Plan 2 succeed

This time of year is often associated with a dip in business after people have splashed out for christmas and are giving their wallets and purses a well deserved rest. Understandably I might add, having two toy-hungry kids myself!

Unfortunately in this time of economic downturn, this only serves to compound the problems that many retailers are seeing with reduced sales.

So it’s important for a retailer not to position themselves in the market in such a way as to expose them selves to a change which will wipe them out in a single blow.

Clearly in the current climate the retailers bailing out are the ones providing solely a product or a service which is considered a luxory. Brand new cars, brand new furniture, expensive crockery, etc etc.

So to be able to weather a storm it’s best to spread risks and not put all your eggs in one basket. Spread products across spectrums such as luxories and necessities, winter goods and summer goods, permanantly needed consumables and specialist items, imported and domestic goods, etc.

Department stores do well because there is no dependancy on one concession and they can adapt to new suppliers as market trends adjust - there’s a definite lesson here.

So avoid high risk exposure and build in a good dose of flexibility and adaptability into the business plan and you might have the competitive edge to carry you through.

It’s been a turbulent few weeks since my last post with countless companies going into administration, stores closing down, jobs being lost. The Euro more or less reaching parity with the pound. The first quarter of this year is going to be a telling time for many small businesses.

But it’s also a time of year when suppliers bring in new price adjustments and this year we all know which way those adjustments are going. The only way is up. Everyone in the supply chain is in the same boat from manufacturers, distributors and wholesalers, independent stockists and smaller retailers right down to the end customer.

Which all means that for those taking part in January sales, there’s someone in the chain whos absorbing increases in prices and typically that is the end retailer who is desparate to get the sales and doesn’t want to risk losing customers. This could explain why this year the typical items to be found in sales are really eand of line rubbish. There’s very little real bargains to be had - ie sales consist of stuff that wasn’t going to bought any other way.

To keep going and increase chances of staying afloat, retailers need to pass on those price hikes down to the customers. I’ve had to do this myself recently and I can honestly say that despite this, some areas of business have had the best turnover ever.

Obvious questions go through my mind like why didn’t I do this sooner and have I been charging too little all this time?

Well, it’s a fine balance between remaining competitive, providing a good service and staying financially sound. I don’t think there’s a formula for doing the right thing every time but I do think that retailers need not try to absorb price hikes themselves. Don’t be afraid to do a bit of trial and error with prices - I’m certainly glad I did!

The BBC newsbeat page yesterday shows an interview with Alan Sugar (The boss searching for a talented new employee in the TV show The Apprentice) by that well known business world interviewer Chris Moyles (Radio 1 breakfast show). Read the interview here as part of Radio 1’s careers week.

I like Alan Sugar’s down to earth approach to business - he knows the way business works - from grass roots to top level, because he’s worked his way from the bottom to the top and learnt lessons through hands-on experience. His advice about learning from your own experience and from the experience and mistakes of others is absolutely spot on and the basis on which this blog is founded - for the sharing of knowledge to help others.

If you’re running a small mail order business there are obviously many ways in which you can try and make your business more friendly to the environment, in the same way as you can in your everyday life, but here’s some possible options to consider with respect to packaging - which is probably the biggest concern…

If you send out packages, try and re-use packaging. We either re-use boxes that stock comes supplied in, or we cut it up into smaller panels to use as stiffening, and whatever is left we make sure to recycle in the green waste. We sometimes use our local freecycle network to collect polystyrene void-fill or bubble wrap that would otherwise end up in landfill. This also saves buying it in, but it’s really only worth doing for larger quantities, perhaps collecting from other businesses that produce it as unwanted by-product. Shredded waste paper is great for void-fill but can be messy!

Where possible use recycled envelopes, but do bear in mind that the quality is lower and less forgiving in the post - especially if it gets wet!

Use recycled printer paper for invoices and sales receipts, if indeed printed versions are required at all. Many different types of recycled printer paper are available and it may depend on offers available from your supplier - we currently use Mondi FSC Certified Nautilus green range 80 gsm superwhite 100% recycled paper. If you get brochures printed etc. then try and use a printer who uses recycled content.

If you take customer orders to a post office or courier that requires an extra car journey, (don’t forget to factor in fuel as business running costs and expenses) then reduce number of weekly visits, e.g. daily trips can be cut to 3 days a week. Bear in mind any customer expectation of next day dispatch though!

