Character, Capacity, Capital, Conditions, and Collateral

Character – This relates to the motivation of the borrower to repay a debt obligation. It is unlike any other financial performance indicator found in the financial statements. Determining character is a judgment call derived from careful interviewing of the applicant and study of the applicants’ historical credit reputation. Background checks and interviews with others having business relations with the applicant are useful to make a fair appraisal.

Capacity – “Cash is King”. Loans are repaid from cash generated by the business’ operating cycle. Can the borrower manage their cash efficiently enough not only to repay the loan, but all other debts simultaneously? Historical financial performance is evaluated to determine how the borrower handles their debts and expenses. Sources to review include the Income Statement, Statement of Cash Flows, and partially the Balance Sheet. A new or very young business is difficult to judge because they have not yet accumulated enough historical data to review.

Capital – It is the funds available to operate a business. The two primary conditions in this area involve the amount of owner’s equity (OE) and efficient uses of the capital to operate the business. It is not good when borrowed capital (credit) is greater than OE. Careful scrutiny of the Balance Sheet is required in this area. The purpose of capital is to maintain operations. Borrowing funds to augment operations is normal. However, too much borrowed capital is a sign that something is wrong.

Conditions – These are external factors relative to the industry of the business. The current state of the economy is a good example. Industry events and situations (current and predicted) are taken into consideration as to how it affects the business. For example, if a key supplier of the business experiences a labor strike, further investigation is needed to consider the affect on the business. Interviews with key officers and the business owner can shed light on what is happening. Additional resources like trade journals, industry news reports and the like are useful tools.

Collateral – Lenders want repayment from cash, not property. The last thing a lender wants to do in a default is take the property pledged backing up a loan. Property pledged is only a means to offset weaknesses in the other Cs. It is a safety net of last resort should a loan default a secondary source of repayment. A collateral pledge is completely irrelevant if the loan request contains too many negative signs in the foregoing credit assessment areas.

Tips for creating an effective cold call pitch

Effective messaging is critical in delivering your sales pitch to grab attention. Poor messaging and inadequate prospect targeting will stifle your effectiveness.

Plan your calling effort in advance. Do some homework about your prospect - Know something about your prospect or the industry in advance. Make sure you are talking to a decision maker prospect when you call. Know why you are calling and have a purpose with a goal in mind.

Tips:

1) Keep sentences short and fewer than 10 words. The tone should be aligned with a natural speaking voice.

2) Do Not use Buzzwords. Everyone hears buzzwords and people tend to view them as annoying.

3) Ask for feedback about your messaging from peers in your organization. Would your message get their attention?

4) Get a second opinion. Read your pitch allowed to a third party in your same industry. Do they understand your offer and does it sound natural? Does it get them thinking how you can offer an effective solution?

Decision makers will shut you down if they don’t like what they hear. Be direct and concise with impact statements to grab attention. Put you best foot forward on the first cal as this will lay the groundwork for developing a cold call into a relationship. Get in the habit of periodically critiquing your pitch and make necessary revisions as your experience grows. Last, never promise something you can’t backup.

Website Marketing – A Tool, Not A Strategy

Think twice the next time you want to market your enterprise with a website. There is a lot of distorted information in the business world about Web Marketing. Many IT or Web Design consultants profess themselves as marketing experts. They tell you that creating effective web content or using the right key words will get you more customers. They tell you that higher ranking in search engines will draw more attention to your site. While having a website is important to gain exposure on the internet, and it adds credibility, a website alone is not marketing. Your website is only one tool used in marketing strategy. If you rely solely on your website to do all the work, you will soon find out that you are missing out on opportunity. Even some of the best E-commerce sites still need to apply a marketing strategy to draw people to their site.

