Business Information for Entrepreneurs by an Entrepreneur

It’s not all doom and gloom. Some marketing strategies are resulting in hot leads despite the recession.

What are companies doing these days?  According to a recent poll by iMedia, it’s all driven by data.  Their survey found that the majority of marketers today are putting their reduced budgets in quantifiable strategies that can prove a good return on investment.

eMarketer very accurately summarized iMedia’s report as “Metrics Key for Winning in the Downturn.”

This data amplifies why keeping your email marketing budget intact is so important in this economy.  The Direct Marketing Association has consistently reported that email garners the highest ROI among all direct response methods.  It is easily measurable — MailerMailer and most other email service providers generate useful reports that illustrate your response rates and other measurable results.

For a business large or small that is experiencing a decline in sales, take a look at what strategies are working for you and get rid of the ones you cannot measure.

Recession Marketing

In previous articles, we have talked about how recessions may actually be beneficial for many businesses.

One area where you may want to think about turning a recession to your advantage is the marketing of your small business.

People Do NOT Stop Buying

Many businesses make the mistake of thinking that people stop buying during a recession. That is a mistake.

The fact is, most people still spend the same percentage of their income on the same items during a recession, it’s just that that income goes down.

Everyone still needs to make purchases from time to time – and odds are that if they needed what your business offered before, they still do.

In fact, even if you have a small business that specializes in goods that aren’t exactly necessary, odds are that you will still have customer support during leaner times.

One only has to look at the role the recession played in election campaigns all over North America in the last six months to see that recession marketing can play a big part in the success of any promotional efforts.

Recession Marketing 101

So just how can you go about taking advantage of the recession in the marketing sense? Well, the first step is to let potential customers know that you empathize with their situation.

The beginning parts of any marketing campaign should demonstrate that you realize there is a recession going on and that your business has made the necessary adjustments to ride it out.

Next comes the part that we call baiting the hook. At this stage, you want to tie your product in with surviving a downturn in the economy.

You might want to relate lower costs to a lack of overhead, incredible purchasing power, and so on. Even higher ticketed items have advantages in recession marketing; make sure potential customers know that product is likely to last much longer, for example.

The key to recession marketing is to remember that a recession isn’t a depression. People are still buying, they are just being much more careful about what they buy.

With some empathy and a little bit of savvy, you can convince people that your product or service is still worth using during leaner times.

My team has a blast running our web sites.  Each site has its own unique personality and enables us to unleash our creativity and utilize our skills.  Our small business site, morebusiness.com, is a favorite among start-ups and currently gets over 10,000 unique visitors per day.  Most seek out sample marketing plans, business plans and other guides to help start a company.  Others seek advice that is more specific to their situation.

To help, we are putting together an “Ask the Expert” section where small business owners and budding entrepreneurs can submit specific questions and get usable answers without the expert pitching his or her consulting services.

Each week, or every few days depending upon how many questions we get, we will pick one or two to showcase on this blog.  Suggestion: the more specific the question, the better the chance of it being profiled (i.e., it is unlikely we will respond to “How do I start a business?” – answer: read our Start-Up section).

Do you have a business issue that is keeping you up at night?  Fill out our morebusiness.com contact form and we’ll try to help with expert business advice!

Payment Costs – The Cost of Doing Business

Every small business has to think about how they are going to receive payment for the goods or services they provide their clients and customers.

If you have been in business for a while, you know that almost every payment means some kind of deduction taken off.

The cold hard truth about business today is that banks and other card issuing companies have almost killed off cash exchanges, and in the process have managed to bilk businesses out of some of their hard earned money.

Here are some of the costs that you can expect when you set up the equipment necessary for taking payments in the age of plastic.

Processing Fees

Credit and debit cards have to be processed somehow, and that means money spent by you.

You can do the transactions for a credit card manually, but this type of transaction tends to cost more.

Electronically, you can expect to bear the cost of the machine (either rented or purchased) as well as fees taken by the card and by your bank on every sale.

Middleman Fees

Internet payments can mean that your costs are mitigated somewhat, but you will still have to figure in several deductions.

Sites such as PayPal mean that both the client and the provider are credit card “customers”, that is, neither are charged for the transaction itself.

But you can bet that the charges borne by the site are passed on to you, in the form of deductions from the total pay amount.

Still, it makes payments easy to obtain.

Service Fees

On top of the money charged for the machine, credit and debit companies will charge businesses monthly service fees for reporting account activity.

