Do Business Well

9. Strategic divisionalising of the policy

Your pricing policies are first and foremost intended to result in a profit for your company. There are several instances where an adjustment in price can achieve a particular objective, such as:

• the maintenance of present activity levels;
• to dispose of slow moving stock;
• to introduce a new product to the market;
• to deter the competition;
• to increase the sales of other products by the use of loss leaders.

You should always proceed with utmost caution and remember that the main objective is to achieve a profit for each and every item you sell. Continue Reading »

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Companies can increase profit either by cost reduction or by margin improvements. Margin improvement or improvement in the gross profit can be achieved either by increasing unit selling prices or by increasing sales volume (this includes the possibility of reducing unit selling prices in order to be more competitive and increase sales volume).

Selling prices are affected by supply, demand and cost conditions. All companies need to ensure that their pricing policy gives the best opportunity for maximising sales and profits.

1. Keep pace with inflation

The inflation rate is the percentage rate per period that prices are increasing and should provide a guideline to the level of price increases generally. Continue Reading »

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My business plan should include how I intend to approach the complicated issue of advertising. The issues that should be addressed include:

1. How much will I budget for advertising the first year?
2. What basis will I use for determining your budget in the second and ensuing years?
3. Whom do I expect to reach with my message?
4. What advertising media will I use to reach my audience?
5. What message do I expect to convey with my campaign?

It’s the rare business that can build beyond a meager beginning without advertising. At the very least, most businesses should have a presence in the Yellow Pages. At the other end of the spectrum, entertainment firms such as nightclubs or movie theaters have to spend a good portion of their start-up money getting out the word that they’re in town. Continue Reading »

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As sales are to business success, so then is enthusiasm to sales success. If you never get the hang of the rest of selling, you can get a long way by just exhibiting excitement about your company, your product, and yourself.

If you don’t think that your business is fantastic, a value to the community, and a work of art, why would you expect your custom_ ers to rate it more highly than you do?

If you’re not brimming over with enthusiasm for your product and the benefits it can bring to your customer, why would youexpect your customers to hand over their hard-earned dollars for it?

If you don’t believe you can add value to the product or service you offer, and that you are the best resource your customers canfind for what you sell, why, pray tell, should they think better of you than you do? Continue Reading »

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BOOK VALUE

Each month or quarter you should be determining the company book value. This is the net worth figure on your financial statement. It’s the difference between your total assets and total liabilities using all the rules of accounting and taxation. As you’ll see, this has very little to do with the actual worth of your company.

LIQUIDATION VALUE

You would only rarely want to sell a successful business for less than liquidation value. You might do so to provide continued employment for loyal staffers, or some types of deals might include your continued employment or the receipt of certain royalties unrelated to the sale price. You arrive at the liquidation value by adjusting each asset to take into consideration its real value, as opposed to its book value. Next, you adjust liabilities to account for any amounts that aren’t going to be realized. Finally, there’s a cost of liquidation. Let’s look at all three for some examples: Continue Reading »

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There are many situations that may cause you to seriously consider selling out. Among these are the obvious such as age, ill health, a decision to move your family to a new area, burnout, family pressure, or just the desire to move on to something new.

When selling becomes a serious option, you need at least nine months to find a buyer and consummate the sale. For even better results, plan to take two years. Here are the steps you should follow to obtain the highest price for your enterprise.

1. Change the way you do your bookkeeping one to two years before the sale. There are many different ways to prepare your income and financial statements that are legal and ethical. When selling the business is not a consideration, your priorities are probably determined by taxes or banks. You’re either trying to limit your profits to reduce tax exposure or maximize profits to prove creditworthiness.

Continue Reading »

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Will you make money — a lot of it — overnight? Direct selling can make you rich, but not overnight. Network marketing is often presented as a get-rich-quick scheme.

However, nothing worthwhile ever came without a struggle, and rewards are modest at first. The average earning for someone who puts in considerable effort could be R300 to R5 000 per month at the end of the first year. But this varies from company to company.

This is not much, you may say. But consider this: if you went to university to study engineering, you might end up with a job that paid R100 000 per year. During the three to four years you studied, you would earn no money. (We’ll exclude vacation jobs.) The cost of a three- to four- year residential course is about R45 000 to R60 000. So you’ve lost between R45 000 and R60 000 and three to four years of income as well! Continue Reading »

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The first use of network marketing is generally credited to Nutrilite, a direct sales company in the United States selling food supplementation products which, in 1943, instituted a marketing and compensation programme that encouraged each of its sales people to build up an independent team which sold and distributed products.

In terms of this programme, the original sales person not only earned a commission on every product she sold, but Nutrilite also gave the sales person a two per cent bonus commission on the sales of every new distributor (sales person) she had introduced. Therefore, the more distributors the sales person introduced, the more money she made.

From this early beginning, the growth of network marketing (sometimes called multi-level marketing or MLM) has been explosive. In 1959 two sales people in the Nutrilite stable, Richard de Vos and Jay van Andel, split with their parent company to form Amway, now the largest network marketing company in the world. They focused on household cleaning products. Another exNutrilite distributor, Dr Forrest C. Shaklee, formed Shaklee which was also a tremendous success in the food supplementation business. Continue Reading »

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Obtain stock

At first you will not need to carry large stocks. Most network companies send products to their large distributors per courier. When your turnover increases, you are likely to place orders directly from the factory, but initially you will obtain stocks from your sponsor for onward delivery to your customers.

Just as a reminder of how the system works — your sponsor will sell you the products you want at exactly the price she paid for it. You make your normal retail profit on those products you sell directly to customers. The balance you sell at no profit to your distributors, but at the end of the month you receive a rebate on the total turnover of goods purchased by your downline. Your sponsor, in turn, gets an overriding rebate (commission) depending on the value of goods sold by her downline.

As your business grows you will want to hold a small stock, perhaps in your office or a spare room, to save you numerous trips to collect stock from your sponsor. Continue Reading »

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Open up distance networks

One of the wonderful things about network marketing is that you can open a network anywhere. For example, although you may live in Cape Town, a friend in Johannesburg could be interested in network marketing. When you next visit Johannesburg, talk to your friend, build up her enthusiasm and sign her up.

Network marketing companies supply goods to their distributors anywhere, so she would order directly from the parent company, but her sales would become part of your overall sales. Because you signed her up, she would fall into your network.

Get the biggest order possible

Here are four proven techniques that build sales turnover: Continue Reading »

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