Web designers and Search Engine Optimization (SEO) experts do offer valuable services for building an effective web presence, but their services must be aligned with the marketing goals and strategy. Take note here - these IT professionals are schooled and trained mainly for information technology and not marketing. Marketing is a discipline of business administration. Only true marketing professionals know how to strategically position your products and services in the marketplace. The marketing matrix involves Product, Pricing, Promotion, Placement, and Distribution. Research and analysis are required to make sure you are targeting the right market segments to promote your product effectively. Marketing professionals will carefully analyze your business situation, your budget, your market demographics and behaviors, your product(s) appeal, and all (internal and external) resources available to attract more customers. A marketing professional will identify how to use your website as a tool, not just the only resource.

Buyers are not looking only for your product or website - the market is filled with competition. You must reach out to your prospects with proactive and strategically sound methods. Your messaging must address Value, Differentiation, and Singularity. Your enterprise (and products) requires development of Branding and Recognition. Once you create awareness, your goal is to use various selling methods to convince people your brand is what they want to buy.

You worked hard at developing your website and you should feel proud about it. However, you must know how to use your site to attract business. Even if people find your site easily, what is your strategy to convert visitors into buyers? How do you know the right target audience is finding you? There is much more involved in marketing your product than creating a great looking website or using key words to attract visitors. Your marketing plan must be developed around your operations, your product(s), and your vertical targets.

The next time you seek help in marketing your enterprise, talk to a marketing professional first. Let your marketing strategy work with and control what your website does. Knowing the difference between Marketing and Website Promotion will set realistic expectations and help you grow your enterprise far more effectively. Remember, your website is only one tool in your strategy.

By, G-Michael Homa
© 2009

Identify Real Opportunity

You worked hard doing market research, developing a good prospect list, prepared a good value proposition, and crafted a snappy sales script. Now you begin contacting prospects and making appointments. Is your prospect truly in a position to buy? Only qualified prospects are worth your effort – otherwise you have wasted valuable time and resources.

What can you do that will increase chances of success for closing more deals? How do you know if a prospect is a real opportunity? Following is a guideline of vitals steps required for every business proposition.

Identify the Decision Maker - The first step in qualifying a prospect is to identify all the decision makers. Sometimes it is a single person and other times it could be a committee. You also need to identify their decision-making procedures; learn how they make their decisions. Identification is the number one rule before proceeding further. Do Not skip this step. If you do, you will set yourself up for disappointment. Know if you are speaking with a decision maker – if not, you need to find out who is the right person. Learn if anyone else is involved. Ask about their decision process so you know how to proceed and set expectations.

Pain-Points and Motivation - What will make your prospect buy from you? What you perceive what the prospect needs is not always what they want. Your value proposition should offer a solution that satisfies something the prospect desires. What are the prospect’s pain-points and how does your product solve it? Probe with open-ended question relative to a perceived need for your product, but focus on the prospect’s pain-point. Open-end questions engage the prospect revealing clues how to address a solution with your product. The prospect needs to believe your product is their solution.

A Sense of Urgency - You have identified the decision maker and your product provides a solution they want. Now, find out when they are in a position to buy. What is their sense of urgency to make the purchase? Knowing when a prospect makes their decisions will help you plan a better strategy. Uncover the length of time it will take for making a buying decision. How soon is the prospect making a final decision to buy? Does the prospect perceive a current need for your product? If they are not ready to buy now, ask when they will be in a position to decide. Does your product fit in their short-term or long-term planning? How often do they make similar purchases? What happens next?

Competition - The competition is calling your prospect, too. Prospects are always receiving offerings and contemplating choices. You cannot always know if your offer is under serious consideration unless you know what you are facing. It is likely your prospect is also someone else’s customer or may soon be. Unless your product is truly unique, chances are your prospect is already buying it or considering an offer from a competitor. You must position yourself against the competition. A good value proposition demonstrates solutions to motivate buying decisions. When facing the competition roadblock, go back to your open-ended questioning to understand your prospect’s choices.