Just another piece out of the pie.

Be prepared to deal with some or all of these extra charges when you take payment by plastic. Unfortunately, the convenience of the card has meant that the simple days of cash are almost over, and it’s the processing companies who win.

We stopped charging consulting fees for my time about 10 years ago, phasing out and selling our consulting business that built web sites and helped firms with online strategies and marketing. My current company generates revenue from product sales (well, SaaS, software as a service) and advertising so we are not dependent on consulting revenue for generating income – if we were, we certainly would be charging every billable hour. I’ve been asked many times by clients and others to get back into consulting, but I’ve declined each request.

Why we give away sound advice

If you have ever been in a meeting with me, you know that if I can contribute an idea, a technique or a strategy to help someone, I do it. I don’t hold back, nor do I try to drop morsels of input sparingly in the hopes of navigating my way into a politically strategic position. I just lay it all out there, whether it is during meetings with prospective clients, people I’ve met at networking events, or others.

Usually, if you are pitching consulting services, you need to be a little guarded with the amount of information you give away for free; otherwise, the prospect might get all they needed and have no reason to hire you. Not charging for business advice allows my team and I to be free and open with information without the agenda of trying to land a consulting deal. Sharing information also encourages those we speak with to share their knowledge.

Granted, the time I spend on “free consulting” is limited to a few hours at a stretch. If someone requires a longer-term consultant to implement a project, I refer them to qualified people I know. Had my company opened up a consulting division, it would have taken our eyes off of our core focus: building a robust, affordable email marketing tool, mailermailer.com, and our very fun-to-run small business portal, morebusiness.com.

So, by giving away sound business advice at no charge, we are able to keep our head to the ground and work on our core offerings. It makes good business sense.

Irrevocable Letters of Credit

The advent of the Internet Age has not only meant that people have the chance to open their own business, it has opened markets for that business all over the world.

Just think; halfway across the world, there are two countries that contain a third of the human population of the Earth.

We’re talking India and China, and the fact that most people in those countries can now connect to the Internet means big business potential for any company.

The Problem

The problem with conducting international business, particularly over the Internet, is ensuring that you are paid for the products or services you provide. You could make it clear to international customers that you won’t be providing or shipping until payment has been made, but this might lose you potential clients.

A better way to go is an irrevocable letter of credit (also known as L/C). Here is how it works.

You have a client or customer from another country, and both of you have agreed on the terms of a sale (this can take place by phone, fax, or email). Once established and documented, the client will go to a bank in her own country to establish an L/C.

The bank then opens the L/C in the name of the customer, naming your company as the recipient. The L/C is then sent to your bank and you need to confirm that it has been received (remember to include all terms and conditions on both sides).

Your bank sends you a copy of the L/C with the letter they sent confirming its receipt.

Shipping

Review the letter and make sure you can meet the specified dates of shipment and so on. If you are shipping goods, then you need to get your freighter forwarder to prepare a statement of all goods on the shipment as well as the date they were shipped, and then take it into your bank.

The records indicate that the shipment is on the way to the bank, which will then send the documents to your customer’s bank, which will review it and then pass it along to the customer.

Once the goods arrive, the customer claims them with the paperwork, and your bank then places the money into your account.

Remember that letters of credit are only one way to receive international payments. They may sound like a lot of involved work but really there aren’t many more steps than with any other type of transaction.

The most important detail of this type of transaction is that it prevents messy hold ups when it comes to payments and different credit laws of different countries by sticking to bank transactions.

Increasing Your Customer Base

Previously, we talked about ways to increase your revenue. There were basically only two ways; you could raise the prices on the goods or services you offered, or you could increase your customer base.

Experience has probably shown you that raising prices is a much easier way to increase revenues than increasing the customer base.

Often, a larger customer base will mean additional expenses for your business. You may find that you need more materials or employees once you increase your customer base, and you will certainly find yourself a lot busier than you were in the past.

However, it goes without saying that if you do want your business to grow, then sooner or later you will want to expand your customer base.

The key to gaining more customers will be marketing; let’s take a look at the most reliable forms of marketing you have at your disposal.

Word of Mouth

Without a doubt, new customers referred to you by a previous customer are the best ways to increase your customer base.

Referrals mean that you are doing a good enough job for people to recommend you to others they know, and that means new clients are predisposed to being loyal to your business.

