5 Ways To Grow Your Business
Market Share, or how much of the pie is coming through your door, is one thing that all businesses try to track. If you listen to the big guys, they’re always tracking if share is up, if it’s down and just how they can go and get more of it. Yet when the economy is down, many business folks and entrepreneurs alike will throw their hands up and say that “oh well, there’s nothing we can do to grow right now.”
Down markets present a host of opportunities for the savvy and innovative business person to grow their business. Listed below are five ways that you can increase your share of the pie when times are tough.
Examine/Exploit Your Competitors Weaknesses. When times are hard, companies will look to ease the bleeding so to speak. This might mean reduced advertising, hiring and marketing. If you look at where your competitors are failing and step in with better services or products, you might just see an increase in customers. For example, when Restaurant A had to stop offering free fries with their meals, Restaurant B took it as an opportunity to market that their combos “still” had free fries. The result? A few new customers during the lunch hour that use to frequent their competitor.
Get The Word Out. While marketing/sales professionals tend to live the good life when the economy is up, their budgets are often the first to be slashed when times head south. However, nothing happens in an organization until a sale is made and sales don’t happen without marketing. Thus when times are down, if you still have adequate cash flow, don’t cut your marketing but instead continue spending on “smart” marketing. What this means is that if you can highlight something you do that your competitors don’t – go for it! What you don’t want to do is spend money where it won’t make a difference. So, if for example you’re a landscaping company in Chicago, it probably doesn’t make sense to do a major ad campaign in December when it won’t lift your sales all that much (unless you offer snow removal of course).
Expand Product Offerings. Expanding by leaps and bounds is never advisable when the market is tough. However, businesses should be encouraged to look for add on, tuck in and complimentary products to help them grow. We’re not talking about adding on a major product line, but something that enhances what you already do. For example, a hot dog stand already attracts people who are looking for an inexpensive yet fast meal. Why not keep a case or two of “veggie” or vegan brats in stock? Many vegetarians don’t frequent this type of establishment alone but may wind up there when a friend or coworker does. If they can make a purchase from you, why not make the sale? It doesn’t cost you a ton to add the product, and you don’t even have to keep loads of inventory as the demand is probably pretty low.
Purchase A Failing Business. If you have deep pockets, a down economy is a good time to look for struggling competitors and help put them out of their misery. The only word of caution is make sure you do a thorough analysis of their business (i.e. due diligence) before you do the deal. Remember, there is a reason the business is struggling – just make sure that it’s something that you can fix or you will simply purchase a headache instead of increased profits.
Increase Volume. Playing the price card (i.e. reducing prices) is one of the last things recommend when times get tough. Not only do you lose money on the top end (e.g. sales) but you tend to lose it on the bottom line as well because of the inflexibility of certain fixed cost. However, if you have a streamlined operation that has solid margins (think > 50%) then you could go for a volume play. For example, if you can slightly reduce prices and keep yourself profitable, you may see an uptick in customers (volume). If the profit generated by the volume increase outweighs the money you lost when you reduced prices, then it’s a smart move. The goal would be to do this long enough where you increase your customer base and then gradually increase prices once the economy improves. The end result would then be a bigger market share and increased revenue/profits when compared to your competitors.
The Power of Thought
Well, today there is a lot of controversy swirling in the media over some comments that presidential candidate and former Massachusetts Governor Mitt Romney made at a fundraising event. In short, Mr. Romney said the following about those voters whom polls indicate will instead vote for President Barack Obama:
“There are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe that government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it.”
He then goes on to state that his role “is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”
Now, we will not get into the details of politics in this post as that is personal opinion and everyone is entitled to their own viewpoint. However, there is one thing that is clear in the last statement, the belief that you can influence change in your life.
At some time or another, each of us fall susceptible to the thinking that there is nothing we can do regarding a particular situation. “I’ll never be smarter. I’ll never be a climber. I’ll never lose weight. I’ll never finish college. I’ll never be any good.” Statements like the foregoing are views that we have of ourselves, however, they are not fact until we make them so. Thus, here is the question at hand; how powerful is thought and can you think yourself into another situation?
Outlined below are six steps that we believe allow one to go from thought to change over the course of time.
