Dave Donelson's Blog: OutTakes, page 11
October 25, 2011
Retail Selling Strategies
In retailing, as in all types of selling, a customer with pricing on the mind may insist they can get by with a cheaper product even when you know they are ultimately going to be dissatisfied with it. It's important to sell this customer the right product the first time if at all possible, because they will probably blame you for their dissatisfaction later—even if you sold the cheap product to them under protest. Even worse, they may spread the bad word to their friends. Selective memory is a powerful force for evil.
One way to up-sell them is to play up the differences between the cheaper and the better products while you stress the very small differential in their prices by breaking it down into smaller amounts. Over the life span of two brands of high performance tires, for example, how many pennies per mile does the twenty-dollar price difference amount to?
Good salespeople always have their eyes and ears open looking for opportunities to up-sell their current customers. Here are some good ways to find more of them:
● Be alert to changes. Has the customer bought a new car? Of course, that's an obvious opportunity to start selling. But how about if they've moved to a new house with a bigger garage? Can't you envision that rack full of tools they have room for now?
● Disappointment breeds more sales. Let's be frank: if your customers won every race they entered, they wouldn't need you, would they? So when you hear one grousing about coming in second all the time, make a few well-chosen suggestions about how they can move up a notch while you're empathizing with them.
● What's new? New products are coming into the vibrant performance market every day and you owe it to your customers to tell them about them! An email newsletter can do the trick—and so can a simple telephone call.
When you take the sales initiative, opportunity knocks a lot louder.
Seller Reluctance
You and your other salespeople may be reluctant to use these tactics because of expected customer resistance or even resentment. But as long as you watch how they are reacting, listen to what they're saying to you, and don't try to cram something down their throat, that problem won't be nearly as bad as you think. Remember, you're dealing with somebody who has already decided to spend some money with you, so they must be pretty comfortable with the way you do business.
The biggest obstacle to increasing your sales this way, however, is simple laziness. It's a lot easier to just give the customer what they ask for, take their money, and say goodbye. When you do that, though, you're actually doing the customer a disservice because you can't be sure that what you sold them will really meet their needs. How much do they know about what they are buying? Do they really understand what alternatives they have or what the differences are between various products? Up-selling is a good way to get to know what they truly need, which puts you—the professional—in a position to make sure they buy the right thing.
When you understand it that way, you realize that you are creating value for the customer while you are bringing more dollars into your store. That's about the best formula for business success I've heard since someone advised me to buy low and sell high.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
One way to up-sell them is to play up the differences between the cheaper and the better products while you stress the very small differential in their prices by breaking it down into smaller amounts. Over the life span of two brands of high performance tires, for example, how many pennies per mile does the twenty-dollar price difference amount to?
Good salespeople always have their eyes and ears open looking for opportunities to up-sell their current customers. Here are some good ways to find more of them:
● Be alert to changes. Has the customer bought a new car? Of course, that's an obvious opportunity to start selling. But how about if they've moved to a new house with a bigger garage? Can't you envision that rack full of tools they have room for now?
● Disappointment breeds more sales. Let's be frank: if your customers won every race they entered, they wouldn't need you, would they? So when you hear one grousing about coming in second all the time, make a few well-chosen suggestions about how they can move up a notch while you're empathizing with them.
● What's new? New products are coming into the vibrant performance market every day and you owe it to your customers to tell them about them! An email newsletter can do the trick—and so can a simple telephone call.
When you take the sales initiative, opportunity knocks a lot louder.
Seller Reluctance
You and your other salespeople may be reluctant to use these tactics because of expected customer resistance or even resentment. But as long as you watch how they are reacting, listen to what they're saying to you, and don't try to cram something down their throat, that problem won't be nearly as bad as you think. Remember, you're dealing with somebody who has already decided to spend some money with you, so they must be pretty comfortable with the way you do business.
The biggest obstacle to increasing your sales this way, however, is simple laziness. It's a lot easier to just give the customer what they ask for, take their money, and say goodbye. When you do that, though, you're actually doing the customer a disservice because you can't be sure that what you sold them will really meet their needs. How much do they know about what they are buying? Do they really understand what alternatives they have or what the differences are between various products? Up-selling is a good way to get to know what they truly need, which puts you—the professional—in a position to make sure they buy the right thing.
When you understand it that way, you realize that you are creating value for the customer while you are bringing more dollars into your store. That's about the best formula for business success I've heard since someone advised me to buy low and sell high.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
October 18, 2011
How Retailers Can Up-Sell
Back in the good old days, when retail stores had living, breathing employees who helped customers choose their merchandise, it was standard procedure for the salesperson to try to increase the size of each individual sale. They did this very effectively in several ways that can be adopted by today's retail shop owners who are interested in increasing the top line on their income statements.
One of the first is simple up-selling, where you guide the customer to a selection with a higher price point than the one they came in to buy. In an extreme example, let's say that the customer came to your hardware store to buy a wrench. An up-seller would make at least an attempt to sell him or her a complete set of wrenches instead. Outlandish? Maybe, but you never know until you try. And, as long as the suggestion is done quickly and without pressure, the customer won't mind.
A good way to manage this kind of interchange with the customer is to ask them what problems they're having while you're getting the item they came in for. That's also the time to get some basic information like what kind of project they're working on so you can give them accurate advice. Then, even if they say "no thanks" to the suggestion, you can reply with "Let me at least give you a price so you can think about it." There's no pressure on the customer in up-selling this way.
