4 To Dos for the Someday Entrepreneur

The 4 P’s of Marketing
Product
Price
Promotion
Place
Expanded to 7
Physical Evidence
People
Process

The Consumer Oriented Model
The 4 C’s
Corporation
Commodity
Cost
Communication
Expanded to 7
Channel
Consumer
Circumstances

Resources

Mindtools- The Marketing Mix and 4 Ps

NetMBA – The Marketing Mix

How to get started in entrepreneurship.

Introduction-
Over the years I have known literally hundreds of people who have had home businesses. Sadly very few, eve none made any money. That’s pretty sad when you think about it. As I thought about this situation I became curious why that was so. Here are some ideas I came up with.

The need for home businesses-
Today and for decades for that matter the average Joe needs to make more money. We all want more money. People start looking around for a way to earn a few extra bucks. When Amway started all of the sudden people were introduced to the idea that they, meaning the average person could become rich, really rich. There was excitement, hoopla, and some even made some money. You all know the dynamos that drive the luxury car, gives dynamic motivation speeches and sell the dream to all of us. I’ve been there.

The problem with home businesses-
There are several problems with the idea of home businesses.

Business models-
For one, most of them are bad business models and no one can make money doing that.

Lack of training and knowledge-
Second, with our American spirit we think we can do anything and so we take the jump into the new business without knowing anything about it.

Picking the wrong business-
We often get into a business that we get excited about but it really doesn’t fit us very well.

Bad products or service-
Let’s face it. There is a lot of junk out there. Junk products and junk services. Who wants junk?

Well here are some things to consider when choosing a home business:

Consider your situation-
If you are married, have three kids, and you and your spouse both work, your chance of having a successful home business is none. For example: Let’s say you pick up the kids from day care at 6 pm. You get home at 6:30 pm and start dinner. After dinner you have to clean up the kitchen, and then it is time for the kids to read to you for 30 minutes. Before you know it, it’s time for pajamas, prayers, drinks of water, several trips to their bedroom to scare away the boogie man, and finally they are in bed. Well now it’s 10 pm or later and you are both exhausted. Let’s see, when will you have time to do a home business?

Consider your time-
There are different seasons of our lives. Some are better for a home business than others. Consider what season you are in at the moment. If you have a family you have limited time for a home business. If you are an empty nester you have plenty of time for a variety of businesses. Where are you? Be realistic about how much time you have to do a business. Pick something that fits your circumstances.

Consider your skills-
All businesses are about selling. Nothing happens until something is sold. Can you sell? Do you like to sell or hate it? Do you have some skills you can turn into a business? I coached a man a few years ago who made arrows. He loved bow hunting and made custom arrows for himself. I coached him how to market them and he was off and running. What skills do you have?

Consider your experience-
Some of us have more experience than others. What have you done in the past? Make a list of all the jobs you have had and the skills they required. How about hobbies? Do you make arrows? Did you teach cub scouts how to start a fire or create a camp site?

Consider the difficultly level-
Some things are just harder to do than others. I coach people in business from an air conditioned office in a soft chair. My neighbor on he other hand is a carpenter foreman in construction and he is out there slaving away in all kinds of weather. Pick a home business that is easy to do. No door to door selling.

What is the best home business?
Without a doubt the best home business is an Internet business. There are hundreds of ways to make money on the Internet and they are all easy. It costs almost nothing to start an Internet business whether you are selling things on a website or on eBay. It costs almost nothing to run an Internet business. It is relatively easy to create a simple website and there are many products you can sell.

If you have a young family you can do work on the business after the kids go to bed or during lunch at work. If you are retired, you can do an Internet business from a warm comfortable home, with no effort, no investment, and it is fun. E-commerce is the direction of business and you better hook your wagon to it. Do some research. Do Goggle searches for the best Internet business. Read about how people are making money. Will you get rich? NO. But you can earn$30-$50,000 a year if you get the right product and take time to learn about it.

Banks-
Yuk! I hate banks. Bankers are some of the most uncreative, and fearful people I know. They don’t know what risk is. Maybe there is a good reason since after five years 50% of new businesses fail. Not very good odds. In this economy, you can pretty much forget getting a business loan from a bank. They have money but will not risk it. If you have money they will give you a loan. If you have collateral such as equity in your home, they will lend you money but other than that, you better have a brother in law who is a banker.

Credit unions-
They are pretty much like banks accept they are owned by the members and tend to be more flexible on loan qualifying. Get to know a loan officer at a credit union and build a relationship. They are more willing to take a risk.

