Weekly Humor - Advice from the old - and wise

As it comes to that time of year when we reflect on the year that's past, I though this piece send in by one of my readers Mary Read who lives on a small holding outside Knysna on the east coast of South Africa, may be quite apt. Thanks Mary, keep them coming.

* Keep skunks and bankers and lawyers at a distance.

* Life is simpler when you plow around the stump.

* A bumble bee is considerably faster than a John Deere tractor.

* Words that soak into your ears are whispered...not yelled.

* Meanness don't jes' happen overnight.

* Forgive your enemies. It messes up their heads.

* It don't take a very big person to carry a grudge.

* You cannot unsay a cruel word.

* Every path has a few puddles.

* When you wallow with pigs, expect to get dirty.

* The best sermons are lived, not preached.

* Most of the stuff people worry about ain't never gonna
happen anyway.

* Don't judge folks by their relatives.

* Remember that silence is sometimes the best answer.

* Don't interfere with somethin' that ain't botherin' you none.

* Timing has a lot to do with the outcome of a rain dance.

* If you find yourself in a hole, the first thing to do is stop diggin'.

* Sometimes you get, and sometimes you get got.

* The biggest troublemaker you'll probably ever have to
deal with, watches you from the mirror every mornin'.

*Lettin' the cat outta the bag is a whole lot easier than
puttin' it back in.

* If you get to thinkin' you're a person of some influence,
try orderin' somebody else's dog around.

* Live simply. Love generously. Care deeply. Speak kindly.
Leave the rest to God.

The anatomy of a price

Yes I realize perhaps a curious title but still a subject that have baffled many a consumer over the years. We have all experienced the disappointment of buying a product or service, only to find it much cheaper elsewhere.

Only yesterday I found out to my amazement that in South Africa my current book is selling at prices that range from a very affordable R250.00 ($35.00) to a wildly over priced R536.00 ($76.00). To further the the fact that the higher price is simple daylight robbery, the book sells for a mere $24.00 in the US and £14.00 in the UK.

Here is the evidence:

Kalahari.net (lowest)

Loot.co.za

Exclusive books -- at a price that may be a bit to exclusive

As small business owners, deciding on a price for our products is a risky business. We don't want to under charge - as this may mean little or no profit -- and of course we don't want to over charge as this may result in fewer sales. So how should you determine a price.

Herewith a few ideas that have worked for many of my clients.

Step 1 - Do your homework

You cannot determine prices based only on costs and desired profit margins. First step is to do a little research to get some "real world" pricing guidelines. You don't need a high priced marketing firm to help. Remember, you know your business better than any consultant. Refer to the micro module on Market Research or follow the following pointers on finding out what your competitors and other businesses are doing regarding price. Once again there is no substitute for getting out into the field and doing the research yourself.

Locate a trade association, organization or networking group whose specialty is your service. If none exists, find an association with a similar product. In general, associations can tell you the high-low and average prices charged by members. You can find some organizations listed at our Free for all links or at any local business advice center.

Trade/Business Journals and newspapers contain articles that may include prices. At least once a year, I see an article about my industry online or in a periodical that contains industry fees.

Ask your accountant or Coach for some ideas; after all, they deal with business owners all the time.

There are many career and employee guides that provide industry or job related prices. Consult any industry specific control or accreditation body.

Obtain the cost of raw materials and supplies necessary for your product. Surely you want to charge more than it's costing you for the items!

Many business owners place a pricing structure on their websites. Using the industry name, plus the word "rate" or "fees", you can find those sites on the Internet.

Determine your hourly rate. What is your time worth?

Call similar businesses, outside your local area, for their prices. If you're not their competition, you have a better chance to be told the score.

Visit stores that sell the product you're interested in selling to determine their pricing system.

Ask everyone you know "if" and "what" they will pay for "x". Ask prospective clients what they would pay for your product or service.

With this information and your own costs you can determine where you set your own pricing and still be competitive.

