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Real Sales Forecasts Have Curves

By Tim Berry, Guest Blogger
Published: November 23, 2014

Are you forecasting sales of a startup or a new product? Avoid straight lines. They aren’t realistic. Projections that draw good-looking curves are better than straight lines. That’s because sales are the result of human behavior, and human behavior is a natural phenomenon. Natural phenomena come much more often in sweeping curves than in straight lines. Look at the spiral of a snail’s shell, or the curve of a giraffe’s neck.

That’s true in nature and also in business and commerce. Business phenomena—sales, users, growth and such ­– are natural phenomena. Cycles sweep up and curve over in big S curves or bell curves, graceful waves­ ­– not straight lines.

Last week I reviewed two different business plans that got this wrong. It really cut into credibility. Put nice curves into your sales forecast and it will also look more realistic. 

Specifically, make a line chart of your projections. Put the value (dollars or units) on the vertical, and the months or years on the horizontal. What I want to see is an S-curve like this one:

image of s-curve

I’m not suggesting that there is some magic reason that the S-curve is more likely to be realistic. The S-curve is not better for any mathematical reason, nor for anything they teach in business schools. It just ends up more likely reflecting the natural course of events. In one case, it’s the way web traffic ramps up naturally. In another, it’s the way physical product is accepted by a distributor and stocked on retail shelves. Maybe sales growth happens in this pattern because it is the product of a variety of natural phenomena. It has to do with practical problems, acceptance, convincing people and so on. People, and the decisions they make, are also a natural phenomenon.

For further evidence, consider the classic bell curve of normal distribution that comes up so often in statistics. Or the standard technology adoption lifecycle, which shows a ramp-up as a curve flattening at the top and then curving back downward.

The first of the two forecasts I complain about looked like the chart here below when plotted on a line.

image of the straight line

Sales started at zero, in this forecast, and jumped to $4.3 million in the first month. Then they went flat, remaining at $4.3 million per month for the rest of the first year.

I think the problem with that is obvious. It is completely unrealistic. Regardless of the product, the channel, and the market (the plan was confidential so I’m not specifying here), sales won’t jump to maximum in one month and then stick there. Sure, if you use your imagination, you can come up with a story that might match the chart above. But for any normal context, any normal reader of the business plan, this looks bad. This startup team doesn’t understand sales.

The second of the two unconvincing sales forecasts, from a second business plan, looked like this one:

image of straight line

 

There two, the straight line doesn’t look realistic to me. Real-life phenomena don’t happen like that.

There are mathematical functions and sophisticated equations that can draw a typical S-curve. That, however, is not what I use, and not what I look for. I do a lot of forecasts and my favorite technique is to use software – a spreadsheet or forecasting software – that lets me estimate numbers interactively with viewing the line chart that shows me the shape. And of course I’ll use educated guessing plus a review of the specifics to calculate – well no, draw, not calculate – how fast the sales increase.

Forecasts are no good unless they are credible. And curves are more credible than straight lines.   

About the Author:

Tim Berry
Tim Berry

Guest Blogger

Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .

3 Up-and-Coming Social Tools and How to Use Them to Market

By smallbiztrends, Guest Blogger
Published: November 20, 2014 Updated: November 20, 2014

If you’re like most small business owners, you’re probably too busy to stay on top of the latest and greatest social media marketing tools. And with more coming online all the time, it’s understandably frustrating to know which are worth paying attention to, and which are just noise.

Here we look at three tools that can benefit you, as well as explore how you can use them to market your small business.

1.  SnapChat

While SnapChat is big with the teens, it can also be a fantastic tool to market your business. Essentially, it’s a mobile chat app that, in addition to letting you converse with your contacts, lets you send images or videos that will expire after a set period unless you say otherwise.

If you’re seeking to connect with the 18-35 year-old demographic and use text message marketing, there’s ample opportunity here:

  • You can use it as a visual customer service tool to illustrate how to use your products.
  • SnapChat stories let you craft the message and image of your brand that you want to share.
  • You can create customer engagement by launching a scavenger hunt.
  • Share behind-the-scenes photos of events or company activities.

While brands are still trying to figure out how to use SnapChat, by jumping in now, you’ll be ahead of the curve by the time the rest of them figure it out.

2.  Piktochart

You know that infographics are a visually appealing tool to disseminate information to your blog readers, but you’re by no means a designer. Today, you don’t have to be if you have the right tools. Piktochart helps you create professional-looking infographics with customizable templates — no design skills needed.

