Monthly Archives: May 2011

Traditional accounting education teaches students that there are several different ways to price a product.  Picture a range. The lowest end price is the cost of manufacturing your product or service, while the highest price is generally the maximum the market will bear. That price, particularly if you are a small player in a large market, is determined by the large players in your industry.

Conventional wisdom says you cannot charge more than your competitor – or else your clients will move over their business. But this is based on the assumption that all products and services are identical and the only way you can differentiate from your competitor is through price. The Price is Right game show follows this line of thinking too – you have a short amount of time to pick a price for an object on display, without knowing anything else about it.

But conventional wisdom isn’t always right. There are so many factors that can separate you from your competitor, even if you are in an industry where your actual product is identical to everyone else’s.

Let’s explore how can you charge a premium price for your product and still have customers come to your doors. Before, we talked about making your business strategic plan different from the other guy in ways that will have people begging to pay more. Now, it is a matter of communicating those differences.

Personally, I don’t spend a lot of time in the makeup department store Sephora, but the females in my life explained how it is an excellent example. While Sephora almost corners the market on having the most cosmetics under one roof, it still competes with larger department stores, Shoppers Drug Mart and others. Sephora sets itself apart with the customer appreciation points program. You earn points on every purchase which you can redeem for merchandise. And via email, you get major perks such as coupons, free offers and a gift on your birthday. Sephora understands that the key is to define, deliver and communicate the way in which its business is different from everyone else who says they can do the same thing Sephora can.  Here’s their communication bonus: the company places “members-only” products under glass in seductive looking packaging at the cash. It entices you to spend more for these great products.

As an entrepreneur, you must stand out in the minds of your perspective and current clients. If your customers can’t identify some way in which you are unique – they will just go back to the price tag.

There are many other non-cosmetic ways to set you apart from your competition.  It can be in the quality of experience your customers have and dealing with everyone in your organization or in the way you package your product or deliver your service.  It can be as simple as sending a hand written thank you note to your customer after you have completed their job or sending a cookie-gram on their birthday.

You can consider offering a guarantee for your product or service that is so strong none of your competitors would ever consider offering it.  For example, a common concern in dealing with professionals (doctors, accountants, lawyers, etc.) is that every time you call to ask a question, you are going to receive a large bill as historically these professions billed on a rate per hour basis.

At Silver & Goren, we differentiate ourselves from a lot of our competitors by offering a fixed fee, all inclusive, contract at the beginning of an engagement that has been discussed and approved by our clients.  We then combine this with our guarantee that you don’t have to pay if you are not satisfied with the results.

Our objective is to remove the anxiety and concern of our customers as to the nature and amount of their bill.  We are able to offer this type of comprehensive guarantee as we take the time to understand our clients and their industries at the beginning of the process, so that we can define what our clients needs are and comfortably charge a fee that our customers are happy with and that is profitable for us. You may not find us on The Price is Right…but we guarantee you’ll be happy with yours.

Getting an Edge on Market Opportunities – Try the iWay?

Most entrepreneurs starting their own business often see opportunities in industries where they have already worked. The catch is, they end up offering products and services the same way as their last company. They need an edge. The simplest way to compete with similar, more established businesses is often to just charge a lower price.

This is the worst way to start a successful business.

A better way is to focus on the familiar industry and find problems within it that no one is trying to solve. Your new business should develop a unique or innovative solution for these problems. Finding that solution will translate into true market opportunity.

For Apple lovers, this will come as no surprise: Steve Wozniak, one of the company’s co-founders, left his job at another hardware producer to go after his own dream. Wozniak worked at Hewlett-Packard, in the calculator and minicomputer departments. He left in the late 1970s and he (along with Steve Jobs and Ronald Wayne) started doing things totally differently.

As an entrepreneur, once you identify the problem and possible solutions in your own industry, you need to ask if your innovative solution would be valued enough by your target customers that they will pay a premium for it. If you have a unique solution that works, you should be able to receive a premium price for delivering it.

In Wozniak’s case, he and his buddies capitalized on the frustrations the average PC user encounters. They were smart enough to not only offer a solution – an easy to use system that rarely is affected by viruses – but grow their solution into a multi-billion dollar enterprise that ultimately surpassed the competition.

I believe the key to finding a market opportunity is to hone in on what your clients value, want, need…or what irritates them. While Apple is the perfect example, I will offer one that’s closer to home. A client of mine worked in the health care industry servicing various testing devices.  He observed that his customers managed their processes with highly labour intensive systems.  He immediately understood that this method was cumbersome and costly for potential clients. So, he found a European technological solution that let him automate a good deal of his potential clients’ processes. Throw in some of his own modifications, and you have a service that anyone in the health care industry would clamour to pay a premium for.

Going back to my third point in the top ten list, he followed my advice and defined his target customer: in this case, all Canadian businesses performing specific kinds of medical tests with labour intensive systems. His solution offered significant value, and in less than ten years he has captured virtually the entire Canadian market for these particular services and has locations in several cities.

Like Wozniak, my client focused on a need that no one else was trying to satisfy. They were both able to find a solution so useful, the money followed.

Another true example of iSuccess.

Tax time is finally over. Ahhhh. A collective sigh of relief for us in the office and for you as well.

If you had to calculate the cost of your car for your job or business, this blog will really … drive the message home.

Most people rely on a car in the course of operating their business. And the majority of those drivers use that same car in their personal lives. Canada Revenue Agency has implemented a fairly complicated set of rules in order to ensure (from their perspective) that only the portion of the costs relating to business use are deducted come tax time.

Basically, if you drive your own car in the course of your job or your business you may write off your work-related automobile costs against your employment or business income.  It’s a helpful small business tax deduction. Similarly, if your employer (or corporation) provides you with a car that can be used for both business and personal reasons, you will be assessed a taxable benefit for your personal use of the car.

The taxable benefit is quite onerous; 2% of the original cost of the car per month (no matter how old the car is or what it is worth today) or two-thirds of the monthly lease cost.  It doesn’t stop there: the portion of all operating costs that relate to personal driving is also included in the taxable benefit. It’s a lot to juggle during year end tax planning.

The effect of these rules can be significantly reduced if you are able to demonstrate that your personal use of the vehicle is relatively small. The practical solution is to keep a log detailing both types of car trips.  Once you understand the relative percentages of your business and personal driving, you can calculate the most appropriate benefits in your income or percentages of business driving that you can deduct.  In addition, by having an appropriately documented log you are in an ideal position to defend any challenges that may be put forward by Canada Revenue Agency.

Here’s the catch: how many people do you know who actually do this? It’s complicated and cumbersome to have to document every single trip that you make and, frankly, most people forget.

Starting in 2010, the CRA has offered a simplified log book solution for reporting business travel.  However, it still requires a full log book for one complete year in order to establish a base year.  Now, business owners can choose a three month sample log book to extrapolate business use for the entire year, as long as the results are within 10% of the base year.  While this is better than having to log every trip, it is still a difficult task.

Here’s a simple solution. At a recent technology conference, I saw an interesting device called Odo Track.  You simply plug Odo Track in your car cigarette lighter and select the type of trip: either business or personal.  Utilizing GPS technology, Odo Track keeps track of both types of driving and can provide you with a complete trip report for the year, which can then be used for your year end tax planning.

Besides being an excellent tool in what can be a cumbersome process, it is also another interesting example of how people are able to develop interesting solutions to meet customer needs, while providing excellent business opportunities.