Is Your Business Ready for Growth?

Most business people want to grow their business but a question often comes up is, “Am I ready to grow or can I afford to grow?”  Those are big questions for small business owners because of the time, commitment, and financial resources it takes to successfully grow a business.

Inventory

The first step towards growth is to take inventory on your business. Richard Proffer, business development specialist for University of Missouri Extension, says, “I am not talking about physical inventory where you count your product but a more mental and financial inventory to see if you have lined up the right resources to grow.”

For this inventory, the business owner will need to invest time in analyzing the current situation and work on redefining the business’s goals. This analysis will allow the owner to make smarter decisions, be more accurate in the financial projections and move faster into growth when it happens.

Many business owners face the Red Queen paradox where they feel the constant strain of working and working and not getting anywhere but where they started.  This feeling is typical of entrepreneurs who have not done a good job of planning their business’s future. “Simply doing more of the same thing is usually not the answer for growing the business,” per Proffer.

 How to Plan

The first step in planning for a business’s growth is taking that inventory and defining where the owner wants to be in the future with the business. Then the owner plans out what needs to happen with the business either in sales, employees, financials or marketing to reach the desired goal. The third step is to start putting into action processes to reach the goal in the stated time. Finally, goals need to be set so progress can be measured and the owner knows the right path has been chosen for success or where to make corrections to the plan. 

If business growth is part of your plans, feel free to contact Richard Proffer at the local MU Extension office at 573-243-3581 or email him at profferrd@missouri.edu.  He is available to answer questions on small business and help make them successful. 

Who Really Are Your Customers

When I was in the advertising business, I would always ask my clients “Who are your customers?” I would quite often get the common response of “Everyone.”  Even if I would question further, I got the same response.  I finally would start to talk about categories like most frequent customers and those that only came in around specific times of the year and we started to get a better picture.

Those retailers were not unlike many other small business owners.  They want to claim everyone as their customer, when in reality, there is only a certain percentage of people who would use that business’s product.

Who Are Your Customers?

One of the ways to look at segmenting a business’s customers is break them into the users or choosers.  Quite often it is not the users who are buying the product but rather the choosers.  Both audiences need to be marketed to, but in different ways and the business owner must know the motivation to buy or recommend behind each segment so the marketing efforts can be successful. Realize by knowing these motivations, the business increases its ability to drive sales up.

 What Type of Person is the Buyer?

A business owner starts a customer profile by letting go of the myth of “everybody is my customer” and really thinking who are my most frequent buyers. The owner should also know what motivates them to buy or the product’s benefits and features. Here you want to learn about client’s values, attitudes and lifestyles.

What Are Their Buying Habits?

The second step in profiling customers is to learn their buying habits. Where do they shop, spend money, spend leisure time or even more important, where are they using your product. Knowing where they are using the product allows marketing to be not place but time specific which increases the results of the marketing the business is doing.

Who’s the Ideal Customer?

The third step is to determine how many of the ideal customers are really out there in the marketplace. Knowing age, marital status, home-ownership and other descriptive criteria will help in rounding out the picture of the top customer.

 Where is Marketing Currently Reaching?

The final step is to start using this new found information to better target the marketing being done. Ask the question – “who is my marketing currently reaching and do they look anything like my ideal customer?”  If not, then revise your plans and change up a few things so the message is reaching the right audience.

Your local small business technology development center is available to help you in determining the correct audience by calling 573-243-3581. 

"Yes Virginia, there is Funding for your Business..."

Just as the headline refers to the 1890’s news story in The (New York) Sun, there is funding in the capital world for many businesses if they cannot get it from traditional local or institutional banks. 

Where to Find Funding

A business should always try to go local first in seeking funding either from community banks or the larger regional/institutional banks.   But not every business can fit the criteria of local banks and when turned down, they must go elsewhere.  But where is elsewhere is the question University of Missouri Extension Business Development counselors often get when these entrepreneurs come to our offices. 

After learning about the business, its past financial performance and where the owner wants to go with the new funding, the matching up process for the business against several new opportunities on the lending market can get started. 

Non-Profit Lender

One set of new lenders is the nonprofit sector.  While nonprofits have always been around, more and more are starting to lend money to qualified business owners or startups.  The lendee must meet criteria set by the nonprofit but if met, the terms are usually more flexible than a traditional bank loan.  In most cases, the lendee must show refusals letters from banks as proof of need.

Online Environment Lenders

Another set is the online environment.  Companies like OnDeck, Lending Club, Street Shares, Source 1 Capital and many others are now competing for local loans as many banking communities continue to have tight lending requirements. Here the entrepreneur goes to the website, completes the profile and the people behind the scenes go to work on matching the request up to potential lenders.  These lenders may be national banks outside of the local market area, financial investors, venture capital firms or other people or organizations willing to lend money to the entrepreneurial marketplace.

A second part of the online lending world are the peer to peer networks.  Here the entrepreneur tells the business’s story, the need for capital and the planned uses for it.  As people read the application, they decide on to invest or not in the opportunity.  Examples of this type of lending are Kabbage, Kiva, Prosper, and Zopa. 

A way gaining popularity amongst early retirees is using their tax-deferred retirement savings to start a business. This method is complicated due to the tax liability and the many maneuvers to avoid tax penalties for early withdrawal.  Guidant iFinance is an example of this type of lending.

Credit Cards

One not so new way more people are looking at is credit cards.  The National Small Business Association reported that about 33 percent of small businesses has used credit card financing in the last 12 months to help meet capital needs. Overusing this method can lead to cash flow chokes later on in the life of the business so entrepreneurs really need to plan out their usage of this option.

