CU-MBA-SEM-IV-Entrepreneurship Development

Note: While email is an integral part of the support for customers, the business would still need to be available across multiple channels. Having an integrated Omni channel communication platform enhances your customers’ experiences. 2. Live chat Compared to other communication channels, live chat support generates higher customer satisfaction levels, and 79% of customer prefer online chat support because of the immediacy it provides. Businesses using live chat for customer service can understand customer needs and align their services to meet their expectations. Real time interaction with the customers not only cultivates brand loyalty but also increases customer lifetime value (CLTV). By implementing a live chat tool, you understand customer pain points and address them effectively. Unlike other customer service channels, web chat is a proactive way of supporting customers by avoiding a series of back & forth conversations. It also offers the lowest queue time unlike reactive communication channels in the business. How can you use live chat as a part of your customer experience strategy?  Identify the places where your customers interact the most and integrate live chat support for those specific pages. 101 CU IDOL SELF LEARNING MATERIAL (SLM)

 Allow your customers to reach out to you even if you are not online. Provide offline forms to raise the query so that agents can follow up once they are online.  Prepare canned responses to improve the resolution by delivering faster and accurate answers.  Collecting feedback after each conversation helps to understand the satisfaction b  Setup routing rules to make sure all conversations are routed to the right team to improve response time. 3. Chatbots Businesses are greatly relying on AI for automating business functions across customer service, sales, or marketing verticals. 50% of consumers no longer care if they are dealing with humans or AI-enabled assistants. It allows businesses to provide better prompt assistance at various touch points of the customer journey. Amtrak’s Julie is a good example of a customer service chatbot. Julie promptly responds to the queries from a comprehensive knowledge base on travel information and policies. The bot has answered approximately 5,000,000 support queries in a year. Amtrak witnesses 25% of a significant increase in bookings and 30% more revenue with the help of Julie. Leveraging a chatbot along with other communication channels in business can help to deliver instant assistance to the FAQs requested by customers. Real time customer 102 CU IDOL SELF LEARNING MATERIAL (SLM)

engagement increases their satisfaction rate. Thus, a chatbot delivers a superior customer service experience. How can chatbots be used as an effective customer service channel?  If your business receives repetitive queries, implementing chatbots can be a wise way to provide instant support without making customers wait.  Chatbots can be used as the first point of contact to reduce customer churn and make human handover for complex issues.  You can train your customer service chatbots to anticipate customer’s needs and deliver relevant answers. The zero wait time increases the customer satisfaction level.  With customer support chatbots, you can reduce the number of support tickets raised by addressing simple queries instantly. 4. Video Chat Visual engagement is a widely adopted trend by businesses to raise their customer service standards and improve customer experience. Using video chat as a customer service channel makes conversations interactive, personalized, and delivers a better experience. Live video chat resulting in 73% satisfaction levels - the highest for any customer service channel as compared with 61% for email and 44% for phone, it’s likely to be the service that consumers are drawn to the most. This is how video chat can be an effective communication channel for businesses.  Live video chat helps to identify issues faster in the first go and provides effective responses.  Using video chat for customer support helps to identify the exact problem in real time and deliver immediate solutions that reduce customer touch points and improves first contact resolution.  You can provide personalized conversations during the chat sessions that build customer trust.  Video chat along with live chat and co-browsing guides customers through tricky situations in real time, unlike reactive customer support channels. 5. Social media platforms The use of social media platforms plays a significant role in customer service. The mutual benefits of easy brand accessibility via Twitter, Facebook Messenger, YouTube, and others 103 CU IDOL SELF LEARNING MATERIAL (SLM)

allow easy customer contact & engaging social interaction, providing brand building and wide-scale contact via multiple channels. The use of social networking sites allows you to reach a much wider group of customers than using traditional communication methods.67% of consumers have engaged a brand’s social media channels for their customer service needs as they get prompt responses to their queries or complaints. Facebook Messengers is fast and efficient, which makes it a great tool for business/customer interactions and a valuable platform for customer care. KLM leverages Messenger effectively for customer interactions. The airline created a multilingual plugin that allows its audience to use Messenger to receive travel information, booking confirmation, boarding passes, and more. How can social platforms be used as a communication channel in the business?  Be prompt with your responses – Integrating social media into your Omni channel support strategy helps to deliver instant support that delights the customers.  Follow social media listening – It helps to understand why, how, and where the conversations are happening. Also, what customers think when they mention your brand?  Keep your tone conversational – Training and knowledge about customer service etiquette can help to start conversations in the right direction. 6. Messaging apps Over 2 billion active users a month on WhatsApp and Facebook Messenger have shown that today’s consumers prefer a messaging interface to other customer service channels. Based on the demography, messaging apps can be popular such as WhatsApp, Viber, Telegram, and Twitter. These apps have now become an integral part of customer service. Customers worldwide overwhelmingly trust businesses more when they can message them.  Messaging apps are great for providing insights about how many of the messages get delivered and read.  They can also be incredibly powerful for broadcasting messages about offers and promotions. 104 CU IDOL SELF LEARNING MATERIAL (SLM)

WhatsApp has become one of the popular channels for customer service globally. Its Business app enables businesses to interact with customers easily by using tools to automate, sort, and quickly respond to messages. Bupa Australia has launched WhatsApp as a customer support channel. There are two ways to start the chat. During a call, you may be directed to WhatsApp by an automated voice. Or you can start by using a WhatsApp chat link on their website. 7. Phone Support Though phone-based support is a traditional customer contact channel, it is one of the most conventional choices for customer service teams. It is an effective communication channel with proven success as because customers are familiar with the process, they’re a popular contact channel for companies to implement. Phone support provides the most significant human element into the support experience, as agents and customers are able to have a natural conversation. It becomes easier for the agent to read the emotions of the customer and reduce miscommunications. Less tech-savvy individuals may also opt to call a company representative to avoid the trouble of having to navigate through a website or customer portal online. Some tips for businesses that use the phone as the primary support channel.  Be sure to train agents with the right customer service etiquette to always keep a positive tone when conversing with customers over the phone to maximize the customer experience.  Agents can make the conversations personalized by using the customer’s name, as well as refraining from over-using scripts. 8. Social groups & online communities Social groups, online communities, and forums act as a great support channel to online businesses. It provides customers a go-to place to ask questions, help each other and learn. Your company can create a supportive environment that will complement your pre-existing teams, giving them much-needed relief and improving their insight into customer problems. LinkedIn Groups are a great way for bringing the customers together, especially if it is a business-to-business (B2B) company. It might be the best way to engage the audience. 105 CU IDOL SELF LEARNING MATERIAL (SLM)

How do online communities improve customer service?  Groups or communities allow customers to make the first search attempt to check if anyone else has had a similar issue and reduce support tickets.  Customers can connect with each other, which creates loyalty and makes your online community just that—a community  Letting more people into the conversation opens your customers and company up to more interesting, creative solutions that end up benefiting everyone in the long run. 9. Knowledge base According to Forrester reports, 67% of customers regularly use self-service support online. Without replacing the personal support, a knowledge base is an excellent way to extend your customer service channels. An online knowledge base can be a vital self-service tool for helping customers to help themselves. Identifying the frequently asked questions and adding answers, a knowledge base empowers businesses to deliver 24X7 supports, even with a small team. Ride-sharing service Lyft published a “Tips” section aimed at helping their drivers create better customer experiences. It’s separate from their customer and driver help center, which they link to prominently at the top of the knowledge base. How does knowledge base help as a part of customer contact channels?  Beyond turning your help desk into an around-the-clock operation, self-serve support can impact cost savings and help you to stretch your support resources further.  Including answers to FAQs, how-to guides, and troubleshooting instructions, the main purpose is to make it easy for people to find solutions independently. 10. Forms Forms are online documents that are widely used communication channels in businesses. The visitors can add their information, request services or products, and add any details or specifications that the business needs to provide the service or product with the help of forms. The objective of providing a form is to establish a customer service channel to allow visitors to reach out to the business easily. Forms are used to create a closer relationship between company and customer. The forms helps to collect data and to guarantee the request will be sent straight to the business. The use cases of using web forms are: 106 CU IDOL SELF LEARNING MATERIAL (SLM)

