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Need to prove your SEO proposal’s ROI?
Will your executive team only approve a proposal if it provides clear value to their business?
You know what’s needed for SEO to drive success, but how do you prove the pathway there?
SEO forecasting can come in handy.
Align sales, SEO specialists, and customers with proven, transparent, precise, and reliable SEO forecasting.
On August 31, I moderated a webinar by Anca Țenea, Community Manager at SEOmonitor, and Edward Coram James, Chief Executive at Go Up.
Țenea and James demonstrated how SEO forecasting could help you solve your organization’s specific business problems.
Here is a summary of the webinar. To access the entire presentation, complete the form.Why Forecast SEO?
For clients, SEO forecasting is done to help them understand how much revenue they can expect to gain from organic search.
As part of your sales process, you can use it to stress test whether you should take a client on.
[Learn how to get great clients with stress testing] Instantly access the webinar →
SEO forecasting helps accurately discover:
The need for a larger marketing budget & a larger sales team.
Well-selected clients that remain for much longer.
In fact, when it comes to well-selected clients, we recommend that you run an internal forecast for a potential client, just for yourself or your agency.
When you run the numbers, you’ll know what it will cost to get the client measurable results.
[See the SEO forecasting client selection process] Instantly access the webinar →
At this point, you’ll have a great pitch for your prospective client that will help you:
Provide results that make the client happy.
Enable you to retain the client for a more extended period.
Gain greater profitability and business for you.When To Forecast SEO
Existing clients: Build a forecast after months three, four, or five of an active campaign.
At this point, you will have populated a whole gamut of keywords, which means you’ll be able to trust the final number.
[See this in action] Instantly access the webinar →
New clients: Forecast SEO before signing them on as an internal stress test and qualification test, as mentioned above.What To Include In A Reliable SEO Forecast
A reliable forecast validates any opportunity from two perspectives:
Assessing the client’s potential.
Evaluation of the campaign’s budget and ROIs.
These two endpoints will help you have all of the information you need to explain SEO’s tangible success to your team and stakeholders.
[Easily see what’s included in a SEO forecast] Instantly access the webinar →
So, you’ll need to consider these five aspects:
To get there, you’ll need to input two main controllable metrics: keywords and ranks.How To Build A Successful SEO Forecast
Using the following steps, you can gain a better understanding of data modeling and explain your plan to stakeholders:
Step 1: Set your desired ranking target.
[Find out what ranking target you should choose] Instantly access the webinar →
Step 2: Determine which keyword variables may influence your overall forecast:
The average CTR curve.
Search volume, year-over-year trends, and seasonality.
Past conversion rate.
Non-brand organic traffic additional improvements.
Step 3: Plug the data into your favorite SEO Forecasting tool and watch the forecast appear.
[Watch SEO Monitor’s use case] Instantly access the webinar →
When you approach forecasting this way, you’ll be able to:
Validate the SEO opportunity and necessary budget.
Quantify the SEO effort impact on a longer-term basis.
Align expectations between sales, marketing, and other stakeholders.
Gain confidence in the potential future outcomes.[Slides] How To Forecast SEO Outcomes With Better Precision & Transparency
Here’s the presentation.Join Us For Our Next Webinar! KPIs, Metrics & Benchmarks That Matter For SEO Success In 2023
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Every marketer will tell you – creating high-quality content is no easy feat and getting page views, shares, and conversions is even harder.
But useful, engaging, and easy-to-find content is critical to successful digital strategies – so where do we start?
Defining high-quality in this space is essentially about the balance of two things: the art of the writing itself and the approach to optimization.
Each piece of content designed for your company’s website should be considered with an SEO lens before you publish.
Applying a search lens atop your content strategy helps to ensure that the content you create supports not only the customer journey (the starting point for your content strategy), but also creates cost efficiencies.
In this article, we’ll share seven tips to help you make the most out of your content.1. Ensure Great Content And Structure
Ensuring great content is all about planning.
Do your homework first.
Think about what it is your customer wants to know, and where you are (the expert who can provide them value). From there, decide what you want to say, and where, when, and how your customers will engage, then map out your plan.
An editorial calendar is a great way to get and stay organized. Amid the constant change that defines the current consumer environment, pivots will be needed, but that’s no reason not to plan.
