Small Biz

Keeping Small
Business Connected

March 2006 Edition

Margin and Markup
Branding Your Business- Not Cattle
Rocky Mountain Quality Conference
Training Survey
Ten Reasons To Love Colorado Small Business
Tech Corner
Some Smiles

MARGIN OR MARKUP - SHOW ME THE MONEY!

Many businesses are missing profit margin, but may not know where to find it. Over the past 30 years of working with small businesses I've shown this following example to many business people and would like to share it with you.

Let's set the stage for why this is important. Let's say a company develops a set of financial projections and their spreadsheets show a net (pre-tax) profit of 15% which is a reasonable profit. Most of us want 20% or more, but 15% is certainly acceptable. To accomplish this and cover all their operating expenses they determine that each product must have a 30% margin to result in a 20% net profit.

This company then sets pricing on their products or services based upon this profit. Six months into their year they are not making the profits they projected and they are not sure why.

One possible answer is how they price their products or services.

If you want to make 30% on the resale of a product (also applies to services), many people will take the cost and multiply it by 1.3. For the sake of this example I will use a cost of $100.00. Therefore, $100.00 X 1.3 = $130.00. Now we can review the actual margin on this product. The margin is $30 so to calculate the actual margin against selling price we divide $30.00 by $130.00 and if you do this you will see a margin of 23% which is 7% short of the projected 30%.

Now the better method is to take the original $100.00 and divide it by .7 (30% less than 100) which results in a sale price of $142.86. Now divide $42.86 by $142.86 and you will result in a margin of 30%. The difference is $12.46 for every product (service) sold.

To follow this process a 10% margin would be divided by .9, 20% by .8, 40% by .6 and so forth.

Therefore, it is wise to evaluate your pricing structure at least annually, and work with a business coach to get that important second opinion. Make certain your margins are correct and they directly correlate to the profit projections you have.

BRANDING your business - nOT CATTLE!

I've listened to many people try to describe what "branding" is for a business and with these explanations come lots of arm waving and mystery. Branding is a very simple concept and does not need to be expensive or difficult to accomplish. As with all of my business training I start at a basic level because I believe most people have not been shown the fundamentals, they are only shown the complexities. This is why I call my works "The Practical Business".

When a person starts a company they usually have some vision of how they want the company to be seen in the market. What they want people to feel or think when they see information from the company. Unfortunately, many companies don't pay sufficient attention to the detail of their brand.

Shape - is the first thing one should pay attention to. If you have a logo does it look good in black & white so it stands out without color? Does it say anything about your business and does it tell your story? Do you think shape is important? Just ask Nike about their "swish" mark. They spent millions and perhaps billions of dollars driving that image into our minds and now it is a highly recognized brand.

Color - can be powerful, but it can also be deceiving if your company does much advertising in black & white. Only use color to enhance an image or shape, don't rely on color to be "the message".

Words - tag lines, mantras, and such all go toward developing your position in the market. Similar to the shape you select you should use words to quickly tell your story. You have one sentence with a maximum of 12 words so what can you do with it? Can you tell someone what you or your company does in twelve words or less? If you cannot then perhaps some professional help and practice will assist you.

Consistency - comes up in virtually every process in your business, but especially in branding. We see companies that have business card that does not match their flyers, their letterhead, their web site or their brochure. This is easy to solve with one small rule - make everything match! Your business card should match your flyer, your letterhead, your envelopes, your web site, your signs on the office door or your vehicle, and everything else that anyone outside your company can see. If it goes outside the confines of your office it should be the same consistent look. No mystery here folks, just common sense.

Part of what you must consider is what you want your prospects to think. When they see your flyer in the mail or at an event, or you hand them your card, you want them to say, "oh, I recognize this". If this happens then you've accomplished good branding.

Next month we will discuss how to hire professionals to support your brand and image.

rocky mountain quality conference

Mark your calendars for April 18 - 18, 2006 to attend this premier event, "Back to basics; people, processes & technology". Greg Goettsch is one of several speakers for this event to be held at The Arvada Center for the Arts & Humanities, 6901 Wadsworth Boulevard, Arvada, CO.

Greg is honored to be selected as one of the presenters and his paper is "It's the "Who", not the "Do", That Makes the Business Work" which addresses the power of leadership rather than control, and developing the skills that directly impact your Profit & Loss Statement (P&L).

To learn more visit www.REQC.org.

TRAINING SURVEY

We are always looking for ways to assist small businesses in our area and across the nation. To help us do this would you please (if you are a small business of 50 or less employees) go to this link and support our research for trainings? We are partnering with the South Weld Business Association and the Carbon Valley Chamber of Commerce to determine what classes, days and times are the best for everyone.