It’s smart to vary the types of content you present on your blog, since not everyone absorbs information the same way. Some people prefer to read their content, while others prefer video, audio or visuals like infographics. Including a custom-made infographic once or twice a month can provide respite from the words, words, words you’ve published, and attract new readers as well.

Infographics are ideal for:

  • Relaying dense data, like statistics or survey details.
  • Telling a story using images and information.
  • Freshening up what would otherwise be less-than-exciting data like sales charts.

Spend some time getting to know Piktochart and its functionalities. You might be surprised at where beyond your blog you can apply your infographics, such as social sites and emails.

3.  Places

The problem with encouraging your customers to check in from your business location or share photos there is that there hasn’t been an easy way to aggregate what people are saying about your brand across social sites. Now, Moment.me Places does just that. Let’s say you own a restaurant. You can create a mini webpage that gathers all the food pictures people take, checkins and comments they’ve made, and reviews of your restaurant. You can share this mini site on your own website or social media and encourage people to see what’s happening at your location right now.

You can use Places to:

  • Encourage people to go where their friends go. The power of a social network often influences people’s decision about where to spend money.
  • Build up excitement around an event and bolster attendance.
  • Enhance your existing online presence and create a sense of community on your own social sites.

There are dozens of other marketing tools springing up, so keep your eyes open and try out any that sound interesting to you. After all, anything that helps you drive sales and get customers coming back is worth investing time and money in.

About the Author:

smallbiztrends
Anita Campbell

Guest Blogger

My name is Anita Campbell. I run online communities and information websites reaching over 6 million small business owners, stakeholders and entrepreneurs annually, including Small Business Trends, a daily publication about small business issues, and BizSugar.com, a small business social media site.

Feeding Your Employees: What Can You Deduct?

By BarbaraWeltman, Guest Blogger
Published: November 19, 2014

It’s common for companies to pay for employee meals under a variety of circumstances. They may be on the road for company business or in your lunchroom snacking. From a tax perspective, the circumstances under which you furnish food determine the extent to which you can write off your costs.

Business travel

If you cover the cost of meals for employees who travel out of town on business, you can deduct 50% of the bill, including tips. (Special rules not discussed here apply for those in the transportation industry where workers are subject to “hours of service” limits.) The deduction is based on the actual cost, as determined by receipts, or reliance on a standard rate set by the government. There are two standard rates you can use (but the 50% limit applies in any event):

  • Federal per diem rate, which are set every October 1. The basic rate for starting October 1, 2014, is $46 per day, but higher rates ($51, $56, $61, $66, and $71) apply for travel to certain high-cost areas in the U.S.
  • IRS high-low substantiation rate, which may be adjusted every October 1. The rate starting October 1, 2014, is $65 for meals and incidental expenses for travel to high-cost areas within the continental U.S. (CONUS). The rate is $52 for travel to other areas in CONUS.

Note: You must obtain substantiation (receipts and other required information) from employees in order for your company to take the deduction.

Wining and dining customers and clients

When employees take a customer, client, vendor, or other business associate out for a drink or for breakfast, lunch, or dinner and the company picks up the tab, 50% of it is deductible on these conditions:

  • The expense must be legitimately for business (e.g., business is discussed), and not for personal reasons.
  • The cost is not lavish or extravagant.
  • There is proper substantiation of the expense given to the company.

Company activities

To foster company loyalty among your staff, you may occasionally host gatherings, such as a holiday party or a picnic. The cost of this activity is fully deductible; the 50% limit does not apply. The cost can cover not only food for staff but also their family or others. This type of benefit should be used only occasionally in order to remain fully tax deductible to you (and tax free to your staff).

Onsite eating facilities

Employees may eat at work:

  • Food service businesses. If you’re in this industry, including a hotel with onsite restaurants, and employees eat on your premises for your convenience, then all of your costs are deductible (this isn’t a separate deduction; the write-off is reflected in the cost of usual operational costs). For wait staff, this usually means meals before or after their shift. Note: Employees aren’t taxed on this benefit and you don’t owe any employment taxes on this benefit.
  • Snacks. Donuts and bagels, apples and bananas, soda and coffee: these snacks you provide at no charge to your staff are fully deductible by you. They’re viewed as a de minimis fringe benefit to employees who are not taxed on their receipt.

Large companies may have onsite cafeterias, with the cost of food subsidized for employees. This benefit typically isn’t offered at small businesses.