Once you’ve got a calendar that sets out your content needs, you’ll want to set your writers up for success.
Detailed content briefs that outline the user intent or inquiry you’re seeking to address are a good standard practice to adopt.
Process, supported by clear and distinct roles and responsibilities, is important here, too.
Subject matter experts are not necessarily writers; writers may make for great editors, but self-editing is problematic. In short, ensure you’ve got a plan for publication that lets your people do what they do best.
Content comes in many forms and creating content in a variety of formats will help you reach a wider audience.
Check out this article for 100 types of content you can create (with examples).
Format aside, your structure should be simple and intuitive; an introduction followed by a body (where the main content is) and a conclusion sets the standard.
A simple way to think about this is the news approach to content: Say what you’re going to say (introduction), say it (body), and say what you said (conclusion).2. Show Your Layout Some Love
You’ve thought about structure already, but have you considered the visual experience?
Visual variety is a key component of high-quality communications across platforms and channels.
From text layout and use of whitespace to headings, paragraphs, and imagery, make sure you think through the visual experience of your customer as well.
Paragraphs and headings with a clean layout help readers scan through text, and the use of subheadings throughout will further simplify navigation for your reader.
A good clean layout will supplement the intuitive structure you’ve already planned.
But remember, a sentence does not make a paragraph no matter how you feel about the look of a new sentence on a new line! Each paragraph should cover a single idea or subject, keeping things concise and linking out for more on the topic wherever it makes sense (more on links later!).
A picture is worth a thousand words, or a bar chart, a graph, a process diagram, a quote of particular importance given prominence through varied font size and script … you get the idea.
In short, use images wherever they help to simplify subjects and as a good way to break up text-heavy content.
Whenever you use images, make sure to optimize them. Here are a few simple tips:
Add alt text: Supporting accessibility for customers using assistive screen readers, alt text also helps search engines to identify content on your page.
Apply logic to your image names: Image filenames should be readable and simple. They can also be used as alt text.
Size does matter: You want to keep your site simple and agile to ensure your pages load quickly. Keep your images under 500 KB and page sizes to less than 5 MB.3. Optimize The Right Way
Images, of course, aren’t the only part of your page that needs optimization.
The structure and layout already outlined give way to lots of optimization options and the right kinds.
Back in 2011, Google launched the Panda update with the aim of eliminating black hat SEO tactics.
But the short version is that black hat SEO tactics are ones that aim to increase a site or page’s rank in search engines by violating search engine guidelines (think dirty tricks like invisible text for a simple example).
The right kinds of optimization are in fact simple enough, so there’s no need to get crafty.
Once you focus on optimizing your site information (think site title, site description, page descriptions, and page and title formats), you’re on the right track.
You want to keep things clear and concise. Fifty to 300 characters should provide a relevant readable description of the content on the site and each of the pages using simple and relevant terms.
Length is another key consideration for optimization and not just within your site information sections.
Google likes long articles, but remember, your customer should be at the center of your strategy, so think about their needs and go from there.
We’d suggest a minimum of 300 words for a topic, which can make for a 1,000-word article easily. What you don’t want is something so long it scares readers away.
Nobody wants to read 2,000 words of keyword-stuffed filler (and again, Google won’t thank you for it). Your content should provide value to the reader and need to be fit for your purpose.4. Use The Right Keywords & Topical Alliance
Speaking of keywords, do your homework.
SEO insights represent the best real-time representation of your customer’s voice, so before you start writing keyword research is critical.
Users search for all sorts of different reasons.
By figuring out what terms your audience is searching for and the intent behind their search, you can customize your content to bolster your search results.
You will want to ensure that you use a mix of long-tail keywords, as well as head terms.
Long-tail keywords address searcher intent while tending to have low search volume, associated low competition, and high conversion.
Conversely, head terms are popular search words representing a broad topic.
Going back to our previous notes on optimization, using focused keywords together with simple substitutes and related terms is an easy win.
Search engine algorithms assess the topic of your content by recognizing your content’s keywords, their associated synonyms, and related terms (back to Panda here – it’s essentially about ensuring that the content you’ve developed has real value to it).