SBA loans-
Guess what? The Small Business Administration does not loan money. They give banks a guarantee that if a borrower defaults on a loan, the federal government will cover part of the loss. You still need collateral.

Second mortgage-
If you have a home or some rental property that has equity you can get a second mortgage. Of course you will put your property at risk if your business fails. Second mortgages have higher interest rates but if you have no other choice take it.
I took out a second mortgage to buy my first rental property.

Home credit line-
Pretty much like a second mortgage only you don’t get the money all at once. Again, you need collateral.

Private investors-
People like surgeons, commercial real estate brokers and bank robbers have to do something with all the money they make or President Obama will take it all in taxes. They invest in stocks, oil exploration, real estate and a lot more stuff. Physicians are famous for being bad business people. Maybe if yon have a great business play he/she will invest in your business or project. Identify who the private investors are in your state and contact them.

Investor groups-
There are people who have money to invest and like to spread the risk with other investors. These investor groups usually specialize in certain areas of investments like real estate. Check around for investor groups.

Limited partnerships-
These are like investor groups but different. Ha! They use a different legal entity to do their investing. I have been involved in limited partnerships in oil exploration. These are more often groups to earn money rather than invest.

Friends and family-
Here is where you can break up a family. Friends and family are the first place most people go to get money for a project or a business. If you don’t want to ruin your family you better tell them that starting a new business venture is very risky and they might loose their investment. You need to show them a business plan and make sure it says they could loose their money. I have seen a number of families break up over this very thing.

Grants and community development funds
Check with the chamber of commerce and see if they know of any grants for business. The government gives special treatment and tax advantages to women owned and minority owned businesses. You might want to put the business in your wife’s name.

401-K
Don’t use it. It will cost you a 10% penalty plus the money you take out will be taxed at your regular tax rate. It is like getting a loan for 30 % interest.

Cash value insurance-
Some life insurance policies develop a cash value over time. You can borrow some of that money out of the policy but it decreases the death benefit by the amount you take out.

Credit cards-
Thank goodness for credit cards. There are more small businesses started with credit card funds that any other financial instrument. The interest rates are high but the money is much easier to get than from a bank.

These are some of the basic ways to fund a business. Of course there are many other ways such as angel investors and venture capitalists but you can Goggle them and read about them. Good luck funding your project.

Excess inventory- during my 20 years of working with all kinds of small businesses I found that most have inventory they either have forgotten about because it is either out of date or out of style, or an ordering mistake. If that inventory has been laying around in a corner for years covered up by other junk, take a look at it, it is an asset that is worth something.

Example: years ago when I was working in the radio business there was a carpet/furniture store that I sold advertising to. While talking to the owner one day he mentioned he had a large roll of purple carpet he couldn’t sell and had put it in the back if the warehouse and forgotten about. I ask to see it and it looked to be in pretty good shape. The store owner said no one wants purple carpet. I said let’s find out. We ran a schedule of radio spots featuring a “Purple Sale.” We marked down the purple carpet 50% and he sold every bit of it. He turned useless carpet into an asset that brought him several hundred dollars. He assumed no one would want it but didn’t really check it out.

Example: I also consulted a client who had a hardware store that also sold lumber etc. As she told me about her store’s property, she indicated there were some materials in the yard that had been there for years. I told her to have a sale, or put it on eBay and turn it into cash.

Customer list- Almost every business has a list of customers. Some businesses have hundreds, even thousands of customers on their list. Sure they sell to that list, at least to the main regular customers, but many are inactive. You can maximize your customer list by determining what other business sells to your customers.

Example: An insurance agency usually has hundreds, even thousands of customers on their list. They sell mostly to home owners and auto owners. Who else is interested in selling to those customers? How about financial advisors? How about attorney? How about realtors? Your customer list is an asset worth more than you think.
You contact one or all of the businesses above and make an arrangement allowing them to mail to your customers with a special offer, approved by you of course. If it’s a lawyer, he could offer a special deal or even free info on wills and trusts. Every will or trust set up will pay you a finder’s fee, maybe even half.
Financial advisors with your help set up a free seminar about retirement, or setting up IRA’s etc.

Dead customer list- Every customer list has past customers who are inactive. Could they be an asset? Sure.

