Me: A few months ago you made a decision to increase your prices and ramp up your marketing efforts. You did both of these things in a down economy in hopes of increasing sales and preventing layoffs. Most business can probably understand the logic of increasing marking efforts, but increasing prices, that was a very strategic decision. What steps did you take to implement those changes and how quickly did you see results?

Eric at Gnosis Arts: First we had a meeting with key staff to come up with a new pricing level. (The Business Development Manager, PR Manager, COO, and myself). We listened to each others arguments for or against.

Second, I trusted the judgment of Suzan Pleva, the business development manager. She has a background in sales. It was her idea to raise prices. She comes from a sales background, so her main argument was: “Listen, we have an excellent service, we dominate the market for it (Wikipedia writing services) – we can charge much higher for this and I believe customers will pay it because I believe in the service and I believe that I can convince them to believe in us.” Going through this process, I found that sometimes just doing market research and trying to figure out what the market will bear can leave you shortsighted.

Finally, we did some research and found that top freelance writers, e.g., those that wrote for pubs like the NY Times, etc – were commanding close to $100/hr for their writing services. We were initially charging $36. We felt it we had paid our dues, so to speak, and had delivered an outstanding service to many clients. In addition, we can arguable be considered authorities in the field of technical online writing – so we raised rates to $70/hr and we felt this was fair pricing for our customers.

Me: In the NYtimes.com video you mentioned that sometimes you have to take risks in order to find the reward. Other than your recent business decision to increase prices and marketing efforts, what risks have you taken in your business?

Eric at Gnosis Arts: Well, it was a risk to keep our two main staff – Suzan Pleva and Susan Marie Kovalinsky, even though we didn’t fully see how we were going to justify their wages. And I think anytime you hire someone, you take a bit of a risk. I’ve hired several people who turned out to cost the firm money in the end, and so I had to let them go. I think the key for an entrepreneur is not to take no risks at all, but to take calculated risks.

Me: Do you use your financial data to make decisions? If so, what data do you use? How does it help you make decisions in your business?

Eric at Gnosis Arts: I mainly use the P & L statement to make decisions. It tells me where we might be spending too much on certain services. It also shows me precisely how much we’re spending on staff wages – typically this will be your largest expense. Knowing that helps me with sales forecasting.

I am also a big proponent of using CPA (Cost Per Acquisition). We track our advertising spend and compare it with sales generated to determine the CPA ratio. For example, if I know that it costs $37 in ad spend to generate 1 Wikipedia customer, I can use this data to try to come up with creative ways to reduce that dollar amount. This type of information determines where we will advertise, which ad services we will use, and how much we will spend on advertising in a given month.

Me: What is one mistake business owners make when consider an online marketing strategy?

Eric at Gnosis Arts: One of the biggest mistakes is not getting your tracking right from the beginning. You need to be able to evaluate the effectiveness of a particular online marketing channel in terms of generating leads and sales. Without proper tracking mechanism, detailed web analytics, it is difficult to measure this.

Another mistake I see a lot is focusing too much on only one or two online channels. For example, some people only do social media. Others only do organic SEO. But to be really effective, an online marketing strategy should utilize several online channels, and try to create a synergy among them: email, PPC, online PR, mobile, social media, B2B/B2C freelance sites (e.g., craigslist, elance), etc.

A third common mistake is mistaking correlational data for causal data. For example, we consulted with a novelist who swore up and down that she generates tons of book sales from using Twitter alone. After drilling down into it a little deeper, however, the truth was only that people were purchasing her books elsewhere, and then later found her on twitter and commented that they liked this or that book. She was mistaking this for “Twitter generating the sales.” Though this is a simple example, there are many variations on this theme.

Me: What prompted you to start Gnosis Arts?

Originally, I had no intention of starting a business. I was just following after the things I was passionate about and enjoyed: Internet marketing, writing, music, multimedia. After it became apparent that I offered services that people really wanted and needed, I began seriously thinking about making Gnosis Arts a legitimate, profitable business in 2007. I suppose I wanted to do it, mainly just to see if I could. I didn’t even really think much about profit or prices. When I first began, we used to sell some services for $5! It gave me such a thrill, conceiving a service, doing market research, SEO-ing my website, negotiating a deal – that I decided to make it a business.

Me: Describe the services offered by Gnosis Arts.

