Posted by Hansie Britz on 28 January 2019

PRICING & PROFIT MARGINS

                              

Pricing your product is one of the most crucial aspects of marketing. Essentially, price determination is about how much consumers are prepared to pay or your company’s offering. Once you have competitors, it means consumers are faced with a choice. Quite simply, they can buy your product/service, or they can buy that of the competition. And, despite what pundits say about the swing towards companies providing service excellence, people in a depressed economy are hugely influenced by price.

The following tips will help you set the tariff you charge for your products/services in such a way that you will not be short- charging yourself.

KNOW YOUR PRODUCT

Separate costs into two columns – fixed and variable costs. Fixed costs are those costs that need to be paid whether you operate or not, while variable costs fluctuate with output.  Fixed costs are costs like Rent, Leases, Vehicle repayments, Salaries, Royalties while Variable costs include Advertising, Wages, Labor, Commission.

Having identified your costs, forecast the sales quantities. From this estimate, the fixed cost component is established by dividing the fixed overhead amount by the sales quantity forecast. Add the fixed cost and variable cost per unit together to get the total unit cost.

MARK – UP VS GROSS PROFIT

Know the difference between 40% mark up and 40% gross profit when discussing profitability. A 40% mark up yields far less profit than a 40% gross profit. This is because the percentage mark up is calculated on the cost price whilst the gross profit percentage is calculated on the selling price.

KNOW INDUSTRY COST STRUCTURES

Most industries have developed an informal guide when pricing good and services based on input costs and these statistics provide a useful starting point when determining the selling price. For instance building contractors will allow between 50& 60% of a contract price for materials. The computer retail industry allows about 87%.

PRICING AND BREAK – EVEN

The selling price determines how quickly your company can pay for its fixed costs and thereafter make a profit. Knowing your company’s cost structure and unit profitability will allow you to determine the precise point when revenue exceeds fixed costs. Use this point to set production, sales and turnover targets. These figures can then be monitored on a periodic basis. The calculation of the break even point is as follows: If a company has fixed costs of R5000 per month and a gross profit of R5 per unit sold it must sell 1000 units per month before the company makes a net profit. Sometimes the break even point is expressed as a capacity percentage. Using the same example above, if the company capacity were 1500 units per month the break even point could be expressed as 1000/1500 or 66.66% capacity.

WHAT IS YOUR PROFIT MARGIN?

Profit margin (also called operating margin) shows how much profit your business makes on every rand of sales, before paying interest payments or taxes. It is usually expressed as a percentage. So, if your business has a 10% profit margin, that means that 10% of your sales are left over as profit, after you’ve paid all your regular expenses such as salaries, rent, and raw materials.

Why is your profit margin important?

Your Profit margin shows you how good your company is at generating income from normal operations of the business, after you’ve spent money on marketing, sales, product development, and so on. Over time, successful companies should develop a higher profit margin. This means that the company is making more on each rand of sales. To assess whether or not this is happening compare the company’s quarterly or yearly figures to those of the previous year or quarter, and to competitors, if possible.

How to improve your profit margin:

To improve your profit margin, you need to either spend less or bring in more revenue. There are a few ways you can do this:

1. ‘Trim operational waste” – For example, cut down on raw materials used during the production process.

2. “Make the most of your employees time”. Synchronize production processes, avoid long delays between tasks, and organize time better to avoid bottle-necking.Give idle employees something to do that will cut down on operational waste.

3. “Consolidate processes”. Spend some time evaluating and analyzing the various systems, you use to run your business. If something is inefficient, change it or get rid of it. The goal is to increase efficiency.

4. “Review your expense budget”. To understand how to improve your profit margin, you need to know where you are spending money. Take a look at or payroll expenses marketing budget, the cost of materials, and so on. Where is the money going? How can you cut costs?

5. “Compare your figures with industry averages”. Once you’ve figured it out where you’re spending your income, take a look at industry averages. How much is the industry spending on each part of their operations? Once you’ve figured this out, you will be able to look for more specific ways to improve your profit margin.