Add-ons
Another sales-building strategy is to suggest add-ons to the original purchase. Back when men wore coats and ties to the office (is anybody besides me old enough to remember that?), you couldn't buy a jacket in a men's store without the salesperson offering you a shirt, a couple of ties, and a pocket handkerchief (now I'm really dating myself). The modern shop owner can and should do the same thing. At a garden center, for example, once you've sold the customer a rose bush you should suggest new pruning shears and maybe some long gloves.
Add-ons should be, but don't necessarily have to be, related in some way to the customer's original purchase. It's also helpful if they have a lower price point. They are truly impulse purchases for the customer, although the impulse originates with the shop salesperson.
There is no reason these same tactics can't work for service revenues, too. The garage customer that buys a set of adjustable shocks, for example, might also be interested in a chassis tune. One incentive for the customer to make the additional purchase might be that you can save him or her some money by doing both jobs at the same time. It can also save the customer something else that's valuable—time.
Up-sell Bargain Hunters, Too
There are some situations where you might think that up-sells and add-ons aren't possible, like when a bargain-hunting customer comes into the shop and says, "I'm looking for such-and-such, and I only want to spend X dollars." There are several ways to deal with that kind of low-baller. The first is to call their bluff and see how serious they are about their budget by telling them you don't have anything in that price range and offering to show them secondhand merchandise or a cheaper job. Note that you're not refusing to meet their needs, just their price. You're also sending them a not-so-subtle message that their expectations may be too high without telling them flat out that they're an idiot.
Another way is to just ignore what they say about their budget and start at the high end of the market and work your way down. One advantage of this approach is that it gives the customer a chance to see options they might not even know exist. What's more, after they've seen that royal banana split, it makes their plain vanilla cone look a whole lot less appealing.
Yet a third approach is to give them alternatives and let them choose. Even if Product A and Product B are both priced higher than they say they are willing to pay, it's always very possible that their budget will change if you do a good job of selling the higher-priced options. This is also a good way to find out what's really important to them, both in terms of what they are looking for and how much they are really willing to pay.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
One of the first is simple up-selling, where you guide the customer to a selection with a higher price point than the one they came in to buy. In an extreme example, let's say that the customer came to your hardware store to buy a wrench. An up-seller would make at least an attempt to sell him or her a complete set of wrenches instead. Outlandish? Maybe, but you never know until you try. And, as long as the suggestion is done quickly and without pressure, the customer won't mind.
A good way to manage this kind of interchange with the customer is to ask them what problems they're having while you're getting the item they came in for. That's also the time to get some basic information like what kind of project they're working on so you can give them accurate advice. Then, even if they say "no thanks" to the suggestion, you can reply with "Let me at least give you a price so you can think about it." There's no pressure on the customer in up-selling this way.
Add-ons
Another sales-building strategy is to suggest add-ons to the original purchase. Back when men wore coats and ties to the office (is anybody besides me old enough to remember that?), you couldn't buy a jacket in a men's store without the salesperson offering you a shirt, a couple of ties, and a pocket handkerchief (now I'm really dating myself). The modern shop owner can and should do the same thing. At a garden center, for example, once you've sold the customer a rose bush you should suggest new pruning shears and maybe some long gloves.
Add-ons should be, but don't necessarily have to be, related in some way to the customer's original purchase. It's also helpful if they have a lower price point. They are truly impulse purchases for the customer, although the impulse originates with the shop salesperson.
There is no reason these same tactics can't work for service revenues, too. The garage customer that buys a set of adjustable shocks, for example, might also be interested in a chassis tune. One incentive for the customer to make the additional purchase might be that you can save him or her some money by doing both jobs at the same time. It can also save the customer something else that's valuable—time.
Up-sell Bargain Hunters, Too
There are some situations where you might think that up-sells and add-ons aren't possible, like when a bargain-hunting customer comes into the shop and says, "I'm looking for such-and-such, and I only want to spend X dollars." There are several ways to deal with that kind of low-baller. The first is to call their bluff and see how serious they are about their budget by telling them you don't have anything in that price range and offering to show them secondhand merchandise or a cheaper job. Note that you're not refusing to meet their needs, just their price. You're also sending them a not-so-subtle message that their expectations may be too high without telling them flat out that they're an idiot.
Another way is to just ignore what they say about their budget and start at the high end of the market and work your way down. One advantage of this approach is that it gives the customer a chance to see options they might not even know exist. What's more, after they've seen that royal banana split, it makes their plain vanilla cone look a whole lot less appealing.
Yet a third approach is to give them alternatives and let them choose. Even if Product A and Product B are both priced higher than they say they are willing to pay, it's always very possible that their budget will change if you do a good job of selling the higher-priced options. This is also a good way to find out what's really important to them, both in terms of what they are looking for and how much they are really willing to pay.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
October 11, 2011
Completing A Complex Sale
Selling the way it's usually described is a pretty simple affair. You find the prospect, research their needs and develop a proposed idea, pitch the decision maker, manage the objections, and close the sale. Straight forward, isn't it? Nice and linear.
But selling in the real world isn't quite that simple. The "normal" sale is about as linear as a basket of eels. You may be able to find something that looks like a beginning, but which of the squirming bodies leads you to the other end? We all operate in the world of the complex sale.
The complex sale is easy to identify but hard to complete. You know you are in the middle of one when Mr. Big says, "I really like this idea, but I have to run it by my boss." And then his boss, Mr. Bigger, says, "Good idea. What does production have to say about it?" And then production says, "Interesting. Can we change these widgets into woudgets—if the new assembly line we're installing next year calls for it? Better check with the vendor." So the vendor of the new assembly line says, "We'll set it up any way they want. Besides, what's a widget?" Get the picture?
