Branding your product

It’s important to remember that your product needs an identity or in essence, a brand.  Branding is one of the most key components in your offering’s success or failure in the broader marketplace.  “A brand is the combination of name, words, symbols or design that identifies the product and its company and differentiates it from competition.”  Businesses use branding to market new products, protect their position in the marketplace, broaden their product offerings, and enter new product categories.

Why is branding key to the success of a small business?  First, it offers instant product recognition.  Second, it gives consumers confidence in the product your selling.  “Retailers like branded products because they make the store profitable - shoppers attracted to branded products spend three to four times more on groceries than do private-label shoppers.”

A brand is in essence your roadmap to financial success.  A brand provides a clear reason for customers to buy your product.  “If this reason does not exist, your product is a commodity and the only measure of value is price. Small, value added businesses cannot compete on price successfully and need to incorporate some form of differentiation.”

Additionally, a brand conveys value.  Consumers tend to perceive brand-name products as higher in quality and a better value than their non-branded counterparts.  “Generally speaking, the number-one brand in a category can command a 10 percent price premium over the number-two brand, and a 40 percent premium over the store brand. “

Most notably, a brand lends itself to brand loyalty.  If customers trust in your brand, they become attached to it and are less likely to switch to the competitor.  Certain products are like an old friend.  In my house, we grew up with Pepsi not Coke, Dove soap, Entemann’s cookies.  I am still loyal to these products today.  Why?  I don’t know?  Comfort maybe.  Why change when something is working for you?  My parents banked with CitiBank so I too bank with them.  Additionally, I always fly American Airlines.  I know JetBlue is a more popular alternative.  They offer television and more leg room but I grew up flying AA and continue to do so.  (It might also have to do with the fact that they fly out of La Guardia and that is my preferred airport but that’s up for debate).  People often don’t do well with change.  As cliché as it sounds, it’s also very true: “It’s hard to teach an old dog new tricks.”  Most notably, I’m a Blackberry customer.  Why boggles the mind.  I am constantly having problems with it.  I have to reboot my device at least once a day; the Internet is terrible.  I undoubtedly know that the iPhone is a better bet but I don’t want to give up the keyboard and so through faults and all, I remain loyal to Blackberry.  When trying to save money, however, I have ventured generic.  I remember the first time I ever went against buying the brand name product.  It was gut-wrenching.  I had serious doubts about whether or not the product would work as effectively and was a small drop in price worth the risk?   It’s that feeling of well, I’ve never tried it but know I won’t like it.

How does one go about branding a product?  A brand must be clear, specific, and unique to your product.  First off, find a name.  Choose one that is easily remembered and relevant.  Try not to be coy or overly cliché.  Experts recommend restricting the name to three words or less.  You don’t want to confuse consumers.  Secondly, develop a slogan – something catchy.  Again, limit your words here.  Keep the buyer in mind when creating a slogan.  What does it say about your product?  How does it differentiate you in the marketplace?  Why should they buy the product?  What will they like about the brand?  How does it compare to the competition?  Third of all, create a symbol or logo.  “It can be as simple as a geometric shape or as elaborate as a silhouette of a person or object.  Use the name, slogan and symbol on every piece of correspondence related to the product e-mails, invoices, letterhead, business cards, advertisements and promotions, etc.  This system will eliminate inefficiencies in creative and production fees and extend the branding process throughout everything you do.  In a sense, it will prevent recreating the wheel with each new media effort.”  Check out this article on the basics of branding: http://www.entrepreneur.com/article/77408.

There are many challenges in developing and building the right brand.  Coming up with the right name, symbol and slogan can be time-consuming and will take a great deal of effort and consideration.  It is often difficult to achieve initial customer recognition of a new product regardless of branding.  However, branded items are more recognizable and memorable so think critically and put in the time and effort required.  Remember, your product doesn’t live in a vacuum and is only as successful as the steps you take to make it so.

Until next time…

Hiring your first employee

As a small business owner, you should ask yourself: When is it the right time to hire your first employee?  Will your product sell itself or do you need someone to help you get your product out there?

Ask yourself why exactly are you hiring?  What do you stand to gain by adding staff?  Will an employee help grow your business and make your product more successful?

First you need to write a concise job description to help you get the right person for the job.  Knowing what your business and product need to become successful is important.  Think critically about this.  This will give you clear-cut guidelines for what is expected in job performance.  “The first paragraph should be a summary overview of what the position entails. Beneath that comes a (usually bulleted) list of job duties and responsibilities. Each duty should fit into a simple sentence or phrase. Include all key areas of responsibility.”  Use your network to help you find the right person.  This is a great way to get a recommendation from someone you know and trust.  It will help you decide if it is even worth bringing the person in to interview.  You need to use your time wisely and not waste effort on the wrong candidate.  “Your time is extremely valuable, so when deciding to hire additional staff you want the process to be as quick, efficient, and effective as possible.”

