Profit is a large part of why you’re in business, and it definitely is what keeps you in business. That’s why using an effective pricing strategy is so important. Here is a look at how to set and use the right pricing strategies for your small business. Benefits of a Pricing Strategy When you price your goods correctly, you sell more of them, and you make a better profit. Specifically, the right pricing strategy will: Customer/Value Relationship Setting the right price can be confusing. The two things you need to take into consideration are the perceived value of your product in the eyes of your customers and how much your target audience is capable of paying. What you can charge is seldom a fixed amount. It ranges on a spectrum, influenced by how much worth you are offering to your customer. If your product or service has more benefits to a customer and offers more features than a competing product, the shopper will be willing to pay more for it. That is easy to see when eating out. At a fast-food restaurant you pay less for a hamburger than you do at your local gourmet sit-down restaurant. It is also essential to get a handle on who is buying from you and the customer you want to target. What are their demographics, their income level, and how much do they typically pay for your type of product or service? They will pay more the higher their perceived value, but only within the parameters of how much discretionary income they have access to. Competitive Environment Next, figure out how much it takes you to produce and deliver the goods and services. You have to cover your costs plus some in order to make a profit. Base this cost on: This process is complex. In addition to contributing to cover these costs, your pricing must cover all costs of the goods you are selling and importantly, contribute to company profit. Then, find out what your competition, both in your local and online markets, are charging for the same or similar goods. Once you know the range of prices in these sales channels, you can figure out how where you want to position your price points. Can you penetrate the market best as the high-end product in the lower-end of the market? Maybe you would do better being the medium-priced product in a high-end market. Where you place yourself will have a major impact on how much you will sell. When you figure out what your customer can pay and where you see yourself in the market, price your product slightly higher than you think you should. Not charging enough is much more common for a small business than pricing too high. Be careful setting yourself in a market position based on pricing below the competition. Your profit margin will be low so you will need to sell a great deal to stay in business. Strategic Pricing Alternatives Don’t limit yourself to a one-price-fits-all strategy. There are several models available. The more pricing options you give your customers, the greater are the number who will buy. The best approach is to get the customer to buy the basic product or service. Then add options that will increase what they ultimately spend with you. This is called tiered pricing. To get of an idea how this works, think of buying a car. The salesperson will give you a price for the car, but then also offer financing options, for a price, and add-ons for the car. He makes considerably more money with these extras, without alienating his customer. Figuring out the right pricing strategy takes time for research and number crunching. And the work is ongoing, subject to review on a regular basis. However, the results are a profitable bottom line.

Pricing Strategies

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Today, more so than any other time, businesses focus heavily on engaging customers, the media, investors, community members, and analysts — or some combination of them. But with so much focus on external audiences, they often overlook their most vital connections: their employees. Successful companies understand that engaged employees contribute to the success of the company. To keep a high level of engagement, a strong focus on employee communications is necessary. Benefits of Strong Communications Organizations that prioritize strong employee communications stand to benefit in a multitude of ways. Effective employee communication: Best Practices In this era of on-demand information, employees expect more from organizational communications. To achieve transparency, pertinency, and immediacy, follow these effective employee communication best practices: If your company is communicating effectively and with purpose, you are more likely to have employees who work with a common purpose of achieving company goals. Effective employee communications allow everyone to work towards the same company goals. It helps employees to stay engaged and be motivated to contribute to the success of the company.