Filling in the survey only takes five minutes and your input is needed and ever so valuable. You do not need to be in our geographic area for your input to have value. Your comments will represent a cross-section of businesses, regardless of where you are located.

We appreciate you taking the time to fill in this survey.

TEN REASONS TO LOVE COLORADO SMALL BUSINESS

Ten Reasons To Love Colorado Small Business

The Heart of the State’s Economy

WASHINGTON, D.C. – Small businesses are the heart of Colorado’s economy, and the Office of Advocacy of the U.S. Small Business Administration is sending them this Valentine with the reasons to love them.

Click to learn more...and see the Top 10 List

TECH CORNER

Research indicates many business owners use email every day, and over 90% use Outlook for their email system. Our experience indicates many of the Outlook users are only utilizing a small portion of the capabilities of Outlook and could save several hours per month if they utilized more.

Those of you not using Outlook may be using a web-based program such as Hotmail, Yahoo, Juno, and other such programs. That’s fine, but have you ever been in a spot where your internet connection has gone down and you can’t refer to an important message from last Tuesday? With Outlook, all your messages are stored in your Outlook folders until you manually delete them. So, even if your internet connection is down, you can at least refer back to both sent and received messages.

Of those of you using Outlook, some of you may be using Outlook Express and some of you may be using Microsoft Outlook. Both are Microsoft products. And the names are so similar that they are often confused by users. But there’s a huge difference between the two.

Outlook Express is included in all versions of Windows operating system. So, if you have Windows you have Outlook Express. Microsoft Outlook, on the other hand, is an application program and is included in the Microsoft Office Suite of products, along with Word, Excel, etc., so if you’re running Office 2000, XP, or 2003, you have Microsoft Outlook. Microsoft Outlook can also be purchased as a stand-alone product if you’re not using the other products. Outlook Express, the freebie that comes with Windows, works as an email editor and you can kinda – sorta store contacts, but it was designed for consumer use rather than for business needs.

Microsoft Outlook is a robust program with many features that Outlook Express doesn’t have – and probably will never have. It was designed specifically to help manage and organize your time, because not only is it an email editor, it has a calendar, to-do list, contact list, and a section for personal or miscellaneous notes.

Now, here’s an interesting fact - - - when you install Microsoft Outlook on your computer it has to use the same internal engine as Outlook Express. So, don’t uninstall Outlook Express because if you do, Microsoft Outlook won’t run.

Next month we will share some "Did You Know" items with you about Outlook so stand by.

We would like to thank Barb at TeamBTS for providing the articles each month. To learn more about TeamBTS visit their web site at www.TeamBTS.com.

some smiles

Knowing that we are getting closer to golf season, and many people enjoy (or pretend to enjoy) this sport, I decided to share some notes from the local course.

Golf Caddy Comments:

Chuck aka "Thunderball": "I've played so poorly all day; I think I'm going to go drown myself in a lake."

Caddy: "I don't think you could keep your head down that long."

Butts: "You've got to be the worst caddy in the world!"

Caddy: "I doubt it, that would be too much of a coincidence."

Orms: "I'd move heaven and earth to be able to break 90 on this course."

Caddy: "Try heaven, you've already moved most of the earth."

S3: "Do you think I can get there with a 5-iron?"

Caddy: "Eventually."

JS: "This is the worst golf course I've ever played!"

Caddy: "This isn't the golf course, sir! We left that an hour ago!"

Sweeener: "Well Caddy, How do you like my game?"

Caddy: "Fine, sir! But personally I prefer Golf."

Mancuso: "Well, I have never played this badly before!

Caddy: "I didn't realize you had played before."

McRat: "Caddy, Do you think my game is improving?"

Caddy: "Oh yes, Sir! You miss the ball much closer than you used to."

Conroy: "Please stop checking your watch all the time, it's distracting!"

Caddy: "This isn't a watch, sir, its a compass!"

Buttercup: "Caddy, do you think it is a sin to play golf on Sunday?"

Caddy: "The way you play, Miss, its a crime any day of the week!"

Banana: "This golf is a funny game."

Caddy: "It's not supposed to be."

Judge: "Do you understand the nature of an oath?"

Boy: "Do I? I'm your caddie, remember!"

Thunderball: "That can't be my ball, it looks far too old."

Caddy: "It's a long time since we started, sir."

Butts: "This hole is a five iron and a putt,"

Caddy: (After ball is topped) "And now for one hell of a putt."

Friendly golfer (to player searching for lost ball): "What sort of a ball was it?"

Caddy (butting in): "A brand new one - never been properly hit!"

Golfer: "Caddymaster, that boy isn't even eight years old."

Caddymaster: "Better that way, sir. He probably can't count past ten."

Irate Golfer: "I want you to know that this is not the game I usually play!"

Caddy: "I should hope not, sir. But tell me, what game do you usually play?"

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