Choosing the Right Media

Posted on February 15, 2012 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

Now that you have developed a great message complete with an outstanding image, where do you put it to reach your target audience? Unfortunately, there is no definitive answer regarding ad placement; however, there are methods that can be utilized to narrow the list of media vehicles for consideration. Initially, much of the media planning is educated guesswork. Trial and error analysis can be applied when there is a track record to determine the best vehicles to stay with. One of the best and simplest methods is to once again put yourself in the customer’s shoes. Look at your business from the outside in, and ask the question, “If I wanted this product or service, how would I find it?” Ask other people. For many small businesses that sell to consumers, a Yellow Pages ad is imperative. Others may benefit as well from newspaper or radio advertising, trade publications or flyers. Most advertising vehicles such as television, radio, newspapers or magazines will provide you with a media kit. The kit should include rates, specifications and deadlines, plus demographic information on their viewers, listeners or readers. This will make it much easier to match your target market demographic with the appropriate radio station or magazine. Using many of the media described is only effective if the campaigns include enough repetition to successfully gain the desired audience response. Now, let’s take a look at where some of that marketing budget can be spent. Advertising Agencies are used by many large companies. Most have complete in-house services including a creative department, copy writers, media buyers and production.

Signage

If you intend to attract customers to a store front, a highly visible sign is a must. The cost may be substantial and should you find the purchase cost too steep, most large signs can be rented or purchased over time. Of course, all business trucks or vans will have a sign and remember to make the web site address and tag line clearly visible. Portable signs can be used effectively on occasion to advertise specials and contractors can attract more business by conspicuously displaying “A” frame signs to announce their services at job sites.

Marketing Collateral

This is a catch phrase for material that will be available in inventory to give to prospective customers. They may be available at your office or showroom, a trade show or part of a sales person’s arsenal.

  • Brochures – can be one page or more and should be produced on a high quality stock in full color. Remember image and layout stressing benefits, features then contact and company information. Your phone and web site address should be prominent and keep in mind that if you use your name as a headline it may only be meaningful to existing customers. Color printing has become very affordable and additional runs of one or five thousand are cost effective. A note of caution – when you send out a design for print graphic layout, many studios will try to use your logo and name as a headline. It is up to you to always think like a marketer and make appropriate changes on your proof for an effective final product. Yellow  pages ads are notorious for this. On-line brochures in Adobe .pdf format maintain excellent quality and are becoming more popular as they can be downloaded instantly from your web site.
  • Folders – can be an excellent way of storing single leaf product panels. The advantage here is your ability to print only single pages when product information changes or becomes redundant.
  • Catalogues – can be very expensive but necessary for many wholesale or retail businesses. If your products do not change often, consider a separate price sheet. It is easier and less expensive to print a single sheet than an entire catalogue. Check with your suppliers to see if they will share some of the production costs through co-operative advertising.
  • Rack and Post Cards – are a popular form of collateral. Lower printing costs have made one or two sided color printing on excellent stock very affordable. People are more likely to pin these rather than an 8 ½ x 11 on a board for future reference. In fact, it is not unusual to hear from someone a year after receiving one of these cards. Again, design and final art costs may be higher than the printing.
  • Promotional Items – such as hats, t-shirts and pens are popular give away promotional items. These are intended for branding and display your name and logo prominently. Try to find items that your customer will use in relation to your business. If you deal in computer hardware, software or operate an Internet based business then mouse pads with your name and web site address would be most appropriate. Pens are always a popular choice, but consider this; you have a very small space to print your message. Try using your web site address instead of the company name if you have a single choice. Sending someone to your site provides them with all the information they need for contact and purchasing.

Flyers

These are relatively inexpensive to produce for many businesses using their own office software. Keep in mind proper layout techniques and the purpose. Flyers are generally used for a time sensitive event, such as a sale or product clearance. They can also be printed non-commercially on your company color printer and reproduced at copy centers. There are many ways to distribute flyers and some methods are more targeted with better responses than others. Here are some suggestions for flyer distribution:

  • Newspaper Inserts – can provide wide area coverage and is best utilized with community type papers. This method tends to be non-targeted and is ideal if your product or service satisfies a broad market. The cost can be substantial, often comparable to that of purchasing advertising space in the paper, but is more likely to be noticed.
  • Postal Walk – allows you to cover a broad area or target specific zip and postal codes. This can be extremely useful to narrow the market and improve effectiveness. By designating certain zones for delivery, you can target businesses only if that is your market, or more affluent subdivisions should that represent your target audience. Sending a targeted message to a broad audience results in many recycled items that are costly in terms of production, delivery and a negligible return on advertising dollar. The cost per item using this method of delivery is much less than that of regular postage.
  • Hand Delivery – is a highly targeted method of delivering your message. You can contract a company to deliver flyers to a specific area, hire a student or even family member. If you have time on weekends or evenings, this method can provide a great means of getting fresh air and exercise. You can also see for yourself if the recipient is your target customer and there may be an opportunity to make personal contact with business or homeowners. This is the lowest cost method of distributing flyers and, depending upon the business you are operating, it can be the most effective.
  • Direct Mail – can be highly targeted and is discussed later in this chapter.

Print Ads

Advertising in print media can be very costly considering variables, such as circulation, position in the publication, number of ad insertions and the use of color. Black and white ads will be more economical than full color ads, yet somewhat less dynamic. Full page color ads on the outside back, inside front and inside back covers have the highest price tag as they are the most favorable position in magazines. A single ad insertion will be much more expensive than contracting for six or twelve editions.

  • Newspapers – often require larger ads, such as full or half pages to grab the reader’s attention. The cost can be prohibitive for a small enterprise and it is generally car dealerships, grocery stores or large chain retailers that take full pages in co-operation with their head office or supplier co-operative advertising subsidies. Smaller ads require more repetition and can often get lost in all the type. You may want to consider a regular classified ad or a business card ad in a local paper. A great headline is a must here.
  • Magazines – are effective when matching their reader demographics to your target audience. Advertising in national magazines, because of their large circulation, can be cost prohibitive to a newly established small business. Instead, you may want to look for local publications to reach your geographic market and trade or specialty publications where the reader demographics match those of your own target market.

Television

Television is a broad reach advertising vehicle that carries the highest price tag. A small business is more likely to utilize specialty or local television broadcasting with thirty second spots going for hundreds to thousands of dollars depending on the time slot and day of the week rather than national television advertising that can cost tens of thousands of dollars and higher for thirty seconds. Production costs for some thirty second commercials developed for national television can be in excess of one hundred thousand dollars, whereas, local stations offer small businesses alternatives, including self-promotion. Ad agencies are often contracted to look after the design and production of high quality commercials for large companies. Television stations should have comprehensive media kits showing viewer numbers and demographics for different times. Other areas of television advertising that can be very costly to set up, but highly effective for the right product, are listed below.