NEED MORE INFORMATION ON THIS OR ANY HELP WITH PUTTING TOGETHER A PROFESSIONAL BUSINESS PLAN CONTACT US NOW AT: 084 583 3143 or money@global.co.za

                                  

 

Posted by Hansie Britz on 21 January 2019

IMPORTANCE OF TAM,SAM & SOM IN YOUR BUSINESS PLAN

                         

A common but very important item missing from most business plans is a breakdown of the business/company’s TAM, SAM & SOM in the marketing section of their plan. Wondering what these acronyms means? Well, you’re not alone – many entrepreneurs are not familiar with these terms.

Here’s a quick explanation of what they mean:

TAM 

Your “Total Available or Addressable Market” – everyone you wish to reach with your product.

SAM 

Your “Segmented Addressable Market or Served Available Market” – the portion of TAM you will target.

SOM 

Your “Share of the Market” – the subset of your SAM that you will realistically reach – particularly in the first few years of your business – this is your target market.

Identifying your TAM, SAM, and SOM requires some market research – levels of research vary depending on your product and market potential – but once you gather the research through your market analysis, you’ll have a better idea of the percentages that coincide with each area. Identifying your SOM, or your target market, is an important step because building a marketing plan around your TAM – in other words, everyone, is a huge waste of resources. Figuring out who exactly you think will actually buy your product or use your services will help you focus.

SOME EXAMPLES

You’re starting a concierge service in your city that focuses on doing tasks/running errands for busy people, and people who need additional assistance (the elderly, individuals who are handicapped, and so on).

Your TAM (total available market) would be all busy people, elderly, and handicapped people in your city. If your town has 150 000 people, you may find (through market research) that total possible demand for business in your city is 15% – or 22,500 people.If you have a competitor in your market, your TAM would be smaller, since you will be sharing the market with another company.

Your SAM (segmented addressable market) would be the portion of that 22,500 whom your current business model is targeting – this will be outlined in your business plan. For example, your business model is being set up to service 7,500 people a year who are ages 35 – 55, with small children and disposable income who live or work within a 2km radius of downtown, this means your SAM would be 33% of your TAM (or 5% of your total city’s population).

Your SOM (share of the market) would be the portion of your SAM that your business model can currently realistically serve. For example, you may only have three employees (yourself and two others), so realistically what percentage of your SAM (7500) can you reach in the first 2 to 3 years? Let’s assume your company can effectively provide concierge services to 100 people a month or 1200 a year. This means your SOM is about 16% of your SAM – or around 5 percent of your TAM, or a little under 1% of your total city’s population.

If you’re seeking funding, savvy investors will ask you for these items in your business plan, and they’ll want you to be able to back up your numbers. This is why conducting some market research up front is important – and even advisable before you begin writing your business plan. It gives you the validation of your market potential.

IF YOU NEED HELP IN ANY OF THESE AREAS OR WITH A PROFESSIONAL BUSINESS PLAN OR MARKETING PLAN CONTACT US NOW AT – money@global.co.za or 084 583 3143

                                       

 

Posted by Hansie Britz on 13 January 2019

STARTING A BUSINESS? – HOW TO GET FUNDING

                                           

 

BUSINESS PLANS 

Your business plan is an essential piece of the funding puzzle, explaining exactly how much money you need, where it’s going to, and how you will pay it back as well as how long it is going to take for you to earn it back.

Investors will first look for a summary or investors pitch; and if you get through that screening, they’ll want to see a business plan for the process of due diligence. Everyone you talk to is going to expect you to have a business plan available.

WHERE TO FIND FUNDING 

The process of finding the money you looking for should match the needs of your company or business. When you look for money will depend a lot on your business or company and the kind of money you need.There is a big difference between a high- growth internet – related company looking for venture funding and a local retail store looking to finance a second location or a new startup business.

TYPES OF FUNDING AVAILABLE 

1. Venture Capital 

Venture Capital is frequently misunderstood. Many start up companies complain about venture capital companies for failing to invest in new ventures or risky ventures. This is not the case. The people we call venture capitalists are business people who are trusted with investing other people’s money. They have a professional responsibility to reduce risk as much as possible. They should not take more risk than is absolutely necessary to produce the risk/return ratios that the sources of their capital risk of them.

