1.Your Risk in the business minimizes:

The major mistake committed by small business people is mixing of business money and personal money. Income and debts from the business are mixed with personal funds. If the business is profitable proprietor will be benefited. If the business incur loss proprietor will be affected.

When you are creating a private limited company, what you are doing is that, you are creating a lifeless separate entity. You are personally not associating with the business but professionally associating with the business. You need not pay the debts personally. The owner and share holders are not personally liable. Hence it is called Limited Liability Company. Your responsibility is limited. Hence by creating a Limited Liability Company, your personal risk is minimized to the larger extent. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It

2.Your Tax burden Reduces:

While Sole proprietorship and partnerships pay income tax, Companies pay Corporation tax on their taxable profits. There are many allowances and tax-deductible costs that can be offset against the profits of a company. That means Tax would be paid after deducting many costs incurred by you. In addition to that the current level of Corporation Tax is lower than income tax rates.

3.Your Social appeal and reputation enhances:

With the formation of company, you are declaring to the people that you are serious about the business and its continuity. Lending from the banks is also easier. Banks provide loans against the security of the company’s assets. The greatest advantage is that you can build right team of people. Quality workforce is not hesitant to be part of the company, because of their sense of security. EntreLeadership: 20 Years of Practical Business Wisdom from the Trenches

4. Your big dream realizes:

Big project requires big investment. Few individual efforts cannot generate trust, to get the required investments. Qualified people also not show interest in you. Formation of private limited company multiplies the borrowing capacity of the organization and also secures the deposits and loans from Banks and financial institutions.

5. Your multiple assets bring multiple advantages:

You play multiple roles and get multiple advantages. As a director you receive remuneration, as a share holder you receive dividend, as a lessor you receive rent etc

6. Your name remains in the history:

People may join or leave the company, but the company is permanent. Whether or not you are there your dream enterprise exists eternally, unless it is dissolved.

7.Your Wealth creation skills leverages:

The secret to wealth building is making use of human resources and finical resources. This blending of the resources is possible only with the formation of the company. You can accumulate huge investment from the share holders and business debt from the lenders. Share holders do not fear much, because their risk is limited to the extent of their share.

8. Your Transfer of the company is easy:

In case you want get away from the company you can do it very easily. You can transfer the entire share holding to the intended people as an ongoing concern. This change of ownership saves the time and money and also stamp duty. The major disadvantage of the private limited company is maintenance and cost of accounts. You also need to follow various statutory regulations. Before taking the decision weigh the pros and cons of forming a private limited company. But your big dreams not become reality without formation of the Company.

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Application of Pareto’s 80-20 rule improve sales It suggests, in many events roughly 80% affects causes from 20% efforts. In other words major results come from minor efforts or minor results come from major efforts. If you are able to identify these patterns in your business you can improve sales and ensure customer satisfaction.

What is Pareto 80-20 rule?

Italian economist Wilfred Pareto observed that 80 % of land in Italy was owned by 20 % of the population. Business management thinker Joseph M juran suggested this principle and named after pareto.The 80-20 rule can be applied in every aspect of our life. Application of this rule in marketing brings out unimaginable customer satisfaction and improved sales.

Common sense Observations:

1.We wear 20 % of favorite clothes about 80 % of time.

2.We spend 80 %of time with 20 % of known people.

3.We spent 80 % of our time on trivial matters 20 % of time on  few valuable matters.

4.Our 20 % of work consume 80 %of our time and resources.

5.In business 80 % of sales come from 20 % of customers.

6.In business 80 % of your profits come from 20 % of your  products and services.

7.In any organization 80 % of complaints are related to 20 % of  problems.

Identify and focus for customer satisfaction and improved sales:

All of the above observations lead you to conclude that our 80% of results come from 20%efforts. Mere observation does not serve any purpose what is required is application of this rule in the business to bring out significant results. Let us identify top 3 elements of business and apply the 80-20 rule to know how it improve sales and customer satisfaction.

1.Our observation reveals that top 20% products give profit of 80%.Identify top 20% products or services which give more profit and improve their quality, expand their market, focus campaign on these products. That means you are shifting your focus to top 20 products.

