Monthly Archives: July 2012

BUSINESS PROMOTION IDEA LIST

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BUSINESS PROMOTION IDEA LIST

 

Use this  BUSINESS PROMOTION IDEA LIST and add your own ideas, then see how many you can implement.

  •  Advertise in the classified advertising section of your community newspaper.
  • Advertise on a grocery buggy.
  • Approach your prospective customers over the phone.
  •  Approach your prospective customers in person.
  •  Approach your prospective customers through the mail.
  • Be a guest speaker at seminars and present on your area of expertise.
  • Be a guest speaker on radio talk shows.
  •  Build and maintain a customer mailing and contact list on database software.
  • Build your image with well designed letterhead and business cards.
  •  Design a brochure that best explains the benefits of your services.
  •  Design a mail order campaign.
  • Design a point of purchase display for your product.
  • Design a telemarketing campaign.
  • Design an image building logo for your company.
  • Design and distribute a quarterly newsletter or an industry update announcement.
  • Design and distribute company calendars, mugs, pens, note pads, or other advertising specialties displaying your company name and logo.
  • Design and distribute a free “how to do it” hand-out related to your industry (e.g. Tips for conserving energy in your home).
  •  Design buttons, decals and bumper stickers or balloons with your company name, logo or slogan.
  • Design T-shirts displaying your company name and logo.
  • Explore cross promotion with a non-competing company selling to your target market.
  •  television, billboards, bus shelters and benches.

 Explore ways to share your advertising costs using cooperative advertising.

  •  Follow up customer purchases with a thank you letter.
  •  Follow up customer purchases with christmas or birthday cards.
  • Have your company profiled in a magazine or newspaper that is read by prospective customers.
  •  Hire an advertising agency or public relations firm.
  •  Hold a promotional contest.
  • Hold a seminar on your service, product or industry.
  •  Include promotional material with your invoices.
  • Look for prospective customers at trade shows related to your industry.
  •  Look for prospective customers in associations related to your industry.
  • Look for prospective customers at seminars related to your industry.
  •  Look for prospective customers in magazines and newspapers related to your industry.
  • Package your brochure, price lists and letter in a folder for your customers.
  • Place a sidewalk sign outside your store or office.
  • Place flyers on bulletin boards and car windshields.
  •  Place promotional notes on your envelopes, mailing labels.
  • Place signs or paint logos on your company vehicle(s).
  •  Prepare a corporate video.
  • Prepare a list of product features and benefits to help you plan your advertising and promotional campaigns.
  • Prepare proposals offering solutions to your customers’ needs
  • Provide free samples of your product or service.
  • Provide public tours of your operation.
  • Sponsor a charity event.
  • Sponsor an amateur sports team.
  • Sponsor a cultural event through a community arts organization

RESEARCHING YOUR MARKET

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RESEARCHING YOUR MARKET

 Where to find information when researching your market:

  • The Internet (Especially Library Online Resources)           
  • Observe Your Competition
  • Talk to your Suppliers
  • Talk to your Customers
  • Surveys and Focus Groups
  • Business friends and associates           
  • Similar businesses in another city
  • Chamber of Commerce/Board of Trade        
  • University or community college
  •  Business schools
  • City or Municipal Hall
  • Advertising agencies
  • Local Government Agent’s office
  • Post Office
  • Downtown business associations
  • Business section of library
  • Trade associations
  • Shopping center developers
  • Newspapers, radio and T.V.
  • Various directories
  • Bookstores 

Observe Your Competition

Get out on the street and study your competitors.   Visit their stores or the locations where their products are offered.  Analyze the location, customer volumes, traffic patterns, hours of operation, busy periods, prices, quality of their goods and services, product lines carried, promotional techniques, positioning, product catalogues and other handouts.  If feasible, talk to customers and sales staff.               

  Consider how well your competition satisfies the needs of potential customers in your trading area.  Determine how you fit in to this picture and what niche you plan to fill. Will you offer a better location, convenience, a better price, later hours, better quality, better service?

  Talk to your Suppliers

 Conversation with your suppliers can tell you a great deal about how your industry works and what trends are taking place in your market.  They may be able to tell you valuable information about pricing techniques and mark ups, about the fastest moving lines and why they are selling, and why some competitors are successful.  (They can also provide you with information about credit terms.)