You can think about this as an ingredient list versus a recipe. Your ingredient list might be all the search keywords you need, but it won’t get dinner made without associated instructions, while your step-by-step recipe is the content that provides real value to the reader, bringing much-needed context.
And if you’re looking for more detail on search intent, we’ve got you covered here.
A quick reminder: Search intent is all about focusing on the why (informational, navigational, commercial, or transactional).
So by first researching keywords broadly and then seeking to understand how the content you’re developing will serve your user’s needs, you’ll be better positioned to maximize value (both for your customer and your Adword budget).
Understanding intent and combining that knowledge with other keyword metrics like search volume, CPC, and difficulty will enable you to serve up the right content at the right times.
Take note of search engine results pages (SERPs) features by keyword, and from there, match your content to compete with the top ones.5. Master The Art Of Meta Description Copywriting
Make sure yours are used to accurately describe the content on your page clearly and concisely and make them engaging. Treat your meta descriptions as copy, just like you would ad copy.
Let’s be clear here: Well-written is always important, and getting it right across the board (that is across your entire website and each of its pages) is the goal.
But with quick wins in mind, optimizing meta descriptions (which are short in nature at somewhere between 156 and 165 characters recommended) is a must.
Plus, a site-wide review can be a great place to flex your writing and editing muscles, ensuring a consistent brand character and tone across your site in the process.
For a deeper dive on meta descriptions, why they’re important, and how best to approach them, including some winning examples, check out this article.
The TL;DR version: Keep these seven tips top of mind:
Know what your competitors are doing.
Map your customer’s journey.
Use your brand voice.
Incorporate the right keywords.
Target specific intents.
Refresh your copy.6. Make Sure You’re Relevant
Discussing keywords and synonyms, as well as search intent, we’ve touched on relevance already, but let’s take a moment to dive deeper.
After all, doing so has the potential to increase our credibility as an expert in our field, and thus the source and top search hit.
Bringing us back to basics, let’s agree that search engines analyze web content to assess whether a particular page contains information that might be relevant to a user based on that user’s search term.
Once we take that simple statement as the basis for the use case, we then must place ourselves in the mind of our users and their needs.
To do the job efficiently, a search engine must assess a user’s search term based on certain key factors.
That being the case, relevance becomes situational in nature; therefore your optimization goals should be, too.
The short version: You cannot be all things to all people.
In general terms, key ranking factors are openly shared by Google and include the meaning of the query (think intent, determined using language modeling), content quality and usability, as well as context and setting.
The specifics (well, don’t get us started on the challenges of SEO), but broadly speaking, let’s just say that you should think about your content and its relevance in the same way you’d want your search results to respond to your personal needs.
Be your own artificial intelligence. Assess the environment, and then lean into the places you are most relevant to maximize your ROI.
Ranking systems are designed to sort through all available content and serve up the most useful to the searcher, as such, they are not one single algorithm, but rather made up of a whole series of algorithms.
As a basic relevance criterion, location information provides an incredible opportunity for niche businesses with great content to maximize ROI.7. Leverage Your Links
Straight off the bat, let’s agree that it’s possible to perform well in SERPs without backlinks, even Google’s John Mueller says so himself.
That’s out of the way, so let’s align that Domain Authority (which predicts how likely a website is to rank in SERPs) is impacted by the credibility granted to your content by other credible sources linking to it.
You can measure your Domain Authority with SEO tools like Moz and Ahrefs.
We’ve been talking about external promoters, but let’s not forget the importance of internal links, as well.
Ahrefs has you covered here, too, with internal backlinks reporting supplying a measurement of your internal linking efforts.
Your site structure should be set up to optimize internal links.Conclusion
Great content is key to an ever-growing list of client experience strategies.
From broad marketing strategies to targeted client acquisition and public relations plans, to search across sectors and specialties, great content has a role to play in every business’s digital strategy.
For your content to attain higher rankings, you need to consider every area of optimization.
If you’re only focusing on body copy, you’re missing out.
While the setup may seem time-consuming, an investment in SEO optimization – truly knowing your audience and delivering accordingly – is well worthwhile.
Outside of the knowledge that planning effectively will yield better customer-centric content, you can rest assured that doing the thinking around SEO optimization will also provide value to your digital budgets.