  • Direct Response – is a thirty or sixty second commercial that urges viewers to call a toll free number to make a purchase by credit card. Most direct response television companies require strict adherence to appropriate inventory levels.
  • Infomercials – have a high cost for a thirty minute production and air in non-prime time spots. There are minimum standards for minimum inventory levels and order fulfillment.
  • Shopping Channels – have high standards for inventory levels and order fulfillment. You must supply your own on air personnel or add the cost for supplied actors to your budget and adhere to rigid conditions.

Radio

Retail and service businesses can often get very good results from local radio stations. It is much easier to match radio station listener demographics to those of your target audience than it is for other media. For example, rock stations tend to have a younger listener than those playing pop or easy listening music. Radio campaigns are generally one or two weeks in duration requiring repetitions of thirty second commercials at the right time of day and the cost is much lower than television. Radio stations can produce your commercial using their own celebrities. You can also pick your own narrator or use an ad agency for a higher quality production. The significant difference using radio compared with other media is the lack of visual high impact graphics. The use of appropriate, well spoken power words is imperative to get the attention of your target audience enticing them to act upon your message. Radio marketing campaigns can also be conducted effectively in conjunction with a public relations event as local stations tend to be very community oriented and may even conduct a broadcast from the event site to attract attendees. There may be an opportunity for co-operative advertising if there is another non-competitive company involved that is willing to share the costs.

Trade Shows

There are two ways to take advantage of trade shows for promoting your business. The first is as an exhibitor and the second is as an attendee. Trade shows can play an important marketing role for B2C (Business to Consumer) and B2B (Business to Business) enterprises alike. Many industries have associations that provide valuable services to their membership including key marketing information and tools, discounted insurance rates and the annual trade show. Some of the larger shows are in the Toy and Giftware industries which can be national or global in scope. Membership in your own industry association is well worth researching. The following are some suggestions to improve trade show results for your business.

  •  As an Exhibitor:
  • Remember image – your booth, display graphics and the appearance of your staff say a great deal about you and your business.
  • An empty booth = lost opportunities and customers.
  • Collect as many qualified names as possible and get them in to your database promptly. (Try the fish bowl contest where visitors to your booth drop a business card in the bowl or complete a ballot to win a prize at the end of the show.)
  • Shows can be a good time to gather competitive intelligence.
  • Follow up promptly with new contacts right after the show, preferably by Email, then phone or regular mail.
  • Plan your show for achievable results. It may be more realistic to attract show visitors later to your store front for purchasing rather than having them buy at the show where inventory levels and display space are limited.
  • Trade shows can be an excellent networking opportunity for B2B operations, so match your choice of shows to your target market.
  • Collect as many names as possible with prompt follow up afterward.
  • Don’t try to sell your product or services at the show. Exhibitors are busy growing their business so leave the actual selling until later.
  • Attending related industry shows can also be a good way of collecting competitive information.
  • As an Attendee:
  • Trade shows can be an excellent networking opportunity for B2B operations, so match your choice of shows to your target market.
  • Collect as many names as possible with prompt follow up afterward.
  • Don’t try to sell your product or services at the show. Exhibitors are busy growing their business so leave the actual selling until later.
  • Attending related industry shows can also be a good way of collecting competitive information.

Web Sites

The importance of a properly developed company web site cannot be emphasized enough in a rapidly changing marketing environment that is becoming dominated more and more by new technology. This technology is driving business in the 21st Century and the web site plays a key role in achieving sales, customer satisfaction and competitive advantage. A well planned and developed site can also reduce many of the traditional costs associated with delivering your message. Some of the many objectives to consider when developing a web site for your business are:

  •  Selling Products On-line – requires a secure way to take credit card payments or existing customer credit purchases then efficiently fulfill these orders and follow up with excellent customer service.
  •  Customer Service – by providing a way for people to communicate easily with the company. This can be accomplished by publishing appropriate phones numbers and Email addresses; posting informative Q&A (Question and Answer) pages; or listing download pages for User Manuals in .pdf format. Providing these services on-line also saves the company in staff time responding to common questions.
  •  Email Marketing – to your customer database with a link to a special offer page on the web site to drive sales.
  •  Sales Tools – such as company brochures in Adobe .pdf format.

 Unless you are operating an actual dedicated on-line business, most visitors will go to your web site because they were sent there by advertising, signs, Emails or word of mouth. The following are some of the attributes that are required for a good site:

  •  Appearance – must be outstanding and professional as this is your image. You will be judged on image; therefore, most companies outsource this important project to a professional designer and developer.
  •  Content – must be rich and current. Think of the objectives you designed into the site in the planning stage and try to put yourself in your customer’s shoes to provide the appropriate content. Refresh the content on a regular basis.
  •  User Friendly – which means an effective navigation system that allows the site visitors to find the information they are looking for quickly.
  • Meet Current Standards – as set by the W3C (World Wide Web Consortium). Sites must also meet professional standards which means they must be search engine friendly. Indexing bots will always like meta tags, html and text links. Do not create sites completely in Flash if you want pages to be fully indexed for high search returns.
  • Administrative Responsibilities – are seldom understood by entrepreneurs. It is important to understand domain registration rules and trademarks, as well as the importance of contracts and doing your homework when choosing a web developer. This is for both compliance and the protection of your own intellectual property.

 This topic is covered in more detail in Section 4.2 – Creating Effective Web Sites.

Direct Marketing

There are several ways to market your products or services directly. The development of an excellent database is the back bone for this method of promotion. In marketing, information is power, and the ability to collect and mine crucial customer information is a vital key in continued business growth and success.

