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I wonder if even the visionaries at Apple know the depth of the revolution they have unleashed. In much the same way Desktop publishing dramatically revolutionized the printing industry and the advent of the true internet has revolutionized publishing, I think we are just on the cusp of a new paradigm of broadcasting via podcast and vodcast that will feature the elimination of the broadcasting elite in much the same way newspapers and magazines have been decimated by online print publishing and music companies are being made less and less relevant as music, too, moves online. For good and ill, the gatekeepers are falling away and information of all kinds, is becoming cheaper for consumers and potentially more profitable for the creators because the middlemen are being squeezed out.
Unlike many, and this reflects the Econ half of my majors in college), I don’t begrudge the music and publishing industries their profits and the very necessary gatekeeping they had to do in the past. Take the music industry, for instance, often the object of vitriol because they blocked so many talented musicians in favor of less-talented but more salable acts, and paid less than what was desired for the ones they did take on. No question that the industry attracted its share of unscrupulous and nasty participants but from a business point of view, they had to act like that. If they didn’t, less music would have been produced and many of those who got something would have gotten nothing. If you have to risk big bucks for five or ten acts for every one thats a hit, you have to play it safer. Remember, in the good old days before the internet, you had to spend tens of thousands printing a first run of cds that might or might not sell, you had to spend money to distribute these cds to influential people, put ads in magazines, book your acts on radio, tv or concerts just to get a few people to hear your act. Just as in graphic design and programming, the business sense of musical artists themselves, often leaves much to be desired.
But now, with music being downloaded rather than printed to cd and bought in stores, advertising and exposure being pushed electronically internationally and for very modest costs, more music is available to us from more sources. Niche markets, like the kind of weird stuff I like, can be satisfied because it doesn’t cost huge fortunes and require huge markets to pay for a new artist. (Check out Emilie Autumn at www.emilieautumn.com for a taste of my newest love. A classical violinist turned way out Alt with some absolutely incredible harmonies and lyrics.)
This same calculation is changing broadcasting with podcasts and vodcast, publishing with internet sites and podcast audiobooks, news production with blogs and online news sources and columnists. I don’t think it is yet clear how the new pay structures are going to fall out but I think it is clear that the middlemen, the gatekeepers and the big printing and production houses are all going to be squeezed way thinner than they currently are. While I do financially support a few of the free sites I visit, I don’t believe the beggar model will work any better for internet publishing and broadcasting than it does for PBS. I think, at this point, a lot more stuff will be free as loss leaders and more and more of the internet will be supported by advertising and sponsors with subscription services taking a distant third for more specialized content. But even this will be democratized further because nothing will cost as much as it used to to produce so more choice of sponsors and advertisers will be available, you won’t have to bend or dilute your message for your sponsors, you just find sponsors who don’t need to have you change your message.
To conclude this wide-ranging ramble, I guess I just have to say that it keeps amazing me how dramatic a change that the lowering of the cost of information is having our lives and how, it seems to me, that this means a dramatic democratization of both news, knowledge and entertainment. The bad news is that the gatekeepers are going, and a lot more schlock and dross will be out there but the good news is the gatekeepers are going and everyone has a chance to participate.
Originally posted 6/18/2007 by wkiraly
Going Green in Your Business; Money that is . . .
Money Management for the Small Business
You just learned some of the ways to track the flow ofmoney through your business from my colleague, Joe Ramey. Now, let’s discuss ways to find andmanage the money to track.
What is the lifeblood of business? Money or, more specifically, cashflow. Cash must be kept flowingfor a business to survive and thrive. If a business’s cash flow stops, the business will die.
So, what are the keys to maintaining cash flow in abusiness?
First, you have to generate cash. First, you do that byselling your product or service – lots of it – and, perhaps more importantly,by selling it profitably. So,there are two important tasks to undertake at the very beginning; develop apricing model for your product or service, then, create a marketing plan.
Developing a Pricing Model
What are the goals of a pricing model?
- To cover costs, and
- To make a profit.
So, how do you determine what your prices should be inusing this model?
First, you need to determine what are your costs of doingbusiness? Moreover, what is the value of your time? Or, if you were hiringyourself, what would you pay yourself? Finally, to determine what your total revenue should be for the year,add a profit factor. . To arrive at your price per unit, divide your profitfactor by whatever unit of product or service you are selling.
Obviously, this is a very simplistic approach topricing. For more information onpricing your product or service, there are a couple of good articles on pricingavailable at the following websites:
Another option, ask your accountant for help with pricing.
Keeping this exercise in mind, it is important that yourpricing model be at least somewhatcompetitive in your industry and market. What do I mean by that? Letme explain by using an example.
If you are a web designer working in a market where webdesigners typically charge $30 per hour, what do you think the effect on yourbusiness will be if you charge:
- $60 per hour?
- $10 per hour?
- $35 per hour?