Changed Thinking Transforms Your Beliefs. Beliefs are nothing more than the perception one has of something based on past or historical experiences/information. For most Americans, we believed that a fellow named Santa Claus brought us presents and cookies on Christmas for some time of our lives. Then one day that changed. Why? Did the facts of receiving presents and cookies change? Nope, your thinking surrounding how they got there did. This changed thinking then caused you to alter your beliefs and you no longer believed in Santa Claus. With that said, thinking can yield changes in all your beliefs. Being creative is when you think about your thinking, being innovative is when you begin to act on your ideas.
Altered Beliefs Modify Your Expectations. What you believe in guides what you expect in life. For the most part, all of us can take a look at a task or challenge and know whether or not we can succeed at it. Thus, in belief lies power; the power to give us clear vision, outline our opportunities and make our visions reality. In essence, our beliefs control just about everything we do in life. If we believe we will fail, we often don’t begin the journey of attempting a feat and thus the result of failing materializes. However, if we believe we can, while it is true that we may ultimately fail, we also move that much closer to ultimately succeeding.
Modified Expectations Give Way to A New Attitude. “Blessed is the one who expects nothing, for he shall receive it” – Benjamin Franklin. We’ll finish our analysis by looking at the story of a minister named Frank W. Gunsaulus who lived in the late 1800’s. While going through college he observed many defects in the educational system, defects which he believed could be corrected if he were the head of a college. He didn’t have the large sum of money necessary to start a school and could not make any real progress in attaining it for almost two years. However, he set his mind on attempting to make a difference which impacted his belief and attitude that he would eventually find a way to open a college.
A New Attitude Transforms Your Behavior. One day while in his room thinking of ways to raise the money to carry out his plans, it dawned on Mr. Gunsaulus that he had done nothing but think. He finally resolved that the time had come to take action. He still didn’t have a clear plan on just how he would raise the money, but he did do one thing, he called a newspaper and announced he would preach a sermon the following morning, entitled “What I would do if I had a million dollars.” Had it not been for his “new” attitude, Mr. Gunsaulus probably would have forever been locked in thought. William James was right when he said, “That which holds our attention determines our action.”
Transformed Behavior Revises Your Performance. By spurring himself to action, Mr. Gunsaulus preached a sermon to a well attended church with all the heart and soul that he could muster. He shared what he would do with a million dollars. He described his plans for organizing a great educational institution where young people would learn to do practical things, and at the same time develop their minds. Mr. Gunsaulus could have never gotten on that pulpit; many of us would rather stay in a routine than make changes. Even when we know that the changes are going to be better for us, we often don’t make them because we feel uncomfortable or awkward about making that kind of a change. However, Mr. Gunsaulus did give that sermon and the results were quite astounding.
Revised Performance Changes Your Life. When Gunsaulus finished and sat down, a man arose from his seat and made his way toward the pulpit. He approached Mr. Gunsaulus with an extended hand and said, “Reverend, I liked your sermon. I believe you can do everything you said you would, if you had a million dollars. My name is Phillip D. Armour.” Gunsaulus would eventually get the money he sought and became the first president of the Armour Institute of Technology (now IIT). The performance that Gunsaulus exhibited in the end changed his reality, yet it all began with his thinking and beliefs.
While thinking yourself to a different place in life is not easy, instantaneous or at times even pleasurable, it is something that can be done. The reality is that change makes a person feel alone, even if others are going through it. Yet it is easier to turn a failure into success than an excuse into a possibility. A person can fail and turn around and understand their failure and then make it a success. However, a person who makes excuses for everything may never truly succeed. With that said, if you are thinking of doing something different in life, take the first step and think your way to a new place. We’re confident you’ll be happy with the results!
The Benefits Of Mutual Funds
Mutual fund ownership by U.S. households has grown appreciably over the past three decades. Forty-four percent of all U.S. households owned mutual funds in 2011. In 1980, this same figure was less than 6 percent. Furthermore, approximately 89 percent of total mutual fund assets were owned by these same estimated 90 million individual investors. So just what is it about mutual funds that make them such an attractive investment option?
