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How To Create A Promotion For Your Business Or Service
Most business experts would like you to believe that promotion has a
certain structure of rules to follow for success. Follow these steps
and a successful promotion is assured. The reason they feel that way
is because they have never had to do it for a small business in a
small town.
Before we begin with the how-to, let me show you some of the
challenges a small town business owner will face.
* You have a smaller population base. In a big town you might have
20,000 - 30,000 people within a few miles. If you just get 1% you'll
have 200-300 people. In a small town you can start knocking zeros off
those numbers. If you only get 20-30 people, the promotion may cost
more than the potential business it creates. The small town business
owner must know their local market much better than the big city
owner.
* A larger percentage of your market already know you. In a small town
people already know if you are a big business in a mall, a small
storefront downtown or a home based business or service. In a large
city you would have more anonymity.
* Local people already have a perception of who you are and what you
do. The most wasteful thing you can do in marketing or advertising is
try to change someone's mind. If you doubt that,
* It's harder to keep a secret in a small town. In order for most
promotions to work, they need to be a surprise. Keeping your
competitor from finding out about your plans is not easy.
The Promotion Steps And How To Use Them
1. The Reason
If you are going to do a promotion, there must be a reason for it.
What exactly do you want the promotion to accomplish? "Increase
business" is not good enough. In order to do a successful promotion
you must have exact goals that can be written down.
Try to come up with at least three ideas for your promotion and write
them down. The most common promotion is the "Grand Opening." Even with
the grand opening there must be specifics that you want the promotion
to accomplish.
2. The Necessary Information
Once you have the promotional goals in place the next step is the
information that will complement the promotion. Does anything have to
be printed for this promotion? Newspaper layouts? Photos? Flyers?
Handouts? Coupons? Radio Ads? If so, what information must be
assembled to create the ads for your products or services?
Who will oversee the information and get it to the proper people? What
if this person is unable to perform these duties? Is there a back-up
person? Create a "check-list" of each step of the promotion project.
3. An Accountable Person
Someone must oversee the total project and assume final responsibility
for all aspects of the promotion. This would include things like proof
reading all ads and printed materials, making sure legal disclaimers
are included, if necessary, scheduling printing, scheduling radio/tv
spots. If co-op advertising is being used, complying with the co-op
guidelines for using logos, and other materials.
4. Keep it to yourself
News travels fast in small towns. If your competitor hears the details
of your promotion they may try to de-rail your efforts. Make sure you
impress on all employees and media people that confidentiality is very
important.
5. The Customer
Sorry to disappoint you. This is not your promotion. This is the
customer's promotion. If you want them to come to your business for
your benefit you will be very disappointed. Customers rarely do
anything to benefit any company. They act to benefit themselves. It
amazes me how many companies promote the business with no benefit to
their customers.
Customers want four things. They want to feel safe, they want to save
time, they want to save money, and they want to feel good. The more of
the four you can provide, the more successful your promotion will be.
The Last Word On Creating Promotions
The best advice I can give you is do your homework before doing a
promotion. A small town promotion that doesn't work can be disastrous
to a business. A lot of capital is expended and little or no new
business is realized.
If possible, find a mentor in another city your size. If I get a
problem question from a local business, I'll get some advice from a
similar business in Boulder that may have experienced the same
problem.
Call and ask them how they promote their business? What do they spend?
Where and how do they advertise the promotion? And, most important,
what did you do that failed? Looking back, what could you have done
differently?
Don't be afraid to contact people who can help you. In most cases they
are glad to do it because they once were where you are now. If there
is a secret to success, it's this, find someone who is successfully
doing what you want to do and copy them.
Promotion, if done correctly, can be a gold mine for your business
Financial Statements: How To Read And Profit From
Them
Today, the manager not only knows the batter's average, but his
average with two outs and runners in scoring position. He knows how
the player bats against right handed and left handed pitching. And, a
host of other stats about every player on the opposition as well as
his own team.
The same is true in business. Your financial reports provide
information about your business that you should be using whenever you
make financial decisions. However, the sad fact is, most business
owners only look at a financial statement twice a year. They look at
the annual Profit and Loss Statement (P&L), (did we make any money?),
and their taxes, (how much of our profit do we have to pay?).
Let me show you how different parts of your financial statements can
effect your business.
First, what kinds of information are we looking for?
We are going to look at the numbers, ratios and percentages and how
each affects your bottom line. In order to know if your numbers,
ratios and percentages are favorable or unfavorable you need something
to compare them to.
Most associations will have these "base" numbers for your industry and
the formulas to calculate them. Your numbers may vary from the average
because or your location, city size or company size.
Cost of Goods Sold (Cost of Sales/Cost per customer)
Cost of goods is producing, converting or buying an item that is sold.
The formula is very simple: Take total sales of all products and
subtract the cost of goods along with "all" overhead and the
difference is your gross profit margin. This should be done on an
overall basis and again for each product. The individual process will
show which products are "winners" and increased inventory might be
considered.
Return on sales (How much do you make on each sale)
Another gauge of your business is, how much does it cost for a
customer to buy a widget from your business? How much does each sale
cost and how much do you make?
You'll need your Profit and Loss Statement (P&L) for this one. Return
on sales will show you the percentage you make on each dollar of
sales.
The formula: Divide "net" pretax dollar profits by total sales. The
beauty of this formula is it measures (in percentage) how efficiently
you convert a sales dollar into profit.
Cost-Benefit Analysis: Should you or shouldn't you?
Ever get an idea and wonder if it will work? The cost-benefit analysis
will help make that decision. Suppose you have an auto parts store and
would like to expand to other cites. If the cost of expansion
outweighs the income produced by each store, then the move is not a
good idea.
Have you ever had a re-call on a household appliance? Companies often
have to weigh the cost of the recall vs. the cost of customer good
will, lawsuits and customer confidence. The re-call may cost the
company more, in the long run, if they don't do it than if they do.
Could you make more someplace else.
How much do you have invested in your company? How much are you taking
out of the business? Salaries, bonuses and benefits can have a major
impact on any business.
Start by dividing pretax profits (P&L) by Equity/Net Worth (Balance
Sheet). This will show you your return on your investment. If it's
less than 5% you could probably make that in a good money market or
bond investment. If you like what you are doing...keep doing it. If
not, stop working and start living.
How often do you turn-over your inventory?
If you are a retailer or wholesaler you must move inventory. How much
tells the health of your business and how well you are managing your
inventory. To calculate: divide your "average inventory" into Cost of
Goods Sold (P&L). The higher the number, the more turns you have and
the healthier your business.
Dealing with accounts receivable
If you are in business you must be paid in a timely manner for your
goods and services. Slow pay can put you out of business. You must
have a "handle" on how quick the money comes.
The first step is to compute your average sales day. You can take your
total sales for the year and divide by 365 "IF" you are open all year.
If not compute the number of days you are open for business.
Next, divide that number into your current accounts receivable. This
will show you the average number of days it takes for you to collect
from your accounts receivables.
Less than thirty days in preferred. 30 to 45 is acceptable; almost
anything over 45 days may cause a hardship on your business.
Learn to do it yourself
Accounting is a lot like practicing medicine. The patient comes in,
you put on the heart monitor, take blood and other fluids for testing.
Then a doctor reads and evaluates the tests and arrives at a
diagnosis. The patient is either in trouble or the patient is healthy.
No, I don't want you to do your own accounting. Most businesses need
an accountant just to keep them out of trouble with the IRS.
What you should do is learn how to read your financial statements so
you know what's going on in your business. Otherwise you will start
making decisions creating problems where your accountant is going to
have to try to bail you out.
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