In this issue
Business Marketing Tips - Leads
Article - Lessons Learnt This Year = More Profit Next Year
Recommended Reading - Small is the New Big
Business Tools - The Insider Secrets to Marketing Your Business
on The Internet
Business Marketing Tips
Every month you should be testing different ways of marketing
your business. In this issue we cover Leads.
Leads
There
are many companies who will provide leads or prospects for your
business. For a
fee, they will display your advertisement (similar to a
classified ad) and when someone clicks on it, they will be taken
to your website. The
great thing about these targeted leads is that you are only
paying for the people who want to know about your business and
products. If you
work out the cost of a lead versus regular advertising, you will
no doubt come out on top. Generally
the cost per lead is between $0.50 - $1.00.
If on the other hand you advertise in a newspaper or a
magazine and pay $200 for the advertisement from which you get
20 enquiries, the cost per lead is $10.
Check
out:
www.getresponse.com
www.rede.net.au/services/leadgeneration.htm
Article
Lessons Learnt This Year = More Profit Next Year
Now is a great time for business owners/managers to consider
the results for this year and what you want to achieve next
year.
There is an old saying “If you aim at nothing you will hit the
target with amazing accuracy”. If you want to improve the
results in your business then you need a target to aim for, and
a system for monitoring progress.
Here are a few questions to ask yourself at this time of year:
· How were your results against your target for this year?
· Did you have a target for this year?
· Are you happy with the results for this year?
· How accurate are the results for this year?
· What do you want to achieve next year?
· What can you learn from this year to improve next year’s
results?
It can be difficult to find the time to consider these issues
when you are busy running a business, but a small amount of time
spent now can pay big dividends to your results next year.
Here are a few ‘key issues’ you need to consider, and get
control of:
· Compare Results: Most businesses have lots of transactions
happening and it can be difficult to keep track of it all. By
having a budget i.e. something to compare actual results
against, you have a regular procedure for checking income and
costs are on track. You can see very quickly if margins are
slipping, find out why and take corrective action.
· Identify Over-spending: If you don’t have a monthly budget you
may not find out until way after the financial year (sometimes
eighteen months later) that you have over-spent on some items.
Imagine if you had a small number of items of over-spending that
added up to say $1,000 per month. If you left it until tax
accounts are prepared it could cost you $18,000 in lost profits.
With a monthly budget you can identify over-spending quickly and
take action to fix it. A budget can be entered into most
accounting software systems and a ‘Budget versus Actual’ Profit
and Loss can be printed so that you can easily see any variances
and manage them.
· Spending Limits: A budget lets your staff know there are
limits on spending. It’s amazing how some staff will keep
spending if they don’t have a limit.
· Resources: A budget helps you to plan what resources will be
required to achieve the sales you plan. It’s important to match
the outgoings with the income and plan what resources will be
necessary. Thus avoiding ‘Crisis Management’ which is no good
for morale.
· Funding: If you want to acquire business funding you will
definitely be required to produce a Budget and probably a
Business Plan. A lending institution needs to be confident you
have ‘thought through’ your business and funding requirements.
If they can see that you regularly measure actual versus
budgeted results, they will feel much more comfortable with you
as a borrower.
· Break-Even: Some people say “It’s too hard to do a budget
because I can’t predict what I will sell”. This should not be an
excuse! Most businesses know what their direct costs and
overheads are, so it should be possible to calculate the
“Break-even” point. ‘Break-even’ means the level of income you
need to cover costs and overheads i.e. not making a profit or a
loss but a $0 result. Once you can manage the business to a
‘break-even’ point any sales above that are a bonus.
If you know how to do a spreadsheet, that’s a great start. You
can set up as many rows as you like to contain various types of
income, costs and overheads. You may need to start with the
overheads, as these are generally the best known numbers.
Here is an example of a really simple Break-even analysis:
The Direct Costs (costs that only occur if a sale is made) have
been calculated at 60%, so the difference, being the Gross
Profit, is 40%. This means that the monthly break-even income
point, with overheads (indirect costs that occur even if no
sales are made) of $20,000 per month, would be $50,000. i.e. 40%
of $50,000 is $20,000.
The business owner now knows what they have to achieve in sales
and Gross Profit to cover overheads to break-even point. Each
month they can measure these numbers whilst also keeping an eye
on Overheads to ensure they are averaging at $20,000. If sales
increase they would need to be measuring the Direct Costs to
ensure they are remaining at 60% in order to maintain the Gross
Profit of 40%.
If the business wants to expand and increase sales, whilst
maintaining a Gross Profit of 40%, they will most likely need to
increase overheads to achieve growth. The first thing they need
to calculate is the likely overheads, then work back to
calculate what sales are required to maintain the Gross Profit
percentage. Obviously the aim isn’t to break-even, but to make a
healthy profit. The challenge is to improve both the Gross
Profit and Net Profit. The obvious answer may seem like
increasing sales but savvy management of Direct Costs and
Overheads can have as good an impact on the Net Profit, often
requiring much less effort.
Anything you can do to increase your Net Profit can have a big
impact on the value of your business. As many businesses are
valued on a multiple of EBIT (Earnings Before Interest and Tax),
it makes sense to increase this result. Many businesses have
been run in the past with the aim being to minimise tax, but
this isn’t a good strategy if you want to sell your business in
order to retire or do something else. Multiples of EBIT vary
depending on the industry but say it is three – this means that
for every extra dollar you can add onto Net Profit, that would
be three dollars added onto the value of the business. If you
could increase your profit from $100,000 to $200,000 you would
add an extra $300,000 onto the sale price and potential
contribution into your superannuation fund on retirement or exit
from the business.
If every business owner/manager spent a little time reviewing
the Profit and Loss and all expenses, I’m sure they could find
unnecessary spending, sometimes thousands of dollars each month.
It makes sense to invest a little time planning for the profit
you want to make in your business and reap the increased
business value benefits down the track.
CAD partners (CFO On-Call) can help with planning for improved
profit, cash-flow and business value. SPECIAL OFFER to readers a
FREE ‘Financial Health Check’. Let us ‘run the stethoscope’ over
the Financial Control in your business. Call us on 1300 36 24 36
to arrange yours.
www.cadpartners.biz
Recommended Reading
Small Is the New Big: and 183 Other Riffs, Rants, and Remarkable Business Ideas
Godin, author and business blogger, presents a collection of
essays that are thoughtful and wise. His ideas are skillfully
presented with themes that include being big is no longer an
advantage, so act small if you want to be big; with instant
communication, lies get exposed faster than ever; consumers are
more powerful than ever; and Aretha Franklin is correct: respect
is the secret to success with people. His comments on business
schools are challenging and contain his list of five things that
help people succeed, including finding, hiring, and managing
extraordinary people; embracing a changing world while
effectively prioritizing tasks in it; and the ability to sell.
Click here
Business Tools
The Insider Secrets to Marketing Your Business on The Internet --
Version 2007"
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More info Till next time ... Ivana Katz
Websites 4 Small Business
www.web4business.com.au |
