The news of the cruise ship disaster off the coast of Italy was particularly noteworthy for my family. On April 1, we set sail on a seven-day Caribbean cruise. My daughter is already freaking out, and my son is not helping matters. He's plastered pictures of the Costa Concordia all over the house. One issue the tragedy has brought into focus for us is travel insurance. My travel agent and I discussed travel insurance when I booked our cruise. Frankly, after spending thousands of dollars on airfare and a cruise, spending even more money on insurance is not my idea of a good time. But because of the cost of our trip, it's an issue we can't afford to avoid. While I'm not an expert in travel insurance, my research has been quite revealing.
1. Only insure what you can't afford to lose. Not every trip needs travel insurance. If your potential loss is a few hundred dollars in airfare, travel insurance is probably not worth the cost or aggravation. On the other hand, a once-in-a-lifetime $20,000 vacation is worth protecting. In this way, travel insurance is no different than most other types of insurance.
2. There are many options. Before my research, I assumed there was just one type of travel insurance. In turns out that there are many types, including travel insurance for trip cancellation, trip interruption, medical, lost baggage, evacuation, and flight insurance. My primary concern is trip cancellation insurance, but there are many options to consider. Many travel insurance companies offer bundled insurance packages that combine two or more types of travel insurance.
3. Age matters. Whether it's medical insurance or trip cancellation insurance, your physical health is an important factor in determining a premium. While you won't have to get a physical like you would with life insurance, your age will affect the cost of the insurance.
4. Health insurance may not cover you. I was also surprised to learn that not all health insurance policies, including Medicare, cover you overseas or on a cruise flying under a foreign flag. The key is to contact your health insurance provider to find out what coverage you do have when you're traveling. Only then can you make an informed decision about this type of travel insurance.
5. Timing issues. I was surprised to learn from my travel agent that we didn't have to decide on travel insurance when we booked our cruise. In fact, you can buy travel insurance just days before your departure. This are risks, however, in waiting. Some types of travel insurance may require you to purchase the insurance within a set time period after you've booked your travel. And for trip cancellation insurance, you won't be covered if you buy the insurance after you've become ill or the hurricane has wiped out your vacation destination.
6. Costs vary. It's wise to compare costs before making a decision. While your travel agent will have options for you, they may not be the best or the least expensive. Some of the more well-known travel insurance companies include Access America, Travel Guard, and Travel Insured. And you can use sites like insuremytrip.com to compare travel insurance options.
7. Travel rewards cards won't help. At first I assumed that a top-notch travel rewards credit card would have some travel insurance. But apart from limited baggage insurance, accident insurance, and rental car insurance with some cards, however, travel insurance is not part of the benefits. If you want trip cancellation or interruption insurance, you'll have to buy it.
Financial plans are written, organized strategies for maintaining financial health and accomplishing financial goals. Whether or not you employ a professional financial planner, it is your responsibility to contemplate and develop your own financial plan, centered on your unique circumstances, desires and objectives. Follow these steps for how to write a personal financial plan. 1) Set goals. Personal financial planning revolves around goals. Consider what you want your lifestyle to be like in the present, near future and distant future, then create an outline of your goals that is comprehensive enough to cover every facet of your life: o Intellectual goals. Furthering your education, participating in leadership retreats, sending your children to college and attending seminars are types of intellectual goals. o Occupational goals. Personal financial planning requires that you produce a stream of income, and you need to consider the ways in which you plan to produce income, whether it be earning raises at work or switching careers altogether. o Lifestyle goals. This category encompasses the things you do for fun and entertainment, and the things you feel are necessary to the quality of life you aim for. o Residence goals. Your financial plans should account for any desire you might have to move to a new location. o Retirement goals. Consider the lifestyle you want when you retire, and set personal financial planning goals that will provide for a retirement that is comfortable to your standards. 2) Organize your financial records. Create a filing system of your tax returns, bank account statements, insurance policy information, contracts, receipts, wills, deeds, titles, bills, investment plan statements, retirement account statements, pay stubs, employee benefits statements, mortgages and any other type of document that is related to your financial life. 3) Create a preliminary budget. Your budget is a starting point for determining how you will reach your financial goals, as it allows you to identify and assess your spending habits. Write out all of your current monthly expenses, as well as your current monthly income. 