Membership Store Lenders

One final way is membership stores like Sam’s Club or Costco’s are turning to lending to their membership businesses as a way to help grow market share and retain customers.  It is important to know that only businesses can apply for these loans not a consumer.  These loans are traditionally under $25,000 and membership is required for application.  Not all club stores participate in this program so the entrepreneur will need to ask and not assume they do. 

Your local Extension small business technology and development center in Jackson, MO is glad to help entrepreneurs sort out the business’s financial needs and match up sources of capital that will increase cash flow and create a healthier business. Just call 573-243-3581 and ask for Richard Proffer or email him at profferrd@missouri.edu.  

Balance Sheet- Does it Matter to a Business

The one of three forms a business owner often does not understand is a balance sheet. This form is one of the best methods for an owner to see how the financial health of the business is and possibly start to see where to improve the business.

What is a Balance Sheet?

The balance sheet is divided into three parts – assets, liabilities and equity.  An asset is something a business owns or has value like cash, equipment, inventory and investments. When completing a balance sheet, do not forget to include items you may not have complete ownership to like the building, a leased car etc.

What is an Asset?

There are two types of assets – current and non-current. A current asset can be turned into cash quickly (usually within one year) like cash, accounts receivable and inventory.  A business owner would not normally expect to keep owed amounts or inventory past this one-year time frame anyway. A non-current asset is the opposite – it is not expected to be turned into cash quickly and include items like fixed assets (land, facilities, equipment and cars.  These assets tend to be used in creating sales for the business.

What is a Liability?

The second part is the liabilities. This is where the business reports what it owes to other people or businesses.  Another name for these items is accounts payable.  Again this section is divided into current and non-current liabilities with the same time requirement as assets. Current paid off within a year and non-current longer than a year is how a business owner should look at the items.

What is Owner’s Equity?

The final section is equity and shows how much the business is worth to the owner(s). It should be the difference between assets minus liabilities. This section can be either positive or negative depending on what is happening within the business. If there is a decision to expand operations, then this section may be in the red due to increased expenses. If there was a significant in sales, the owner may decide to keep money in the business for future use and it would be in the black.

The one thing a balance sheet does not show is how profitable a business is. This is reported on the income statement (a form we will talk about in another column). 

As a business owner, the balance sheet provides a snapshot of the health of the business at that moment and is an aid in deciding on future plans for the business. If there are questions about a balance sheet or any part of your business, feel free to contact Richard Proffer at the University of Missouri Extension Small Business Technology Development Center at 573-243-3581 or email at profferrd@missouri.edu. 

Where Did My Cash Go?

A question many small business owners ask themselves way too often.  In this column, I have written about the balance sheet and the income statement as financial tools to help entrepreneurs manage their business.  But what if that entrepreneur could predict how much cash would be coming in to and going out of the business on a monthly basis? Or better yet, be able to look further months down the road and have an idea of the in and out flow of cash?

 What is a Cash Flow Statement?

This final of the big three financial reports is called the Cash Flow Statement. This report shows the cash received and paid out on a time specified period as related to the business’s revenue and expense categories found on the income statement. This report is very helpful for startups.

A simple analogy of this report would be to look at the business checkbook where each deposit and withdrawal is recorded. The cash flow report does the same thing except it groups the in and out flows under categories.  By doing this, the owner is able to see monthly trends by categories and annually start to adjust for seasonal variances. 

The Cash Cycle

This report also helps the owner stay on top of the business cash cycle – the time lapse from when money was spent to generate sales till the revenue from sales comes in to the business. This cycle could be days, weeks, or months, but it shows the owner if additional cash is needed to cover expenses until sales revenue comes in from the sales related expenditure.

The cash cycle sounds easy but the devil is in the details. The owner will need to be diligent in tracking the cash flow in and out of the business on a regular basis.

For more information on this final top three financial small business statement or questions, feel free to contact Richard Proffer, business development specialist, at 573-243-3581 or email him at profferrd@missouri.edu.   

How to Set Your Business Apart from Your Competition

As I spend time with friends, I often hear them say, “There is no unique place to go shop these days. They all have the same stuff.”  To which I reply, “why do you shop where you do?’  This leads to sometimes an interesting dinner conversation. But it always reminds me many business owners may not know how to set themselves apart from the competition with little or no cost.

Business Image

Creating an image of your business being different than the competition is part of establishing a competitive advantage for the business.  As a business owner, the competition for your business should be well researched so the idea of what you will do differently will be clearly thought out and easy to implement. Two ways to establish the business’s competitive advantage is pricing and the market.  With pricing, you can lower the price by finding a way to be more efficient thus lowering costs. With the market, you find a niche and exploit it to attract more customers.

Quality of Service

In creating a competitive advantage for the market, some strategies are to really push superior customer service, increase product quality or benefits to the customer, create an atmosphere where customers are welcomed or offer additional add-on services not currently offered by your competitors. The idea behind higher quality is to prove the product to be of such high quality that the niche customers will pay more for it.  I know I am glad to pay for something of quality that will last longer than one month. With customer service, the first impression needs to be positive as customers make quick decisions on if they will come back or not within minutes of entering the business. Also finding new uses of a product and showing it off is another way to benefit the customer. In the store, show how piece of fabric could be used as a fast and easy table runner for an upcoming house party. By focusing on a niche audience, you focus on the needs or desires of a narrow audience who find it hard to shop.  I used to work in a local Big and Tall men’s clothing store.  The store was definitely a niche since we started at extra-large and went up to eight extra-large.  The people who came to us typically had few retail choices and with our focus taking care of them, they kept coming back. We had chairs for them to sit on, we kept it cool even on winter days. They did not have to struggle to get a shirt or pant, the sales staff did it for them and so on. 