Effective Employee Communications

View Resource Effective Employee Communications
Employees who are well-trained are an asset to any business. In a poor economy, unfortunately, the training budget for a business is often the first thing to go. Although eliminating your company’s training budget might make sense at that particular time, the implications long-term can outweigh the costs you are saving at the moment. Thinking long-term, lack of training can have a big impact on the motivation levels of your employees, increase business inefficiencies, and lead to employee turnover. These three things alone can be costly. So, how can you train and educate your employees efficiently but still keep within budget? Tips for Budget-Friendly Training Methods Optimize the Strengths of Your Employees When you first hire a new employee, begin them with general training that gives them an overall introduction to your company. Each team member will not just be good in their specific roles, but be competent and comfortable with other roles inside your organization. Following that, have them pursue more specialized roles with more individualized training. It is also a good idea to cross-train for other roles. Cross training is one way to help employees become knowledgeable and skilled at performing other roles within the organization. If you can allow your employees to wear many hats, you are building a strong foundation and deepening your bench strength. Positive Learning Atmosphere Providing a positive learning environment promotes employee confidence and encourages development. With each lesson, clearly explain the purpose of each aspect of the training and how it relates to the employee’s role within the company. Negativity limits the learning process; therefore it is essential that trainers be patient, be constructive when mistakes happen, and reward staff accordingly for new achievements. When employees receive positive feedback, it will affirm and reinforce their efforts, and provide them with encouragement to continue learning. Utilize Online Training Classes Online courses are often low-cost or free and allow employees to proceed through the learning process at their pace. Companies like Dale Carnegie, Learning Tree, Business Training Institute, and BizLibrary all provide a wide array of online classes and can let your employees choose from a wide array of learning experiences. Bring in the Professionals You can utilize low-cost online courses, however, if you have specific training requirements you might have to invest in off-site educational programs. These will enable your employees to learn in an interactive classroom environment that offers fewer distractions. It can be a more time-saving and cost-effective option if you have multiple people to train if you bring the instructor on-site. You can check into organizations like the Women’s Business Center or your local Small Business Development Center about classes and courses that will fit your budget and your needs. Continue the Learning Process New employees should not be the only ones benefiting from the right kind of training. To keep an employee trained and focused on the success of your business, be sure to continue their learning process throughout their career. New areas, including laws, regulations, and technology, are continually popping up that employees need to learn. Also, keeping abreast of internal business changes will require fresh perspectives, updated skills, and new ideas. Utilize trade associations, brown bag lunches, and mentoring and cross training programs for ongoing employee development. Not only can performance be improved through proper training, but staff morale and profit can be as well. When employees acquire new skills, it builds their self-esteem and increases their contribution to your company. They will also feel valued and appreciate the investment you make in them.

Training and Educating Employees

View Resource Training and Educating Employees
Making an offer and negotiating pay with an ideal candidate can be a trying situation. On the one hand, you want to make the best offer possible. On the other hand, however, you do not want to overextend your budget and overpay the candidate. Negotiating takes practice. However, it is a skill that you can master. Here are steps you can implement in the negotiation process that will enable you to hire the best candidate in a cost efficient manner. Elements of Compensation According to the U.S. Small Business Administration (SBA), a good practice would be to pay a salary that is based on location, experience, and the available talent pool. Payscale.com, Salary.com, and the Bureau of Labor Statistics are three sources that can help you analyze these factors with respect to deriving a fair and competitive salary structure. However, how can you combine these factors, stick within a budget, and offer an attractive compensation package to potential candidates? When starting the negotiating process for a potential candidate’s compensation package, there are some reference points you can follow. These include: Some other factors to take into consideration before moving forward with the negotiating process include: This latter component is especially important since a potential valuable employee might be lost if they fail to assert themselves during the negotiation process. Preparing a Budget and Offer Before extending an offer, it is important to determine exactly what your limits are, especially if you are operating within a tight budget. Consider some “employee perks”’ that are less costly that you could throw in. No matter how well-qualified and valuable the candidate might seem, you should never promise the moon if you are not able to deliver. Some less costly perks you could make to sweeten the deal would be offering the candidate the chance to work remotely as long as the work gets done, adding an additional week off during a major holiday, such as during Christmas or perhaps during a period when work is slow. You can even offer special bonuses such as a signing bonus, shares in the company, or annual performance bonuses. If you decide to provide a company car, you might want to consider the maintenance, insurance, and fuel costs associated with it. Closing the Deal When it comes time to close the deal, deliver your offer in writing as well as in person. By putting your offer in writing, you are protecting your company from any misunderstandings that might result from improperly communicated compensation components. Additionally, presenting your offer in person allows you the opportunity to review it directly with the candidate and answer any questions they might have. You can excuse yourself for a few minutes to grab a coffee, which will give the candidate some time to read through it. Be sure to include all job expectations and responsibilities so they are clear. Put strong emphasis on company benefits. Even though many candidates will be focusing on the salary component primarily, stressing benefits such as health insurance, bonuses, profit sharing, retirement, tuition reimbursements, vacation allowances, and other amenities are all significant parts of the entire compensation package. Further, make it clear that they have room for growth in your company (if that is true), which could just be exactly what the candidate is looking for and what might win them. The bottom line: Salary negotiation has a tremendous psychological impact on a prospective employee. If they come onboard with a sense of enthusiasm and satisfied mood after salary negotiations, they will be more motivated to work hard and put forth the effort to help you make your company a success.

