Business Posts

The Power of a Strategic Plan

Operating a business without a strategic plan is like piloting a boat without a rudder. The business might be going somewhere, but no one knows for sure where or why, or if it is a good destination. Strategic planning is the process of assessing where the business is now and setting a path for where the business will be at some point in the future. In setting that path, the strategic plan should consider specific goals and establish actions that will help accomplish those goals. A written strategic plan helps owners, investors, and employees identify and understand how best to respond to opportunities and challenges.

In this post we will identify specific parts of the planning process that a business owner can follow to prepare a written plan. It is important to involve as many of the business’ stakeholders as possible in this process to avoid any blind spots that an owner may otherwise miss. Getting a broader perspective always makes planning better.

Situational Analysis

The place to start is assessing the current situation. There are several tools for this analysis, including SWOT, PEST, PESTLE, scenario planning, and the Porter’s Five Forces framework. Perhaps the best known and most commonly used is the SWOT analysis, which invites a candid review of the strengths, weaknesses, opportunities, and threats of a business. PEST and PESTLE assess major external factors in a marketplace that might impact the business. PEST is an acronym that stands for political, economic, social, and technological factors; the PESTLE analysis includes two additional factors: legal and environmental. The Porter’s Five Forces analysis more specifically addresses potential competition in the marketplace. Scenario planning is just that, considering alternative scenarios that might arise and planning responses to each scenario.

As shown in Figure 1, the SWOT analysis is done in a quadrant format lining up internal (strengths and weaknesses) vs. external (opportunities and threats) situations along the vertical axis and helpful (strengths and opportunities) vs. harmful (weaknesses and threats) situations along the horizontal axis.

Figure 1. The SWOT Analysis Grid

The SWOT Analysis Grid

In this way stakeholders can see the analysis in a quick one-page summary. A completed SWOT analysis is displayed in Figure 2. In this example, a new business owner is considering opening an insurance agency and has used SWOT to evaluate the situation.

Figure 2. Completed SWOT Analysis Example
Strengths:
  • Solid reputation of insurer
  • Recognized leader in industry
  • Well-known name and vast promotional campaigns
  • Great location at major intersection
  • Online and toll-free customer service access for extended hours
Weaknesses:
  • New agency, short track record in local market
  • Small staff, limited sales experience
  • No existing customers means no renewal income, dependent on new business
  • Allstate took two significant rate increases in 5 months
  • Enhanced commission for startups ends quickly
Opportunities:
  • Growing community–new homeowners, new move-ins needing new insurance coverage
  • Good economic growth in city and county
  • New location for an insurance agency
  • Owner’s ability to market for commercial business, not just personal insurance
  • Large network can become prospects or referral sources
Threats:
  • Major insurance agencies already established in town
  • Low-cost insurers present
  • Current economic downturn–fewer new car purchases, etc.
  • Slightly depressed trade area in immediate neighborhood
  • Excessive costs for obtaining leads and marketing campaigns

This analysis prepares the owner and other stakeholders to consider a vision for the future of the business. From that view, specific goals can be identified that would help attain that vision; these goals then guide the day-to-day operational action plans required to make it all happen.

The VGOST Strategic Plan Format

One common and effective strategic plan format is called VGOST, an acronym that stands for Vision, Goals, Objectives, Strategies, and Tactics. After completion of a thorough situational analysis, the next step is to set a vision for the future of the business. The vision is what the business is expected to be within a certain time frame.

While a mission statement identifies the purpose of the business, or what it does and why, a vision statement identifies what the stakeholders want to make of the business. Another way to think of it is the direction of the business in terms of growth, improvement, or competitive position. It is a description of what the business will be as the goals and objectives in the plan are achieved.

Goals are broad statements of what needs to be achieved in order to attain the vision statement. These goals could be set in various categories of business operations, marketing, and sales.

Objectives are more targeted in nature than goals and must be measurable and based on a time period. There may be several objectives under the heading of a single goal, each of which support achievement of the larger goal. For example, a goal to grow the number of customers in a business might have a few specific objectives like attend 1 public event each week to grow a network of contacts, contact 20 new prospects each month, add 10 new customers per month, and visit 10 current customers each month and build relationships. Each of these objectives supports the goal to retain and grow new customers. Each is specific, can be measured, and has a time frame for accomplishment.

The action steps that are undertaken to achieve the objectives take the form of strategies or tactics. A strategy is a specific approach or method to doing business, whereas a tactic is a specific activity. Strategies supporting the objectives in our example might be to make prospecting calls during certain hours of each business day, or to work with certain associations or affiliated groups of potential customers. Some tactics that support these same objectives might be to place a marketing campaign ad on a social media site at a certain time every weekday or make 20 prospecting phone calls during certain hours each weekday.