4) Determine which spending habits you need to change. Using your budget as a reference, identify unnecessary monthly expenses so that you can redirect any wasted money into accomplishing the goals outlined in your personal financial plan. 5) Estimate your projected income. Take into account your future plans for increasing your income, as well as your timeline for those projected changes. Consider the following 3 income-producing methods when forecasting your income, and decide which you intend to employ: o Career. Traditional employment under an employer, either salaried or hourly, constitutes career income. o Business. If your financial plans include starting a home business or profiting from a hobby or interest, then that income would be classified under business. o Investments. Investing is an activity that leverages money to produce a return, and includes things like stocks, bonds, real estate, money market accounts and certificates of deposit. o Inheritance. In addition to active forms of income production, be sure to include any anticipated inheritance money to your projected income. o Unexpected income. There may be circumstances in your future where you find yourself with an unexpected lump sum of money (i.e. lottery winnings, gifts, bonuses and/or property value increases). Plan for this possibility by deciding how you will use that money. For example, you may allot 50 percent to your retirement account and the other 50 percent to growing a business, or you may choose to put the entire amount into an interest-bearing savings account. 6) Set a time frame for accomplishing your goals. Separate goals into categories, starting with present goals and dividing the rest into immediate future (within 1 year), near future (within 5 years), extended future (within 10 years) and distant future (onward to retirement) goals. 7) Create an extended budget. This budget is different from your preliminary budget in that it uses your projected income and takes into account what your future goals will cost you. Be sure to include necessary expenses as well as luxury expenses. 8) Devise an income strategy that will sustain your goals. Taking your projected income, time frame and goal expenses into account, calculate how much of your income you need to dedicate toward each goal category on a monthly and yearly basis. This amount may fluctuate in correlation with your future income projections. 9) Commit to your financial plan. It is not enough just to write your plans on paper. You must commit to adhering to the steps you outline for yourself if you want your personal financial plan to be effective. 10) Reframe your financial plan as necessary. Remember that personal financial planning is a goal - not a process - and that you may need to update it as your life's circumstances change. If you find that your income is not enough to accommodate your goals, then formulate a plan to create more income through career, business and/or investments, or reset your goals within a more realistic framework.
You may have been intensely creative in generating solutions to a problem, and rigorous in your selection of the best one available. This solution may still not be worth implementing, as you may invest a lot of time and money in solving a problem that is not worthy of this effort. Cost Benefit Analysis or CBA is a relatively* simple and widely used technique for deciding whether to make a change. As its name suggests, to use the technique simply add up the value of the benefits of a course of action, and subtract the costs associated with it. Costs are either one-off, or may be ongoing. Benefits are most often received over time. We build this effect of time into our analysis by calculating a payback period. This is the time it takes for the benefits of a change to repay its costs. Many companies look for payback over a specified period of time – e.g. three years. In its simple form, cost-benefit analysis is carried out using only financial costs and financial benefits. For example, a simple cost/benefit analysis of a road scheme would measure the cost of building the road, and subtract this from the economic benefit of improving transport links. It would not measure either the cost of environmental damage or the benefit of quicker and easier travel to work. A more sophisticated approach to cost/benefit measurement models is to try to put a financial value on intangible costs and benefits. This can be highly subjective – is, for example, a historic water meadow worth $25,000, or is it worth $500,000 because if its environmental importance? What is the value of stress-free travel to work in the morning? These are all questions that people have to answer, and answers that people have to defend. The version of cost/benefit analysis we explain here is necessarily simple. Where large sums of money are involved (for example, in financial market transactions), project evaluation can become an extremely complex and sophisticated art. The fundamentals of this are explained in Principles of Corporate Finance by Richard Brealey and Stewart Myers – this is something of an authority on the subject.
A sales director is deciding whether to implement a new computer-based contact management and sales processing system. His department has only a few computers, and his salespeople are not computer literate. He is aware that computerized sales forces are able to contact more customers and give a higher quality of reliability and service to those customers. They are more able to meet commitments, and can work more efficiently with fulfillment and delivery staff. His financial cost/benefit analysis is shown below:
New computer equipment:
· 10 network-ready PCs with supporting software @ $2,450 each · 3 printers @ $1,200 each · Cabling & Installation @ $4,600 · Sales Support Software @ $15,000 · Computer introduction – 8 people @ $400 each · Keyboard skills – 8 people @ $400 each · Sales Support System – 12 people @ $700 each · Lost time: 40 man days @ $200 / day · Lost sales through disruption: estimate: $20,000 · Lost sales through inefficiency during first months: estimate: $20,000
· Tripling of mail shot capacity: estimate: $40,000 / year · Ability to sustain telesales campaigns: estimate: $20,000 / year · Improved efficiency and reliability of follow-up: estimate: $50,000 / year · Improved customer service and retention: estimate: $30,000 / year · Improved accuracy of customer information: estimate: $10,000 / year · More ability to manage sales effort: $30,000 / year Total Benefit: $180,000/year Payback time: $114,000 / $180,000 = 0.63 of a year = approx. 8 months
The payback time is often known as the break even point. Sometimes this is is more important than the overall benefit a project can deliver, for example because the organization has had to borrow to fund a new piece of machinery. The break even point can be found graphically by plotting costs and income on a graph of output quantity against $. Break even occurs at the point the two lines cross.