  •  Direct Selling – involves marketing your products directly to the end user in a variety of ways including door to door; through agents hosting parties; at flea markets, events and shows; or through an elaborate method of recruiting, sometimes referred to as multi-level marketing. Use caution with the latter, often considered pyramid schemes, as many jurisdictions prohibit the use of this method of selling and recruiting.
  •  Direct Mail and Catalogue – are methods that can be very good in generating sales. Similar to other marketing techniques, these are totally database driven and since the return rate tends to be low, success is dependent upon high output numbers and a well targeted mailing list. Although this method can be used to attract new customers, it has proven to be an excellent way to up-sell existing or past customers who are familiar with your company and offering.
  •  Telemarketing – can be a rewarding method of marketing directly to the end customer or prospective customer if conducted properly. Telemarketers have a bad reputation, as we all know, for a number of reasons. Whether you engage in making the calls yourself, or hire a company to place calls on your behalf, there are some protocols and methods that should be followed to improve results. B2C and B2B enterprises can both benefit from telemarketing. The following are ways to improve your success rate using telemarketing:
    •  Use a targeted database of qualified prospects whenever possible. The rate of success will be much higher and less time will be wasted on people or businesses that do not match your primary or secondary target market profiles.
    •  Develop a dynamite script then memorize and practice the delivery until the words are automatic. The key here is that it should not sound like a recording. There is nothing worse than listening to an inexperienced telemarketer who fumbles through a script then needs to start from the very beginning if interrupted.
    •  Always be polite and smile when you are talking.
    •  Remove the prospect from your database when requested and always be cordial when ending a call regardless of the outcome.
    •  Choose hours to call that will not be highly disruptive.
    •  Fax Distribution – is usually an unwelcome activity and not recommended.
    •  Email Marketing – has become one of the most powerful marketing tools in use but, unfortunately, one of the most abused. Spamming has become a global plague which makes it difficult for legitimate marketers to use this medium without encountering impenetrable fire walls. Email marketing is totally database driven and often integrates with your web site to produce optimal results. Listed are some of the ways to conduct successful Email marketing campaigns.
      •  Existing Customers – are generally a safe bet to receive your Email newsletter or promotion without complaint. Try including a link in the body of the Email sending them to a contest form or an exclusive customer page on your company web site. Preferred customer offers are usually appreciated and produce good results.
      •  Opt-in – is a requirement for ethical Email marketing. Unsolicited messages are spam – something you do not want your name attached to. Opt-in means that the recipient has agreed to let you send them your newsletters or special offers. This is generally done on a form submitted on-line, at time of purchase, or by submitting a contest ballot at your premises and checking the appropriate box. The double opt-in method makes your list even more robust. This authorization involves sending an Email back to confirm their permission to be on your list. The recipient must click the link in the message to confirm their opt-in status.
      •  Inform Why – the recipient is receiving the Email promotion. This information should be included in the first part of the message body reminding the recipient that they opted-in.
      •  Personalize – the message by putting the recipient’s name and company if applicable, on the first line. Your contact management software should have the capability of performing this merge function. Keeping in mind that different markets have different needs so make the offer specific to their personal interest. Proofread the message template several times before sending – typos are a very nasty blemish on image.
      •  Creative Subject Lines – are a must to catch the reader’s interest and to help penetrate spam filters. These should be brief and written like the headlines you have already created for ads. Use upper and lower case. Upper case in Email messages equates to shouting – an unacceptable practice. It is also important that the From line contains your company name. Also remember that spell check does not always catch subject lines so proofread carefully.
      •  Avoid Excessive Use of Graphics – as they increase the size of the message. The advent of html versus text only Email has empowered senders to change fonts, colors and insert photos in messages. Use this power judiciously as the message can get cluttered and lose its purpose.
      •  Avoid Attachments – as most people will delete the Email when viewing the header rather than opening a message with an unsolicited file that is attached. Instead, provide a link to your company web site where the file can be downloaded at their discretion.
      •  Opting-out – is the method you provide for a recipient to be removed from your list. Located at the bottom of your message, the easiest way to perform this important function is to ask them to reply to the message and type “Remove” in the subject line. Be sure to flag this person’s name in your database (don’t delete them) so they never receive a message again.
Posted in Marketing | 2 Comments

Credit Management and Collections

Posted on February 6, 2012 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

Monitoring Credit Accounts

Once credit has been extended to a customer and they begin purchasing on terms, it is imperative to make a regular analysis of the aged accounts receivable and their status. There are two methods of monitoring accounts. The primary technique is the In-House method which can be combined with the Commercial Credit Agency Warning method.

  • In-House: The A/R (Accounts Receivable) department prints out the Aged Receivables list on a regular basis. (Every two weeks suggested). When accounts approach their due date (within 25 to 28 days on thirty day terms), make a call. At this point, everyone will answer the phone because they are not in default. It is important that customers honor your terms. Failure to demand adherence to terms gives the customer tacit consent to pay at a later date and take advantage of you. Here is a reality check. If you wait until an account is 45 to 60 days old, chances are better than ninety percent that they will pay at 60 days every time and you are financing them for thirty days. There is also a better than sixty percent chance that the account will go to 90 days plus and an account that reaches 90 days has a thirty percent chance of going to third party action. Most companies will claim that collection reminder calls are made at 45 to 60 days, which implies that customers are allowed 60 days to pay. After 60 days, it is more difficult to reach people for collections. At the 60 day stage of aging, eighty percent of the credit department’s time will be spent chasing accounts and only twenty percent collecting money. Making a call as an account is just approaching terms provides the following benefits:
    • 80% of your time will be spent collecting accounts and only 20% chasing.
    • The call is friendly, simply asking the customer if the product was received in an undamaged state and reminding them of your thirty day terms. This eliminates any future excuses that the customer did not receive the product or that it was damaged and not acceptable. There is also a customer service flavor added to the call.
    • Ask for another order. This part of the call can substantially increase sales. It may be prudent with new orders to ensure that the promised payment was made before shipping.
  • Commercial Credit Agency Warning: Commercial credit reporting agencies such as Dun & Bradstreet and Equifax offer a valuable account monitoring service to the member companies that provide them with monthly aged receivable information. In addition to the compilation of negative legal data, the collection of payment information makes the credit reports highly objective and very rich in content. In return for the submission of their valuable receivables data, these member companies are generally provided with the following types of warnings:
    • Legal Items – a notification if any of their credit customers on the submitted list incurs a legal item including a statement of claim, judgment or a collection action. This allows the subscribing company an opportunity to investigate and take corrective action, such as a credit hold, until the situation is clarified and the risk level improves.
    • Payment Information – showing how their customers are paying other suppliers. This information is valuable in analyzing payment trending. If the payment habits of a customer begin to show a negative trend, the company may be running into financial difficulty and an investigation may be in order. It will also be apparent if they are paying other suppliers more promptly than you. At this stage a current credit report can be ordered and a re-assessment of the risk conducted. If necessary, a reduction in a customer credit line or a credit hold can be put on an account to prevent a bad debt or further exposure to risk.
    • Credit Groups – are conducted for certain industries by some commercial agencies in various jurisdictions. Attendance is restricted to credit professionals who share payment and negative information on customers. These meeting are an excellent method for reducing risk.