 Collect basic customer details  Start a conversation with prospects  Allow the visitor to make comments  Gain feedback from your offers How to choose the customer support channels for your business? Which customer service channels should be your primary focus, and which can you leave as a future option? It is a crucial decision and ultimately comes down to three factors:  The support team, their capacity, skills, and interests.  Identify your target customers, their expectations, needs, and context.  The industry trends and norms you need to be aware of. There are many customer contact channels available but not all of them are relevant for your business. Every business has different target customers and based on that the communication channels vary. Best practices to manage Omni channel customer support  Understand your customer expectations to align your services to their needs across their entire journey and deliver a personalized service experience.  Collect customer feedback to know whether your customers are satisfied or not. It helps to improve your support process and exceed customer expectations.  Ensure that your website engagement strategies focus on mobile optimization while designing the website.  Provide self-service options for your customers as a part of customer service channels.  Engage your customers in real time with visual engagement tools and deliver a virtual in-person experience.  Promptly respond to social media comments & posts. By analyzing comments you can deliver the right solution that will keep your customer churn rates low and boost brand awareness. Futuristic scope of customer service channels Going forward, having Omni channel customer service channel support is highly critical. To deliver the best online customer experience and customer service, you need to sync up the different communication channels so customers can hop from one to the other when needed. 107 CU IDOL SELF LEARNING MATERIAL (SLM)

Identifying your customer expectations and preferences can give you insights on the right customer contact channels to be used for communicating with customers. When done right, it delivers an omni channel customer experience and brings significant benefits to your business. 4.4 SUMMARY  A business plan is a written document describing a company's core business activities, objectives, and how it plans to achieve its goals.  Startup companies use business plans to get off the ground and attract outside investors.  Businesses may come up with a lengthier traditional business plan or a shorter lean start up business plan.  Good business plans should include an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget 4.5 KEYWORDS  Relevancy - Explain how the product solves customers’ problems or improves their situation  Quantified value - Deliver specific benefits.  Differentiation. Tell the ideal customer why they should buy from you and not from the competition.  Visual Element - a video, info graphic, or image may convey your value proposition better than words alone can. Enhance your message with these visual elements to capture your audience’s attention.  Customer Segmentation - Also known as market segmentation, customer segmentation is the division of potential customers in a given market into discrete groups. That division is based on customers having similar:  Value-based segmentation - differentiates customers by their economic value, grouping customers with the same value level into individual segments that can be distinctly targeted.  Needs-based segmentation - It is based on differentiated, validated drivers (needs) that customers express for a specific product or service being offered. The needs are 108 CU IDOL SELF LEARNING MATERIAL (SLM)

discovered and verified through primary market research, and segments are demarcated based on those different needs rather than characteristics such as industry or company size. 4.6 LEARNING ACTIVITY 1. Define Value Proposition ___________________________________________________________________________ ___________________________________________________________________________ 2. State the analysis Customer Segment Channels ___________________________________________________________________________ ___________________________________________________________________________ 4.7 UNIT END QUESTIONS A. Descriptive Questions 109 Short Questions 1. Define Value based segmentation 2. Explain what is need based segmentation? 3. Describe briefly about benefits of value proposition 4. What do you understand segmentation? 5. How to segment consumers in the market Long Questions 1. What is a Value proposition? Explain it with examples. 2. Describe the necessity of value proposition 3. What are the components of Segmentation 4. Describe the benefits of consumer segment channels 5. Explain the structure of consumer segmenting channel B. Multiple Choice Questions 1. Everything we do has a single focus: To deliver... a. Unique Expertise and Perspectives b. Robust Risk Management c. Better Client Outcomes CU IDOL SELF LEARNING MATERIAL (SLM)

d. Investment Excellence and Rigor 2. \"Building long-term, mutually beneficial client relationships with aligned interests.” is a proof point for which core strength? a. Collaborative Approach b. Robust Risk Management c. Investment Excellence and Rigor d. Global Scale and Local Insights 3. Entrepreneurs change the world by Tour plan a. Sharing their ideas b. Thinking of new things. c. Implementing new and big ideas. d. Learning new technologies. 4. Who is known as the father of Travel Agency business? a. Cox and Kings b. Jeena & Co. c. Lee and Muirhead d. Thomas Cook 5. What do Customer Pains mean? Escorted tour a. The physical pains felt by customers due to various challenges in life. b. Thinking of new things. c. Emotional negativity arising in the customer because he has to pay for the services. d. Problems which annoy a customer before, during, or after trying to get a job done. Answers 1-c, 2-a, 3-c, 4-a, 5-d 110 CU IDOL SELF LEARNING MATERIAL (SLM)

4.8 REFERENCES References book  ANDREWS, K. R. (1971). The Concept of Corporate Strategy, USA: Irwin/McGraw Hill.BARNEY, J. B. & HESTERLY, W. S. (2006). Strategic Management and Competitive Advantage, USA: Prentice Hall.  BRAD, S. & BRAD, E. (2015). “Enhancing SWOT Analysis with TRIZ-Based Tools to Integrate Systematic Innovation in Early  Task Design”, World Conference: TRIZ FUTURE; TF 2011-2014, Romania, Procedia Engineering 131, pp. 616-625.  CHANDLER, A. (1962). Strategy and Structure: Chapters in the History of American Industrial Enterprise, Cambridge: MIT Press.  CHERMACK, T. J. & KASSHANNA, B. K. (2007). “The use and misuse of SWOT Analysis and implications for HRD professionals”, Human Resource o Development, 10 (4), pp. 383-399.  COJANU, V. & BILBOR, M. R. (2007). “The SWOT Technique in Action: Strategic Analysis of Development in Romania”, Review of Management and Economical Engineering, 6 (5), pp. 162-167.  DAVID, F. R. (2003). Strategic Management-Concepts and Cases, (9th Edition), USA: Pearson Education. Textbook references  Mamoria, C.B. (2002). Personnel Management. Mumbai: Himalaya Publishing House.  Dipak Kumar Bhattacharyya, Human Resource Management, Excel Books.  French, W.L. (1990), Human Resource Management, 4th ed., Houghton Miffin, Boston.  H.J. Bernardin, Human Resource Management, Tata McGraw Hill, New Delhi, 2004. Website  http://www.slideshare.net/sreenath.s/evolution-of-hrm  www.articlesbase.com/training-articles/evolution-of-human-resource- management- 1294285.html  http://www.oppapers.com/subjects/different-kinds-of-approaches-to-hrm- page1.html 111 CU IDOL SELF LEARNING MATERIAL (SLM)

112 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 5: BUSINESS PLAN DEVELOPMENT STRUCTURE 5.0. Learning Objectives 5.1. Introduction 5.2. Definition of Customer Relation 5.3. Revenue Streams 5.4. Key Resources 5.5. Summary 5.6. Keywords 5.7. Learning Activity 5.8. Unit End Questions 5.9. References 5.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Describe nature of Customer Relation  Identify scope of Revenue Streams  State the need and importance of Key Resources  State the need and importance of Customer Relation 5.1 INTRODUCTION Developing an amazing product is one of the hardest challenges that a company can overcome — but it's not the only factor that will determine the success of a business. Today's consumers have more industry influence than they've ever had in the past, allowing them to focus on more than just the product that you're selling them. Today consumers are interested in what the companies are selling to them, how they are selling it, and what happens after a sol is initiated. The shift has placed pressure on companies to invest in their customer service teams and meet rising customer demands. In fact, a 2018 study showed that 59% of consumers have higher expectations for customer service than they did in 2017. Businesses are now facing the 113 CU IDOL SELF LEARNING MATERIAL (SLM)

challenge of creating an excellent customer experience that's consistent across every interaction. To achieve this, many companies are now focusing on how they manage their customer relationships. Building strong customer relations is a great way to develop customer loyalty and retain valuable, long-term customers. If you're looking to improve customer relationships at your company, it helps to understand what successful customer relations look like and how you can create them with your clientele. 5.2 CUSTOMER RELATION Customer Relations Customer relations describes the ways that a company will engage with its customers to improve the customer experience. This includes providing answers to short-term roadblocks as well as proactively creating long-term solutions that are geared towards customer success. Customer relations aim to create a mutually beneficial relationship with the customer that extends beyond the initial purchase. Customer relations are present in all aspects of a business, but it's most prevalent in the customer service department. Customer service teams, customer support, customer success, and product development all play important roles in building a healthy customer relationship. Customer relations also extend to marketing and sales teams as well since these departments have a significant influence over the company's interactions with the customer. What functions do customer relations include? Customer relations include both the reactive and proactive functions performed by your customer service teams. Reactive functions are the efforts made by your team to solve issues that are reported by customers. This includes tasks like responding to customer complaints and solving problems with the support team. Being able to solve unexpected customer roadblocks is essential for brands that are looking to build strong customer relationships. Proactive functions are the measures taken to ensure a long-term relationship with customers. These efforts are aimed towards fostering customer success by consistently satisfying evolving customer needs. Customer success teams do this by providing information about products and updates as well as by promoting discounts and exclusive offers. This type of 114 CU IDOL SELF LEARNING MATERIAL (SLM)

