Thursday, April 16, 2009

Dusting off Layaway

Remember layaway? I sure do – I remember when all the big box retailers had a layaway counter in each store. Scores of shirts, pants, toys, lawnmowers, and unassembled kitchen tables would be scattered around the counter as the layaway folks processed tickets and moved the items to storage. Remember what happened to layaway? I sure do – the big box retailers started offering “10% off your entire purchase if you open a store credit card.” A pretty smart idea for the retailers, really: no longer did they have to store items that weren’t completely sold. And – oh yeah – those little things called interest and late fees were a bit more lucrative.

Layaway grew in popularity back in the 1920s and 1930s, long before credit card applications lined the checkout counter. For a small fee, typically around $5, customers can pay for their purchase over a 30 or 60-day period, then take it home with no strings attached.

Kmart and Sears have both remained stalwart in their adherence to the longstanding layaway tradition. Since the economy slipped and sputtered some of their retail brethren are reintroducing the payment option to entice more folks through their doors.

What interests me about the resurgence of layaway is how so many folks refer to it as “old fashioned.” The idea of buying something only when you can afford it is foreign to our microwave culture. Certainly, credit cards are not going the way of the dinosaur anytime soon, but if the latest economic dip has taught us anything it’s that living outside of our means is a recipe for failure.

While I definitely prefer the use of layaway to credit cards, I would recommend trying a non-monthly expense fund. Rather than put a lawnmower or new wardrobe on layaway, try paying a portion of what you’ll need to spend into a savings account. Once you’ve saved what you need to make the purchase, head to the store and spend your cash. You’ll avoid the layaway fee and come home with your purchases right away. Want to have some fun? See if you can negotiate a discount when paying with cash upfront – you’d be amazed what bargains retailers are willing to give for a sale.

Tuesday, April 14, 2009

How Much Does Your Penny Cost?

“With each new penny and nickel we issue, we increase the national debt by almost as much as the coin is worth.” - Edmund Moy, Director of the U.S. Mint.

I find it interesting that it costs the U.S. Mint (and ultimately the tax payers) 1.5 cents to create a penny and nearly 9 cents to manufacture a nickel.

Copper prices have risen but the mint seems to be rooted in the mindset that says “but this is always the way things have been done.” Steel just happens to be a metal, that if used to manufacture pennies, could save up to $100,000,000 annually. Due to a shortage of copper during World War II the U.S. actually used steel to make pennies. That year was 1943.

I help individuals and businesses who are struggling nearly every day, doing things the way they’ve always been done, afraid to try something new. In the current Business Coaching Group that I’m leading, I pointed out on the very first day that the economy has changed. Regardless of the economy changing however, it’s important to point out that the market, and thus our reality, has changed so we must be doing things different, regardless of the economy.

The bottom line is this... If you’re doing the same things now that you were doing at this time last year, you’re getting left behind. Broaden your horizons. Try new strategies and ideas. Be open to change; after all, without change we wouldn’t have electricity or indoor plumbing and we’d all be riding horses and buggies. I bet the guy manufacturing horse whips down the street from Ford Motor Company in their early years had wished he embraced change instead of remaining rooted in his current reality.

Sunday, April 12, 2009

Non-conventional Street Level Marketing

In a grass roots campaign, KFC has hit the streets in its hometown of Louisville, KY to fix potholes. Once fixed, the newly smoothed over potholes are stenciled with a white chalk logo that says "Re-freshed by KFC."

While it looks like KFC is taking matters into their own hands and doing something the city should have done, it does create an air of good will. It's also a great advertising opportunity as passing motorists begin to take notice.

But all KFC did was to figure out how much money it was spending to acquire a customer the conventional way and redistributed that money in a non-conventional way.

What if, instead of spending $500 per month on radio or yellow pages advertising, you instead handed a $5 bill, with your business card stapled to it to 100 of your best prospects. You could tell them "This is a free preview of what I can help you save." I'm guessing they'll call you, but I'm also guessing you're a little too scared to try this.

