresses from the trough to the peak for a few years.
After a few years of growth of Consumption at a faster rate than Savings, the percentage of Savings in the income would drop so low that Savings are not sufficient to meet the expectations of surplus of the producers of the Consumption sector. Even if Savings are fully invested, this does not generate the surplus as expected by the Consumption sector because of the lower size of investment and would lead to disequilibrium. Producers see their unsold inventory stock piles rise and their profits dwindle. The situation needs correction. Consumption needs to be cut and Savings need to be raised. As they are not able to sell their goods, the producers of Consumption sector would be more than willing to do so. They cut their production and increase their Savings.
However the required correction might not materialize! The very objective of capitalist economies is Consumption. If Consumption is on the decline, we cannot expect Investment to increase. We cannot have fewer bikes sold as compared to previous year and at the same time have much higher Investment in the bike sector as compared to the previous year. A cut in Consumption might increase Savings but would not raise Investment. Investment follows the path of Consumption and it itself starts in the downward trend. As a result the increased Savings are not invested and the disequilibrium takes on a relatively permanent position and we have a recession! There are no automatic forces to ensure immediate correction. What started with a cut in Consumption to increase Savings leads to a fall in Investment. This drop in Investment leads to a further depletion of aggregate demand which then prompts the producers to cut their production levels even further. Consumption declines even further and the spiral continues until the economy settles at a low output with a lot of unemployment. This sort of downward spirals were recognized by the eminent British economist John Maynard Keynes. Eventually, after a few years of low output, some invention or some enthusiastic entrepreneurs who are attracted by prevalent low interest rates might trigger Investment to reverse its downward path and start the process of expansion all over again. I believe that most recessions in US and Europe after 1940s occurred in this way. I would call these cycles – the Consumption led Business Cycles.
© 2005 Thotakura R,US registration:TXU 1-256-191
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Once you make up your mind you want to go into business for yourself, that leads to a number of important decisions. You know you want to be your own boss, but you’re not sure what kind of business to go into. Here are two different ways of addressing this question.
The “Production Model” of Doing Business
Most of us start out in business by applying what we might call the “production model”. We are all capable of doing certain things — cutting hair, cooking food, framing houses, fixing teeth, designing buildings, etc. — and we set about to sell these services. We ask ourselves “What can I do? What are my skills?”, and then we ask “How can I sell these skills? What products can I produce that take advantage of these skills?”
Many, many people believe the production model is the only way to do business. They believe Kevin Costner in “Field of Dreams” was uttering an important truth when he said “If you build it, they will come.” They just change the words around a bit:
“If I set up my restaurant, people will come.”
“If I start building bird houses, people will flock to my store.”
“If I set up a lemonade stand, the neighbours will buy some.”
“If I learn to be an airline pilot, surely someone will hire me.”
And generally, this works. People go to school to become dentists or engineers or teachers, and they actually end up being dentists, engineers, and teachers. Other people love to cook or make bird houses, so they set up restaurants and craft shops, and miracle of miracles, their restaurants and craft shops are actually successful.
But this is an oversimplification of the marketing process, and distorts what actually happens “on the ground” when a new business is started.
One important reason trained dentists end up with successful practices is because the dental market is tightly controlled to allow only the right number of dentists to graduate every year.
And the reason we can point to successful restaurants and bird house companies, is because we are looking at them after they have been successful. What about all the restaurants, construction companies, and land development conglomerates that were not successful? Their owners were probably equally skilled, and enjoyed cooking and serving the public as much as the next guy. They built it, and nobody — or at least, not enough people — came.
So obviously going into business is not as simple as “If you build it, they will come.” There are factors we cannot control, variables we cannot predict. And once we acknowledge this, we are forced to begin looking for an alternative to the “production model”.
A Real Life Example
Let me give you another example. Many years ago, long before the internet even existed, I had a client involved in the music business. This company had been around for many years, and had grown to become one of the country’s major publishers of certain niche music products. These were aimed mostly at the music-in-schools market, and included things like sheet music, children’s music, and specialty record albums, featuring a stable of relatively low profile artists.
