Economic Efficiency – 5 Tips to Create Efficiencies in Your Business

Strategy Plan One

April 17, 2012 

economic efficiencyEconomic Efficiency

In tough economic times, the global economic environment is striving for economic efficiency.  As an entrepreneur you need to keep operations running smooth and cost-effective.  

 

 

Competitive environments require team solutions and creativity in developing and implementing efficiencies in your business.  Through economic efficiency and efficient operations your business will realize a higher earning potential and at the same time, experience reduced, cost-effective methods and procedures to earning that revenue.

Here are 5 tips to creating economic efficiency in your business.

Economic Efficiency – Eliminate Redundant Procedures in Your Business

Undertake an operational review to identify unnecessary repetitive methods and procedures.  Many approval processes go way over board in requiring multiple persons to review, analyze and either recommend approval or approve a project, cost, or contract.  Federal government processes in many cases highlight this problem, as procedures go over the top to ensure the highest accountability.  Maintain your accountability, but streamline your operations to the necessary reduced human resources to make decisions.  Rely on and empower your professional team to make great recommendations at each level.  With elimination of steps in procedures, your operation will be more cost-effective.

Implement Technology Wherever it Makes Sense for Economic Efficiency

Automate procedures when it makes sense from operational and budgetary perspectives.  Reduce laborious tasks if automation and technology can do the same task more efficiently and cost-effective over the long run.  The implementation of Kiva System robots in warehouse operations is one example of efficiencies gained through automation.  It would also be a shocker if businesses have still not adapted to computerized sales, accounting and inventory systems – a must in business operations to keep competitive and cost-effective.

economic efficiencyEconomic Efficiency – Make it Easier For Everyone to work together

In business operations today, being all physically located in one location is not as important as it was decades ago, due to improved technology and connectedness.

Through innovation and technology, staff can work at any location and be easily connected by phone, mobile device, web or cloud-based applications.  All current technology methods make communication and business functions more smooth and easy.  Businesses that can provide work-life balance flexibilities and mechanisms, can ensure the work can get easily done from any location.  Collaboration across units, teams and partners can happen seamlessly with the implementation and the availability of smart technology in your organization.

Business Efficiencies – Making the Customer Process Easier

Straight forward information and sales procedures for your products and services will make the overall experience with customers more effective and efficient.  Make the product or service information readily available to the customer, whether at a physical location or web-based.  When designing e-commerce sites, ensure the client can easily navigate through to the completion of the sales process.  Nail down a streamlined sales process both internally and externally and ensure that your have contingency CRM plans to deal with issues around customer complaints.  The more prepared you are, the less time per customer it will take to generate revenue or resolve an issue.  More time can then be spent on building the relationship aspect of customer service with more customers.

Business Efficiencies – Getting the work done without the Travel

If you want to quickly and effectively reduce costs in your organization, travel budgets can be significantly reduced, while getting the same scope of work (meetings) done by using technology.  Phone and video conferencing can easily replace face-to-face meetings and the costs associated.  Meeting in person may be the richest form of communication in cutting a deal or working collaboratively.  However utilizing video conferencing or using Skype or other forms is more the standard and acceptable these days.  As an entrepreneur you will have to make a careful decision on the appropriate forms of communication for the appropriate audience, while cognizant of the need for cost-effective methods.

Economic efficiency can be achieved in your business, however ensure you take adequate business planning steps to maximize benefits from reduced resources and methods.

 

Strategy Plan One

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Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Social Media Sites – Pushing Over Valuation (Infographic)

Strategy Plan One

April 17, 2012 

Social Media Sites

We have all heard the hype and buzz around the valuations of social media sites.  These sites have gained massive users quickly and before you blink, now are worth billions.  With Facebook on the verge of an Initial Public Offering (IPO), the estimated value puts Facebook near $100 Billion, 50 times revenue value!

Here is an interesting look at timelines, revenues and valuations of social media sites, courtesy of gplus.com.  Statistics and valuation highlights of this infographic on social media site valuation:

  • Facebook: $3.7 Billion in revenue (2011), 1 Billion users, $100 Billion valuation (50 times revenue)
  • Twitter: $150M Revenue, 300 M users, $7.7B value (50 times revenue)
  • Linkedin: $200M in revenue, $9B valuation (45 times revenue)
  • Groupon:  $760M in revenue, $25B valuation (32 times revenue) 

social media sites

Strategy Plan One

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Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Social Media Sites – Valuation Out of Control?