 Talk to your Customers

 Conversation with your customers or potential customers can give you insightinto what their needs are.  They can indicate what they look for in your industry, what they think of your competition, what price they might pay and what level of service they like.

Surveys and Focus Groups

Surveys and Focus Groups represent more formal ways of getting insight from your customers. 

 If you have a specific information requirement and a definable audience, it is likely that you can undertake a useful survey.  Designing a non-biased questionnaire requires attention to detail.  There are many good books available on questionnaire design and initiating a survey.  If you are depending on the survey to assist with a costly decision, you  may want to consider hiring a professional marketing research firm.

 A focus group involves getting feedback from a specially picked group using controlled interview techniques.  The process usually allows the participants to  provide their opinions, come up with new ideas and brainstorm.

 This is valuable for generating new concepts,  getting feedback on proposed advertising or gaining insight into attitudes and opinions about a new product.   Focus groups require a skilled interviewer and  hand-picked participants.    Professional firms can be hired to tackle the project for you.

 Hire Students to do a Survey

 Universities and community colleges have marketing management programs where students can be hired on a confidential consulting basis as part of their curriculum.  The students do not have the experience of professional firms, but will often do a reasonable job at little cost.

 You will probably have to cover expenses incurred by the students and course objectives and timing may compromise your requirements. Research will help you with a wide variety of business decisions. You will likely have to make decisions involving:

  • A good location.          How much capital you require
  • Sales projections         How much floor space you need
  • Your product line         How much inventory you order
  • Your pricing strategy     How much equipment and supplies you require
  •  where you advertise       How many employees you hire
  • Offering credit           Etc. Etc.

 Business information is required to make sound decisions and to prepare a credible business plan and cash flow forecast.

Pricing Techniques

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Pricing Techniques

 The importance of pricing  cannot be underestimated as incorrect pricing can often result in the failure of a business. New businesses often make the mistake of either charging too little or too much for their product or service. So to help you avoid making one of these mistakes, the following section will outline some of the guiding principles of pricing techniques.

 Price is a key part of marketing. Setting prices is called pricing.

 Setting Prices

 Prices for products and services can be set by pricing to the market, pricing to your costs, and rule of thumb pricing. New business people with little experience may set an initial price based on the market, and then as experience grows, re-set prices according to costs. These two aspects of price–what is acceptable to the market, and what costs are–must both be considered.   In addition, effective pricing depends on the business goals of your company: do you want to maximize profits or are you aiming for high growth in sales?  The choices that a business ultimately makes about its markets and sales make a big difference in pricing.

 

For example, a business may make an early choice about where to position themselves in  the market–the “good value,” low end of the market, or the “quality conscious,” upscale market. In pricing, as in everything else in business, the customer is the reference point.

 Pricing to the Market

 Compare prices with your competitors for similar products and services.  Set the price range that customers will expect. You can use that market price range–what is acceptable to the market–as a guide to set your prices. Businesses or people to whom you sell may also price to the market by telling you what they will pay for your product or service. As you keep records of actual costs, the cost approach to pricing will help you make sure all your costs are covered, which may not be true in a market approach to pricing.

 NOTE: Be careful about underpricing in order to compete or make sales. Use competitor’s prices to establish the price range for similar products or services but don’t underprice; if your true costs are higher, your final prices will have to be higher.

 Cost Approach to Pricing

Price must cover all costs of goods/services sold, including production costs of supplies, materials, fixed overhead, and time/labor, plus a profit. Costs should include costs of production, labour and non-labour, including overhead or fixed costs as well as supplies and materials.

 Use this simple formula in setting a price (per unit):

 Total Costs of Production Per Unit + Desired Dollar Profit Per Unit

 Businesses can set different profit rates, for example 15% profit on supplies and materials, 20% profit on labor/time, and 25% profit on overhead. These more complicated approaches to pricing usually emerge in response to the special needs of a particular business.

 If your research reveals that similar products or services are available on the market at a cost  much lower than what you could offer, you may have to either adjust your profit margin, the return you expect, or decide to provide enough specialized service or selection that the market will pay the extra.  Alternatively, you may be forced to conclude that you cannot afford to make this item or provide this service and look for something else to do.