Everyone wants to think outside the box, but what do you think would happen if you acted outside the box?

Friday, April 10, 2009

The Small Business Marketing Mistake

I’m the first to admit that you should not price your services to on the WalMart level. Doing so puts you in a mode of competing with other businesses on price. I’m willing to bet that your quality and service is a lot better (or you should want it to be) than your competition.

There's a dry cleaner that has a sign on the wall above the register. Here’s what it says:

1. Quality

2. Service

3. Price

"Pick Two"

It's true, you can't have all three in your business and I don't think you should either.

Keep this formula in mind:

Intention + Mechanism = Results

Let’s view this as a simple math problem. First, determine the results (the phone rings or someone visits your website, etc.). Second, determine your intentions. What do you want to say to your target market? The very last part of marketing is then determining the best mechanism to reach your market.

Contrast that example with what most business owners do...

As a business owner we tend to first focus on the mechanism. We buy an ad somewhere and then we figure out what it's going to say. We sit back and wait to see what results come from it. This is so backwards!

Honestly, think back to your last advertising mistake. I’m willing to bet that someone sold you an ad (mechanism) in the yellow pages, radio, newspaper, magazine, etc. They got you really excited and then asked what you wanted to say (the intention). All you really knew you wanted out of the deal was a few customers, but the results are the last part of your planning process. It’s like throwing a balloon with a marketing message on it into the wind and hoping it lands in your prospects backyard. It won’t happen and that’s why your last marketing venture failed.

Stick with the above formula and you’ll have no more wasted marketing dollars.

Wednesday, April 1, 2009

The Tax Man Cometh and... Giveth?

April showers bring May flowers – so they say – which gives us something to look forward to. April also ushers in the annual deadline we all love bumping up against. It’s tax time again.

Many of us will receive tax refunds this year. I’m not a huge fan of refunds simply because I want that money in my pocket throughout the year rather than sitting in the government coffers as an interest-free loan. Please recognize that if you divide your refund by 12, that’s how much more you could’ve been bringing home each month last year. We can’t change the past, though, just the future. So what is the best use of those refunds anyway?

Given the pervasive attitude of fear in the economy right now, I imagine some are viewing their refunds as an unexpected boon – kind of like finding a $20 bill in a pants’ pocket that you completely forgot about. Fear is a terrible motivator – often times causing us to make brash decisions without a solid basis in reality. The reality is that we can’t control everything around us, but we must have a plan for what we do have authority over.

Start with a budget for your refund. Of course, you definitely need a monthly budget – where every dollar is spent with purpose before each month begins. Now we’ll create a plan specifically for the tax refund. Take a look at the Seven Financial Freedom Steps.

Do you have a beginner emergency fund? If you don’t have around $1,000 in a savings or money market account, then use your tax refund to open and fund an account like this. There’s no sense in throwing caution to the wind – unexpected expenses happen all the time, it’s called life. Money Magazine tells us that 78% of Americans will have a major negative financial event in any given ten-year period; that’s plenty of reason to be prepared. Likewise, if we’re going to get out of debt for good, we have to stop going into debt for these expenses, which aren't really "unexpected" after all.

Are you aggressively paying off your debt? After you’ve gotten your beginner emergency fund in place, go ahead and pay something off with your tax refund. Believe me, it’s going to feel really good! Use the debt snowball process: list all your debts from smallest to largest, pay minimums on everything except the smallest – throw as much at that one until it’s paid off. After that, move on to the next one and repeat until free of consumer debt.

If you’ve already dumped your consumer debt, find a creative way to give a portion of your refund to help someone else. Use the rest to top off your full emergency fund of three to six months’ expenses, invest toward retirement and your kids’ college, or pay down the principal on your house. The most important thing is to have a plan for this money; without one it’ll sprout legs and wander out the door.

To estimate your 2009 taxes, visit the IRS Withholding Calculator.