Price carefully. You might not be able to compete on price only but remember your advantages as a small business and emphasize your "quick service" or "outstanding customer service." You may be able to price higher and still win customers within your market niche.


Step 2 - Determine Your Pricing Objective - What do you hope to achieve?

There are 3 ways to find the appropriate level for you and your product.

Base Price -- The lowest price or rate you must charge to cover your cost including, cost of living and keeping your knowledge and skills up to date.

Base Price is one of your pricing objectives. It's a very important one. This is the one figure you need know so you can keep your doors open. This is your break even point. The absolute minimum needed.
Chargeable Time is the maximum number of working days/hours in a given year. This is the one figure most business owners never consider. It is the number one reason why you end up working long hours and long weeks for your business.
Now divide your cost or Base Price by the number of days from your chargeable time figure. This gives you your daily income benchmark. The amount you need to be making per day from your products or service rates.

Be careful about lowering prices just to meet or beat the competition. There are, however, some good reasons to lower prices:
A strategy to increase market share.
Promote a new product or service.
Attract attention to a over stocked product.
Encourage high volume purchases.
Increase seasonal business (Christmas sale, etc)

Realistic Price -- Substantially higher than Base Price. Top of the quality range in your field but still competitive while offering good value and service to your customers.

Sometimes you have to increase prices in order to cover, for example, increased cost of materials, labor, etc. When an increase is necessary ease the pain for your customers by considering the following:
Notify your existing customers of the increase and, if possible, give them an opportunity to purchase at the existing prices.
Try and advertise the increase along with "new and improved" products or services.
Give the customer something in return for the increased costs. For example, free shipping with orders above a certain value.
If possible, delay the increase for existing customers.

Premium Price -- You position your product for the "elite group" and go after the client who wants and can afford the best.
Daily Income Benchmark -- How Much Per Day You Need To Make.
How do you determine daily amount? You need two figures... Base Price and Chargeable Time.

Step 3 - Consider some key pricing strategies

Pricing to the Market
Compare prices with your competitors for similar products and services. Set the price range that customers will expect. You can use that market price range--what is acceptable to the market--as a guide to set your prices. Businesses or people to whom you sell may also price to the market by telling you what they will pay for your product or service. As you keep records of actual costs, the cost approach to pricing will help you make sure all your costs are covered, which may not be true in a market approach to pricing.

NOTE: Be careful about underpricing in order to compete or make sales. Use competitor's prices to establish the price range for similar products or services but don't under price; if your true costs are higher, your final prices will have to be higher.

Cost Approach to Pricing
Price must cover all costs of goods/services sold, including production costs of supplies, materials, fixed overhead, and time/labour, plus a profit. Costs should include costs of production, labour and non-labour, including overhead or fixed costs as well as supplies and materials.
Use this simple formula in setting a price (per unit):

Total Costs of Production Per Unit + Desired Dollar Profit Per Unit
Businesses can set different profit rates, for example 15% profit on supplies and materials, 20% profit on labour/time, and 25% profit on overhead. These more complicated approaches to pricing usually emerge in response to the special needs of a particular business.

If your research reveals that similar products or services are available on the market at a cost much lower than what you could offer, you may have to either adjust your profit margin, the return you expect, or decide to provide enough specialized service or selection that the market will pay the extra. Alternatively, you may be forced to conclude that you cannot afford to make this item or provide this service and look for something else to do.

NOTE: Remember to cost materials at the level it costs to replace them - NOT at original prices; include salaries as a business expense; include interest in your business cost calculations -- interest that could have been accrued had the money used in the company been invested elsewhere (i.e. a bank); make allowances for future refunds, servicing, bad debts, amortization of capital costs of equipment or machinery.

Calculating actual costs is the only proven way to make sure your prices cover your costs. Labour/time charges are to be covered partly in the costs of production and partly as a salary in the fixed/operating or overhead costs. In summary, key points to consider in setting prices are:
marketing strategy and your immediate goals
competitors' prices, and the market
market demand for the product and consumer buying trends need to cover costs and provide an adequate profit.