 NOTE: Remember to cost materials at the level it costs to replace them – NOT at original prices; include salaries as a business expense; include interest in your business cost calculations — interest that could have been accrued had the money used in the company been invested elsewhere (i.e. a bank); make allowances for future refunds, servicing, bad debts, amortization of capital costs of equipment or machinery.

 “Rules of Thumb” in Setting Prices

 Some types of businesses charge prices according to certain “rules of thumb”: For example:  price is always twice labor plus materials, or twice materials plus labor depending on which is higher;  price is always materials and  labor plus 20% for fixed costs, plus 25% for profits.

Calculating actual costs is the only proven way to make sure your prices cover your costs.  Labor/time charges are to be covered partly in the costs of production and partly as a salary in the fixed/operating or overhead costs. In summary, key points to consider in setting prices are:

  •  marketing strategy and your immediate goals
  •  competitors’ prices, and the market
  • market demand for the product and consumer buying trends
  •  need to cover costs and provide an adequate profit.

Marketing Approach

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Marketing Approach                                                 

Many people consider marketing to be promotion, advertising and all the selling techniques used to get someone to buy a product.  However marketing is much more.

A marketing approach to business begins with the customer’s needs and involves designing the entire enterprise around fulfilling those needs.  Decisions about the product’s design, sales outlets, the price, the service level and where to advertise are made with a solid understanding of who the customer is and what they are looking for.            

MARKETING PRIMER

  • Who is your Customer?
  • The Right Product
  • Positioning your Business
  • Pricing Techniques

Who is Your Customer?

 

In order to tailor your marketing and advertising strategies to appeal to the tastes and interests of your market, you must first identify your customer.  In order to do this, you it is necessary to conduct thorough research of the consumer marketplace.  Keep in mind, the more information you have about your target market, the better able you will be to develop a successful marketing plan.

 

A market profile typically uses primary and secondary sources to answer key questions about a potential market. A profile is a picture or an outline.  Information that makes up the social profiles of the people in your target market is called demographic information, and includes:

 

 

                        age, usually given in a range (20-35 years)

                        sex

                        marriage/partner status

                        location of household

                        family size and description

                        income, especially disposable income (money available to spend)

                        education level, usually to last level completed

                        occupation

                        interests, purchasing profile (what are consumers known to want?)

                        cultural, ethnic, racial background

The Right Product

 

What are your customer’s needs?  What do they expect to get when they buy your product or use your service?  The right product is the one that best fits their  requirements.

 

If you have identified your customer and listed their expectations, you can design your product  or service around their requirements.

 

The more you fulfill your customer’s expectations, the better the quality of your product.  Think of your product or service as more than just what the customers pays for.  When you are planning your business consider how the whole transaction meets the customer’s needs.

Positioning your Business

 

Positioning refers to the image customers have of your business. The goal is to create a business image that enables you to position your business in such a way that, in essence, it acts as a natural magnet for your intended customers. A number of factors that customers often look for include:

 

            price (i.e. cheapest price, fair price, price for quality, etc.)

            assortment

            parking

            service

            sales personnel

            quality

            fashion

            convenience

            location

            atmosphere

 

Your overall position should emphasize those areas that your customers value most, and those which make you different from your competition.

Income Statement Ratio Analysis

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Income Statement Ratio Analysis

 

The Balance Sheet and the Statement of Income are essential, but they are only the starting points for successful financial management. Apply Income Statement Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business.

 Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before they destroy your business.

The following important State of Income Ratios measure profitability:

 

Gross Margin Ratio

This ratio is the percentage of sales dollars left after subtracting the cost of goods sold from net sales. It measures the percentage of sales dollars remaining (after obtaining or manufacturing the goods sold) available to pay the overhead expenses of the company.