At $60 per hour, you will likely price yourself out of themarket, unless you have some particular skill or technique that clearly sets you far above yourcompetition. At $10 per hour, youwill attract business, but is it business that you really want? The customers who are accustomed to andwilling to pay $30 per hour will likely perceive that there must be somethingwrong with you or your work and will, therefore, avoid working with you.
What happens at $35 per hour? At this price, you are probably close enough to thecompetition to build a business based on the proposition that you are bringingsomething more to the table than the $30 per hour designers are. It is up to you to define and promotethat difference to your target market to be successful.
Create a Marketing Plan
What’s in a marketing plan? More than just a plan to sell your product or service. It is important to understand thatmarketing is a multi-faceted pursuit. If you look at any basic marketing text, they talk about somethingcalled the Four P’s; Product, Price, Place and Promotion. To sell your product and to sell it profitably, it isimportant that you give proper consideration to all of these facets.
When defining the product or service you are providing tothe marketplace, it is important to make certain that there is a need for it andthat your product or service meets that need. Sometimes, you have to create that need in the minds of yourmarket. More on that later.
I covered pricing earlier, but it is important to remindyou that your pricing has to be competitive, while allowing you to make areasonable profit.
This “P” speaks to the means by which you will distributeyour product or service. With theaccess provided by the Internet, perhaps it isn’t out of line to begin thinkingglobally or, at least, nationally. State-wide?
This is what most small business owners usually think ofwhen they think about marketing; and, then, only with regard to their product. Promotion begins with you and with yourbusiness. Think in terms ofbranding. Have you developed abrand for your business? If not,now is the time to start. Then, you can think about how to promoteyour product or service.
Now that you are generating a cash flow, we can talk abouthow to manage it. Did you rememberthat we are here to talk about money management?
So, what are the keys to effectively managing money inyour business?
Use a Separate Bank Account for your Business
It is important for a business owner to segregate herbusiness finances from her personal finances for a variety of reasons.
First, doing so tremendously facilitates recordkeeping. Imagine the frustrationand aggravation associated with trying to separate your business activity fromyour personal activity in a single commingled bank account.
Second, in the event of an IRS audit, you only want toshow an auditor the minimum amount of information you are required toshow. If your business andpersonal banking activity is commingled, you lose that option.
You need to be able to make effective money managementdecisions for your business, based on the activity of your business. If you haven’t effectively segregatedyour personal and business banking activity, you won’t be able to do that.
Create and Maintain a Solid Accounting System
You have already heard about accounting systems. I can’t stress their importance enough.
Make it Easy for Your Customers to Pay You
Open a Credit Card Merchant Account
We are becoming a cashless society. Accepting credit cards simply makes iteasier for your customers to pay you. In fact, you may have an easier time getting some customers to pay bycredit card, than by any other means. Why? Rewards. Deferral of actually having to partwith their money. Studies haveshown that merchants who accept credit cards can increase sales by as much as50%.
Downside? Youmust generally have good credit to open a merchant account. You will pay fees when you acceptpayments by credit card. Comparedwith the cost of collections and bad debts, this is probably worth it.
Utilize Online Payment Services
This is a fancy moniker for PayPal, though they are notthe only online payment option out there. To accept credit card payments, you would need to set up a businessaccount. Credit is generally notan issue in setting up a PayPal account.
Here, too, you will pay fees and, for a customer to payyou, they will have to go online and log into their PayPal account. If they don’t have one, they will haveto set one up. This could be apotential deterrent to a customer doing business with you.
Consider Getting Deposits Up Front
If a customer is placing a large order, or if you areentering into a long term service relationship with a new customer, considerasking for a deposit up front. Ifyou have to purchase materials to make the sale or do the job, the depositshould be at least enough to cover your materials and, ideally, should behigher.
If you are providing a service, rather than a product,consider asking for somewhere between a third and half of the expected fee upfront.
In either case, if your customer balks at paying you adeposit, were they planning on paying you, in the first place?
Be Smart about Extending Credit
Generally, if you are making a sale or providing a serviceon a one-time basis, there should be no need to extend credit. You should get paid upon delivery ofthe product or the completion of the service. This, too, is where credit cards can be useful.
If, however, you are entering into an extendedrelationship with a customer where you will be providing regular, continuousproduct or service, then you may be in a circumstance where it is appropriateto extend credit. If that is thecase, how should you do it?
Before extending credit, you should enter into a contractwith your customer that spells out exactly what product or service you willprovide, how much it will cost, and exactly what the payment terms are. Then, ask your customer to complete acredit application. You shouldthen follow that up by actually checking their credit. Once you are satisfied that yourcustomer is a good credit risk, then, and only then, should you extend themcredit.
How to Collect Past-Due Accounts Receivable
No matter how careful you have been about extendingcredit, a day will come where you have difficulty collecting a balance due froma customer. Now, what should youdo?
The most important thing you can do is to keep the linesof communication open with your customer. All communication with yourcustomer should be professional and respectful. There is no place for making threats. They will only serve to offend yourcustomer, making it difficult to get paid, ever.