There is a decision maker, but there are also multiple decision influencers. There is ultimately a "yes" or "no" decision, but there are also multiple interim decisions to be made before that point is reached. Multiple decision influencers making multiple decisions. It's a recipe for mass confusion.
The dollar size of the buying decision doesn't necessarily dictate the number of decision influencers involved. One of the more interesting sales I ever made was a multi-million dollar communications tower to a company in Saudi Arabia. The situation had all the hallmarks of a complex sale. The purchasing company was a joint venture operated by two other companies, one French and one Saudi, and the item I was selling was a very high priced component in a much larger complete system to be operated by a ministry of the Saudi government. The construction manager was an Egyptian subcontractor to the Saudi/French joint venture.
Even the payment wasn't linear. The customer's funds were coming from an insurance settlement that was still in dispute. The payment to us was to be made in the form of an Irrevocable Letter of Credit, which had to be approved by the Saudi bank, our bank, and a transmitting bank in Switzerland.
There was an endless chain of meetings, referrals, studies, and opinions offered, countered, and negotiated by phone, fax, and snail mail that went on for six months and involved engineers, bankers, and various functionaries on three continents. Finally, the sale was closed after a single 90-minute meeting I held with the president of the joint venture and his construction manager. That meeting was basically a formality, however, since all the details had been ironed out in the months before.
On the other hand, I once sold a small-market television advertising package worth $300 that required four weeks of study and deliberation by an advertising agency's media planner, buyer, and account supervisor, their client's store manager, regional manager, and advertising director, and the co-operative advertising manager of one of the store's vendors. The Federal Express and long-distance telephone bills were greater than our profit on that sale!
Watch out, a complex sale could be lurking anywhere out there.
Successfully completing a complex sale requires tremendous patience and perseverance, two qualities often in short supply among salespeople, who often chose sales as a career in the first place because they like the instant gratification of closing a deal. If the reason you get up and go to work each morning is to see how many sales you can make that day, I suggest you find something simple to sell—like Girl Scout cookies—and a simple market to sell it in—like sole proprietorships with fewer than two employees. Selling just about anything else to larger organizations requires the ability to navigate through a complex sale.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
But selling in the real world isn't quite that simple. The "normal" sale is about as linear as a basket of eels. You may be able to find something that looks like a beginning, but which of the squirming bodies leads you to the other end? We all operate in the world of the complex sale.
The complex sale is easy to identify but hard to complete. You know you are in the middle of one when Mr. Big says, "I really like this idea, but I have to run it by my boss." And then his boss, Mr. Bigger, says, "Good idea. What does production have to say about it?" And then production says, "Interesting. Can we change these widgets into woudgets—if the new assembly line we're installing next year calls for it? Better check with the vendor." So the vendor of the new assembly line says, "We'll set it up any way they want. Besides, what's a widget?" Get the picture?
There is a decision maker, but there are also multiple decision influencers. There is ultimately a "yes" or "no" decision, but there are also multiple interim decisions to be made before that point is reached. Multiple decision influencers making multiple decisions. It's a recipe for mass confusion.
The dollar size of the buying decision doesn't necessarily dictate the number of decision influencers involved. One of the more interesting sales I ever made was a multi-million dollar communications tower to a company in Saudi Arabia. The situation had all the hallmarks of a complex sale. The purchasing company was a joint venture operated by two other companies, one French and one Saudi, and the item I was selling was a very high priced component in a much larger complete system to be operated by a ministry of the Saudi government. The construction manager was an Egyptian subcontractor to the Saudi/French joint venture.
Even the payment wasn't linear. The customer's funds were coming from an insurance settlement that was still in dispute. The payment to us was to be made in the form of an Irrevocable Letter of Credit, which had to be approved by the Saudi bank, our bank, and a transmitting bank in Switzerland.
There was an endless chain of meetings, referrals, studies, and opinions offered, countered, and negotiated by phone, fax, and snail mail that went on for six months and involved engineers, bankers, and various functionaries on three continents. Finally, the sale was closed after a single 90-minute meeting I held with the president of the joint venture and his construction manager. That meeting was basically a formality, however, since all the details had been ironed out in the months before.
On the other hand, I once sold a small-market television advertising package worth $300 that required four weeks of study and deliberation by an advertising agency's media planner, buyer, and account supervisor, their client's store manager, regional manager, and advertising director, and the co-operative advertising manager of one of the store's vendors. The Federal Express and long-distance telephone bills were greater than our profit on that sale!
Watch out, a complex sale could be lurking anywhere out there.
Successfully completing a complex sale requires tremendous patience and perseverance, two qualities often in short supply among salespeople, who often chose sales as a career in the first place because they like the instant gratification of closing a deal. If the reason you get up and go to work each morning is to see how many sales you can make that day, I suggest you find something simple to sell—like Girl Scout cookies—and a simple market to sell it in—like sole proprietorships with fewer than two employees. Selling just about anything else to larger organizations requires the ability to navigate through a complex sale.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
October 4, 2011
Make Your Interviews Meaningful
From the hirer's standpoint, the purpose of the job interview is to learn things that will hopefully predict the potential employee's future success (or failure). Some things I learned while hiring hundreds of salespeople over the years:
• The applicant should do most of the talking. If you spend more time speaking than listening, you're not learning as much about them as they are about you.
• What they say may not be as important as how they say it. Do they speak clearly and convey a positive outlook? Do they get defensive?
• Communication goes both ways, so do they listen well? How much attention they pay to your questions may reveal how much attention they'll pay to those of your customers.
