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BUSINESS OPERATIONS |
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How Much Is Enough? 3 Keys to Pricing Strategy |
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Pricing strategy is a major consideration when launching operations, and it's also an ongoing challenge for small-business management. Numerous factors are at play when setting a price for a new offering or adjusting prices for existing lines of business. To meet pricing challenges, focus on three key areas.
1. Efficiency: Business success is dependent on more than simply selling superior products or services. You must provide something that represents the best value. This means delivering what you offer in the best possible and least costly ways. It means taking steps to make prices fair to both you and the customer. The first step is to make a careful assessment of internal business processes. Could you improve the efficiency of your procedures? Be sure to look at general business functions that don't directly affect customers. Having cost-effective organizational methods ensures a focus on output quality and customer service.
2. Costs: Fixed and variable costs directly affect pricing. Identify these costs and consider the costs incurred for each sale or service. Manufacturers must look at the cost for producing a number of units. Service businesses must consider labor expenses for the time needed to complete a project. Derived from these calculations is a price per unit/service that covers both production costs and overhead expenses.
3. Competition: What are others charging for similar products and services? Comparing your determined price to the prices charged by competitors is essential. If you decide that you offer something extra or distinctive, keep in mind that customers must perceive your added value to justify a higher price than your competition. |
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HOT BIZ TRENDS |
| 5 Ways to Boost Productivity with Décor and Design |
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A stylish and professional-looking place of business will impress clients and prospects, encourage efficiency, and nurture productivity and creativity among employees.
Try using these tips to create a welcoming and positive environment.
Color: Use color purposefully to add character and appeal. Whites and light neutral tones can make a tiny space feel more spacious and airy. Integrate your brand colors throughout the premises to convey a consistent color story.
Keep in mind that colors affect workers, too. For example, warm tones on the shop floor can stimulate productivity, while cool tones like blues and greens in a break room create a more relaxing environment. Choose your hues wisely!
Lighting: To light your space, try to make the most of the natural lighting in your office, production, and display areas. Where artificial light is needed, install good-quality lights, such as lamps and indirect light, instead of generic fluorescents.
Maintenance: Keep everything well maintained. Be sure fixtures are clean and fully functional. This includes everything from desks and seating to windows, lights, and display cases.
Entry: As you work on the design and décor of your space, don't neglect your entrance. Make it eye-catching. Remember, the entryway is the first thing people see when entering your place of business. It's your one chance to make a first impression, so give careful thought to that impression.
Ambiance: After ensuring that your workplace is clean, uncluttered, well-lit, and colorful, consider adding thoughtful design touches. Use wallpaper, area rugs, tasteful artwork, and green foliage to enhance the environment and make a statement about the culture of your business. You might even use your office décor as a way to display and promote the work of local artisans. These small finishing touches can make a big impact on the overall environment of your workspace. |
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CUSTOMER RELATIONS |
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How Well Do You Know Your Customers? |
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You can learn a great deal about your customers simply by talking with them. Don't be afraid to call, email, or approach customers or prospective customers and engage with them about what they're buying or planning to buy in the future and what's important to them about the purchasing experience.
Probe deeply to understand why and when they buy certain things, what they expect from you and your company, and what unmet needs they have that your business might fulfill. Their purchasing motivations may be related to pricing, convenience, selection, timing, or levels of service, or it may be something you haven't even considered.
Find out what brings top customers back again and again, what brings occasional customers in, and what prompts new customers to give your business a try.
Be sure to ask people what they know and think about your competitors and why they might choose to purchase either from you or from another company. Inquire about what competitors may be doing to attract or reward customers and stay ahead of trends.
If yours is a B2B business, get to know whoever is responsible for the decision to buy your products or services, and be familiar with the company's procurement processes and protocols.
If you know what drives your customers and the challenges facing them, you can address their needs and offer them solutions. Conducting your own market research can be as simple as just chatting with them. |
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ACCOUNTING |
| Managing Your Margin with Changing Costs |
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Successful operation of a small business hinges on managing two types of expenses: fixed and variable. As the names imply, fixed expenses are stable amounts that must be paid routinely. Variable expenses, on the other hand, constantly change depending on your sales. Here's what you need to know about both:
Fixed Expenses
You have to pay fixed costs regardless of your revenue. For instance, telephone and internet are essential business costs. Bills for these expenses are paid even if you have no revenue for the month. Rent and payroll are other common fixed expenses for a small business. Every entrepreneur should also plan for some amount of recurring personal compensation. You don't want to run your business without reward for your effort!