long-term customer relationship management helps companies create lasting impressions on customers who eventually become loyal to the brand. Customer Service vs. Customer Relations Customer service and Customer relations are two very similar concepts with one distinct difference. Customer service is what your company provides to ensure customer success. It is an inbound function that's now expected by customers at the first point of interaction with your business. Companies can provide proactive customer service features, but most customer service functions are delivered in response to customer action. Customer relations differ because it consists of both the inbound and outbound measures taken by your company. It considers your organization's ability to react to present issues as well as your approach to bettering future experiences. Customer relations focus on the proactive steps you're taking to engage customers and improve the customer experience. Customer relations encompass all of the important functions that customer service performs, but also includes the efforts made before and after customer interactions. While responding to immediate customer needs is a great way to provide excellent customer service, searching for solutions to future roadblocks is how your company can build positive customer relations. What are positive customer relations? Positive customer relations are long-term, mutually beneficial relationships between a customer and a company. These relationships are built by creating a stable environment of trust that results in the continued growth of both the customer and the organization. Positive customer relations include consistent quality of what the business is offering as well as how they are offering it the customer. Benefits of Positive Customer Relations Positive customer relations can result in an array of benefits for the company including more potential leads and higher customer retention rates. To narrow it down, here are the top three benefits that positive customer relations can provide for your company. Customer Retention 115 CU IDOL SELF LEARNING MATERIAL (SLM)

Companies that do a better job of managing customer relations are more likely to see higher customer retention rates. In fact, studies show that 61% of customers stop buying from a company if they have a poor customer experience. Customers know when the company is being genuine and are willing to overlook your mistakes so long as you demonstrate a dedication to their success. That type of transparency is essential when reducing churn as well as when the company is building a positive customer relationship. It can also be financially beneficial too, as studies show increasing customer retention rates by just 5% can increase your profits by 25% to 95%. Customer Loyalty When the company has a good history with your customers, it makes it more difficult for the competitors to lure people away from the company’s brand. Customer’s loyalty is highly valuable for businesses as repeat customers are more likely to buy from the same company. Building positive customer relations drives customer loyalty because it creates an intangible incentive for the customer to return to the same business. Think jar research even shows that 55% of consumers will pay more money for a product or service if it's a guaranteed good experience. While it may cost more for companies to invest in building positive customer relations, the payoff in customer loyalty can be instrumental for generating consistent revenue over time. Customer Satisfaction Often times it can be hard to tell whether the customers are truly happy with the business or not. In fact, 91% unhappy customers who don't complain simply don't return to a company for another purchase. Having strong customer relations can act as your insurance policy for preventing these unidentified customers from churning without warning. Positive customer relations give companies more insight into their customer's problems because it creates an open channel of communication for relaying customer feedback. This leads to better individual interactions with customers which builds up trust over time and influences their buying decisions. Studies have even found that consumers believe that a good experience with a company has more influence over their purchase decision than advertising does. So while the commercial of the cute dog may get a smile or two from your target 116 CU IDOL SELF LEARNING MATERIAL (SLM)

audience, customer satisfaction actually is the result of your brand creating memorable customer experiences. Every company should aim at building positive customer relations but hitting your target can be a lot easier said than done. It takes a complete effort from the entire company to build a long-lasting and trustworthy customer relationship. Building Positive Customer Relationships Customer relations consider all of customer interactions, there are a lot of factors that can influence a customer relationship. When building positive customer relations, organizations need to take a company-wide approach that's focused on promoting customer success. To do that, here are three key factors that any business should consider when pursuing positive customer relations. 1. Invest in employee training. A great customer experience comes not only from the product being sold but also from the employees who interact with the customer they must be highly skilled in their trade and motivated by quickly solving customer problems. Customer service training may include developing some of the \"soft\" skills such as improving active listening, developing a professional communication style, and how to solve problems efficiently in the organizational framework. While you might expect your reps to have these skills when you bring them on, continual training helps align the entire team to your organization's brand standards, policies, and procedures, resulting in a more consistent experience across the board. 2. Create a fulfilling workplace for the company’s customer service reps. Richard Branson of Virgin Airlines famously said, \"If you take care of your employees, they will take care of the clients.\" This seems intuitive: If a customer service rep is having a bad enough day that the customer perceives this, it can change the tone of the experience. Studies have also shown that happy workers are also 13% more productive, and in the service world, productive reps and quicker resolution times lead to higher rates of customer satisfaction. 3. Improve first call resolution rate. 117 CU IDOL SELF LEARNING MATERIAL (SLM)

86% of customers will pay more for a better experience, and great customer experiences are becoming the norm in today's marketplace. One of the metrics to look at when creating a frictionless service model is first-call resolution (FCR). FCR refers to the percentage of calls that get resolved with no follow-up or additional touch points needed. It's a critical metric that improves satisfaction (no one wants to call multiple times about one issue, and more calls equate to more frustration) and the team's internal efficiency. The more calls that are resolved completely, the less system is taxed by call volume. The company’s service and support teams should be equipped and enabled to handle the majority of issues that customers present. 4. Leverage software to increase efficiency. Speaking of enablement, companies faced with higher volumes of support and service cases should consider adopting customer service tools to help manage customer relations. Adding a help desk software can significantly help customer service, support, and success teams monitor interactions with customers over time? Tools like a customer relationship manager, or CRM, can help the team expand its bandwidth and create satisfying experiences for every person that interacts with the business. 5. Create opportunities for self-service. The company may not have the bandwidth to provide on-demand one-to-one support at all hours of the day. Ensure that they are providing the tools for the customers to get help when they need it, even without the help of a rep. Chat bots can help disseminate information and guide website visitors to the right areas on the company website. Knowledge bases can address some of the most common questions customers have. Even though some customers will prefer calling in, these simple steps can address the problems of the more self-sufficient customers and increase satisfaction by continuing to solve problems on demand. 6. Be accessible. To provide an excellent customer experience, the company’s service and support teams need to be readily available to help. A Microsoft survey revealed that over a third of consumers reported that their biggest complaint with a company is not being able to get help from an agent when needed to. 118 CU IDOL SELF LEARNING MATERIAL (SLM)

While it helps to have things like self-service help desks, your team still needs to be there when the customer has a problem. Technology can help ease some of the stress for the customer service team, but it can never recreate the memorable experience that a live rep can provide. This human interaction is crucial to creating a meaningful relationship between a company and its customers. 7. Show appreciation. Part of creating a great customer experience is providing small moments of delight where the company can exceed their expectations. This is particularly important as our culture is shifting away from brand loyalty and more toward loyalty to the brands that provide the best experience. Consider rewarding your best customers with a loyalty program or other small token of your appreciation. 8. Measure and improve customer satisfaction. Making the customers happy doesn't have to be an intangible effort. Ask for feedback from the companies customers and develop a system for measuring that feedback. This could be in the form of customer satisfaction surveys and NPS scores. It is also important to ensure that the company should be committed to acting on the feedback that is received. 9. Create a customer-first culture. Companies that want to create positive customer relations need to install a customer- centric culture into the organization. This culture has to be focused on customer success as well as creating long-term solutions for every customer. Companies can do this by creating a customer journey map that outlines the buyer's journey for a target consumer. Employees will be more motivated to help customers as they can see exactly where they play a role in the customer's success. It also helps to hire a customer relations executive who can lead the development of customer relationships. Benefits of Positive Customer Relations Here are 5 points that highlight the importance of effective consumer relations: 1. Create a Loyal Customer Base 119 CU IDOL SELF LEARNING MATERIAL (SLM)