Other activities

You can fully deduct the cost of food for:

  • Hospitality suites at conventions your employees attend.
  • Meal money for an employee working overtime. As long as this doesn’t become a regular thing, it’s treated as a de minimis fringe benefit.

Conclusion

When it comes to the tax rules on deducting meals and other food costs, things are complicated. The IRS has begun to look closely* at Silicon Valley companies, such as Facebook and Google, that provide free food for workers in order to tax employees on this fringe benefit, so tax rules could change at any time. To learn more about feeding employees, see IRS Publication 463 (the 2014 edition hasn’t been posted yet, but the general rules from 2013 apply to 2014 and 2015).

* Denotes link to non-governmental website

About the Author:

BarbaraWeltman
Barbara Weltman

Guest Blogger

Barbara Weltman is an attorney, prolific author with such titles as J.K. Lasser's Small Business Taxes, J.K. Lasser's Guide to Self-Employment, and Smooth Failing as well as a trusted professional advocate for small businesses and entrepreneurs. She is also the publisher of Idea of the Day® and monthly e-newsletter Big Ideas for Small Business® and host of Build Your Business Radio. She has been included in the List of 100 Small Business Influencers for three years in a row. Follow her on Twitter: @BigIdeas4SB or at www.BigIdeasforSmallBusiness.com

From Military Base to Business: Resources that Help Veterans Make the Move to Entrepreneurship

By Caron_Beesley, Contributor
Published: November 17, 2014 Updated: August 23, 2016

During the week of November 3-7, the nation and the U.S. government recognized and celebrated the second annual National Veterans Small Business Week. And rightly so – one out of every 10 small businesses in American is started by a vet. These companies employ nearly 6 million workers and generate more than $1.2 trillion in revenues. Moreover, statistics show that the success rate of these veteran-owned businesses is higher than other startups – perhaps a reflection of the discipline, skills and leadership experience acquired in military service. As SBA administrator, Maria Contreras-Sweet states, “…this is a talent pool we must nurture.”

To help veterans succeed in the transition from service to entrepreneurship, extensive support from both the public and private sector is readily available. Here’s a rundown of free training, financing and mentoring opportunities available to vets.

Get your business off the ground with Veterans Business Outreach Centers

Whether you need help putting together a business plan or need the advice of a business counselor, SBA’s Veterans Business Outreach Centers (VBOCs) provide free entrepreneurial development services including business training, support, mentoring and more. VBOCs are situated throughout the U.S.

Boots to Business Program – SBA and DoD help vets make the transition to business

Boots to Business is a free, three-step training program developed to introduce and train transitioning service members to business ownership. The program is sponsored by the SBA and is offered as a component of the Department of Defense’s (DoD) redesigned Transition Assistance Program (TAP) renamed Transition GP.

Boots to Business gives vets the tools and knowledge they need to identify a business opportunity, draft a business plan, connect with local small business resources and launch their small business.

Need capital? Low-fee loans and workshops boost veterans’ access to funding

If you need financing to start or expand, consider the SBAExpress loan program. It offers low-interest rates and streamlined, expedited procedures for members of the military community (responses to loan applications are made in 36 hours). It’s also worth knowing that fees on all SBA loans have never been more favorable and are currently set at zero for loans under $150,000.

To help you take advantage of capital opportunities, check out VetCap (capital for veterans) event in your region. VetCap national workshops are focused on educating veterans on where and how to raise capital. The workshops also connect veterans to a network of financial sources. More information on specific VetCap events is available through SBA’s district and regional offices.  

Woman-owned veteran small business programs

Resources to start up and grow a woman-owned veteran small business are at your fingertips!

  • Women's Business Centers (WBCs) are designed to assist women to start and grow small businesses. WBCs operate with the mission to "level the playing field" for women entrepreneurs, who still face unique obstacles in the world of business. WBCs offer comprehensive training and guidance on a variety of topics in many languages to help them start and grow their own businesses.
  • Veteran Women Igniting the Spirit of Entrepreneurship (VWISE) is an entrepreneurial training program that assists female veterans to discover their business passion and learn business-savvy skills. VWISE is a three-phase program that includes online self-study courses, a three-day conference, and ongoing support from mentors. To apply, visit Whitman.syr.edu/vwise.

Check out SBA’s women-owned business guide for additional information.