In time, and through great effort and consistency, following tried-and-tested optimization tips, your new (and improved) content may just appear on the first page of your soon-to-be newest clients search.
Featured Image: VectorMine/Shutterstock
An Evil, disease-carrying vermin sucking out the blood of its victim. A mosquito feeding
Ah, summer. Time for days filled with sun, and hours whiled away at the beach, pool or grill.
But there is a cost to all that fun, and we all must pay. The bugs are back in town.
Cue screams of horror.
The National Pest Management Association (an organization of pest management companies) just released its annual forecast for how bad pests might get this spring and summer, and unfortunately the news is not great.
Most of the country experienced a mild and wet winter, which could give pesky populations of insects a boost.
Jim Fredericks, chief entomologist for the NPMA told Popular Science that the two main weather factors that affect bug populations are temperature and rainfall or other precipitation. Temperature plays a role as insects are “cold-blooded”, and tend to become more active as the weather heats up. Excess rainfall can create standing water where insects like mosquitoes can lay their eggs. Larvae also thrive in standing water.
Forecast of pests for this spring and summer.
This winter was remarkably warm, which could provide a boost to insect populations. “There are a number of pests that overwinter or harbor inside buildings to stay warm in the winter,” Fredericks said. Which is why some homeowners may start to see bugs like ants inside their home as temperatures start rising. A mild winter could mean that more bugs managed to find cozy places to hide from the cold, and that fewer insects were exposed to freezing temperatures that could cut their populations down.
If this spring brings warm and wet weather, then the mosquito population is expected to have a particularly good year. In the Western United States, which is undergoing El Nino conditions, more rain could mean more mosquitoes, and more ants entering buildings to escape their sodden homes.
If the Northeastern states get plenty of rain this spring, they can also expect a banner year for mosquitoes, as well as an early start for ticks, stink bugs, and ants, thanks to a mild winter.
The Midwest, like the Northeast, had a record-warm winter, and will also see an early start to bug season, with increased numbers of ants and ticks. The situation is mostly the same in the Southwest, but a colder spring might delay the onset of termite swarms, a problem across the south.
The Southeast should expect mostly normal pest activity, with an increase in mosquitoes. What joy.
Mosquitoes are on everyone’s mind this summer, with their ability to transmit diseases like the Zika virus. While U.S. mosquito populations aren’t currently carrying Zika as far as we know, defending yourself from mosquito bites couldn’t hurt. Plus nobody wants to deal with itchy bug bites.
Over the years, personas have been great tools to support user experience. These fictional characters catered to identifying the needs and problems of different segments of people. However, with time, their importance decreased. This is because relying merely on generalizations wasn’t helping companies to grow. The companies saw that these personas did not influence the decision-making process. It was soon realised that these personas lacked interactivity. The situation seems to be have changed now. With data analytics in place, personas using big data can now be generated. A combination of interactivity and analytics opens the door of interactivity as a persona is no longer limited to being a static, flat file. As the preferences of one user varies with that of the other, personas catering to the same are no longer a distant dream. Data-driven personas hold the potential to adapt to different preferences, choices and demographics of the users. Such an interactive persona can be deployed in a variety of fields – marketing, HR, healthcare and design to name a few. That said, what garners the attention of people across the globe is the concept of APG – Automatic Persona Generation (APG). This is considered to be an excellent tool to turn data into personas. This data-driven system is a blend of analytics metrics, foundational data and conceptual persona. Considering the fact that the user population has varied interests, the tool aims at generating casts of personas and each segment of the user population having a persona. APG stands the potential to identify the unique behaviour pattern of the users. APG generates casts of personas representing the user population, with each segment having a persona. Relying on regular data collection intervals, Data-driven personas enrich the traditional persona with additional elements, such as user loyalty, sentiment analysis, and topics of interest, which are features requested by APG customers. This is followed by associating these unique patterns to demographic groups based on the strength of association to the unique pattern. It is now time for matrix factorization to come into play. Using this technique, latent user interaction is determined.Working of APG personas
APG makes use of algorithms to improve the user segment. A lot of attributes go into this for example occupation, marital status, etc. Additionally, APG holds a database of a lot of information pertaining to purchased copyright photos and also hundreds of thousands of names. A point worth noting is that all the data is age, gender, and ethnically appropriate. APG relies on foundational user data heavily. Algorithms work on this data to further transform it into information about users. The outcome is a list of metrics that are of high importance in industry-standard analytics packages. The crux of all of this is – a persona analytics system can present user insights at different levels. What are the different levels of APG?
