DriveYourSucce$$

Price Skimming Sales Strategies: Remove Middlemen in the Value Chain

When someone talks about price skimming, what exactly are they referring to? Are they referring to a pricing strategy, or about focusing on a particular type of customer, or both? In order to answer these questions, think of how some companies are able to get a higher price for their product by focusing in on a couple of unique customer segments. They have a product offering whose cost-per-use benefits are clearly ahead of their competition's offering. However, because they operate in a price sensitive market, they focus on a specific customer segment in order to get the highest possible return on sales. Therefore, it’s a pricing strategy that is predicated on appealing to the needs of specific customer segments. So, how does this work?

Small Business Financing: Facing an Uncertain Future

Are you a small business owner who is suddenly facing an uncertain future, a future where financing is hard to come by and where delinquent customer payments aren’t the exception to the rule, but the only rule? If this is your first time visiting my site, then you’ve not read the posts I’ve included about some of the simple ways to improve your small business financing. It’s never easy to deal with an uneven cash position. Given the current state of the economy, the pending issues in the Euro zone and the prevailing concerns of businesses about the future of business financing, I thought it once again necessary to allay these fears. As bad as it might seem, there are solutions.

Lower Customer Acquisition Costs With Analytical Marketing Practices

Can marketing be used to lower a company’s costs of acquiring new customers? Can marketing justify the universal claim that it costs companies anywhere from three to four times more to find new customers, than to retain existing ones? Well, the simple answer to both of these questions is a resounding yes, it can. Most companies hear that it costs them more to find new customers, than to keep existing ones, and chalk up this statement as just another erroneous business cost that can’t easily be quantified, or one that is merely a soft cost not to be concerned about. Unfortunately, for them, and fortunately for you the reader, they’re dead wrong.

Sample Kan Ban Contract: Finished Inventory, Semi-Finished Inventory & Raw Materials Inventory

Today I decided to include a sample Kan Ban contract that specifies the liabilities for both a buyer and supplier as they pertain to the finished inventory, semi-finished inventory and raw material inventory within the agreement. These contractual agreements work when both parties clearly define these aforementioned liabilities and are willing to negotiate in good faith. However, it’s essential that these agreements are signed by both parties, as the amount of inventory needed to make these contracts work is quite substantial. Use properly, the Kan Ban agreement can help reduce the buyer’s inventory holding costs, while providing the supplier with consistent manufacturing volumes.

Market Risk and High Financing Costs Within Your Strategic Plan

Does your strategic plan account for the possibility of increased market risk and high financing costs? If not, then consider the following. Just when businesses thought the damaging effects of the 2008 recession were over, along comes a new and more menacing threat posed by a potential Euro zone failure. Whether it’s Greece, Italy or Spain, one of these countries is sure to have a long-lasting impact on global financial markets. In fact, it’s happening already and either your company's strategic plan addresses this market risk, and possible higher financing costs, or it will suffer the consequences.

TOWS Analysis and Your Supply Chain: Lower Costs, Better Service!

Can a TOWS analysis help lower costs within your supply chain and be the catalyst to secure better service from your vendor base? When answering this question, think of how most companies apply a simplistic approach to reducing their supply chain costs. Think of how these companies rarely plan or come up with specific strategies. These are the enterprises that try to use fear and intimidation to threaten their suppliers with lost business. To these companies, their volumes are the only tool at their disposal and the biggest lever to bending suppliers to their will. Unfortunately, rarely does this approach work. However, a TOW analysis incentivizes companies to think outside the box by forcing them to consider more than just their volumes. So, how can a TOWS analysis help improve your supply chain?

Strategic Business Planning: Top 5 SWOT Analysis Applications

In my recent post entitled Strategic Business Planning: Use TOWS to Move SWOT to an Action Plan, I outlined how the TOWS analysis can turn the items under each SWOT heading into an actionable plan. The approach is to be succinct, to the point and not go overboard in assessing the four quadrants of the SWOT analysis; Strengths, Weaknesses, Opportunities & Threats. With this post I wanted to go over the top 5 applications for the SWOT analysis with respect to the content on this blog. Suffice it to say, this strategic business planning tool has multiple applications.