Pricing and Product Efficiency

On pricing, the business is typically working on a lower price point to attract new customers.  This method is fine if your way to doing things is more sustainable because the serious competitor will also work to match your price. Some ways to do this is to increase your production efficiencies.  Here you learn to be more energy efficient, buy product for lower prices or work out credit terms with the suppliers. As a business owner, you might upgrade your technology to better track inventory, record sales for bookkeeping purposes or to develop an online presence. Innovation is also a way to reduce price and it does not necessarily always mean technology.  You could be innovative on how you promote a sale through Facebook or other social media outlets, by better tracking your customer’s purchases to remind them when a similar product has come in or being more personal to customers by creating an anniversary/birthday program. As the business owner, staying on top of overhead is a daily task.  This is an area where a business owner can lose his shirt quickly. Staying aware of employee turnover, salaries, benefits, operational costs and physical structure costs like rent, can help see areas to trim. 

Creating a competitive advantage is important to the success of a business. The business can stand out and attract customers or be like its competitors and be open waiting on the doors to open. If interested in obtaining free assistance in establishing your business’s competitive advantage, feel free to contact Richard Proffer at the University of Missouri Cape Girardeau County Extension SBTDC at 573-243-3581 or email him at profferrd@missouri.edu. 

Small Businesses Can do Customer Focused Promotions

Many small business owners see the big box stores doing promotions and wish they could do that. They can do them but differently and quite often more effective. It only takes some careful thought and partnering.

Promotions

Sales promotion spending has grown dramatically in recent years because a good planned out promotion drives people into the store and can generate purchases. In today’s very competitive environment, sometimes a promotion gives the edge to a retailer and creates an opportunity to make a life-long customer once he gets into the store.

How to Get New Customers

If a store’s product mix is in the mature life cycle stage, then only growth can come from stealing market share (customers) from a competitor. If the store’s mix is commodity with few distinctive features, then the marketing of all store’s is relatively the same.  Finally, with America coming out of its worst recession in decades, spenders are slowly opening their purses and are looking for reasons to buy – hence a promotion.

Sales promotions are not meant to generate long term behavior changes but rather short term increases in sales.   This increase is caused by the change in the price/value relationship a consumer sees in a product. For example, a customer sees a lower price for the same value product, this can cause a change in decision on which to purchase very quickly.

Small Business Efficient Promotions Strategies

How can a small business owner effectively do promotions? When asked that question in both

my classes and counseling sessions, I ask questions back.  I often start by “who is the target audience you are trying to reach?” “Tell me more about them beyond just age, gender, marital status etc.- tell me why they buy this product?” These and other questions get the owner thinking more in depth about why do a promotion.  

The Effect of Promotions

Once we have more knowledge of the audience, the promotion can be planned to better appeal to them.  For example, I once had a client in my advertising career, who wanted to generate more traffic parents with children.  After doing some research, I came up with the grand prize of two electric race cars to be given away. We sought out partners and the local Coke bottler signed on and became the main sponsor.  They got displays at the front of the store and end aisle and the car prominently placed on the top of the product.  The results were overwhelming.  The store sold more Coke in two weeks than they had sold in months and definitely noticed an increase in families in the store. Coke was happy because they were selling more to the store than they had recent months since Pepsi had agreed to higher slotting fees and gotten more shelf space.

As local store owner, a great place to start planning is with your local media partners. They have many opportunities to help you plan promotions and can be very efficient in reaching your target audience. Also, my office is always willing to help small business owners plan out their events.  Your local Cape Girardeau County SBTDC can be reached by contacting Richard Proffer at 573-243-3581 or emailing him at profferrd@missouri.edu. 

Business Planning 101

Developing a business plan is sometimes a daunting task and hard work by business owners. However, business planning can help advance any company or small business forward. Why write a business plan, you may ask, it provides entrepreneurs a powerful tool for the foundation and goals for their business. There are many reasons to why writing a business plan is essential to any owner. Scott Pietreface, owner of Fumatore di Sigaro Premier Lounge and Cigar Shoppe located in Cape Girardeau Mo., said that, “All businesses should have a business plan because this allows entrepreneurs to brainstorm ideas that they would like to implement how to accomplish them.”

 Importance of a Business Plan

Think of a business plan as a blueprint for a home. What can help keep the house up and steady? What makes a blueprint for a house successful? As for businesses, what can help a business stay steady and up and running? Also, how can a business increase profit? What can help make a business a successful one? The answer is preparation and developing a business plan. Business plans are excellent tools for implementing the company’s vision, mission, and goals to investors, customers, and even employees. Also, to give any business any chance of success, writing a business plan will guarantee that business owners pay attention to financial details, such a budgeting. According to Rieva Lesonksy, author of A Business Plan Doubles

Your Chances for Success, says the findings of a new survey, “The study indicated that the type of entrepreneur who completes a business plan is more likely to run a successful business.” Pietreface spent two and a half years developing a thorough business plan. He said, “I always had a vision of what I wanted the business to look like, but didn’t know how to get there.” The business plan laid everything out for Scott and for many other business entrepreneurs.

Competitors

With every company, comes a competitor, and establishing a business plan will provide business owners with strategies to differentiate their products.  This allows them to better market their business to customers better than the competitor can. Also, business planning is a critical time process because it allows entrepreneurs to test “what-if” situations and create back-up plans just in case the first plan turns out a little differently than what was expected. Pietreface included, “Fail to plan, then you plan to fail.” The business plan can show you what your business’s strengths and weaknesses are and this forces the entrepreneurs to create a timeline of events that must happen. Also, plans can help provide organization tactics for business owners. Nonetheless, business plans will help entrepreneurs survive over time and have a constructive impact to their business.