Step 4 - Price your product and review regularly

Don't guess or do your pricing on a whim. Take time and go through the process and you'll be on the right track to a more successful and profitable business.

The biggest mistake small businesses make concerning pricing is not reassessing pricing on a regular basis. The marketplace is constantly changing making it mandatory you keep a close watch on your pricing. Raise or lower prices as necessary keeping the above suggestions in mind.

Whatever route you choose, even a small increase in price can have a big positive effect on the bottom line–especially if you’re a high volume producer, notes co-authors Dolan and Simon. If Coca-Cola raised its prices 1% across the board, the company’s bottom line would rise by 6.4%, they write.

Remember that you can always increase your price. See Additional Coaching bellow for some tactics on raising your price.

I trust this was helpfully
To your success!!

Start up opportunity of the week - Going Green

This week we consider the exiting and rapidly growing field of recycling

A whole industry is fast developing around recycling and going green. Governments around the world, including South Africa working hard to cut CO emissions and reach energy saving targets, entrepreneurs are serving a number for gaps in this market.

Examples of opportunities that exist are:
1) Establish a recycling waste collection service and convince your local municipality to pay you for doing so.

2) Become a green consultant and help organisation's to be more recycle friendly, energy efficient and improve their public image by helping the environment.

3) Create new products by using recycled material.

4) Create a recycling site where, glass, organics, metal, construction waste and paper are recycled and re-sold in usable format.

5) Import and sell recycled products to the South African Market

6) Recycle and create recycled products for export and sell to the fast growing international market.

For more details on this, there is a great website here

The business opportunities for recycling is really endless, plus you will be doing your part for preserving our home planet for generations to come. Seems like a win-win to me.

Upside: Growing market, endless opportunities, government support and grants available and a good nights sleep every night knowing you are making a real difference.

Downside: Could be cash and training intensive depending on what you will be taking on.

Verdict: An absolute winner no matter how you look at it.


Please contact me should you need further information and support with this idea.

The source of our entrepreneurial under-performance

As many of you, I was surprised to find out that According to the Global Entrepreneurship Monitor (GEM), South Africa is well behind most of the other developing countries, let alone developed countries when it comes to creating small business and entrepreneurs. When speaking with entrepreneurs from around the globe at entrepreneurship seminars, exhibitions and conferences, a common theme of discussion (aka small talk) will be the positive and entrepreneurial nature of South Africans in general. Why then do we fall behind when it comes to results?

In my view this is mostly as a result of the following five issues- and I realize that I may be making more enemies than friends with this one:

1) We operate from fear and defensiveness. - Joint venture strategies are wide spread and common place in most of the worlds most successfully economies. In SA it seems that we are always weary that someone is going to steal our business, customers, ideas or livelihood. Lets help each other and do not work against each other, even of it does mean that we sometimes get burnt (see point 4 below)

2) We have a blame and claim culture. - Many small business owners that I know - and not know I assume - are to quick to point the finger at others, blame the economy, the government, the old government, our partners and just about anything else you can think of (yes we have great imagination and innovation when it comes to this) - anything apart from taking responsibility. The first thing that hits me when speaking to entrepreneurs from the US - (the most successful and effective entrepreneurs globally) is their will to grab the bull by the horns and do something about what ever is a challenge or obstacle) - We wait for someone else to fix it, help us or hand it to us on a platter.

I was stunned to hear from a colleagues that Junior Achievement South Africa, an organisation that works and support young entrepreneurs, are finding it difficult to get enough people on their free training courses for small business and entrepreneurs. Apparently people want to be paid to go on the courses and are otherwise not interested. - What type of a culture are we creating here? - In countries like India - who came tops in the survey by the way, - you will find young people working part time or saving up to take advantage of courses like this.