Eric at Gnosis Arts:
Writing & Communications
• Wikipedia Writing
• Article Marketing
• News & Press Releases
• Writing Research Tools

Multimedia Web Promotion
• Audio/Video Web Applications
• Upload Photos/Videos
• Mobile Website Conversion
• Mobile Applications
• Chat Box Deployment

Internet Marketing
• Search Engine Optimization
• Submit A Free Press Release
• Get Our Latest Social Media Marketing eBook
• NEW! Twtsynd: Twitter Syndication Network

To learn more about Gnosis Arts visit their website. Follow Eric on Twitter at: @slashcareer.
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Accounting data can be used to:
1. Determine how liquid your business is. By calculating a few ratios you can determine if you have enough current assets to pay your current debts. This is particularly important if you have one or more customers who are slow to pay you and you are anxiously awaiting their payments.

2. Assess your long-term solvency. Solvency is the ability to pay your long-term debts. If you are short on cash, will you be able to pay your long-term obligations? Even if you have good cash flow today, is there any possibility this may change? We need to think long-term so that our business can continue to operate effectively.

3. Provide a snap shot of how well, i.e., efficiently, your business is running. The income statement is a good place to see how well, or poorly, operations are generating revenues and managing expenses.

4. Obtain outside financing. A banker or investor will want to review your financial statements and perform their own analysis on the numbers. Your ability to obtain financing will be based on those results.

5. Make purchasing decisions, such as a new truck or equipment, or other business decisions such as moving to a bigger (or smaller) location.

The information reported on the balance sheet and income statement are truly a wealth of knowledge. Many people use the phrase “numbers don’t lie.” These numbers, if used and analyzed on a regular basis, will help you create a very effective and efficient business. In trying economic times, the regular use of your accounting data will prove beneficial for the long-term success of your business.

When reading an Income Statement start at the top, see a summarized Income Statement below. Gross Revenue is the first line item on the Income Statement. Gross Revenue is the accumulation of your sales. You can review your Income Statement monthly (required), weekly or even daily (depending on the accuracy of daily recording keeping).

If you own a business that sells products, i.e., you have inventory, you should have the line item Cost of Goods Sold. Cost of Goods Sold is the expense associated with the products you sold. You would have purchased these inventory items to sell in your wholesale/retail or online stores. Once these inventory items are sold you convert the asset into an expense, i.e., Cost of Goods Sold. If you have a service business you may report direct costs in the Cost of Sales account.

The Gross Profit is determine by subtracting the Cost of Goods Sold (or Cost of Sales) from the Gross Revenues. The Gross Profit is the amount of “money” you have left over to pay for operating expenses such as rent, utilities, staff salaries, insurance, phone, etc.

After you calculate the Gross Profit, you need to subtract the Operating Expenses. Operating expenses are the indirect cost incurred to run the business, such as rent, utilities, phone, and marketing expenses.

The last line on the Income statement will be the Net Profit. Hopefully this line item is a positive number. The Net Profit tells you how much “profit” you have per every dollar in Gross Sales. This is not necessarily your cash profit, especially if you had depreciation or made large purchases of equipment during the period.

Summarized Income Statement

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A friend of mine recently told me he has become a cash buyer. If he doesn’t have the cash, he doesn’t buy. In my personal life I follow this logic, to some extent. Our home is financed as is one of our cars, but everything else is paid for in full at the time of purchase. My husband and I are both simple people so this work for us. However, this might not work for you in your personal life, but can it work for your business?

What would happen in your business if you only made purchases when you had the cash to do so? Note, we are talking about big purchases, not your daily operational costs associated with inventory or supplies to provide your products or services. Would your manufacturing process suffer because you don’t have the most modern equipment? Can you get by with the computer equipment you current have?

We have all heard the saying that you have to spend money to make money. And while this saying does make sense, especially for advertising and outsourcing, we should strategically plan for how we use our cash. Incurring debt to buy a new laptop creates additional burdens on the business owner for how they manage the cash available for daily operations or emergencies.

I challenge you to only make purchases when you have the cash on hand for one month. Can you do it? If so, does the “cash only” negatively or positively impact your gross sales? If your sales are not negatively impacted, could you use this strategy for one more month? What changes do you notice in your bank account? To your stress levels?

Share your story here.