• Appearance isn't everything, but who wants to work with a slob? To find out how neat an applicant really is, go outside and look in their car. If the back seat is full of junk, they may not be as well-kept as they appear.
• Follow-up counts, especially in personal sales. Give the applicant your phone or fax number or your email address, then a day or two to see if they send you a thank-you after the interview. If they do, it will not only show that they're polite, but that they care enough about the job to go the extra step.
Starter Questions
The goal of an interview is to listen to the candidate talk so you can learn about them. Here are few open-ended questions to start the process:
• Tell me about your work history. Which job did you like best? Why?
• Did you enjoy school? What was your favorite subject? Why?
• Is there anything I should know about your career that doesn't show up on your resume?
• What part of your current (or last) job do you like best? Least?
• Do you like your boss? Why? Why not?
• Describe for me the most difficult problem you've ever faced and tell me how you solved it.
• What do you do best?
• What do you want your employer to do for you?
• Who is the person you most admire? Why?
• Tell me what you do to improve yourself.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
• The applicant should do most of the talking. If you spend more time speaking than listening, you're not learning as much about them as they are about you.
• What they say may not be as important as how they say it. Do they speak clearly and convey a positive outlook? Do they get defensive?
• Communication goes both ways, so do they listen well? How much attention they pay to your questions may reveal how much attention they'll pay to those of your customers.
• Appearance isn't everything, but who wants to work with a slob? To find out how neat an applicant really is, go outside and look in their car. If the back seat is full of junk, they may not be as well-kept as they appear.
• Follow-up counts, especially in personal sales. Give the applicant your phone or fax number or your email address, then a day or two to see if they send you a thank-you after the interview. If they do, it will not only show that they're polite, but that they care enough about the job to go the extra step.
Starter Questions
The goal of an interview is to listen to the candidate talk so you can learn about them. Here are few open-ended questions to start the process:
• Tell me about your work history. Which job did you like best? Why?
• Did you enjoy school? What was your favorite subject? Why?
• Is there anything I should know about your career that doesn't show up on your resume?
• What part of your current (or last) job do you like best? Least?
• Do you like your boss? Why? Why not?
• Describe for me the most difficult problem you've ever faced and tell me how you solved it.
• What do you do best?
• What do you want your employer to do for you?
• Who is the person you most admire? Why?
• Tell me what you do to improve yourself.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 27, 2011
Planning For Successful Negotiations
Mention negotiating to some people, and the first image that comes to mind is a table full of lawyers and accountants haggling over a billion-dollar contract. In most small companies, you seldom get involved in those kinds of deals, but you do conduct negotiations of many kinds all day every day—sometimes without even realizing it. You negotiate with suppliers, customers, service providers, even employees. You give and take over everything from delivery dates and financing terms to whose turn it is to clean the coffee pot in the break room. Perhaps the most important negotiations, though, are the ones you conduct with vendors and suppliers. How well you perform there can make a major impact on your company's success.
Obviously, being a good negotiator can improve your bottom line. Less obviously, though, when you improve your negotiation skills you also reduce some of the stress that comes along with running a business. You'll enjoy both wider profit margins and fewer headaches if you're prepared for the negotiating process and ready to use your skills when the need arises. Before you begin a negotiating session, you need two things: information and a game plan.
Information is something you can't have too much of. You need to know as much about the other person's needs and wants as you do about your own. If you are negotiating with a vendor, how's their business? Is this sale important to them or just routine? Are they operating under competitive pressure in the marketplace or do they have a monopoly? Is their plant running at full capacity? Is their warehouse bulging with unsold inventory? Is the rep over quota or desperate for a sale? Some of these things you can find out by asking them directly or just listening closely to casual conversation; others will take a little research in the trade press or a reading between the lines in your dealing with competitive vendors. In either case, the more you know in advance, the better off you'll be.
Look at your own situation ahead of time, too. Get the facts and figures straight about what you need, when you need it, how much you're willing to pay for it, and so on. The more solid information you have, the more confident you will be in making decisions—and such confidence will greatly influence the way the vendor responds to your offers.
Remember, too, that this information is as confidential as your bank account numbers. You don't need to reveal it to the vendor unless it's going to help you get something you want.
Successful negotiation is by definition a matter of give and take, which is where the planning comes in. Preparing a list in advance of the possible concessions you can make as well as a list of things you'd like to have in return is often a good idea. The list will help you prioritize your requests and make sure you don't overlook any possibilities. As you're drawing up your list, remember that negotiation isn't just about price. Delivery schedules, payment terms, packaging and displays, advertising allowances, return policies, and many other elements can add (or subtract) value to the transaction. And nearly every one of them is negotiable, so it never hurts to ask.
You can also offer the vendor some items he or she might want besides a higher price, too. The size of the order comes to mind right away, of course, but what's it worth to them to get a quick decision from you? Or how about payment in advance? While you normally don't want to tie up your capital, if the price of the parts or merchandise you're buying can be slashed below the cost of the money (the interest you would earn if you kept the money in the bank for the time it takes to sell turn the inventory, to look at it simply), it might make sense.
One of the preparatory steps I always found useful was to think through my final position—my least acceptable alternative—before I started negotiating. This might include the highest price I could afford to pay, the largest quantity I could justify ordering, the longest delivery date I could accept, and so on. I would try to include every factor that might come up and decide—in advance—the worst terms I could accept before walking away from the deal.
