Buying

Skillful buying is an important essential of profitable operation. This is true whether you are a wholesaler or retailer of merchandise, a manufacturer or a service business operator. Some retailers say it is the most important single factor. Merchandise, which is carefully purchased, is easy to sell. Buying is using the firms scarce resources and thus should recieve the hightest attention of management.

 

Determining what to buy means finding out the type, kind, quality, brand, size, color, style -whatever applies to your particular inventory – which will sell the best. This requires close attention to salespeople, trade journals, catalogs, and especially the likes and dislikes of your regular customers. Analyze your sales records. Even the manufacturer should view the problem through the eyes of customers before deciding what materials, parts, and supplies to purchase.

 

Know your regular customers, and make a good evaluation of the people you hope will become your customers. In what socioeconomic category are they? Are they homeowners or renters? Are they looking for price, style or quality? What is the predominant age category?

 

The age of your customers can be a prime consideration in establishing a purchasing pattern. Young people buy more frequently than most older people. They need more, have fewer responsibilities, and spend more on themselves. They are more conscious of style trends whether in wearing apparel, cars or electronic equipment. If you decide to cater to the young trade because they seem dominant in your area, your buying pattern will be completely different than if the more conservative middle-aged customers appear to be in the majority.

 

Study trade journals, newspaper advertisements, catalogs, window displays of businesses similar to yours. Ask advice of salespeople offering you merchandise, but buy sparingly from several suppliers rather than one, testing the water, so to speak, until you know what your best lines will be. You should se the internet to find information as well as suppliers. Don’t forget that special cable shows as internet sites can help you determine trends.

 

Locating suitable merchandise sources is not easy. You may buy directly from manufacturers or producers, from wholesalers, distributors or jobbers. Select the suppliers who sell what you need and can deliver it when you need it. Most business people for quick fill-ins between factory shipments use (Distributors and jobbers.)

 

You may spread purchases among many suppliers to gain more favorable prices and promotional material. Or you may concentrate your purchases among a small number of suppliers to simplify your credit problems. This will also help you become known as the seller of a certain brand or line of merchandise, and to maintain a fixed standard in your products, if you are buying materials for manufacturing purposes.

 

When to buy is important if your business will have seasonal variations in sales volume. More stock will be needed prior to the seasonal upturn in sales volume. As sales decline, less merchandise is needed. This means purchases of goods for resale and materials for processing should vary accordingly.

 

At the outset, how much to buy is speculative. The best policy is to be frugal until you have had enough experience to judge your needs. On the other hand, you cannot sell merchandise if you do not have it.

 

To help solve buying problems, you should begin to keep stock control records at once. This will help you keep the stock in balance – neither too large nor too small – with a proper proportion and adequate assortment of products, sizes, colors, styles and qualities.

 

Fundamentally, there are two types of stock control – control in dollars and control in physical units. Dollar controls show the amount of money invested in each merchandise category. Unit controls indicate the number of individual items when and from whom purchased by category. A good stock control system can help you determine what, from whom, when, and how much to buy.

Setting Goals

Good management is the key to success and good management starts with setting goals. Set goals for yourself for the accomplishment of the many tasks necessary in starting and managing your business successfully. Be specific. Write down the goals in measurable terms of performance. Break major goals down into sub-goals, showing what you expect to achieve in the next two to three months, the next six months, the next year, and the next five years. Beside each goal and sub-goal place a specific date showing when it is to be achieved.

 

Plan the action you must take to attain the goals. While the effort required to reach each sub-goal should be great enough to challenge you, it should not be so great or unreasonable as to discourage you. Do not plan to reach too many goals all at one time. Establish priorities.

 

Plan in advance how to measure results so you can know exactly how well you are doing. This is what is meant by “measurable” goals. If you cant keep score as you go along you are likely to lose motivation. Re-work your plan of action to allow for obstacles which may stand in your way. Try to foresee obstacles and plan ways to avert or minimize them.

Managing Your Business

You are not ready to start your own business until you have given some thought to managing it. A business is an ongoing activity that doesn’t run itself. As the manager you will have to set goals, determine how to reach those goals and make all the necessary decisions. You will have to purchase or make your product, price it, advertise it and sell it. You will have to keep records, and determine costs. You will have to control inventory, make the right buying decisions and keep costs down. You will have to hire, train and motivate employees now or as you grow.

The Unique Selling Position (USP)

What is a USP?

 

The Unique Selling Position (USP) – How Brand and Benefits Fulfill Customer Needs

 

This is the key marketing program for small advising business to compete with larger firms. Define your market niche, and then use your USP to fulfill needs in that niche.

 

You have gone through special training, maybe even achieved accreditation or certification in a given field. You may even have a Brand. How do you transfer your skills, your education, your training (your benefit package (BP)) to develop a marketing program that communicates how your unique benefits fulfill your target market’s needs? It’s by developing your USP that communicates your benefits. How do you develop an USP? First we have to understand what a need is and how your USP communicates that your BP will fulfill those needs.