In Figure 3, we have created a mock strategic plan using the format discussed above. Notice the hierarchical relationship between the strategies, tactics, objectives, and goals. The strategies and tactics make up the day-to-day activities of a business that support attainment of the stated measurable objectives. The objectives support achieving the goals, and all of these pieces support the overall vision for the business.

Each one of the strategies and tactics is assigned to a specific staff member who is responsible for attainment of the objectives and goals. This example is only a small part of a strategic plan, but it need not be overly complex. For a small- to medium-sized business, two or three goals and one or two objectives per goal are sufficient to maintain momentum toward the overall vision.

Figure 3. Sample Strategic Plan in VGOST Format

Goal #1: Grow customer base to 1,000 customers.


Objective #1 – Add 10 new customers per week by July 1, 2021.
Strategies and TacticsPoint PersonTarget Date
Execute a Facebook advertising campaign each quarter of the year and measure effectiveness rate.MeMar 31
Jun 30
Sep 31
Dec 31
Make 20 telemarketing or networking contacts by telephone each day and measure each week.Me and my staffOngoing

Objective #2 – Retain 90% of customers and encourage repeat purchases at a rate of at least 50% by September 1, 2021.
Strategies and TacticsPoint PersonTarget Date
Develop a customer service program to maintain frequent contact with existing customers to be implemented by 3Q 2021.MeSep 30
Build brand loyalty through a frequent user rewards program offering discounts after multiple purchases. Deliverable by 2Q 2021.StaffMar 31

Goal #2: Attain 1 million followers online.

Objective #1 – Create an attractive website that draws viewers’ attention and becomes listed on the first page of a search engine search for my keywords by January 30, 2021.
Strategies and TacticsPoint PersonTarget Date
Hire a superb web designer and set expected completion date in the service agreement by December 1, 2020. Finalize the project by January.CIO (me?)Jan 5
Track effectiveness and SEO impact, adjust action plan as needed.CEO (me?)Jan 31 and ongoing

Objective #2 – Execute a comprehensive online marketing campaign that steadily increases followers by 100 new followers each month of 2021.
Strategies and TacticsPoint PersonTarget Date
Execute a social media campaign that attracts visitors to the website. Include an email gathering feature to begin developing a list of potential customers.CMO (me?)Jan 5
Execute an email marketing campaign to expand audience and attain return visits to website.CMOFeb 15 and ongoing
Create a blog that provides valuable information to potential customer audience to attract frequent visitors.CMOMar 15 and ongoing

Our example here is focused on marketing. As stated above, a written strategic plan would likely include other areas of the business and would follow this same format of goals, objectives, etc. and ultimately identify who is responsible with target completion dates. This way, all stakeholders in the business understand the direction and vision. Management and employees can move in that direction together and meet the strategic vision the business owners established.

For more on these and other topics, consider registering for the NaperLaunch Academy Workshop series. In addition, business librarians, NaperLaunch coaches, and SCORE mentors are available for one-to-one mentoring sessions.

Posted: 
Monday, March 29, 2021 - 08:45

6 Invaluable Selling Skills

In the NaperLaunch Academy workshop series, participants learn principles known as Professional Selling Skills. This sales approach could also be called “need-satisfaction” selling. The foundation of the workshop was developed many years ago and is based on scientific observation and analysis of successful salespeople. It was discovered that all successful salespeople automatically perform these basic skills almost flawlessly every time they engage in a sales interaction.

Need-satisfaction selling is a learned process of asking customers questions in such a way that they reveal their needs so that a seller can “support” those needs with a statement of the benefits of a product or service. It is a systematic approach to sales that a seller (or business owner) can easily learn and follow. With practice it becomes second nature and sales effectiveness increases dramatically.

There are 6 basic skills used in this sales approach or process: opening, probing, supporting the need with a benefit statement, handling objections, the trial close, and closing.

  1. Opening
  2. The skill of opening a sales interaction focuses on two key goals: building rapport and setting the objectives of the interaction.

    At the beginning of every sales interaction, the seller should begin to build rapport with a customer. Rapport is built by showing interest in the customer and the customer’s needs. Getting to know a customer and understanding their situation should actually start before any meeting or call. Sellers should invest time in researching the potential customer to understand their needs and experiences. Effectively building rapport puts the seller in a position of trust with the customer.

    Setting objectives for the sales interaction involves clearly stating the purpose and the expected outcome. This only requires a brief statement of what is hoped to be gained by meeting; however, a seller can also confirm acceptance of the purpose and expected outcome by the customer. Starting this way also gives the customer the chance to express specific things they want to know about the product or service, which will be immensely useful to the seller. If there is no agreement on objectives, then the seller should seek a different objective of the call until there is agreement. For example, instead of expecting to obtain an order, the objective might be adjusted to informing the customer about an offering and obtaining a commitment for a follow-up interaction.