Strategy Plan One

April 16, 2012 

social media sites - valuation Social Media Sites

Social Media sites seem to pop up out of nowhere, gain popularity, and before anyone knows it, the company behind the site is worth millions or billions of dollars.  What is driving business valuation of a current wave of social media sites?

This pattern is very similar to what was seen in the early internet years of internet sites popping up and soon valued at millions of dollars.  There are certain valuation factors that go into valuing web sites and the new wave of social media sites.  Although heavy financial analysis has much weight in valuation, factors such as the number of users, market potential, innovator factors, revenue potential, goodwill and speculation are all considered into the valuation models.

Social Media Sites – Revenue

The biggest revenue driver behind social media sites is advertising revenue.  In approximately 77% of social media sites, ad revenue dominates the revenue streams.  In 2011, Facebook alone was estimated to bring in $2 Billion from ad revenues.  Based on financial analysis formulas and calculations, analysts can determine advertising revenue potential by the number of users, visitors and page views.  Valuation models can involve calculations on potential revenue and future value of earnings or revenue.  Models can factor in complex valuation, with estimates of total revenue potential of social media sites which would include ad, user fees, subscription, licensing and other sources.

social media sitesSocial Media Sites – Number of Users & Market Potential

Even if the social media website has not generated one dime, but has millions of users and potential to earn revenue, speculative valuation can be determined.  An investor will be interested in a business acquisition if there is a projected return on investment.  A website that contains an existing, massive base of subscribed members, paid or unpaid membership base, would be appealing to an investor.

Most investors are looking at the revenue potential and would be interested if the valuation of that same asset has been projected to increase.  Obviously the investor may be looking for a return based on an asset turnover a few years down the road when selling off the acquired business.

Information, Mechanics and Proprietary Features of Social Media Sites

Valuation factors may also include value based on the mechanics and functionality of the website.  Through some analysis of backlinks and SEO, some automated valuation models can determine valuation of a website based on the standards created by other existing websites.  The value of the content is also important, along with any proprietary and/or patented features, widgets and coding, original to that website.

Speculation of Social Media Sites

Those in the technology field may fuel speculators by stating the what the next greatest social media sites will be, citing the next greatest thing on the internet.  When that buzz occurs, so does the buzz around the speculation on value.  Once again like other valuation factors, speculation may be driven by revenue potential.  Speculators may estimate the market potential, number of future users, future revenue, future return for investors.

Social Media Site – Valuation of Assets and Goodwill

In most acquisition projects, business valuation is undertaken to determine the valuation of assets and the valuation of goodwill.  Goodwill is the valuation of the intangibles (non-assets of the company) such as the name of the company, the Brand of products and services, and the value of relationships with the audience.  Goodwill in the name will be carried forward with the new owner or investor, as long as names or Brands, or customer appeal do not change that much.  Speculation sometimes drives up the valuation of goodwill, and sometimes investors must gamble with investing on an acquisition that has a high goodwill valuation attached to it.

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Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Tax Refunds – Make Smart Decisions and Use Wisely

Strategy Plan One

April 12, 2012 

tax returnsTax Refunds

With the tax filing deadline around the corner for both the US (April 17) and for Canada (April 30), many taxpayers will be expecting tax refunds.

According to a National Retail Federation (NRF) survey, two-thirds of US taxpayers are expecting a tax refund this year.  The tendency when receiving a win-fall check from government is to go out and spend it.  However, in these tough economic times, you may need to take more controlled actions around this and may need to make some wise decisions when receiving tax refunds.

You will have several options and choices to make on how to best utilize that money.  Most   families and individuals have significant short and long-term debt, and priorities that must be accommodated.  Strong financial planning is required when making decisions, and you will need to prioritize items, in either the payoff or investment categories.  Where needed, always seek the advice of a professional to assist in your own personal financial situation.

Tax Refunds – Use to Tackle Debt Payments

Debt payments should be a first consideration and priority with the money from the tax refunds.  The NRF survey counted 39.4% of taxpayers who expected a refund, stated they would pay down debt.  Following some of these trends from the survey, you may need to focus on the following sources of debt:

  1. High interest credit card debt, high interest Line of Credit balances
  2. Short term debt – personal loans, car loans, debt owed to other taxes,  & “bills“ 
  3. Longer term debt – mortgage payments

