If you don’t have enough funds to purchase equipment for your business, small business equipment leasing is an alternative. Leasing business equipment is paying for the use of equipment on a rental basis. You can lease just about anything for your business including cars, computers, manufacturing equipment and more. When leasing equipment you pay on a monthly or yearly basis.
Two types of Equipment Leases
True Lease / Operating Lease– In a true lease, you have no rights or ownership over the equipment you are leasing. The rental payments you make on the equipment does not give you any form of ownership over the equipment. You just have the right to use the equipment until your term in the true lease contract is over. True leases do offer you advantages. Besides the lower monthly payments, a true lease usually qualifies as an operational expense and therefore is 100% tax deductible! When your true lease term is over you will have to return the equipment to the owner or you may be granted the option of purchasing the equipment at it’s fair market value, or extending the terms of the lease.
Financial Lease/ Capital Lease– This type of lease is used to finance the purchase of the equipment. Instead a paying one large lump sum to purchase the equipment, you spread out your payments over the equipment’s life cycle. The Financial Lease is structured so you purchase the equipment at the end of the agreement. The advantage is that your monthly payments are going into the purchase of the equipment but the disadvantage is that unlike a true or operating lease it is often not tax deductible.
When evaluating pricing strategies entrepreneurs often struggle in this process. They don’t want the price to be too low in order to make a decent profit but they fear if they make it too high consumers will flee to their competitors. It can be difficult developing a price that works well for consumers and you however it is a critical and influential step to the success of your business. Here are some helpful tips for developing a pricing strategy.
#1 Know your target market
Is your business planning to sell more for less, or less for more? For example a high end restaurant targeting wealthy individuals may sell 20 sandwiches a day and charge $30 each but another restaurant targeting the average consumer may sell 300 sandwiches a day and charge $2.00 each. Each restaurant has made the same amount of sales revenue but the first sold less quantity for a more expensive price and the last sold more quantity at a cheaper price. Both are very different but each can be just as effective.
It is essential that you know your target market (targeted customer) in order to develop a pricing strategy that is appealing to them. Is your business targeting high end consumers or a budget conscious consumer? If you are targeting high end consumers your price will be higher but your products or services should also be of higher quality. If you are targeting a budget conscious consumer (bigger percentage of the population) be sure to have competitive prices.
#2 Find out the minimum cost
Figure out the costs to sell one product (or service) in your business. In this estimate include factors such as a percentage of advertising, rent, insurance, labor and other factors involved in selling that product. This is the minimum price you can price your product in order to not acquire a loss. However you should price higher than you minimum price in order to acquire a profit. Knowing your minimum price will help you develop a pricing strategy that will be attractive to your customers while keeping you in business.
#3 Research Competition
When developing a pricing strategy it is essential to look at your competitors. How is your competition pricing their products or services? If you choose to price your product or service higher than your competition be sure that your product or service is better in some way or supplies consumers with something that your competition doesn’t. Consumers may choose to pay more for a product from your business because of factors including a convenient location, great customer service, reliability and incentives. For example there are many people who choose to buy popcorn, candy and drinks at the movie theater even though they know they can get the same products elsewhere at a much cheaper price. Factors such as convenience can influence buyers to pay more. Conduct market research to find out what drives your target market to your business. You may be surprised that it is not always lower prices. Since lower prices is often a big factor for budget conscious consumers keep an eye out for suppliers that offer your products at a cheaper price.
#4 Test your prices
See how consumers respond to your prices. You can try selling your products at fairs to get an idea of how buyers respond to different prices. Do they nod in disagreement? Are they pleasantly surprised?
#5 Be willing to adjust Prices
Be willing to change prices to reflect changes in the marketplace. Factors such as costs of your business, and customer demands should all be taken in consideration. Remember you want a price that will appeal and attract customers but you have to make sure you are making a profit.
#6 Avoid Price Wars
Avoid price wars with your competitors. A price war is when your competition lowers their prices and as a result you lower your prices which causes your competition to lower their prices even more. Instead of falling into a price war with your competitors, develop a more effective strategy. For example think of something that you can offer that your competition doesn’t which can attract buyers to buy your product or service even though it may cost more. These factors can include incentives, bonuses and more.
Your business supplier will be a contributing factor to your business success therefore it takes research and thought. Finding the right products at the right price can make all the difference to the success of your business. Finding a good business supplier may not be an easy task but it is well worth it.
Where you can find Business Suppliers
Trade Magazines: There is a trade magazine for nearly every industry. Ask your local librarian for help finding a trade magazine. Be sure to look for local publications which contain local business suppliers. Once you have found a trade magazine that focuses in your field of business look at the ads for listings of suppliers. Companies may be able to send a sales representative to you to perform an on site demonstration of product samples.
Search Online– Use search engines to locate manufacturers and business suppliers of your needed products. Here are some websites that can help you locate manufacturers and business suppliers.
Thomas Register of American Manufacturers
Yellow Book Pages– The Yellows Pages offers listings of local businesses including suppliers and manufacturers.