3) Lack of support and trust from SA banks. - This is an old issue - and still not close to being addressed. South African banks appear to simply not be interested in, or have any idea about supporting new ventures in this country . my Blog posts here
and here - and also Blog post from the White African Blog here


4) Shortage of integrity. Many South African entrepreneurs don't trust each other and this leads to obvious difficulties in creating sustainable business relationships. This is not without reason. Just recently the SABusinessHub team was burnt twice in one month. Firstly one of our now competitors - entrepreneur.co.za - initiated dialogue with us under the guise of becoming a possible partner. Only after sharing resources, ideas, website and network access and strategy information with him, did we find that he suddenly became a direct competitor doing exactly what we do - but charging more and delivering less.

Our fathers and their fathers prided themselves on the word. They meant what they said and said what they mean. Lets get back to this and walk our talk.

5) Mis management of small business funding. Although the government is spending large amounts on small business support, most of this money is going towards management salaries and infrastructure and little or none filters down to where it matters most.

- Further ideas welcome

Report findings here

Funding boost for Famous Brands

It was good to see the IDC put its hand deep into its well funded pockets in support of small business and specifically the franchise industry in a recent deal with Famous Brands.

With many small businesses struggling to live with the governments BEE strategies and in many cases taking the brunt of the risk on this, entrepreneurs in some industries will see this as a step in the right direction. Small and micro enterprise (smme) support and enticement could be seen as two of the easier ways to stimulate South Africa's economy and with the smmme sector already in trouble and lagging far behind that of other developing countries around the world, much more of this is needed.

Concerns may be raised that certain industries are receiving more funding than others and that the money seldom reach the areas where it can have the biggest effect. We would encourage a move from the IDC not only to publish details of the funding granted to certain industries, but also to publish the results and effects that such funding may be creating.

The above is in response to the article by Edward West below.
click here

Your comments welcome,
Ben

The secret to getting there first

This week I offer my thoughts on the importance of a well thought out system for your small business.

No matter what you are doing, from my work with hundreds of business owners I can guarantee that systems beat effort every time. In the competitive world of small business there is no doubt that the well planned, logical business system will out perform the most hard working company every time.

Most entrepreneurs confuse effort or being busy with progress. The key to making money, building a business and satisfying your customers is NOT frantic motion, but a few simple things done well.

Many of us have observed that the key to keeping our promises is to make fewer of them. In business, the same principle applies.

Well-run businesses rarely scramble or improvise. They have systems and plans for creating great products and delivering them at a fair price. Great companies understand their customers, sometimes even better than the customers know themselves! World-class companies do a few things, do them extremely well, and generate profits from their ability to impress (and keep!) their customers.

New or young entrepreneurs get caught by the lure of the "next big thing". They are impressed with innovation and can't wait to expand or grow, and they forget the basics of serving customers and developing life-long partnerships.

Take time to get organized. Set up automatic tracking and record-keeping systems. Stay in touch with your best customers and ask them for feedback about your company. Sam Walton used to say that his best ideas came from talking with stock-boys, check-out clerks and people on the loading docks. In Tom Peter's phrase, he "managed by walking around".

We can learn from that. Slow down and achieve more. Simplify. Focus. Do one thing, do it better than anyone in the world, and your fortune is assured.

I realize that at this time of year, business systems and processes are probably the last thing you want to be thinking about. Remember that a successful 2007 starts today. Get your foot in the door early and make sure that your time, effort and resources are spend wisely right from the start.

If you need support with designing effective systems for your business, there are some great South African software available, especially designed for small businesses. Give us a call on 084 908 9131 and speak to Luther Diedericks.

Weekly humor - Sugested Medication

Sugested Medication

With the marketing of prescription medications for everything from anxiety to sexual dysfunction, it was only a matter of time before some humorist came up with suggestions for drugs the big pharmaceutical companies haven't thought of yet. Linda Brent sent me these some time ago - thanks Linda, please keep them coming. D A M N I T O L
Take 2 and the rest of the world can go to heck for up to 8 full hours.

ST. M O M M A'S W O R T
Plant extract that treats mom's depression by rendering preschoolers unconscious for up to two days.

