Financial Tests For Business

Last week I went for my annual physical.  I am doing fine, but the doctor had me undergo a stress test.  As I was briskly walking on the treadmill, I thought about the bank failures and financial stress tests.  What exactly do they measure and how can a company determine their financial stability through one?

According to an article in accountingtoday.com, a bank’s stress test involves looking at its loans: determining which ones are likely to default and then figuring out if the reserves contain enough money for survival.  The article went on to note that the stress test financial formula could change, depending on which regulating authority performed the test.

I found an interesting article by Michael Gunther, the president and founder of Collaboration LLC about performing stress tests on your business.  The questions below will help owners and manager s to evaluate their business objectives and determine if the company is prepared to succeed and thrive. 

• If your sales decline by 10%, 20%, or more, what will you do to be profitable?
• If you lost your top three clients, what plan does your business have in place to generate new key clients?
• If you lost the ability to obtain additional credit, how would you finance your business?
• If you lost your top two employees, how would you manage their roles and find their replacements?
• If new competitors enter the marketplace, how will you respond?
• If your competitors lower their prices in order to gain market share, how will it impact your sales and revenue?
• If interest rates rise, how will you handle the increased costs on loans and credit cards?
• If unemployment continues an uphill climb and consumer spending continues to decline, how will that impact your business?

Next, ask yourself the same questions in regards to positive business growth

• If sales grow by 10%, 20%, or more, is your company prepared to handle the growth?
• If you find three or more potential top clients, how will you entice them to purchase from your business?

The questions are meant to spark discussions and help your business be proactive in developing a plan for each scenario. 

Do you have tests or measures for your business’s finances?  What signs have you seen that the economy is improving or staying stagnant?  Tell us about it on our blog.

I Am Going Skip The Thanksgiving Pie This Year

Last week I went to the doctor for my annual physical.  I am doing fine, but he had me undergo a stress test.  As I was briskly walking on the treadmill, I started to think about the bank failures and financial stress tests.  What exactly do they measure and how can you determine your own financial stability through one?

According to an article in accountingtoday.com, a bank’s stress test involves looking at its loans: determining which ones are likely to default and then figuring out if the reserves contain enough money for survival.  The article went on to note that the stress test financial formula could change, depending on which regulating authority performed the test.

Since the economy is still uncertain, I wanted to perform a stress test on my own finances.  Click here  the complete test from the Dallas Morning News article by Pamela Yip.  The critical financial stress test for your financial situation includes:

•If you lost your job, how long would it take you to replace your income through a job search?  To find out, divide your current gross annual salary by $10,000 to determine how many months it would take you to replace your current income. The formula is based on an estimate that for each $10,000 you make, it will take you one month to replace your salary.

•If you were laid off, would your emergency savings last as long as it would take to replace your income? And, if not, how much of a shortfall would there be?

To find out, divide your total emergency savings by your monthly expenses to determine how many months you can get by without income. Then subtract the number of months you're covered in savings from the number of months it would take you to replace 100 percent of your income to determine any potential income shortfall.

Click here for CNN ‘s online calculator to gauge the health of your finances.  My results definitely made me think twice about my financial future.  I am also thinking twice about having a second piece of pie after Thanksgiving dinner after my physical stress test.

Do you have tests or measures for your business or personal finances?  What signs have you seen that the economy is improving or staying stagnant?  Tell us about it.

4 TipsTo Transform Leads Into Sales

In last month’s newsletter, we discussed ways to increase sales without breaking the budget.  We hope a few of the tips saved you money or brought in a few potential customers.  This month, our tips focus on turning leads into sales, adding even more to your bottom line.

Types of Leads- “A place for everything, everything in its place” --Benjamin Franklin

Determining high priority from low priority leads will save time and result in easier conversion.

·          Inbound-A potential customer comes to you and inquires about your product of service

·          Outbound-A business seeks out the potential sale through marketing efforts

Obtaining Leads-Everyone is a potential sale

Communication is the key to converting leads into sales. Knowing who your audience is will determine the type and frequency.

·          

Di   Direct mail-The rising cost of postage has turned some companies away from sending bulk mailings, but a special mailing can keep you ahead of the competition.  A personalized, hand- written holiday or birthday card sent to potential new customers  can turn around a lost sale.  

·           E-Mail blasts- A monthly newsletter or regular update is a cost-effective way to keep in touch with potential new sales.  Send personalized and specialized sales offers targeted to customers’ needs on an ongoing basis.  Be sure they can unsubscribe easily to prevent them from receiving unwanted correspondence.

Landing Pages-Don’t make your customers  fend for themselves on your website

·          Social Media- A link embedded in your social media efforts (blogs, Facebook, SEO) that a potential customer can be directed to, with a simple click of a key. 

·           Customized-The page viewed should  fit the initial clicked site. If it was clicked from a keyword pay-per-click, make sure the landing page fits exactly what the person is searching for.

Measuring Reponses- “If you can’t measure it, you can’t manage it”--Robert Kaplan, founder BSC

·           Tracking-Where are your leads coming from and which ones have turned into sales?  This can be done in several ways, including customer relationship management systems, a simple spreadsheet, or database.  Track leads by all sources, dates, campaigns, and follow-up actions.

·           Return on investment (ROI)-Once a tracking system is in place, develop a conversion rate of leads generated, that compares customers for every campaign.  An example might show clicks to your landing page for the month, compared to new customers or actual sales.

How does your company stay on top and keep customers coming back?  What methods does your company use to gain leads?  What lead conversion methods work best in your market?  Tell us all about it.

Time to Think of A New Name

 In the process of looking for something to blog about this week, I found this article by Jason Fell in Folio Magazine. 

A Dallas moving company being sued by a magazine over copyright infringement.  It pays to do your homework and to make sure the graphic design firm you are working with does too. It was a costly lesson learned by both!


http://www.foliomag.com/2010/magazine-moving-company-lay-my-logo