The reading level for this article is Novice
“There is a sure way to avoid criticism. Be nothing and do nothing.” – Napoleon Hill
Hi. Welcome to Issue Twelve of the Entrepreneurs’ Chronicle.
1. News Update
Updates on Ryan’s Companies
Well it’s a bit rainy today, but overall the flowers are blooming and the blue skies are beautiful here in Chapel Hill as another school year comes to a close. Welcome to issue 12 of the Entrepreneurs’ Chronicle. This month, we include an article by myself entitled, “What is Marketing?” and one article from YoungEntrepreneur.com on the basics of financial management.
Virante, my web marketing and search engine optimization consulting firm is excited to announce an item of note. As mentioned above, new employee Malcolm Young began work on Thursday as our Director of Client Services. If you are interested in optimizing your web site for the search engines, going after a position on a competitive search term, or improving your online sales, I encourage you to contact Malcolm at email@example.com with a description of what you are looking for.
Personally, I am excited to announce that I will be going to Lagos, Nigeria August 15-23 to be the keynote speaker at the First Nigerian Youths ICT Empowerment Conference 2004 in front of 2,000 attendees. The conference runs from the 19th through the 21st. Prior to the conference, I will be speaking at the following locations in Nigeria.
Other confirmed speaking dates this summer include:
If you would like to book me to speak at your organization’s event please contact Malcolm Young at firstname.lastname@example.org. Recent topics include entrepreneurship, personal development, and web marketing. Additional information on past topics can be found at http://www.ryanallis.com.
If you have any comments, suggestions, or would like to contribute content to be published in the newsletter or online, I encourage you to contact me at email@example.com. Please do feel free to forward this newsletter on to your colleagues and associates. On behalf of the Zeromillion.com team I thank you for being a subscriber.
What is Marketing?
This article is an (updated) authorized excerpt from Zero to One Million by Ryan P. M. Allis. The book may be purchased for $11.17 from Amazon.com
Two shoe salesmen find themselves in a rustic backward part of Africa. The first salesman wires back to his head office: "There is no prospect of sales. Natives do not wear shoes!" The other salesman wires: "No one wears shoes here. We can dominate the market. Send all possible stock."
Simply stated, marketing is everything you do to place your product or service in the hands of potential customers. The purpose of marketing is to get the word out about your product—and in turn to make sales of your product or service. Sales is only a part of marketing, however. While sales is simply the act of converting a prospect from prospect to customer, marketing is the process that makes sales possible including brand development, partnership creation, publicity, and advertising. Marketing is the background work that gets prospects in the door. Sales is the process of converting those prospects to lifetime customers.
The cause of the failure of many businesses is a breakdown in or lack of marketing. You can develop a wonderful product or provide a high value-add service, but if the marketing is not there, your business will not succeed.
There are two different types of marketing. The type you’ll learn in most business schools can be generally defined as corporate marketing. In a business school class on corporate marketing, you’ll learn about things like branding strategy, demographics, and positioning statements. While these subjects are important to know, they will not be of great benefit to the bootstrapping entrepreneur who does not have a million dollar budget, ten ad designers, and a sales force of one hundred.
The other type of marketing is entrepreneurial marketing. In entrepreneurial marketing, instead of concentrating on brand recognition you concentrate on sales. Without much money to spend, the return on investment (ROI) of every ad, of every campaign, is that much more important. In this chapter, I will present both the basics of marketing, the core of much of what corporate marketing is based on, as well as a complete step-by-step marketing strategy to launching your business and building it to one million dollars in sales, without spending a dime in upfront costs.
One of the most basic and most important concepts in marketing is known as the Four Ps. The four Ps are product, price, place, and promotion. If you can develop a good product at the right price, position it in a place where buyers are, and promote it well to create desire in the customers’ mind, you’ll quickly succeed in making a lot of sales.
As we talked about before, your product is crucial to your success. If you have a good product, getting the other three Ps right will be that much easier. The ‘product’ includes both the actual physical product as well as product decisions such as function, appearance, packaging, labeling, and warranty. The word ‘product’ also encompasses any services you may provide. The service you provide is your product.
If your price is too high, not enough people will be able to afford it. If your price is too low, you will not make any profit. On the other hand, if your price is too low, many will not buy it because they may see it as an inferior good. To best manage these forces and optimize your net profits, you will have to test many different prices of your product(s).
Place is essential to building sales. Place essentially rests on positioning—the positioning of your marketing message and the positioning of your product.