Inevitably the estimates of the benefit given by the new system are quite subjective. Despite this, the Sales Director is very likely to introduce it, given the short payback time.
Cost/Benefit Analysis is a powerful, widely used and relatively easy tool for deciding whether to make a change. To use the tool, firstly work out how much the change will cost to make. Then calculate the benefit you will from it. Where costs or benefits are paid or received over time, work out the time it will take for the benefits to repay the costs. Cost/Benefit Analysis can be carried out using only financial costs and financial benefits. You may, however, decide to include intangible items within the analysis. As you must estimate a value for these, this inevitably brings an element of subjectivity into the process.
Developing your sales forecast isn’t as hard as most people think. Think of your sales forecast as an educated guess. Forecasting takes good working knowledge of your business, which is much more important than advanced degrees or complex mathematics. It is much more art than science. Whether you have business training or not, don’t think you aren’t qualified to forecast. If you can run a business, then you can forecast its sales. Most people can guess their own business’ sales better than any expert device, statistical analysis, or mathematical routine. Experience counts more than any other factor. Break your sales down into manageable parts, and then forecast the parts. Guess your sales by line of sales, month by month, then add up the sales lines and add up the months. The illustration below gives you an example of a simple sales forecast that includes simple price and cost forecasts which are used to calculate projected sales and direct cost of sales and estimate total dollar value for each category of sales. Use text to explain the forecast and related plans and background
Although the charts and tables are great, you still need to explain them. A complete business plan should normally include some detailed text discussion of your sales forecast, sales strategy, sales programs, and related information. Ideally, you use the text, tables, and charts in your plan to provide some visual variety and ease of use. Put the tables and charts near the text covering the related topics.
In my standard business plan text outline, the discussion of sales goes into the chapter on Strategy and Implementation. You can change that to fit whichever logic and structure you use. In practical terms, you’ll probably prepare these text topics as separate items, to be gathered into the plan as it is finished. Sales strategy
Somewhere near the sales forecast you should describe your sales strategy. Sales strategies deal with how and when to close sales prospects, how to compensate sales people, how to optimize order processing and database management, and how to maneuver price, delivery, and conditions.
How do you sell? Do you sell through retail, wholesale, discount, mail order, phone order? Do you maintain a sales force? How are sales people trained, and how are they compensated? Don’t confuse sales strategy with your marketing strategy, which goes elsewhere. Sales should close the deals that marketing opens. To help differentiate between marketing strategy and sales strategy, think of marketing as the broader effort of generating sales leads on a large scale, and sales as the efforts to bring those sales leads into the system as individual sales transactions. Marketing might affect image and awareness and propensity to buy, while sales involves getting the order. Forecast details
Your business plan text should summarize and highlight the numbers you have entered in the Sales Forecast table. Make sure you discuss important assumptions in enough detail, and that you explain the background sufficiently. Try to anticipate the questions your readers will ask. Include whatever information you think will be relevant, that your readers will need.
Details are critical to implementation. Use this topic to list the specific information related to sales programs in your milestones table, with the specific persons responsible, deadlines, and budgets. How is this strategy to be implemented? Do you have concrete and specific plans? How will implementation be measured?
Business plans are about results, and generating results depends in part on how specific you are in the plan. For anything related to sales that is supposed to happen, include it here and list the person responsible, dates required, and budgets. All of that will make your business plan more real.
How many years?
I believe a business plan should normally project sales by month for the next 12 months, and annual sales for the following two years. This doesn’t mean businesses shouldn’t plan for a longer term than just three years, not by any means. It does mean, however, that the detail of monthly forecasts doesn’t pay off beyond a year, except in special cases. It also means that any detail in the yearly forecasts probably doesn’t make sense beyond three years. It does mean, of course, that you still plan your business for five, 10, and even 15-year time frames; just don’t do it within the detailed context of business plan financials.