What we're talking about here is my "take it or leave it" offer. I would certainly never reveal it to the vendor, but knowing where I stood gave me a scale on which to measure possible concessions that I was either willing to make or that the vendor offered as the negotiation continued. Knowing the ultimate bottom line ahead of time also kept me from making costly mistakes in the heat of the moment.
The other thing to prepare in advance is a wish list of everything you could possibly want from the vendor. Don't keep anything off the list just because you think "they'll never go for that." You don't know unless you ask!
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Obviously, being a good negotiator can improve your bottom line. Less obviously, though, when you improve your negotiation skills you also reduce some of the stress that comes along with running a business. You'll enjoy both wider profit margins and fewer headaches if you're prepared for the negotiating process and ready to use your skills when the need arises. Before you begin a negotiating session, you need two things: information and a game plan.
Information is something you can't have too much of. You need to know as much about the other person's needs and wants as you do about your own. If you are negotiating with a vendor, how's their business? Is this sale important to them or just routine? Are they operating under competitive pressure in the marketplace or do they have a monopoly? Is their plant running at full capacity? Is their warehouse bulging with unsold inventory? Is the rep over quota or desperate for a sale? Some of these things you can find out by asking them directly or just listening closely to casual conversation; others will take a little research in the trade press or a reading between the lines in your dealing with competitive vendors. In either case, the more you know in advance, the better off you'll be.
Look at your own situation ahead of time, too. Get the facts and figures straight about what you need, when you need it, how much you're willing to pay for it, and so on. The more solid information you have, the more confident you will be in making decisions—and such confidence will greatly influence the way the vendor responds to your offers.
Remember, too, that this information is as confidential as your bank account numbers. You don't need to reveal it to the vendor unless it's going to help you get something you want.
Successful negotiation is by definition a matter of give and take, which is where the planning comes in. Preparing a list in advance of the possible concessions you can make as well as a list of things you'd like to have in return is often a good idea. The list will help you prioritize your requests and make sure you don't overlook any possibilities. As you're drawing up your list, remember that negotiation isn't just about price. Delivery schedules, payment terms, packaging and displays, advertising allowances, return policies, and many other elements can add (or subtract) value to the transaction. And nearly every one of them is negotiable, so it never hurts to ask.
You can also offer the vendor some items he or she might want besides a higher price, too. The size of the order comes to mind right away, of course, but what's it worth to them to get a quick decision from you? Or how about payment in advance? While you normally don't want to tie up your capital, if the price of the parts or merchandise you're buying can be slashed below the cost of the money (the interest you would earn if you kept the money in the bank for the time it takes to sell turn the inventory, to look at it simply), it might make sense.
One of the preparatory steps I always found useful was to think through my final position—my least acceptable alternative—before I started negotiating. This might include the highest price I could afford to pay, the largest quantity I could justify ordering, the longest delivery date I could accept, and so on. I would try to include every factor that might come up and decide—in advance—the worst terms I could accept before walking away from the deal.
What we're talking about here is my "take it or leave it" offer. I would certainly never reveal it to the vendor, but knowing where I stood gave me a scale on which to measure possible concessions that I was either willing to make or that the vendor offered as the negotiation continued. Knowing the ultimate bottom line ahead of time also kept me from making costly mistakes in the heat of the moment.
The other thing to prepare in advance is a wish list of everything you could possibly want from the vendor. Don't keep anything off the list just because you think "they'll never go for that." You don't know unless you ask!
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 22, 2011
Limited Seats Available for Social Media Panel
There are still a few seats available for the 914Inc Social Media Panel at Antun's next Tuesday. RSVP here today. For details, see my previous post. Don't wait--and don't just show up at the door with a hopeful grin on your face!
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 20, 2011
Pay Attention To Business Details
Ask anybody who spends their day in a furniture finishing spray booth, and they'll tell you ninety percent of success in a paint job comes from attention to detail. Proper sanding, masking, tacking, priming, and so on are mandatory. So is a clean gun, properly mixed paint, and the right temperature in the spray booth. Skip a step or give it a half-baked effort, and you're going to find sags, clouds, over-sprays, fisheyes, and other ugly features in your finish coat. Your attention to detail is what matters.
The same is true when it comes to running your business. Just as a perfectly-applied finish coat depends on what came before it, a successful business depends on dozens of factors other than the ability of the company to produce eye-popping work. Profit doesn't just magically appear. It's the result of constant attention to the large number of details involved in running a successful business. Unfortunately, like sanding between finish coats, most of these details aren't things many people consider fun.
How much do you enjoy bookkeeping, for example? About as much as you like root canal, right? You know it has to be done, but you'd just as soon not do it yourself. I know plenty of company owners who approach the job of keeping their books by throwing all their receipts, invoices, and bank statements into a big box. When tax time rolls around, they dump the box on their accountant's desk and wait for the bad news. This approach is about as effective as throwing an old sheet over a sofa and calling it re-upholstered.
As tedious as it is, keeping a timely set of books will help you run a company with much higher profits. And with the availability of easy-to-learn software, you don't need to be a CPA to master the basics. Even if you're lucky enough to have an office manager who handles the task, it's a good idea to personally review the results every month. Good, timely bookkeeping will help you spot profit leaks before they become floods.
If you review your books in detail, you can plot the costs of materials or labor over time to see if there are any negative trends developing. You probably have a good sense of what's happening, but it's never a bad idea to have the specifics in front of you before you make any decisions. You can also spot cash flow glitches and accounts receivable problems before they occur so you can take the appropriate steps after considering all the alternatives. It's always better to talk to your banker about a loan before you're in crisis mode.