Library– In the library you will find several directories. Ask your local librarian for directories of wholesaler suppliers or manufacturers. One of the directories they might have is The American Wholesalers and Distributors Directory which offers listings of more than 30,000 big and small wholesalers across the US. Be sure to seek the latest Edition.
Trade Shows– Trade shows are a great place to find business supplies. In a Simmons Market Research Bureau study, 91% of respondents ranked trade shows as “extremely useful” for finding information on products. You can find a trade show near you at tsnn.com. Not only can you potentially find suppliers but you can also network with other business professionals and check out the latest trends in your industry.
Ebay– Believe it or not, you can get just about anything on Ebay. When searching for a product be sure to search for the wholesale products. There are wholesale lots for just about any product. However before you get the urge to pounce on what seems like a good deal, research rates of other suppliers as well.
Ask other business owners for Referrals– Business owners who are not your direct competition may be able to give you recommendations on a business supplier. In order to avoid your competition you can ask business owners in neighboring areas for referrals.
Shop Around– Many products show the manufacturer’s name often located on a sticker at the bottom or back of the product. If you see a product that you are interested in keep note of the manufacturer’s name. Once you are home conduct a search on a search engine such as Google for the manufacturer’s name to see if they have a website.
Outsourcing– Consider outsourcing your products. Search online for oversea suppliers. Often times you can find products manufactured in other countries to have much lower prices. However be aware of scams. Many scammers ask to be paid through Western Union. When evaluating prices consider the costs of shipping. Trade Associations may have a list of oversea contacts.
Consider dropshippers– A dropshipper works like this: When a customer makes an order, you will send the order to your supplier and the supplier will ship the order to your customer. This eliminates you having to store excess amounts of inventory. Drop shipping can be valuable for entrepreneurs who work from home or online businesses and do not have a storefront. To find a dropshipper coduct a search for your desired product + dropshipper in a search engine.
H3>What is a Break-even analysis?
A break even analysis determines how much profits you have to make in order to cover total costs of your business. For example if it takes $2,000 to cover costs of your business such as rent, inventory, insurance and more for that month, you would have to make $2,000 in revenue just to break even. This is your break even point. If you make more than your break- even point you make a profit, if you make less you have a loss.
Calculating your Break-Even Point
As an entrepreneur your goal is to create a successful business that produces a profit. By determining your break even point, you will have an idea of how much you have to sell in order to break even. Your business will have to exceed your break even point in order to make a profit. According to the Women’s Business Center the following formula is used to determine your break even point.
Fixed Costs– Fixed costs are standard costs of your business that remain the same every month. These costs include rent, office equipment, insurance, business license fees, employee salaries and more. These costs remain the same regardless of how much or how little you sell.
Variable Costs– Variable costs are costs of your business that are subject to change every month. These costs can fluctuate in relation to changing seasons, advertising and sales. For example if you own a gift shop you will probably spend more on advertising around Christmas. Advertising costs are subject to change each month, therefore it is a variable cost. Other variable costs include office supplies, temporary workers, sales commissions and shipping and delivery.
In business it is a good idea to explore different avenues of saving money. Eliminating unnecessary expenses is one way of increasing your bottom line. Here are some tips for saving money on small business supplies.
6 Tips for saving money on your small business supplies
1.Get several suppliers – Don’t feel obligated to get all of your merchandise and products from one supplier. Many businesses today have several suppliers. Shop around and see which supplier offers the best rates for a product. If you find a new supplier that offers you a better price on a product take advantage of it.
2.Trade Credit– With trade credit you may be able to pay for your products/ inventory 30, 60 or 90 days after receiving them. This gives you time to sell products and raise the money needed to pay back your supplier. When using this method you should be able to effectively manage your inventory so you don’t have too much inventory and are able to pay the supplier on time. When searching for suppliers be sure to ask if they offer this.
3.Selling through consignment– You can also attain inventory with little to no money by selling through consignment. When you sell through consignment a supplier gives you the products with an understanding that you will pay them only after you sell the products. A disadvantage to this is that you do not make as much a profit as you would have if you owned the inventory. In many cases suppliers agree to sell on consignment when they have a new product they are sure will sell but retailers are hesitant about putting it on their shelves. Selling through consignment is a low risk way of testing a new product.
4.Avoiding the middlemen– Your products can be distributed through many levels before finally reaching your small business. For example a manufacturer can sell to a wholesale supplier which can sell to a distributor before selling to you. Buying straight from the manufacturer or importer can eliminate costs of middlemen. There is a disadvantage of purchasing straight from the manufacturer; you may be required to make bigger quantity purchases. Negotiating skills can prove to be useful in this situation.
5.Take advantage of Suppliers who reward Early Payments– Some of your suppliers may offer discounts or rewards for making early payments. It would be wise to prioritize payments to these suppliers before making payments to suppliers that don’t offer any benefits or discounts.
6.Buying surplus Items– Keep an eye for surplus goods that are offered far below normal prices. When manufacturers and dealers have an enormous supply of slow moving inventory they will usually sell these products as “closeouts.” Other factors that can cause surplus goods or closeouts are bankruptcies, ordering too much, or even chance. One way of finding surplus goods is through the Internet. Below are some sites containing surplus goods.