Example: I had a client who owned an online natural health college. They sold many different programs to customers over the Internet. We were talking about ways to get some of the local residents to buy his programs. His target customer was primarily women age 20 to 55 years old. I thought about other businesses that had the same target customers. There was a massage therapy school only a few blocks away. Now when schools like massage therapy schools have a recruiting promotion, most of the attendees don’t sign up. The school will follow up with calls but ultimately most of the list is “dead.” I suggested he contact the owner of the massage therapy college asking to let him market to the dead list and my client would pay the massage therapy owner half of the sales. A good deal. The massage therapy owner got money from a dead list, and my client got access to a list of his exact target customers. Dead lists are assets.
Example: If you have a good customer list you may be able to rent your list to other businesses. My ecommerce business has 7,000 customer names. I can rent that list for .25 cents a name and sometimes more. Just be sure you have not told your customers you will not use their names. Otherwise it is fine.

Unused time, equipment, or services- Many businesses have unused capacity, time or equipment.

Example: I know a company that did packaging of products but the equipment only ran from 5 a.m. to 1 p.m. found another company that needs packaging that could be done at your facility. The same for delivery trucks.

Example: I had a client who owned a new spa. It had everything, hair, nails, massage, facials, tanning etc. Her new business was slow and had not developed like she expected. Her employees weren’t selling products and services like they should. She had 4 tanning beds that weren’t being used…always empty. I told her those empty beds were a good asset. We created a promotion to use the empty beds as incentive to get people to visit the spa. With every waxing and nail job, get 10 free tanning visits. She said she sells a ten tan package for a good amount of money and didn’t want to give it away. Think about it. Tanning beds empty. She is already paying for the equipment, overhead, and labor. It cost nothing to give a tanning package away, but it does bring in new customers to experience her spa and opportunity to sell her services and products.

Increase the perceived value with little or no cost- Every business has hidden services or products that can be given away to increase the value to a customer.

Example: I have an e-commerce business where I sell “G” rated videos. In addition to my website, I also sell them on amazon.com and some other selling sites. On Amazon, all the movies with the same titles are grouped on the same page. There could be 10 different videos of the exact same movie, all with different prices from $2 to $14 each. This causes downward pressure on prices. I decided to make my videos have more value by offering something other sellers could not. I offered a Free life-time replacement guarantee on each of my videos. I then raised the prices of my videos. The guarantee increased the perceived value of the purchase so I could charge a higher price. I recognized that new videos only get played a few times over a year which is not much. Therefore there is little chance they will break. Knowing that, I could offer the free life-time replacement guarantee with little or no risk to me. In nine months I have had only one request for a replacement. Every business has something that can be used in the same way.

Example: I also coached a man who was an electrician. He wanted to get more customers. He decided he could provide additional services free that increased the perceived value of doing business with him. In his ads he could put an offer of Free 15 point safety check with each visit. Or when he does some work for a customer, to do the 15 point safety check for free. He is already there, and it takes less than five minutes to check all the electrical outlets in the house, the breaker box, smoke alarm etc. It takes only five minutes but increases the perceived value to the customer substantially.

Example: Another client I coached built custom grandfather clocks. Very nice quality. As we tried to find some ways he could increase the perceived value of his clocks I ask him how long the competitor’s warrantee was. He said two years. I ask him if he felt like he could offer a 5 year warrantee. He said there is little chance something would go wrong in a five year period with his clocks so he felt OK offering the five year warrantee. It cost him nothing, and increased the value to the customers.

In summary:
Every business has hidden assets. I’ve just showed you some ways to find them. Try the increasing the perceived value exercise with your business or with a business you know of. You will surprise your self.

1. Saving money with your graphic design
2. Saving picking the right quantity to print
3. The secret about saving with the right paper
4. The number of ink colors used can affect the prices
5. What is the right quantity to print?
6. Which printer will save you money?
7. The magic of printing two or four at a time.
8. Giving the printer extra time to print saves money.
9. Proofs.

Saving money with your graphic design:
1. Bleeds- ink that prints and runs off the edge. Using bleeds will often require the printer to use a large sheet of paper to print on thus increasing the cost.

2. Designing difficult designs to print-large solids. Graphic designers sometimes design features into a brochure that are difficult for the printer to print. An example is designing a large solid color of ink on the brochure. When you have a brochure with the entire back page one solid color you can get lines across the page, or heaver ink coverage in some areas making the solid ink look uneven. You must have a very good pressman and the right kind of press to get a good even solid color. It’s harder than it looks. There are other design elements that are equally difficult to print.

Saving by picking the right quantity to print:
1. Printing more lowers the price of printing. We all have heard or experienced the fact that when you print something like brochures, post cards, calendars, and other print job, the larger the quantity printed, the less the per brochure cost is. For example, printing 1,000 brochures have a cost of ten cents per brochure. If you print 5,000 brochures, the price per brochure will be five cents each. When the printer says you can get a price break at a certain quantity, usually higher price, don’t do it. The per unit cost is lower with the higher quantity, but your total out of pocket cost is much greater. Don’t buy 5,000 if you only need 2,000.