E M P T Y N E S T R O G E N
Pill that eliminates melancholy and loneliness by reminding you of how awful they were as teenagers and how you couldn't wait till they moved out.

P E P T O B I M B O
Liquid silicone drink for single women. Two full cups swallowed before an evening out increases breast size, decreases intelligence, and prevents conception.

D U M B E R O L
When taken with Peptobimbo, can cause dangerously low IQ, resulting in enjoyment of super big hair, ultra high heels, country music and jacked up pickup trucks.

F L I P I T O R
Increases life expectancy of commuters by controlling road rage and the urge to flip off other drivers.

M E N I C I L L I N
Potent anti-boy-otic for older women. Increases resistance to such lethal lines as, "You make me want to be a better person. Can we get naked now?"

B U Y A G R A
Injectable stimulant taken prior to shopping. Increases potency, duration, and credit limit of spending spree.

J A C K A S S P I R I N
Relieves headache caused by a man who can't remember your birthday, anniversary or phone number.

A N T I-T A L K S I D E N T!
A spray carried in a purse or pocket to be used on anyone too eager to share their life stories with total strangers in elevators or on airplanes.

N A G A M E T
When administered to a husband, provides the same irritation level as nagging him all weekend, saving the wife the time and trouble of doing it herself.

Funding for the Service industry in South Africa

This weeks venture funding sources focus on the Service sector. Pondering on which sectors I have not covered yet this morning I could hardly believe that I have not featured my favorite sector of all - Services. Here are ten active
investors in Services for South African entrepreneurs. Some of them may take hard work and resilience to convince but it will be worth your while if it means you get the funding you need.


African Harvest Capital
African Harvest Capital houses all the investment banking activities of African Harvest.
Private Equity Company
www.africanharvest.co.za
Private Bag X1005,Claremont,Cape Town,7700
Post Net Suite 28,Claremont,Cape Town
ngugushe@aharvest.co.za
Mr N Gugushe
011 263 9500


AMB Private Equity Partners
AMB Partners business include traditional private equity, leveraged transactions and equity finance. Private Equity Company
www.ambpartners.co.za
PO Box 786833,Sandton,Johannesburg,2146 The Forum, Maude Street, Sandton,Johannesburg pep@amb.co.za
Mr Z Lusengo
011-303 2900


Tourism Industry Development Financing (from IDC)
Financing aimed at commercial projects in the medium to large sectors of the tourism industry. Development Agency, Financial Institution
www.idc.co.za PO Box 784055,Sandton,Johannesburg,2146 19 Fredman Drive,Sandown,Johannesburg,2196
benn@idc.co.za
Mr B Nkosi
011 -269 3509



Black Economic Empowerment Programme (from DTI)
The objective of this strategy is to bring about structural change in South African economy regarding black participation Government
www.dti.gov.za Private Bag X84,Pretoria,0001 House of Trade and Industry, 11th Floor, Prinsloo Street mxolisib@dti.pwv.gov.za
Ms M Buthelezi
012-310 9675


CWCI
A donor providing developmental assistance. Donor
www.cwci.co.za P.O.Box 14664, Hatfield, 0028 1090 Arcadia Street,Hatfield,Pretoria director@cwci.co.za
Ms E Gille
012-342 3911



Greenfields Venture Capital (Pty) Ltd
Greenfields manages the Pick n Pay Ackerman Foundation, which focuses on most sectors, except property, liquor, gambling and tobacco.
Private Equity Company
www.gvc.co.za PO Box 44436,Claremont,Cape Town,7735
info@gvc.co.za
Mr G Galiel
021-671 2820


International Finance Corporation
This fund excludes distilling, tobacco, armaments and gambling industries
Private Equity Company
www.ifc.org PO Box 41283,Craighall,Johannesburg,2024
mtiller@ifc.org
Mr M Tiller
011-341 9000