Think about writing an employee handbook that will really help you understand what your employee will add to your business and what is expected of them in job performance.  An employee handbook is one of the most important communication tools between you and your employees.  “When well written and organized properly, it clearly sets forth your expectations for employees, describes what they can expect from your company, and lays out your legal obligations as an employer and your employee's rights.  When well written and organized properly, it clearly sets forth your expectations for employees, describes what they can expect from your company, and lays out your legal obligations as an employer and your employee's rights.”  As an employer, you should be familiar with federal, state, and local employment laws that you must abide by.

Devise a compensation plan that works for your business.  As a small business owner you might have limited resources.  Look at your budget and see what you can afford to spend.

Run your ads.  Many business owners post to sites such as Craigslist, LinkedIn, Monster and CareerBuilder.  You want to be very specific in the qualifications you are looking for in a candidate so that you receive the resumes that match your criteria and you don’t have to waste time sorting through resumes that aren’t worth your time and effort.

The next step is to interview the candidate.  Ask poignant questions so that you can get a real sense of the candidate’s background and prior experience.  Have they done their homework on your business model?  Are they asking the right questions?  Do they truly understand your product and what it takes to make selling it a success?  You might also want to consider sending the candidate a pre-interview questionnaire to help decide if they are even worth bringing in for an interview.  You also want to make sure the candidate is a good cultural fit and will fit in well with others.  If you worked for a regular company before starting your own business, think about the attributes of your co-workers.  How did they help you be successful?

What types of questions will you ask during the interview process to help you drill down on the candidate’s qualifications?  First start with fact-based or general questions such as how long they worked for their previous companies; how they spent their time; how they were efficient in getting the job done.  Next think about hypothetical questions.  Set up situations.  Ask how they would solve a problem or how they come up with unique and original ideas.  Next, think about stress questions.  Ask how they would overcome an obstacle.  Ask them to give you examples of how they’ve done it in the past.  Lastly, ask behavioral questions.  “Past performance is an excellent predictor of future performance.”

Next you need to check references.  "If you think they're fudging the answer or fabricating the answer, you can always ask former employers that they're saying they showed that behavior at whether it was true or not."

You might also consider hiring on a trial basis.  Giving a probationary time-frame might be a wise idea.

Hiring your first employee might be tough and as a small business owner you want to make sure it is the right decision.  Remember your resources are limited and you need to use your money wisely.  If you use the guidelines I have set forth in this blog, you should be able to find the right candidate to fill the job successfully and help you grow your product and brand in the broader marketplace.

Until next time…

Should you incorporate your small business?

An important question you should ask yourself as a small business owner is: should I incorporate my business?  

A common scenario is for small businesses to start out as sole proprietorships or partnerships and become incorporated at some later date when the business has grown. A sole proprietorship is a one-person business that is not registered with the state as a corporation.  Sole proprietorships are so easy to set up and maintain that you may already own one without knowing it.  “For instance, if you are a freelance photographer or writer, a craftsperson who takes jobs on a contract basis, a salesperson who receives only commissions, or an independent contractor who isn't on an employer's regular payroll, you are automatically a sole proprietor.”  The drawback of sole proprietorship is that the business owner assumes all the liability of the company.  When a business becomes incorporated, an individual shareholder’s liability is limited to the amount he or she has invested in the company.  If you’re a sole proprietor, your personal assets can be seized to pay the debts of your business.  Unlike an LLC or corporation, you generally don’t have to file any specific forms or pay any fees to start up a sole proprietorship.  One of the advantages of doing business as a sole proprietor is that you can avoid a “double tax.”  Whereas corporations pay income tax separately from their owners, as a sole proprietor, all your business income is treated as your personal income.  Additionally, there are no restrictions on the number of people you can hire, and from the tax and legal perspective there is no distinction between you and your business. You can therefore hire as many people as you want and also recruit independent contractors if need be.

However, there are many advantages to incorporating your business.  Most importantly, as mentioned above: limited liability.  An additional advantage of incorporating is continuance.  “Unlike a sole proprietorship, a corporation has an unlimited life span; the corporation will continue to exist even if the shareholders die or leave the business, or if the ownership of the business changes.”  It is also easier for corporations to raise money than sole proprietors as they can sell shares and raise equity capital.  As a sole proprietor, you get your income when it is received but as a corporation, you have the ability to determine when you receive that income which can be a tax advantage.  Another tax advantage of being incorporated is: tax deferral.  As a corporation, you can defer paying some taxes until a later time which could be a benefit if the tax rates fall.  Most significantly with regard to taxes, “if you incorporate your small business, your corporation may qualify for the small business deduction. This annual tax credit is calculated at the rate of 16% on the first $200,000 of taxable income, which may be a much lower tax rate than that applied to your personal income.”  Experts say the number one benefit of incorporating your business is credibility.  Some investors see corporations as more stable than sole proprietorships and are more willing to do business with them as a result.