Events, seminars and fairs

Bookmark SBA’s event calendar for info about nationwide and online veteran-specific training, networking and outreach events.

Other essential resources

The SBA offers a wealth of resources for veterans through its Office of Veterans Business Development. For a useful round-up of just how the agency can help you view this quick video.

Other public and private sector resources include:

  • SBA’s Veteran and Service-Disabled Veteran Small Business Guide – A one-stop portal with links to programs and resources, financing information, government contracting opportunities and other resources.
  • Small Business Development Centers (SBDC) – If you don’t have a Veterans Business Outreach Center in your area, you’re very likely to find an SBDC nearby. Each center provides business training, seminars and one-on-one consulting. Sponsored and partially funded by SBA, these centers also offer support for veterans, including help with understanding their financing options.
  • SCORE: Counselors to America’s Small Business – SCORE is a nonprofit association dedicated to helping small businesses get off the ground, grow and achieve their goals through education and mentorship. Volunteer business counselors, advisors and mentors provide free, confidential business counseling; free business tools; and inexpensive or free business workshops to aspiring entrepreneurs and small business owners.  
  • Vets in Technology – Entering the technology field? Get help from Vets in Technology.
  • VetFran – Interested in opening a franchise business? VetFran supports veterans and their spouses’ ability to access franchise opportunities through education on the franchise industry, financial assistance and industry mentorship.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

What Kind of Business Insurance Do You Need?

By Caron_Beesley, Contributor
Published: November 5, 2014

Business insurance is one of those gray areas. Do you need it or don’t you, and, if so, what kind? For certain businesses – for example, amusement parks and health care related industries – it’s an absolute necessity from the get-go, but what if you run a freelance business or engage in low-risk work? Is business insurance a requirement?

While it may not seem so from the outset, as your business grows and takes on additional risk, business insurance quickly becomes a must. The problem is that many smaller businesses ignore the issue of insurance until it’s too late.

One reason for this is that many small businesses often assume that by forming a Limited Liability Company (LLC), they’ll be afforded protection in the event of a lawsuit. However, while this structure can protect you from personal liability for business decisions or actions of the LLC – the liability protection is limited.

For example, if you inadvertently break intellectual property laws or are sued by an employee, you could face a lawsuit and potential losses that being an LLC cannot protect you against.

Of course, LLCs aren’t the only business structure that can benefit from business insurance. Sole proprietors, partnerships, S-Corps and Corporations all need insurance.

But what kind of insurance do you need? Here are four forms of coverage that you should consider (over and above healthcare insurance and any employer insurance obligations):

General Liability Insurance – This is the silver bullet for protecting you, your business and your employees from any damages incurred as the result of bodily injury, property damage, medical expenses, libel, slander, the cost of defending lawsuits, and settlement bonds or judgments required during an appeal procedure.

General liability insurance is often sold as a catch-all and includes numerous add-ons that you can tailor to your business and its degree of risk. For example, if non-paying clients are a concern, you can add accounts receivable protection to your policy. Inland marine coverage is another option that can protect against loss or damage to business property when it’s not on your premises.

It’s also worth noting that oftentimes a client will request evidence of your certificate of general liability before doing business with you – another good reason to secure a policy before it holds up any potential new work.

Property Insurance – Whether you own commercial real estate or run a home-based business, protect your assets and the equipment, fixtures and furniture inside it. Property insurance is often rolled into general liability insurance, check with your broker to be sure. Home business owners should also be aware that home insurance doesn’t always cover home-based business losses. You may need to add additional riders to your home insurance policy or get other insurance to cover additional risk.

Professional Liability Insurance – Also known as errors and omissions insurance, this insurance protects against errors, malpractice and negligence in the provision of services to your customers. This is often recommended to businesses who provide services such as tax or financial advice, as well as physicians (who are often required by state law to carry this insurance). 

Product Insurance – This protects businesses that manufacture, distribute and retail products against any financial loss incurred as a result of a defect product that causes harm or injury. Product insurance can also be tagged on to a general business liability insurance policy.

The Bottom Line

Insurance can be a confusing business. A good insurance broker can help demystify this process and put together a package based on your unique needs. Once in place, don’t forget to keep your policies current and under review (for example, if you take on employees or new assets).

Check out SBA’s Business Insurance Guide for more information and some useful tips on buying insurance.

Disclaimer: The information in this blog does not constitute legal advice. Seek the services of a lawyer if you have any questions about business liability.

About the Author:

Caron_Beesley
Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

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