Like most companies, this one had built up a set of “skills”, and had developed specific products and services in response to market demand. There was just one problem. The market was changing and the company was now losing money. My job was to help them sell more of their products.
Sometimes being an “outsider” is not a good thing. It seemed obvious to me that the market was changing, that sales of the old faithful products were doomed to decrease rather than increase, and that the long term answer to their problem was to develop new products in response to new demands, rather then try to flog the old ones. It was hard for me to be a “true believer” in the long term success of the company. It looked to me as though we were fighting a losing battle.
Of course, this was the beginning of the end of our relationship. As I’ve said, my job was to help them sell stuff, not reorganize their company. Most companies have a very difficult time shifting gears, and they certainly don’t want to hear about it from some young whipper snapper who knows virtually nothing about their business. Within a few months we lost the account. And within a year or so the former client declared bankruptcy, and was forced to contract to about 25% of its former size.
I don’t think this is very unusual. Lots of companies — probably most — are successful for a while, and then fall on harder times and are forced to change. My point is that eventually the “production model” stops working, and we are forced to consider alternatives.
The Most Obvious Alternative is the “Marketing Model”
When confronted with these obvious facts of business life, most marketers trot out the theory they learned in Marketing 101. “You must begin with an analysis of your market, determine what people are likely to buy, and then develop products accordingly.”
In other words, the marketing guy (predictably) advocates that the marketing / production process be inverted. Marketing should be used to determine which products are likely to be successful in the market place, not brought in after the horse has left the barn. Marketing should come before production, not after. Don’t worry about what skills you have. Skills can be bought or rented. Worry about what products you can sell. And then figure out how to make them.
The purest application of the marketing model these days is in internet marketing. For example, take Ken Evoy’s instructions in the Site Build It manual where he details how to choose your marketing “niche”. The process goes more or less like this:
1. Choose four or five possible areas of interest you might enjoy. These are your “website concept” candidates â?? the type of businesses you should consider going into.
2. Then analyze each of these website concept candidates in terms of the potential traffic you can generate, products you can sell, etc.
3. Choose the one with the best sales potential.
This sounds like a perfectly reasonable procedure. But in fact it is rather revolutionary for most non-marketing people. They are being told “Don’t get “production” underway until you make some important decisions about what people are likely to buy.” This is the “marketing model” in a nutshell.
Problems with the Marketing Model
The “pure” marketing model has one obvious problem. It assumes we are all sitting around a table as consultants with unlimited options and infallible information about all of them. The model seems to assume we can just feed the information into our decision-making machine and have the answer to the question “What should I do?” pop out the other end.
Even committed marketers know it does not work this way. Every person or organization has their own special likes and dislikes, and generally are good at doing some things, and not so good at doing others. Ken Evoy’s procedure addresses this by saying “Be sure to choose something you feel passionate about.” He should probably add “…and make sure you’re good at it too.”
Think of it like one of those industrial food processing units where you put a variety of things in the funnel at the top, and it spits out products at the bottom. What we feed into our business idea processor is not just a bunch of statistics about products and markets and prices, but also information about our own preferences, skills, habits, and experiences.
And we must keep all the ingredients going into the top of the machine in their proper proportion. It’s not just about what people will buy. And it’s not just about what we are good at or what we enjoy. It’s about all of these things at the same time.
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At one level this is a relatively simple tool, requiring the management to select a key area of business activity and to audit performance in that area, comparing to previous performance levels and, ideally, benchmarking against known best practice and performance levels. The information generated by these audits will then be used to identify unsatisfactory performance and enable measures to be introduced to bring about improvements.
The business areas that should be regularly audited, in any business, whether public, private, or not-for-profit, include: External Environment: well established tools and techniques are available and used to scan the external environment for information on issues, events, and trends that will impact on the strategies and performance capabilities of the organisation. The quality of this information, and the interpretations of it, is critical, as it is the foundation stone of the strategic planning activity that follows. An audit of processes, tools, and techniques, and the quality of output, is essential in ensuring that the strategic planning process is provided with high quality, relevant, valid information.