The monitoring phase of Receivables Management is all about awareness. The decision to grant credit has previously been made based upon sound risk assessment, now the task is to deliver this service profitably. This entails eliminating or reducing exposure to bad debt as previously discussed and keeping finance charges low on outstanding receivables. The method for keeping finance charges low is the regular analysis of the Aged Receivables report and an understanding of Days Sales Outstanding (DSO).

Days Sales Outstanding (DSO)

Days Sales Outstanding measures the number of times in a year that a company’s Accounts Receivable turnover. This turnover has a direct relationship with cash flow. The formula to determine DSO requires two pieces of information; a determination of your annuals sales and, of course, the total amount in outstanding receivables from your aged receivables report.

Days Sales Outstanding           =          (Accounts Receivable / Annual Sales) X 365

Example: If annual sales are $1,000,000 and total accounts receivable are $175,000

DSO     =          (AR / AS) X 365

                        (175,000 / 1,000,000) X 365

                        .175 X 365

DSO     =          64 days.

The receivables turn over (365 / 64) = 5.7 times per year. For many industries this would be considered high (DSO of 47 days with a turnover of 7.7 times per year is typically an optimal target). A DSO of 64, in this example company, should be lowered if possible to reduce financing charges and increase cash flow. The aged receivables report for the example above may look similar to the report on the next page.

 TOTAL               CURRENT           31 to 60           61 to 90              90+

 $175,000.00     107,000.00       52,200.00        12,600.00        3,200.00

 100%                          61%                  30%                    7%                     2%

The Aged Receivable figures listed above are representative of a company that has a relatively liberal approach to credit management. Conservative receivables management would likely prevent aging percentages from reaching these high levels. The 90+ level could represent accounts that may require third party action. The 61 to 90 period should be no higher than 4% (generally due to special circumstances), and the 31 to 60 day aging period should be no more than 15% as a target figure. The customers on this report are taking advantage of this organization’s generous lending policy, and the company in turn is financing their credit. Reducing the aging percentages to optimal numbers would reduce the outstanding receivables to approximately $138,000. This would in turn reduce the DSO to 50 days and the annual turnover would be 7.3 times.

Reducing the DSO by 14 days would have a substantial positive effect on cash flow. With annual sales of $1,000,000 – 1 day of sales = $2,740 X 14 = $38,360 increase in cash flow. On a line of credit with a 6% interest rate, the finance charges are $2,300.

These positive results are achieved through customer education in compliance with your terms and collection calls that begin at 25 days instead of the typical 45 days when it is more difficult to collect money. If your customers are currently taking advantage of you, it may take some time to slowly adjust them to your terms; but it can be done with patience, politeness and great customer service.

Collections

The best way to look at phase three of receivables management is the scenario of not having to worry about collecting delinquent accounts at all. In a perfect world, all of your customers are a great asset and they all pay on time. Collection activities are costly as it is an indicator that you are financing someone else’s debt and you are wasting resources in time and expense to collect it. Good will by this stage has also been exhausted. It is true; a more conservative approach to credit granting will result in lower delinquencies. Unfortunately, even this approach will not totally eliminate them, therefore it is necessary to have a procedure to conduct phase three of the receivables management program. There are a number of steps that a credit collections department will follow. These may vary depending upon the industry standards and specific customer arrangements.

  • Phone Calls: With thirty day terms, calls should start at 25 to 28 days. (See Monitoring Accounts) The second call should be made at 40 days accompanied by a hold on credit if payment is not made within five days. This is a conservative approach and although it may sound harsh, it will cause the customer to adjust to your terms to continue receiving your products and it will prevent further losses. This is most likely to occur with new accounts that have not been properly screened or are testing the waters. If it is an existing account, the important thing is communication as there would have been a business relationship established and there may be a good reason for the delay. Trust is what relationships are built on. If a customer promises payment and doesn’t deliver or fails to return calls to discuss their indebtedness, good faith may have been lost. If a customer is honest and open in discussions with suppliers, working with them could result in continued profitable sales with new conditions until their situation improves.
  • Letters: At sixty days, phone calls result in more chasing than collecting and a demand letter should be considered at seventy-five days if the customer is not responding to collection calls or has broken a promise about making a payment. Some companies use a two or three letter system with the language becoming progressively harsher in tone. I have found, through experience working with one of the larger commercial credit organizations, that the longer it takes to collect, the less likelihood of success. Once an account reaches 120 days past due, the odds of collection using in-house methods, and often third party action, becomes futile. Therefore, a two letter system speeds the process with the first demanding immediate payment within ten days to maintain their account. (Even if they pay at this point they should go on COD). If the first letter is not responded to, the second letter will demand payment within ten days or the matter will be handed over to your legal department resulting in a negative occurrence being posted on their credit report.
  • Third Party: At 120 days turn the account over to a collection agency. (A more conservative approach would dictate 90 days.) If the agency collects the account then a commission will be taken from the proceeds. If they cannot collect it, a recommendation is made either to sue or abandon the action.
  • Civil Litigation: It may be necessary to sue the customer in order to get repayment. If they are being sued by other suppliers, you may want to skip the third party collection action and go straight to litigation to be first in line. This can be a costly venture with a doubtful outcome; therefore, careful consideration must be given to the odds of collecting even if you get a judgment. In large lawsuits, legal costs are very high and most often only the law firms win, especially if the action is defended. Don’t throw good money after bad.
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Extending Credit – Part 2

Posted on January 15, 2012 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

Credit Screening

Once you have determined that your company must extend credit, set the terms, or the maximum number of days you will allow customers to wait before paying a particular invoice in full. If you establish thirty days for your terms, pretty much a standard for most industries, be prepared to educate your customers about adherence to your conditions. Remember, after thirty days you are likely paying interest to finance your customers and these aged receivables will have no value as collateral against a line of credit. The first phase in the process of managing receivables covers the extension of business credit. Companies that are liberal in their lending habits do very little checking in advance of shipping. They are, of course, at a high risk for loss. Although risk can never be eliminated entirely, it can be reduced substantially by adopting a more conservative approach to credit management. Many companies insist on COD at first and possibly credit card payments. The actual extension of credit terms requires an effective method of screening prospective credit customers and a policy for limiting exposure.

