Just as the downturn in the economy is impacting the lives of the majority of private individuals in this country, so is it squeezing small businesses. Most small business owners can tell you they are no stranger to belt tightening and budget cuts. Many prefering to take that avenue before raising pricing, knowing how difficult it is to complete sometimes. Unfortunately, there are situations in which you have no other alternative than to raise your prices.
A recent survey by the Small Business Research Board (SBRB) found that of the 1,000 small business owners surveyed, over 65% had raised their prices. Another 23% were adding or increasing shipping/handling fees and 21% were working to reduce other operating costs. Renegotiating customer pricing agreements was another solution, as was negotiating long-term fixed cost supply contracts and reducing lead times.
As I stated earlier, I believe small business owners are quite creative and savvy when it comes to finding creative solutions in order to stay competitive during economic hard times. So to the readers of this blog, feel free to share with others what solutions you are implementing to stay competitive.
Typically during an economic downturn, many small business owners begin to look for ways to cut expenses. One type of expense that is often cut is advertising. However, that may not be the right thing to do. If anything, it is the one budget you might want to keep in tact.
You may need to review and determine if the advertising mix you are using is the best one at the moment to get optimum exposure, but fight the urge to really slash your advertising budget.
One avenue to explore may be the use of promotional products. According to the Promotional Products Association International (PPAI) and Staples, “compared to print, TV and other advertising methods, promotional products lead to higher advertiser recall, increased ROI and better overall impression among consumers.” A survey by PPAI found that using promotional products in your advertising mix can increase brand interest up to 69% and creates a good impression of the brand 84% of the time.
Other benefits of promotional products:
- Leads to more frequent or repeated exposure of your marketing message
- Long-term visibility – most of those individuals surveyed kept promotional products for more than a year
There are several cost-effective options such as proprietary apparel, calendars, post-its, key chains, letter openers and magnets available. Strong competition should ensure you get the best price available. An idea definitely worth taking a closer look at.
If you are a small business owner and are entertaining the idea of setting up a retirement plan for your employees, then take note of two important upcoming dates: Oct. 1 and 15th.
Oct. 1st is the deadline by which a business must set up a Savings Incentive Match Plan for Employees (SIMPLE). If you received an extension on filing your 2007 tax returns, and want to set up a new Simplified Employee Pension (SEP) and take a deduction for 2007, then that deadline is Oct. 15th. Owners who received an extension and want to make 2007 contributions to existing SIMPLEs and SEPs need to also do so by Oct. 15th.
SIMPLEs and SEPs are popular retirement plans geared to small businesses. They are easy to create and maintain. Under a SEP, a company can deduct up to $45,000 for the 2007 tax year and $46,000 for 2008 for contributions to an employee’s account.
Employers setting up a SIMPLE can match employee contributions in a similiar manner to a 401(k). There are however more restrictions placed on SIMPLEs than on SEPs by Uncle Sam. For instance, a SIMPLE can only be created by a company with 100 employees or less.
More information is available on the IRS and Labor Department websites:
IRS Publication 560, Retirement Plans for Small Business, on the IRS website, http://www.irs.gov
This Labor Department link explains the types of plans available, employer responsibilities, and annual paperwork requirements, an owner can expect for each type of plan. http://www.dol.gov/elaws/pwbaplan.htm