Tax Refunds – Utilize for Savings and Investments

Once debt obligations have been taken care of, partially or fully, savings and investments can be considered with the remainder of the tax refunds.  In the NRF survey, 43.8% of those US taxpayers surveyed, stated that they will take the refund and move some of it to savings.  If you have no debt then obviously you may find brilliant investments to generate additional revenue for you.  Be smart with your money and make informed decisions to invest.  You may take riskier approaches to investments, while others take a lower return, risk-adverse investment strategy with money from tax returns.  Once again, a financial advisor is your best source to guide you through financial management of your resources.  Here are some examples of investments you may be considering:

  • Saving accounts, term deposits
  • Retirement savings accounts (term deposits)
  • Retirement savings (mutual fund linked, stock-market linked)
  • Educational savings plans
  • Real estate investments
  • Business Investments

Tax Refunds – Other Uses

There will be a select group of individuals who do not have debt obligations and may have existing lucrative investment portfolios.  In those situations, social investments in community causes and donations could be considered.  In tough economic times, someone may need your help.
Spend and invest wisely!

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Revenue Forecast – Factors and Projection Models

Strategy Plan One

April 12, 2012 

 

revenue forecastRevenue Forecast – Overview

In one of your key business planning activities you will need to accurately project revenue streams. As part of revenue management, the information on your revenue forecast would be your strongest indicator in your business plan.

 

Your revenue forecast will illustrate how successful your financial situation is projected to be.  Investors, partners and bankers will be reviewing how you arrived at your numbers, at how you justified revenue and sales levels.  Your forecasting will need to be more than just an educated guess, however, an educated, experienced background is essential to forecasting.

 

Everything in your financial and business planning will be centered on revenue numbers, from estimating variable and fixed expenditures, to determining the amount of debt that can be serviced with the projected revenue levels.  So many factors, differing in various industries, need to be included in revenue projections.  Integral to forecasting revenue, your marketing plan will include some factors and will need to incorporate market potential information.

 

Revenue Forecast – Tools

Spreadsheets and calculators can assist in a formula based approach, but some are generic and do not take into account industry specific factors and differing revenue projection models.  In essence, you will need to incorporate specific factors into your calculations and run differing simulations to capture all potential circumstances.

 

The following describes some of the various factors and models to determine your revenue forecast:

 

revenue forecastRevenue Forecast – Based on Historical Financial Data

If you are forecasting revenue for an existing business, revenue projection may not be as difficult as you may think.  There is a historical track record of data for existing businesses to build on.  In reviewing revenue and sales trends in the historical financial data, you can estimate the ongoing continuous trend forward.

 

When reviewing and analyzing financial trends, pay attention to the rate of growth or rate of change in revenue and expense categories.  The rate of change must be taken into consideration, and don’t rely on a calculation of straight-line revenue projections.  If negative growth or declining trends are showing, differing strategies may need to be developed to get trends back on the right track.

 

Using Intelligence for Your Revenue Forecast

As an experienced entrepreneur you may carry some intelligence from past employment, from operational and management experience.  If your experience was industry specific and applicable to your start-up or existing business, you may have the intelligence to develop some close to accurate projections.

 

You may also be able to surround yourself with professionals that also have this intelligence.  We are not suggesting that you steal information from a competitor, but acquire professionals that are well-versed in a certain applicable industry, that have an innate ability to complete an accurate revenue forecast.  Accountants also specialize in this area but will need access to information and intelligence on the industry and markets.

 

Revenue Forecast – Industry Standards Data

Revenue models can be generated from using the industry standards data.  Loads of generic industry data has been compiled for decades.  The US Census Bureau is also a good source for industry data to base your projections on.  In Canada, you may want to search through Statistics Canada for general industry data.  Note that utilizing this data is more along the lines of a theoretical, averaging approach and may not take into consideration the factors of your specific business circumstances, area and markets.

 

Marketing Information for Your Revenue Forecast

Good potential sales data can be obtained from surveying your potential customers and potential markets.  You can base your revenue forecast on the total market and on your estimated market share.  If you have excellent relationships with your potential customers and there is a mutual agreement to supply products or services you may be able to sign into a preliminary agreement, or Letter of Intent (LOI) for future sales.  You can definitely extrapolate more solid information from this for your projected revenue and sales.

 

In addition to your own surveying efforts, you can obtain the services of a marketing company to do the work for you or to provide you will more specific market information for you to base your projections on.  Depending on the firm used and type of information obtained, this would be an additional reliable source of information, and more valuable to your revenue forecasting.