Keep packaging size in proportion to content - we often see mail order items coming as a huge box with small content and lots of void fill - this isn’t friendly in terms of packaging or transportation either.

Any other tips are gratefully received and we’ll happily share them on this site.

In the doom and gloom of the current economic climate, there are plenty of reasons why you might think that now is not a good time to start a new business, but actually there are also reasons why now is a perfect time.

Many small businesses are started by an individual who already has a day job but wishes to supplement their income with a home-run business, perhaps along with their partner. Typically the financial benefit is fed by time and effort rather than great swathes of money poured into the business. Running a business alongside a day job provides security, confidence, reduced risk and the ability to grow at a pace that suits without the pressure to need an income to live on from day one.

Certainly some people do leave their day job to jump straight into a new venture, but if that venture can be started on a small scale as a sideline which grows gradually, then when the time comes to make the break to full time, then the landscape is known that much better and you can land running, rather than stumbling in the dark.

So - if the type of business is such that it can takes this supplemental sideline approach, and if the waters can be tested in the current economic climate, and found to be able to successfully grow despite this, then the chances are that much greater that in a more bullish market condition, the business will progress that much better. I.e. if you can succeed in hard times, you should do wonders in the good times.

This of course relies on the right sort of business - one which can be started with little effort, with low financial risk, with no long term shackles - one which can turn hard work, long hours and determination into financial gain, but the slowdown or downturn in the economy need not necessarily be a showstopper. A thoroughly reccommended way to get started is by starting a business on eBay but I’ll come back to the subject of an eBay business later.

Philips comment on the ‘about page’ regarding a business equity plan reminds me of a very important issue about working with partners in business. If you start up a business with someone else, you absolutely must build in mutually agreed paths to follow should one or more of you drop out. There are no end of businesses that go down the pan because relationships between owners or partners go sour. They can’t agree a mutual exit plan and the business collapses around them.

It may sound rather negative at the outset to be talking about failure early on and this is why it often doesn’t get done. But it’s so important to be up front and open. Communication is key. If all concerned know where they stand then there’s less chance for relationships to turn for the worse due to sudden issues.

Of course, situations occur that mean people leave a going concern for personal, geographical, or health reasons, not just because an argument has arisen, but still, a plan set out and agreed in the early days can fall naturally into position, and if the strategy is well thought out, the business should be able to continue without the blind panic that a critical partner’s leaving might otherwise incur.

A common situation is that two people start a business. One is keen, the other goes along with it all, but after a couple of years gets bored and wants out. Maybe they find they’re not spending enough time with family. Whatever the reason - introduce a plan from the beginning to cover all concerned. It’s especially important where partners have put funds or assets into the business.

If you’re running your own business, one of the first people you need to let know is Inland Revenue, because if you’re running a business you’ll need to fill in a tax form and pay your tax bill every year. No way of avoiding this one of course - but what you can do is ensure that you don’t pay more tax than you need to.

There are many expenses which you are ligitimately able to put on your accounts, some obvious and some not so. I’d thoroughly recommend getting a book on Paying less tax, as this will be sure to save you more money than it costs. Personally I’ve used the The Daily Telegraph Guide to Paying Less Tax , but do always check facts and figures to ensure they are still valid in the year for which you are filing your tax return, as some things, such as the VAT registration threshold changes virtually every year.

Whilst on this topic, the HM Revenue website is defintely worth checking out before doing anything!

I’ll be revisiting this theme frequently I would imagine, but the title of this article is so true - every penny does count. Every little income and expenditure is going to show up somewhere on your profit and loss for any given business period. Every penny saved means a penny profit, and they all add up!

Let’s take postage for a small e-commmerce business run from home as an example. There’s options for how items posted out have their postage applied: Post office labels, stamps, franking, smartstamp, courier business account, to name but a few, that are commonly used for businesses run from home.

Let’s say you use stamps and send out 1000 items a year (My own part-time business sends out about 7000 packages a year at the moment) - if you save a penny per item on postage, you’ve saved £10 over the year - nothing to write home about, or to write a blog about.

But then lets say you opt for franking - you could save an average of 25p per item (depending on typical weights of course) - a total of £250 saved on 1000 packets, and suddenly it’s real savings, real profit that’s potentially wasted if options are not considered properly. By regularly considering the postage options a busy sole-trader retailer could save thousands.