  • Credit Applications: Credit apps are a key part of the screening process as the application is completed and signed by a principle of the company seeking credit thus agreeing to your organization’s terms and conditions. LIABILITY NOTE: If the company seeking credit is a sole proprietor or a partnership, the owner(s) are also responsible for the indebtedness. If the applicant is a corporation, the shareholders or directors are not responsible for the debts of the company unless they personally guaranty them. Since most small corporations are private, it will most often be the owner applying for credit. Consider adding a clause on the application whereby the owner guarantees any outstanding amount owed to you from credit purchases they make. There are a number of important pieces of information to include on the application:
    • Primary Contact Information: Company name, how long in business, complete mailing and physical address, phone, fax, Email, web site address, and principal(s) name (if the principal(s) are to personally guaranty then obtain their date of birth and possibly social insurance number if permitted in your jurisdiction). Don’t be afraid to take down their vehicle plate number as well before they leave your premises.
    • Bank Information: Include in this section of the application the name of the customer’s bank and account number they will be using to write checks for payment of invoices, bank location along with phone number, line of credit and the amount of credit utilized.
    • Trade References: Have the applicant list at least three trade references that have recently done credit business with them including the supplier’s company name, full mailing address, credit contact name, phone, fax, length of time doing business, date of last purchase and credit limit.
  • Credit Reports: Commercial credit reports are available extensively for North American businesses and at special request globally from Dun and Bradstreet and Equifax. These reports are available for a fee; an investment that may be well worth the time and expense depending upon your exposure. With one exception, these reports are totally objective and permission is not required to obtain commercial credit information. (Note: In many jurisdictions, consumer credit information cannot be obtained without permission). Commercial credit reports are compiled from legal information (lawsuits and collections) along with payment information from trade suppliers that report customer history. The exception occurs when there is no history and information is compiled through a telephone enquiry. This type of subjective information is collected by some reporting agencies to create a report. Before purchasing a credit report, ensure that there is a record of payment history, otherwise check for legal items. 
  • Credit Groups: Some commercial credit reporting agencies offer memberships with inclusion in industry credit groups. During monthly meetings, credit professionals meet to discuss accounts. Presenting names of prospective customers to the group may result in timely information that could bring a good customer on board or deny a potentially bad account.

Making the Decision

When you feel that you have collected all of the data available, it is time to make a decision about the applicant’s creditworthiness and the amount of credit to extend. But first, there may be some investigation and information verification required on your part.

  • Analyzing Credit Applications: Credit apps, like resumes, can be very subjective in nature because the person completing them will be biased. Therefore, it is necessary to verify the information before applying any weight to its relevance in making a credit decision.
    • Contact Information: Prior to extending large amounts of credit, it may be advisable to visit the prospective customer’s facility. This can verify the address, the location where your product may be shipped and the physical state of the company you will be dealing with.
    • Bank Information: Don’t be afraid to contact the bank as they can verify if the applicant is indeed a customer and for how long. They should also be able to advise you regarding activity levels, any returned items, and possibly the status of any line of credit along with the amount utilized (generally stated by the number of figures).
    • Trade References: The weight applied to this criterion is questionable as the applicant is most likely to give you the best suppliers they deal with, possibly a relative. It is still important to contact them by phone or fax a form to the credit department requesting verification of the details submitted on the application.
    • Suspicious Activities: Be wary of any hesitation on the part of the applicant to answer any questions or give details and be very cautious regarding requests for large one time or first time purchases.
    • Analyzing Credit Reports: Commercial credit reports (except for those manually produced) are objective in that the information is supplied by unbiased third parties. It is not uncommon to have a disgruntled customer. Therefore, one line of legal information, such as a lawsuit or collection, is not necessarily reason for concern but should be questioned. More than one collection, civil action or a judgment is reason for concern. When analyzing trade information on the report, look for negative trending and recent enquiries. If payment patterns are deteriorating, the applicant may be experiencing financial difficulties, losing suppliers and seeking new sources.

There should be enough information at this point to make an informed decision. The optimal decision would be to extend credit in the amount requested. For this to be the case, the applicant company should have been operating for at least several years with no legal items, a good credit report and a number of satisfied suppliers who are paid on time. If anything negative turns up, either reduce the total amount of credit extended or deny credit altogether leaving them on COD. It may be hard at times to turn down a sale, however, that feeling will quickly disappear if the applicant burns your competitor.

Alternative Methods of Protecting Receivables

There are other methods of protecting receivables so that your company does not have the risk of incurring bad debt. It involves insuring your receivables or selling them to a factoring company. Both alternatives will cost you a commission or a portion of the amount being financed. It is only current receivables that can be financed. There are government agencies that assist, such as the Economic Development Corporation (EDC) if you are a Canadian exporter. Two types of factoring are available where receivables are actually purchased. The rate charged for Factoring with Recourse is less than that charged in Factoring without Recourse. You retain a certain level of liability for unpaid receivables with Recourse; otherwise the factoring company assumes the risk.

Next time – Monitoring credit accounts and Collections.

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Extending Credit – Part 1

Posted on January 9, 2012 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

One of the important considerations for business owners is determining the best way to be paid for products or services. There are a number of considerations to keep in mind.

  • Making it easy for the customer to buy: For retailers and many service providers, this means accepting cash along with bank or credit card payments even if there is a small fee or commission payable. Personal checks are always a risky form of payment and should be avoided.
  • Competitive methods: A competitive analysis before startup for a new company, and periodically for an existing business, should include an assessment of typical methods they accept for payment. If the major competitors accept credit card payments, it is imperative that you set up a merchant account to do the same. If they extend credit, it may be necessary for your company to offer terms. Failure to do so may drive the customers to the competition where it is more convenient to purchase goods or services.
  • Extending Credit: B2C enterprises seldom extend credit on their own. Retailers of larger ticket items often extend credit through finance companies who then accept the risk. In many industries, B2B enterprises are expected to offer a variety of payment methods to remain competitive, including the extension of credit terms. Extending credit requires a strict receivables management policy to remain in business.

Bad Debt and the Bottom Line

In a sense, there are a number of businesses that are in a catch 22 situation when it comes to offering customers credit terms. Failing to extend credit may result in lost customers, yet extending credit involves risk and possible losses. Some industries anticipate a certain amount of bad debt each year for member companies, such as .25% of annual sales as an example. Being stuck with a bad debt still hurts no matter which way you look at it, and for some companies, more than others. The financial consequences resulting from a bad debt vary depending upon the margin. A $5,000 bad debt means that a great deal of additional product must be sold in order to make up for the loss if you have a low margin. Here are a couple of instances. With a margin of 10%, you need to sell an additional $50,000 in product to cover the debt. At 25% it is $20,000 and at 100% the sales required would be equal to the debt of $5,000. If it is strictly a service business without direct costs, it is often your own time and again extra sales would equal the debt to reach break-even. Don’t forget that there are still operating expenses to pay. There is no way to totally eliminate the risk involved in the extension of credit if you finance the receivables yourself. There are a number of ways to minimize the risk and it starts with a sound Receivables Management Plan.

