What Is A Loss Leader Strategy And What Do You Need To Know?

Companies use loss leaders as a method of strategic cost setting for goods and services. A loss leader is simply a product or service that a company offers under cost in an effort to attract customers. The goal of the loss leader strategy is that the loss a company takes on the product or service will be offset by the increase in additional sales from profitable items. Whether you are an online retailer, a brick and mortar storefront or a service provider the loss leader strategy may be one way to garner additional traffic that will pay off in the long run. Magazine publishers have utilized this strategy very well. They offer free issues or a highly discounted rate for the initial year in hopes the subscriber will see the value of the product, and continue their subscription at a higher rate. There are differing opinions on whether loss leader strategies are successful, and each company must carefully consider their situation and legal ramifications before offering one.

Is It Legal?

In many states, the answer is in a gray area. Twenty-two states have laws in place banning the use of  loss leaders under  the General Sales Below-Cost (SBC) Laws. In the Midwest, Minnesota and Wisconsin are the only states with laws regarding loss leaders on the books, along with many southern and eastern states. The SBC laws look at the use of loss leader strategy as predatory. The idea being that the companies most commonly using the approach often have dominance in their area. They can lower costs for a period that is long enough to drive away competitors, and once achieved raise the prices to cover their losses leaving consumers with nowhere else to turn. The laws, enacted during the 1930’s and 1940’s, were created along with Antitrust Laws.

Is It Archaic?

Many say yes. Because, as critics explain, most of the laws were created when the majority of producers and suppliers were controlled by large holding companies. These holding companies would invest in businesses that relate to one another in an effort to control the market and manipulate pricing. The Antitrust Laws helped to reduce this problem and protect the free-market. Though many of the SBC laws were amended in the latter half of the 20th Century, some believe they should be removed completely.

Other Considerations

Implementing a loss leader strategy requires some diligent planning and research. Along with understanding the SBC laws in your state, you also need to make sure that your company can afford the loss and will likely recoup it. Also, important to remember is that you advertising must be done carefully as well. False or misleading advertising could be considered fraud, which opens the door to some serious exposure.

SafeShield: Protecting Your Business, Protecting You

SafeShield is dedicated to protecting new and existing small businesses by ensuring that they  are adhering to corporate formalities and meeting all compliance requirements. They work hard to ensuring you are not one of the more than 85% of U.S. businesses that fail to meet the most basic compliance standards. Visit our services page for more information, or contact us with any questions. Allow us to help you protect your business, and protect yourself.

3 Tips on How Compliance Can Help You Sleep at Night

For every small business, there are many things that compete for your attention. Generating income, serving clients, researching new opportunities, managing finances, and many other responsibilities leave you with little time to spare. For most companies, the issue of compliance is not typically the highest priority. In fact, it is often ignored until the very last minute. This approach leaves many frantic, victims to increased stress, fines, penalties, and lost opportunities for new business. Also, because compliance regulations are often changing, it is easy to fall behind and set yourself up for disaster down the road. Fortunately, managing compliance doesn’t have to be so troublesome. These three tips for managing your company’s compliance requirements provides some simple ways to streamline your process and help you sleep better at night knowing that your company is covered.

1. Assess Where You Are And Develop A Plan

Before you know where you are going, you need to know where you are. Taking a little time now to audit how much of your resources focus on compliance will help determine ways to make the process easier. Create a master compliance calendar that calls for regular compliance checks and time to research any compliance changes that affect your business. This ensures that you remain in good standing and are aware of any compliance modifications. You might be surprised at how easy it is to manage when you have a solid plan in place.

2. Create Standard Operating Procedures

It is important that your compliance activities are well documented and easily available to the person or people involved in your compliance program. It may also be helpful to consolidate your program and assign it to one individual or department to manage. Having a documented system in place will help to foster communication and collaboration between involved parties and simplify compliance for greater efficiency.

3. Talk To A Pro

Hiring a registered agent for your company and taking advantage of a compliance advisor or other outside service to manage your compliance is likely the easiest and safest way to make sure you are fully covered. A professional who is an expert in the various compliance requirements and experienced in the best ways to manage them can be invaluable. The money and time you save can far outweigh any expense for this high level of care.

SafeShield: Protecting Your Business, Protecting You

SafeShield is passionate about protecting and improving new and existing small businesses by ensuring they are following compliance guidelines, adhering to corporate formalities, and meeting all compliance requirements. They work hard to make certain that you are not one of the 85% of U.S. businesses that fail to meet the most basic compliance standards. Visit our services page for more information, or contact us with any questions. Allow us to help you protect your business, and protect yourself.