No matter if it is a small cafe or run a multi-million dollar IT company, loyal customers drive the business forward. For example, remember how we as consumer visit the same cafe to get our favorite cup of coffee every time you are around that location? According to Microsoft, 96% of consumers across the globe consider customer service as an important factor in their choice of loyalty to a brand. Creating positive relationships with the customers inspires a type of loyalty that surpasses many common reasons why customers usually defect, including cost and convenience. While it may cost the business some amount to invest in building positive customer relations, but at the end of the day, the company are rewarded with a loyal customer base. 2. Enhance Customer Satisfaction Businesses that excel at customer relations create the right environment for customers to share their candid feedback. For such businesses, a strong feedback loop is central to their operations. But what’s the benefit of establishing a strong feedback culture? By capturing customer feedback from time to time, the company can assess the needs of the customers without any hurdle. The company can easily measure how satisfied they are with the existing services, employees, or their overall experience with the business. When customers engage with a brand that values their feedback and wants to improve their experience, customer satisfaction levels automatically go up. 3. Generate Repeat Business One of the main benefits of delightful customer experiences is that it persuades people to do business with your company more than once. According to a study by Gartner, when it comes to making a purchase, 64% of customers find customer experience more important than price. But what really leads to repeat purchases? The truth is that repeat sales are not accidental and happen when you make it easier for customers to buy from you and assist them across multiple touch points. Even small gestures such as a thank-you email can make customers feel valued regardless of the amount of their purchase. 4. Gain a Competitive Advantage 120 CU IDOL SELF LEARNING MATERIAL (SLM)

No matter what companies sell, there are good chances that they have business competitors in the market who share the same target audience as you do. So how the company stands apart from the crowd? Another importance of customer relationship is that it puts your brand right above your competitors. In a time where customers often complain about the feeling that they mean little to a business and are taken for granted, customer relations can set your business on the right foot. It can give your brand a unique identity and make your customers choose you over your rivals. 5. Boost Employee Morale The quality of service and care you provide to your customers has a direct impact on the kind of work environment you create for your company. When employees see that you respect your customers, are kind to them, and are willing to go the mile, they feel more connected to the values on which your company is founded. Therefore, building positive customer relations is a great way to boost employee morale and make them love what they do. Take a look at your strongest and long-lasting friendships. What made the relationship grow stronger as time passed? The right answer is always and always EFFORTS. Here are 10 customer relation strategies that will put your team into action: 1. Practice Consistent & Proactive Communication Consistent communication is one of the key strategies for effective consumer relations. The customers should never feel like your business has forgotten about them right after making a purchase. Rather than just informing customers about the products or services, it is important to have real one-to-one conversations with them. Ask the employees to reach out to customers and find out what they need, what their aspirations are, and what your business can do to create a long-term relationship with them. Now, proactive communication can help the business build trust and avoid future issues. To practice proactive communication, regularly update customers about the status of their issue, report any unusual activity in their account, share industry news and trends via newsletters, etc. 121 CU IDOL SELF LEARNING MATERIAL (SLM)

Example during any downtime or technical issues, Netflix proactively communicates with its subscribers over its Twitter account and saves the situation. 2. Be Willing to Exceed Expectations Customers today expect more than simply a product that works great or a service that helps them save money. Amidst such high expectations, the company needs to raise the bar on what the company offers and strive to exceed customer expectations. There are a lot of ways to exceed customer expectations. For example, the company can deliver a product or service faster than anticipated. Simply tell the customer that they can expect their product within 7 days and try to deliver it well before that. 3. Create a World Class Customer Service Model If there’s one thing that frustrates the customers, it is following up with multiple customer service agents, constantly repeating the nature of the issue or complaint, and still not getting a clear and concrete solution. This is precisely the reason why you should improve your customer service. 5.3 REVENUE STREAMS What are Revenue Streams?  Revenue streams are the various sources from which a business earns money from the sale of goods or the provision of services.  The types of revenue that a business records on its accounts depend on the types of activities carried out by the business.  The revenue accounts of retail businesses are more diverse, as compared to businesses that provide services. 122 CU IDOL SELF LEARNING MATERIAL (SLM)

Types of Revenues To classify revenues at a high level, there are operating revenues and non-operating revenues. Operating revenues describe the amount earned from the company’s core business operations. Sales of goods or services are examples of operating revenues. Non-operating revenues refer to the money earned from a business’s side activities. Examples include interest revenue and dividend revenue. The following are common revenue accounts: 1. Revenue from goods sales or service fees: This is the core operating revenue account for most businesses, and it is usually given a specific name, such as sales revenue or service revenue. 2. Interest revenue: This account records the interest earned on investments such as debt securities. This is usually non-operating revenue. 3. Rent revenue: This account records the amount earned from renting out buildings or equipment, and is considered non-operating revenue. 4. Dividend revenue: The amount of dividends earned from holding stocks of other companies. This is also non-operating revenue. Why understanding revenue streams matters? 1. Revenue is a Key Performance Indicator (KPI) for all businesses A Key Performance Indicator (KPI) is a measure that aligns to the overall business strategy. It is also observed that financial KPI’s link to revenue and profits but can also involve further measures such as cash flow and liquidity. Whether it is a startup or large corporation revenue is a key measure for all stakeholders. 2. Performance prediction differs between different revenue streams The organisation always tries to predict is how much sales will be generated in the future. An investor will want to understand this because they have a vested interest in the future of the company. Shareholders will want to know or understand what a business is forecasting to understand its overall health. 123 CU IDOL SELF LEARNING MATERIAL (SLM)

Recurring revenue is the most predictable income because the cash inflow remains consistent with a stable customer base. In contrast, transaction-based and service revenues tend to fluctuate with customer demand and often are also affected by seasonality. 3. Different forecasting models are needed for different revenue models Depending on the type of revenue models a company employs, a financial analyst develops different forecasting models and carries out different procedures to obtain necessary information when performing financial forecasting. For companies with a recurring revenue stream, a forecast model should have a uniform structure and a similar pattern in revenue predictions. Examples of Revenue Streams Revenue streams categorize the earnings a business generates from certain pricing mechanisms and channels. To describe it simply, a revenue stream can take the form of one of these revenue models: a. Transaction-based revenue: Proceeds from sales of goods that are usually one-time customer payments. b. Service revenue: Revenues are generated by providing service to customers and are calculated based on time. For example, the number of hours of consulting services provided. c. Project revenue: Revenues earned through one-time projects with existing or new customers. d. Recurring revenue: Earnings from on-going payments for continuing services or after-sale services to customers. The recurring revenue model is the model most commonly used by businesses because it is predictable and it assures the company’s source of revenue as on-going. Possible recurring revenue streams include: 124  Subscription fees (e.g., monthly fees for Netflix)  Renting, leasing, or lending assets  Licensing content to third parties  Brokerage fees  Advertising fees CU IDOL SELF LEARNING MATERIAL (SLM)

Examples of revenue streams i. Advertising Advertising involves being paid to communicate to an audience about a product or service. ii. Agents and Brokers Agents and brokers act as intermediaries and take a percentage fee for their services. iii. Asset Sale An asset sale is usually a one-off transaction involving an asset owned by either a person or a company. iv. Business Services Business services can have a variety of revenue types depending on the type of service. As an example, a website built for a business can involve a transaction initially but then may move to a subscription for maintenance. v. Club Goods Cinemas and theme parks are examples of Club goods and involve a fee for entrance. vi. Consulting Consulting companies such as McKinsey, PWC, Deloitte and Bain work on both a project and retainer basis. The retainer can be thought of as a subscription for a set number of hours and level of service. Projects are normally defined in terms of a start date and end date with a set outcome. vii. Content Subscriptions Digital technologies disrupted and transformed the media industry. Newspapers used to rely on a regular set of customers buying a physical copy of their entire output. Now they are often online and customers pay a subscription to access the full content. Several bloggers have also moved to this type of arrangement. viii. Consumer Services Consumer services range from restaurants to hairdressers and other forms of services aimed at consumers. ix. Education 125 CU IDOL SELF LEARNING MATERIAL (SLM)

Education consists of both services and products that educate either companies or individuals. Training can be either online, eLearning, face to face learning (e.g. as a workshop or in a classroom) or a blend of the two (blended learning). x. Experiences The experience economy has grown massively over the last 10 years. This includes real- world experiences such as travel, war games, parachuting, paragliding and many more. xi. Licensing Intellectual Property can be licensed to create a recurring revenue stream. xii. Media Sales of media are a common revenue stream for businesses such as production companies that make movies, documentaries, TV shows. xiii. Metered Services Many services are now being metered such as electricity, gas and water. A business will then gain revenue by charging for use or consumption. xiv. Products Products have been around for aeons and represent one of the oldest and more traditional revenue streams. They are mostly transactional involving a buyer and seller. xv. Product Subscriptions A Word Press plugin is a good example of a product (digital) that is purchased downloaded and installed. Most premium Word Press plugins then work on an annual subscription model. Other products offer different timeframes for the payment terms. xvi. Products As A Service Some products such as wearable devices often also come linked with services. These product-service systems are present in consumer goods and B2B product-service systems e.g. aircraft engines. xvii. Service Subscriptions Web hosting services are an example of how some companies create revenue streams. Different pricing points take into account a range of customer segments and how the different requirements for each e.g. web developer vs. agency vs. a small business. 126 CU IDOL SELF LEARNING MATERIAL (SLM)