Critical Steps to Determining Your Financing Cost on Sales

What exactly do companies mean when they refer to their high financing costs on sales? To answer this question, think of the company’s financing costs to support its inventory and its financing costs of supporting its receivables. The longer it takes to sell inventory, the higher the costs. The longer it takes a customer to pay their invoice, the higher the costs. These aren’t soft costs by any means, but real, identifiable and quantifiable costs that directly impact a product’s gross profit and the company’s bottom line. So what are the critical steps to determining your financing costs on sales?

Higher Commissions for Prepaid Orders & Faster Turnover Rate Products

Most companies ignore the benefit of paying a higher commission to salespeople for securing prepaid orders and focusing on faster turnover rate products. These companies simply ignore their daily cost of money and its impact on the product’s gross profit. They fail to account for the company’s financing costs of inventory and the company's costs to finance receivables. For instance, if the product is retained for months on end, the salesperson still gets the same commission. Consequently, if a customer takes 30, 60 or even 90 days to pay an invoice, again the salesperson still gets the same commission. However, doesn’t it just make sense that the company’s sales team should be compensated for ensuring that inventory moves quickly and that customers pay faster? It most certainly does!

Strategic Planning: Reducing Inventory & Receivable Financing Costs

When it comes to strategic planning, few approaches are as important as reducing the company’s inventory & receivable financing costs. When a company looks at its financing costs of inventory, it is really concerned with its daily cost of money. Even after the product has been invoiced, the company will continue to cover this daily cost of money for everyday their receivable goes unpaid. This is why a number of companies only consider a sale finalized once the invoice has been paid. However, just how impactful are these financing costs? More importantly, how does a company reduce its inventory & receivable financing costs?

B2B Sales Strategies: Using Reward Programs to Track Market Pricing

In one of my earlier posts entitled Sample Back-End Rebate Excel Sheet for Customer Retention , I showed how a back-end rebate and reward program could be used to improve customer retention in B2B sales. While most of us associate these reward programs with larger consumer focused companies, the right back-end reward program can improve customer retention and dramatically upgrade your B2B sales strategies. More importantly, using customer reward programs will help your business better track market pricing, thereby allowing it to remain one-step ahead of your competitors.

Sample Back-End Rebate Excel Sheet for Customer Retention

It simply doesn’t matter what type of market your business operates in, if you aren’t doing everything you can to retain customers, you’re dead in the water. It's just that simple. Customer retention is an essential part of business growth. It’s one thing to capture and close on new opportunities, but it’s something else entirely to retain business for the long-term. With this in mind, I thought I would provide a sample back-end rebate excel sheet for customer retention. The process is simple and straightforward and is ideally suited for B2B sales.

Five Inventory Holding Costs That Impact Your Bottom Line

You need inventory to capture opportunistic sales but can’t quite come to terms with your inventory holding costs. It’s why most companies have a love hate relationship with their inventory and all strive to reduce their costs to hold inventory for extended periods. It’s a constant reminder of the company’s cost of money and extremely expensive to support. However, when it comes to these costs, it’s important to remember that every dollar saved goes directly to your company’s bottom line. Consequently, every dollar wasted has the exact opposite effect. Given the high cost of holding inventory, what are the most prevalent holding costs? More importantly, what are the five inventory holding costs that are impacting your bottom line?

Small Business Management: Calculating Gross Profit on Sell Price

Calculating gross profit on sell price is a preferred pricing method because it is the exact same reporting structure small businesses use on income statements. The focus is on defining the product’s direct expenses, accounting for the company’s overhead and then using a simple and straightforward calculation. While there are companies, or distributos, that adopt a “cost-plus” pricing model, the more common approach is to determine gross profit within a product’s overall price. So, what are the steps to determining gross profit on sell price?

Product Life Cycle Management: Grow Market Share by Selling at a Loss

Can companies adopting product life cycle management strategies actually grow market share by selling at a loss? Well, while conventional wisdom states that products & services must derive a profit, there are some cases where companies intentionally sell at a loss. For these companies, selling at a loss implies they must at some point either raise prices or lower costs, right? Well, not exactly. While some companies know they’ll be able to secure lower costs at a later date through increased volume, some companies merely sell at a loss in the hopes that their customers will accept a price increase later. Unfortunately, this isn’t wise and leads to customers buying on price and not on a product’s features & benefits. Therefore, is there an instance within product life cycle management where selling at a loss makes sense, even if the company never changes its price or reduces its costs? Surprisingly, there is!