2. Overs and Unders. It is a general practice in the printing industry that when a customer orders a certain quantity of printing, the printer can deliver up to 10% more of that quantity orders, or up to !0% quantity less than the amount ordered. If there are more brochures printed than 10% overs, the printer will try to sell you those also. Unless you need them, don’t buy them. Tell the printer you want them free. The printer will just throw them away so why not give them to you?

The secret about saving with the right paper:
1. What color is white? Ninety eight percent of all printing is on white paper. The kind of paper you print your brochure on can cost you more than necessary. White printing papers come in different qualities; number one paper is better but costs more than a number two paper, which is better than a number three paper. You save money when you use number three papers. For the general printing you do, you won’t be able to tell the difference between a brochure printed on a number one paper vs. a number paper.

2. Paper comes in different weights. Seventy pound, 80 pound, 100 pound etc. Picking the right weight of paper will also save you hundreds of dollars. Almost all brochures are printed on a 70 pound gloss text. Use this weight of paper and you will save money.

3. Paper comes in different colors and finish. White printing paper comes in a range of white colors, from a warm yellowish white to a cool bluish white. Papers also come in various brightnesses. For your printing needs, just pick a number three paper for your brochure and you’ll be OK.

The number of ink colors used can affect the prices:
1. More ink more expense.
2. Four color is more expensive
3. Save money with two colors-magic

Which printer will save you money?
1. Get three bids
2. Printing is a commodity-price is king
3. Prices are negotiable

The magic of printing two or four at a time:
1. Use two colors to appear as four colors
2. Duotones
Giving the printer extra time to print saves money:
1. Printer’s always in a time crunch.
2. Every customer wants their printing yesterday
3. You can have two printer gets one- fast, quality, cheap

Order on the internet
1. There is always a cheaper printer but be careful
2. Internet printing is incredibility cheap

Check your proofs-check your proofs-check your proofs
1. Customer is responsible for correctness.

Introduction

Many businesses feel pressure because of tight cash flow, and a lack of resources. Here are some ways to find new value with little or no costs.

1, Turn Unused things into assets- Spa tanning beds- Spa owner needed more business but had a bad location. She had 4 new tanning beds that were never used. She said they were costing her money every month. I said these are an asset. Make some coupons for 10 free tans and have your staff give 10 each away. The free tans brought in lots of new business.

2. Increased perceived value of a product or service- There are things a business owner can do to increase the value of his service without giving anything away.
On my videos I gave a free life time replacement guarantee. It increased the value of my videos and prices increased from $4each to $19.95each. Customers were willing to pay more for value rather than buying on price.

3. Recontact past customers or patents- I coached a plastic surgeon to help her increase her business. The market in southern California was brutal and prices were forced down. I had her recontact her past patents to see how they were doing and off a special on a procedure. Many bought. It increased business but cost nothing.

4. The dead list- Every business has on their customer list customers which they could not sell or who were unhappy with their service. Ask businesses that have the same target customer but do not compete, if you can market to their dead list, those names the business could no longer use and you have new customers in your customer’s demographic.

5. Partner with other businesses- If I were an auto detail shop and I wanted more business I could go to the owner of the big car dealership down the road., He has a big list of customers that I would like to market to. I offered to create an email letter to the car dealer’s customers offering in behalf of the dealership exclusively for their customers only a free rock chip repair, no strings attached. The dealer sends the email out to his customers. Some take advantage of the offer and come to my detailing shop for free rock chip repair. Of those some will buy other services and I make money. It is a win,win,win. I get access to the dealer’s customer list, the owner of the dealership earns $100 for each sale I get, and the customers win because they get free windshield repair. The whole thing cost nothing.

7. Get a customer’s products on 50 websites- I had a client who made customer golf clubs. I said he could get them selling on 50 websites across the country. I said, make some emails to send out to 100 websites that sell golf clubs and offer to provide custom club services for their business. All the website owner has to do is to put photos on the custom golf clubs on their website. When they are bought the dealer sends the order to the custom golf club maker and he fulfills the order. The websites only need a photograph of the product, but has no inventory to buy or ship.

What is direct mail and how is it used?
Of all of the major types of advertising that businesses use, direct mail can be the most effective. The goal of direct mail advertising is to get the recipient to read it and act.

Junk mail
“I tried direct mail advertising once and it didn’t work.” I have heard those words hundreds of times from owners and managers of businesses. The fact is, all major advertising works when used correctly and at the right time.

