Business Best Practices

Pricing products or services to maximize profits is a challenge — often part art and part science. To do so effectively requires research, an understanding of your market, and an intuitive feel for what will work. Getting it right, however, is critical if your business is to be profitable. There are several important issues that you must factor into any decisions you make on setting prices for your goods or services.

Start by Identifying Your Costs

Whether you have an online business or operate out of a physical property, sell inexpensive or high-end goods, or provide professional services, you will still encounter numerous expenses each day. You will be unable to price your services or goods accu

rately if you do not understand what your total costs are. There are a variety of components that make up your total costs, which include:

• The cost of materials and merchandise
• Your labor costs, including salaries and benefits
• Your overhead costs, including mortgage/rent, taxes, utilities, insurance, transportation, and marketing/advertising

Knowing how much you need to charge just to cover your total costs is a key step in setting prices. However, your costs do not remain fixed. They chang

e, and when they do, you will have to reevaluate what you are charging your customers. That is an ongoing process.

Understand Your Customer Base

Customers are driven to buy by a variety of factors and emotions. Some customers are acutely price sensitive. They have limited spending power and always consider price. Other customers want convenience over anything else. For them, the availability of concierge services, home delivery, and in-store pickup are important considerations when choosing a vendor. And certain people focus on the implied exclusivity or the status attached to buying and experiencing a product or service. You can more easily refine your pricing structure once you identify what type of customer you are targeting.

Identify Your Competitors

You will be more successful in positioning your business in the marketplace once you determine what your competitors are charging for similar services and goods. Do competitors emphasize low prices or superior service? Do they promote their knowledgeable staffers or

the exclusivity of the goods they offer? Once you understand where you stand in relation to your competitors, you may be better able to leverage service, for example, as a value proposition that can permit you to charge higher prices than your competitors.

Explore Other Opportunities to Generate Revenue

Look beyond a single sale or service to see if there are additional ways to drive revenue. Consider making it beneficial for customers to buy larger quantities of a product by dangling discounts based on the quantity ordered. Are there opportunities to sell service contracts, options, and add-ons to a basic service or product, perhaps by offering several packages at different prices?

Pay Attention to Macro and Micro Issues

Small business owners always face factors that may threaten the viability of their businesses. The reality is that what happens in the larger world will affect your business in multiple ways. Significant hikes in your costs for labor, gasoline, and materials as well as the costs associated with supply chain issues will mean that you have to revisit your current pricing. You’ll want to continuously monitor your prices and your profitability. Understanding which products and services are profitable and which ones are not allows you to make data-driven decisions about pricing.

An experienced financial professional can assist you with your business strategy and planning.

In the realm of business, the terms “leadership” and “management” are often used interchangeably, but they represent distinct approaches that play crucial roles in the success of an organization. While both are essential, understanding the differences between leadership and management can unlock new perspectives on how to effectively guide teams, drive innovation, and achieve organizational goals. In this article, we explore the nuanced differences between leadership

and management and delve into the unique contributions each makes to the dynamic business landscape.

Leadership: Guiding with Vision and Inspiration

At its core, leadership centers around inspiring and influencing individuals to align with a shared vision. Leaders are visionary trailblazers who empower their teams by setting a compelling direction, fostering a sense of

purpose, and motivating employees to transcend their limits. A true leader operates on the principles of authenticity and integrity, nurturing an environment where trust and collaboration flourish. Effective leaders are change agents who embrace ambiguity, take calculated risks, and adapt to dynamic challenges. They stimulate innovation, encourage creativity, and encourage the growth of their team members.

Management: Organizing and Executing Efficiently

Management, on the other hand, is the art of planning, organizing, and executing tasks to achieve established goals and objectives. Managers are responsible for optimizing processes, allocating resources, and ensuring tasks are completed efficiently and effectively. A skilled manager excels in decision-making, delegation, and problem-solving, ensuring the day-to-day operations of the organization run smoothly. They prioritize tasks, maintain schedules, and enforce accountability to maintain the overall structure and functionality of the business.

Leadership and Management: A Harmonious Symbiosis

While leadership and management are distinct concepts, they are not mutually exclusive. The most successful organizations strike a balance between the two, recognizing that effective leadership complements efficient management. Leaders provide the visionary direction, while managers execute that vision meth

 

odically. The symbiotic relationship between leadership and management creates a harmonious environment that fosters growth, innovation, and operational excellence.

Cultivating Leadership and Management Skills

1. Leadership Skills: To become an effective leader, hone skills in emotional intelligence, communication, empathy, and the ability to inspire and motivate others. Embrace a growth mindset, continuously learn, and model the behavior you expect from your team.
2. Management Skills: Developing management skills involves mastering organizational abilities, decision-making, time management, and efficient resource allocation. Effective managers communicate clearly, set realistic expectations, and empower team members to perform at their best.

