Sensitivity Analysis - one of the many decision making tools

This week's challenge was to deliver a 10 minute presentation to my networking group on a useful topic which demonstrates one of the skills I use in the course of  my work.  It really helps your network understand in greater detail the way in which you work.  The difficult part is to make it interesting to the whole audience.

I chose the topic of Sensitivity Analysis which is one of the tools I use when helping businesses through periods of change.  It helps clients focus their minds on the numbers.  It's all very well having a great idea but if the figures don't stack up, the impact on the business may be disastrous.  Assigning probabilities to different outcomes helps us consider what might happen to the bottom line if sales fall below expectations or costs exceed estimates.

The video shows the charts I used to help explain my points.

Promotional Video!

Welcome to the first in a series of 30 second videos.  The first will be shown on our Facebook page http://www.facebook.com/linkedinforbusiness.

Create your own video slideshow at animoto.com.

The challenges of Multi-Level Marketing

This week I have been assisting a client of mine with some forecasting for her new business.  The business is one of the many companies which operate a sales force using MLM or multi-level marketing.  Most of the products marketed in this way are 'business to consumer' and range from cosmetics to housewares, slimming aids to books.  One thing these all have in common is the appeal of flexible working  You are essentially your own boss with the backing of a large organisation and a team to help you market your product.  MLM seems attractive to those who want to fit a job around family commitments or another career.  It is also know as network marketing, direct selling or referral marketing.

There are essentially 2 revenue streams - sales made by yourself where you earn a commission sometimes expressed as a percentage of the retail price and a commission from recruiting a team of recruits.  For a relatively small outlay, a new consultant purchases a pack of samples and receives some initial training from their up-line ie the person who recruited them.  Large organisations have training days or online training videos and manuals. The level of sophistication of the marketing and selling training varies enormously from company to company. 

The mechanics of setting up in business are very simple but establishing the potential revenue from selling MLM products is actually very complex.  The discounts, percentages earned from your downline and their downline, bonuses for reaching targets, minimum sales requirements and numerous other rules, make forecasting very complicated.

I set up a model using an Excel spreadsheet which allows my client to work through some different scenarios.  As this was a new venture, the surprising result was the level of sales required to achieve a worthwhile return.  We worked on a balance between her direct sales and the commission which could be earned by recruiting a team.  But how large a team can you manage - 5, 10, 25?  There figures brought home the importance of knowing your numbers inside out and back to front.  Understanding the MLM model in minute detail is essential for anyone thinking of embarking on a new careeer in this competitive space.

A New App from LinkedIn

This little app from LinkedIn Labs allows you to see who is joining LinkedIn in real time.  This clip was downloaded on a Saturday afternoon - not the busiest time on LinkedIn but does demonstrate that a new person joins the platform nearly every second.

For those of you who are skeptical about social media, remember it takes time and persistence.  Not long each day but regular interesting posting.