Why Not? - Objections and rejections do not always mean no. How you handle the objection may save the deal. An objection may simply mean the prospect was not convinced your offer was the right solution wanted. It may also mean that you have not provided enough information for the prospect to make a sound decision. This is your opportunity to understand the buying motive and use other tactics to turn the objection into a yes. Acknowledge the objection, restate it, and present an alternate solution based on what the prospect is telling you. Even if you cannot turn every rejection into a sale, you will gain valuable feedback that will prepare you better for future presentations.

Once you have a prospect’s attention, it is imperative that you make sure they are qualified. Qualifying techniques are used immediately after gaining an audience and delivered during your presentation. These techniques can be used equally as well for many business proposals, not just sales presentations. The foregoing qualifying points are to be used as a guide to reveal opportunities and facilitate closing more deals. Do not try to avoid any one of the steps presented here because all are equally important to close the deal.

© 2009 gmh

Market Research Primer for Beginners

A well-defined Marketing Strategy is dictated by your Marketing Plan and influenced by your research. This can be complex, but some basics are worth noting. I cannot hope to encompass all aspects of Marketing Research elements in this article. My intent is to give you an idea where to start and get you thinking in the right direction.

A marketing strategy should boil down to identifying customer bases that your service or product can be perceived as an alternative over target competitors. Your approach and product offering should be tailored to meet the demand of market segments. It is key to understand the difference between what customers need and what they want. Customers recognize value in your offering. Value positioning is another topic of discussion and will not be discussed in this article.

You need to know what your Target Market is about and segment it. There are two basic methods used to segment a market: Geographic Segmentation and Customer Segmentation. Are you trying to serve the needs of customers in a geographical area? Alternatively, are you trying to identify people most likely to buy your product?

The Market Research Process Involves:

1. Define Marketing Problems and Opportunities.
2. Set Objectives, Budget and Timetables.
3. Select Research Types, Methods and Techniques.
4. Design Research Instruments, e.g. a questionnaire.
5. Collect Data - Organize and Analyze it.
6. Present and Implement from Research Findings.

Do some Competition Analysis:

1. Identify a few of your nearest "direct" and "indirect" competitors.
2. What is the status of their business? Growth - Static - Decline.
3. Learn from their advertising and operational deployment.
4. SWOT analyze competitors.
5. What are the major differences between you and them?

Market research and planning can get very involved. Many resources and books cover each element of this research. My intent is only to create an awareness of what is involved before you go to market with a product. I hope that you can use my overview to help you understand where to start.

Best Regards and Good Luck

© 2009 gmh

Chief reasons behind business failures

Approximately two-thirds of all business failures stem from improper marketing and poor management. Improper marketing can and usually is a result of not understanding what your buyers really want. Poor management is not about brain power - it's about not understanding how to manage the resources available. Planning properly and actually using the plan will help get ahead of the game. More on this topic will come in future blogs.

Business Planning Takes A Road Trip

By G. Michael Homa ©2009
Spectrum Business Consultants

Here is a simple overview of a planning hierarchy: The business plan is the master document that directs all aspects of an enterprise. Yet, many executives fail to fully understand its importance for achieving goals. Too often, the plan is written then filed away and never used as a key tool in managing a business. A good plan is not necessarily about how well it is written - more important is how well it is implemented. Someone once said, “A partial plan implemented well is better than a well written plan never placed into action”. It is very important to use the plan as your guide, but it must also be dynamic under constant revision because the marketplace is not static. Without a plan, how do you know where you are going and how you will reach your destination?

A business plan addresses functions related to product, marketing, operations, administration, finance, legal, and budgeting. Yes, you can argue that more goes into the plan – remember this is just a simple summary. Planning is like preparing for a road trip. You know where you are and know where you want to go, but how do you get there?

Let’s say your trip is several hundred miles long. Studying your map, you ask yourself questions about time and resources needed before you start the journey. You want to get to your destination as quickly and efficiently as possible, but at the lowest cost without sacrificing essentials or your comfort.

