Yeshua is coming back! Are you ready?

Yeshua is coming back! Are you ready?
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Tuesday, January 24, 2012

Business Profitability

                When starting up a business the new entrepreneur need to think about what products or services they'll be selling to the client. The next step in the process is pricing strategies. The one thing to ask yourself is to find the balance between charging too much or too little. Think on these terms about your clients or customers. They want the best value for their money and they will almost always do a quality comparison and make purchases based on the best price for the best value. Perception is everything. It's how the client will view your product or service and what they are willing to pay for it is based upon discernment. In the end, the client will tell you loud and clear through their purchasing behavior whether or not your price is too high, too low or right on the money. (SCORE)

                When conducting your market research never assume anything. Determine what competitors and charging for products or services similar to you.  Assess how your inventory measured up the terms of quality compared to those of your competitors. Investigate areas of the Internet, trade publications, and trade shows. Give surveys of customers or conduct focus groups. Try and get out and physically shop the competition and evaluate how the operate and how they do business. And, go straight to the customers themselves for feedback. Examine pricing models beginning start-up costs, followed by research, product development, materials (marketing and sales), manufacturing, staff, office space, equipment, packaging.  Keep in mind, that the raise and lowering of prices can change in economic conditions, supply and demand, and competitor's prices. Prices are affected by inflation, recession, a boom, and raising and falling interest rates.
A Plan for Making your Business Profitable
  • The difference between gross profit and net profit.
    • Gross profit is the difference between a company's total revenue or sales of its products and services and the direct costs associated with producing and selling a company's products and services.
    • Net profit or net income is a company's total earnings after subtracting all its expenses from total sales and other income on a quarterly and annual basis.
    • The concept between them both is that gross profit is determined by taking the company's total sales and subtracting the goods costs. Cost of goods sold include raw materials, fuel, transportation, shipping, and employee's salaries directly involved in manufacturing of company's products and services.  Net profit is determined by subtracting a company's sell, general, administration, SG&A expenses, depreciations costs, taxes from revenues and other income. SG&A consists of sales commissions, advertising, marketing, research and development, legal and accounting fees, general administration, other expenses, employee's salaries not directly involved in the manufacturing of the company's product or service. These are the CEO, CFO, and administrative staff. Depreciation refers to the gradual decline in value of the company's hard assets, for example, furniture and equipment. These are usually found in the middle of the income . Net profit is listed on the bottom. (Wang)