In addition, packet shapes and sizes affect costs (with Royal Mail), so a little bit of thought about how some items are packed for Royal Mail’s postal rates could save more than 50% on postage in some situations. In fact, Royal Mail offer consultancy to bigger businesses on how to reduce postal rates by some lateral (out of the box!!) thinking towards packing their products. In my own business, we occasionally repackage products to fit in thinner containers, as the savings make it cost effective.

Even for those using stamps - there are ways to get reduced postage, from savings of around 5% at places like Superdrug at Christmas time, to significant savings buying postage in bulk from eBay, but, be warned of rogue traders on eBay as there are many ways to slip up there. Having said that, there are of course mostly genuine sellers and savings of 20% or more should be possible.

Postage is just one small area where savings can be made, where perhaps you thought this was a fixed cost area of the business. Apply this logic elsewhere and you’ll soon find all sorts of places where your business could be making you much more money than you thought.

If you’re setting up in business, you’ll be wanting to keep an eye on how well you’re doing. You need hard facts - are you making a profit or a loss, is the business worth your time. How are you doing compared to last month, or this time last year. You’ll be wanting a good handle on the financial figures and for this reason it’s imperative to be able to see income and outgoings of all kinds, but also to see how much money you have in the bank.

This means that you really should have a seperate bank account to manage all your business expenses. Don’t be tempted to use a personal bank account and to sort all that sort of thing out later - chances are it will be one of those things you never quite get round to because there’s so much else to do.

Mixing business finances and personal finances is something that is going to really confuse the issues of determining the hard facts mentioned above. Unless you look at the meticulous paperwork or spreadsheet (that you’ll no doubt be keeping up to date all the time!?) then there’s no way to easily determine if last months income was greater than expenditure because you’ll have mortgage, food, petrol and bills of all sorts in the frame, making the overall picture very hard to see.

So get yourself a business bank account (rates are often quite good for the first couple of years), and a business debit or credit card and do it all nice and cleanly from as early on as possible. When the business takes off it’ll be very useful when dealing with larger business customers and your suppliers, as a business account counts for something towards a professional face onto your business. If possible make the account name a business name not your personal name. You should still find that even if your bank request that you put the name ‘John Smith T/A MyBusiness’ (T/A = trading as), you’ll still be able to accept cheques in the name of MyBusiness - but always cheque with your bank when setting up the account.

Another consideration is that if you’re trading online and taking credit card payments you’ll possibly want an Internet Merchant Trading account and this will likely necessitate a business account. Equally if you’re retailing face to face you’ll definitely need a seperate business account to be allowed to have an epos (electronic point of sale) system to take card payments.

When you go to a restaurant, (and I’m not talking McD’s) you expect not just good food, but good service, good presentation, good atmosphere. It’s the same when you purchase something from a shop. John Lewis and Aldi will both sell you something. Neither should provide a bad experience, but somehow, one of these two has set the expectation amongst the public that they will provide you an added value in the process, whether it’s knowledge of the products, friendliness of the staff, ability to help outside their area, professionalism in handling queries, product presentation or general ambience of the store etc etc.

A good service and a good reputation means people will come back time and time again - even if the prices are not the absolute cheapest around. The added value of a good service will reap rewards.

This is true online as well. Someone looking to set up an e-commerce site absolutely must do their research. It’s easy to think that you can just whack up a website with a shopping cart and sit back. A bad looking website will turn away visitors faster than you can say ‘flashing-neon-text’.  I’ve heard that visitors make a decision within 7 seconds as to whether a site is worth staying at or not. In fact I think there’s a strong element of decision before visiting. When you do a search in google, there’s something about the content that comes up that says whether a site is worth visiting. A site might come up top of the search but if the content of one further down looks more descriptive, clearer, more professional, it’s more likely to get a click through than one at the top which has the search term but more noise surrounding it.

So a professional looking site is a good start to the ambience and product display. Make it easy to buy, easy to pay, give good product detail, good pictures. Deal with questions with a good FAQ and quick informative response to emails. Deal with problems quickly efficiently. Dispatch promptly. Include a freebie! Make it personal.

If you give customers more than they expected, you will be remembered and they’ll come back. Often. And they’ll recommend you. Give a bad experience, they won’t come back and they certainly won’t recommend.