Red Zebra Business Centre -Management Memos
June, 2008. Making Measurably More For Your Business Since 1985!


There's a Goldmine in Your Office!

Hey!...   Just where is this 'goldmine'?   How do I get the gold? Read on!

Estimates vary, but it's generally agreed that a new contact costs at least three or four times more to bring to the purchase a decision, than it does to make the same sale to a previous customer.

What about the cost of generating sales leads that go nowhere? When you have an interested lead, it's on the way to being money in the bank. 

And sales leads that have gone cold? That's money spent but achieved nothing - so far!

Proper, cost effective marketing must always include keeping effective contact. Get help to find your gold!

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  • Oh! You do have a database in your accounts system (or some other application)?
    Sorry to say, these are usually good databases - just not good at getting your marketing done easily and effectively! We'll get you a better database marketing tool - one that really does work.

  • You don't know how to make best use of the database you've already got?  
    Fine. We can show you how to make the most of it, and train your staff to do the best with what you have. Then we'll show you how to get a good database!

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How to Budget for Better Times

Recent confusing signals about the economy will leave some businesses in a very difficult position by June 30, 2009! When you're planning for this year, it's probably wise to take a long, cold shower!

Here's a classic example. Late last year (2007), information in the caravan industry showed a demand almost twice the industry capacity to supply, with long lead times, and very fraught retailers. Now demand has come right off, with the combination of rising fuel costs and strong RBA steps to slow the economy. Plans which once seemed bold, to invest in increasing capacity to meet the high demand, now look questionable. What will be important for you in budgeting for these uncertain times?

First, have a plan!  For many small businesses, the idea of a business plan seems academic, impractical, and a waste of time. "They never work out anyway!", or so it's said. That is true, literally, in most cases - although businesses with a plan do better than those without! In turn, that makes writing the budget easy - it's just your plan set to numbers!

Second, look at the numbers!  This is really important. A few weeks ago, Mark McInnes, CEO of David Jones, said that his company was planning on a slower rate of growth, but still working for strong growth,. Having looked at what is happening in the economy, that company saw how its numbers would be affected, and planned to do something about it. There's that word again - they 'planned'!

Third, look beyond the numbers!  This is even more important. When commenting on the David Jones plans to continue strong growth in a slowing economy, McInnes said David Jones had ordered more cosmetics and less plasma TVs - clearly signalling a planned change of attack in response to the work of the Reserve Bank in slowing demand for consumer durables. What is even more startling, is that McInnes told his audience that these plans had been in process for eighteen months! They looked ahead. So can we!

Fourth, work out what is important for your business!  Do you depend on big ticket items - the kind of discretionary spending that needs consumer credit to facilitate? Probably need to work on the service and support side of the business to provide a bolster against a slide in consumer demand. Do you depend on smaller sales value items? (Generally that means consumables.) Probably better focus on items that give a 'high value in use' to strengthen your competitive edge, and support that product mix with budget lines to 'signal the savings'.

Fifth, plan your activities to maximise your strengths!  Your advertising plan, your sales training workshops, your merchandising plans, and your buying plans all need to match your emphasis on what's important for your business. Make it a comprehensive plan - one that takes into account all the parts of your business. And watch your stock holding like a hawk!!!

Sixth, plan for a crunch!  General consumer demand has already weakened significantly. If demand for your products and services has not slowed yet, it almost certainly will. When an economic slowdown comes, it doesn't hit everything all at once. Generally it hits investment industries first, that 's why there is so much concern that mining investment is not slowing. Unless investment slows, there will be an ever bigger crunch coming. Next in line is retail spending - hence the David Jones comments about its plans for this year. Last of all, long lead infrastructure projects get hit, and pipeline and electricity projects get deferred. Glenn Stevens, Governor of the Reserve Bank of Australia is on record (RBA statement, 06 May, 2008)"

"In order to reduce inflation over time, growth in aggregate demand needs to be significantly slower than it was in 2007. Evidence is accumulating that this is occurring. Indicators of household spending have recorded subdued outcomes over recent months, and demand for credit by both households and businesses has weakened."

Remember, you must plan for what you can see will happen! Taking last year's figures as a guide for this year, and saying, "That'll do for our budget", is indeed a risky, risky business!

You can plan for better times - just like David Jones has!

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