 

Comparison of your business ratios to those of similar businesses will reveal the relative strengths or weaknesses in your business. The Gross Margin Ratio is calculated as follows:

 

                                    Gross Profit

Gross Margin Ratio = _______________

                                      Net Sales

 

(Gross Profit = Net Sales – Cost of Goods Sold)

 

Net Profit Margin Ratio

This ratio is the percentage of sales dollars left after subtracting the Cost of Goods sold and all expenses, except income taxes. It provides a good opportunity to compare your company’s “return on sales” with the performance of other companies in your industry. It is calculated before income tax because tax rates and tax liabilities vary from company to company for a wide variety of reasons, making comparisons after taxes much more difficult. The Net Profit Margin Ratio is calculated as follows:

 

                                         Net Profit Before Tax

Net Profit Margin Ratio = _____________________

                                                Net Sales

 

Management Ratios

Other important ratios, often referred to as Management Ratios, are also derived from Balance Sheet and Statement of Income information.

 

Inventory Turnover Ratio

This ratio reveals how well inventory is being managed. It is important because the more times inventory can be turned in a given operating cycle, the greater the profit. The Inventory Turnover Ratio is calculated as follows:

 

                                                      Net Sales

Inventory Turnover Ratio = ___________________________

                                            Average Inventory at Cost

 

Accounts Receivable Turnover Ratio

This ratio indicates how well accounts receivable are being collected. If receivables are not collected reasonably in accordance with their terms, management should rethink its collection policy. If receivables are excessively slow in being converted to cash, liquidity could be severely impaired. The Accounts Receivable Turnover Ratio is calculated as follows:

 

 Net Credit Sales/Year

 __________________ = Daily Credit Sales

    365 Days/Year

 

                                                                   Accounts Receivable

Accounts Receivable Turnover (in days) = _________________________

                                                                      Daily Credit Sales

 

Return on Assets Ratio

This measures how efficiently profits are being generated from the assets employed in the business when compared with the ratios of firms in a similar business. A low ratio in comparison with industry averages indicates an inefficient use of business assets. The Return on Assets Ratio is calculated as follows:

 

                                    Net Profit Before Tax

Return on Assets = ________________________

                                         Total Assets

 

Return on Investment (ROI) Ratio.

The ROI is perhaps the most important ratio of all. It is the percentage of return on funds invested in the business by its owners. In short, this ratio tells the owner whether or not all the effort put into the business has been worthwhile. If the ROI is less than the rate of return on an alternative, risk-free investment such as a bank savings account, the owner may be wiser to sell the company, put the money in such a savings instrument, and avoid the daily struggles of small business  management. The ROI is calculated as follows:

 

                                     Net Profit before Tax

Return on Investment = ____________________

                                            Net Worth

 

These Liquidity, Leverage, Profitability, and Management Ratios allow the business owner to identify trends in a business and to compare its progress with the performance of others through data published by various sources. The owner may thus determine the business’s relative strengths and weaknesses.

Balance Sheet Ratio Analysis

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Ratio Analysis

 The Balance Sheet and the Statement of Income are essential, but they are only the starting points for successful financial management. Apply Balance Sheet Ratio Analysis to Financial Statements to analyze the success, failure, and progress of your business.

 Ratio Analysis enables the business owner/manager to spot trends in a business and to compare its performance and condition with the average performance of similar businesses in the same industry. To do this compare your ratios with the average of businesses similar to yours and compare your own ratios for several successive years, watching especially for any unfavorable trends that may be starting. Ratio analysis may provide the all-important early warning indications that allow you to solve your business problems before they destroy your business.

 Balance Sheet Ratio Analysis

Important Balance Sheet Ratios measure liquidity and solvency (a business’s ability to pay its bills as they come due) and leverage (the extent to which the business is dependent on creditors’ funding). They include the following ratios:

 

Liquidity Ratios

These ratios indicate the ease of turning assets into cash. They include the Current Ratio, Quick Ratio, and Working Capital.

 

Current Ratios. The Current Ratio is one of the best known measures of financial strength. It is figured as shown below:

 

                           Total Current Assets

Current Ratio = ____________________

                        Total Current Liabilities

 

The main question this ratio addresses is: “Does your business have enough current assets to meet the payment schedule of its current debts with a margin of safety for possible losses in current assets, such as inventory shrinkage or collectable accounts?” A generally acceptable current ratio is 2 to 1. But whether or not a specific ratio is satisfactory depends on the nature of the business and the characteristics of its current assets and liabilities. The minimum acceptable current ratio is obviously 1:1, but that relationship is usually playing it too close for comfort.