Factors to consider for your trip include mode of transportation, cost, length of trip, and best route in a realistic amount of time. What happens during the trip, if you encounter road construction, traffic jams, or even detours? What if your car breaks down along the way? You tried to plan properly in advance, but now you’re faced with unexpected choices. What resources do have at your disposal? How do you tap resources you don’t have now? What are the opportunity-cost to consider? Which options make most sense to keep you moving on?

Planning your road trip, you consider all the route options. Route A is the shortest, but research shows the route is full of road construction. Taking this route will make your journey longer because of delays and it may cost more in gas money because poor mileage efficiency caused by many stop and go driving. Route B is significantly longer meaning it takes more time to reach your destination. However, there are no detours or construction to deal with. You can zip all the way with minimal stops and find the improved mileage efficiency means less gas station stops resulting in cost savings.

These are the kind of factors requiring consideration when starting a plan. After you decide on the route to take, you must now consider your available resources and their capacity to fulfill your goal. In our road trip example, your next considerations will be influenced by a systems check of your automobile – is it road worthy for a long trip? Must you invest in new tires? Is your battery reliable? You get the idea. How much money do you have allocated for gas, food, and the unexpected? Are you doing all the driving and navigation yourself? When do you start your trip after considering your options?

Being realistic with your goals and anticipating roadblocks will assist you in starting your plan. Don’t waste time constantly refining your plan at the start or you will never reach your destination. Just start with the basic elements using research and a little common sense. Risk is part of the game, but you can significantly reduce future risk if you plan, learn, evaluate, and adjust. Adjustments are always necessary because the market is dynamic - so should be the application of your plan. You cannot anticipate every obstacle, but you will be better prepared to resolve issues if you have a plan and evaluate it on a regular basis.

What is Business Development?

By G. Michael Homa ©2009
Spectrum Business Consultants

Too often, I have encountered business managers hiring Sales people and classifying them as Business Developers. The same holds true when managers call their Sales people Marketing Professionals. Main reasons behind this misclassification are twofold: First, many people DO NOT understand what the differences are between sales, marketing, and business development. Second, organizations do not accurately recognize which of these functional areas need help to drive revenue and how they compliment each other. These misunderstandings of disciplines cause unrealistic expectations and failure to achieve goals.

Business Development (Biz-Dev) is often misunderstood. It is often times mistaken as purely a sales role and other times as a marketing initiative. Well, it is a little of both, but it is also much more. Understanding what Biz-Dev is and what it does can focus the strategic direction of an enterprise, which ultimately creates new opportunities. Biz-Dev can be sales oriented, but it also can act as an operational function to support sales. Biz-Dev supplements marketing, sales, operations, and management. All of these functions are dependent upon each other. Biz-Dev is part sales, part marketing, part strategy, part planning, and part management. Biz-Dev can also work on promotion of an enterprise or even relationship building functions.

Isn’t a business developer’s main job expected to generate sales? Isn’t the lifeblood of business driven by sales? Yes, the ultimate business goal of an enterprise is to gain and grow sales. Even non-profit organizations need to raise money to survive. Without sales there is no revenue, without revenue there is no working capital, no working capital means no sustainability, and so forth. However, all units in an organization affect the outcome of sales. A company must define its purpose and objectives within their business plan. Upper management must communicate directives to staff and control processes. Employees are accountable to perform duties within their unit of responsibility. All units must work cohesively with their output contributing to the common goal of the company. For example, marketing cannot initiate a promotional campaign without input from finance, otherwise budgets and production costs will soon run into chaos.

Simply said, Biz-Dev is management process that uses resources available to an organization and coordinates plan activities to achieve goals. Sometimes the goal is increased sales, but other times an organization needs improvement or aid in another part of its operation. Examples that are not exactly sales oriented include business planning, administrative refinement, market research, finance, general management, and more. The bottom line is Biz-Dev can perform multiple initiatives to achieve a goal that will improve a functional business process resulting in opportunity. Think of Biz-Dev as project management for sales.

Understanding the various roles Biz-Dev can perform will improve the focus of your enterprise and help achieve its goals.