The highest level is the conceptual level. This is the set of personas that APG generates from the data.
Next is the Analytics level where you can find the APG personas acting as interfaces to the underlying information and data that is used to create the personas.
Lastly, this is the user level wherein the decision-makers can access the specific user level directly within APG.
Over the years, personas have been great tools to support user experience. These fictional characters catered to identifying the needs and problems of different segments of people. However, with time, their importance decreased. This is because relying merely on generalizations wasn’t helping companies to grow. The companies saw that these personas did not influence the decision-making process. It was soon realised that these personas lacked interactivity. The situation seems to be have changed now. With data analytics in place, personas using big data can now be generated. A combination of interactivity and analytics opens the door of interactivity as a persona is no longer limited to being a static, flat file. As the preferences of one user varies with that of the other, personas catering to the same are no longer a distant dream. Data-driven personas hold the potential to adapt to different preferences, choices and demographics of the users. Such an interactive persona can be deployed in a variety of fields – marketing, HR, healthcare and design to name a few. That said, what garners the attention of people across the globe is the concept of APG – Automatic Persona Generation (APG). This is considered to be an excellent tool to turn data into personas. This data-driven system is a blend of analytics metrics, foundational data and conceptual persona. Considering the fact that the user population has varied interests, the tool aims at generating casts of personas and each segment of the user population having a persona. APG stands the potential to identify the unique behaviour pattern of the users. APG generates casts of personas representing the user population, with each segment having a persona. Relying on regular data collection intervals, Data-driven personas enrich the traditional persona with additional elements, such as user loyalty, sentiment analysis, and topics of interest, which are features requested by APG customers. This is followed by associating these unique patterns to demographic groups based on the strength of association to the unique pattern. It is now time for matrix factorization to come into play. Using this technique, latent user interaction is chúng tôi makes use of algorithms to improve the user segment. A lot of attributes go into this for example occupation, marital status, etc. Additionally, APG holds a database of a lot of information pertaining to purchased copyright photos and also hundreds of thousands of names. A point worth noting is that all the data is age, gender, and ethnically appropriate. APG relies on foundational user data heavily. Algorithms work on this data to further transform it into information about users. The outcome is a list of metrics that are of high importance in industry-standard analytics packages. The crux of all of this is – a persona analytics system can present user insights at different levels. What are the different levels of APG?The journey of personas being still and flat to being interactive has been phenomenal. With Data-driven personas, new possibilities for interaction always come in thus making the whole process of decision making lot easier. Nothing can get better than personas reflecting the underlying user information. What we thought would remain a dream is now a reality!
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How can you kick ass at Amazon SEO? In this episode of Marketing Nerds, Amazon and e-commerce expert Robyn Johnson joins SEJ Executive Editor Kelsey Jones to share the latest insights and best practices for Amazon SEO. Robyn and Kelsey discuss:
The black hat Amazon SEO practices that Amazon has recently started cracking down on
What statistics you can view for your product pages
What’s coming next for Amazon sellers in 2023 (hint: voice search will be huge!).How is doing SEO for Amazon different from other platforms?
Robyn: Everything in Amazon is very structured and data-based. There’s some pieces of data that are involved in your organic search then there’s some pieces, like the bullets and descriptions, which they tell us are not. Some people have seen that it can make a difference, but for sure, it plays a role in PPC and Amazon sponsored products. The biggest thing is knowing which pieces of structured data you really need to focus on and using the style guidelines.
They don’t tell us a lot about how the algorithm works. They don’t announce changes. We don’t get fuzzy animals like penguins and panda bears. We just notice, like one day everybody will be on Facebook saying, “Something changed. Does anybody know because we have to try to figure it out.”
