In this day and age, when businesses are crying about dwindling customer bases very little are willing to go out of their way to do anything real in order to draw in new customers, let alone retain their current ones.  Sure, some companies publish discount coupons and offer special sales, but how many of them come with strings, such as not applying discounts to certain groups of items (ie: the way Office Depot excludes technology items from coupons), or offering such specials to new customers only (ie: the way drugstore.com applies this practice)?  The simple fact of the matter is that not many businesses go far enough to really make consumers stop and tell people about their experiences.  In fact, I’m willing to argue that most businesses instruct their employees not to even reveal any free offers unless the customer brings it up in the first place!  But hey, I can understand that some companies would rather sell a product or service than give it away for free.  I do wonder, though, what kind of word of mouth marketing they would receive if they did just throw in a little something here and there….

All of the small business owners out there should take this as a lesson.  I’m not the type of person to be surprised very often, and am rather cynical when it comes to the quality of service from national chains, and my pessimism is tempered compared to many from what I hear and read.  For me to react the way I did, and recommend this particular store to others is a very big deal, at least to me.  So, imagine if you went above and beyond what was expected of you, and had people talking your business up to their friends, family, and in this case even complete strangers on a blog that will appear on twitter and facebook among other outlets.  How could you possibly go wrong by doing something that could possibly get you that kind of exposure and good publicity?  And what would you have to do, give something away that you would normally do anyway if asked?  Delivered earlier than promised?  Maybe did a little bit more without being asked or charging more just to provide value?

It’s a widely known fact that without customers, you could not possibly survive in a business, let alone thrive and grow.  It’s about time you started to think about ways to take care of your current customers to not only ensure that they remain your customers (and not run off to a competitor), but also to possibly gain the attention and loyalty to an entirely new customer base.  As I stated earlier, it doesn’t take much to show customers that you appreciate them and their business, but by showing even a little bit of appreciation you are both doing the right thing by them and giving them a reason to recommend you to others in the future as well.

Remembering 9-11-01

Nothing insightful or thought-provoking today.  Simply a rememberance of a tragic time and a small way to pay respect to the families that lost friends and loved ones.

Sales Figures Alone Do Not Reveal Everything

The other day, a client who was in search of additional business financing called me to talk about his prospects.  His personal situation had not always been the greatest, but his current credit scores are now nearing excellent.  The banks that he had been to were all turning him down, and he was searching for answers.  After a few minutes of complaining about how he was being scrutinized for past indiscretions regarding his personal credit, and his lack of “juice” with the institutions he had been dealing with, one comment came out that I could not ignore.  He stated that even with the seasonality of his business (he’s in the event planning industry), and the dry period about to end, his sales were already approaching last year’s totals.  That is where his biggest mistake was, and the most likely reasoning behind all of the rejection he received.

Most often, people tend to think of sales as the most significant measure of success for a business.  Of course, this theory isn’t without merit, as the sales figure often represents the total amount of revenue flowing into a company, at least from the standpoint of the normal day-to-day operations.  There are also some other figures that can make their way into the equation, such as advertising income and commission income being two of the more common, but anything other than income from the direct purpose of the business is considered to be “below the line” income in the financial world and not generally included in the same manner.  The biggest reason being (other than the fact that it is not why a company is in business), is that such secondary forms of revenue are not predictable or even manageable.  In addition, most people only consider gross sales, which is misleading in itself since it does not take returns/refunds into account.  So, getting back to the sales figure representing success, it is just plain wrong!

Whichever method you prefer, gross or net sales, it doesn’t matter since both numbers ignore the cost of sales.  Cost of sales is total amount of money spent to get the product into the consumers’ hands.  The methods of calculating this number vary, since some companies choose to take all of the factors (cost of labor, machine hours, advertising) but for the sake of simplicity I will use just two costs: purchases and freight.  These two figures are prominent in the sense that these are the direct costs involved in getting the final product to market.  You absolutely have to pay for the components as well as the means for getting the components to you in order for you to assemble your product (unless you are working with a supplier whom is willing to absorb the freight costs).  These figures reduce the original sales amount and give you your company’s gross profit or margin, which can then be calculated into your gross profit (margin) percentage by dividing this gross profit by the gross sales amount.  The gross profit (margin) percentage will tell you how much profit the company made from each dollar of sales taking sales and cost of goods into consideration.  This is a figure that is more telling of a company’s positioning than simply looking at sales alone since it takes into account not only the sales, but the costs of those sales when comparing performance over time or to other companies in the same industry.  In the case of the client that failed to secure financing, his gross profit percentage was relatively unchanged year-over-year, so that was not the reasoning behind the denials.  In actuality, this was a good sign, since in a steadily declining economy, he was able to maintain a relatively level profit percentage when many businesses tend to see theirs drop due to the decreased demand combined with either steady or increasing costs.