Key Performance Indicators, KPI, for Distributors, Sales Agents & Integrators

How does your company measure sales with respect to your channels to market? Do you focus solely on a sale’s value, its strategic importance to your company, or are you more concerned about the gross profit generated by the sale? More importantly, what role does your company’s key performance indicators, or KPI, play in defining those sales that you’ve deemed important to your enterprise? Well, if you’ve not yet established your company’s sales KPI, you’ve likely not taken the time to define what types of business your company sees as important. It’s not merely about securing an order, but about making sure that order is of value to your company. So, what can your company do to ensure your key performance indicators clearly define the types of business your channels to market should focus on?

Determining Safety Stock & its Impact on Inventory Holding Costs

When it comes to retaining safety stock, a number of companies are concerned about its impact on their inventory holding costs. Unfortunately, some companies believe retaining emergency stock is simply too expensive and doesn’t justify holding inventory to capture opportunistic sales. However, is having safety stock really about capturing opportunistic sales or more about ensuring the company meets its obligations, better services its customer base and protect its market share? Well, the fact is, money tied up in inventory isn’t easy to accept and it can be expensive. However, having that safety stock is an essential part of your company’s success. The key is in determining your safety stock levels and their impact on your company's inventory holding costs.

Measure Factoring Costs Against Standard Bank Loan Financing

As customers take longer and longer to pay invoices, more and more businesses are looking for alternative financing options like invoice factoring. After all, these late customer payments have a cascading effect on business credit. Late customer payments mean companies are late collecting on receivables and paying their own vendors & creditors. In response, banks and credit unions raise interest rates and make it more difficult to secure affordable business credit . However, can factoring help alleviate the pressures companies face from late customer payments? More importantly, what are the costs of factoring and can it help the company protect its gross profit? It can and the approach that makes it possible is to measure factoring costs against standard bank loan financing.

Three Ways Small Businesses Can Protect Their Gross Profit

Gross profit is the ultimate indicator of success or failure in sales. Regardless of how much a product or service sells for, if there’s no gross profit, then there’s no benefit to the sale. It’s that simple. As such, small businesses must be proactive in protecting their gross profit. In fact, protecting the company’s profit is an essential aspect of business success and one of the more important reasons some companies are proactive while others are reactive. To this extent, there are some simple ways small businesses can protect their gross profit. So given the importance of protecting the company’s interests, what are some of these simple strategies?

Invoice Factoring Isn’t a Loan and Won’t Affect Balance Sheet

Can invoice factoring be the solution to the credit crunch companies are facing today? It might just be! After all, factoring isn’t a loan and won’t appear as a liability on the company’s balance sheet. This makes it a clean transaction and one of the reasons why many businesses have come to rely upon to manage their daily expenses. With the economy mired in a long recession and customers taking longer to pay invoices, every company is left struggling to find a solution. Unfortunately, as the situation has deteriorated, banks have been less than accommodating by raising interest rates and imposing tighter lending restrictions. It’s a vicious circle where late payments mean tighter credit. Therefore, if invoice factoring is indeed the solution, what must companies do to make sure they use it properly?

Maximize Your Product’s Gross Profit in a Declining Market

In yesterday’s post “Product Life Cycle Management: Steal Market Share in the 4th Phase”, I reviewed how proper product life cycle management can increase a product’s gross profit in a declining market. This is done by grabbing market share in the product’s final end of life phase and then positioning that product for another growth spurt. However, I didn’t delve into the strategies companies can employ to make this possible. After all, it’s one thing to discuss the “why” of something, but it’s the “how” that makes all the difference. Therefore, today I want to provide you with some simple strategies to maximize your product’s gross profit in a declining market.

Product Life Cycle Management: Steal Market Share in the 4th Phase

Product life cycle management allows companies to anticipate and manage their product’s various business cycles or phases. It involves using multiple pricing strategies along four phases of the product's life. There’s the introduction phase (1), the growth phase (2), the peak phase (3), and finally the decline phase (4). Every product goes through these four phases. Some go through these four phases very quickly, while others take decades to reach their final end of life. However, in some cases there’s a fifth phase called a “rebirth phase”, and although this last phase is somewhat rare, it does occur. When it does, it is those companies who steal market share in the 4^th phase that are ultimately able to achieve significant profits in the fifth. So, what are the most important strategies in this final stage of product life cycle management?