Of course, there are also disadvantages to incorporating your business as well.  The number one problem for a small business owner?  It’s expensive.  It also takes longer to set up than a sole proprietorship as it is a far more complex legal structure.  The fees charged for incorporating a business, either federally or locally, can be as high as several hundred dollars. When setting up a corporation, you will need to file paperwork with your state’s office that charters corporations, which is time-consuming as well. You also must pay annual fees.  Additionally, as I mentioned earlier, a corporation must pay a “double tax” as you have two tax returns on file – a corporation tax and an income tax.  There are also extra legal formalities and paperwork – detailed accounting/auditing books and meeting notes, for example.

As I’ve discussed in today’s blog, there are both advantages and disadvantages to incorporating your business.  While it has its benefits, it can be an arduous, expensive process.  I suggest giving it some serious thought and doing thorough research before leaving the world of sole proprietorship.  If you do choose to go ahead and incorporate, you can check out: https://www.legalzoom.com/ where you can form an LLC in 3-easy steps or go to: http://www.usa.gov/Business/Incorporate.shtml to find out the steps to getting your business incorporated in your own state.

Until next time…

Writing a marketing plan

You’ve done a lot to get started on your new business.  Now it’s time to write a marketing plan.  A marketing plan will help you be able to intelligently discuss the market for your new venture with potential buyers.  “It will allow you to sell or license your invention to manufacturers, retailers or other interested parties.”

In writing a marketing plan you should understand your target market, your competition, your product, your budget and your pricing, promotional and advertising strategy.  Most importantly, know your customers so you can fulfill their needs.  Of course, you should also be prepared to identify changes in the marketplace.

Many business owners think that attracting customers is solely done through advertising and getting the word out about your product.  This is true to a certain extent but people may never learn of your invention without a strong marketing strategy in place.  You need to understand how to effectively use your marketing strategy to attract buyers.  After all, you don’t just want to attract a steady group of loyal customers but you want to keep them and identify and gain new customers.  You also want to anticipate market shifts that can affect your bottom line.  Think about product, price and promotion.

Your marketing plan should identify your customers by age, sex, profession, income and educational level.  You must understand your customer base – their likes, dislikes and expectations especially since you might have limited resources as a small business owner.  “Try to describe the benefits of your goods from your customer's perspective. Emphasize its special features - i.e., the selling points. Successful business owners know or at least have an idea of what their customers want or expect from them. This type of anticipation can be helpful in building customer satisfaction and loyalty.  Make sure you have a clear idea of who your ideal customers or clients are, what they like, what they need and what they expect. This will make your marketing strategy more accurate and applicable to your target audience.”

Some sites you might want to check out that can help you write a marketing plan are: http://www.mplans.com/, http://www.morebusiness.com/templates_worksheets/bplans/printpre.brc, http://www.marketingplan.net/sample-marketing-plan/. Additionally, you might want to consider checking out existing marketing plans to get a better sense of how one goes about writing one.  Here is an example of a real-life real estate marketing plan: http://marcozarfati.live.keyes.com/?PageID=2976.  Here is one for a boat manufacturer: http://www.guerrillaconsulting.com/downloads/guerrilla_marketing_plan_and_roadmap_sample.pdf.

Make your marketing plan unique by knowing your competition.  Indeed, you should include a heavy component on your competition.  Do your homework.  Thoroughly research your competition.  Understand your competitors’ strengths and weaknesses.  Are new competitors entering or leaving the marketplace.  Understand why.  Understand how they might threaten your success.  Are you offering a new product or an existing one?  Is the market for your product growing or declining?

Keep your plan brief.  Experts believe the best ones are written in 15 pages or less.  Don’t over-think it.  “For small businesses, it's best to think of a marketing plan as a way to tell a concise story that covers all the key points of your strategy going forward.”

Decide what your vision is so you can get a better sense of the opportunities and threats facing your business.  “You can begin by establishing S.M.A.R.T. objectives – specific, measurable, attainable, relevant, time-bound - that will help you drive to your tangible goal, such as profitable growth or market share.”  Be realistic and specific – set goals for yourself.

Most importantly, do your research and define your strategies.  Think about your purpose and mission.

Writing a marketing plan takes careful planning and time.  As I’ve mentioned here today know your customers and their needs and most importantly understand your competition so you can position yourself uniquely in the market.  These are the keys to success.

Until next time…