That leads to the next omission from the equation, which is operating costs.  Operating costs are all of the other regularly occurring costs that arise from normal business operations.  These include salaries, rents, insurance, automobile, advertising and promotion, office supplies/equipment, licensing, telephone, electric/gas, etc.  These costs are important to consider when gauging the success of a business because they are necessary in the normal operations of any particular business.  These operating costs reduce the previously discussed gross profit to give you the business’s operating profit.  This represents the amount of profit the company made in any given period of time after all of the necessary expenses and costs of goods are considered. This, too, may be used in calculating a key ratio called the net profit margin, which reveals the amount of profit from each dollar of sales taking into consideration sales, cost of sales, and operating expenses, which is an even more telling sign of a company’s success due to the fact that almost all of the expenses are included.  This, in fact, is where my client made his big mistake.  While it is true that his sales and gross profit were in line with the previous year, his operating expenses were out of control.  The rent on his warehouse space increased 10%, and his electricity costs also increased due to an across-the-board increase by the utility company.  Also, he had expanded his advertising campaign to almost five times the amount of the previous year, and was falling behind on credit card payments and paying significant amounts of interest.  This is important to understand because the banks look to see that there is enough profit left over after all of the regular and necessary expenses are covered to ensure that, in the case of a business slump or some other unforeseen occurrence, the company is able to maintain its current payments as well as handle the loan repayments.

And then there’s what is the other income/expenses, which is considered to be “below the line” since neither is part of the normal cycle of business, and include interest income (unless it is derived from the company’s main business purpose), insurance settlements, lawsuit payment/payouts, one-time or extraordinary charges, medical expenses that are not covered by an employee benefits plan, among a host of others.  These are generally not regarded as heavily due to their infrequent nature but nonetheless are expenses which alter the company’s bottom line.  As you can see, there a many factors that go into running a business, so it is not as simple as looking at the gross sales figures to get an accurate view of how a company is performing.  Of course, this was all simplified for the sake of making a point, but the point wasn’t to give an in-depth lecture, but rather to show how oversimplifying things can hide potential problems within a company.

The environment is a hot topic not only in politics, but in everyday life as well.  Companies are making strong pushes with green products, mainstream television is promoting green living, people are making the move to more environmentally friendly products and services.  It seems that in many ways, going green is the new way to market to consumers. Unfortunately, especially for small businesses, it is a rather capital-intensive process that in most cases can not be fully implemented at this point in time.  There are, however, ways to operate your business and do your part to help the environment, and save a bit of green in the process.

One of the most popular ways to save the environment is by recycling.  Many governments have been requiring their residents to separate their recyclables from non-recyclables for years, but that is on the residential side.  There is no regulation as far as commercial recycling goes in many areas, especially when it comes to office buildings with several (or hundreds) of tenants.  The good news is that there are ways to get rid of items of business nature without trashing them  I cannot speak of the country as a whole, but in the South Florida area, about once a quarter, there are local computer/electronic recycling stations set up in the parking lots of some of the larger stores.  There, the agencies will collect all of the items and dispose of them in a manner that is less harmful than simply leaving them in the regular trash to sit in landfills for all eternity.  In the case of ink and toner, several of the office supply store are enabling members of the rewards programs to trade in their empty cartridges in exchange for reward dollars.  By going this rout, not only are you helping to sabe the environment, but also essentially getting store credit toward future purchases.

Another popular method of reducing the environmental footprint has been to reduce the need to travel by car.  This helps in several ways: by reducing the consumption of gasoline, reducing carbon emissions, and in turn the tires generally last longer rather than having to be replaced (particularly since the disposal of rubber is rather messy and environmentally unfriendly).  With the popularity of the internet and the advances in the technology used to deliver the electronic content, videoconferencing has gone from a method once used solely by public, multinational corporations to something that grandparents can now use to see the grandkids more often.  Why not implement something similar in your business?  On the smallest scale, for a one-on-one conference, all it takes is a high-speed connection and a web cam.  By doing so, you will not only save money on gas and tolls, but think of the time that you will be saving.  Rather than traveling back and forth, possibly sitting in traffic, you will now have that time available to be productive and billable.

Of course, another very easy way to incorporate cost savings with being environmentally friendly is by purchasing used/refurbished.  Some people shy away from anything that isn’t new because of the lack of warranty against failure, unknown treatment or conditioning, and most of all, receiving the item DOA (dead on arrival).  One solution, however is to simply purchase refurbished/display model-type products from reputable stores.  Not only will you ge tit at a discounted price, but you will get the store’s warranty and possibly and additional manufacturer’s warranty.  Computer manufacturers for example have outlets in their webstores where they sell older models and refurbished ones as well.  By purchasing refurbished, the need to produce new parts for a new product are eliminated, saving on the need to consume more materials and the corresponding waste produced in the process and there is the additional benefit of the cost savings as well.  Even better is the purchase of floor display models from retail stores: office furniture, equipment, computer equipment all right there for you to examine for functionality and cosmetic health.

Obviously, there are numerous other ways to operate your business so that it spending less capital while also being environmentally responsible such as going paperless to conserve the forestry, using light bulbs which consume less voltage and conserving electricity, using recycled paper products, and many many more.  The preceding were simply a few of the most cost-effective and simple techniques to implement without making wholesale changes to the way your business operates.

The Advanta Corporation has announced that effective on May 30, 2009, all accounts will effectively be closed.  This means that no further activity will be allowed on any existing accounts, whether they be purchases, balance transfers, or via convenience checks.  While no account will be allowed to incur new charges, none of the accounts are being required to be paid in full at this time. In addition, according to the company, any promotion or special rate pricing that commences prior to the May 30th closing date will be honored, as will the rewards program earnings.

More detailed information can be found here