However, you should keep the pressure on to get paid. You do this by making nonthreateningphone calls, sending professionally worded letters and making personalvisits. Remember, allcommunications should be respectful and professional. You may be skeptical about this approach, but I can tell youtrue stories where I have successfully collected past-due balances followingthis approach when others around me were convinced we would never get paid.
If you are unsuccessful in collecting a delinquentreceivable in this fashion, you may have to consider using the services of a collectionagency or a collection attorney. If you go down this road, understand that they will take a contingentfee, often 1/3 of the debt, if they collect any money.
Your final option, if none of the above is successful, isto take your customer to small claims court. Be aware that, even if you succeed in securing a judgment,getting paid can still be difficult, if not impossible.
Making Smart Use of Debt
What happens when you need more cash than is beinggenerated by your business? Itdepends. The first question thatneeds to be answered is why is there a cash shortage? Is this a new business that is just getting started? Is your business a seasonal one in whichyou experience peaks and valleys of cash flow? Has there been a general downturn in your business resultingin an inability to pay your bills?
The answers to these and other questions will determinewhere, if anywhere, you can find money to help you through the lean times.
Sources of Cash for New Businesses
Unless you have a strong track record from previousbusiness ventures or are financially strong yourself, the truth is that youwill have a very difficult time securing cash for your business. Let’s examine possible sources of cashfor a new business, along with their advantages or disadvantages:
|Owner Contributions||No interest payments or repayment requirements||No leverage created|
|Home Equity Credit Line||Leveraged, not out of the owner’s pocket; Interest is generally deductible||You are paying interest; there is a repayment obligation|
|Credit Cards||Readily available source of cash (if you already have the credit card)||Exorbitant interest rates; Payment terms often encourage spiraling debt|
Sources of Cash for Established, Cyclical, Businesses
If you are in a business that experiences regular,predictable, up and down cycles, you are in a cyclical business. The challenge you are often faced withis the ability to find the cash to pay bills when you are in the midst of adown cycle.
What are examples of business that have predictable,annual cycles? A few that come tomind are retailers (think Christmas), amusement parks (think summer) andlandscapers (also think summer). They know, with a fairly high degree of certainty, when their businesseswill likely generate a strong cash flow and when they won’t.
So, what to do, in those circumstances? Assuming the business is wellestablished and has a history of being profitable, this is a textbookapplication for a business credit line. If your business has a difficult time qualifying for a business creditline, some options that exist might be for you, the owner, to guarantee therepayment of the credit line or, perhaps, to utilize a credit line on yourhome, if that is an option.
If none of these options is available, andif your need for cash is short term, then a credit card may be a viableoption. But, be very carefulhere. I have seen too manyinstances of well-meaning business owners getting into serious credit cardtrouble by not properly managing their credit card debt.
Sources of Cash for Businesses Experiencing Downturns
If you find yourself in the unfortunate position ofsuffering through a downturn in your business, you most likely will have totake a close look at your business to determine if the downturn is a short termone, or of a more permanent nature.
If the downturn is a short term one, then you need toexamine the causes of the downturn and try to determine what actions need to beundertaken to reverse the negative trend. Are these actions within your control or not? If they are not, you need to determine if you have thestaying power (financially) to weather the storm, or, if you need to considerother options.
If, however, the downturn is of a more permanent nature,you will have to take an even more in depth look at your business to determineif it is still viable. If it is,you will then need to look for ways to alter your operations to permanentlyreduce costs, so you may continue to operate. This option, by the way, also exists in the case of atemporary downturn in your business.
If, however, you determine that your business is no longerviable, you must consider liquidation. It is better to make a smart business decision and move on than tocontinue throwing good money after bad. This, too, is a key principal to effective money management.
If you have a solid business model and the initial capitalto get your business to the point at which it is self-sustaining, thenfollowing some common sense principals for managing your business’s money willhelp your business to survive and thrive for many years. You just need to take a well consideredapproach to business management to give it the best chance possible. This includes, among other things,aligning yourself with a solid team of professional advisors in whom you haveconfidence and whose advice you will take.
Money Management Miscellany
Some common sense things your mother should have taught you.
- Pay your bills on time
- Reconcile (balance) your check book each month
- Find ways to reduce fees in your bankingrelationship
- Move excess cash reserves (more than one month’sneeds) to a savings account
- Deposit your receipts as soon as is practical(daily is good)
Weighing in at 750 pages (not counting the index) PS CS4: TMM (sounds like a Star Trek series) is broken down into 5 areas: Basics, Editing, Artistic, Printing/Web Output, and PS Power, making it very easy to find what you are looking for.
Now, normally in a PS book or manual, trying to read the copy makes my eyes start to glaze over and start to drift, but that is not the case with this book. Her writing has an easy humorous style about it, keeping you reading. Add to that plenty of COLOR photos to guide you, and this is one book that will have a prominent place on the bookshelf until it gets worn out and replaced with an exact duplicate.
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Reviewed by Mark Mindlin