    Once the opening conversation has introduced the participants to one another, established some rapport, and confirmed the objectives, it is time to proceed.

  3. Probing
  4. The next skill is called probing, which simply means asking questions–but not just any questions. Sales probes are intended to help uncover specific customer needs. Answers to sales probes should reveal what the customer really wants or needs, and the best sales probes will help uncover needs that the seller’s offering can solve.

    There are two types of probes: open and closed. An open probe gets the customer speaking freely, preferably about their routines and challenges. This may reveal specific needs that can be solved by the seller’s offering. Closed probes are more focused questions that may be answered with a shorter response, possibly a single word–yes or no. Closed probes are used to confirm or clarify the seller’s understanding of what the customer has said; in particular, they are used to confirm a need.

    In a sales interaction, a seller’s listening skills are more important than their speaking skills. Sellers must listen carefully to hear what the customer reveals in terms of problems (needs) that the seller can solve. When such a need is uncovered and confirmed, it must be supported with a benefit statement.

  5. Supporting the Need with a Benefit Statement
  6. A benefit statement describes the value that the customer will receive when using the product. It should not describe a feature of the product or service; rather, it must focus on the benefits of that feature. It should answer the question: What does the customer get?

    The first part of the statement generally acknowledges the customer’s need. The second part describes the benefit of the seller’s offering. The statement must specifically address and solve the need the customer has revealed. Lastly, the benefit statement concludes with a closed probe to confirm customer recognition of the need and acceptance of the benefit statement.

    If, as shown in Fig. 1, the features of a seller’s coffee pot are its heavy-gauge stainless steel construction and special silicone seals, then the benefits of that coffee pot to the customer are its resistance to rust, breakage, and leaking.

    Figure 1. Features and benefits of a coffee pot

    Features and benefits of a coffee pot

    In this example, the benefit statement should acknowledge that the customer indicated a need for a coffee pot that is resistant to rust, breakage, or leaking. Then the seller would point out that the superior-quality construction of the coffee pot being offered is such that it actually resists rust, breakage, and leaking. The statement would end with a closed probe: “Does that sound like the kind of coffee pot that you are looking to put into your warehouses?”

    In a sales interaction, this 3-step process of probing, uncovering needs, and supporting needs with a benefit statement is repeated continuously until the customer either cannot identify any more needs or exhibits buying signals. Buying signals are responses that indicate customer interest; they are sometimes verbal expressions and other times detected only in customer body language. With mild buying signals, the seller might proceed to a trial close. When strong buying signals are obvious, then the seller should proceed to the close. However, most of the time, some type of customer objection will arise. We will cover handling objections first and then return to the closing skills.

  7. Handling Objections
  8. In our experience, all possible types of customer objections to a sales offering fit into one of four categories: skepticism, indifference, misunderstanding, or drawback.

    Skepticism means the customer does not believe the seller’s claims about the product or service. The handling skill would include probing to determine the source of the skepticism. Once the source is identified, the seller may be able to offer some form of proof of the claims, such as research findings, third-party authoritative articles, or customer testimonials. This requires the seller to anticipate possible sources of skepticism and prepare valid proofs ahead of time.

    Indifference means that the customer is exhibiting no interest in what is being offered. It does not matter what the product or service delivers in benefits because the customer does not perceive any need for that benefit. The sales response is two-fold: First, remind the customer of other needs and their associated benefits that have already been confirmed and supported during the interaction. Second, try to uncover hidden needs that have not yet surfaced by probing. Perhaps the customer does not recognize what the product or service can do and may actually have some needs that have not yet occurred to them.

    After reviewing any newly confirmed needs and supporting them with benefit statements, the sales approach is to probe for additional needs by asking the customer to provide more information about their operation or processes. When the review is complete, if new needs are supported, the seller can return to the trial close. On the other hand, if no needs have been confirmed or supported, then the prospect is not a potential customer and the seller can stop wasting time and look for a new prospect.

    When a misunderstanding occurs between customer and seller, the basic handling step is to probe to discover the root cause. The misunderstanding can usually be clarified and resolved through discussion. Sometimes the misunderstanding comes from an uncovered need; when the need is revealed, the seller can support it with a benefit statement and move back to the trial close.