5.4 KEY RESOURCES Key Resources is the building block describing the most important assets needed to make a business model work. Every business model requires them, and it is only through them that companies generate Value Propositions and Revenues. Key resources can be physical, financial, intellectual, or human. What are Key Resources? Key Resources are the main assets that your company needs to create the end product. How and what resources you need and how you source them can dramatically affect your overall business model. Key resources depend entirely on the type of business. As an example, while Apple designs their laptops they do not own the factories that make them. Apple has Key Partners that own factories and make their laptops, iPhones, iPads and Macs. Key resources can be thought of in a number of ways and I’ll break these down into common business language so you can think about them. What are the five key resources you need for your business? The main key resources for your business are:  Financial Resources  Physical resources.  Intellectual resources.  Human resources.  Digital resources Types of Resources 1. Financial Resources Probably the most important resource you need is money. Another term for money is capital. When you start out you need to buy things, even simple things that help you get your business off the ground: Branding – design, logo, graphics, business cards Office – rent, furniture, office equipment, storage 127 CU IDOL SELF LEARNING MATERIAL (SLM)

Web – website hosting, collaboration software, email hosting and other essential software and tools. Employees – money for salaries, tax, healthcare… Expenses – travel, meetings, food, hotels… Insurance – insure your business against normal risks. Accountant – these may be outsourced or internal. Project Management Tools – software for managing projects. Marketing – the marketing mix you use will depend on the type of business e.g. B2B vs B2C and market sector. chatbots web analytics SEO Webinars Content Marketing Raw materials/goods – these are the basic materials you need to buy to make your final value offering. Some examples: 2. Physical Resources Physical assets are tangible resources that a business uses to create its value proposition. These could include:  Equipment  Inventory  Buildings  Manufacturing plants  Distribution networks A car manufacturer company like BMW needs specialized production plants as a key resource. These production plants require land, equipment, buildings and other infrastructure. 3. Intellectual resources. 128 CU IDOL SELF LEARNING MATERIAL (SLM)

These are intangible resources like Intellectual Property (IP), brand, patents, copyrights and partnerships. For industries like consulting and advertising the intellectual property, and in fact, the people are key resources. At 5.30 pm all of the key resources for an advertising company leave the building. The people have the know-how, skills, customer knowledge and understanding of how the business works. Because the business doesn’t and can’t own these people, it has to have legal contracts in place to protect itself. Brands are an intangible key resource that has a monetary placed against them. Brands like Apple, Nike and Gillette have invested huge sums of money creating their brand and fostering how people perceive their brand. The name, logo and use of the brand, therefore, are a significant intangible resource that they can use when marketing new products. Software is a good example of a digital resource that often takes years to code and perfect. Companies like Adobe, Slack, Google and Microsoft have invested millions of dollars to create, maintain and support them. Many of these companies protect their intellectual property through patents. Increasingly companies realize the significance of intellectual resources as can be seen through the increase in patents filed in the United States. Companies understand that patents as a major driver of their business and growth and secure potential future revenue streams. 4. Human Resources Employees are the most valuable key resources of most companies. Not only do employees help run the business, but they also interact with customers, help develop the business through innovating and hold the skills and knowledge that differentiates the business from another. For businesses that provide services, people are the most important resource. Examples of the importance of people as a resource can be seen across different industries:  Hospitality industries:  Food and beverages.  Travel and Tourism.  Lodging. 129 CU IDOL SELF LEARNING MATERIAL (SLM)

 Recreation.  Services:  Media  Healthcare  Finance  Banking  Investment  Insurance  Consulting  Design  Sales and Marketing  Research:  Scientific research  Engineering  Design  Medical What makes people so important in these industries is that they involve high-levels of customer interaction, information (often tailored to the customer), creativity and customization. How Key Resources Link To the Value Proposition The type and characteristics of a company’s key resources determine how well a company can fulfill its value proposition. For example in the case of an airline company, if the value proposition is their ease of travel, then providing an app will be a key part of the value proposition. The app could hold your booking, allow you to book your seat, receive notifications about changes to your flight, hold your e-ticket and allow you to easily communicate with a customer. 5.5 SUMMARY  Once all parts of the business plan have been written, the company will have a document that will enable them to analyze your business and determine which, if any, changes need to be made. 130 CU IDOL SELF LEARNING MATERIAL (SLM)

 Changes on paper take time and effort but are not as expensive as changing a business practice only to find that the chosen method is not viable.  For a proposed venture, if the written plan points to the business not being viable, large sums of money have not been invested and possibly lost. In short, challenges are better faced on paper than with investment capital.  A business plan is a \"road map\" that will guide the future of the business. The best business plan is a document in continual change, reacting to the influence of the outside world on the business.  Having the basis of a written plan will give you confidence to consider changes in the business to remain competitive. Once the plan is in place, the business will have a better chance of future success. 5.6 KEYWORD  Microfinance Robinson (2001) defines microfinance as ―small-scale financial services primarily credit and savings—provided to people who farm, fish or herd‖ and adds that it refers to all types of financial services provided to low-income households and enterprises.  Entrepreneurship - An entrepreneur is a person who has possession over a new enterprise or venture and assumes full accountability for the inherent risks and outcome. The term is a lone word from French and was first defined by Irish economist Richard Cantillon A female entrepreneur is sometimes known as entrepreneurs. However, Entrepreneur in English is a term applied to type of a personality who is willing to take upon herself or himself a new venture or enterprise and accepts full responsibility for outcome. (Veira, X. (2008).  USP - A “USP” is the “Unique Selling Proposition” of a company, product or service in other words, what makes it different from similar offerings. USPs are considered when a company is set up or a new product or service is launched, and they’re also at the forefront of marketers’ minds,  Thinking outside the box - A favourite of ‘quirky’ creative agencies, the phrase “thinking outside the box” means to think creatively, abandoning all preconceptions. 131 CU IDOL SELF LEARNING MATERIAL (SLM)

 Touch base - This is surely one of the most cringe-worthy pieces of office jargon, and it’s filtered its way through from the pitches of American baseball into the offices of the UK. All it means in the office environment is “to make contact”. You might hear “let’s touch base”, meaning “let’s talk”. 5.7 LEARNING ACTIVITY 1. Define Business Plan Development ___________________________________________________________________________ ___________________________________________________________________________ 2. State the principles of customer relation ___________________________________________________________________________ ___________________________________________________________________________ 5.8 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Elucidate functions of customer Relations 2. Identify and discuss best customer relations? 3. Elaborate about the nature of Business plan development. 4. What are the criteria that determine whether an organization’s should have positive customer relations 5. Identify the typical need of revenue streams Long Questions 1. What is a customer relationship? Suggest its benefits 2. Describe the need of building positive customer relations 3. What are the components of revenue streams? 4. Describe examples of key resources 5. Explain factors responsible for developing customer relations. B. Multiple Choice Questions 1. Which of the following is not one of the stages in the Consumer Buying Cycle? a. Awareness 132 CU IDOL SELF LEARNING MATERIAL (SLM)

b. Activate c. Consideration d. Purchase 2. The type of activities a company uses to establish connections with specific customer segments is called: a. The Marketing Mix b. The Buying Cycle c. Customer Relationships d. Financial Modeling 3. The price you pay to obtain a new customer is called: a. Cost of Goods Sold b. Customer Acquisition Cost c. Customer Awareness Cost d. Revenue 4. Sally sells lemonade at a lemonade stand, what type of revenue stream is she using? a. Brokerage Fee b. Asset Sale c. Subscription Fee d. Usage Fee 5. Netflix is successful by using which revenue stream? a. Asset Sale b. Advertising Fee c. Subscription Fee d. Usage Fee Answers 1-d, 2-c, 3-b. 4-b, 5-c 5.9 REFERENCES References book  Abrams, R. The Successful Business Plan: Secrets and Strategies (Successful Business Plan Secrets and Strategies). Palo Alto, Calif.: Planning Shop, 2014. 133 CU IDOL SELF LEARNING MATERIAL (SLM)

