There are hundreds of ways to market businesses of any size, but for a small businesses owner or entrepreneur, it may seem impossible to find which marketing strategy will work best for you. Luckily, it’s not impossible, but it does take a bit of work. Every business or product is different, but one universal rule holds true: You have to know your product, your competitors, and your customers like the back of your hand before you have any chance of successfully marketing your products or services. The most important part of being in business is making sales. All the good intentions in the world won’t pay your bills or help you realize your dreams. Yet despite how important this simple fact is, many entrepreneurs and would-be business people struggle with marketing. With so many options available, from TV to E commerce stores, how can you decide the best way to market your goods? The best advice is to follow the 4 P’s.
If you’re trying to decide how to price your product, or wondering how the process of marking-up an item works, read on. You’ll learn about how cost is determined, why some items sell for so much more than their cost, and how you can decide the best price to sell your product for.
It’s sometimes hard to see how items are priced. Sometimes the cost to the final buyer is much more than for the retailer that sold it. Some prices are marked up hundreds, or even thousands, of times more than they cost to the seller. How can an item bought for so little sell for so much? Is it because sellers are greedy, and want as much profit as possible, or is there another reason?
Sometimes greed does indeed influence the price a product sells for, but often, items must be marked up so sellers can make a profit. While some sellers artificially inflate their prices to take advantage of their clients, most successful merchants know that exploiting the people they depend on for their continued existence is a poor way to run a business, and charge only as much as they need to cover their costs and make a modest profit.
Have you ever wondered what to charge for your products? Charge too much, and nobody will buy. Charge too little, and you won’t make enough to continue selling products. But finding the sweet spot when pricing your products is hard. So how can business-people determine how to price their products or determine how much to mark them up?
Find Your Cost First, Then Your Selling Price
When deciding on a price for you product, or how much to mark something up, the most important thing is determining how much your product costs you. If you pay $10 for the supplies to make a single gift basket, you may think your selling price shouldn’t be much higher, but don’t forget; you also have to add in any other factors that increase your costs. For example, how much electricity do you use to assemble each basket? How many labor hours does each require, and how much does that cost you on average? Finding a price to sell your product for is much easier once you know where every penny spent in the process goes, and what it goes for.
If you are just in the beginning stages of looking for a business to start, one of the best places to look is what I call the “Too Area“. You have heard it said before, “look for a need and fill it”. So in your exploration of trying to decide on a business to get into, you want to look around and find things that are in demand, but are too difficult, too dirty, too complex, too expensive, too dangerous, too embarrassing, too fragile, too big, too small, too ugly, too impractical, too far away, too tall, too short, to smelly and the list goes on and on. Obviously there is a wide range of options when thinking about starting a simple small business. However, almost every new business begins this way even though they may not realize it.
One of the simple small businesses we own is a video production company that specifically caters to other small businesses. One of the reasons this business has been successful is because it’s not really that simple of a business to operate.
These days video cameras and editing software are readily available to just about anyone. However, the complexities of producing a high quality video product is beyond most people’s technological capabilities. There’s not a day goes by that I don’t curse being in a high tech business. Nevertheless, I know it is these same problems
According to the Quarterly Census of Employment & Wages at the beginning of 2011, in Missouri (where I live) small businesses that have less than 50 employees, makes up 94% of all businesses in the state. I suspect that those numbers are similar throughout the nation although I have not verified that. In any case, both state and federal governments agree that small businesses are the driving force of our economy. Contrary to popular opinion, I predict that this number will actually increase in the coming years despite the ongoing recession.
Everywhere I look people are beginning to wake up and realize that they have sold their souls for a dollar. They have given up their freedom for what they mistakenly believe is a “secure paycheck”. In reality people have lost their independence, their identity and I even their security.
Yes, the odds are against the success of a startup business. But the odds can greatly be altered in favor of the entrepreneur who is prepared with the right knowledge and actions. The basics of starting and running a successful small business really is simple. Simple, however, does not mean easy. From what I have read, performing an emergency Tracheotomy on someone using a pocket knife and the barrel of an ink pen sounds pretty simple. But how many of us could actually slit someone’s throat, stick our fingers into the blood and flesh and attach a pen barrel to their wind pipe?