Competitors: although an element of the external environment analysis activity, this deserves a separate mention. Monitoring and-or benchmarking – variations of auditing – of competitor performance is essential. Competitors are, by default, in the same business, and gaining knowledge of competitor performance levels, in as many key areas as possible, will bring benefits to any organisation in any sector.
Strategic Planning: often an area of activity that is not evaluated, because it is carried out by the senior executive levels of management, but should be. In addition to the information gathering discussed above, the level of expertise in strategic planning of the managers, the rationale and justification for the chosen strategies, the processes used to communicate the strategies throughout the organisation, the level of support and resources provided for implementation, the performance of existing and previous strategies, are all areas that should be audited in order for optimum performance to be continuously achieved.
Leadership: separate from the Strategy audit, the quality of leadership should be audited regularly. A set of competencies for leadership, at all levels in the organisation, should be drawn up, and the leadership performance measured against these. Development activity should also be based on these competencies, and on eliminating or reducing weaknesses identified by the audit.
Culture: the existing culture that blend of beliefs, values, perceptions, behaviour, that makes up the culture of the organisation should be regularly audited and compared to the culture that is desired by, the objective of, the organisation’s leaders. Particularly at times when the organisation is planning or undergoing major change, information gathered from these audits will be invaluable.
Financial: where, although there is usually a framework of management and financial accounting processes, there is a need to rigorously and regularly audit the effectiveness of these, to ensure that the budgeting and accounting activity is as productive as possible.
Suppliers: one of the most critical areas of any organisation’s activity, the start of the supply chain, supplier performance, including the performance of those in the organisation who audit supplier performance, must be audited, rigorously and regularly. Now accepted, in parallel with research & design and strategic planning, as one of the foundation stones of quality assurance, any weakness in supplier performance can damage the organisation, sometimes irreparably. Auditing ensures that optimum performance levels are maintained.
Physical Resources: the quality of and use of physical resources, such as raw materials, operational equipment, technological equipment and systems, furniture, fittings, and buildings, all need regular auditing to ensure that the most appropriate resources are purchased, installed, maintained, and used effectively.
Human Resources: this entails auditing the quality of human resources employed by the organisation, the way in which they are deployed, how well they are trained and developed, as well as what opportunities and channels exist for progression. Every aspect of human resources activity should be audited at all levels, from operational up to and including executive level.
Equality: encompassing diversity, discrimination, and equality of opportunity which are all key areas that if not audited regularly to ensure high levels of performance not only abiding by legislative requirements but also contributing positively to the culture of the organisation will lead to conflict, dissatisfaction, lower morale, lower motivation, and ultimately lower levels of performance.
Internal Customers: often ignored, the level of satisfaction of internal customers the next department, individual, or team, that handles the next stage of production or service creation is critical. Overwhelming evidence shows that dissatisfaction of internal customers, leading to breakdowns in communication and cooperation, is one of the major causes of poor overall performance.
Distribution: of the products and-or services provided by the organisation is an essential element in making the organisation successful. Auditing this process will ensure that logistics best practices are in place, and that distribution activity is contributing positively, in terms of financial costs and corporate identity, to marketing, sales, and customer service efforts.
External Customers: auditing the satisfaction levels of external customers is a critical activity that should be carried out on a frequent basis. Customers here include all those at separate points in the distribution chain, through to buyers and end users. Information drawn from these audits will ensure that the organisation is in tune with and can respond appropriately to the needs of its most important stakeholders its external customers.
Stakeholder Relationships: stakeholders are any individual, team, external organisation, that has a legitimate interest in the performance of the organisation. This could include, depending on the sector and specific organisation: employees, unions, parents, relatives, local or national media, local authorities, emergency services, shareholders, financial institutions, funding bodies, governors, national or international governments, strategic partners, and of course, a variety of external customers. Relationships with each of these, in their own way, are critical, and should be audited regularly to ensure that they are as healthy as possible.