Direct mail is often referred to as junk mail because most of it is thrown away by the recipient. In fact, only a small amount of direct mail advertising is read by the consumer. A typical scenario is a consumer gets his mail from the mail box and starts glancing over each piece. The mailers he has no interest in (which is most of it) are immediatly thrown into the trash. The ones of interest are kept and read.

When a direct mail campaign is sent, only ½ to 2% of the mailers are read, the rest are trashed. How can advertising be effective when almost all of the recepitants don’t look it? Simple, mail a large amount to get a large return. I’ll show you how in a minute.

Just like all advertising direct mail has advantages and disadvantages; a right way and a wrong way to use it.

Advantages of direct mail advertising
1. Targets customers better than any other kind of advertising, period.
2. Direct mail advertising is the only major kind of advertising where its effectiveness can be measured exactly. You know the exact amount of customers a business gets from each mailing.
3. Direct mail advertising works.
4. Direct mail is still a growth industry as apposed to traditional broadcast and print advertising. If it did not work, advertisers would not continue to use it.

It may not seem like very many advantages, but when it is as powerful as it is you only need one advantages, it works. All other kinds of advertising cannot reach a specific target customer, and only that target customer without “wasted circulation.” I will explain that in a moment.

Disadvantages of direct mail advertising
1. The cost per customer reached is very high.
2. You get a very small reach; typically ½ to 2% of the pieces mailed are read.
3. People think of it as “junk mail” so they assume it couldn’t possibly be effective advertising.
4. You usually need to mail large quantities to get much response.
5. You must obtain a specialized mailing list in order to reach the specialized target customer.

The goal of direct mail advertising
The goal of direct mail advertising is to get the recepiant to read it and ACT, meaning go to the phone and call the business, or to the Internet, find the businesses’ website and buy the product or service, or to actually go to the business and buy the product advertised.

The design of the direct mail piece
The design of the mail piece is critical to the success of the mail campaign. The direct mail industry has done more research on what causes people to respond than any other medium. They know which colors work the best. They know whether a post card or letter work the best. They know which kind of headline and copy (in advertising and publications the text is called copy) works best and more.

The kind of design used for a direct mail piece depends on who the target customer is and what you want him to do. Do you use post cards or a letter? Will one color of ink or four color process (full color) work best? What kind of paper should it be printed on? What should the headline and copy say? What offer will the mailer give? How do you want the recipient to respond? These are all critical elements that will affect the success of the campaign.

The mailing list is critical
The most critical element of a mail campaign is the mailing list. You must have an up to date list from which you are mailing including names their addresses. In most cases you can get a good list from either a list broker or a direct mail company. (You can find both in the yellow pages) You don’t buy a mailing list, you rent it. You pay for the list each time you mail to it.

The list must be clean
That means it must be up to date with the most correct addresses and without duplicates names. You must depend on where you get the list for its correctness. Use a well respected list provider.

How many names should you rent for a campaign?
Mailing lists are rented in groups of a thousand. Often there is a minimum amount of 5,000 names. The cost is based on a per thousand amount such as $25 per thousand etc. You can rent any amount from 5,000 to millions.

An example of a direct mail campaign:
For our purposes here I will not go into all the details of the process but you will get the idea.
We are selling men’s high end retail clothes; Cherry’s Hot Digs.
We decide we will mail to 25,000 males in a four zip code area.
The target customer is men age 25 plus, income of $70,000 a year plus, middle to upper management, and lives in affluent zip code areas of the city, etc.
We decided to advertise a special group of expensive fine wool sweaters at a 50% discount.
We decide to use post cards rather than letters for a variety of reasons.
We write a compelling headline and copy to get the attention of the reader and add attractive photographs.
We rent the mailing list for the target zip code areas. (Cost is $40 per thousand ).
We deliver the art for the printed post cards and the list reciepents on a CD to a direct mail company.
We have the printer print the post cards.
The direct mail company addresses, applies postage and mails the post cards. The date the post cards are mailed is called the drop date.
After about three days customers start to respond and we get a response rate of 2%.
Two percent of 25,000 is 500 customers. Of those let’s say three hundred customers buy and are also sold additional items for an average sale of $250 per customer.
Total revenue for the campaign is 300 respondents X $250 = $75,000. Subtract the cost of the mailing, approximately $5,000, and you have net revenue for the mailing of $70,000. Not bad for a two percent response rate.

Direct mail can be a very powerful advertising medium when used correctly. It is affordable, easy to do, you can target any group of customers, and it gets results for the businesses. If you have a business consider trying a direct mail campaign.