Small Business Sales Planning: Grow Market Share with Bad Credit Customers

As a small business owner, you’re probably looking for whatever advantage you can get to grow your company’s sales. In this case, discussing small business sales planning initiatives always coincides with plans to increase your company’s market share. One of the ways to do just that is by securing business with those less than credit worthy customers. Why? Simply put, your competitors have likely turned the page on these customers and have decided to avoid them altogether. However, these bad credit customers are an excellent source of business information and the gross profit per-sale to these customers is higher than to your existing customers with credit. How is this possible?

Small Business Marketing: 5 Simple Key Performance Indicators (KPI)

As a small business owner, you’ve likely had to accept that stretching your marketing dollar just goes with the territory. After all, your business doesn’t have the deep pockets, vast resources or manpower of your larger competitors. To make sure you’re maximizing returns, you must be able to track the success or failure of a given marketing initiative. So, how does a small business track its marketing performance? Well, the method that makes it possible is to use marketing key performance indicators or more commonly referred to as marketing KPI. We’ll look at 5 simple key performance indicators for small business marketing.

Product Management: Determining Inventory Holding Costs By Product Line

When it comes to product management, determining inventory holding costs by product line is an essential part of controlling costs and maximizing gross profit. Like every company, your enterprise probably has some products that sell very well and others that likely don’t. However, have you ever taken the time to consider what your company’s inventory holding costs are to support those less than stellar product lines? Have you ever wondered what percentage of your company’s sales revenue is occupied by your company’s biggest hitters versus those ancillary products, and what the inventory costs include to support all products?

Small Business Financing: Using Factoring To Cover Payroll Tax

When it comes to small business financing options, most companies have been limited to using banks and credit unions. Of course as the global recession deepened, and customers took longer and longer to pay invoices, those same banks were more than willing to increase interest rates to those businesses fortunate enough to still qualify for credit. For the small business owner, pursuing alternate financing options has become a priority. One of these options is invoice factoring. However, factoring not only allows small businesses to secure the working capital needed to support their day to day operations, it’s also a great tool to cover a company’s payroll tax.

Small Business Inventory: What Are Inventory Holding Costs?

When it comes to small business inventory management, most business owners understand that inventory costs money. Of course, there’s the initial cost to purchase that inventory, but there are a myriad of other factors that drive inventory costs. To reduce the impact of these costs, small businesses must concentrate on having high inventory turnover rates – which is simply reducing the time it takes to move inventory. Sell inventory quickly, and these costs are minimized. Retain inventory for too long a period, and the costs simply add up. These costs are commonly referred to as inventory holding costs and they are the main cost drivers when looking at small business inventory management. So, what exactly are inventory holding costs and what must small businesses watch out for?

Sample Excel Sheet for Freight Costing & Inventory Cost Reduction

Some companies become so concerned with their inventory holding costs that they end up purchasing just enough to fulfill their existing orders, and nothing more. While this may seem like a good way to avoid holding too much inventory, in the end it does nothing more than impact a company’s ability to reduce its inventory costs. In essence, these companies aren’t using their volumes to maximize their purchasing power. Therefore, I’ve decided to include a sample excel sheet for freight costing & inventory cost reduction. The excel sheet shows how companies can better measure their inventory holding costs, versus their part savings, when purchasing higher volumes.

Sample Break Even Excel Sheet for Small Businesses

Every small business owner must have a solid grasp of their break even point. This requires they fully understand both their fixed and variable cost structures and capture their profit contribution – which is simply the product or service’s price minus its variable costs. To make it easier, I’ve decided to include a sample break even excel sheet in today’s post. This sample sheet includes a graph depicting various break even points, different profit contributions, and allows the user to input different product prices and variable costs.

Small Business Capital Investment: Equipment Buy or Lease?

A number of my small business customers often ask me whether they should lease or buy capital expenditures. Often companies with a strong cash position tend to favor an outright purchase of the equipment or machinery. In other instances, small businesses with cash flow concerns, tend to lean towards leasing as a means to retain more cash on hand. However, there is one option that most companies should choose regardless of their cash position. One that might be considered the best option in every situation. Interested in knowing which one that is?