Three Part Process

If your company needs to extend credit to customers, it is essential to have a Receivables Management Plan in place. The primary purpose of developing the plan is reducing risk. There are other reasons as well, such as improving customer service and increasing sales.

Accounts receivable management is a three phase process:

  • Credit Screening
  • Monitoring Credit Accounts
  • Collections

Reducing risk is an effort that takes place in each of these phases. Before discussing the stages of the process, it is important to understand some key terms and principles.

Aged Receivables

When a company extends credit to customers, there are terms of repayment specified. Perishable items typically require repayment in less than ten days. Most products and services, however, have typical repayment terms of thirty days or one month attached to them. At the end of each accounting reporting period, as discussed earlier in this chapter, certain reports will be printed by the company bookkeeper. When a company offers credit to its customers, a list of receivables is created and an additional report must be printed each month. This document, called an Aged Receivables report, shows every outstanding customer invoice with an amount in each period of aging. For a company offering thirty day terms, these periods would be specified as follows:

  • Current: All outstanding invoices that have not reached their due date.
  • 1st period: Those invoices that are 31 to 60 days old.
  • 2nd period: Invoices that are aged 61 to 90 days.
  • 3rd period: Delinquent accounts that are more than 90 days past due.

Aged Receivables is the report that the credit department works each month when engaged in collection activities.

Liberal or Conservative Receivables Management

  • Liberal: It is difficult for many new business owners to turn down a sale, even if it means taking a chance. The instant sale posted to accounts receivable can often cloud thoughts of a possible entry to the bad debt account months down the road. Businesses that are highly sales driven with minimal consideration to credit risk are considered liberal in their credit or accounts receivable management policy. These companies must have high margins with lower priced items to survive as losses tend to be high and a large percentage of receivables would be in the 2nd or 3rd period of aging.
  • Conservative: Many companies, often those with higher priced products or lower margins also have a low tolerance for risk. The high negative impact on the bottom line forces many of these businesses to adopt a very conservative approach to extending credit. Extensive up front credit screening may include credit report analysis, and this is only the start for a conservative credit grantor. Their receivables management process demands strict adherence to terms and accounts are monitored closely with credit holds when an invoice ages to the 1st period. Credit limits often rise as customers prove their worthiness.

Next time – Receivables Management

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A New Year and New Opportunities

Posted on January 2, 2012 by Larry

For many businesses (and homes), 2011 was a real challenge to keep their heads above water. As the United States was slowly dragging itself out of a terrible recession, Canada was feeling the brunt of consumer spending restraints. All of the signs point to a slight improvement in growth and consumer confidence through 2012 in North America and this is good news for small business. This means more than ever, that entrepreneurs do the basic things right. Don’t assume anything. Concentrate on great customer service and understanding changing customer needs. Remember the important consideration from my book, The Small Business Planner, the customer doesn’t necessarily need what you are selling, but what you are selling must have a benefit that satisfies their need.

I am very pleased with the number of people following my blog which has grown since its inception in July last year to over 3,000 each month. I am going to continue sharing snippets from the book and occasionally express my own opinions – all in  an effort to help entrepreneurs avoid costly mistakes and hopefully make better decisions to increase revenues and profitablilaty.

2012 will see me make more speaking engagements for groups, resume my involvement with mentoring programs and possibly return to the classroom for part-time studies. Of course, I will maintain the hogh level of service that I provide my existing customers and may provide marketing and strategic planning assistance for one or two more. Included in this post is a link to a descriptive video that I just completed outlining the key benefits of this great entrepreneurial guide. You can find the video by visiting You Tube at: YouTube

Thank you for following my blog and supporting the book. I look forward to any comments you may have and don’t forget about the great templates and resources available at www.thesmallbusinessplanner.com.

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The Media Plan

Posted on December 21, 2011 by Larry

 This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

This is an example of a plan within a plan. A poorly developed Media Plan is another common mistake in the implementation of marketing strategy. At this stage, the B2C organization should have a good understanding about matching the advertising vehicle with the target audience. The tool that is utilized to schedule your ads and allocate the budget is the Media Plan which is created using spreadsheet software. There will be a plan for each month with a quarterly and an annual summary. Determine every advertising vehicle that will be used and list them. Determine the rate that you must pay for each insertion of an ad, airplay for radio, the cost of promotional items or trade shows. If the total on the spreadsheet exceeds the budgeted amount, start trimming. (A Media Plan worksheet, complete with formulas, is available with The Small Business PLanner.)

 Failing to Measure Media Results

Failing to measure results is similar to tossing dice when it comes to establishing new budgets and Media Plans each year. Identifying the lead source of each new customer is the key to effective spending and maximizing your return on advertising dollar. Make a point of asking the question, “How did you hear about us?” Educate your employees to ask the same question and keep a scorecard. You can even attach codes to certain promotions such as coupons that identify the source. Contest ballots submitted in-store or on-line through your web site can include lead source questions making it easier to measure results. This information is critical in determining your return on advertising dollar. Cut back on media that are not producing sales and spend more on those that do.

The Marketing Budget

It is more difficult to develop a marketing budget for a new business versus an established business with a proven track record. A new business must allocate funds to start up costs for basic first time marketing requirements such as a web site and marketing collateral including brochures and promotional items. Annual budgeting for a new B2B, even in the first year, is not too difficult as it will be primarily for sales tools. For a new B2C enterprise, it is not as straight forward. There are several ways to establish a budget:

  • Affordable Method:    Many new businesses do not have enough capital to meet all required start-up and initial operating costs. For organizations that sell to consumers, the first budget to get cut when funds are short is generally that portion of marketing that is allocated to the media plan. The result is reduced advertising exposure.
  • Built-In Cost: Some manufacturers, distributors, or retailers will include the advertising cost as a percentage of the individual item. Similar to paying straight sales commission, this amount becomes factored in as a cost of goods.
  • Co-op Advertising:     Charged to distributors as a percentage of products sold to large retailers to produce catalogues. Also known as in-store arrangements.
  • Task Method:  Considered a separate plan where funds are allocated as a percentage of an individual campaign or project or a one-time lump sum.
  • Percentage of Sales:  The most common method of determining marketing and media budgets for established businesses is to allocate a percentage of annual sales. Retailers often utilize this method with budgets between four and seven percent of sales being common.
  • Associations:  Membership in many trade or industry associations provide member companies with industry statistics and standards along with co-operative advertising opportunities.
  • Government:   Many businesses, such as those in tourism and agriculture or fisheries, can take advantage of government subsidies for advertising.
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Employees – Planning and Recruiting

Posted on December 10, 2011 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

As your small business grows, employees will become your most valuable asset. They are expected to deliver skill, productivity and reliability in return for a fair compensation and a healthy working environment. Employees, in any capacity, are also the biggest ambassadors of your product or service and the individuals that can make the biggest impact on customers. There are many aspects of employee relations that must be understood and subscribed to by small business owners. I will discuss some of the more obvious areas that can have a major impact on your operation. These are divided into two separate time frames. The first is a list of important considerations when recruiting an employee and the second details important factors to consider for retaining and motivating the people you have hired. Today, we’ll deal with the first aspect – plannning & recruiting.