Starting a simple small business is very much like a roller-coaster ride. It has many ups and downs, twists and turns and sometimes heart pounding excitement. It is definitely thrilling and scary at the same time. In the midst of hundreds of things to do for a new start-up, one can get lost in unnecessary tasks or even lose track of the important things. In order for start-up founders not to lose their sight on important things, it is imperative to have a business plan. Even if that business plan is on a napkin or a single sheet of paper.
Business plans are like roadmaps or blueprints. They provide start-up founders with a direction, and necessary information to form correct action plans to use at different stages of the business.
Many business books and business scholars talk about why you need a business plan and how to go about creating one. The rule of thumb seems to be to ask the creator to predict the future and to create a five-year plan describing everything that will happen in detail. However, a lot of successful start-up founders today will disagree with this approach. Simply because five years is too long to create a definite and certain plan (see “How To Create a One Page Business Plan“). This approach just doesn’t take ‘uncertainty’ into consideration.
Many people have a problem with accountants’ jargon and often get confused between the terms “profit margin” and “markup” which are often bandied about freely or used interchangeably. Although these two terms are used to express different things, they are also, in fact, two different ways of analyzing the cost and profit of a product or service in your small business .
Let’s explain in simple terms.
Say you bought an item for $50 and could sell it for $100, doubling your money. In this case your markup would be (the difference between selling price and cost price) divided by the cost of the item and multiplied by 100 to bring it to a percentage.
ie ($100 – $50) = $50(difference). $50(difference) / $50(cost) = 1 x 100 = 100% (here “/” stands for divide)
Your markup was then 100%.
When you look at the profit margin on that sale, that would be (difference between selling price and cost price) divided by the selling price and multiplied by 100 to bring it to a percentage.
Starting a small business can be one of the most rewarding and fulfilling things that you ever do, or it can turn into a huge nightmare if you let it. You greatly increase your chances of success by having a simple one page business plan created as your starting point.
There is an old saying that has proven itself over and over again and it is especially true in the business world. The saying goes like this “If you fail to plan, you plan to fail”. Having a simple business plan is like having a road-map, guide or cheat sheet to help you get from where you are today to where you want to be some time in the future.
If you are planning on starting a multi-national major corporation, then you will benefit from having a full-blown 20 page business plan that outlines your companies strengths, weaknesses, market opportunities, marketing strategy, mission statement, competitor’s strengths and weaknesses, etc…
However, if it’s just you or just a couple of people working together, then a one page business plan is really all you need to get you started.
This one little step can mean the difference between starting a business that never actually achieves any real level of success or starting a business that eventually becomes hugely successful.
1. Find a Need & Fill It! (Blah, Blah, Blah!) You have heard this a million times before, but it is the core, the root, the foundation of any business. Business is about serving people’s needs. The more people you help, the greater you are rewarded. It is not about doing what you love. Although if you can accomplish both, then that’s great. But as catchy and simple as this phrase is, unfortunately there is a little more to it.
One of the biggest problems people have when starting a business is what I call “Dedication Justification“. Justifying what they want to do by concocting some need that really does not exist for their product or service. Dedicated Hobbyists and Artists are notorious for this. For example, Let’s say you are an artist and want to start a business selling other people’s creative works as well as your own. So you convince yourself that there is a real need in your town for great art. The only reason more people in your town don’t buy art is that there is no place to purchase great art. Guess what? Chances are you are lying to yourself and you don’t even realize it.
I own and have owned many businesses in my life. Some were failures, but many were successes. After thirty years of diligently practicing this game we call business, patterns begin to emerge. When looking back, it is easy to see what I did right and what things I did that were downright stupid. I can state without any hesitation that every successful business I wound up with were successful because eventually systems were created and implemented. Based on that, I would argue until the sun goes down that if you want your small business to really be successful you need to start creating, documenting and implementing systems.
Keep in mind I always distinguish between being self-employed and being a small business owner. Neither one is necessarily better than the other. If your desire is to keep everything simple, never hire more than one or two people and to always be the main producer or service man, then being self-employed is a much less stressful way to go. But as a small business owner, the business will take on a life of its own. Like a child it needs rules to regulate how it acts or before you know it, the spoiled child will take you down, hard! Systems are the rules for your child.
There are hundreds of ways to market businesses of any size, but for a small businesses owner or entrepreneur, it may seem impossible to find which marketing strategy will work best for you. Luckily, it’s not impossible, but it does take a bit of work.