What’s interesting about Amazon is it’s a very capitalistic search engine. It used to be that it was really easy to trick. It used to be, you could buy some fake reviews, you put out a promo code when things were free, and then it would increase that best seller rank so you were getting more sales and that would cause you to have an organic search lift.
However, they recently made some changes where those hacks are not working. They’re actually banning people for them. All those fake reviews they bought, a lot of them are disappearing. Especially in 2024, people have had to really readjust some of the strategies that used to work for Amazon SEO that no longer work.
Kelsey: That was something I wanted to talk to you about — black hat SEO for Amazon. It’s good to see they’re recognizing that people are trying to manipulate it, and kind of clean it up. I guess it’s good from a holistic standpoint, maybe not so good for the sellers.
Robyn: It’s good for the quality sellers. It’s good for the people that I’m rooting for.
Kelsey: There you go.
Robyn: Amazon is a very customer-obsessed culture. There’s a couple of things that really dictate everything — from the way the search engine works to the way you can interact with their support team.
The most important thing as a seller on Amazon is to be customer-obsessed, to take ownership. They expect you to take a deep dive. They expect you to have knowledge on the platform. When you’re putting data into their catalog, they can see who put that information in there. Their algorithms are very complicated. They’re just now starting to catch up with some of the black hat things that happen. But know that if you want to stay selling on Amazon for a long period of time, white hat is the way to go. Amazon does not give a lot of second chances. Once you’re banned, you can be banned for life.
Robyn: The only way you can get their actual search terms is by using Amazon sponsored products. However, if you go to Reports, then you go to Sales Business Reports, there’s a report called Sales and Traffic by Child. When you get into that report, you can actually see how many page views versus sessions you had, how many orders you’ve had, and you can look at your unit section percentage. Depending on the niche that you’re in, there’s no target number. We want it, for sure, at least in the double digits. We like to see that it’s at least 20, 30 percent on most of our products. We know some people that have much higher units while some people have lower. It’s going to depend on the competitiveness of your niche. That can be how you can tell if your list is converting or just not getting the traffic it needs.
You can also see your Buy Box percentage in that report. The reason that’s important is you actually cannot run sponsored products unless you’re getting the Buy Box. If you have somebody who’s undercutting you on price, you might not get it, or let’s say you put the MSRP at $20 and you’re selling it for $40, Amazon could suppress the Buy Box. Nobody gets the Buy Boxes because it’s overpriced and we’re afraid it will be a bad experience for the customer.What are some ways you can compete with other people selling the same product? How do you stand out from multiple sellers for the products you’re offering?
Robyn: The biggest thing is to make sure your listing is optimized for the customer. Anybody listening to the show knows how important mobile is. There’s also a lot of desktop users. The biggest thing is to make sure your title is optimized for the user and follows style guidelines.
For photos, make sure they really demonstrate your product. You want to make sure they’re at least 1001 pixels on the shortest side so they’re optimized for mobile, and they’ll come out well for thumbnails on mobile.
Make sure that both the bullet points and the description are easy to read and benefit the customer. It used to be that we would just focus on the bullets because on the desktop version, the bullets are above the fold. However, on mobile, the description comes up before the bullets. It’s important that you really manage both.
On the back end, make sure you maximize all of the keywords. One of the things that makes Amazon different from other search engines is you don’t need to repeat any words that are in the title. You don’t need to put commas in, you don’t have to worry about order as much. You want to put it in an order that makes sense, but to do ‘white chocolate fudge’, it will pull up ‘chocolate white fudge’ as well. The look will slightly be different, but you don’t have to have ‘white chocolate fudge’ or ‘chocolate fudge white,’ even though that would be kind of a weird example. You don’t have to have every variation. You can map out 5,000 characters for each one of those. Really maximize that as much as you can.
There’s tools like merchant words, keyword inspectors, and reverse search. You can see somebody else’s ranking or get an idea for keywords that you haven’t thought of before. Merchant words will give you estimated search volumes so you can know which keywords you want to focus on and sometimes give you ideas for other ones. For keywords, it looks like there’s only space for five words, but on the seller central side, you can really put 5,000 characters, sometimes more. Keep going until you get that red alert that says you’ve passed the maximum number of characters. That’s really the best way to out-market.Where do you see Amazon going in 2023?