Planning and Recruiting

The best way to avoid problems with employees after they are hired is to do a good job at the planning and recruiting level. Although there is a probationary period in your favor, usually three months, the expense of recruiting and training during that time along with lost productivity provide great incentives for doing it right from the start. Growth in any small business must be well planned to provide sustainable profitability. The two most common types of growth in a small business are facility along with production equipment and the addition of new employees, both of which must be carefully planned as there is a substantial cost to each – fixed cost. Part of a business plan is the Operations section which outlines how the company will establish, maintain and expand all of the operational processes and components that were listed earlier. This includes drafting a plan to accommodate new employees and management personnel. The best way to do this is to look ahead at your business in one year, two years, three years and five years. As sales grow, the need for new employees to fill important positions may be substantiated.

A new employee comes with a price tag, not only a wage or salary, but benefits such as: employment insurance, employer’s share of government pension, and expenses related directly to payroll such as Worker’s Compensation coverage and medical benefits if applicable. All of these costs must be considered at each stage of development as they are a fixed cost that must be met every month regardless of sales. A small business owner may find it necessary to add an employee to take orders and do clerical work when it is realized that they cannot keep wearing a large number of hats. A new employee can free up a great deal of time for the business owner, who in turn can more than offset the additional cost with increased sales. The small business owner may find it necessary to hire a new salesperson. It is relatively straight forward to calculate the performance in sales volume required from the new rep based on knowing your margins. This also helps in the assignment of objectives and bonus levels.

In establishing a growth plan for human resources, an easy way to lay out objectives and requirements is to draft an Organizational Chart (see below) for each year. The timing for the addition of new employees and the department where a vacancy must be filled can be established by looking at the sales growth figures on the Profit and Loss projections. For each projected year, create a simple organizational chart showing where new positions must be filled. Some Microsoft Office programs have SmartArt functionality to create these charts. Below are some examples.

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Promoting Your Business (Part 2)

Posted on November 21, 2011 by Larry

Advertising

Even if you have developed a great message for each target market, there still remains a tremendous hurdle. People, namely your target audience, are bombarded with advertising messages every waking hour. Think about it! Radio, television, Internet, billboards, street benches, buses, taxis, magazines, newspapers, signs, displays and direct mail are all competing for their attention. There is no escape – so how do people maintain their sanity in light of this constant barrage of noise? They filter it out. The job of a good marketer is to generate a message that will break through this barrier and create some form of recall or action – ultimately the purchase of your product or service. Considering the daily competition marketers are facing, the message must be better, or it won’t work, resulting in wasted time and money.

One way to break through the filters is to send a highly repetitive message over the air waves (at a substantial cost), until their will is broken. Some ads get attention by insulting the intelligence of the audience. This risky method does work in some cases as the individual recalls the product (possibly with some distaste), however, most small businesses do not have a budget for this kind of psychological warfare. The proper and economical way for most companies to create recall is by creating a headline for an ad or flyer, possibly in combination with a striking graphic, which has a good chance of catching the attention of the target audience. This message comes from the strategy development phase where customer core needs were established and verified. The headline should leave no doubt as to their identity, and when the target audience sees it, they will know it is directed at them alone.

How many people read junk mail? You have approximately two seconds to catch your prospective customer’s attention before your masterpiece lands in the trash which is where most of these messages end up. The same applies to poorly written ads in magazines and newspapers that readers skip over. Getting the attention of your target audience is the master key to successful advertising so if you’re not sure about doing it right, hire a professional to help.

In many cases, individuals need to get emotionally charged before they buy. This can be achieved by using power benefit words in your headline. Remember, benefits satisfy needs and if these needs are not addressed then people won’t buy. Attention can also be achieved by creating emotion using sympathy, fear, humor, or sex appeal often in conjunction with an eye catching graphic.

CREATING EFFECTIVE ADS

Image Is Everything

The first of these mistakes is image, or should I say the wrong image and, it is worth repeating that you only get one chance to make a good first impression. This first impression is very difficult to change in people’s minds if it is not favorable. Unfortunately many small businesses cut corners here. Instead of having a professional create an outstanding image, expenses are trimmed and key marketing collateral are created with inappropriate software and sub-standard creative ability resulting in the kind of branding that should be avoided. Company logos, brochures, flyers, print ads and the company web site all convey an impression to the target audience. Should you decide to tackle this important aspect of production yourself, make sure that you have the proper tools, the required level of skill, and the time to do it right – otherwise outsource it to a pro. Your time is more productively spent in other important aspects of the business operations. If indeed you do posses the three attributes necessary to develop your own work, keep this in mind. It is human nature to believe that everything we create is a masterpiece. So before you publish your work, get some reaction from more than one objective third party and appreciate their input and proofread it several times.

One Message for Each Market

Another mistake that is often made by small business owners in the area of advertising is trying to include everything they sell in one message. This is generally done to cut expenses but it is a guaranteed way to create junk mail or ads that are totally ignored. Each target audience has unique core needs based upon demographic or psychographic characteristics; therefore, each market requires a unique message to address these needs. Readers are not willing to wade through paragraphs of material pertaining to another group’s interests before reaching the copy you are directing toward them. Each target group requires a unique message and the headline must meet the test: Is there any question as to the identity of the target audience?

Your Company Name as a Headline?

Why do so many small business owners try to gain attention by using their name as a headline? This is the most critical part of the message. Make a point of looking at some ads in the yellow pages and flyers that come to your door and you will see that a vast majority of enterprises use their name as a headline. This is fine if your name is Nike, Sony, Ford, or Coca Cola. These companies have spent millions of dollars making these trade names a household word. So what makes most small business owners think that they can brand their own name on a shoe string budget? In actual fact, unless your name is very descriptive of the benefit that your customer can expect, this act of vanity is almost certain to create junk mail. A flyer has about four seconds to catch the attention of the target audience before it lands in the recycling bin. An effective headline or eye catching graphic is the most important part of the message. Some of the best ads I have seen don’t even show the company name, just the benefits and how to obtain them.