 

If you decide your business’s current ratio is too low, you may be able to raise it by:

 

Paying some debts.

  • Increasing your current assets from loans or other borrowings with a maturity of more than one year.
  • Converting non-current assets into current assets.
  • Increasing your current assets from new equity contributions.
  • Putting profits back into the business.

 

Quick Ratios. The Quick Ratio is sometimes called the “acid-test” ratio and is one of the best measures of liquidity. It is figured as shown below:

 

                        Cash + Government Securities + Receivables

Quick Ratio = _________________________________________

                                      Total Current Liabilities

 

The Quick Ratio is a much more exacting measure than the Current Ratio. By excluding inventories, it concentrates on the really liquid assets, with value that is fairly certain. It helps answer the question: “If all sales revenues should disappear, could my business meet its current obligations with the readily convertible `quick’ funds on hand?”

 

An acid-test of 1:1 is considered satisfactory unless the majority of your “quick assets” are in accounts receivable, and the pattern of accounts receivable collection lags behind the schedule for paying current liabilities.

 

Working Capital. Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. It is calculated as shown below:

 

Working Capital = Total Current Assets – Total Current Liabilities

 

Bankers look at Net Working Capital over time to determine a company’s ability to weather financial crises. Loans are often tied to minimum working capital requirements.

 

A general observation about these three Liquidity Ratios is that the higher they are the better, especially if you are relying to any significant extent on creditor money to finance assets.

 

Leverage Ratio

This Debt/Worth or Leverage Ratio indicates the extent to which the business is reliant on debt financing (creditor money versus owner’s equity):

 

                               Total Liabilities

Debt/Worth Ratio = _______________

                                  Net Worth

 

Generally, the higher this ratio, the more risky a creditor will perceive its exposure in your business, making it correspondingly harder to obtain credit.

Locating Reducible Expenses

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Locating Reducible Expenses

Your profit and loss (or income) statement provides a summary of expense information and is the focal point in locating reducible expenses. Therefore, the information should be as current as possible. As a report of what has already been spent, a P and L statement alerts you to expense items that bear watching in the present business period. If you get a P and L statement only at the end of the year, you should consider having one prepared more often. At the end of each quarter might be often enough for some firms. Ideally, you can get the most recent information from a monthly P and L.

 

Regardless of the frequency, for the most information two P and L statements should be prepared. One statement should report the sales, expenses, profits and/or loss of your operations cumulatively for the current business year to date. The other should report on the same items for the last complete month or quarter. Each of the statements should also carry the following information:

 

(1) this year’s figures and each item as a percentage of sales.

 

(2) last year’s figures and the percentages.

 

(3) the difference between last year and this year – over or under.

 

(4) budgeted figures and the respective percentages.

 

(5) the difference between this year and the budgeted figures – over and under.

 

(6) average percentages for your line of business (industry operating ratio) when available, and

 

(7) the difference between your annual percentages and the industry ratios – under or over.

 

This information allows you to locate expense variation in three ways: (1) by comparing this year to last year, (2) by comparing expenses to your own budgeted figures, and (3) by comparing your percentages to the operating ratios for your line of business. The important basis for comparison is the percentage figure. It represents a common denominator for all three methods. When you have indicated the percentage variations, you should then study the dollar amounts to determine what line of operative action is needed.

 

Because your cost cutting will come largely form variable expenses, you should make sure that they are flagged on your P and L statements. Variable expenses are those which fluctuate with the increase or decrease of sales volume. Some of them are: advertising, delivery, wrapping supplies, sales salaries, commissions, and payroll taxes. Fixed expenses are those which stay the same regardless of sales volume. Among them are: your salary, salaries for permanent non-selling employees (for example, the bookkeeper), depreciation, rent, and utilities.

 

Taking Action

When you have located a problem expense area, the next step obviously is to reduce that cost so as to increase your profit. A key to the effectiveness of your cost-cutting action is the worth of the various expenditures. As long as you know the worth of your expenditures, you can profit by making small improvements in expenses. Keep an open eye and an open mind. It is better to do a spot analysis once a month than to wait several months and then do a detailed study. Take action as soon as possible. You can refine your cost-cutting action as you go along.