 Becker, J. C., L. F. Kime, J. K. Harper, and R. Pifer. Understanding Agricultural Liability. University Park: Penn State Extension, 2011.  Dethomas, A., and L. and S. Derammelaere. Writing a Convincing Business Plan (Barron's Business Library). Hauppauge, N.Y.: Barron's Educational Series. 2008.  Dunn, J., J. K. Harper, and L. F. Kime. Fruit and Vegetable Marketing for Small- scale and Part-time Growers. University Park: Penn State Extension, 2009.  Harper, J. K., S. Cornelisse, L. F. Kime, and J. Hyde. Budgeting for Agricultural Decision Making. University Park: Penn State Extension, 2013.  Kime, L. F., J. A. Adamik, E. E. Gantz, and J. K. Harper. Agricultural Business Insurance. University Park: Penn State Extension, 2004. Website  BizPlanit (Virtual Business Plan)  SCORE (Volunteer Business Assistance)  Small Business Administration 134 CU IDOL SELF LEARNING MATERIAL (SLM)

UNIT - 6: SOURCES FOR START UP STRUCTURE 6.0. Learning Objectives 6.1. Introduction 6.2. Definition and Modes of Finance at each Stage 6.3. Financial Analysis 6.4. Project Estimation Cost 6.5. Financial Institution Loans 6.6. Summary 6.7. Keywords 6.8. Learning Activity 6.9. Unit End Questions 6.10. References 6.0 LEARNING OBJECTIVES After studying this unit, you will be able to:  Describe nature of Start Up  Identify scope of Financial Analysis  State the need and importance of Project Estimation cost  State the need and importance of Financial Institution Loans 6.1 INTRODUCTION History of start-ups in India Before the recent hysteria of Start-ups, India was mostly popular as an IT outsourcing destination that provided cheap and easy labor to the global companies for carrying on various back-end jobs. Technology start-ups in India date back almost three decades. On compilation of the Industry’s major landmark, Microsoft Accelerator in India came up with four distinct phases of growth and maturity that have traversed so far: software services and global delivery model, the dotcom era, the rise of product start-ups and growth of start-up ecosystem. Some of the milestones include US-based Texas Instruments’ decision to start an R&D center in Bengaluru in 1985 which further served to be an incubator for many of the current entrepreneurs and the launch of the infamous accounting software Tally 135 CU IDOL SELF LEARNING MATERIAL (SLM)

in 1986. Aiming to foster entrepreneurship and promoting innovation by providing an ecosystem that is conducive for growth of Start-ups, with an object to facilitate India become a nation of job creators instead of being a nation of job seekers; the Indian Prime Minister launched the initiative formally on January 16, 2016 from Vigyan Bhawan, New Delhi. In modern entrepreneurship, “funding” is mentioned so often that it almost seems like a required step in the process. New companies, particularly companies that are developing brand-new products, often don’t have customers or revenues when they start. These start-ups need money for product development, and to support the company’s operations until revenues (sales) pay the bills. Often, the more innovative the product, the longer it will take to develop, or to reach a large market. So a new company needs money to develop and survive during this innovation start-up period. There is no set funding path for entrepreneurial start-ups. The path depends on two factors: What the start-up needs (funding requirements) and the potential return on investment.  Funding requirements of the start-up: May vary wildly, depending on the type of company, product, product development costs, and expected time until break-even  Funding sources: The preferred investment size, industry sector, expected ROI, and the total they have available 6.2 STAGES OF STARTUP AND AVAILABLE MODES OF FINANCE AT EACH STAGE From an investors point of view there are 6 phases of investment; Self-Funding or Bootstrapping, Friends and Family, Seed, Growth (also known as the ‘Early Stage’) and Expansion. 1. Self-funding/Bootstrapping Self-funding being the first phase of the entire investment process is the stage in which a founder invests his or her money to begin the start-up journey. A founder introduces the initial start-up investment from his own funds/savings before going to the next stage of investment. However, a high net worth individual can be expected to put in much more money. It also demonstrates additional commitment on the part of the entrepreneur to other outside investors (including Angel Investors) from whom the money can be raised at a later stage. Sometimes entrepreneurs also choose to provide funds via loans to their company. 136 CU IDOL SELF LEARNING MATERIAL (SLM)

This is a common practice, although most venture investors usually require that such debts are converted into equity during the entire investment process. 2. Friends and Family In the friends and family phase of investing, the founder reaches to people from friends and family and asks them to put a portion if not all of their life savings in the business idea. The founder needs to be very honest with them about the risks of losing all of their investments in case the start-up business stagnates, thereby failing, so that 3. Seed The seed stage of investing is the first level of raising capital outside of the most common reach of the Entrepreneur such as self-funding. Usually, this round is sourced from professional, experts or seed capital investors such as Angel Investors can either individually, or in an angel group comprising small individual angel investors. Since Angel Investors in most cases having their own businesses have experience, being a founder they can provide more than just capital. It is their knowledge, experience and expertise of the start-up ecosystem prevailing in an economy that might provide useful insights to the Entrepreneur. Usually, the three most common traits of an Angel Investor include Wisdom, Wealth, and willingness to Work. These Angel Investors in India invest solely into an entrepreneur with an idea and they usually do not encumber the entrepreneur with any corporate governance responsibilities. 4. Growth/Early Stage Early Stage Investing is the first round into venture capital. It is often used to scale the company’s business model & often comes from larger institutional funds. Many of the famous venture funds are the commonly known early- stage investors in India. The major advantage of having a conventional venture fund as an investor is that they typically have sufficient funds for investment and therefore can provide growth capital in the future, leading to “Series A” financing rounds and also actively participating in “Series B” financing and sometimes beyond that. Moreover, VCs invest money according to their fund size. An entrepreneur looking to raise INR 5 – 10 Crores could approach early stage Venture Capitalists also known as Micro VCs. The benefit of choosing a Venture Capitalist that can participate in follow-on investment rounds is that it is not required of the entrepreneur to start looking for an investor once the initial money invested is over. Depending upon the size of investment and the stage at which they enter in a start-up, Venture Capitalist expects returns as low as 2 times up to a maximum 10 times cash on cash basis. 137 CU IDOL SELF LEARNING MATERIAL (SLM)

5. Expansion The expansion stage is where the start-up business is growing month over month at a good pace. Business valuation varies wildly in this phase and has a great scope for heavy negotiations. One common thing is that the founder will own a microscopic amount of the company started by him in comparison to the stake owned by him at the Self-Funding stage. In most cases, his share would be 10% or less but a very high valuation. If the founder believes and hopes to have a real chance of the company becoming a unicorn (a company valued over $1B) in the future with an excellent chance of going public, then it is a common practise to sell the business at this point or very soon after that, in order to be in a win-win situation for all. 6.3 FINANCIAL ANALYSIS Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. ... A financial analyst will thoroughly examine a company's financial statements—the income statement, balance sheet, and cash flow statement. Financial analysis involves using financial data to assess a company’s performance and make recommendations about how it can improve going forward. Financial Analysts primarily carry out their work in Excel, using a spread sheet to analyze historical data and make projections of how they think the company will perform in the future. This guide will cover the most common types of financial analysis performed by professionals. Learn more in CFI’s Financial Analysis Fundamentals Course. Types of Financial Analysis The most common types of financial analysis are: 1. Vertical 2. Horizontal 3. Leverage 4. Growth 5. Profitability 6. Liquidity 7. Efficiency 8. Cash Flow 9. Rates of Return 10. Valuation 138 CU IDOL SELF LEARNING MATERIAL (SLM)

11. Scenario & Sensitivity 12. Variance 1. Vertical Analysis This type of financial analysis involves looking at various components of the income statement and dividing them by revenue to express them as a percentage. For this exercise to be most effective, the results should be benchmarked against other companies in the same industry to see how well the company is performing. This process is also sometimes called a common-sized income statement, as it allows an analyst to compare companies of different sizes by evaluating their margins instead of their dollars. 2. Horizontal Analysis Horizontal analysis involves taking several years of financial data and comparing them to each other to determine a growth rate. This will help an analyst determine if a company is growing or declining, and identify important trends. When building financial models, there will typically be at least three years of historical financial information and five years of forecasted information. This provides 8+ years of data to perform a meaningful trend analysis, which can be benchmarked against other companies in the same industry. 3. Leverage Analysis Leverage ratios are one of the most common methods analysts use to evaluate company performance. A single financial metric, like total debt, may not be that insightful on its own, so it’s helpful to compare it to a company’s total equity to get a full picture of the capital structure. The result is the debt/equity ratio. Common examples of ratios include: a. Debt Equity b. Debt/EBITDA 1. Growth Rates Analyzing historical growth rates and projecting future ones are a big part of any financial analyst’s job. Common examples of analyzing growth include: 139 CU IDOL SELF LEARNING MATERIAL (SLM)