Your local small business technology development center in Jackson, MO is always ready to help any future or present entrepreneur plan for their start up or growth of the business idea.  The Jackson center serves the I-55 corridor from Ste. Genevieve to Pemiscot counties and

includes Bollinger, Madison, Iron, St. Francois and Washington counties. The center is also part of a statewide network so the resources extend beyond Southeast Missouri. For assistance just call 573-243-3581 and ask for Richard Proffer. 

THE THREE PRICING STRATEGIES FOR SMALL BUSINESS OWNERS

One of the questions that comes up in my counseling sessions most frequently is “what can I charge for this?”  After a few discussions and cost gathering, we arrive at a true cost.  Honestly, there are only three pricing strategies a small business owner can use in any situation.  These strategies are: every day low price (EDLP), high price high value and market parity.

The EDLP Method

EDLP is the strategy typically adopted by the big discount chains where they advertise the lowest price. Here the plan is to achieve high sales with low profit. It is a strategy to grow market share, remain competitive or restrict new competition. As a small business owner though, it is a hard one to maintain as the owner may develop a downward spiral on pricing and creating lower and lower profit margins. Main street businesses typically do not have the resources to take on the big chain stores so this strategy is typically not the one used. It does not mean the business can’t temporarily do a sales event where they might have the lowest price but sustaining that price point would be difficult to do. A small business could help control costs by joining a cooperative to increase buying power, work with suppliers to create special events where their products are prominently featured in the store and in advertising or take on new lines with marketing support from the supplier. A price sensitive shopper is the best target for this pricing strategy as they have the lowest expectations for service.

Higher Price, Higher Value Method

The second method is higher price high value when compared to the competition. Here the small business owner can certainly compete because of the high degree of value that can be added to the purchase. In this situation the store is constantly seeking ways to improve the quality of the

experience when shopping, buying and using the purchased product. When compared to a big chain, the customer usually feels they are getting taken care of better, able to get answers to questions from knowledgeable employees who will take the time necessary or the service after the sale.  Most people state they are willing to pay more if they are assured of a quality experience, customer service and support after the sale. This strategy often creates the belief products purchased at this price are better than those at lower prices as they are made with better materials or ingredients, last longer or picked at the best time for taste. Also if a store handles a product with a short life like fresh fish, then a higher price may be charged to account for the lifespan. A store can also use this pricing strategy if they are on the front end of a new product roll out and get it before other stores begin to carry it.

 Same Market, Same Product, Same Price Method

The final strategy is market parity where pricing is held to relatively the same throughout the market for the same product.  With this strategy, the stores offer the same product with little differences in service, price, or quality. This customer is not as price sensitive as the EDLP shopper but is not usually prepared to pay for extras like service after the sale. The key for this pricing strategy to exist is for there to be little difference in the marketplace between all the competitors. Once one competitor breaks rank, customers tend to gravitate towards that business.

The Floor

Pricing is also controlled internally by two factors – ceiling and floor. The floor is where the business adds up all the costs related to the product and says “I have to have this much just to cover my costs.” The old adage “you will make it up in volume” is not true because once a business starts losing money on one product it rarely can buy enough to lower costs to make money at that price.  This floor is typically the breakeven point for the business.

The Ceiling

The ceiling is the highest price the market can bear or the customers will pay. A business owner following the high price high value strategy needs to make sure the value being added to the product or service justifies the price or sales will dwindle. A retailer can test pricing to find the ceiling but should always be aware of what is happening the marketplace.

If a business owner would like more information on pricing strategies feel free to contact Richard Proffer at the University of Missouri Extension Center Small Business Technology Development Center in Jackson, MO.  He can be reached at 573-243-3581 or email at profferrd@missouri.edu. 

Coupons Still a Solid Small Business Sales Strategy

Coupons are the most common sales promotional tool used by businesses. Their usage continues to grow annually as they provide a way to save money for the consumer while the retailer uses them as a way to grow and retain sales.  The coupon has been consistently proven to be an effective tool in business.

 Coupon Use by the Numbers

They are a cost efficient way to generate sales because literally everyone in the buying market uses them at some time.  Here are a few statistics that prove the usage of coupons in the marketplace from 2016 year to date analysis.

1)      Over half of consumers use a coupon at least one of every four purchases (RetailMe Not).

2)      45.1% of Millennials use coupons (CCG Catalyst).

3)       Valassis reports

a.       88% of affluent shoppers use coupons from the mail

b.      81% find print coupons before shopping

c.       77% search for deals in store circulars.

4)      Print and online are the most frequently use mediums to search for incentives

5)      85% of consumers look for coupons (non-grocery) prior to visiting a retailer (Retail MeNot).

 Who Uses Coupons

There are myths as who uses a coupon to shop.  Typically, women are the biggest users of coupons at 82% while men are at 56%.  The difference is related to the idea that women do most of the shopping but as times continue to change, I believe men will use coupons more and more. Interesting as heavy coupon users (5+ coupons used weekly) women and men are very close with a four percentage point spread.  Roughly 70% of all households use coupons and of the heavy user households it is about 30%. In age brackets, adults 18-24, 66% have used coupons (a group many retailers feel do not use coupons at all). With coupon usage continuing to climb as the age group ages to 61+ at 80% usage. Missouri households tend to use coupons at 81% while heavy users are 16%, so the practice is very active here in our state. (Information for these statistics is from the Manufacturers Coupon Control Center).