 

The “Holy Grail” of marketing is called a need. Needs are internal human drives that force humans to seek specific “things” to reduce the force of the drive. All services and products have elements called benefits that are the key to satisfying needs. Marketing is the science and art of matching benefits to target market needs.

 

The matching of benefits to needs is the primary function of any business. Until recently marketing was often thought of as a division or function within a firm. Many firms are now considered marketing driven firms. The recognized leading scholars in the marketing discipline now consider that the sole reason for the existence of a free market firm or organization is to deliver goods and services whose benefits match the needs of the market place. Understand that this implies that all resources of an organization/firm are committed to this action.    

 

What is a need? Perhaps one of the best needs models is that of Abraham Maslow. Maslow developed a model known as the “hierarchy of needs”. There are many other needs models, but Maslow’s model has stood the test of time in social science literature. It has as its basis five different level of needs.

 

These five levels of needs are: physiological needs, safety needs, social needs, esteem needs, and self-actualization needs. You might find it useful to look up Maslow on the net and become more familiar with this theory if you have not been exposed to it. This is another good model to keep handy and ask yourself “my BP most important benefit satisfies what need level (s)”.

 

 

Marketing has developed significant tools to discriminate product benefits. These are used a predictive models for market acceptance. What does it mean to match a benefit to a need? It means that some form of communication from the organization seeking to deliver a good or service convinces the intended target market that the product/service will indeed satisfy the markets need.

 

Some benefits of particular products are so strongly related to needs that little “marketing” communication is needed. Gasoline for your car. Milk, bread, and toilet paper at the super market. Insulin for diabetics and antivenin for snake bite victims. Some of these items are commodities – meaning that price is often the key selling point. Some are specialty items that are so import that quality is more important than price, but the price/value ratio can also be important in these products.

 

Marketing communications are often highly visible elements in the marketing mix of a firm. Yet there are other marketing elements such as product quality and channels of distribution that can change the markets perception of how well the product’s benefits meets its needs.

 

Your BP is a unique set of benefits. No one else has the same exact BP. The best place to start developing your USP for you BP is your resume. The small business advisory services should be a relationship driven business. The development of customer loyalty should be a target of every small business advisor.

 

Step 1 – Translate You BP into A USP

 

With your resume in front of you, ask yourself – what specific things did I do that I was very good at? Each person is different but here are some examples:

 

  • I was very good at evaluating Cost of Goods Sold analysis which translates into pricing model development for small business
  • I was very good at evaluating staffing for operations  which translates into reviewing employee expense levels for small businesses
  • I was very good at building sales organizations which translates into building a sales model for small business
  • I was a CFO which translates into I can build income/expense and balance sheets to help small business owners become professional managers
  • I was a successful operations manager which translates into, I can help you build your process so they easily expand when you do (scalability)

 

Each accomplishment on your resume represents an element(s) in your BP that you need to translate in the benefit that fulfills the needs commonly found in small business. That is focus of our USP development package. In a two one hour sessions  we help you determine your BP and then help you create your USP and suggest how to integrate it into your marketing program.

 

From Rolling 10 letters to newsletters to your website, the development of your USP will communicate your brand and how your benefits will fulfill needs for small business. At the same time it will give you focus for you niche markets and raise the productivity of your marketing program.

Making the Decision to Start Your Own Business

Making the Decision to Start Your Own Business

The time is now to be Making the Decision to Start Your Own Business. You’ve analyzed yourself, your life style, your opinions, and your attitudes. You’ve read and studied and discussed the pros and cons of starting a business of your own with your business advisor and then attorneys and accountants, other business owners and bankers. You’ve picked a lot of brains, and given your own a workout. Now it is time for you to make the one all-encompassing decision which, if it is in the affirmative and you decide to start a small business of your own, will require one decision after another to implement.

 

You’ve done your cash planning and explored your cash requirements in consultation with your lawyer, banker, accountant or any combination of the three. Can you swing it financially? Make a decision.

 

You’ve pondered the advisability of sharing ownership with others as compared with the independence of going it alone. Which will it be? Another decision required.

 

Some of you have faced the alternative of buying an existing business. After carefully weighing the advantages of such a transaction against the disadvantages, what decision will you make on this question?

 

Others among you who are reading these pages have given the possibility of investing in a franchised business serious consideration. Do the safeguards the quick-start advantages offered by operating within the shelter of a national franchise make up for the lack of freedom under which you may be forced to operate? What will your decision be?

 

Now answer the following questions.

 

What are my immediate goals?

 My long range goals?

 

If you have given long and careful consideration to all the requirements, regulations, financial obligations and hazards implicit in setting up a small business, and you regard them as challenges you can meet.

 

If you would gladly give up your safe job working for someone else for the independence, the excitement, the sheer joy of being your own boss.

 

If you are aware of the responsibility, the hard work and the long hours it will take before your goal as an entrepreneur can be realized, and you are not deterred….

