Tuesday, March 23, 2010

How can I maximize my advertising dollar?

Even on a limited budget, every retail business must advertise to keep new customers coming in the door. Co-promotions and cooperative advertising are two approaches to maximizing the value of your advertising dollars by sharing the costs. The supplier (typically a manufacturer or distributor) benefits because its product gains greater exposure at the same time its sales are increasing.

Co-promotion may be an option if you can split your ad costs with another local business serving your same target audience. Those costs could include sponsorships, ads, newsletters, fliers and bill stuffers. You may identify one or more vendors who are willing to share the cost of a trade show booth as well as the printed materials and staffing required for the booth.

With cooperative advertising (also known as co-op advertising), two or more parties are sharing certain ad costs. This arrangement may take the form of an incentive program, with manufacturers contributing dollars to the ad campaigns of distributors or retailers to encourage the promotion of certain products.

Suppliers who participate in co-op advertising programs usually give the retailer credits for purchasing their products or services. Those advertising credits can amount to 3 percent to 5 percent of the total purchase. The credits can be redeemed when the business owner buys advertising that the supplier approves. Often Yellow Pages advertising qualifies for co-op money.

The supplier sets the guidelines. Usually the ads eligible for co-op dollars feature the supplier’s brand exclusively. In addition the supplier may have to sign off on the ad and the chosen medium being used if not also the frequency. Sometimes suppliers have ad copy or scripts that must be used to qualify for a reimbursement. If not, the supplier probably will want to approve of the ad before it runs. Remember, however, that the ad should feature your business prominently in addition to playing up the product.

How do you get reimbursed for co-op advertising? There are two approaches. You may have to pay for the ad up front and then give the supplier a copy of the ad. For radio or TV ads, you’ll probably need to show the script and proof of the dates and times the ads were aired. Some suppliers, however, may issue credits that equate to their agreed-upon share of the advertising. Then the business owner can make future purchases from the supplier at a discount.



Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

Tuesday, March 16, 2010

How can networking help my business?

SCORE counselor, Alan Yarnoff, shares his fifth article with us, this time, on the subject of networking.

“In this difficult economic period, it may be time to look at your current networking process and begin to think more “out of the box.” Now is not the time to rely on the common networking practices like handing out business cards, attending meetings, and joining local chambers of commerce because these tactics will only go so far. You need to become more proactive since the same old tactics may have reached the point of diminishing returns.

One of the real problems is that most people believe that networking consists of telling as many people as possible about yourself or your business, rather than the real objective: which is to find out as much as you can about the potential prospect you are networking with. It is important that the initial conversation focus on understanding your prospects problems, needs, concerns, and getting solid contact information. With this in hand, you can determine whether they would have an interest in the product or services you provide.

If the answer is yes, it’s time to get to work and follow up the initial contact within an actionable way. People have short memories; it is incumbent upon you to remind them that you are the one that can solve their unmet business needs. Send a letter or email with suggestions they could use right away, send samples of your products, or articles you have written that would be useful in building their business. Most important keep the pressure on until either you get the new client or are asked to stop.

Another way to expand your network is to speak to local groups, organizations, and associations about your field of expertise. The object is to transform your experience into an informative concise and entertaining presentation to help the audience improve their business. Position yourself as an expert and validate your credibility in the local business community.

Lastly you may consider creating a blog for your business. The blog offers you a valuable tool to stimulate a personal dialogue with potential customers and a great way to let your current clients know what’s new with your business.”
Good luck and good networking.



Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

Tuesday, March 9, 2010

How do I manage cash flow?

Just as watching your blood pressure is important to your personal health, monitoring cash flow is vital to the well-being of your business. Minor “hiccups” may be expected, but they can also be an early warning of bigger, potentially chronic problems ahead, especially if other indicators such as sales seem positive.

Though critically important, monitoring and predicting cash flow is actually a matter of consistently following some simple, common-sense financial management practices.

The object is to make certain that more cash enters your business than exits your bank account. First you need to translate sales into real money as quickly as possible. Once you’ve collected the cash, your business needs to guard it. Surprises, such as slow or non-paying customers and unexpected expenses, are your worst cash flow enemies.

One way to shift cash your way is to ask for all or a portion of payment up front. Asking for at least a deposit in advance is a great way to jump-start your cash flow. And if you establish the policy fairly and properly, it shouldn’t alienate good customers.

Accepting credit card payments also can help, so you may want to sign up for a merchant account that allows you to do this. Or, if you already have one, encourage customers to use this option more often. You do pay a fee for this. But credit cards are a great way to speed cash into your account, and the cost is generally small.

You may need to manage “receivables” more closely. This is the money that customers owe to you for products or services you’ve delivered. Create a detailed “aging” schedule of what you are owed, by whom and for how long. Place phone calls to overdue accounts, focusing first on the largest amounts due. Offering a discount can bring some quick cash in the door, but play this card only after you’ve called the customer to ask for full payment.

Finally, don’t overlook the power of an operating budget. Note specific due dates for payables as well as receivables, and regularly use it to get a “snapshot” of your cash flow status. With that information, you’ll be better able to make short- and long-term plans, spot potential problems, and avoid potentially crippling cash crises.


Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties

Tuesday, March 2, 2010

What are the pitfalls of borrowing from family or friends?

Friends and family are an invaluable source of support for the aspiring small business owner. And often, they’re an invaluable source of financial assistance as well.

In fact, more small businesses rely on loans from friends and family than any other funding source. Familiarity with the person and his/her business goals, the investment opportunity, and the ability to monitor the venture’s progress are among the major reasons why friends and family members willingly contribute to a start-up or expansion.

However, ready source of cash is not without its potential pitfalls. Business loans from family and friends also can be a disaster is they are not done right. Unstructured or loosely structured financing and payback terms can haunt both sides later on. Research shows that 14 percent of business loans from family and friends go into default, compared to about one percent for bank loans.

To increase the odds of success, approach family and friends with a detailed loan proposal, including financials from your business, just as you would a bank or venture capitalist. Be frank about the risks. If things go badly, they could lose all or some of their money. Consider the consequences of a soured business deal to your relationships.

Pick a financing structure that works best for your business and make certain everyone understands it. Specifically, be clear on whether the deal involves an ownership stake in your business, or whether it is a simple debt you plan to repay. And be clear about repayment terms.

To legally seal the deal, use a document such as a “Promissory Note.” Putting the terms of your borrowing agreement into proper legal form is crucial. You can find the downloadable legal documents you need, including many different Promissory Note variations, at www.findforms.com. Self-help legal publisher Nolo also offers loan forms and related information at www.nolo.com.

Another helpful resource is Virgin Money at www.virginlendingus.com, previously known as CircleLending.com before it was acquired by well-known entrepreneur Richard Branson. Virgin Money helps small business owners avoid the problems that can arise with loans from friends and family by providing loan administration, recordkeeping, payment processing and structural support. The service emphasizes flexibility to meet the needs and concerns of both borrowers and lenders, from terms and interest rates to repayment strategies.


Richard Strug
Greater Princeton Area SCORE (Chapter 631)
Serving Mercer and Middlesex Counties