How to Get Your Coupons Out There

As a retailer, you have many options to choose from for coupon delivery.  Some, like the FSI, are used mainly by national companies. For our local businesses, the options are direct mail, ROP newspaper, local magazines, handouts and electronic. Each has its own advantages and disadvantages and to get the best results the retailer needs to evaluate them against his/her marketing objectives for the coupon.

How to Attract with Coupons

Another question is how much should the coupon be for? According to NCH Promotional Services, consumers require a coupon value of 23 cents before they would consider using one. For a product they have not tried before, a value of 44 cents was required. The survey pointed out that by increasing the value did not necessarily mean a higher redemption rate. 

So as a local small business, the idea of couponing should be considered as part of your promotional marketing mix.  It can deliver an audience ready to buy.  If there are questions about this article or would like to set up a time to discuss your business marketing strategies, feel free to contact Richard Proffer, University of Missouri Extension Business Development Specialist at 573-243-3581 or profferrd@missouri.edu. 

BRANDING YOUR LOCAL BUSINESS

As we think of a company what do we remember about it? The logo, the slogan, the price or the experience we have with the store or product? For most shoppers, it is the experience they have they remember the most and for the longest. This is because it helpful in solving a need the shopper had at the time or a pleasant impulse purchase.

For stores to attract customers, they need to provide solutions to the desired customer’s needs and desires.  This self-created image allows the business to stand out and be noticed by the most desired customers and to attract customers who have just entered the marketplace for the store’s product mix.

The image or brand is often described as the promise made to customers about what and how they will experience when they shop the store.  This image helps in creating the identity that people can relate to while shopping. This philosophy must then run all through the operation to be successful at every customer touchpoint.  For example, Disney has a strong family entertainment philosophy and their branding portrays families, fun, clean environments and strong customer service.  This idea extends to the employees also where they are called “cast members” instead employees. 

The benefits created from a strong brand are helpful in growing a business. According to the Kauffman Foundation, “businesses with strong brands often see these benefits: 1) enjoy a higher perceived value of their products or services, 2) maintain higher margins over their competitors, 3) create loyal customers who don’t switch easily, 4) cross-sell other products and services easier and 5) develop new products and quicker.

Some questions a business owner should ask regarding how to communicate the brand to customers and prospects are: 1) What can my customers expect from doing business with me?, 2) Why will customers choose my business over my competitors?, 3) What are the core values of my business?, and 4) How do I want my customers to describe my business to others?

Once those answers are developed, then the owner can look at how to tell the story of the business.  That story needs to contain the mission statement and core values of the business in a way that clearly tells why the business exists and relates to the customers. That message needs to be included in all touchpoints with customers, employees, suppliers, etc. so all users see a consistent message.

None of this happens overnight but rather over time spent thinking and rethinking.  Often it helps to spend time with a person skilled in this area to help the business owners really get the message down pat and ready to be used daily.  Your local University of Missouri Extension Business Development Specialist can help you at no charge in this process.  The owner just needs to call Richard Proffer at 573-243-3581 or email him at profferrd@missouri.edu. 

Increasing Sales Through Events

When I was in the cable ad sales business, I helped small businesses plan promotions (sweepstakes or contests) to drive customers into their stores.  One in particular stands out to me.  It was called “Mountain of Coke®” and a local grocery store chain in Lansing, MI.  We worked with the local distributor to provide a tall display of Coca-Cola® in the front of the store in a shape of a mountain with a motorized car on the top.  People would register to win the car on a given day. This activity along with the store’s agreement to special pricing, sold more product that month then the store had ever sold. So promotions do work if planned out carefully.

Sweepstakes Vs. Contest

What is a sweepstakes versus a contest promotion? The former has the winner chosen purely by chance – their name is drawn from a list of people who registered and no purchase required. The later has the winner chosen by demonstrating some sort of skill like writing an essay on how the person would use the car and purchase could be required to win.

Why Use a Sweepstake?

Sweepstakes pull in a larger number of registrations due to the simplicity of being able to win. According to Manufacturers Coupon Control Center, sweepstakes attract more than ten times the number of entrants than contests.  Sweepstakes are best used to attract a large audience to your business or product whereas contests are used to appeal to a more targeted audience (hence the skill element).

Either tactic can create excitement around your business, event or product and provide a burst of short term sales.  It could also help undecided buyers purchase the product or shop your business for the first time. Also the business’s image can be reinforced to current customers as the place to purchase solutions to their needs or wants.

As a small business owner, it is not advised to go out and start running your own sweepstakes or contests.  There are legal factors that need to be addressed on the federal, state and sometimes local levels.  By partnering with your local media salesperson to plan such an event, you can get them to help in this area or contact your own attorney to get legal advice. 

My grocery client was very happy with the results. His goal of having a burst in sales over a specific time period was achieved and exceeded his expectations. All small business owners should be encouraged to try this marketing tactic to drive sales and extend brand awareness.  If interested, feel free to contact me at 573-243-3581 or email me at profferrd@missouri.edu.  

10 Do’s for Website Promotion

The internet has become a household tool that everyone knows how to use it seems. Even first graders know how to wiz around on the web faster than I do sometimes. But while it is now a common place part of our lives, as a small business owner, do we effectively use it to benefit your own business?

Your Website

Just because you have a website does not mean people (your potential customers) will see it. Yes, it can make your small business look as capable as a large business but the people still have to see it. The need to promote your website is just as important the budget you developed to get it built.  So once the gate is built, you have to develop ways to keep it open for your target audience to find it and either go shopping on it or learn more about your small business.  You have got to promote the website to make this happen.