Variable Expenses
Controlling variable expenses is key to constructing a workable design for business success. Why? The management of these costs is necessary to fund your recurring fixed expenses.
Typically, variable costs should rise when revenue increases and decline when revenue decreases. The obvious category to examine for these trends is the costs of goods sold on your income statement. Examples of these variable inputs are materials, parts, and components necessary to complete business sales.
These variables directly impact your gross profit margin (revenue minus cost, divided by revenue). The goal should be to maintain a constant gross profit margin by properly managing your expenses. To do this, you must ensure that variable expenses rise and fall in step with revenue, so your costs don't throw off the equation.
Semi-Variable Challenges
Of course, maintaining steady expenses can be challenging when costs are variable by nature. And in some cases, the expenses are semi-variable.
Labor is the main expense that falls into this category. While direct labor related to customer interaction is typically variable, general office personnel may be needed regardless of sales volume, and administrative wages are almost always a fixed cost.
General overhead expenses can also shift from fixed to variable. For example, you might choose to spend more on marketing and advertising if sales take a downturn. You may also divert some of your direct labor from other projects to beef up marketing efforts.
Market prices may also change, taking control of costs out of your hands and limiting your spending decisions. Entrepreneurs must adjust to changes in cost of materials and labor as they occur. The obvious course of action is to increase or decrease sales prices in response to new costs.
Eye on the Margin
Accounting for all these fluctuations is crucial to identifying optimal use of your resources. Remember, revenue minus variable costs is what's left to pay for fixed expenses. You must know which expense categories are genuinely changing with shifts in revenue in order to effectively monitor costs and make necessary adjustments.
This will allow you to calculate a modified gross profit margin that provides a realistic look at your finances. You can multiply this gross profit margin by your expected revenue to calculate how much you will have to pay fixed expenses and how much will be left over to grow your business.
A financial professional can help you navigate these numbers and suggest steps to further the success of your company. |
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Gold Gerstein Group
505 Pleasant Valley Avenue
Moorestown NJ 08057
856-727-0100 Office
856-727-0772 Fax |
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| How to Win Big in Today's Economy |
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| The altered economic landscape presents innovative and nimble businesses
with opportunities to thrive. |
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Find out how by requesting my free report
"How to Win Big in Today's Economy" by
replying to this email. |
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Who is considered to be the "Father of Computers" for his creation of the first mechanical computer? |
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| Worth Reading |
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How to Develop a Dress Code for Work
By Shelley Frost |
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SmallBusiness.Chron.com
Workplace dress code policies can provide clarity for employees and protect employers. This article details what these policies should encompass. Policies should reflect the workplace's culture and practical realities. Help employees understand why dress codes are important, and the consequences of not following them. Remember to be flexible for religious beliefs.
5 Things to Demystify Hiring Disabled Employees
By Barbara Weltman
SmallBizTrends.com
The majority of people with disabilities don't have full-time employment. But that doesn't mean they can't do the job. Often, it means employers don't know how to make workplaces suit their needs. This article gives some practical tips to help you better understand how to equip people with disabilities during the hiring process and in the workforce. Remember, the legal requirement to accommodate begins during the interview, even if you don't end up hiring the candidate. Read carefully to glean helpful legal and tax information.
The Top 5 Ways You're Burning Out Your Employees (and How to Stop)
By Scott Mautz
Inc.com
Preventing employee burnout is, in many ways, a leader's responsibility. Don't wait for your employees to tell you they're burning out. Create work environments that contribute to their success. Read this to learn how clear roles and proper communication can maintain employees' health and productivity.
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LINKS YOU CAN USE
This Month-Organization |
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Starting, developing, and running a business requires organization. If there's no healthy flow for the many moving parts, the company can suffer. What can you do to keep your operations organized? Learn a few tricks with the following links:
If you want to get organized, you need a system. These six simple steps can help you develop one:
6 Simple But Remarkably Powerful Organizing Secrets
Staying organized requires making the most of every opportunity. Here's how to get the most out of each moment of your business day:
Six Tips For Getting The Most Out Of Your Business Day
You don a different hat every hour. How can you keep your busy schedule organized? Try these hacks for busy entrepreneurs:
5 Hacks For Busy Entrepreneurs
Using the right tools for productivity and file management are key to organization. Check out these recommended tools for small businesses:
3 Tried-and-True Ways to Get Your Small Business Organized This Year
It's hard to stay organized when you're pressed for time. Try this 60-second guide to organizing your business:
60-Second Guide to Organizing Your Business
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