Top 5 Reasons Recurring Revenue Is Critical For Your Business

For a business to be valuable, it needs to be generating revenue. However, not all revenue is the same. Recurring revenue is income that your company can count on to roll in month after month, and year after year. The cellular phone industry uses recurring revenue models exceptionally well and the benefits have been noticed. The current trend is that more and more businesses are seeing the importance and value of recurring revenue models, and focusing their resources on creating consistent revenue streams. Businesses operating solely on income from project to project, beginning each month with zero revenue, are functioning at a large disadvantage. Having recurring revenue that can be expected each month is critical to the success of your business for several reasons. Below are the top five reasons why.

1. Recurring Revenue Increases Revenue

Recurring revenue allows companies to be more strategic, and allows a focus on generating new revenue streams, without having to spend all your time simply trying to reach the same level of revenue from the previous month. The ability to count on recurring revenue each month means less time is needed to generate enough business just to remain afloat.

2. Recurring Revenue Increases Customer Loyalty

By providing your customers with products and services that hold ongoing value is also a great way to build customer loyalty. While it’s important that you truly are offering your customers value and great service, those customers that you can count on month after month will begin to feel a relationship with your brand, and will have the desire to keep coming back to you instead of switching to your competition.

3. Recurring Revenue Works for Any Business

Though cellular phone and other technology companies may be the best known group for capitalizing on this model, more and more businesses in a wide range of fields are making the shift. Using some creativity, and understanding your clients’ needs, can arguably allow any business providing a product or service to develop ways to generate recurring revenue. Monthly service plans, are one great example that even a product-based company can use to begin making recurring revenue work for them.

4. Recurring Revenue is More Than Just a Fad

There are a lot of systems and methods that companies invest in only to find the ROI is less than stellar, and hanging on to these fads can prove far more harmful when a business is unwilling to move on from it. In the case of recurring revenue, the experts agree about the importance of building this into your business, and that it is not something that will lose value as time goes on.

5. Recurring Revenue Increases Opportunities

Companies that partner with other companies to create collaboration models can be very beneficial and the transparency that a recurring revenue model provides enhances opportunities for collaboration.

SafeShield: Protecting Your Business, Protecting You

SafeShield is dedicated to protecting and improving new and existing small businesses by ensuring they are following compliance standards, adhering to corporate formalities, and meeting all compliance requirements. They work hard to ensure that you are not one of the 85% of U.S. businesses that fail to meet the most basic compliance standards. Visit our services page for more information, or contact us with any questions. Allow us to help you protect your business, and protect yourself.

Do It Right! How to Start a Company While Reducing Your Risks

In the middle of the night you shot upright in your bed, the light bulb over your head fully illuminated the room as you suddenly had the idea for the perfect business. Having an idea for a business is not rare. In fact, people have great business ideas all the time; the real question is will they act on it? Many people allow their fear and lack of understanding to prevent them from realizing their dream of owning their own company, but starting a business doesn’t have to be a pipe dream. With a lot of planning, a lot of effort, and the right kind of help your brilliant business idea may be your dream come true.

Setting up Shop

It’s true, you may have a great idea for a business, but it’s important to understand that a great idea is no guarantee. Starting your own company can be challenging and is not without some level of risk and a lot of unanswered questions. It is risky to leave a job to start a business. It is risky to back a new company financially. These and many other risks must be faced, but ensuring that your business is set up properly can reduce those risks and protect you and your assets.

There are many decisions that must be made from the type of business entity including sole proprietorship, Limited Liability Company, Corporation, cooperative, and others. You must properly secure a name with your state, register the company with your state, pay any fees, obtain a tax identification number, and complete a host of formation documents. Business permits and licenses must be applied for if necessary. And you must think about your method of accounting and all tax implications. If you are hiring employees, you will need to know the laws involved in that process. Finally, you must familiarize yourself with state and federal laws that regulate your business and the products or services you provide to make sure you are in full compliance. Furthermore, once all of this is tackled you have to consider ongoing compliance requirements as well.

Don’t Be Discouraged

Looking at that list can be disheartening, especially when you consider all the other things you need to think about such as marketing, accounting, sales, and all the other areas that many individuals starting a small business must tackle on their own. The key is that taking your time to research and plan can make the process much easier, and much safer. There are some excellent resources to help you including the Small Business Administration, your local Chamber of Commerce, even friends and other business owners. One of the best investments you can make is to partner with a business formation and compliance expert that can help you to skillfully navigate the process.

SafeShield: Protecting Your Business, Protecting You

SafeShield is dedicated to protecting new and existing small businesses by ensuring they are following the law,  adhering to corporate formalities, and meeting all compliance requirements. They work hard to ensuring you are not one of the more than 85% of U.S. businesses that fail to meet the most basic compliance standards. Visit our services page for more information, or contact us with any questions. Allow us to help you protect your business, and protect yourself.