You may also have a nice surprise in store when tax time rolls around. If your accountant doesn't have to wade through your box of dusty documents, he or she should charge you a lot less to prepare your tax return. And who knows? Your diligence throughout the year may actually enable you to lower your tax bill by shifting expenses or revenues—quite legitimately—from one year to the next, by making a timely retirement plan contribution, or by using other time-sensitive strategies of the tax-wise. You can only do those things if you've paid attention to the details of your bookkeeping.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
The same is true when it comes to running your business. Just as a perfectly-applied finish coat depends on what came before it, a successful business depends on dozens of factors other than the ability of the company to produce eye-popping work. Profit doesn't just magically appear. It's the result of constant attention to the large number of details involved in running a successful business. Unfortunately, like sanding between finish coats, most of these details aren't things many people consider fun.
How much do you enjoy bookkeeping, for example? About as much as you like root canal, right? You know it has to be done, but you'd just as soon not do it yourself. I know plenty of company owners who approach the job of keeping their books by throwing all their receipts, invoices, and bank statements into a big box. When tax time rolls around, they dump the box on their accountant's desk and wait for the bad news. This approach is about as effective as throwing an old sheet over a sofa and calling it re-upholstered.
As tedious as it is, keeping a timely set of books will help you run a company with much higher profits. And with the availability of easy-to-learn software, you don't need to be a CPA to master the basics. Even if you're lucky enough to have an office manager who handles the task, it's a good idea to personally review the results every month. Good, timely bookkeeping will help you spot profit leaks before they become floods.
If you review your books in detail, you can plot the costs of materials or labor over time to see if there are any negative trends developing. You probably have a good sense of what's happening, but it's never a bad idea to have the specifics in front of you before you make any decisions. You can also spot cash flow glitches and accounts receivable problems before they occur so you can take the appropriate steps after considering all the alternatives. It's always better to talk to your banker about a loan before you're in crisis mode.
You may also have a nice surprise in store when tax time rolls around. If your accountant doesn't have to wade through your box of dusty documents, he or she should charge you a lot less to prepare your tax return. And who knows? Your diligence throughout the year may actually enable you to lower your tax bill by shifting expenses or revenues—quite legitimately—from one year to the next, by making a timely retirement plan contribution, or by using other time-sensitive strategies of the tax-wise. You can only do those things if you've paid attention to the details of your bookkeeping.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 17, 2011
Sharpen Your Interviewing Skills
Making a great impression—not just a good one—is the key to landing a job in this economy. I will lead a workshop on how to give an impressive interview at the Harrison Library on Wednesday, September 21, 6:30 - 8 PM.
The event, which is free and open to the public, will focus on short practice interviews followed by critiques designed to strengthen the job seeker's presentation skills. Participants will learn
• How to make a great first impression
• How to sell your skills and yourself
• How to stand out from the competition
The Harrison Library is at 2 Bruce Avenue in Harrison, NY. For more information, call (914) 835-0324 or visit www.harrisonpl.org.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
The event, which is free and open to the public, will focus on short practice interviews followed by critiques designed to strengthen the job seeker's presentation skills. Participants will learn
• How to make a great first impression
• How to sell your skills and yourself
• How to stand out from the competition
The Harrison Library is at 2 Bruce Avenue in Harrison, NY. For more information, call (914) 835-0324 or visit www.harrisonpl.org.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 16, 2011
Can You Make Money On Facebook?
Can you make money with Facebook, Twitter, LinkedIn and other social media? Five experts answer that pressing question and several more at the Social Media Panel Discussion and Business Breakfast presented by 914Inc Magazine. I'll be moderating the panel and asking the social media pros the things business owners need to know in order to use these tools effectively--and profitably. This FREE event is Tuesday, September 27, 7:30 to 9 AM at Antun's of Westchester, 35 Valley Avenue, Elmsford, NY. Tickets are limited, so RSVP by September 20.
Here's the pane that will answer your questions about making social media work for your business:
Tara Carraro
Senior Director, Corporate Communications, Heineken USA
In this capacity, she is responsible for developing internal and external communications strategies and programs, reputation management, crisis preparedness, consumer affairs and executive communication. Tara is also responsible for providing strategic counsel and guidance to Heineken USA's brand teams on the use of social media consistent with the Company's guidelines and marketing codes, and she successfully managed the Company's first crisis involving social media. In addition, Ms. Carraro oversees the use of social media in responding to consumer inquiries. Prior to joining Heineken USA, she served as Director, External Communications for Altria Corporate Services, Inc. In this role, she was responsible for developing external communications strategies and plans, along with the execution of both the paid and earned components. Ms. Carraro was also responsible for the development and day-to-day management of programs and strategies to enhance the reputation of Altria Group, Inc.
Chris Cornell
"The Twitter Professor" and Owner of Cornell Gallery and BaseballArt.com
Chris S. Cornell was named "Social Media Guru for 2010″ by Westchester Magazine. Here is what they had to say: Can't tell your Twitter from your Tumblr? Through his website, twitterprofessor.com, Chris S. Cornell helps people and businesses not only make sense of the crazy social media jungle—but he teaches them how to have fun there, too, by trying to get us all online together as a community. "My original goal with social media was to use it for the benefit of my businesses, Cornell Gallery and BaseballArt.com," he says. "Along the way, I saw how useful social media could be for individuals, organizations, and businesses. There has been a surge in the use of social media in the Westchester area. I believe we've hit the tipping point." And Cornell is leading the way!