Self promotion

A lot of people struggle with the idea of self promotion, but it’s the next best thing to word of mouth when it comes to marketing.

Seize any opportunity to get the word out to friends and acquaintances about what you do and how you do it; you never know who will be interested in using your services.

Internet Marketing

Operating a business web page is another tried and true way to increase the number of customers you have, but it is quite involved in terms of both time and money.

You have to know exactly what you are doing, and the best ways to promote your site are through the above two methods!

Marketing through media has always been a controversial issue as the results can never be fully measured.

At worst, though, media marketing will mean that word about your small business is out there, and people may contact you if they come across the business name.

How to Raise Prices and Keep Your Clients

Whether you run a small business that sells products or services, there will come a time when you consider raising your prices.

Aside from increasing your customer base, it is the best way to increase the profits coming in.

Raising prices, though, is a risky step for any small business. Customers and clients are more sensitive than ever about products and services that they pay for, and you may have to prepare for a bit of a backlash in terms of support.

Just how big that backlash is will be determined by the preparation you put in before raising prices.

Let’s take a look at a couple ways you can make this step as painless as possible.

Conduct Tests

Before you raise your prices, you may want to test the new prices out before you hit the market with them.

One good way to do this is to put higher prices on products you put out for new customers or clients. If you run a service based business, for example, you might want to raise your quotes when potential clients ask what you charge.

If acceptance seems to be easy, then the new prices are probably quite reasonable.

Explain the Changes

If you do find that the price testing goes smoothly, you will probably want to raise them across the board.

If you do, remember to explain to existing clients and customers why you did so. Odds are that if you are still attracting new business with higher prices, your services or products are worth it.

The key to raising prices is making the changes slowly and in an informed manner.

No one likes to see the cost of goods and services go up, but you can minimize the backlash (or at least be prepared for it) with a bit of preparation.

Price Considerations for Your Small Business

One of the trickiest parts of operating a small business is figuring out just how much to charge for your service or product.

You probably know that base factor is what is going to make or break you as far as your business goes, but what should you charge?

Let’s take a look at some important consideration when it comes to setting your prices.

Initial Cost

Obviously, the last thing you want to do is lose money.

Whereas service based businesses come down to what the job is worth, selling products make pricing a bit more complicated.

You want to cover the costs of original materials, shipping, and so on, plus make a certain amount of money per sale on top. Don’t forget to take taxes into account!

Competition

The main factor when it comes to the pricing of goods or services will be what customers are willing to pay, and that is often determined by how much your competition is charging.

If you offer a service or product that is more expensive than a similar business charges, you have to have a good reason why.

Moreover, you need to be sure your customers understand the reasoning as well (the best way to do this is offer hints but let them come to their own conclusions).

Customers

Finally, consider what your target market will be willing to pay for your products or services. In the case of services, you may be lucky enough to have some flexibility.

Many times service based businesses are the first to suffer during recessions, as people begin to take on a whole new “do-it-yourself” attitude. If you can lower prices to fit customer’s needs without breaking your business, consider doing so until things pick up again.

Pricing will be an important determinant when it comes to who uses your small business. If you bill right, the customers will come.

Marketing, Web 2.0 Style

The Internet has recently taken a massive step forward in terms of its evolution.

The rise of social networking sites and services has become so popular that it has caused whoever entitles such phenomenon to come up with a whole new Internet Age, dubbed Web 2.0.

Web 2.0 is centered around sites such as Facebook, MySpace, YouTube, and so on. These sites not only offer a lot of information to those browsing, they allow individuals to tailor their own pages to reflect their personal tastes and lifestyles.

The idea caught on like wildfire, and you can see shades of Web 2.0 philosophy in everything from children’s sites to business sites.

Adapt or Die

Web 2.0 has meant that many businesses have the opportunity to adapt and take advantage of an entirely new marketing medium.

Whereas traditional Internet marketing met the criteria used by media forms of advertising, the development of social networking means that businesses can now take advantage of the most important marketing tool of all, personal contacts.

Just how can a business use Web 2.0 to get the word out there? Well, the first step is to join the different social networking sites.

How to Use It

Once you have a Facebook or MySpace page set up, you want to find a good balance between business and personal life.

Most small business owners choose to use their social networking sites with taste when it comes to advertising their businesses; they set up groups to get the word out, update their pages, and so on.

It’s a non-invasive marketing approach that doesn’t intrude on people’s sense of personal space, but still gets the word out about your small business.