Wipprivate Equity
Private equity and venture capital providers to most industries Private Equity Company www.wipcapital.com P/Bag X2600,Houghton,Johannesburg,2041 61 Central Street,Houghton,2041 tmuranda@wipcapital.com
Ms T Muranda
011 715 3500




Viking Investments and Asset Management
This fund focuses on seed and start-up capital for most industries, excluding agriculture. Private Equity Company www.viam.co.za Venture House Peter Place Park, 54 Peter Place,Bryanston,Johannesburg
walshm@viam.co.za
Mr M Walsh
011-548 2400



Thuso Mentoring Programme (from Khula)
The primary aim of Thuso Mentorship is to ensure transfer of skills on a one-to-one basis. Development Agency www.khula.org.za PO Box 4197,Rivonia,Johannesburg,2128 Mellis Park, Bradenham Hall 7 Mellis Road,Rivonia,Johannesburg,2128
willyh@khula.org.za
Mr W Hlalele
011-807 8464

Contact me if you need any support when applying.

South African version of Grameen Bank needed

Following my earlier Blog in response to the World Bank report that more than 1 Million black African Woman entrepreneurs still have no access to finance, this inspirational story of Professor Muhammad Yunus cam to mind. As describe this in my book, the vision and resilience showed by Prof Yunus has helped millions of woman around the world, and it is now time for South Africa to find a Grameen Bank of its own.
The Grameen story is as follows:

In 1976 when Professor Yunus and his colleagues started giving out tiny loans under a system which later become known as the Grameen Bank. One day, interviewing a woman who made bamboo stools, he Lent that, because she had no capital of her own, she had to borrow the equivalent of 30cents to buy raw bamboo for each stool made. After repaying the middleman, she kept only a 2p profit margin. With the help of his graduate students, he discovered 42 other villagers in the same predicament.
"Their poverty was not a personal problem due to laziness or lack of intelligence, but a structural one: lack of capital. The existing system made it certain that the poor could not save a penny and could not invest in bettering themselves. Some money-lenders set interest rates as high as 10 per cent a month, some 10 per cent a week. So, no matter how hard these people worked, they would never raise themselves above subsistence level. What was needed was to link their work to capital to allow them to amass an economic cushion and earn a ready income."

And so the idea of credit for the landless was born. Yunus's first approach was to reach into his pocket and lend each of the 42 women the equivalent of $27. He set no interest rate and no repayment date: "I didn't think of myself as a banker, but as the liberator of 42 families."
Immediately, Yunus saw the impracticality of carrying on in this way, and tried to interest banks in institutionalizing his gesture by lending to the poorest, with no collateral -- Bankers laughed at him, insisting that the poor are not "creditworthy". Yunus answered, "How do you know they are not creditworthy, if you've never tried? Perhaps it is the banks that are not people-worthy?"
Undeterred, he started an experimental project in Jobra, the village he and his students had been studying, and staffed it with his graduate students. Between 1976 and 1979, his micro loans successfully changed the lives of around 500 borrowers. But it was hard work combining the project with his full-time job as a Professor, and he continued to lobby the state-owned Central Bank and the commercial banks to adopt his experiment.

Today Garmeen Bank is jointly owned by 2.4milion of its borrowers, most of whom are woman. When asked about the secret of his success, Yunus said that the two foundations of Garmeen Bank is that the poor is as trustworthy as anyone and dreams are the seeds of success. More on this organisation here - www.grameen-info.org

Who is supporting our black woman entrepreneurs?

With competition hotting up between South African banks and their international counterparts wanting a piece of the pie, I find it surprising to say the least that most SA banks are still ignoring black woman entrepreneurs.

The informal sector is growing at break neck speed and woman of all colors and creeds are playing a major part in this. When will someone step up to the plate and create a win-win solution for this ignorance that is against everything that our new South Africa stands for?

This latest report from the word bank found that up to 1 Million businesses run by black woman are still without any finance. Are the banks really still so ignorant as to not realize that a small risk taken today may result in return clientèle for life?

Full article here