Robyn: One thing you want to watch is Amazon voice search. There’s a new badge that came out and people were wondering what it was. If you see that Amazon’s choice badge, you’re coming up as the voice search for results, for things like Echo. That’s going to be important. They are also working on trying to eliminate some of the bad actors that are on there. They’re going to really be focusing on counterfeit and fake reviews. They sent out warnings to many people on the platform. Take the time to learn Amazon right. Color within the lines and you will be a value seller for them, and you’re going to make a lot more money in the long run.To listen to this Marketing Nerds Podcast with Kelsey Jones and Robyn Johnson:
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Introduction to Business Forecasting
Business Forecasting and Business Forecasting Techniques – Business Forecasting Techniques operate in an ever-changing and rapidly evolving environment, as each business competes with another in the market. This dramatic change can even place this business from being a local entity onto the global map. But there’s one thing that keeps it ever so pumped and up-to-date. This one thing is proper and accurate information. From the vast information logs a company harbors, financial information reserves the top place when arranged in order of importance and value.
To know the future of a growing or sustained business, you need to carefully monitor and efficiently forecast financial information and money transactions, both incoming and outgoing, using business forecasting techniques. With leaner processes adorning the scene, machinery and equipment, purchases and sales, all seem to have a say in the organization’s revenue generated and return on investment (ROI).
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Whether it is a large multinational company or a small start-up business, business forecasting has proved to be an essential tool in determining where the organization is headed and what’s in store, and what needs to be taken care of in the finance department. To aid with the business forecasting of the company, the concept of cash flow has proved to be very beneficial with every implementation. So, in the article, we will delve a bit deeper into what cash flow is and how it makes such a difference in the corporate world.What does Business Need? Understanding Cash Flow
To understand business forecasts using cash flow, we will need to brush up on your understanding of the concept of cash flow and its statement.
As per a definition, cash flows can be termed as:
“The total net amount of money (cash or cash-equivalents) being transferred into and out of business, especially as affecting liquidity.”
It can also be understood as the difference between the available cash at the start of a financial accounting period to the end of that particular period. Within a business, cash may come in from various sources, such as sales, investments, loan proceeds, and the sale of different assets. In the same way, cash can go out to pay for the purchase of assets, direct expenses, and operating expenses.
A cash flow budget would be looking at the following figures:
Cost of goods and materials
A positive cash flow indicates that an organization’s liquid assets are considerably increasing, where it can go ahead and clear off debts, reinvest in the business it’s running, sort out all expenses, and return money from stakeholders. With this positive cash flow, it’s possible to even buffer the business from any future challenges that might come up.
A negative cash flow indicates that an organization’s liquid assets are considered on a decrease.
Cash flow is used to assess the actual quality of the organization’s income and determine its liquidity. This helps estimate whether the company can meet its long-term financial obligations.
A cash flow statement would mean simply considering all the changes in a balance sheet and income that affect the cash and cash equivalents. Once you have this financial statement, you will analyze an organization’s operating, financing, and investing activities.
With all these crests and troughs in the world of finances and cash flows, it becomes essential for businesses to ensure that they plan and anticipate cash flow conditions, taking appropriate steps towards neutralizing them. When it comes to dealing with finances, businesses are expected to do the following:
Business Forecasting Methods or Cash Flow Forecasting
I’ve numbered these steps as they need to be carried out in the sequence stated and not any way around. Establishing a business plan is highly essential for any business, small or large, to get through a year or a tenure of the next 5 years. Let’s look at these steps quickly before we latch onto an in-depth coverage of business forecasting Methods with cash flow.Business Plan
A business plan is essentially a written document stating the business. It covers and clears the objectives, strategies, sales, marketing, and financial forecasts. It says the target the business sets, the costs involved, the competition facing the business in the market, and the strengths and weaknesses. The business plan should feature a solid contingency plan that you can revive in case the original plan fails or faces difficulties.
The business plan, in summation, will cover up:
The customer need that you’re aiming at
How will the business benefit in terms of profit while meeting customer needsBusiness Forecasting Techniques Using Cash Flow
Cash flow business forecasting techniques are a vital way of helping you to manage your costs and indirectly collect one of the crucial elements of your business. With this technique using cash flows, you can use available information to predict how much money will come in or go out of your business at any time.