In the dynamic world of business, leadership and management are two sides of the same coin. Both are essential for achieving organizational success, yet they offer distinct approaches to guiding teams and achieving goals. Effective leaders inspire with vision and purpose, while skilled managers ensure efficiency and execution. Striking a harmonious balance between leadership and management fosters an environment of innovation, collaboration, and growth, propelling businesses toward sustained excellence in today’s competitive landscape.

It’s reassuring to remember that downturns are a normal part of the business cycle. And, just as there are strategies that help businesses thrive during profitable times, there are basic survival tactics that businesses can employ when the outlook is less than rosy.

Control Spending

Finances should be your fundamental concern when economic conditions are unsettled. When sales are slow, it’s time to preserve your cash. Look closely at how you can reduce overhead. Make certain that all your operating expenses are necessary. Even if you’ve recently made cuts, see if there are other measures you can take. Unless absolutely necessary, consider putting plans that call for capital investment on the back burner until conditions improve.

Maintain Customers

While containing costs is essential, maintaining your customer base is also crucial. So, when you’re deciding how to trim spending, make sure you don’t make cuts in areas that deliver real value to your customers. At the same time, watch your receivables. Make sure your customers’ accounts stay current.

Think Short Term

Plan purchases for the short term, keeping a minimum of cash tied up in inventory. At the same time, however, make sure you’ll be able to restock quickly. Your suppliers may be able to suggest ways you can cut costs (perhaps by using different materials or an alternative manufacturing process). See if you can negotiate better credit terms.

Plan for Contingencies

There’s a big difference between imagining that you might have to seriously scale back your business and having an action plan in place that you can quickly execute. To develop a realistic contingency plan, prepare a budget based on the impact you imagine an extended downturn would have on your business. Then outline the steps you would need to take to survive those conditions. For an added level of preparedness, draw up a second, “worst case scenario” budget and chart the cost-cutting steps you’d need to take to outlive those more dire circumstances.

Many businesses will survive challenging economic times by being informed about their financial condition and by planning ahead to succeed.

A SIMPLE IRA is an option for small business owners who do not currently have a retirement plan in place but would like to have one. This particular type of retirement plan has several attractive features that deliver significant benefits to both employers and their employees.

What It Is

The Savings Incentive Match Plan for Employees (SIMPLE) is a retirement savings plan targeted at employers with 100 or fewer employees who earn $5,000 or more in compensation. With fewer reporting and administrative requirements than other retirement plans, the SIMPLE plan is designed to appeal to employers with limited resources and personnel to handle benefit administration and compliance issues.

With a SIMPLE IRA, employees may make tax-deferred contributions through payroll deduction to traditional individual retirement accounts set up under the plan. In 2023, the contribution limit is $15,500 ($19,000 if age 50 or over). All account earnings are tax deferred until the plan participant begins withdrawals. Withdrawals from a SIMPLE IRA are taxed at regular income tax rates.

Employers appreciate the fact that a SIMPLE IRA is relatively easy to set up and operate. An annual report is not required, although certain documents must be distributed to inform employees about the plan.

Employers are required to contribute to the plan, either by matching employee contributions up to 3% of pay or by contributing 2% of each eligible employee’s compensation. The matching percentage may be lowered in some years.

Plan Benefits

• Employee contributions are tax deferred
• Employer contributions to employees’ SIMPLE IRAs are tax deductible
• Account earnings are tax deferred
• No annual filing requirement or discrimination testing

Potential Drawbacks

• Employer contributions are required
• No Roth contributions are permitted
• Full immediate vesting (employee has ownership of all SIMPLE IRA money)
• No loans permitted

Your financial and tax professionals can help you assess your retirement plan options

Your most valuable asset isn’t your real estate or the tech stocks you bought in the 90s that have done well. It isn’t even your business per se. Your most valuable asset is you — specifically your ability to run a profitable company and make money.

Are you protecting that asset from the risk that a disabling illness or accident might prevent you from working? If you don’t have disability income insurance, you’re not protected.

What Are the Odds?

People generally think the odds of becoming disabled are low. But the numbers say otherwise: More than one in four 20-year-old workers become disabled before reaching retirement age. Here’s another reality check: Serious accidents are not the leading cause of long-term disability; chronic conditions are. Muscle and bone disorders (such as a back disorder or joint or muscle pain) are responsible for more than one in four disabilities.

How Long Could You Go Without an Income?

Even a short period of disability could be devastating. The average group long-term disability claim lasts 2.6 years. Even if you have reserves you 3 could tap, your personal finances would take a hit. If and when you were able to start earning an income again, you might have to start all over.

What Would Happen to Your Business?

Your involvement is vital to your company’s financial success. If you’re unable to work, you might have to hire someone to take your place and borrow money to pay the bills until you’re back on the job. Bottom line? If you’re sidelined by a long disability, it could jeopardize the success or even the survival of your business.

What Can You Do?

Call your financial professional to review and discuss this important issue.