When my husband and I noticed that a night club was opening in this particular area we both thought it was an odd choice for its location. However, the building is prefect for a night club/concert venue. While the building itself is perfect that doesn’t matter if it cannot attract clients or doesn’t meet city code/regulations. I wonder why type of research Sam did to determine the demographics and geographics of his target market. The night club would have to attract a decent population that does not reside in the area, mainly because it is a suburb with a lot of families.

According to the article the night club owner, Sam, was given a list of 10 things that the three neighboring businesses asked him to do so that his business didn’t impede upon their business. Sam said that he did “most” of the items on the list. This was one of his many mistakes. There either should have been an agreed upon compromise on the 10 items or Sam should have conceded to all 10. By not doing so he created an adversarial relationship, either intentionally or unintentionally, with others.

In the article it mentioned that Sam applied for a liquor license and signed some sort of agreement with the landlord acknowledging the type of business he was going to establish there. No where did Sam defend that he applied for the appropriate business licenses or followed the covenants of the strip mall location. So, I have to wonder if his business was doomed from the beginning. An agreement by the landlord is technically irrelevant if the business itself doesn’t meet the requirements of the covenants, codes, and/or regulations.

In addition, the article stated the neighboring businesses did not care for the type of “clientele” the night club served. Duh! What did Sam do to minimize their fears? It appears nothing, as he didn’t even fulfill the 10 items they asked him to. It does not appear that Sam took the time to build relationships with the other business owners. Sam owned another business for 20 years. Shouldn’t he have known better?

Even if you think a business plan is a waste of time, at least take the time to verify you can actually operate your business with no risk of being shut down shortly after opening your doors.

Our impression of someone is not always right. Sometimes we make judgments about people before we really get a chance to know them. Sometimes we might even change our perception of someone based on either a really good or really bad experience either directly or indirectly.

The other day I offered to make an introduction between two people, I’ll call them Bob and Sally. Sally discounted the possibility of a quality business relationship with Bob. Sally gave me a list of reasons of why Bob wouldn’t be a valuable referral for her without knowing anything about Bob or his business. Bob happens to be the type of professional that Sally targets for strategic business relationships. I shared with Bob that I was going to introduce him to Sally and how she discounted him without knowing anything about him or his client base. Bob laughed and stated that he could send her more business than she would probably ever send him. Sally made a huge networking mistake.

From my point of view, it never hurts to have a cup of coffee or a short phone conversation to see if there is synergy between two businesses. You might find that the person/business is not a good fit, but at least you took the time to find out. Or you could determine the two businesses are perfectly aligned to create a strategic relationship. Sometimes it is not a matter of who you know, but who knows you. In Sally’s case, Bob doesn’t know her and therefore will never send her any business. Too bad for Sally. Don’t be a Sally.

The book Everyone Wins! that I posted about last week was about conflict resolution. The Love and Logic book is about teaching children how to think for themselves so that they can problem solve and make good decisions on their own. Sometimes letting a child fail teaches them more than if we were to forcing them to succeed. One of the examples in the book discusses letting a child miss the bus and being confined to their bedroom for the school day. Their parents inform them they need to explain to the teacher (and the school) why they missed class as the parent doesn’t write an “excuse” letter for them. Most children don’t miss the bus again.

What if you let one of your staff miss a deadline for a major project? Would you have the guts to let that person explain to the other employees why they missed the deadline or would you try to finish the project yourself so that the deadline could be met? If that staff had to take responsibility for failing to complete a project as promised and there were consequences (such as an CEO or deductions in pay/missed bonus opportunities) it is unlikely that they would miss a deadline again.

If these concepts were applied in the business environment it might be a little frustrating for the supervisors at first, but in the long run they would end up with better employees. Even though Love and Logic is not a business book, it is about creating positive and respectful relationships as well as teaching the “younger” (younger does not necessarily mean a young person) staff responsibility. Don’t we need these skills in business too?

A company called Auto Equity Loans offers loans on motor vehicles (cars, trucks, vans, motorcycles and farm equipment) that are owned outright. The loan amount is a percentage of the fair market value of the vehicle. The loan interest rate is not cheap, yet it can be a lifesaver at a time when you need cash now and do not have any other options available.