    A drawback is the toughest objection to handle because it usually means there is some customer need that cannot be supported with benefits from the product or service being offered. In this case, the seller simply cannot meet the need. The only way to overcome a drawback is to support enough other needs to overcome the impact of the drawback. The sales response is to confirm previously supported needs to remind the customer of the other benefits of the sales offering. The seller can also probe for any hidden needs that can be supported.

    Once enough benefits have been accepted that the customer accepts the drawback due to the other benefits of a product or service, the seller can return to the close.

  9. Trial Close
  10. When a customer seems to be giving buying signals, a seller can verify agreement using trial close techniques, for example, asking “Do you see any reason we can’t move to the next step?”

    If any customer stalls are encountered, a seller should execute the 3 steps to commitment strategy:

    1. Get the customer saying yes by reviewing each of the needs that have already been discussed and asking for agreement that the customer expressed that need.
    2. Keep the customer saying yes by confirming acceptance of each benefit that has already been stated in support of each of the needs.
    3. Help the customer visualize the benefits of using the product or service being offered. If all responses are positive, continue to the close.

    If the customer raises any objections to continuing during the trial close, the seller should execute the appropriate handling skill based on the type of objection raised.

    At any time in the sales interaction, if the customer signals a readiness to buy or move to the next level, it should not be ignored by the seller. Do not talk yourself out of a sale! When there is clear consensus to move to an agreement on next steps, the seller should move to the close.

  11. Closing
  12. Closing is really just reaching agreement on what will be done next. If there has been no trial close, the seller may use the 3 steps to commitment strategy described above to review the needs and benefits of the offering. Then the seller can outline the next steps in placing an order, making the arrangements for delivery of the product, or scheduling the offered service. These agreements should address when, where, and by whom next steps will be taken. Next steps might be setting a follow-up appointment or executing a buy order or similar interaction.

    For more information or assistance with these and similar subjects we recommend one of three options:

    1. Register to attend the NaperLaunch Academy Workshop Series.
    2. Arrange to meet with a NaperLaunch coach.
    3. Arrange to meet with a business librarian.

For more information, titles on this subject available at Naperville Public Library include the following:

Little Red Book of Selling
Value-Added Selling
Secrets of Question Based Selling
Sales Bible
Posted: 
Monday, March 22, 2021 - 08:15

Accounting vs. Bookkeeping

As a new business owner, you may hear the terms bookkeeping and accounting used interchangeably. While both bookkeepers and accountants work with financial data and help business owners manage their finances, they have complementary but different responsibilities. This blog post will distinguish between the functions of each and their respective roles in a business.

A bookkeeper completes the clerical side of accounting functions, recording transactions and maintaining accurate records. Bookkeepers record, or “post,” the sales, expenses, cash, and bank transactions of the business. This enables a business owner to easily understand how much money is entering and leaving the business.

The complexity of the bookkeeping process depends on the size of the business and the number of transactions conducted daily, weekly, and monthly. However, the following are common bookkeeping tasks:

  1. Recording income and expenses
  2. Managing payroll
  3. Creating invoices and making payments
  4. Comparing the balances in a business’ books against bank transactions and reconciling any discrepancies
  5. Tracking accounts payable (money owed by the business) and accounts receivable (money owed to the business)
  6. Maintaining the general ledger, the master accounting document containing all of the business’ financial transactions

Most businesses use the double-entry bookkeeping system, in which every debit to an account requires a corresponding and opposite credit to another.

An accountant uses the data recorded in the business’ ledgers to interpret, analyze, and report on the financial health of the business. Accountants offer detailed insights that inform business decision-making, including:

  1. Preparing big-picture financial statements to assess the financial health of the business, such as balance sheets and income and cash flow statements
  2. Analyzing journals and ledger entries and making any necessary adjustments
  3. Providing tax advice and completing and filing tax returns
  4. Offering financial advice and insight regarding the consequences of financial decisions

How a small business handles bookkeeping and accounting can vary depending on the size of the business and the owner’s areas of expertise. At a minimum, a business owner must keep records of expenses and sales and, if the business has employees, manage payroll. You may decide to handle those functions yourself initially and just retain an accountant or CPA as an advisor.

Very simple bookkeeping and accounting may be done manually. There are also a variety of accounting software packages available for business owners who are inclined to do their own. QuickBooks is the most popular brand and has the largest market share. It is used by most bookkeeping services and can be used to generate financial reports.

As your business grows, you may decide to hire someone to join your company or you may hire a third party to provide bookkeeping, accounting, and/or tax advisory services.

For more information about bookkeeping and accounting, as well as other aspects of business operations for new startups, visit our BizVids Tutorials or register for a NaperLaunch Academy workshop. NaperLaunch coaches and SCORE mentors are also available to provide one-on-one virtual assistance.

Posted: 
Monday, March 15, 2021 - 09:00