 

Tips to Assist in a More Accurate Revenue Forecast

  • Be realistic, and plan modestly
  • Generate projection scenarios, from conservative to optimistic
  • Back all projections with information to make it more objective
  • Use multiple information sources in developing projections
  • List your assumptions and justification for your numbers
  • Seek advice and feedback on your information
  • Develop strong relationships to build in LOI, MOUs with potential customers to assist in revenue projections
  • Adjust wherever needed and frequently; the more effort you put in the better the forecasting will get.
  • Remember this is not a perfect science but are tools for estimating

 

Using a fusion of models and factors indicated above may result in more comprehensive, more accurate revenue forecast.  Ensure you complete the due diligence required on detailed business planning, including using revenue projection models to minimize risk, and you will experience actual results closer to your financial projections and goals in the future years.

 

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Credit Card Statistics and Payment Impacts [Infographic]

Strategy Plan One

April 11, 2012 

Credit Card Statistics

Credit card debt in the US is a significant portion of consumer debt, amounting to almost $2.00 Trillion in debt.   That figure is staggering considering that the Federal Financial Budget in the US is approximately $2.5 Trillion annually.

Courtesy of CreditDonkey.com this infographic illustrates consumer credit card statistics, consequences of varying levels of payments on credit cards, and credit score impacts.

Highlighting some of the credit card statistics:

  • 156 Million credit card holders
  • 54 Million households with credit card debt
  • 1.25 Trillion credit cards issued
  • $1.994 Trillion total credit card debt
The infographic below includes the impacts of varying levels of monthly payments on the credit cards, raising the facts that higher principle payments result in a shorter duration to payoff credit card debt and less interest charges.

Credit card statistics

Source – Credit Card Statistics Infographic – Creditdonkey.com

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Franchise Statistics and Opportunities in the US Favorable [infographic]

Strategy Plan One

April 8, 2012 

Franchise Statistics

Franchised opportunities are brilliant options for entrepreneurs who want to invest in a turn-key operation, join and enjoy the fruits of a recognized brand, and experience a whole support team behind the venture.  Franchises are big business and account for close to 800,000 business establishments in the US alone.  Everywhere you turn in your community, in your town or city, you will encounter a franchised opportunity, offering you products and services.

McDonald’s, Subway, Pizza Hut, Pearle Vision, Hampton Inn & Suites, 7-11, and H&R Block franchises hammer the consumer with multiple locations and big advertising campaigns to ensure our brains are wired into recognized brands, wherever we go.  Some of these factors make it very challenging for entrepreneurs to enter the markets with their own individual start-up brands.

Franchise Statistics – Infographic

MGD Marketing has developed and distributed this infographic on franchise statistics and outlook in the US.  Here are some key points from most recent year of statistics (2011):

  • $1.3 Trillion in Sales across all franchises (2007 US Census Bureau) 
  • Over 784,000 establishments
  • 7.8 Million employees; growth in number of employees 3 years straight
  • Output:  $740 Billion
  • Number of Lodging franchises experiencing the highest growth 2010-2011
  • Both Franchisors and Franchisees experience similar challenges with access to credit, same-store sales, and competition

Franchise statistics

Strategy Plan One

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Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

Kiva Systems and the New Robot World Order

Strategy Plan One

April 7, 2012 

Kiva Systems Kiva Systems Robots

It has been fascinating to see the recent buzz around Kiva Systems robots controlling and working the floor spaces of warehouses.

 

According to some current reports, the Kiva Systems alone is now being used in up to two dozen larger corporation warehouses, including Amazon and Staples.

So impressed, Amazon acquired the 9 year old Kiva Systems company for $775 Million.  It is sure to have a positive, efficiency impact on Amazon, a company that spends $4.6 Billion on warehouse operations.  Considered to be expensive capital costs to start, but in the long-term, will save companies money with efficiencies created.  Check out this informative YouTube video of Kiva Systems at work.

kiva systemsAutomation Impacts

If this initiates the reoccurring trend and debate around automation, what does this mean in a country that is dying for an absolute job turnaround?  The criticism of automation using machines, robots, and electronics is that those methods directly impact labor jobs, resulting in job loss, people loss.

However, in start-up operations with automation implemented right away there will be no pain of job loss or reduction.  In some cases, businesses may establish a new arm or warehouse in an expansion project to run a pilot project of automation.

Kiva Systems Automation Success

Recently acquired by Amazon, the Kiva Systems Company is doing well, with reports of triple figure growth and profitable figures.  More corporations are jumping on board seeing the value and reliability of modern automation.  Initial kinks have been straightened out and it has been reported that Kiva systems are operating in a flawless manner.

