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Importance of Relation Building in Online Business

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happy woman looking at ring

There are so many people who are involved in the process of setting up a strong business and one needs the help of many more people in order to succeed in the chosen business. If you do a deep dive analysis as to why certain online businesses are really successful, you will realize it is because of the people – it can be the employees, vendors or even the customers. An online business is incomplete without these people.

Relationship building is really very important in online business. Here are some of the reasons as to why it’s crucial.

The Loyalty Factor

If you can have a strong bond with your clients, your online business transitions from being an ordinary company into a brand that your clients will respect and trust. Trust is very important in a business. Sometimes, when it comes to buying something online, customers are scared to deal with a company that they are not sure about or the one they do not trust. They will be more than happy to buy products from the company they trust.

The customers will be fine to forgive you if you are a reputed company as they know they can trust your brand. However, if you are not a familiar face in the industry, then your business is at stake. Therefore, it is important to have a strong relation with your clients. This article on Entrepreneur.com guides you through how to build customer loyalty.

Relationships Form an Image

It is not easy to feel good when you have a company that is faceless. With good fostering relations, you will be able to bring in a face to your company – the one that people can easily relate to.

If you give it some serious thought, you will know as to why there are a lot of good companies that depend on the nice spokes-creatures for representing their company. It is simple – it is because people love such characters and the kind of love that people have for these so-called corporate faces that are directly transferred to the brands that they represent.

The customer relationship should actually be a shared responsibility in a company. Each and every person whom your organization deals with all day can be a possible customer.

Word-of-Mouth through Relationships

These days, the competition is just insane in any kind of business. If you have an online business, then it is even more challenging as you have to really work hard to get your brand noticed. There are millions of people who are doing online business and it is not easy to outperform them.

If you maintain a good relationship with your customers, then there is every chance that they will be more than happy to refer their network of friends or even family members to your business. Most of the times, people completely trust these kinds of word-of-mouth referrals from their close-knit friends. This is one of the reasons why it is important to maintain a healthy relationship with your customers.

If you have a strong bonding with your customers, you can be sure that they will never look out for an alternate service provider as they completely believe in your company’s standards and the ultimate outcome will be a long term relationship. Get to know about some effective word-of-mouth tactics from this Forbes post.

You Can Create an Awesome Team

Although it is extremely essential to create healthy relationships outside your online firm, it is really important to have warm and healthy relationships within your online firm. If you are able to develop a strong bond with your team mates or associates and if you can bring in an environment that favors your employees, then you will be able to bring out an awesome team, which can completely transform your company. You need to be taking care of your employees on a timely basis and ensure that they are really happy with their job; if they are, then that will increase the productivity as well.

If you have good relationship with the people who are related to your business, you may even come across some talented resources that you can recruit and form a strong team. It goes without saying that if the team is strong enough, then achieving bigger targets is a cake-walk. Most of the online firms recruit their resources via various social media platforms and they have been successful in finding the right kind of resources for their firm.

5 Reasons Why People Fail in Their Businesses

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business, people, fail, paperwork and technology concept - businessman with laptop computer and papers working in office

Many people have the desire to start their own business for many reasons – to find better income or they really don’t want to work under anyone or have an ambition to become an entrepreneur. The reasons can be many, but the bad part is that they fail to understand the basics and the techniques of the business and recklessly venture into it, which is unfair.

Here are five reasons why people fail in their business.

No Written Plan

Before starting a business, one should have a written plan, but many people neglect this practice. Written plan can help one to develop their innovative ideas into a real business in the market. Therefore, a written plan is mandatory.

No Revenue

Many people who are in small businesses are not concerned about setting revenue on their effort and that is a bad start. So, one has to work on the revenue to survive and establish a company.

Limited Business Opportunities

Sometimes, a good concept cannot be a great business too. This is due to people not willing to buy your service or product. Thus, one has to do market research and a lot of homework initially to succeed in the business.

Fail to Execute

People with great ideas are not the ones who are worth the money, but it is about the execution. One has to be wise enough to take decision correctly and venture in to the business. But, many fail to execute it.

Lack of Network

Before starting a business, one must spend time in cultivating the market, which means nurturing and developing your personal and professional contacts. If a businessman is not good at making friends or never keeps in touch with friends, then entrepreneurship is not for them.

Heavy Competition

It is good to have a competitor as it helps one to get recognised in the market. However, if there is a heavy competition, there are chances of killing a business all the time as the team will not be able to handle it.

Thus, people have to be aware of the mistakes and the reasons for failing in a business and try to follow the few guidelines mentioned in the article to succeed in the business. There are many who have the dream of becoming an entrepreneur, but very few make it a dream come true!