  • The misconceptions that new business owners have with regard to revenue and expenses.
                In every business staying on top of obligations of paying taxes to federal, state, and local taxes. It will pay in the long run to keep accurate records by professional accounting. Tax professionals are well trained to keep up with the changing tax codes. As a business owners you need to understand that once your business opens the start-up fees are immediately deductible. If you overpay the Internal Revenue Service you are automatically audit proof. As long as you pay the right amount or a little overpayment. Make sure you properly document your expenses and make sure your getting good advice. Being incorporated can be expensive and a headache. Small businesses that incorporate don't make money for the first two years and are burdened by corporate tax payments and no income. It's best to take the home office deductible. Business expenses are not deductible. You can take deductions on business supplies, depreciation, phone bills, travel expenses, printing, wages, and other expenses. Extensions on taxes only means an extension to pay taxes this extends your filing date. If you do not pay on time it will mean, penalties and interest begin accruing from the due date. Part-time business owner can not set up self-employed pensions. When you start-up a company with a salaried position with a 401K plan you can step up a SEP-IRA and take the deduction. If you have the basic knowledge of how the tax system work you are still liable for the accuracy of your tax returns. If you have an accountant and he messes up your still responsible. (CPA Solutions)
  • Software for Business Management.
    • Sage Peachtree 2012  is one of the top accounting programs for Windows PC. The reviews claim it to be one of the best and can integrate with Excel. (Software News Daily)
    • MS Office Suite 2010 for Windows and MAC features Word, Excel, PowerPoint, OneNote, Outlook, Publisher, and Access. Does so many different tasks that you can integrates between the programs like transfer data from Word to a spreadsheet in Excel. It offers e-mail program and contact management.
    • Sage Act Pro Contact Management integrates with Microsoft Office and can be customized. It keeps track of progress with sales staff and has contact management for e-mail programs, and has capability to import contacts from other programs.
    • The top choice for business owners would be the Sage Peachtree 2012 because they need to keep records of all their sales transactions together. It makes complex accounting tasks like transactions, billing, payroll, and reporting more manageable for small business owners. It's new Vendor Management System showcases vendor history, payment, contact information, and historical information. (Justine)
    • When buying computer software the price tag is a fraction of the cost. The greater cost would be the installation, training, maintenance, upgrades, and troubleshooting. There are two kinds of upgrades: version upgrades and bug fixes. Bug fixes are more frequent they correct major software performance o r security problems. Major upgrades are fundamental changes and are less frequent. The main reason for upgrading is to maintain capability with clients and contractors that use the same software. Technical support on the other hand can be a bit of a problem. Even though the 90-day free support covers short-term installation and hardware compatibility problems, you still need long term technical support. This can get expensive and some companies charge a fee per year depending on required support. Try free sources from software companies that offer websites, newsgroups, and fax-back services that can answer most common support questions. 
  • Pricing products and services for profit
                Pricing can be just as important as the product. Take for example, Xerox. Despite its technology it wasn't selling its copy machines. They were too expensive. Their solution they stopped up-front purchase and charge by the copy. They placed their machines in offices for free and charged for the copies. No approval was required and office personnel grasped its utility and productivity. The trend grew and Xerox expanded. Gillette razors gave away the handles to their razor cartridge refills while their competitors sold them. The customers like the freebies, all they needed was the refills. Gillette razor use exploded as did the revenue for the company. These pricing innovations are just as important as the product innovations. That way your customer can pay for what they really want. Pricing your products and services can be very difficult. It can also be very confusing and frustrating, but is necessary for you to be complete effectively and to turn out a profit. (Frey)
  • Pricing to compete
                Good marketing strategy is how you price your product and service. According to the experts at competing on price has pass. They're saying that customers need more on service, marketing support, better fast delivery. Now that price is the least effective. Customers who have been jaded on sales know. This is where you can compete on price. But it takes some thought and smarts. Don't confuse customers will down one day then up the next. If you're going to compete with pricing it must drive every decision you make. According to Jan Bell Marketing of Sunrise, Florida sells its private label jewelry wholesale about a third of manufacturer prices. The company is able to sell for less and make more. Begin by examining how a company buys its raw materials. Purchases were made in bulk. Jan Bell brought direct from the source. Price governs everything  to sell low controls every decision the company makes from buying to advertising to the customers. The lower your fixed costs the higher your margins. Jan Bell doesn't contract out anything. It makes a representative sampling of its line. So they know what each item costs and what should be charged. You can't afford to have inventory to sit around. The line must be designed to move quickly. Leave the caviar to someone else sell the fresh fish. (Brown)

  • Pricing scenarios in a sluggish market, an average market, and a strong market.
Market pricing is one of the most common methods for setting prices. The market pricing approach requires a strong market research endeavor to assess the customer's reaction.
Pricing in a sluggish market  - In the solar panel market, when the market slows the prices fall. When prices are low means it can't support normal production. As in the China slowed its solar output booms as price slips down. China's plants are faced with backed-up inventory, slow capital spending, with shrinking profit margins. (Walet)
Pricing in an average market - When the market is steady the prices are moderate  meaning it will less in demand. This is called "holding the market" the prices can drop but remains steady along with the market trend and production is steady.  The economy is balanced.
Pricing in a strong market - In this market the product can met supply and demand, prices are increasing or decreasing moderately but production slows or decreases. The market trading volume corresponds to price change where increasing  volume accompany increasing prices.


Brown, Paul B. How to Compete on Price. INC. May 1, 1990. Web. retrieved January 21, 2012.
Free Reports for Business Owners. CPA Cite Solutions. Web. retrieved January 21, 2012.
Frey, David. How to Prices Your Products or Service for Maximum Profit. Marketing's Best Practices. Web. retrieved January 21, 2012.
Justine. Sage Peachtree 2012 Features and Review. Software News Daily. Web. retrieved January 21, 2012.
Business Sale Seminar. Barnes Walker. Web. retrieved January 21, 2012.
Trend Analysis. Investopedia. Web. retrieved January 21, 2012.
Wang, Elizabeth. Gross Profit Vs. Net Profit. Small Business Chron. Web. retrieved January 21, 2012.
Pricing Products and Services. SCORE. Web. retrieved January 21, 2012.
Support and Upgrades: Determining the Real Cost of Software. Dun & Bradstreet. Web. retrieved January 21, 2012.
Walet, Leonora. China to Slow Solar Output Boom as Price Slips. Reuters - Singapore. Nov 2 2011. Web. retrieved January 21, 2012.
Ward, Susan. Top 5 Small Business Software. Web. retrieved January 21, 2012.

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