Diversification. Mutual funds invest in a broad spectrum of securities and debt instruments. Thus, an investor can potentially limit their investment risk by reducing the effect of a decline in any single security. For example, if you own 100 shares of XYZ stock and it all tanks, you lose your shirt. However, if you own 100 shares of ABC mutual fund which is comprised of 5% XYZ stock, when the stock declines, your portfolio won’t feel the full brunt of it. Another benefit of diversification is that one can gain ownership to more companies and industries with a lower overall purchase price when compared to purchasing outright individual shares.
Professional Management. Most investors don’t have the time or wherewithal to perform the necessary research and continual analysis required to protect their investment. By pooling the money of many investors, mutual funds are a way to receive full-time professional management that few investors would be able to otherwise afford. These “fund managers” have teams of analyst and researchers who routinely update them and provide recommendations as to how the fund can achieve its goals. Thus, by investing in mutual funds you can rest assured that someone is continually monitoring you investments performance and making the necessary adjustments when warranted.
Liquidity. Buying and selling shares in a mutual fund is just as easy as it is to purchase shares of an individual stock. Most people can either invest or divest of their holdings within the same business day. This makes this vehicle extremely attractive for those who may need “relatively” quick access to their funds.
Convenience and Simplicity. Instead of having to track down and purchase each individual share, you only have to keep track of one; that of the mutual fund itself. Additionally, you will still receive the benefits of owning a diversified portfolio and a wide range of services including:
- The ability to purchase or sale your shares via mail, telephone or internet
- Minimal investment floors; allowing you to invest with as little as $50-$100 per month
- The ability to schedule automatic investments/transfers into or out of the fund via your bank account
Top 5 Reasons Businesses Fail
When an entrepreneur embarks on their journey to build the next big thing, they will undoubtedly come across the “statistics” that we’ve heard a thousand times. You know the ones where 50% of businesses fail within a year and 95% are gone within five years. But just what is it that causes these new establishments to go belly up? Here is a list of the top five drivers based on our experience helping new companies navigate those early startup waters:
5. You start your business for the wrong reasons. The thought of being your own boss is cool until the first major issue comes up. Is the sole reason you’re starting your business because you want to make a lot of money? Do you think if you had your own business that you’d have more time with your family? If so, you’d better think again. Running a business is hard work – often much harder than what you have previously been doing to earn a living (especially if you’re coming from an office job). With that said, when times get tough (mentally, financially, spiritually, etc.) you need to have a firm resolve as to why you’re in this game. If your reason is planted on a weak foundation, don’t be surprised if you find yourself quitting before success has had a chance to begin.
4. Lack of Planning. Anyone who has ever been in charge of an event knows that that were it not for their careful, methodical, strategic planning (and hard work) success would not have followed. The same should be said of most business successes. Many small businesses fail because something which was very fundamental to their success (such as marketing or customer seasonality) was not thoroughly understood and addressed. If for no other reason than to flush out these potential sticking points, we always recommend that a new entrepreneur take the time to prepare a business plan. Besides, most lenders will request one if you’re seeking to secure capital for your company so you might as well go through the exercise.
3. Over-expansion. A leading cause of business failure, expanding too quickly, often happens when owners confuse success with how fast they can grow. Thus, a focus on slow and steadily planned growth is far more ideal. Many a bankruptcy has been caused by rapidly expanding companies.
At the same time, you do not want to repress growth. Once you have an established solid customer base and good cash flow, let your success help you set the right measured pace. Some indications that expansion may be warranted include the inability to fill customer orders/requests in a timely manner and employees having difficulty keeping up with production demands. If expansion is what you need to succeed, identify what and who you need to add in order for your business to grow.
2. Poor Management. Many a new business owner often find themselves admitting that they know how to make the product or deliver the service , but lack management expertise in areas such as finance, purchasing, selling, production and hiring/managing employees. Unless they recognize what they don’t do well and seek help quickly, many owners may soon face disaster.
Neglect of a business can also be its downfall. Care must be taken to regularly study, organize, plan and control all activities of its operations. This includes continually staying in touch with market research, customer data and of course the financials. The moment that that you take your eyes of the game so to speak is when your competitors will take the opportunity to make their move. Thus, new owners must always be aware of what’s going on or risk sinking their ship!
1. Insufficient Capital. The most common yet fatal mistake for many failed businesses is having insufficient operating funds. Many owners often underestimate how much money is needed to weather the start up phase and are forced to close before they even have had a fair chance to succeed. Some also may have an unrealistic expectation of incoming revenues from sales, which can exacerbate the situation.
