module 3 - increase your profits€¦ · module 3 - increase your profits _____ this module is all...

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Don’t get stuck! Email me [email protected] - I’m here to help! ©2016 Ann Hawkins All rights reserved.

Module 3 - Increase Your Profits

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This module is all about how to make your business more profitable with the least amount of effort and this is what you’re going to learn:

The easiest way to increase your profit

How small changes can improve your profit

The discount myth

Why cash is all important and how to control it

How to find the most profitable activity in your business

How to manage regular financial activities

There are five Worksheets for this module

Worksheet - How to Increase Your Profits

Worksheet - A simple Cashflow template

Worksheet - Fixed and Variable Costs

Worksheet - Focus on the most profitable activities

Worksheet - Regular Financial Tasks

In addition there are extra resource sheets on:

How to keep track of regular payments like VAT, PAYE and Corporation Tax

Where to access more finance when you need it

How much is an ice cube worth?

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Price increases The most obvious way to increase profits is to increase prices. Every time I suggest this to business owners they put up a strong resistance and give me all sorts of reasons why it’s not a good idea. However, those who try it report that most customers either don’t notice or accept it without a qualm. Even if you lose a few customers, the overall effect can still be an increase in profits.

The most important thing to remember about price is that it is a perception that gives the impression of value. Businesses lose as much trade by being perceived as too cheap as they do by being perceived as too expensive. On the worksheet there are a number of other ways to increase your profits. Make a list of the most appropriate ways for your business.

Don’t lend YOUR money to your customers Getting your money in on time can make a huge difference to your profits. Whenever a customer pays late you are, in effect, lending them your money at no interest. If this means you have to borrow money or use an overdraft facility to tide you over, it’s adding injury to insult. Set your terms and conditions for payment and make sure your customers and clients understand them and agree to them. If you have the type of business where payment is made on invoice you can set the payment terms to seven or 14 days. There is no need to wait 30 days or more. For larger jobs you can agree an upfront payment followed by staged payments as work progresses. Beware of large companies that say they only pay after 90 days as this can often cripple a small business and needs to be negotiated up front, sometimes by agreement to invoice at the start of a job rather than the end. Invoice promptly Don’t wait until the end of the month to send invoices. Send them as soon as jobs are completed, preferably by an automated system that will also send reminders for unpaid bills. Increase prices The most obvious way to increase profits is to increase prices. Every time I suggest this to business owners they put up a strong resistance and give me all sorts of reasons why it’s not a good idea. However, those who try it report that most customers either don’t notice or accept it without a qualm because most people don’t buy on price. They’re buying from you because they like your

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product or service more than others or because they like YOU more than others. Even if you lose a few customers, the overall effect can still be an increase in profits. Look at how this works:

What happens when you increase your prices?

Increase prices by 10%.

Let’s assume 80% of customers still buy from you (in reality it will probably be at least that).

Number of products sold =80. Price = £110. Total sales = £8,800

Profit is now £20. Total Profit = £1,600

In this case your revenue drops but your profit has increased significantly!

Remember your goal is to increase your profit – not just add sales revenue that doesn’t generate profit.

Increase the number of customers This is the favourite avenue pursued by most business owners but is often the least effective way of increasing profit. It is estimated that it costs seven times more to acquire a new customer than to get more business from existing ones. Increase the average order value Adding extra offers in to regular orders can work well and is often an easier way to increase profits. Increase the average order frequency Getting each customer to buy more often can increase profits because the costs of servicing each customer will already be accounted for. When you increase each of the last three sections by just 10% you end up with 33.1% more turnover. If your profit margins stay the same or increase with economies of scale, profits will increase accordingly.

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The Discount Myth

It can be tempting to offer a discount or have a sale to get some money in.

I’d almost always advise exactly the opposite – put your prices UP instead!

This is why …

What happens when you discount?

Discounting can be the death of many businesses that don’t realise how badly this destroys their profits.

Here’s an example using a product that you normally sell for £100 each, making £10 profit on each sale.

Number of products sold = 100. Price = £100. Total sales = £10,000

Profit on each sale = £10. Total Profit £1,000

Discount prices by 5%.

Get an extra 20 sales

Number of products sold = 120. Price = £95. Total sales = £11,400

Profit is now £5 on each sale. Total Profit = £600

Although your revenue is up, your profit drops dramatically!

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Choose which strategies will work for you to increase profits:

Review entire pricing structure

Prune range of products/ services offered

Weed out loss making products / services

Concentrate efforts on high margin products / services

Invoice as soon as a job is finished, not monthly

Negotiate up front and staged payments

Make your payment terms as short as possible – on receipt of invoice is best

Don’t accept 60 or 90 day terms from big companies – negotiate

Don’t lend customers your money (late payments)

Make good use of cashflow forecasts

Review fixed and variable costs

Make paying easy by debit or credit card or directly into your bank

Add payment details to every invoice.

Talk to your bank or other lenders about cheaper repayment costs

Buy on short term credit to free up cash

Call the tax office to agree a payment plan when cash is tight

Decide on the most appropriate ways for you to increase your profits and list them below:

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Managing Finances Ask any successful business owner about their most important responsibility and they’ll answer, “managing finances”. As your business grows you may employ a bookkeeper, an accountant or even a Financial Director but knowing how your business is doing financially is the one thing that a business owner should never let go of. You should always know the exact

financial position of your business and have an accurate projection of what is coming in and going out in order to make the right decisions. I recommend employing a bookkeeper as soon you possibly can. They charge very modest fees and save you much more in accountant’s charges. They also help you to set up good systems that save you time and that help you to be able to manage your finances on a daily basis with the minimum of effort. As old as business itself is the saying that

There is little point in creating a huge amount of turnover if there is little or no profit in the business. Many businesses look as though they are making a profit on paper but the real test is how much cash they have to play with. Daily checks on cash flow and what is due in and out of the business is a key factor in making the right decisions.