It is interesting to watch videos, demonstrating the efficiency and power of these little orange Kiva robots moving about the warehouse, sliding under a customized skid, lifting and following a programmed route on the floor full of sensors.  You could imagine the programming behind such as a system is complicated, but obviously achievable from an operational perspective.  Within the programming there must be many logic functions to almost allow these robots to alter or find best routes from A to B when traffic gets congested, as seen in some of these videos.

Human Labour

Human power is still evident in these automated warehouses, at stations loading and unloading these skid towers and scanning products before the Kiva robot takes off again.  Obviously there are probably backup plans of a labour force filling in for Kiva robots when the system is “down”.  How often have we all experienced system or computer failures?  There will always be a requirement for a well-trained labor force behind maintaining these robots, building them and developing coding and programming.

Cost Benefit Analysis

On the simple cost-benefit analysis side of things, if the capital and operating costs of automated, innovative processes and assets are less than the cost of non-automated, labour process over a defined period of time, then your organization could experience greater profitability and decreased issues around human resources.

Millions of dollars must be spent acquiring a system such as the Kiva system.  These corporations would undertake their own due diligence, such as a cost-benefit analysis on an automated system vs. conventional warehouse system full of employees driving skid steerer and forklift machines.  Based on many assumptions, savings could be realized even with a Kiva Systems basic scenario implemented. 

Kiva Systems Possible Limitations

Evident in the demonstration videos is the fact that warehouse space (height) is not being used to full capacity with Kiva Systems in place.  In the conventional warehouse system, pallets of products are stacked 30-40 feet high in warehouse shelving frames.  There appears to be limitations in volume with the Kiva robots lifting and moving the customized pallets that are 6-8 feet in height, and in terms of dimensions of the pallet, a 3 by 3 footprint.  With a system like this, warehouse space and volume can be planned effectively with respect to capabilities of this system.

As previously mentioned, automated, computerized systems sometimes experience glitches.  Power outages, coding and programming flaws, electronic interference, physical obstructions, logic flaws and an underestimation of operational issues come to mind when brainstorming the potential issues that could arise.   However, the corporation is probably well prepared with fixes and contingencies for everything.  Build into the program, the system does appear to monitor power levels and automatically schedules charging.

Kiva Systems Opportunities

If the Kiva Systems automated world continues to build, opportunities in other areas could emerge, such as a team of robots to:

  • Carry out office work
  • Automate the front counter at a fast food restaurant
  • Sort and file books at libraries
  • Fully automate beauty salon duties, with programmed robots completing hair and body packages

If these examples above come to fruition, this would now look like a scene of the Disney movie WALL-E.  For sure WALL-E would feel comfortable and at home within a Kiva Systems environment.  It has been interesting to read and see the new buzz around this system.  What will be more interesting in the future to observe will be the impacts and the adjustments made to the human labor force, in the development of more value-added jobs around systems like the Kiva Systems model.

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

2012 Tax Freedom Day in the US …. April 17

Strategy Plan One

April 2, 2012 

From the Tax Foundation, here is a calendar highlighting that US citizens must work an average 107 days into the calendar year to reach the Tax Freedom point.  It illustrates what proportion of your work year goes straight to taxes.

tax freedom

Courtesy of taxfoundation.org

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One

 

Struggling with Tax Prep & Filing – More Tax Return Tips

Strategy Plan One

March 21, 2012 

Tax return tips Tax Return Tips – IRS Website

The April 17 tax filing deadline is fast approaching and If you are still in need of assistance to help complete you tax forms and return, check out the help features on the IRS website ( IRS.gov ).

 

The home page is easy to navigate with links to forms, news, hot topics, helpful hints and other features.  Help and search buttons are in the upper right corner of the page.

 

Tax Return Tips – YouTube Videos

The IRS has made it easy for you by providing some tax tips and assistance through YouTube at  www.youtube.com/irsvideos .  The IRS has a YouTube channel which currently has 116 videos uploaded to the channel.  The channel has received over 3 million  views.

 

Tax Return Tips – Social Media

To stay up to date with the latest IRS updates, news and messaging, you can follow and sign up for other forms of social media on their website.  Follow the IRS on Twitter, sign up and configure to receive RSS news feeds and Podcasts.  Check out Social Media buttons in the lower right hand section of the IRS Home page.   Also located on their page are widgets and mobile apps to assist you with information for your tax prep and filing.

 

Strategy Plan One

http://strategyplanone.com

Business information, resources and tips for the entrepreneur

© 2012 Strategy Plan One