In both retail stores and online, how to properly position your product is a very important skill. Without proper positioning, no one will know you exist. If you are hidden in the back corner of a store on the bottom shelf and your web site is number 3425 in the search engines for your targeted keywords, you likely will not make many sales, no matter how good your product is. We’ll talk more about how to position your product both online and off later in this chapter.
The positioning of your product is also known as your distribution strategy. A distribution strategy is developed by determining where on the value chain you want your business to be positioned, and who the buyer will be. You may sell your product to a retail store who then resells it to the buyer, a manufacturer who sells exclusively to jobbers and regional representatives, or directly to your end consumers. We’ll talk more about distribution models and strategies later in this section.
Promotion is an essential part of the marketing process. Promotion decisions include those related to communicating your message, advertising, and public relations.
Important Definitions for Marketers
B2B – Business to Business.
B2C – Business to Consumer
Brand – The aggregate representation and reputation of your business across all those who interact with it. Includes much more than simply the logo and corporate identity.
CRM – Customer Relationship Management
Demographics – Data on customers and prospects such as gender, location, birth date, past purchases, income level, marriage status, and birth date. A marketer can better target their promotions with good demographic data.
Direct-to-consumer – Selling a product directly to the buyer without any middlemen.
Distribution Model – The levels of companies through which a product is sourced, manufactured, and then sold.
Distribution Strategy – Where and how a company positions itself in the value chain, including what type of distribution model it follows.
LTV – The Lifetime Value (of a customer).
Market Research – research about a market including the competitors and competing products, its size, and growth rate.
Retail – Selling a product to an end buyer
ROI – Return on Investment
Target Market – Who your business will be targeting with the promotions for your product. Those that are most likely to buy.
USP – Unique Selling Point, also known as the value proposition; what you do that differentiates you from your competitors.
Value Chain – A representation of the distribution model based on the value added by each type of business at each level.
Wholesale – Selling of a product to another business who will later resell it.
Ryan Allis, is the CEO of Broadwick Corporation, a provider of permission-based email marketing and list management software IntelliContact Pro and CEO of Virante, Inc. a Chapel Hill, North Carolina based web marketing consulting firm. Ryan, who is 19, is on leave for a year from the University of North Carolina at Chapel Hill, where he is an economics major and Blanchard Scholar. Additional information on the author can be found at www.ryanallis.com.
This article may be republished online as long as the byline remains.
An Introduction to Financial Management
Financial management in the small firm is characterized, in many different cases, by the need to confront a somewhat different set of problems and opportunities than those confronted by a large corporation. One immediate and obvious difference is that a majority of smaller firms do not normally have the opportunity to publicly sell issues of stocks or bonds in order to raise funds. The owner-manager of a smaller firm must rely primarily on trade credit, bank financing, lease financing, and personal equity to finance the business. One, therefore faces a much more severely restricted set of financing alternatives than those faced by the financial vice president or treasurer of a large corporation.
On the other hand, many financial problems facing the small firm are very similar to those of larger corporations. For example, the analysis required for a long-term investment decision such as the purchase of heavy machinery or the evaluation of lease-buy alternatives, is essentially the same regardless of the size of the firm. Once the decision is made, the financing alternatives available to the firm may be radically different, but the decision process will be generally similar.
One area of particular concern for the smaller business owner lies in the effective management of working capital. Net working capital is defined as the difference between current assets and current liabilities and is often thought of as the “circulating capital” of the business. Lack of control in this crucial area is a primary cause of business failure in both small and large firms.
The business manager must continually be alert to changes in working capital accounts, the cause of these changes and the implications of these changes for the financial health of the company. One convenient and effective method to highlight the key managerial requirements in this area is to view working capital in terms of its major components:
(1) Cash and Equivalents
(2) Accounts Receivable
(4) Accounts Payable and Trade Notes Payable
(5) Notes Payable
(6) Accrued Expenses and Taxes Payable
As a final note, it is important to recognize that although the working capital accounts above are listed separately, they must also be viewed in total and from the point of view of their relationship to one another: What is the overall trend in net working capital? Is this a healthy trend? Which individual accounts are responsible for the trend? How does the firm’s working capital position relate to similar sized firms in the industry? What can be done to correct the trend, if necessary?
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This concludes this issue of The Entrepreneurs’ Chronicle. We’ll see you June 1, 2004. If you are not subscribed and would like to subscribe, please visit http://www.zeromillion.com. If you would like to contribute content, become involved with the zeromillion.com team, make suggestions, or provide feedback please feel free to contact us at email@example.com.
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“The seeds of great discoveries are constantly floating around us, but they only take root in minds well prepared to receive them.” – Joseph Henry