 Promotion of Your Website

To make your website promotion effective, a small business owner needs to decide why do you want to be on the web anyway? Some reasons come to mind immediately – to communicate to staff or customers. Another one is to share your knowledge about a topic so you appear to be a source of information for people seeking that information. Thirdly, it is a way to show your business’s personality so people know what to expect when they go in. Or it is one method customer’s can shop your store. Hopefully, you know your reasons for wanting to be on the web and use them as a guide in developing your website.

 Website Efficiency

Understand for a website to be effective, you need to constantly adopt and adapt it to what is happening in the marketplace. Understanding what is working is essential to a successful website promotion.  If it works, keep it on the site and tie it your other promotional activities. If it is not,

then adapt it by trying new ideas.  You should always be aware of the new techniques or ideas that exist in your industry and be willing to give them a try.

 Ten Commandments to Follow

A book called “Streetwise Low Cost Web Site Promotion” suggests the following 10 Commandments of website Promotion.

1)      You need to make a commitment to planning and doing website promotion so you can stay on top of your competitors.

2)      Know your visitors so you can make sure your website delivers their wants and needs and drive traffic to your business or create online sales.

3)      Be open to learning new things to help you promote your website.

4)      Don’t be afraid to look at competitor’s websites and borrow their techniques if you see a need for them.

5)      Be like Gumby, the ‘80’s TV character, always willing to go with the times (when it makes sense).

6)      Make changes to your website based on feedback from your visitors and users.

7)      Use the analytics from your search engines to help make decisions.

8)      Your decisions on website promotion will be based on their ROI not personal favorites.

9)      Take at least 1 hour per day to work on website promotion.

10)  Do not spam.

If you have questions about your website marketing or general business questions, feel free to contact Richard Proffer, business development specialist for the University of Missouri Extension at 573-243-3581 or email him at profferrd@missouri.edu.  

The Secret to a Successful Business Plan

As a small business owner or future one, you will experience the opportunity to write a business plan. It is not an evil invention of the financial or business industry full of hoops to jump through to delay your dreams. It is a tool to help you evaluate your idea’s potential before you take to the bank or share it with other potential partners.

What is a Business Plan

A business plan is the tool to help you see how feasible your idea is and if the local community or target consumer is ready for you.  The great thing about a business plan is when you reach that stage, you already know a lot about the idea and it can simply become a way to write down what you know in an organized fashion.  You get to realize the gaps you did not know about and start to fill them in with new knowledge.

How to Write a Business Plan

Each plan is a custom one because no one business is exactly alike. All lady dress shops are not alike just as jewelry stores are not the same. Your business will not be the twin of the same concept down the street. With that in mind, you usually have three choices in writing the plan: 1) hire someone to do for you, 2) purchase business plan writing software or 3) write it yourself. It is strongly encouraged, you write it yourself to have the most knowledge of the plan and ideas and are better able to answer questions regarding the plan.

 How to Format a Business Plan

There are seven main sections of a business plan. The executive summary which capsulizes the plan and is written last is the first section. The second section is the business description where you talk about the industry, the company and the products/services to be offered to the target customer. The third part deals with marketing and how you plan on reaching the target customer. It is here you will show the need for the product/service and how many potential customers are in the market. A customer profile is usually included here also.  Your pricing strategy is discussed along with your sales strategies.

The fourth part is a study of the competition. Competitive spying is legal as long as you do not break any laws according to the law books. You need to know who are your current competitors as well as any potential future ones who currently have no storefront but could be coming. The fifth section deals how you plan on managing the business and the structure. You will also talk about the management team.  Every industry has its own set of risks so you need to address them in the sixth section.

The final section deals with financial projections and statements. You may want to enlist the assistance of a banker, accountant or a business counselor to help you prepare the necessary statements for this section. They are a balance sheet, profit and loss and cash flow and three years of projections.

A lot of research goes into writing a business plan to help make it a solid document so a potential partner will consider providing the necessary funds. As a small business owner, you are not alone in this venture. You have many resources to help you, bankers, accountants, business advisers and small business development counselors. All have the ability to provide assistance to help you move along in the writing.

Your local Small Business Technology Development Center business counselor is available to discuss your options and provide many services.  All you need to do is call 573-243-3581 and ask for Richard Proffer. 

Your Business Income Statement Has a Few Surprises

Many small business owners take their financial statements and either put them on the back burner. This lack of attention can result in the business owner being caught in a cash flow crunch or worse waking up one day to ask “where has my money gone?”

Income Statements 

The income statement or profit and loss statement is like a report card showing how your business performed over a specific time period just like when we used to get quarterly report cards from elementary school. That time period can be whatever the business owner sets it as – daily, weekly, monthly, quarterly or annually.  The most common time is monthly and it simply shows the business’s revenue and expenses. Then net income is calculated to show if there was a profit or loss.

 What are Revenue, Expenses and Net Income?

So what are revenue, expenses and net income?  Revenue is simply any money brought into the business.  Typically, income comes from some type of sales for the business. Expenses are costs or what was paid out for time period to support the business functions like sales.  The expenses listed on the income statement are typically those allowed by the IRS for tax deductions. Then net income is the reflection of how the business handled the inflow of revenue versus the outflow of expenses for the time period.

 Negative Income Statements

Many startups will show a negative on this report until they start to generate enough sales to cover the startup expenses.  It is advised that a new entrepreneur really know how long he or she feels the business will be in the “red” so enough funding can be injected into the startup.

