Money – Where should you spend it in your business/

You only have a limited amount of money to invest in your business.  One of my readers asked me, how it should be broken down and how much should she invest in each area of her business?”

Of course, there are fixed expenses, those recurring bills for phone, internet hosting/website, etc.  But after those bills are paid, how much should be set aside for marketing, for education, for inventory, and to pay yourself?

The answer is simple.  There isn’t an answer.

There are lots of numbers tossed around in the accounting world.  I’ve heard 20% of profits should go back into marketing, etc.  But these are just numbers.  To be honest, it’s a very individual decision that each business owner has to make for him or herself.

When you first started your business, you should have created a feasibility plan with a projection of income and expenses for the first 3 – 5 years.  But, once again, these are projections.  And projections are basically educated guesses.  In an ideal world, your projections would be pretty accurate, or better yet, your profits would be more than predicted and expenses would be less.  But, as we all know, this is not an ideal world and finances are never black and white.

It’s all too easy to forget to include some expenses and there are frequently unexpected surprises. The economy changes from month to month and profits differ from season to season.

Creating a budget is a good starting point but that is based, once again, on guess what?  Guesses.  I suggest that you begin by putting aside the money needed to pay any fixed expenses PLUS a nest egg to cover those unexpected expenses.  Each of us would know what amount we would feel comfortable saving for a rainy day.  It makes it easier to track if you use your accounting program to separate these amounts into individual accounts such as a tax account, a rent/utility account, etc.

Then we come to the hard decisions – the how much do you put into marketing, education etc.

It all depends what you need and when you need it

This is a good time to look carefully at your marketing plan for the whole year.  Can you do most of your marketing on a shoestring using networking, internet mailings, etc. or does your business require costly advertising such as newspaper/magazine ads, yellow pages, radio, and direct mail. If you use these more expensive advertising venues, keep careful records and determine what your return on investment is for each type of marketing.  You may find that even though you get more orders from a large newspaper ad, the cost of that ad could drastically reduce the return on that investment.

Only you can say how much your marketing budget should be and where it should be spent.   But you can’t afford to just spend money without tracking return.  Sometimes, investing time into marketing can be more valuable than spending money.  But you never know unless you’ve tracked the returns.

Regardless of how long you’ve been in business and how well known you are, education is important.  Times change.  Methods of marketing and even techniques and new products evolve.   Investing in a quality magazine that not only keeps you up-to-date but also makes you think is essential.  And reading books, magazines, and even newspapers not related to your industry are important as well.  A well-crafted ad for a product in an entirely different industry can trigger an idea for your product.

On-line forums and communities can also provide valuable education depending on who is contributing to the conversations.  Be careful of these and remember that “anyone can create a whole new persona for him or herself on the internet”.  You want to make sure that the people giving the advice have walked the walk and made the mistakes that you want to avoid making.

Basically, how much you should spend comes back to your long-term plan for yourself and your company.  Where do you want to be in one year, in three years, or five years?  What do you need to learn and how do you need to market in order to get there?

What skills and techniques do you need to learn to increase your marketing and production ability?  Will these skills justify the cost of getting them?  Technology changes so quickly that it’s hard to forecast what you’ll need in five years.  Some training may be available for free while you may have to pay for others.  But don’t make the mistake of thinking that you’ll decide what you need as you go along.  Even though you may make adjustments along the way, you must have somewhere and something to aim for and determine how you are going to get there.

After saying all this, everyone’s answer is different.

It all comes down to a combination of your personal situation, the goals you’ve set for yourself and your business, and how badly you want to achieve them.

Share with us how you are deciding the breakdown for your business investments.

That Myth Called Talent!

If you want to be successful at whatever you want to do, whether it be designing gift baskets, marketing, or writing descriptions for your website, you’ve got to put one piece of nonsense out of your head.  It doesn’t take Talent!  Now let me explain why.

Sure, some of us have more of a “natural ability” in some areas.  But there are many people with no natural ability that are successful.  And there are many people without a so-called “natural ability” that are very successful.  Like a foot race, this natural ability just gives you a few feet head start over the ones behind you.  It’s what those in the starting position do — with or without that natural ability — that makes the difference.

To understand what I am talking about, you have to understand a little bit about the brain and how it works.  No, this isn’t going to be a science lesson — but it could be one of the most important things you will ever learn.

What does the brain do best?  The brain recognizes problems and figures out a way to overcome them.  If you’re walking up the stairs and encounter a closed door at the top, your brain would tell you what to do and you  would automatically try to open that door.   You’ve encountered a lot of closed doors since childhood and your brain learned that you could either open them or you had to turn around and go back.  No matter how many closed doors you come to, you would try to open it.

Now, if you reached the top of those stairs and instead of a closed door you found a huge snake blocking your way, your brain wouldn’t know what to do.  So it panics.  You either turn and run down the stairs or you freeze and can’t move or even scream.  Your brain doesn’t know what to do so it shuts down instead of telling you how to react.

For those of us who are writers, it is referred to as “Writer’s Block”.  But this same thing affects all of us, regardless of what you are trying to do.

You sit down to try to write a sales letter.  You try to tie a bow for the first time.  You stand up in front of a group to talk about your business.  You try to build a website.  You make a cold call to a corporate client that you hope to impress.  You go to a networking function for the first time.  Anytime, you try something new, the brain goes into panic mode.  It quickly scans through all your memories for a memory of success at doing this.  And it fails to find one.

Instead it finds failure.  And fear of failing again.  And you believe that you can’t do it.

Everyone else is just born to write a good sales letter, speak in front of a group, make a cold call, build a website or whatever it is you are trying to do.  They are the talented ones.  You have no talent.