In its essence, cash flow business forecasting techniques are a cashbook that helps you project your business’ income and outgoings for a week, a month, or year. Business forecasting Methods can help organizations identify the instances when the company has extra cash or is low on cash. With this knowledge, strategists and managers can make informed decisions about what will prod the business toward profitable investments and gains.
Predicting a business’s income is tricky, and relying on assumptions can be quite detrimental. Still, in the case of business forecasting techniques, it is essential for a judgmental call to be taken as to how much the business is expecting to receive and what.
When putting forth a business plan including business forecasting techniques with cash flow, it is essential that you put forth the following three types of income forecasts to indicate that there can be a wide variation and there are scenarios that can be as wide apart as it is from a worst-case scenario and a best-case scenario:
Most Likely, or a realistic estimate
An existing business will find this exercise of business forecasting Methods easier to conduct as the business already has a performance threshold. On the other hand, a start-up needs good groundwork conducted, and an accountant or industry personnel will have to retrieve good benchmarking data.Creating a Cash Flow Forecast
For business forecasting techniques, a cash flow forecast can be easily broken down into 6 essential steps and carried out. These are as follows:1. Preparing the Sales Forecast
You will need to get up and running with this. Businesses already existing will need to look at the sales figures of the preceding year and punch in the numbers accordingly. You can use this method for the coming year by analyzing the market and how the demand is proceeding. Based on past trends, you can determine whether sales will increase, decrease, or remain the same.
New start-ups can look at a competition or consider all that can bring about cash outflows. This way, since you know your expenses, you can estimate how much money needs to be coming in. Thus, you can set sales targets and categorize and study them to avoid overly optimistic forecasts.2. Preparing detail sheets on any other estimated cash inflows
Cash inflows can come in all shapes and sizes, not necessarily through sales. Preparing a detail of these income sources can benefit the organization and the business forecasting Methods based on cash flows. These can include the following sources:
Sale of an asset, loans being paid back
Royalties, license fees
More investment in the business3. Preparing detail sheets on all estimated expenses or outflows
Providing cash outflow numbers comes in as important as enlisting the cash inflows. Enrolling these pending costs in your business forecasting techniques requires calculating how much it would take to make goods available to develop or create a product.
Once the sales are done and the actual figures are in as the year progresses, you can adjust the sales figures accordingly by conducting this step. Depending on the kind of business you’re running, you can spend expenses on various operations and administration purposes. There are the following modes of expenses that can trigger a cash outflow from a business:
Payment to owners/rent
Buying new assets4. Preparing profit and loss forecast
A profit and loss forecast will allow you to combine the business’ income and costs to give you a wholesome view of your projected profit, which you expect in the future.
The benefits of a profit and loss forecast are as follows:
You will be mindful of the tax you’re liable for once you know how much profit your business will make.
If you change the sales, the costs will be affected. In this case, you will have a great idea if you can sustain your business in the face of changes.
You can estimate the business forecasting Methods if you spend more as per the forecasts and take corrective, preventive actions in the nick of time.
Every overhead that you pay for needs to be accounted for. Whether it’s the printed paper you use, the landline phone bills, the depreciation of your assets, the wages you pay your employees, the professional services you avail of, software package costs, or even your company’s logistics. These little things will benefit you in your business forecasting Methods and determination of your profits and losses during the financial year.5. Business forecasting Techniques using cash flow by collating the data
With your business forecasting techniques period all slated and decided, it now is all about the timings and cash flow. A business would need an opening bank balance- actual cash. You would make all the additions and subtractions to this amount as per the business forecasting techniques activity.
The number at the end of each projected month would be the opening balance of the following month.6. Reviewing estimated cash flow to actuals
You must conduct this step to gauge how much your business forecasting cut. This is the most crucial step. With each period that passes, compare the forecast with the actuals you receive monthly. This way, you can bridge the gap in the future years and ensure to tap on some good analysis.Recommended Articles
This is a guide to Business Forecasting. Here we have discussed the basic concept, business forecasting techniques using cash flow, and creating cashflow forecasting. You may look at the following articles to learn more –
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