A fact that often trips up business owners is that just because the income statement shows a profit, there may not be a “real” profit meaning the business made money during that time period. That is because non-cash expenses like depreciation and amortization are included in this report which can result in you having cash flow but no profit.

If you have questions about your financial statements, feel free to contact Richard Proffer, business development specialist for University of Missouri Extension Small Business Technology & Development Center in Cape Girardeau County.  He can be reached at 573-243-3581 or profferrd@missouri.edu.

Why Small Business Owners Need to Understand Copyrights

People see the little copyright sign daily but do they ever stop to think what it really means? We see it in books, music, or any published work daily as we go on with our day. We might hear about them on the news occasionally in dealing with who really owns a certain piece of work, art or even a product.

What is a Copyright? 

Fortunately for small business owners, the Federal Government maintains a system so everybody is able to profit from their own works. These programs give the creator or inventor legal control over how the piece or product is used.  So the copyright is the broadest protection possible in the U.S. because if it is protected it cannot be reproduced in any fashion without the expressed permission of the owner/creator who holds the copyright. There is an end date for the copyright protection and it is the author’s life plus seventy years. 

 What does the Copyright Do?

Work that can be copyrighted is literary compositions, pictures, drawings, sculptures, musical scores, sound recordings, theatrical works, dance techniques/moves, any audio-visual work and architectural drawings. If the idea or product is not physical, then it cannot be protected. The same goes for basic names, phrases, and lists of commonly held information like a phone book. It is important to note that ideas cannot be copyrighted but if it is written down or drawn out, then it can be.

How to Make a Copyright

A copyright is automatic for the creator. To help make that claim stronger, the author should include a copyright notice on the work. This notice has three parts: 1) the word copyright is on it, 2) the year it was published, and 3) the creator’s name. If you want, you can register your work at the U.S. Copyright Office which gives you a stronger claim if you ever have any legal issues arise by going to http://www.copyright.gov/.

In most cases, the creators get the copyright, but there are a few areas where someone else gets the cake. These cases are where a person was hired to do the explicit work. These works are called “Made for Hire” and include portions of a larger literary work like a magazine, film, other AV materials or items like charts.  If the work is translated it also goes to the hiring entity.

Benefits of Copyrights 

The Copyright Act of 1976 gives the copyright owner several rights including: reproduction, distribution, creating adaptations and performance and display. With these rights, the owner has the ability to decide how he wants to profit from the work.

As a small business owner, you may have come upon an idea that you feel will be the next best seller you want to be protected and make money on it.   So follow the process of copyrighting your work at http://www.copyright.gov/eco/.  

THE PRICE IS RIGHT? MAYBE OR MAYBE NOT

Pricing is one of the hardest activities an entrepreneur can do because of the ever changing market. What an entrepreneur buys today may not be the price he pays next week. How can a business owner stay on top of the roller coaster?

How to Find Your Price.

With pricing affecting almost everything, the entrepreneur has to know key pieces of the pricing puzzle.  The first piece is the “ceiling.” This is the highest price possible and still be sold. Customers will clearly indicate by their pocketbooks if the price is too high by not buying it.  The second piece is the “floor” where the cost of doing business sets the lowest price. This is usually determined by the breakeven point of a business.   The range in between the “ceiling” and the “floor” is where the ideal pricing exists. As the business owner, price experimentation may occur to find the ideal one and still covers the costs and provides a profit.

There are three general pricing rules an entrepreneur needs to keep in mind. The first is the price can’t go below costs. The old saying “you will make it up in volume” is never true and if followed, the business is doomed to experience cash flow shortages. The second one is the price can’t go above competitors or the business’s position in the market.  This means if the business has an image of a store catering to blue collar workers, then the pricing can’t be the highest in the area. If the store is appealing to a more affluent person, then the pricing could be higher than the competition if the audience will pay it. The final one is the customer decides if the price is right compared to the perceived value and benefit of the product. The better the customer sees your product as a solution to their need, the more they will pay.

Why Pricing is Important

Pricing plays an important role in any business.  It influences the business’s cost of goods, demand, competition, overall market pricing, customer perceptions and margins. Priced too high and demand goes down but the same can be said if the product is priced too low also.  Consumers may perceive the product to be of little value or not provide a solid solution to their needs, but pricing is not the controller of everything.  The entrepreneur has some control over pricing in the areas of sales volume and revenue, market share of the business, the competitive advantage of the business, company image and profitability.

A simple way to look at pricing strategies is EDLP, market parity and high dollar high value. EDLP was made famous by Wal-Mart with its every day low price strategy where the price will be the lowest of any competitors. Market parity is where pricing is in line competitors and not excessive above or below the market price. The final high dollar high value is where the price is where the business has an image of quality compared to the competition.

For more information on pricing, contact your local small business development counselor by calling 573-243-3581and asking for Richard Proffer.  He can be reached also by email at profferrd@missouri.edu. 

Did You Know the Local Extension SBTDC can do that for You?

I was reading an article on marketing research recently and it stated that many small business owners and budding entrepreneurs make decisions without really putting any thought behind it.  I agreed with the article, but what have I done to let the business community know what my local center can do to help them?  My answer was disappointing and the result is this article. 

Financially

Financially, we are able to assist entrepreneurs with financial projections, business planning, preparing to grow and comparisons to their industry. We use software to help make these activities happen and often the client is able to obtain funding or figure out what needs to be changed to fix the problem.  Software like Profit Cents and BizMiner provide us with a great resource to make these services available to the local business community. With BizMiner, we are able to look at a business’s industry financials the same size and as close to the same service area as we can get plus deliver key dashboard information. So basically, we can look at the business owner’s back yard to help make decisions.