Negotiating with Prospective Employees

View Resource Negotiating with Prospective Employees
Operating a business on a virtual basis is quickly gaining in popularity. Although running a virtual company can be attractive to small business owners, they still need to understand that there will be benefits and challenges with this business operations concept. No matter what type of small business you have, when you take the leap to run it virtually, you’ll encounter obstacles. If your virtual business hopes to flourish, you must overcome them. With that said, below are some benefits and challenges you might face. Benefits Low Overhead Costs Traditional companies have no choice but to run brick-and-mortar offices. On the other hand, if your business offers the opportunity to operate virtually, you will not have the real estate and office costs that brick and mortar business incur. This can give your business a competitive advantage since the money saved can be used to offer lower prices to customers. This is a clear cost advantage to running a virtual company as opposed to a brick-and-mortar establishment. Staff Retention Talented individuals are often attracted to remote work environments since many can save an average of 10 hours of commute time each week. Just the thought of avoiding busy city rush hour commutes can be enough, not to mention the gasoline expenses savings. Wider Talent Pool A virtual company does not have significant geographic limitations. Being able to ignore local borders, and often national borders, can expand your talent pool by making it much easier to find the best candidates for the job. Many companies can often see a significant increase in job applicants when they post national, as opposed to regional, job openings. Challenges Social Interaction Self-motivation is often thought to be the hardest part of working a virtual position. The reality, however, is that individuals are struggling more with the social change. They find they miss the office interaction and how this interaction broke up their workday. If your business has hired strong employees, it will not matter which environment they are in; they will get the job done. However, many employees still need some personal connection since they are human and not machines. Even though social interaction does take the employee away from their work, for some workers, it is still needed to keep them motivated. Negative Perception Although more companies are making the switch to virtual setups, investors, customers, and business partners may have a negative perception of this type of setup and question if you are a serious business or not. They might wonder if you will still be in business a month or two down the road or if they will be able to reach you in the event of a major issue. Questions like these are valid, but the good news is they are being asked less these days. Weak Communication In the office, if you need to communicate with a team member, you can simple turn around to the next desk or stop by their office. In a virtual environment, communicating can become more difficult. Though with email, smartphones, and tools like Skype communicating remotely is becoming less of an issue. Best Practices To manage in a virtual environment, business owners have to rethink their traditional approach to management and devise tactics to use over video chats, calls, and email. It is now the leader’s responsibility to fill the social gap and be intentional and strategic with their communication. If your virtual team is going to work effectively, processes and tasks will need to be clarified; and not just your employees roles and goals. Companies have to align their team on roles, goals, and responsibilities. However, without co-located individuals, coordination can become the greatest challenge. Therefore, it is essential that companies put more emphasis on the details of tasks and processes required to complete them. Meetings are still highly encouraged, but should be held using video or online conferencing technology. Also be sure to allow a few minutes before and after each meeting for open conversation. Companies should still recognize and acknowledge accomplishments, share milestones and big successes in meetings and emails, and recognize the team members that got them there. Running a virtual company can be extremely beneficial from a cost and talent acquisition perspective. If operated properly and efficiently, the virtual model can offer some very competitive advantages that become the difference between succeeding and failing.