But what you fail to understand is what the brains of these so-called “talented people” are doing.  And why.  The secret that successful writers use to overcome Writer’s Block is the same secret that you can use to overcome “Cold Feet”.

Those who are successful at doing what you are attempting and failing at has a brain that has

  • A memory of success
  • And it’s not just success that happens occasionally or sometimes.
  • It’s success that is a direct result of having structure, a mentor, and a memory filled with success.

They didn’t just sit down in front of the computer and write a great sales letter on the first try.  They weren’t always dynamic speakers.  That first website that they built was pretty pitiful.

They’ve been through the drill before.  In the process, they learned the techniques needed to acquire the skill they were striving for.  And these “talented” people had a teacher or a mentor (or even a book or manual) that helped guide them past the obstacles that lead to failure.  The more the drill is repeated, the more it became ingrained as a part of their memory process.  As a result, they’ve built a structure that makes it possible for them to succeed each time.  And they’ve created a memory bank of successes.

And then suddenly it happens.  You need to build a website that gets results.  You need to stand in front of a group that is looking to spend lots of money on gift baskets.  You call on that corporate client that has a huge holiday budget.

And, if you’ve been through it before, you have the structure and techniques instilled in your memory.  And the memories of success become the dominant ones.  Your brain no longer goes into panic mode.  Instead it whirls through all the memory banks and pulls up just the right one — without your even being aware of the process.

This is the same way that you learned just about everything in life.  It’s how you learned to walk.  Watch a child take his first steps.  He falters and falls.  Mom encourages him to try again.  He pulls himself up using the coffee table for support and tries again.  Over and over until he is walking, then running across the room.  And now, you don’t even think about the techniques, the structure required to walk anywhere you want to go.

Remember when you learned to swim for the first time.  How about riding a bicycle?  That’s why they say, “Once you know how to ride a bicycle, you never forget.”  Actually your brain pulls up that earlier success from your childhood and, even though you may falter a bit in the beginning as the memory of the techniques are whirled into place, you climb on that bicycle and ride away.

So if you’re sick and tired of having cold feet and feeling the fear of failures, stop believing in this myth called “talent.” Do what the so-called “talented ones” have done and create your own memory bank of success.

There are mentors ready to help you, to teach you the techniques, the path to follow and those to avoid.  That is the very reason why I’ve created this website, why Gift Basket Network exists, why we’ve created Gift Retailers Connection magazine and the Gift Industry community and forum , and why I’m continuing to create new opportunities for you to create those memory banks that mean you don’t have to have talent to be a success!

How Nimble is Your Business?

One of the biggest benefits that we, as micro business owners, have over large businesses is the ability to be flexible and to change quickly.  We can respond to market changes and trends.  We can change something, test it to see if it works, and if it doesn’t, change it again.

If you’re an online business, as I am, you can make changes daily on your web pages.  If you get a great price on something or a new item comes in, you can tell your customers about it immediately on your website or by sending out an email message.

Michael Gerber, author of The E-Myth tells us that “the difference between great people and everyone else is that great people create their lives actively, while everyone else is created by their lives, passively waiting to see where life takes them next.  The difference between the two is the difference between living fully and just existing.”

The same statement can be applied to our businesses.  We can wait as the economy and our customers determine where we’ll go next or we can get off our duff and take charge.  We can exist or grow our business to its maximum capacity.

Regardless of what kind of business you’re in, there are only four ways to grow that business:

  1. Get new customers
  2. Increase the dollar amount per transaction
  3. Increase the number of transactions per customer
  4. Increase the length of time your customer stays loyal to you.

One of the biggest mistakes that entrepreneurs make is focusing their entire energy on getting new customers.  Not only does this cost more than keeping existing customers, but it takes more effort because you have to be constantly looking for new ones to replace the ones you lose.

The other three options depend on your staying in touch with your customers on a regular basis and ALSO on continuing to think of reasons for that customer to buy from you either more often or spend more when they do buy.  Creating systems (something I’ll discuss in a later post) makes it much easier to stay on top of this and make it work effectively for you.

For example, you sell a baby basket.  Contact the sender 11 months later and suggest sending a one-year-birthday gift.  Your Realtor customer orders a closing gift.  Suggest that they stay in touch with their customers (and get those listings and referrals) by sending a six-months gift and a one-year-anniversary gift.

Add-on gifts can increase the dollar amount for a transaction.  Think outside the box and look for new and different products that they “simply can’t resist.”  Or how about creating a Costumed Delivery for an extra charge.  A jolly leprechaun could deliver a St. Patty’s gift.  Santa or one of his elves could make those Christmas deliveries.  Or, if you’re one of the fortunate few who can carry a tune (and that’s not me!), provide a singing delivery service.

Being a micro-business is what enables us to be Creative  Entrepreneurs.  So put on your creative thinking cap and think of some ideas that would enable you to be nimble and test some new and different marketing ideas.  And while you’re at it, share some of those ideas with us.  Just click on “comment” above and share.

Surprises in life and business

Yesterday, I woke up to the sun glistening on snow here in Flagstaff.  It was a beautiful but unusual mid-May event.  This morning, the snow had completely disappeared leaving the sunshine to welcome me when I opened the blinds.  The squirrels were once again scampering on the ground under the bird feeder, waiting for the birds to drop their breakfast to them.

It’s often said by folks here in Flagstaff that if you don’t like the weather, just wait a few hours and it will change.  That’s true of business, and even life, as well.  Surprises happen.  Sometimes they are good ones.  Other times disappointing.  But, they do happen.

The snow was a pleasant surprise in the middle of a beautiful spring.  Today it is only a memory.  We’ve all had surprises in our business.  If they are pleasant ones, we enjoy the moment and savor the memories.  If not so pleasant, we make the most of them and wait until tomorrow when things will be different.

What surprises have you had in your business and life?