 

Than small business ownership may indeed be for you!

Sharing Ownership With Others

Sharing Ownership With Others

You have decided what business to start and about how much capital will be required, you may find Sharing Ownership With Others is necessary.

 

Partnership

If you lack certain technical or management skills which are of major importance to your chosen business a partner with these skills may prove a most satisfactory way to cover the deficiency. If you are very skilled in your special area but lack management training and skills, you might look for a partner with a background in management. If you may need more start-up money, sharing the ownership of the business is one way to obtain it. Great care should be taken in deciding upon a partner(s). Personality and character, as well as ability to render technical or financial assistance affect the success of a partnership.

 

A partnership can be a mixed blessing. A partner who puts in time or money has a right to expect a share in running the business.

 

In a partnership the liability for the debts of the firm is unlimited, just as it is in a single proprietorship. This means the owners are personally responsible for the firm’s debts, even in excess of the amount they have invested in the business. In a corporation the liability of the owner is limited to the amount they pay for their shares of stock. A partnership, like a single proprietorship, lacks continuity. This means the business terminates upon the death of the owner or a partner, or upon the withdrawal of a partner.

 

Corporation

The corporation is a legal entity whose continuity is unaffected by death or transfer of stock shares by any or all of its owners. Even with no partners, you may decide a corporation with minor stockholders is better than a single proprietorship primarily because of the corporation’s limited liability.

Getting the Money

Getting the Money

Now that you have computed your initial capital requirements, where will you be getting the money? The first source is your personal savings. Then relatives, friends, or other individuals may be found who are willing to “venture” their savings in your business. Before obtaining too large a share of money from outside sources, remember you should have personal control of enough to assure yourself ownership.

 

Once you can show that you have carefully worked out your financial requirements and can demonstrate experience and integrity, a lending institution may be willing to finance part of your operating needs. This may be done on a short-term basis of from 60 days to as much as one year. Any institution that has money to lend is primarily concerned with security. The security may be a business asset, but when you’re just starting the best security is usually your home or some other personal asset.

 

The second thing the lender will want to see is some sort of business plan. If you complete a business plan – which includes a cash flow forecast – the lender will see that you have done some serious and realistic thinking about your business and be more likely to consider your request.

 

Become acquainted with your banker. In selecting a banker consider progressiveness, attitude toward your business, credit services offered, and the size and management policies of the bank. Is the bank progressive? The physical appearance of the bank may give you some indication. When the employees are reasonably young, interested in your problems and active in civic affairs the bank is likely to be progressive. The character of the bank’s advertising may also be a clue to its progressiveness.

 

To be effective the banker should be interested in helping you to become a better manager, and build a continuing relationship that will mean profitable business for you and the bank over the years.

 

Will the bank offer you the kind of credit you need? For example, if seasonal accumulations of inventory become a problem will the bank make a loan against public or field warehouse receipts? If your capital is tied up in account receivable during your heavy selling season, will the bank take these receivables as security for a loan? Will the bank consider a term loan?

 

Finally, know the size and management policies of the bank. Will your maximum requirements fall well within the bank’s “legal limit”? If you plan to do some export business, does it have a foreign exchange department? If you or your dealers sell on installment terms does the bank have facilities for handling installment paper? How deeply is the bank concerned with the growth and prosperity of your local community?

 

When you deal with your banker, sell yourself. Whether or not you need a bank loan, make it a practice to visit your banker at least once a year. Openly discuss your plans and difficulties. It is the bank’s business not to betray a confidence. If you need financial assistance carefully prepare, in written form, complete information that will present a thorough understanding of your entire proposition. Many business-people or prospective business operators destroy their chances of obtaining financial help by failing to present their proposition properly. Remember, before a banker will make a loan he/she must have satisfactory answers to questions such as these:

 

What sort of person are you?

What will you do with the money?

 When and how do you plan to pay it back?

 Does the amount requested allow for unexpected developments?

What is the outlook for you, for your line of business, and for business in general?

 

Companies from which you buy equipment or merchandise may also furnish capital to you in the form of extended credit. Manufacturers of store fixtures cash registers, and industrial machinery frequently have financing plans under which you may buy on an installment basis and pay out of future income. You need not pay for the goods at once. If goods are for resale, no security other than repossession rights of the unsold goods is involved. However, too extended a use of credit may prove expensive. Usually cash discounts are quoted if a bill is paid within 10, 30, or 60 days. For example, a term of sale quoted as “2-10; net 30 days” means that a cash discount of 2 percent will be granted if the bill is paid within 10 days. If not paid in 10 days, the entire amount is due in 30 days. If you do not take advantage of the cash discount, you are paying 2 percent to use money for 20 days, or 36 percent per year. This is high interest. Avoid it.

 

One of the principal causes of failures among businesses is inadequate financing. If you do go into business, remember it is your responsibility to provide, or obtain from others, sufficient money to supply a firm foundation for your enterprise.