Running a Virtual Company

View Resource Running a Virtual Company
When you are trying to get your personal finances in order and achieve your financial goals, finding a budgeting method that works for you is one of the most important steps. You need a method that makes sense to you, works with your lifestyle, and that helps you stick to the budget you create on paper. What is envelope budgeting? Envelope budgeting is an all cash budgeting technique. You decide how much money you are going to spend on a specific type of purchase, put that cash in a labeled envelope, and then use only that cash for making that type of purchase. You can replenish your envelopes monthly or each time you receive a paycheck, depending on your preferences. Steps to set up your envelope budget system
  1. Subtract fixed expenses, such as your housing payment, car payment, utilities, and credit card payments from your income to find out how much discretionary spending you have available.

  2. Divide your discretionary spending money between spending categories that match your spending habits. Allocate the amount you plan to spend in each category based on past spending habits or future spending goals. For this method to be effective, make sure to be reasonable, especially in necessary categories like groceries or gas. If possible, allocate money in $20 multiple amounts to make it easy to put the appropriate amount of cash in each envelope.

  3. Label envelopes with the categories you have determined and the amount of money you have budgeted for each category. If you would like something more durable and easier to keep tidy than a stack of envelopes, an alternative is to use a small accordion folder with tab dividers.

  4. Go to the ATM or the bank or credit union when it is time to fill your envelopes and withdraw the appropriate amount of cash. Divide it between the envelopes according to your budgeted amounts.

  5. Spend money only from your envelopes. If you have to make a purchase online with a debit card, immediately take that amount of cash out of the appropriate envelope and put it in an envelope labeled “deposit into checking account.”
Replenish your envelopes each month or after each paycheck. You can either carry over remaining cash or take that cash out and use it to help achieve a financial goal, like paying down debt or saving money for a vacation. Pros and cons of envelope budgeting Consider the pros and cons of envelope budgeting to help you decide whether this is the right budgeting method for you. Pros: Cons:

Try the Envelope Budgeting Method

View Resource Try the Envelope Budgeting Method
You have many decisions to make when shopping for a loan, and one of them is whether to obtain a secured or an unsecured loan. Whether you are familiar with the terminology of secured and unsecured loans or not, you are probably familiar with the underlying concepts. Secured loans get tied to an asset, like your home or automobile. Unsecured loans are not tied to any specific asset. Understanding these types of loans in more detail can help you borrow money wisely. What is a Secured Loan? Lenders often issue loans secured by a specific item of personal property. This item might be a house, a car, a boat, or even stocks or bonds. When property is used to secure a loan, the lender maintains ownership rights in the asset until the loan gets repaid. This means if you fail to repay the loan or otherwise meet the terms of your loan agreement, the lender has the legal right to seize and sell the property in order to repay the loan. That property is sometimes referred to as loan collateral. With a secured loan, the lender also places a lien on the property. The lien indicates that should you sell the property the lender is entitled to get money to pay off the remaining loan balance before you receive any money from the sale. The most common type of secured loan is a mortgage, which is secured by the house being purchased. If you stop making your mortgage payments, your lender could foreclose on the home and sell it to pay off the mortgage. If you sell your home, you have to pay off your mortgage immediately. Advantages of Secured Loans Disadvantages of Secured Loans What is an Unsecured Loan? An unsecured loan does not involve naming any specific property as collateral on the loan. Instead, the loan is issued on the basis of your ability to repay the loan. You might have to provide information about your income, savings, employment, or credit history. Some common types of unsecured loans include credit cards, student loans, and personal loans. Advantages of Unsecured Loans Disadvantages of Unsecured Loans

Secured vs. Unsecured Loans

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Many popular credit card issuers advertise balance transfers as one of the top perks for their card. In fact, you can often find promotional offers of 0% interest on balance transfers for the first year or more after opening the credit card. Transferring account balances can be a great financial choice for you because you can move the balance from a high-interest rate credit card to one that is not charging you interest at all. That way, your credit card payment will go entirely toward paying down the balance, rather than having to pay the monthly interest first. If you are looking to get out of credit card debt, transferring account balances to a new card can help. Features to look for on your new credit card Making the most of balance transfers is largely about choosing the right credit card. There is a lot of competition in the credit card industry, so as long as you have a good credit score, you should have plenty of strong offers from which to choose. Look for several features to help you pick the best new credit card. Make sure balance transfers do not hurt you Overall, transferring your balance can be a wise financial move if you handle it correctly. However, there are a few things that could hurt you in the long run if you are not careful. Pay attention to each of these factors to protect your credit and your personal finances.

