As the year 2004 comes to an end, it means different things to many entrepreneurs. For retailers, this is the time of the year when the cash register rings loudest. For service firms (save warehousing, transportation, delivery and others involved in the big Christmas sales), it generally reflects a lull in business. Regardless of your trade, the end of year offers opportunities and time to take steps toward building business and profits in the New Year ahead:
Buy, Buy, Buy
With retailers striving to push sales and move inventory in this most important time of year for them, competition increases and prices decrease. It also represents the last opportunity for SMBs to make purchases that reduce net profit exposure to income tax. Take advantage of price reductions for those hardware, peripheral and office supply needs. The leather office chair I sit in now cost $120 two years ago. This summer it was advertised at $89. Now you can roll it into your office for $49.
Time for Experimentation
With the competitive year-end price reductions, take this opportunity to try a new technology for your office. Digital cameras with four mega-pixel resolution or higher still exceed $200, but the big names like Kodak, Nikon, Olympus, Canon, Pentax and others offer many models for as low as $100.
Don't forget eBay if you want or need an all-in-one printer. The competition for sales is just as rough. I just saw one of my older favorites, the Epson CX4600, for $80 and HP's PSC2175 for $79. Even when you factor in $10 to $15 for shipping, they're still excellent bargains.
Software: Take the Plunge
For businesses that experience a slowdown during holiday season, the extra time offers a chance to try out new software. Better yet, more and more software vendors offer 30-day trial periods, so you have nothing to lose.
Cnet Downloads is one of my favorite stomping grounds where I learned about and tested free copies of Adware and Spybot. Firefox is not the only free software offered by Mozilla. If Outlook Express and Eudora still don't fulfill your needs then give Thunderbird a test drive.
Retailers need to get through the end of this hot sale season, but most service firms can begin evaluating their financial performance. Take the time to compare your financial statements for 2004 with those from the last two years. Compare gross sales, cost of sales, gross profit, operating costs and net profit. Include all line item expenses in this comparative analysis.
You'll find trends good and/or bad that tell you what kind of year you've had. Naturally you want to increase gross sales, but if the costs of sales and operating overhead have increased more than those gross sales, you'ill see a decline in net profit.
That means you incurred expenses that did not result in sales that, at the very least, cover those expenses, much less resulting in more profit. Comparing those expenses from one year to the next will help you to identify the problem area(s).
Retailers, if they are successful, already know what the competition is doing right now. Regardless, now is the perfect time to see what your competitors are doing. Check their Web sites and catalogs, or visit the storefront if they have a brick and mortar location.
Do they offer new products or services? Have they reduced their pricing? Have they put their products or services under new, more appealing packages? This is a critical issue to address if you found your sales performance has either declined or not improved. This is where I always tell my clients to copy the good and avoid the bad. In other words, if a successful competitor has taken on a new product, service or way of generating sales then why not consider a similar tact, or your own idea that does the same or better?
Evaluate Product and Service Delivery
I can't think of a better way to explain this concept than to relate my own firm's experience. Until recently we always sent our clients the final draft of our business plans, via e-mail attachment, to their e-mail inbox. Now we deliver four bound copies of the plan. We also burn a copy onto a CD and insert it in a sleeve adhered to the inside back cover of the business plan.
Although we raised our rates, the cost includes the spiral-bound hard copies and additional gross profit to us. Frankly, I am very pleased. Service firms must realize that clients feel more satisfied with what they spend when they have something tangible they can hold in their hands. And having a CD copy in the back of the document makes them feel even better about their investment.
For virtually every small business, the end of the calendar year means it's time to think about Uncle Sam and get ready for income taxes. Start gathering and organizing all your data for filing those forms with federal, state and local returns.
You also need to learn about any tax law changes that have taken place since last year. For tax obligations I suggest accessing the CCH state tax directory to gather basic information and access your state's related Web sites. For the IRS start with its Small Biz Tax Information page. If you want detailed information or to get a free CD go to the Small Business Products page. Order a free CD or view online content regarding taxes, home-based business deductions, self-employment and the annual, federal tax calendar.
The end of the year offers opportunities to expand and grow. It also demands looking in the mirror to learn from our mistakes, expand on our successes and seek new and better ways to beat the competition. Likewise, it's the best time to prepare for and deal with income taxes now, not on April 15.
Steve Windhaus is principal of Windhaus Associates, a business plan consulting firm serving small, existing and startup ventures throughout the United States and overseas. His clients range from technology-based firms in software development, e-commerce and telecommunications to retailers of ATV's and watercraft and a variety of service firms. Steve is a published author who also conducts training in business plan development and participates as a judge in business plan competitions. Steve can relate to small biz environments relying on computer technology. His skills and use of many related technologies are all self-taught.
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