Areas of Interest

We also offer heat mapping (a fancy way of saying birds of a feather flock together), customer profiling, retail studies, demographics and media studies.  This information can be used to flush out a business plan or get a better handle on where the customer’s live or where to open a new business.  By subscribing to ESRI, we have the ability to map many different characteristics plus profile geographical areas and help a business owner make a more informed decision.

Client Satisfaction

We also do a lot of secondary research for clients on a variety of topics where we search the web for information related to the client’s request. But through a partnership with a local marketing research class, we also do primary research for clients on customer satisfaction, pricing, and many other topics.

Marketing

Marketing wise, we can do media efficiency studies where we analyze which media delivers the most target audience at the most efficient price.  We also can help a retailer grow the advertising budget by looking up co-op funds or putting together a vendor market development opportunity. The ability to help a retailer put together an annual marketing opportunity calendar is also a service provided.

Internships

Our internship program includes students in advertising, public relations, sales, marketing, management, human resources, agriculture, accounting and graphic design also help business owners.  In the past, they have created logos for clients, came up with advertising campaign ideas, wrote news stories for distribution, developed HR manuals and job descriptions and many other activities.  Since it is student work, it is closely supervised and each week meetings are held to help the student stay focused and able to deliver client focused work.

Plus we do the work we traditionally have done, helping people get the legal structure figured out, intellectual property guidance, counseling and training for many topics. 

If you feel your business might benefit from one or more of these services give Richard Proffer a call at 573-243-3581 or email him at profferrd@missouri.edu.  

Getting Ready to Start a Business

Everyone at one time or another had the thought – I can do that, so why don’t I start a business? Or that idea is so new that everyone will want to buy it.  Unfortunately, those ideas, a heart, and a prayer is not all it takes to start a business. Many entrepreneurs leave out the pre homework to starting one. 

Initial Thought

The pre homework is the initial thinking that gets an entrepreneur started in the right direction.  First a budding entrepreneur should be able to define his or her product or service. The definition should include the reason for going into business, what problem is being solved, along with unique features and characteristics. The entrepreneur does not want to get too “hip” by using too many words like best or advanced, but rather in the description the product or business should be clearly stated why the product is the best or more advanced amongst others, so the potential users know why to buy it. So the initial thought should answer the following questions:

·         What do you want to be known for?

·         What sets you apart from your competition?

·         How did you determine the need for the product/service?

After developing those answers, spend some time on thinking about how does the product/service solve a problem or fill a current need in the marketplace. This line of thinking is not about the physical make-up of the product but rather the psychological side of the product. Here the questions to be answered are:

·         How do the features of the product solve the need?

·         What is the purpose or the item?

·         Does it really do what it is supposed to do?

 Conversation on Competitions

Next the conversation on competition must happen. An entrepreneur just can’t copy the competition and expect to make a success. The entrepreneur must improve upon the competitor’s product in significant ways to garner sales.  Just changing the color will not cut it in the marketplace. This area is where the entrepreneur can create the niche to get started and not compete with well-established larger competitors. Money can be made in niche markets and allow the startup business to gain financial health.

 Where You Fit

Finally proving the product works must happen. This proof shows the new idea will fit into the current marketplace and be accepted by consumers. If the product has a strong solution, it will probably have low resistance to entry into the marketplace.  If it requires consumers to have to change their buying patterns, there may be increased resistance.

So if an entrepreneur is thinking of starting up a new business review these questions and suggestions and then call Richard Proffer at the University of Missouri Extension SBTDC of Cape Girardeau County at 573-243-3581 or email me at profferrd@missouri.edu.  We are here to help. 

Small Business Trade Secrets

Every business, whether large or small, has a secret considered vital to success.  It could be a top secret family recipe for a dish that has a special spice, or a new way to create a rubber product for a cheaper price, but it lasts just as long. Whatever it is, it is of value to the business and is often considered to be one of the most important assets when the business is up for sale.

Unfortunately, trade secrets cannot be easily and universally defined. The real definition comes from the following three tests on the idea: it’s kept secret, it’s considered important, and it is necessary for the business’s success and has adds value to it.  These three tests must be met for a court to protect the trade secret in a legal issue.

A trade secret can be almost anything used in the business or created by the business as long as it is not generally known in the industry. For example, if a business owner creates a new recipe using pinto beans for a homemade chili, it would not be considered a trade secret because 1) chili is common, 2) pinto beans are common, and 3) most importantly, it is common knowledge you can use pinto beans in chili. A trade secret is a very important key to the competitive advantage given to the business owner and allows the business to operate at higher profit margin usually.

As long as the trade secrets are kept secret, they remain valuable to the business’s success, though over time that value can diminish if a competitor figures out how to duplicate the process. Once discovered independently, the trade secret can be used without any legal action being able to be taken unlike the copyright or patent. If the secret is obtained illegally, then the owner has the right to take legal action and claim damages.

How can a business protect its secrets?

The first step is to determine what in your processes created a trade secret. Unfortunately, the information gathered in creating a product cannot be labeled as one, as it usually represents skill or industry practices. Courts also protect an employee’s rights to carry with him his experience from one employer to another or her own business.

The second step is to write them down in a log and indicate who knows the secret.  The business owner needs to make sure all the people on the log understand the importance of the secret to the business and that they are not to disclose the information.

While no protection plan is entirely safe, the starting of one should indicate to the staff the owners are serious about protecting the secret and its importance to the business.

Your local University of Missouri Extension Small Business Technology Development Center can assist you in identifying and classifying trade secrets through its programs. For such assistance, please call 573-243-3581 and ask for Richard Proffer.