Michael Perry
Chief Product Officer (and "Social Media Guru") of House Party, Irvington
As Chief Product Officer, Perry is responsible for House Party's product vision, design and development, as well as product marketing and management. He has extensive experience in marketing and product development, as well as technical training in analytics, with a specialty in econometrics. He combines this experience and training with a strong research background in human behavior and human cognitive development. This unique talent set is the basis from which he has developed truly innovative marketing strategies and programs for some of the world's largest brands.
Prior to joining House Party, Perry spent over 20 years on the client side, leading strategy, product, marketing and data analytics teams. Most recently, he served as Senior Vice President of Marketing, Brand Strategy and Emerging Technology at Story Worldwide, a global content marketing agency. He successfully implemented new branding and business initiatives, which resulted in building new revenue and retaining current receivables of $17 million for the agency. He has also established himself as a leader in the social media marketing space, creating social media and storytelling approaches, tools and methodologies at Story, and as a major contributor to the Online Marketing Blog Network. Prior to his experience at Story, Perry held strategic marketing positions at Wyndham Worldwide/Group RCI, JPMorgan Chase & Company, Bertelsmann AG (BMG), Citibank and Time Warner.
Kris Ruby
President of Ruby Media Group, LLC
A Social Media Marketing & Public Relations agency, RMG "socializes" businesses for Web 2.0 and helps companies adapt traditional marketing into social media platforms. RMG specializes in social media optimization, personal & corporate branding in real time and optimized PR. By utilizing various social media platforms including Facebook, Twitter and LinkedIN, RMG creates online visibility for her clients and increases overall branding awareness by enhancing their brand image in Web 2.0 communities.
Kristen founded RMG with the goal of opening the vast potential of Social Media on the web to companies wishing to build relationships, grow and profit from Web 2.0. Kristen is at the epicenter of the social media marketing world and frequently speaks to businesses and associations on new media and viral marketing. She also presents social media workshops for CEO groups to empower business owners to utilize social tools for their networks. Kristen was honored by Columbia University's Business School to lead a social media workshop for its alumni organization and was chosen to speak on personal brand authenticity at Microsoft.
Kristen graduated from Boston University's College of Communication with a major in Public Relations and a minor in Sociology. She is also the Director of the" Girls In Tech" social media mentorship program, created to encourage girls to enter the field of social media marketing. She has partnered up with some of Westchester's most reputable PR and marketing agencies as their New Media Specialist on social media campaigns, including Giles Communications and DataKey Consulting. Kris has filmed segments on personal branding, social media overload, and how social media is impacting dating on ABC Good Morning CT and NBC. Kris is also a columnist for JMAG & Inside Chappaqua Magazine on social media/ branding and was chosen by the Business Council of Westchester as the youngest "40 Under 40″ Rising Stars for 2010.
Nancy Shenker
Founder/CEO, theONswitch
Since starting theONswitch in 2003, Nancy A. Shenker has helped a wide range of businesses launch, re-brand, and flourish. Prior to starting her venture, she worked in various business development and marketing positions and is experienced in all media and in small- and large-scale marketing. She started another business, a publishing venture called www.nunumedia.com in 2010.
Her expertise is in business start-ups and transformations and she has an extensive track record in growing businesses through creative new solutions. Although Nancy was raised in the "traditional" media era, she has embraced the web and social media and is fluent in all forms of online media and uses them to build brands and revenue. theONswitch has succeeded in using combinations of "old and new media" to deliver huge increases in lead volume and sales for a variety of businesses, including real estate, food, retail, and others. Her process is based on four key steps — Imagine, Focus, Buzz and Profit.
Among her corporate accomplishments is the launch of Citibank's Connecticut branches. She also developed a proprietary database system to identify new retail customers, researched and launched numerous new products/services, played a lead role in MasterCard's "Priceless" campaign roll-out and managed event marketing for the world's largest producer of business trade shows, spanning 40 industries.
She holds an AB in English and Psychology from of the University of Michigan in Ann Arbor and a Graduate Diploma in Book Publishing from New York University. She also completed Kellogg's Executive Communications program at Northwestern University.
Nancy is a Contributing Editor for the New York Enterprise Report and Canada Camps magazines. She has been published and quoted in The New York Times, Smart Money TV , aol, Business Week, Entrepreneur.com, the Associated Press syndicate, The Stamford Advocate, the Westchester Business Journal, AT&T's and Lowe's websites, and other publications. She also publishes three blogs – theONblog, Hippy to Wiki and Show Girl Talk and a series of marketing and business tips, which can be found at www.10volts.com. She serves on the Board of Yonkers Partners in Education.
RSVP via email to pr@westchestermagazine.com or call (914) 345-0601 ext 146. Hurry--tickets are limited!
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
September 13, 2011
Finance Your Business With Bank Credit
"It takes money to make money" may be the truest axiom since "measure twice, cut once." But look at that first statement closely. Nowhere does it say whose money it takes. If you need capital for your business (and who doesn't?), for new equipment, materials, or to even-out the spikes in your cash flow, there are several places to get it other than your own wallet.
Let's start, though, with the single worst source of funds: your credit cards. Unless you are sure you can pay the balance off in full before the end of the month (and if you could do that, you probably wouldn't need to be borrowing the money in the first place), the interest is going to kill you. You won't last long if you borrow money at 18% (or more!) to build a product where the net after-tax profit margin is 10%. And, no, you won't make it up on volume.
Many entrepreneurs look to family and friends for loans, especially when they are starting up their company because it's tough (although not impossible) to borrow money from a bank or credit union to start a business. Ignoring the personal relationships involved, personal loans are viable options not to be overlooked. They often carry lower interest rates and generally have a less formal approval process than those from standard financial institutions. There are a few IRS rules to watch out for, though, and there are about a thousand reasons to have a legally-binding written loan agreement signed, so consult with your attorney or tax advisor before Aunt Sadie reaches into her cookie jar.