2. Profitability Analysis Profitability is a type of income statement analysis where an analyst assesses how attractive the economics of a business are. Common examples of profitability measures include: 3. Liquidity Analysis This is a type of financial analysis that focuses on the balance sheet, particularly, a company’s ability to meet short-term obligations (those due in less than a year). Common examples of liquidity analysis include: a. Current Ratio b. Cash Ratio c. Net Working Capital 4. Efficiency Analysis Efficiency ratios are an essential part of any robust financial analysis. These ratios look at how well a company manages its assets and uses them to generate revenue and cash flow. Common efficiency ratios include: a. Asset turnover ratio b. Fixed Asset turnover ratio c. Cash conversion ratio d. Inventory turnover ratio 5. Cash Flow As they say in finance, cash is king, and, thus, a big emphasis is placed on a company’s ability to generate cash flow. Analysts across a wide range of finance careers spend a great deal of time looking at companies’ cash flow profiles. The Statement of Cash Flows is a great place to get started, including looking at each of the three main sections: operating activities, investing activities, and financing activities. 6. Rates of Return 140 CU IDOL SELF LEARNING MATERIAL (SLM)

At the end of the day, investors, lenders, and finance professionals, in general, are focused on what type of risk-adjusted rate of return they can earn on their money. As such, assessing rates of return on investment (ROI) is critical in the industry. 7. Valuation Analysis The process of estimating what a business is worth is a major component of financial analysis, and professionals in the industry spend a great deal of time building financial models in Excel. The value of a business can be assessed in many different ways, and analysts need to use a combination of methods to arrive at a reasonable estimation. 8. Scenario & Sensitivity Analysis Another component of financial modeling and valuation is performing scenario and sensitivity analysis as a way of measuring risk. Since the task of building a model to value a company is an attempt to predict the future, it is inherently very uncertain. Building scenarios and performing sensitivity analysis can help determine what the worst-case or best-case future for a company could look like. Managers of businesses working in financial planning and analysis (FP&A) will often prepare these scenarios to help a company prepare its budgets and forecasts. Investment analysts will look at how sensitive the value of a company is as changes in assumptions flow through the model using Goal Seek and Data Tables. 9. Variance Analysis Variance analysis is the process of comparing actual results to a budget or forecast. It is a very important part of the internal planning and budgeting process at an operating company, particularly for professionals working in the accounting and finance departments. The process typically involves looking at whether a variance was favorable or unfavorable and then breaking it down to determine what the root cause of it was. For example, a company had a budget of $2.5 million of revenue and had actual results of $2.6 million. This results in a $0.1 million favorable variance, which was due to higher than expected volumes (as opposed to higher prices). 141 CU IDOL SELF LEARNING MATERIAL (SLM)

6.4 PROJECT ESTIMATION COST Project Cost Estimation is defined as the process of approximating the total expenditure of the project. The accuracy of the cost estimation and budgeting in project management depends on the accuracy and details of the project scope, which is the scope baseline. What is project cost estimation? Cost estimating, by definition, is the practice of predicting the final total cost is the fundamental part of project cost management (a discipline used by project managers since 1950 to manage costs). Cost estimation validates the project budget and enables the monitoring and controlling of project costs when the project is in progress. The approximate project cost is then being referred to as a cost estimate or a planned price. It includes all project expenses and is fairly difficult to forecast, since the project scope is an ever-changing phenomenon. Oftentimes, project cost estimation is much like looking into a crystal ball. Why project cost estimation is important There are many reasons why cost estimation is an indispensable part of project management. A cost estimate reflects if the project is financially viable. First things first, an accurate cost estimate is essential for deciding if the project is feasible or not for the company at the moment. In this light, a cost estimate answers if the project can be completed with available resources in the given time period and still bring value to the organization. Cost estimation helps to stay on schedule and on track. At the end of the day, sound project estimates are important to ensure that actual effort, once the project is in progress, matches the estimated targets that were set at the beginning of the project to the greatest possible extent. Thus estimates are one of the foundational pillars for safeguarding client expectations and your company’s bottom line. It's essential to note that it doesn't matter whether you're using PMI, PRINCE2 or something else for project control or Scrum, Waterfall, etc. for project execution. The estimates of the work to be performed will always be the foundation for your project. Unless you of course have a client with an unlimited supply of cash and in that case you're probably the luckiest (and only) supplier in the world. Factors involved in project cost estimation 142 CU IDOL SELF LEARNING MATERIAL (SLM)

It won’t hurt to repeat that cost estimation should cover each small element required for the project - labor, material, training, you name it. And since it’s difficult to account for all, initial cost estimates can rarely be called credible and reliable. They are typically revisited and modified when the project’s scope becomes more explicit. In all cases, ensuring that you have priced your project correctly requires that you have estimates you are fairly certain will hold water. When the client has accepted the project and it starts going over time and budget it can quickly turn the client and other stakeholders extremely sour. Common project cost estimation techniques Depending on your project type and size, stakeholder expectations, potential billing method, and other project-related factors, various techniques and tools can be applied to make an educated guess about the project’s price. We’ve gathered them in one table together with recommendations. Estimation Definition Recommendations technique Bottom-up Assigning costs to the individual Best for estimating projects with defined estimation elements of the project plan, such expectations and specific requirements in as tasks, milestones, or phases, line with stakeholders who won’t expect and putting the bucks together major changes in the scope Top-down Figuring out the project’s total Commonly used to estimate elements on estimation price and determining the scope fixed price projects when the price is of work that can be done initially specified by the client 143 CU IDOL SELF LEARNING MATERIAL (SLM)

Analogous Relying on data from previous Recommended when there’s limited estimation similar projects to forecast the information about the project cost Parametric Taking specific cost variables and Usually called in for use when the estimation data points from other projects to previous project data you have is scalable figure out the ultimate project cost Three-point Doing the average from the best, Well-advised when the risk of going over estimation worst, and most likely case budget is high estimations Prime reasons for inaccurate project cost estimates More often than not, project cost estimates turn out to be off-the-mark. The main reason being the timing when they’re made - during the proposal phase - that is when you know the least about the project, plus many other factors that compromise the quality of cost estimates. The common pitfalls to watch out for that can destroy the accuracy and reliability of your estimates are:  Farsighted predictions. Seasoned project managers know that every estimate is a premature estimate if it’s made a long time in advance, let’s say to predict the budget three years ahead. It immediately turns into a guess estimate that will hardly be relevant then.  Shortage of expertise on similar projects. There is no denial of the fact that better cost estimates come with experience on comparable initiatives. Analogous projects inform your next estimation decisions by giving you a clearer understanding of how the new project can be better scoped out and which milestones take longer than usual. 144 CU IDOL SELF LEARNING MATERIAL (SLM)

 Lack of requirements. Having an idea what the project is all about is not enough. To provide an accurate estimate, every element in the project should be specified per client’s request. Staying on the same page with the client will help you break the project down into manageable chunks of work and ensure that you don't miss out on anyone’s expectations.  Splitting one task across multiple resources. When more than one person works on a task, clear processes should be set in place, which in turn requires additional planning and management time, often not taken into account. Not only does it make the task last longer, but it also increases chances of overshot deadlines and estimates. In the end, one task divided between multiple team members turns out to be more costly than you initially thought.  Expecting that resources will work at full battery. Total efficiency at workplace is a utopia we all want to believe in. There will always be “dead time” or unexpected non-billable work. A more reasonable number to target would be 70-80%. Don’t forget to include that when scoping your next project. 6.5 FINANCIAL INSTITUITION LOANS Finance is the lifeblood of any business. Case in point is the self-funded (bootstrapped) ventures, which need a timely influx of funds to survive. It’s rare that a startup born out of a founder’s brainwave, and backed by a strong idea, would also have its own personal treasure trunk. This is exactly why angel investors, venture capitalists, and other financing options available to startups are so important. For a first-time businessman though, the world of funding seems complex and challenging. So, let’s try to dive deeper and have an in-depth understanding of financing options available to startups and how you, as a founder, can leverage this knowledge to fund your next venture: The funds that you obtain can be broadly categorized as 1. Equity Financing 145 CU IDOL SELF LEARNING MATERIAL (SLM)