Should You Transfer Account Balances?

View Resource Should You Transfer Account Balances?
When you are looking to borrow money, your credit report is the most important document that influences the lender’s decision. This credit report contains sensitive personal data about your payment history on many types of loans and lines of credit, plus legal information about bankruptcy, foreclosure, and tax liens. Because of the importance of your credit report, the Fair Credit Reporting Act (FCRA) was created to regulate the collection, dissemination, and use of consumer information, including consumer credit information History of the Fair Credit Reporting Act As consumer credit became more common in the 1960s, the United States government wanted to create clear legislation regulating how consumer credit information would be stored and shared. Congress passed the resulting Fair Credit Reporting Act on October 26, 1970. FCRA has gone through a series of amendments and clarifications from the late 1990s through present day. The current piece of legislation is comprehensive and offers a wide range of protections and rights for consumers. Important Components of the Fair Credit Reporting Act The Fair Credit Reporting Act is national legislation. Some states have also created legislation to provide further consumer credit rights. Contact your state Attorney General if you would like more information about state laws.

The Fair Credit Reporting Act

View Resource The Fair Credit Reporting Act
Staying on top of paying your bills can feel like an impossible chore when you have mounds of account statements and bills that arriving in your mailbox or email account. However, it is a responsibility that you need to pay attention to because it can be very costly to push it aside. Missing a payment will trigger late fees and can even damage your credit score if the bill was for a credit card or loan. How to organize bills that come in the mail Your bill organization strategy should start by designating a specific spot where you put your bills the day they arrive in the mail. You do not want to lump them in with the place where you keep the rest of the mail because they are time sensitive and can get buried quickly. The spot where you keep your bills could be an inbox on your desk, a basket on a bookshelf, or a hanging slot on a wall. When a bill arrives, you also may want to take a minute to open it, find the due date, and write it in marker on the front of the envelope. That way, it is easy to sort bills by the due date so you can keep a close eye on the ones with due dates coming up soon. Best bill payment practices Start by scheduling a regular time when you will pay your upcoming bills. For some people, it is easiest to pay bills weekly to get in a consistent routine. Others like to pay bills the day after receiving each paycheck. Set up a reminder to help you get in the habit of paying bills every time your scheduled day comes around. Use whatever calendar you use for other reminders in your life. This might be on your phone, on the computer, on a paper wall calendar, or in a day planner. You should mail a check at least seven days before the bill is due to ensure it arrives and gets processed on time. Therefore, unless a bill is due at least seven days after your next scheduled bill paying session, you will want to pay it in this session to ensure it gets paid on time. How to use online bill payment In today’s world, paying bills by check is not the only available method. Online bill payment saves money because you do not need to pay for checks or stamps. It is also helpful because you can set up payment reminders to arrive in your email just a few days before a bill is due. Some accounts even waive fees if you opt to receive account statements via email rather than on paper. To use online bill payment, you will need to set it up with the bank or credit union that you have your checking account with or directly with individual companies that you owe. Each bill should be very easy to pay once you go through the initial step of setting up payment information for every account. Using bill payment through your bank or credit union allows you to do that all in one place. You just need to login and authorize each payment electronically to make the transfer and pay your bills that day. An even easier option, if you are comfortable with it, is to opt for automatic bill payment. If you set this up, your bills will automatically be paid on their due date every month, without you having to do a thing. The concern with this approach is that you need to have money in your bank account for the scheduled date of each bill. Otherwise, you might incur overdraft charges.

Getting Organized for Bill Payment

View Resource Getting Organized for Bill Payment