Auto Equity Loans is accredited by the Better Business Bureau. The offer loans for both personal and business needs. If you are in need of immediate funds and do not have anywhere else to turn this could be an option for you. Be sure to review all of the terms and understand the rate you are paying so that you are not caught off guard when the loan comes due.

To learn more about Auto Equity Loans visit their website. Please note that I have not used their services before. I am just informing small business owners about some additional options for quick cash or “seed” money to start their business. Be sure to check out any company before you sign any documents or agree to any financial terms.

This book is a MUST read. I am not saying this because I know the man who wrote it. It is full of great advice, stories and exercises. Yes, exercises. If you have any type of conflict in your life, business or personal, you need to get a copy of this book.

As Larry mentions at the very beginning of the book you need to read it with an open mind. If you are going to resolve any conflicts you are currently experiencing, you will need to be flexible and willing to change. Otherwise, you’ll continue to remain in conflict with the person you are trying to get along with.

Chapter 2 is titled “Give Up Your Need to be Right, Not Your Needs.” When I was a teenager, still in high school and soon to graduate I decided that I was going to stop fighting with my Step-dad, who I call Dad. We would argue about anything and everything. We both needed to be right. Not knowing how to resolve this conflict, I just decided to give up the need to be right. Whenever I noticed my Dad and I getting into a debate I would stop arguing. I didn’t tell him I thought he was right, but I didn’t tell him I thought he was wrong. Our relationship started to change. We didn’t fight anymore and our relationship is very positive now. I wanted to get along with my Dad, not fight with him. My need was about getting along, not about being right.

I have used a similar approach in other relationships and it works. As do the many other concepts in Larry’s book. Check it out for yourself, visit Larry Barkan’s website.

This shorter-version business plan can include items that are important for your business. There are many templates available, but I recommend creating a document that makes sense for your business so that you will actually use it on a regular basis.

When writing this short business plan consider the following sections:

1. Vision/Mission. When you started your business did you create Vision and Mission statements? If so, copy/paste them into this document so you can easily refer to them. Does the Vision or Mission need to be updated? Or do you need to re-evaluate how your business is following the original Vision and Mission? If you did not write a Vision or Mission, go ahead and create them now. The Vision Statement is more about the big picture – what do you want to accomplish.

The Mission Statement is about why the company exists, i.e., what is it that you are trying to accomplish with the services or products the business offers. Many Mission Statements include a brief declaration regarding employees, customers, and/or the community.

2. Product/Service Summary. Since many businesses are constantly changing their business offerings, it would be a good idea to include 2-3 sentences within the document that summarize the product/services you are offering. A business plan Executive Summary includes this information too, it is the basis for everything else in your document.

3. Target Market/Competitors. In this competitive environment it might make sense to re-evaluate your target market. Are the demographics of your customers the same as they were 18-24 months ago? If not, how would you describe your current customer? What about your competition? Have new competitors entered the market? How have they changed the way you attract or retain your customers? Have any competitors left the market or changed their focus? What were some reasons for them doing so? Can you gain insights as to how their exit might impact your business, either good or bad?

4. Tactical Goals. What are some tasks or projects that you want to complete within the next 9-12 months? For example, obtain XX number of new clients or XXX number of quality Twitter followers. Maybe you want to open XX number of new locations or add XX number of new products to your retail mix. The objectives should be measurable and realistic. You’ll use this information to create your strategies and plans.

5. Long-term Strategies. What are the long-term goals of your business? What types of activities will help you move from where you are today to that goal in 3-5 years? If you are a sole-preneur, would you like to add employees? If so, what would that look like for you and your business. If you have a retail operation, have you considered moving to a bigger location or adding stores? Think about what your business should look like in 3-5 years and create both long-term and short-term objectives to help you get there.

Remember to include a summary of the action steps you will take to achieve your objectives. For example, let’s say you want to attract 10 new clients for your coaching program. What types of activities could you engage in that might drive clients to your program? Establish Teleseminars, create a referral program or book speaking engagements/seminars. Where do you currently find your clients? Use that information to determine what activities you should be participating in to drive business to your door.

A short (or single page) business plan is easy to create. When you don’t have time to update your regular business plan, this is a great alternative. You can create these types of plans for different divisions, departments or product/service lines. Update your business plan at least once per year or when a major change occurs in your business or marketplace.

Consider the book by Jim Horan, the One-Page Business Plan to create this type of document for your business.