Raising funds equity means board with you as co-owner. This person shall contribute to business capital, share risk and participate in profit sharing. Startups are usually equity financed/funded by way of venture capital/ private equity investors and (or) angel investors 2. Angel Investors Angel Investors are real-life business angels having deep pockets. These are the High Net worth Individuals (HNIs) who, if they have conviction in your product, will be willing to fund your venture in return for ownership equity or convertible debt. The capital angel may provide a one-time investment to help propel the business, or inject funds on an ongoing basis to support and carry the company through its difficult early stages.  SEBI (Alternative Investment Funds) Regulations, 2012, as amended in 2013, regulates angel funds investing in an Indian company.  Restrictions imposed on angel funds are:  Maximum of 200 funds can invest in one scheme (earlier limit was 45)  The investee company should not be older than five years (earlier it was three years)  Lock-in period of investment is one year (earlier it was three years) 1. Venture Capitalist/Private Equity Expecting a large investment? Go to Venture Capitalists. Venture Capitalists are companies/funds that raise funds from various sources and use the corpus to further fund startups. They are ready to invest in small businesses, funding young, unproven companies that appear to have a great idea and a great management team. VCs usually prefer convertible instruments which include compulsory convertible preference shares and compulsorily convertible debentures. 2. Debt Financing Loan from Banks & NBFCs Banks and Non-Banking Financing Companies (NBFCs) grant loans and become business leaders and not owners, unlike VCs and angels. These loans so procured can be used for various business needs like: Purchase of inventory and equipment 146 CU IDOL SELF LEARNING MATERIAL (SLM)

Operating capital (working capital) Fund requirement for expansion etc However, there are several drawbacks of this funding option. The interest on loan has to be paid periodically irrespective of how your business is faring. The bankers ask for substantial collateral and you need to prove a good credit record along with fulfillment of other T&C* 3. External Commercial Borrowings Funds can also be obtained from non-resident lenders commonly called as External Commercial Borrowings (ECB). The various forms in which ECSs can be procured are:  Bank loans  Buyers’/Suppliers’ credit Securitized instruments (e.g. non-convertible, optionally convertible or partially convertible preference shares, floating rate notes and fixed rate bonds etc) These ECBs can be accessed under two routes, viz. (i) Automatic Route; and (ii) Approval Route depending upon the category of the eligible borrower and recognized lender, the amount of ECB availed, average maturity period and other applicable factors. 3. CGTMSE Loans The Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched Credit Guarantee Trust for Micro and Small Enterprises MSE) scheme to encourage entrepreneurs. Under the scheme, one can get loans of up to 1 crore without collateral or surety. Any new and existing micro and small enterprise can take the loan from all scheduled commercial banks and specified Regional Rural Banks, NSIC, NEDFi, and SIDBI, which have signed an agreement with the Credit Guarantee Trust. 4. Venture Debt It is a type of debt financing provided to venture-backed companies by specialized banks or non-bank lenders to fund working capital or capital expenses, such as purchasing equipment. Venture debt can complement venture capital and provide value to fast-growing companies and their investors. Unlike traditional bank lending, venture debt is available to startups and 147 CU IDOL SELF LEARNING MATERIAL (SLM)

growth companies that do not have positive cash flows or significant assets to use as collateral. These are some funding options that can help you meet your financial needs. There are some other Unconventional modes of financing options which are now becoming popular in India such as Crowd funding, approaching incubators etc.  India has about 40 million Micro Small and Medium Enterprises (MSMEs), including registered and unregistered ones. MSMEs fall under the categories of both the organized and the unorganized sectors.  These MSMEs contribute to about 40% of the total GDP of India, and it remains a critical source of employment.  The MSMEs provide solutions to critical issues in the country like poverty, unemployment, income inequality, regional imbalances, etc.  The government for this purpose has introduced various schemes to sanction loans to MSMEs to boost their business and their economy.  The entrepreneurs who run such MSMEs can borrow money in the form of a loan through any one of the schemes that suit their requirements. Some of the most significant kinds of Government loan schemes for small businesses MSME Business Loans in 59 Minutes It is one of the most loan schemes introduced by the government in September 2018. The loans sanctioned under this scheme are to boost financial assistance to the growth of the country and to also encourage their growth in the country. The scheme allows new and existing businesses to utilize the financial assistance that is provided by the scheme. The loans provided under these schemes extend up to Rs. 1 crore and take about 8 to 12 days to complete the process, wherein the approval for the loan is received within 59 minutes which is primarily why the name of the scheme is known as MSME Business Loans in 59 minutes. The rate of interest depends on the nature of the business that is carried on by the applicant of the loan. The interest of such loans begins at 8.5%, and the loan amount granted under this scheme can range from 1 lakh to 5 lakh. The following are the requirements for obtaining a loan under this scheme: 148 CU IDOL SELF LEARNING MATERIAL (SLM)

 GST verifications  Income tax verifications  Bank account statements for the last 6 months  Ownership related documentation  KYC details MUDRA Loans The MUDRA loans are sanctioned by the Micro-Units Development and Refinance Agency organization that has been established by the government of India for providing finance to units of micro-business. The theme behind MUDRA loans is to “fund the unfunded”. All bank branches across India provide MUDRA loans. Such loans have created the low-cost credit concept for micro and small businesses. The MUDRA loans are categorized as under: Eligibility criteria All businesses including proprietary concern, partnership firm, Private Ltd., Public Company and other legal entities are eligible to apply for a loan under this scheme. Stand-Up India Stand-up India Scheme introduced by the Government to provide loans for businesses run by Scheduled Castes/ Scheduled Tribes and women. Small Industries Development Bank of India (SIDBI) governs this scheme. The loan granted under this scheme can range from Rs. 10 lakhs to Rs. 1 crore. Every bank must provide this loan to a minimum of one Scheduled Caste/Scheduled Tribe or woman entrepreneur. According to this loan, the fund is expected to cover about 75% of the cost of the total project. Eligibility Those businesses engaged in trading, manufacturing or other sectors relating to services are eligible to avail loan under this scheme. If the business is not an individual undertaking, then a minimum of 51% of the shares must be held by an individual who is a woman or who belongs to Scheduled Caste/ Scheduled Tribe. Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGFMSE) This is a loan scheme that is launched by the government of India that allows for funding through loans without collateral to those businesses that fall under the MSME sector. The loans under the scheme can be granted to both new and existing enterprises. The Credit 149 CU IDOL SELF LEARNING MATERIAL (SLM)

Guarantee Fund Trust is a trust that has been established by the Ministry of MSMEs and the Small Industries for the purposes of implementing the CGFMSE Scheme. The funding under this scheme can provide for working capital loans up to Rs. 200 lakhs with preference to eligible women entrepreneurs. Eligibility Undertakings who are into manufacturing activity like retail trade, educational institutions, self-help groups and training institutions. Further, businesses which are in the service sector are also eligible to avail of funding under this loan scheme. National Small Industries Corporation Subsidy  The NSIC is a Government enterprise under the MSMEs, and it is ISO certified. One of its primary functions is to aid the growth of MSMEs by providing services including finance, technology, market and other services across the country. The NSIC has initiated two schemes in order to promote the growth of MSMEs, which are:  Marketing Support Scheme – The scheme supports in development any business by devising schemes such as Consortia and Tender Marketing. Such a scheme is crucial as the MSMEs must be aided in order for them to grow in the current competitive market.  Credit Support Scheme – The NSIC provides for financial aid to procure raw materials, for activities in relation to marketing and for financing with banks through syndication to MSMEs. The benefit of this scheme is that it offers the small-scale industries access to tenders without them having to bear any costs, and the MSMEs also do not have to pay the security deposits for availing financial aid under this scheme. Credit Link Capital Subsidy Scheme for Technology Up gradation This scheme allows small businesses to upgrade their process by financing technological up gradation. Technological up gradation can be related to numerous processes within the organization, such as manufacturing, marketing, supply chain, etc. Through the CLCSS Scheme, the government aims to reduce the cost of production of goods and services for small and medium enterprises, thus allowing them to remain price competitive in local and international markets. The scheme is run by the Ministry of Small-Scale Industries. The 150 CU IDOL SELF LEARNING MATERIAL (SLM)