Venture Capital professionals look for businesses that they believe could produce a huge increase in business value within just a few years. They know that most high-risk ventures fail, so the winners have to win big enough to pay for all the losers.

2. Angel Investment 

Although angel investment is a lot like venture capital, there are important distinctions. First, angel investors are groups or individuals who invest their own money. Second, angel investors tend to invest in companies at earlier stages of growth, while venture capital typically waits until after a few years of growth, after startups have more history. Like venture capitalists, angel investors normally focus on high-growth companies at early stages of development. Don’t think of them for funding established , stable, low-growth businesses.

3. Commercial Lenders

Banks are even less likely than venture capitalists to invest in, or loan money to, start up businesses. They are, however, the most likely source of financing for established small businesses. A business that has been around for a few years generates enough stability and assets to serve as collateral. Banks commonly make loans to small businesses backed by the company’s inventory or accounts receivable. Normally there are formulas that determine how much can be loaned, depending on how much is in inventory and in accounts receivable.

A great deal of small business funding is accomplished through bank loans based on the business owners personal collateral such as home ownership.

                                        Creating Together

4. Other Lenders 

Aside from standard bank loans, an established small business can also turn to accounts receivable specialists to borrow against its accounts receivable. The most common accounts receivable financing is used to support cash flow when working capital is hung up in accounts receivable.

Another related business practice is called “factoring”. So-called factors actually purchase obligations, so if a customer owes you R100 000 you can sell the related paperwork to the factor for some percentage of the total amount.

Various other private investors or government lenders are also available for small business funding, each one with their own criteria and documentation required.

5. Friends/ Family Funding 

f your parents, siblings, good friends, cousins, and in-laws will invest in your business, they have paid you an enormous compliment. In that case, make sure you understand how easily this money can be lost, and that you make them understand this as well. Although you don’t want to rule out starting your business with investments from friends and family, don’t ignore some of the disadvantages. Go into this relationships with your eyes wide open.

Maybe, your idea and your situation is a better fit for “crowdfunding” – that is, creating a profile and pitching your business idea or product on a site like “Kick starter”. In fact, this method of raising money has become so popular that there are dozens of crowdfunding sites to choose from, all offering different terms and benefits.

IF YOU NEED HELP IN ANY OF THE ABOVE AREAS OR WITH A WELL – STRUCTURED, BANKABLE BUSINESS PLAN CONTACT US NOW AT – 084 583 3143 OR money@global.co.za AND GET A PROFESSIONAL SERVICE

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Posted by Hansie Britz on 11 January 2019

HOW TO START A NURSERY OR COTTAGE SCHOOL

            

Nursery schools provide preschool education services for children aged 3-5 years, combined with day care. Most businesses in the nursery school industry are private but may get funding from a variety of sources, including state grants.

Getting affordable, quality child care, especially for children under the age of 5, is a major concern for many parents, particularly in recent years with the rise in families with two working parents. As the need for child day care has increased, the child day care services industry began to fill the need for non-relative child care.

CHOOSING THE RIGHT LOCATION

If you are going to open your business on a commercial site, it should either be close to where parents work or where they live. This could be in a residential neighborhood near a school , a concentration of office parks or sharing a facility with another community organization.

OPERATING FROM YOUR HOME

There are may role-players that must be consulted if you decide to operate your business from home. First and foremost will be your own family who will have a business operating around them and possible encroaching on their space. The neighbors will also have to be consulted about the potential noise and extra traffic. Its important to explain how you will keep the inconvenience and disruptions to a minimum. You may also have to find out from your local municipality whether your home needs to be zoned for business rights or special concessions.

RULES & REGULATIONS

If you are going to accommodate six or more children , you have to register your business with your local municipality, who follows the rules set out by the Department of Social Development.

Your application must contain the following:

Your particulars – identity number, address and telephone numbers.

The physical and postal address of the operation.

The number of children that will be accommodated.

Your qualifications, skills and experience.

A description of the programs and services to be offered, including the aims and objectives.