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

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Promoting Your Business (Part 1)

Posted on November 17, 2011 by Larry

Sales Promotion, Publicity and Public Relations

 This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of your favorite retailers.  

  • Advertising
  • Personal Selling
  • Sales Promotion
  • Public Relations
  • Publicity

Advertising tops the list if you are a B2C (Business to Consumer enterprise) and all of the other methods are way down the list. This means establishing a budget that will cover advertising production and placement costs that will be outlined in the Media Plan. If you operate a B2B (Business to Business) then the primary way to promote your company is through personal selling, either a sales force or by you, the owner. This means your budget will be primarily for the development of effective sales tools. Other methods of promoting a business are Sales Promotion, Publicity and Public Relations. (See the diagram below.) Although any one of these areas can achieve results if delivered effectively, the return in sales is minimal in comparison to the results that can be obtained from the primary methods of promotion listed for each type of marketing environment. In this blog I will discuss the three least effective methods on the list.

 The Small Business Planner - Methods of promoting your small business.

Sales Promotion

There are two forms of sales promotion, both of which offer your target customer or your dealer incentives to purchase products from you. There is a cost attached to this form of promotion.

Consumer Promotion:

  • Free Samples included with the primary product.
  • Coupons for redemption.
  • Rebates.
  • Patronage Rewards with a point accumulation on purchases that can be redeemed at a later date for your products, or, bonuses such as dining or travel.
  • Contests are also a form of sales promotion and a great way to build qualified prospects in the marketing database.

Trade Promotion:

  • Discounts.
  • Promotional products. (Items with your logo and branding).
  • Rewards for achieving a set sales volume.
  • Co-Operative Advertising with a dealer or retailer.
  • Trade Show expenses.

Publicity

The only cost here is your time. Publicity is simply getting your name in front of people and there are several ways to accomplish this.

  • Press Releases can be developed on newsworthy items about your business such as a new product launch, store opening or event sponsorship. There are basically two ways to get your word out via press releases. The first is to have an editor of a newspaper or magazine publish it, however, given the number of releases they receive each day it may need to be a slow news day. The other method is to send the release to all of your customers or prospects in your database and post it on your company web site. When drafting a press release, be sure to write it objectively like a newspaper article in the third person with a catchy but brief headline. It should also have a date for release and contact information including name, phone number, and Email address.
  • Public Speaking is a great way to gain an audience and expand your network. Many organizations, such as chambers of commerce and trade groups invite industry experts to address their members.
  • Publishing articles and books is another way of spreading the word about you and your business. Many publications look for experts in various fields to write articles of interest for their readers. In return, a free ad and exposure is offered for the contribution, but try not to blow your own horn too much. The article is meant to help educate or entertain the reader in some way. A plug for your business is usually allowed at the end which should always include your web site address and contact information.

Public Relations

Public Relations is all about image and the way your company is perceived in the public eye. There is a cost attached to these activities which can often be a co-operative effort with another company, group or charity.

  • Charitable Donations are guaranteed to create favorable opinion and this type of P.R. generally involves donating a percentage of sales for one day or another specified period of time to a popular charity. The event can often be promoted free as a community event by the sponsor along with local newspapers or radio stations.
  • Give-aways such as providing items for the needy and sponsoring food drives can be effective. Providing product for high profile news-making events proved invaluable for Oakley Sunglasses during the Miner Miracle on October 13th, 2010.  They supplied a pair of their glasses to each of the thirty-three miners rescued from the San Jose mine in Chile. You can’t put a price on this kind of exposure where your product is viewed by millions of people on all major television networks worldwide.
  • Sponsorships are another great way of getting your name in front of the public. Sponsoring local sports teams such as minor baseball, soccer or hockey provides youth organizations with the funds needed to operate league play and your name is front and center on the uniforms. If you provide sponsorship money for an event then be sure to get a plug for your business on the programs or advertising whenever possible.

Next time – Advertising

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Marketing – Implementing the Strategy

Posted on November 7, 2011 by Larry

This is an excerpt from The Small Business Planner and is protected by copyright. The book is available from your favorite bookstore or on-line. Go to,    http://thesmallbusinessplanner.com/sbp.php for a list of retail sites.

The first set of common marketing mistakes discussed at the start of this chapter occurred during the strategy development process prior to action plan implementation. The remainder of the mistakes that were mentioned occur in the development and execution of the action plan – those tactics that make the strategy work. The illustration made by the Marketing Planning Process in The Small Business Planner, clearly shows the tasks to be performed before action planning. Most companies ignore this area of planning and jump right to the Action Plan stage; printing flyers, brochures, and paying for print ads that will become trash or just ignored. This is most often a result of inadequate research and investigation to properly answer the key questions: “Who is my customer and what do they really need?” along with, “Why should the customer buy from me?” When developed properly, the marketing strategy developed can be built into the mix; the actual Product, the Price, Place (distribution to the end user), and Promotion. Let’s examine the first three.

  • Product: This could include the actual product design, the packaging to reflect and restate your positioning, or a service business that clearly shows in the offering “What’s in it for the customer?”, along with your positioning statement confirming the competitive advantage.
  • Price: The offering must deliver value to the customer but you still need to make a profit. A critical mistake many businesses make with price is to position their product or service on low price. A low price strategy may work, if the bottom line can support it. You will know what these critical figures are from the Profit and Loss projection you created earlier. This is the minimum price you need to charge in order to sustain and grow your business. Beating the competition on price requires lower overheads (fixed costs); purchasing in higher volumes to encourage supplier discounts (raw material and resale products); or better economies of scale relating to manufacturing. If this isn’t possible, try providing a better product or superior customer service. Some people don’t buy a lower priced product or service because they often equate price with quality. The pricing strategy utilized by most small businesses is Meet the Competition.

Once you have set a price – stick to it! Print rate sheets and offer discounts on a consistent basis for volume purchases or quick payment only. Altering from your price sheet indiscriminately will result in a lack of credibility.

  • Place: Refers to the way in which products will reach the end user. You may need to consider channels and develop channel partners from manufacturer, to wholesaler, distributor, dealer or retailer. Location can have a very large monetary effect on distribution and if you are an Internet business these issues primarily concern shipping to customers. If the plan is to develop a dealer network, a suggested retail price must be established for the product. This allows you to sell directly to the end customer without competing with your dealers, but, your retail price must always be the suggested list price and never lower.

Next time – The 4th ‘P’ – Promotion.

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