Quality System: deliberately listed as the last area to be regularly audited, this is an audit that should be carried out in addition to all the individual audits listed above. Whether an organisation has an externally certificated quality assurance management system, or an internal only system, there should be quality criteria set for every critical activity, event, stage, and process, from the starting point to the final point of the supply chain from the earliest stages of design and supply activity to the point where the product or service is in the hands of the final, end-user customer. Quality criteria that describe required quality levels, performance levels, and outputs, are essential to the success of any organisation. The quality system, including the internal and external auditing processes, should be audited to make certain that it is performing as intended that is, assuring that the required quality standards are being met, and of course, continuously improving.
Effective auditing will bring a number of benefits to the organisation. The first group of benefits are those where obvious weaknesses or problems are identified, including: identifying where immediate improvements could be made; identifying emerging trends that may signify corrective, defensive, or offensive action is needed. The second group of benefits are more subtle, and include: identifying the actual situation, rather than what is perceived to be the case by management or specialists; increasing the pool of knowledge that individuals and teams can learn from; ensuring that the operational activity is, as intended, supporting the strategic objectives: establishing a culture that expects performance to be regularly audited and evaluated: establishes a culture that is driven by continuous improvement activity.
Unless an organisation continuously audits and evaluates its performance in all key areas, it cannot know for certain where poor performance is occurring, and it cannot take corrective action because it is not aware of the problem, or it does not have sufficient information on which to base appropriate action. Rigorous, regular auditing will provide a flow of valuable information that the organisation’s management can use to decide on operational changes that will improve performance in critical areas. Applied across the whole organisation, this will provide the strategic objectives with a stronger foundation of support, and ultimately more chance of success.
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Given this backdrop of explosive growth opportunities, the challenges for VAR executives becomes managing for revenue growth and targeting the highest margin opportunities – in initial sales and throughout ongoing client relationships. Professional services automation software applications give VARs a competitive edge and make the difference between struggling to grow and harvesting profit from the abundant growth opportunities.
Advantages for VARs who use Professional Services Automation Software
1. Executive Insight
VAR businesses usually start by selling a primary set of products and services. As they become more successful, they add more products and services, ultimately bundling them up in ways clients want to buy them. Most VARs look at their business through “business practice” lenses – areas of marketing and delivery that bring together the multiple disciplines needed to constitute a client solution. Basic start-up system tools don’t fit any more, VARs need professional services automation software tools that manage and report products the way clients buy them, through the lens of a practice.
#Example of how PSA Software can help improve executive insight
As an example of this, think of a network practice that combines elements of hardware (servers, routers, and hubs) with software (security messaging and e-mail), along with client education and even network monitoring and management.
A CEO view lists all the practices and ranks them by key performance indicators: revenue, growth rates, and margins. Practice managers can see how their projects are unfolding and with drill downs, identify what’s working and what?s not.The important point is that with the help of PSA software, VARs can put their fingers on the pulse of the business and tell where the market is expanding or contracting.
2. Client Visibility: All clients are important, but in reality, some are more important to your bottom line than others. Once you understand a client?s lifetime value – revenue, projects, invoices, and opportunities with the help of a PSA software – you can shape your interactions with them better.
Look at yourself from your client’s point of view
Clients see their relationship with the VAR as the sum total of their experiences with sales, receivables, service incidents and other interactions.
For a VAR, getting such specifics for even one client is usually a tedious one-off spreadsheet exercise. And when it’s done, the rest of the organization usually doesn’t share in the insights. As a result, the type of effective follow-up activities you want to have routinely – whether it’s having an executive make a remedial call or initiating an incremental sales opportunity don’t happen.
Professional services automation software changes all that. It gives executives the most critical elements of any client’s transactions at a glance: practice revenues and margins, buying patterns, service incidents, and invoice payment. It gives insights about the client’s experience with the VAR and shows the value the client brings to the VAR.
Using this knowledge can trigger a well placed call from a senior executive at the right time to reinforce your position and lead to a deeper relationship. It’s the information you need to set priorities, ensuring you take care of your best clients and nurture the most promising ones.
#Keep tabs on ongoing interactions to improve revenue growth
Many executives measure the health of a client relationship by the number of interactions between the firms, recurring order patterns, and by increasing order size. The converse is an increasing number of calls to a support center about a repeating, nagging problem, or too many on-site visits that do not lead to any sales. Finding shifts in buying patterns through PSA software can act as an early warning system to help you prevent a good client from getting away and recognize where new strategies may reignite purchases.