Before you begin your venture it is imperative to ascertain how much money your business will require. We’re not talking about only the costs of starting your endeavor, but the cost of staying in business. It is not uncommon for a business to take a year or two to get going. This means you will need enough funds to cover all your expenses until sales can eventually pay for these costs. To start, we’d recommend using a business start up cost calculator such as this one or setting up a consultation with a local accounting firm or CPA. Many will be happy to talk with you as no one wants to see a business fail.
Upcoming Tax Changes in 2013
Q: I’ve heard that tax year 2013 could be much different than 2012 due to the expiration of the Bush tax cuts. Do you all have any perspective on this?
A: Back in 2001, then President Bush passed what was known as the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), more commonly known as the Bush Tax cuts. For the last few years ever since the cuts were extended through 2012, there has been much consternation as to what is going to happen to tax rates in 2013 when they expire. The question on everyone’s mind is if the expiration of the cuts in 2013 will really be all that painful? Some also wonder if Congress will extend the tax cuts as they did in 2010 when the expiration was originally scheduled to occur. Not knowing the final outcome, it’s important to have a plan in place to prepare for whatever Congress decides.
In addition to the above, the Patient Protection and Affordable Care Act (PPACA), also referred to as Obamacare, will also have provisions that begin in 2013.
If we take a look at the provisions that President Obama has included in his fiscal year 2013 budget, we can get an idea if we need to worry much about what may potentially happen.
EGTRRA
Increase in ordinary tax brackets. The most significant changes from the expiration of the 2001 tax cuts would be the increase of the Ordinary Income Tax Brackets. For most earners, the Income Tax would not increase, but individuals who are in the top two brackets would see changes. For example, if you earn over $390,050 a year, expect an increase of 4.6% in the top most bracket.
Increase in long-term capital gains rates. Ever since 2003 long term capital gains tax for assets held greater than 1 year has been 15% for those in the 15% bracket and higher and 10% for those in the 10% bracket. The change would affect single taxpayers with taxable income below $200,000, head of households below $225,000 and joint couples below $250,000. These individuals long term rate would remain at 15% while filers above these amounts would have a have a 20% rate.
Qualified dividend tax rate. Since 2003 the maximum qualified dividend tax rate has been 15%. President Obama’s budget proposal looks to keep the current dividend rate of 15% for everyone not considered an upper income taxpayer. For these individuals, dividends would be taxed at their ordinary income tax rate of either 36% or 39.6%.
Change in benefit of itemized deductions. Itemized deductions allow one to reduce taxable income be deducting amounts greater than the standard deduction. This includes things such as charitable deductions, mortgage interest, state income taxes, medical expenses, etc. The value of itemized deductions for those upper income taxpayers would be capped at 28%, so someone in the 35% that currently receives $3,500 of benefit for $10,000 of itemized deductions, would only receive $2,800 of tax savings.
PPACA
Change in the health care deduction limit. Through December 31st 2012 you can deduct health care expenses that exceed 7.5% of your adjusted gross income (AGI). However, beginning January 1st 2013 that threshold will rise to 10%. For some, that essentially results in a tax increase, since you have to spend more on health care before seeing the deduction. A way to get around this is to use a FSA or HSA so that all of your expenses are basically tax deductible.
Medicare wage surtax. Starting in 2013, if you make more than $200,000 as a single person ($250,000 if married filing jointly) you will pay a 0.9% tax on the income above that level.
Medicare unearned income surtax. Another tax will be applied to Modified AGI (in this case AGI + tax-free income) for those with income levels that are the same as above. There is an additional 3.8% surtax applied to the lesser of your net investment income OR the excess Modified AGI beyond the limits.
Excise tax on medical devices. Medical devices such as prosthetics and wheelchairs will be assessed an excise tax of 2.3%, although items like hearing aids and eyewear that are sold in retail settings won’t be subject to the tax.
While the impact of most of these items won’t be felt until you file your 2013 return in 2014, it’s good to give some thought as to how you will plan out next year in light of what may be on the horizon. But then again, this is an election year so there is always the probability that no increases will happen. Who wants to increases taxes when you’re trying to get elected?
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