Business Saves $1,177 Annually In 5 Minutes!
July 1, 2010 by Mark Fregnan
Filed under Marketing
One important area of improving your profit margins is to reduce your costs. Sometimes you can reduce your costs without a reduction in the quality of service you receive from a supplier, sometimes you’ll see lower quality – cheaper isn’t always better. However…
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I saved a client $1,177 in 5 minutes. Without mentioning the name of the client, I can say the business is located in Perth. For illustration purposes, let’s call my client – Mary. |
Area saved #1 : Mary sent me an email saying that she was still paying $77 per month on her Sensis bill for a CitySearch web site.
CitySearch was one of the many online directories that popped up during the dotcom boom in 1997-2000. It was bought out by Sensis. Back in the 1997-2000 period many businesses were called with an offer of a new website for only $77 per month.
What many businesses didn’t realise is that this monthly fee went on forever. Sensis never contacted Mary to say “Hey we’re billing you $924 per annum for a web site we built 10 years ago, we can now update your website for free if you like.”
Mary’s website was replaced over a year ago (not by CitySearch), so I knew that the $77 per month was a totally unnecessary expense. I got Mary to cancel the CitySearch service. I only wish Mary brought it to my attention sooner. She could have saved over $1,000 in the past year.
STRATEGY FOR YOU : Check all your supplier’s invoices and question any unnecessary services.
Area saved #2 : Do you have a website? If you do you’ll be paying an annual fee for domain name renewal. Did you know however that I use Netregistry (an Australian company) – their annual fee for renewal is $44.95. If you’re paying any more than that you are paying too much.
STRATEGY FOR YOU : Check the bill from your domain name supplier.
Area saved #3 : Unnecessary domain name registration. Mary had a website ending with .net.au. DotnetDotau domains are really not needed. If you want to secure another domain for your business, register the Dotcom name as well as your DotcomDotau address.
STRATEGY FOR YOU : Don’t register or renew a DotnetDotau domain (.net.au). Save the money instead.
Mary’s savings per annum : $984 for CitySearch, $140 for (.net.au) and $113 for using Netregistry to renew her DotcomDotau address. Total saving $1,177.
(Actually it took less time for me to save my client $1,177 than to write this email. But I thought you’d appreciate this information.)
The lesson : Charges from suppliers for unnecessary or excessive fees is commmon. It’s worthwhile to periodically check all your invoices and question any charges you don’t know about or feel are overpriced. This is an easy way to improve your profit margins.
How Are Businesses Valued?
May 5, 2009 by
Filed under Buying A Business
Business valuation can be a difficult figure to obtain because there are so many variables. Business valuation models (methods) have been developed to make the process easier and more accurate. Some of the methods include :
- Return on Investment (ROI) method
- Market value
- Asset value going concern
- Asset value liquidation
- Net present value
The most appropriate method of valuing the majority of small businesses (up to $1 Million) is through the ROI method. The technique measures the return (i.e. profit before owner’s salary) received from an investment (i.e. purchase price) and is calculated by the following formula:
Price = net annual profit x ROI % (for that industry)
For example: if a business is making $50,000 profit and the accepted ROI for that industry is 30% then the price equals $166,667.
Here are example ROI’s for different industries (information provided by GMO Business Brokers – September 2009):
- Book Stores 20% to 25%
- Boutiques 75% to 80%
- Florists 70% to 100%
- Liquor Stores 22% to 28%
- Lotto Kiosks 22% to 28%
- Newsagencies 25% to 30%
- Restaurants (Fine Dining) 70% to 80%
- Lunch Bars 50% to 75%
- Manufacturing 25% to 38%
- Wholesale 27% to 35%