#Making yourself visible to your clients increases trust
The ultimate deliverable is your ability to create trust and business value for your clients. Opening up to let clients see their own daily interactions with you saves your client time and money, and you too.
By using PSA software portal clients can answer their own questions like have my payments been received (and applied to the right invoices), which invoices are outstanding, which orders are still open (and is any delivery info available), how many service calls have been placed recently, and how many (which ones) are still open.
Once an order is placed you set up a project to design, install, get the system operational, and ultimately accepted. During the project your clients can use the PSA software portal to understand the status of a project, use it for internal reporting purposes, and use it as a communication platform.
Forward thinking VARs are using professional services automation software to monitor the acceptance process and even ensure that a project delivers on its business improvement or ROI projections. During this process, a savvy practice manager will be looking for sales opportunities for after market services.
3. Marketing Effectiveness: Capturing true marketing costs and performance improves your capture rates and minimizes wasteful spending.
There is an old marketing saw that says 50% of advertising dollars are wasted – we just don’t know which 50%. Unfortunately, that principle is true for VAR marketing expenditures too. Through professional services automation software, you can collect true costs for all aspects of your lead generation efforts and compare them to sales achieved. It’s powerful information that ensures winning propositions are used again and less than stellar efforts are jettisoned. Knowing the cost per lead and success rate of every campaign brings marketing operations closer to the company’s mission of growing revenue and high margin opportunities.
#Watch pipeline activity to identify where you can stimulate growth
Pipelines are hard enough to manage, even if you aren’t dealing with sandbagging or missed executions. Professional services automation software generates real-time reports for the sales executive, CFO, and CEO that detail the movement from proposal to order to shipment and acceptance. Reports that help you understand proposal conversion rates, internal execution, and how successful your employees are when visiting on site. Knowing this can help you identify good sales execution, spot remedial work for individual sales people, and decide what needs to be done to help cement a good relationship with a client.
#Use client feedback to productize opportunities
Every VAR maintains a support center for ongoing client support and project installations. Data from these interactions can be a treasure trove of new opportunities. PSA software identifies important call issues so you can examine them for add-on product and sales opportunities. Getting a lot of calls about start-up issues at the end user level? Perhaps an onsite introductory training class is needed. Do clients have insufficient skills in their IT departments? Maybe it’s time to consider a managed services offering.
PSA software for VARs can provide the facts to make informed decisions about when to productize services for repeatable, high margin sales and to help you spot emerging areas clients are inquiring about.
#Accelerate upgrade opportunities through insight into your clients’ installed environments
By its very nature, the technology industry is always racing towards the next breakthrough. Unfortunately, end user clients can’t possibly keep up with the relentless adoption of the next big thing. In fact, they often don’t maximize the use they get out of any piece of equipment and may not be aware of savings opportunities that come with some upgrades.
It’s easier to sell when you know how and when the client buys. Many IT directors have a budgetary model that subscribes to the notion of being fully depreciated. Knowing when equipment depreciation occurs can trigger sales activities to harvest this built-in financial understanding. Creative sales executives will also see this as an opportunity to offer new contractual terms that extend beyond a single project or delivery. For example, they may take a deal off the street by replacing all of a company’s PCs over a three-year period, as the systems become fully depreciated, and offering special payments terms to take the sting out of lump sum payments.
4. Internal Operations: Managing technology implementations means running projects on-time and on budget. Real time awareness can detect margin leakage before it becomes a problem.
#Tight control of new technology introductions can speed revenue and contain ramp-up costs
Becoming market ready for each new technology is not a small or inexpensive undertaking. PSA software with good project management functionality enables you to identify and control key ramp-up tasks such as obtaining licenses, employee training and certification, setting up development environments, arranging your product distribution network, and so on. Technology ramp up is a huge internal project that requires costly capital outlays and profitability often depends upon skillful project and budget management and preventing cost overruns. PSA software tools give you time and cost management insights to use to help guarantee a prepared staff and an on-time rollout at a cost you expected.
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