2.Our observation also reveals that top 20% customers covers 80% sales. Identify top 20% customers who are covering 80% sales and focus on their relationships. Since these customers represents 80% of your sales, your survival in the business depend on their loyalty. Hence be in touch with them. Send them wishes whenever possible. Help them and give them value added services. Focus on these customers because they are your bread earners.

3.Our observation also reveals that majority complaints are related to few problems. Identify the problems which generate 80% of your complaints. Focus finding solutions to such problems that improve sales.

80-20 principle can be applied in all aspects of your work. Success of your business depends on shifting the focus from trivial more to valuable few. All successful business enterprises following this rule and optimizing their resources and achieving 100% success. Hence don’t work hard on all matters. Work smart on few right things and improve sales and customer satisfaction.

To improve sales Choose the right pricing strategy

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What is the right pricing strategy? It is a big question before small-business people. Fixation of the pricing strategy is an important decision that will decide the success or failure of the small business. Consumer always try to get the goods for competitive price and whereas the seller always try to maximize the profit by pricing it higher.

The price of the product depends on Company’s popularity, quality of the product and how it is establishing its unique identity in the market. Generally there are four important pricing strategies adapted by the business people. Knowledge and understanding of these pricing strategies will help small-business people to take right decisions.

1.Cost plus pricing;

In this method price is fixed based on the cost of the product and estimated profit. This is a survival strategy because without profit no business survives. Customer is however not interested in costs. Customer assesses the cost of the product by comparing with similar products available in the market. Generally the price of the product must match with the value of the product but not based on cost price. This strategy however is quite useful in the initial years of business where survival of the business is important than gaining profits.

2.Market set pricing;

This strategy is market driven. Market sets the price rather than you fixing the price. When there is higher demand people will pay higher prices and you get benefit out of it. However when the demand is low people tend to pay fewer prices. This is very familiar in travels business. When ever there are holidays the volume of passengers increases and travels people raise the prices. In other days when the demands fall down they also reduce the prices.

3.Value created pricing;

Reputed company’s like Sony, hp, apple, etc. set prices based on this strategy. In this method the value of the product is improved first and then price is fixed. Small-business people must focus on this pricing strategy to get maximum profit and advantage of it. In order to adopt this pricing strategy focus must be on the development of unique brand. Development of brand means development of the trust and relationship. The priority must be given to fast and efficient service to the customer. You need to change goods return and exchange policy and also money back guarantee schemes to develop trust in customers. A lot of patience is required to meet requirements of the customer. You need to ensure that they would not be any communication gap between you and the customer. When you achieve full satisfaction of your customers you can adapt this pricing strategy enhancing the prices gradually.

4.Market capturing pricing;

Many large business companies adopt this pricing strategy, to grab the huge market share. In this pricing strategy the main intention is to capture the sizable market share initially so that they can avoid other competitors. Many big companies like Reliance, Sun direct, etc. are using this strategy to capture the large market share.

You need to assess the situation carefully before fixing the price. There is no hard and fast rule in fixing the price of the product or service. You need to be flexible and change the strategies according to the situation on the ground, taking into consideration the factors which I discussed above. I must tell you business is always dynamic and it is not static and therefore fixation of price also situation dependent. Right pricing strategy helps small-business to survive and stay top in the business.

After understanding right pricing strategy Apply Pareto’s 80-20 rule to improve sales and customer satisfaction

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Fixation of the pricing strategy is an important decision. It will decide the success or failure of the business. The price of the product depends on company popularity and quality of the product. There are four important pricing strategies. Price is fixed based on the cost of the product. —>Watch Video

The price of the product must match with the value of the product. This strategy is quite useful in the initial years of business Survival of the business is important than gaining profits. This strategy is market driven. When there is higher demand people will pay higher prices and you get benefit out of it. When the demand is low people tend to pay fewer prices. Focus must be on the development of unique brand. That means development of the trust and relationship with the customers. When you achieve full satisfaction of the customers you can adopt this pricing strategy. The main intention is to capture the sizable market share and avoid other competitors. Need to assess the situation carefully before fixing the price. Right pricing strategy helps to survive and stay top in the business.

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