You must also submit:

1. A business plan containing:

– the business hours of the facility;

– the fee structure;

– the day-care plan;

– the staff composition; and

– the disciplinary policy.

2. The constitution containing the:

– name of the care facility;

– composition, powers and duties of the management.

3. An original copy of the approved building plans.

4. An emergency plan.

5. A tax clearance certificate.

6. A health certificate from the municipality.

OTHER REQUIREMENTS

A safe playground that meets the requirements of your municipality.

Insurance – At the very least, you should have public liability insurance, accident and equipment liability insurance.

Compliance – Once you are set-up, the local authority will come assess the premises and the playground.

To serve food you will need a Certificate of Compliance for Food Preparation.

                     

STARTING AND RUNNING A COTTAGE SCHOOL.

Unlike home schooling, a cottage school is where a group of children gathers at a venue and receives education together from one or more teachers. Contrary to popular belief, these are not the same as home schools. “Cottage Schooling” – often called “cooperative schooling” – is an alternative form of education in which children are taught by one or more teachers at a location outside the home for a limited time during the week. Cottage schools can be started by a group of parents or by a teacher.

If you are considering a cottage school but are unsure where to begin, here are some tips to help you get started:

1. Figure out all the legalities – just as public school curriculum vary from state to state, so too do the rules about cottage schools;

2. Decide on an approach.;

3. Tap into your school community;

4. Be patient.

CONTACT US NOW IF YOU NEED HELP IN THIS AREA OR WITH A PROFESSIONAL BANKABLE BUSINESS PLAN – 084 583 3143 OR EMAIL: money@global.co.za

                           

 

Posted by Hansie Britz on 5 January 2019

USING DRONE TECHNOLOGY IN AGRICULTURE

                        

Agriculture is one of the fastest growing markets in the commercial drone industry today. Technology is changing at a radical and continuous rate in agriculture as much as in any sector. Drones  are quickly becoming an indispensable tool to help farmers become more efficient in the field, and make more informed crop management decisions.

In the South African agriculture sector, drones are not yet as fully utilized as in other countries like Argentina, Brazil, Colombia, USA, Spain and Russia. In these countries, drones are used mainly in crop farming, although the opportunities for use on livestock, wine, fruit, vegetables and solar farms are endless.

Today’s drone solutions let farmers detect crop health issues in real time, accurately assess losses after a major weather event, and even generate variable rate prescriptions that can save some serious cash buy limiting labor and resources.

Drones present vast opportunities when it comes to the irrigation side of agriculture, allowing for irrigation systems to be accurately planned and monitored. If a standard camera and infrared camera combination is used, leakages and faulty applications can quickly be identified and corrected. It is also easy to determine and adjust optimum irrigation time by monitoring the temperature of the plants.

                         

Drones have a number of uses on livestock farms. Specific software is available that can identify and count animals. Drones with infrared cameras can give an indication of animal health by monitoring animals temperature and timeously informing the producer of any changes in health status.

Various companies market drones for security purposes. The drones are installed outside the house and are controlled from inside. In this way, a farmer can easily inspect the yard/property without having to leave the house if suspicious behavior is observed.

Drones also have another interesting use: to inspect solar panels for dead or damaged cells. The difference in temperature is immediately noticeable if an infrared camera is used and the necessary attention can be given quickly to the specific panel.

In the world of agriculture, timing is everything. Diseases and invasive species spread fast, but in the days – and in some cases weeks – it takes to schedule and process imagery taken from a manned aircraft or satellite, what begin as a small problem can spread to something much larger.

Drones, on the other hand, give you a high-resolution map of your field in a matter of minutes. Powerful plant health tools, allow you to visualize issues and make decisions on the spot. No more guesswork or costly waiting periods. Just actionable data on plant health and crop stress in real time.

NEED TO KNOW MORE OR NEED HELP WITH A PROFESSIONAL FARM BUSINESS PLAN? – CONTACT US NOW AT: (27) 84 583 3143 or Email: money@global.co.za FOR PROFESSIONAL ASSISTANCE AND SUPPORT.

         

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