For larger or longer loans—or if you want to avoid the psychological quagmire of borrowing money from your brother-in-law—you'll want to turn to the people whose purpose in life is lending money: banks, credit unions, and savings & loans. The thought of going through the loan application and approval process can be very off-putting, but it's kind of like spinach; you may not like it but you're a better person for eating it. The process of compiling the necessary information and thinking through your proposal will help you focus on some important shop management factors.
It may not seem like it, but banks are actually eager to loan you money because that's where they make their profits. These institutions will grant your loan if you can show that your business proposal is sound. They will turn your loan down, however, if they judge you to be a bad credit risk. While your personal credit history may be a factor in the decision, most of the time bank loans are denied because the proposal was inadequate or poorly presented. Your shop's financial history alone is generally not sufficient proof that the loan you're requesting is secure. For that, you need to show that the future of the business is rosy enough to make the probability of repayment very high.
Don't even think about applying for a loan unless you know exactly how much money you need, what you need it for, and how you will pay it back. Every one of those items will need to be substantiated in some way, too. How much money you need is directly related to the amount of cash your shop generates now, so you'll obviously need up-to-date financial statements (backed up by a CPA's analysis and/or tax returns). What you need it for comes from your marketing plan and answers questions like who is going to buy the product you are going to make and the likelihood of their purchase based on competition, pricing, the economy, past purchases, etc. The question of how you will pay it back is answered by your cash flow projections.
Assuming your proposal answers all the pertinent questions, your financial institution is probably still going to ask for some sort of collateral and/or a personal guarantee. The collateral, of course, may include the assets (equipment and inventory) of your business, real estate, marketable securities, or other tangibles the financial institution can sell if they have to. They probably won't consider as collateral the value of your company as a going concern—because they don't want to operate it, which is what the bank would have to do if they took over your business in the event of a failure.
The personal guarantee is slightly different. A lien against your home, bank account, or other personal assets assures the bank not so much that they can recoup their money in the event of a failure, but that you have a strong incentive to keep running your shop and living up to the terms of the loan. They know it's much easier for the borrower to walk away and leave the bank holding his unsold inventory than it is to give up his car.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
Let's start, though, with the single worst source of funds: your credit cards. Unless you are sure you can pay the balance off in full before the end of the month (and if you could do that, you probably wouldn't need to be borrowing the money in the first place), the interest is going to kill you. You won't last long if you borrow money at 18% (or more!) to build a product where the net after-tax profit margin is 10%. And, no, you won't make it up on volume.
Many entrepreneurs look to family and friends for loans, especially when they are starting up their company because it's tough (although not impossible) to borrow money from a bank or credit union to start a business. Ignoring the personal relationships involved, personal loans are viable options not to be overlooked. They often carry lower interest rates and generally have a less formal approval process than those from standard financial institutions. There are a few IRS rules to watch out for, though, and there are about a thousand reasons to have a legally-binding written loan agreement signed, so consult with your attorney or tax advisor before Aunt Sadie reaches into her cookie jar.
For larger or longer loans—or if you want to avoid the psychological quagmire of borrowing money from your brother-in-law—you'll want to turn to the people whose purpose in life is lending money: banks, credit unions, and savings & loans. The thought of going through the loan application and approval process can be very off-putting, but it's kind of like spinach; you may not like it but you're a better person for eating it. The process of compiling the necessary information and thinking through your proposal will help you focus on some important shop management factors.
It may not seem like it, but banks are actually eager to loan you money because that's where they make their profits. These institutions will grant your loan if you can show that your business proposal is sound. They will turn your loan down, however, if they judge you to be a bad credit risk. While your personal credit history may be a factor in the decision, most of the time bank loans are denied because the proposal was inadequate or poorly presented. Your shop's financial history alone is generally not sufficient proof that the loan you're requesting is secure. For that, you need to show that the future of the business is rosy enough to make the probability of repayment very high.
Don't even think about applying for a loan unless you know exactly how much money you need, what you need it for, and how you will pay it back. Every one of those items will need to be substantiated in some way, too. How much money you need is directly related to the amount of cash your shop generates now, so you'll obviously need up-to-date financial statements (backed up by a CPA's analysis and/or tax returns). What you need it for comes from your marketing plan and answers questions like who is going to buy the product you are going to make and the likelihood of their purchase based on competition, pricing, the economy, past purchases, etc. The question of how you will pay it back is answered by your cash flow projections.
Assuming your proposal answers all the pertinent questions, your financial institution is probably still going to ask for some sort of collateral and/or a personal guarantee. The collateral, of course, may include the assets (equipment and inventory) of your business, real estate, marketable securities, or other tangibles the financial institution can sell if they have to. They probably won't consider as collateral the value of your company as a going concern—because they don't want to operate it, which is what the bank would have to do if they took over your business in the event of a failure.
The personal guarantee is slightly different. A lien against your home, bank account, or other personal assets assures the bank not so much that they can recoup their money in the event of a failure, but that you have a strong incentive to keep running your shop and living up to the terms of the loan. They know it's much easier for the borrower to walk away and leave the bank holding his unsold inventory than it is to give up his car.
Dave Donelson distills the experiences of hundreds of entrepreneurs into practical advice for small business owners and managers in the Dynamic Manager's Guides, a series of how-to books about marketing and advertising, sales techniques, motivating personnel, financial management, and business strategy.
