When making assumptions and estimates the most important thing to remember is to bring the base information down to the lowest common denominator. Nobody can project a sales figure for a year off the top of their heads, but most people could project the sales for a specific week. Here are a few suggestions to start you off:
 Try and project figures over a short period of time and then extrapolate these figures up. For example, work out figures by the week and then multiply up to month and years. In this way it is easier to estimate as most people have a good idea of figures on a weekly basis.
 Try to think in quarters. Remember that there are thirteen weeks in a quarter. Thus in every three month cycle there are two months with four weeks and one month with five weeks. This extra week can make a difference particularly when working from a weekly basis. If you forget to cover this thirteenth week you can get into difficulties as you have thirteen weeks of overheads.
 We don’t work fifty-two weeks a year. You lose time from Christmas or other religious holidays, summer holidays and sick leave. Factor in a number of weeks of non-earning, but remember bills tend to run over the whole year. Therefore leave at least four weeks per year with no income to cover sickness and other eventualities.
 Learn the business cycle in your business. Every business has a business cycle. In any year there are good, bad and average weeks. It usually takes time to find these cycles out, but they are very important, especially when projecting income and cash flow.
 Cash flow is about exactly that, cash! Remember that it is time when bills or receipts are paid from the bank that counts, not when invoiced. Thus if you have to wait sixty days for payment, January invoices do not actually appear in the cash flow until March. If you get credit from suppliers you enter the cash flow payment when the cheques are paid not when the invoice is received.
 On the subject of invoices and statements, remember that few businesses actually pay out on invoices anymore. The norm is to pay out on monthly statements. Thus there are two things to remember. One if you do not send out monthly statements you don’t get paid. Secondly, most businesses will take their thirty days credit from receipt of the monthly statement. Thus to be safe, if you invoice at the beginning of the month and send the statement at the beginning of the next month, the customer will take another month to pay, and it will take several days to draw up invoices and send payments. Therefore an invoice in early January will be sent in the January statement in early February. The customer will look to pay this in early March and will take up to two weeks to get the payment to you. This is now mid to late March. Remember this is quick payment in the modern business environment.
 As a rule be realistic, it is better to be conservative with the sales estimates (slightly underestimate) and liberal with the payment estimates (slightly overestimate).
 Try to compare figures with similar ventures. A shop of a certain size, on average uses the same amount of electricity no matter what it is used for. Thus compare your figures with a similar size shop that is not in competition with you.


What influences buyers

July 8, 2009

In general people focus too much on understanding ‘selling’ rather than why customers ‘buy’. Ultimately, it is the buyer’s mental processes during a sales presentation that is the most important thing. Buyers are influenced by several factors:

You – there is no doubt that peoples reaction to the salesperson is a primary factor in the buying process. People simply will not do business with people they dislike and, conversely, people want to do business with people they like. You cannot control how you come over to a new person but you can learn from your mistakes. We all make mistakes, it is part of the learning process and in many ways it is the best way to learn assuming the negative consequences are not too great. Try to empathise with people, understand where they are coming from and how they are thinking about the things you are presenting. Again, people are not buying from your company or organisation, they are buying from you.

Previous history – people have good and bad experiences with different companies and different sectors. Prejudice is a hard thing to break down. Finding out why a person is not warming to you or your company is important. Remember, you are the ambassador not just for your company but for the sector you work in. You get the chance to undo a negative or reinforce a positive every time you talk to a client.

Satisfaction with present situation – the vast majority of businesses will only change supplier if they are very unhappy with the current service being provided. Changing supplier can be very costly. The company has to break in a new accounts payable department, get new people used to your systems and it takes time to build the rapport necessary for a long-term business relationship. There is a high opportunity cost in changing supplier. The message here is very simple. If you keep your customers happy they are unlikely to want to change. Mess them around and they will be out the door and to your competition.

Price & Credit – everybody has a bottom line. I always emphasise that price is the perceived value the customers is willing to pay for a good or service and as a perception it can be built up. But you also must live in the current market situation. My advice, where possible, is not to reduce your main price but to give concessions around the edge of the deal. Thus, give better or longer credit terms, guarantees or additional peripherals. These all add value to the deal but maintain your price integrity.

But if I am going to ask you to do one thing different it is to focus on the ‘buying process’ and stop focusing on the ‘selling process’. Focus on the customer.

When people make a final buying decision they are prompted to do so by one of only two triggers: rational buying motives and emotional buying motives. A salesperson can really only sell if they understand the psychology of buying; the process that the buyer is going through when they make a final buying decision. So what are the factors that affect buying motives.

Examples of rational buying motives are:
Profit – people buy stocks and shares mainly to make money from the increased valuation of these equities over time. Most people buy equities to make money from them not out of any emotional bond they might have with the particular company.
Health – people buy health insurance not because they have an emotional attachment with the health company but rather that they want to ensure that they will get treatment no matter what might happen to them.
Security – people buy car and house alarms mainly to ensure peace of mind when they are away from their property or because it gets them cheaper insurance, not normally because they have an emotional attachment to the alarm or alarm company.
Utility – people buy batteries when they need them and for purely utilitarian reasons, people do not get much emotional attachment from a battery.
Caution – again the peace of mind argument made by every insurance company and insurance salesperson in the world. People buy insurance ‘just in case’.
All of these buying motives are rational and made for utilitarian and practical reasons. There is very little emotional content to the purchase.

Examples of emotional buying motives are:
Envy – this is a powerful buying motive. ‘If he/she/they have x, I must have x’. Plasma screens, sports cars, women’s handbags etc etc.
Vanity – everybody is surely guilty of this buying motive. Why buy the latest football jersey even though you already have the last 3 styles. Vanity is related to self esteem and is a very powerful buying motive.
Love/sentiment – Hallmark is accredited with building up St Valentine’s Day as it sold millions of St. Valentine’s Day cards. If you ever want to see the power of love/sentiment as a buying motive ask a husband or boyfriend about the dangers of forgetting St. Valentine’s Day!
Entertainment – This is a guy buying motive. Car accessories, plasma screens, stereo systems etc etc. Do we buy these things because we need them…no. We buy them because we want them,
Pride – Another powerful buying motive. How many football jerseys are bought during a World Cup year as compared to an ordinary year? Lots. Why? Pride!
There are many other emotional triggers but what is the point here?

In start your own businesses classes I quote a figure that 84% of all purchases influenced by emotional motives. Even apparently rational decisions are finally influenced by emotion. Let me give an example. A friend of mine went out to buy a new fridge freezer for her apartment. Having spent a few hours wandering around stores she noted that most of the fridge freezers were similar, white on the outside and white on the inside. Eventually she arrived at an electrical store and looked at 3 models. All did exactly the same job and were of similar size and specification. Two were white on the inside and white on the outside. The third was white on the outside but had a nice turquoise on the inside. She made her buying decision there and then. The final reason for buying the fridge freezer, a normally utilitarian purchase, was that she liked the turquoise interior. That was the only difference between the different models. The final buying decision is normally influenced by emotional factors.

So if you are selling your product/service to clients look for the emotional buying motives and sell to them. Remember, people do not buy furniture per se, rather they are buying a particular style that will fit in their home or are buying something comfortable to watch television. People don’t just buy cars, they are buying status, image etc. Most people don’t buy clothes to cover themselves up, rather they are buying a style or image based upon their personal self image. And if you really still don’t believe me then who ever bought a lotto ticket so that they could help charities and needful causes? If you are not selling to the emotional triggers then you are missing the point of why people actually buy.