What Happens When Interest Rates Rise?

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When the Fed increases the federal funds rate, it does not directly affect the stock market itself. The only truly direct effect is that it becomes more expensive for banks to borrow money from the Fed. But, as noted above, increases in the federal funds rate have a ripple effect.

The first ripple: Because it costs them more to borrow money, financial institutions often increase the rates that they charge their customers to borrow money. Individuals are affected through increases to credit card and mortgage interest rates, especially if these loans carry a variable interest rate. This has the effect of decreasing the amount of money consumers can spend. After all, people still have to pay the bills, and when those bills become more expensive, households are left with less disposable income. This means that people will spend less discretionary money, which will affect businesses’ top and bottom lines (that is, revenues and profits).

But businesses are affected in a more direct way as well. They too borrow money from banks to run and expand their operations. When the banks make borrowing more expensive, companies might not borrow as much and will pay higher rates of interest on their loans. Less business spending can slow down the growth of a company; it might curtail expansion plans and new ventures and even induce cutbacks. There might be a decrease in earnings as well – which, for a public company, usually means the stock price takes a hit.

Interest Rates and the Stock Market

So now we see how those ripples can rock the stock market. If a company is seen as cutting back on its growth spending or is making less profit – either through higher debt expenses or less revenue – then the estimated amount of future cash flows will drop. All else being equal, this will lower the price of the company’s stock. (A key way to value a company is to take the sum of all the expected future cash flows from that company discounted back to the present. To arrive at a stock’s price, take the sum of the future discounted cash flow and divide it by the number of shares available.)

If enough companies experience declines in their stock prices, the whole market, or the key indexes (like the Dow Jones Industrial Average or the S&P 500) that many people equate with the market, will go down. With a lowered expectation in the growth and future cash flows of the company, investors will not get as much growth from stock price appreciation, making stock ownership less desirable. Furthermore, investing in equities can be viewed as too risky compared to other investments.

However, some sectors do benefit from interest rate hikes. One sector that tends to benefit the most the financial industry. Banks, brokerages, mortgage companies and insurance companies’ earnings often increase as interest rates move higher, because they can charge more for lending.

Interest Rates and the Bond Market

Interest rates also affect bond prices and the return on both CDs and T-bonds and T-bills. There is an inverse relationship between bond prices and interest rates, meaning that as interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. The longer the maturity of the bond, the more it will fluctuate in relation to interest rates. (Learn the basic rules that govern how bonds are priced in Bond Market Pricing Conventions.)

When the Fed raises the federal funds rate, newly offered government securities, such Treasury bills and bonds, are often viewed as the safest investments and will usually experience a corresponding increase in interest rates. In other words, the “risk-free” rate of return goes up, making these investments more desirable.  As the risk-free rate goes up, the total return required for investing in stocks also increases. Therefore, if the required risk premium decreases while the potential return remains the same or becomes lower, investors might feel that stocks have become too risky, and will put their money elsewhere.

One way that governments and businesses raise money is through the sale of bonds. As interest rates move up, the cost of borrowing becomes more expensive. This means that demand for lower-yield bonds will drop, causing their price to drop. As interest rates fall, it becomes easier to borrow money and many companies will issue new bonds to finance new ventures. This will cause the demand for higher-yielding bonds to increase, forcing bond prices higher. Issuers of callable bonds may choose to refinance by calling their existing bonds so they can lock in a lower interest rate.

For income-oriented investors, the Fed’s reducing the federal funds rates means a decreased opportunity to make money from interest. Newly issued Treasuries and annuities won’t pay as much. A decrease in interest rates will prompt investors to move money away from the bond market to the equity market, which then starts to rise with the influx of new capital.

What Happens When Interest Rates Fall?

When the economy is slowing, the Federal Reserve cuts the federal funds rate to stimulate financial activity. A decrease in interest rates by the Fed has the opposite effect to a rate hike. Investors and economists alike view lower interest rates as catalysts for growth – a benefit to personal and corporate borrowing, which in turn leads to greater profits and a robust economy. Consumers will spend more, the lower interest rates encouraging them to feel they can finally afford that new house or send the kids to a private school; businesses will enjoy the ability to finance operations, acquisitions and expansions at a cheaper rate, thereby increasing their future earnings potential, which, in turn, leads to higher stock prices.

Particular winners of lower federal funds rates are dividend-paying sectors such as utilities and real estate investment trusts (REITs). Additionally, large companies with stable cash flows and strong balance sheets benefit from cheaper debt financing.