The most successful business owners say they check their cash flow projections EVERY DAY. There is

nothing like understanding exactly what your cash position is to prompt you to pick up the phone

and chase outstanding invoices or to make some sales calls. Keeping the money flowing in and

controlling how it flows out is crucial.

Most businesses that fail do so because they run out of cash. There are no resources left to trade with, so planning is a crucial part of ensuring this doesn’t happen.

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Worksheet - A simple cash flow template Most bookkeeping packages have cash flow templates and there are many free examples available on-line and even videos on YouTube on how to construct one that is right for your business. It’s important to use that one that suits both you and your business and not to overcomplicate it. The most popular is a simple excel spreadsheet. A business owner’s best friend is the spreadsheet. Learning how to use these will give you more perspective and more control. These are much easier to use on an excel (or equivalent) spreadsheet. However, the trick is to find a method that you find easy to use so that you’re happy to check it every day. Try creating your own or use one that suits your business and send me an example if you’d like some feedback.

Income Week1 Week2 Week3 >Week52

Sales received ex VAT VAT received VAT rebate Bank Interest Other Income Total Total Total Total Total

Outgoings Wages Insurance Web hosting Stationery Other supplies Fuel Bank Charges Marketing / Advertising Accountancy Fees Travel Rent Other outgoings VAT Payments Total Total Total Total Total

Income minus outgoings = cash available

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The Profit Formula This is where you add up all the expenses of running your business and take them away from your revenue. It’s useful to split expenses into fixed costs and variable costs. Total Sales minus Total Costs = Profit Increasing your profits means that you regularly look at how to control or reduce costs.

Start by listing and examining all your costs. Variable costs are those costs that vary depending on a

company's production volume; they rise as production

increases and fall as production decreases.

Variable costs differ from fixed costs such as rent,

advertising, insurance and office supplies, which tend

to remain the same regardless of production output.

In the next Worksheet, list the fixed and variable costs that apply to your business. When you set up your cash flow chart add actual costs to those that apply to your business, detailing when each item is due to be paid.

Worksheet - Fixed and variable costs that apply to your business. Increasing your profits means that you regularly look at how to control or reduce costs. The costs are split into fixed and variable. Here are some examples to highlight the differences between Fixed and Variable costs:

Fixed Costs Web hosting, Rent, Membership fees, Salaries/wages, Equipment maintenance, Broadband/Internet costs, Insurance, Utility bills, Tool hire, Storage, Furniture.

Add others that apply to your business:

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Variable Costs These are all the costs that vary as your production and sales numbers increase and decrease. There

will be a break-even point that is useful to know as all sales over that number should result in

increased profits if the costs are controlled.

Add others that apply to your business:

When you set up your cash flow chart add actual costs to those that apply to your business, detailing when each item is due to be paid. Where can you cut costs? Look at all expenditure and consider whether it is possible to reduce each one, without adversely affecting your current quality of service. For example buying supplies in smaller quantities may increase unit price but could help your cash flow and save you having to pay interest on overdraft or credit facilities. Savings by buying in bulk need to be balanced against how much it really costs in terms of cash flow. Other ways to reduce costs:

• Automate everything that can be automated • Eliminate waste • Use cheaper materials (only where appropriate without damaging your product or service!)

Pool purchases with associates – buy in bulk • Challenge price increases from suppliers – many will offer a discount if asked • Update and change methods of working

Employ casual / part time / contract labour • Eliminate under-performing advertising / marketing • Systematically review all overheads • Improve negotiating skills

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What is the most profitable activity in your Business? If your business is about supplying products it is relatively easy to determine the most profitable lines. If you have a service based business it can be trickier to figure out which are profitable activities and which are not. We all tend to gravitate to the activities that we enjoy. A photographer may love the process of taking and producing great shots but hate the idea of having to sell them. The activity of taking the pictures is essential to the business but without sales there is no business so there needs to be a decision about how much each activity is worth and who is best suited to do them. Pursuing high return activities and dropping or delegating the less profitable ones is often the difference between creating profit and creating turnover. Examine your business; put every activity under the microscope and be ruthlessly honest about finding your most profitable activities and about what your time is worth. Then look at how you can do more of the profitable activities and what to stop doing or outsource to someone else.

Worksheet - Focus on the Most Profitable Activities

In the following chart, list all the activities in your business and put each one under the spotlight.

Mark each one as high or low profit generators or no profit (e.g. admin).

Decide how each activity can be made more profitable by:

a) Increasing prices

b) You spending more time on it (assuming your time is the most expensive resource in your

business)

c) Decreasing costs (materials/ outsourcing to a lower paid person/ streamlining/ automating)

or, if the activity is non-essential and can’t be made profitable

d) Eliminating it

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Activity High / Low / No Profit Increase profitability by:

Add more rows as needed

Regular financial tasks

More businesses stop trading through lack of cash than for any other reason. Nothing is more galling than going out of business because you are owed money by clients who are unwilling to pay on time. This is why it is essential to always know your cash position.

Make time for regular daily, weekly and monthly tasks as well as quarterly and annual reviews. Set the intervals that are most appropriate to your business. Start by creating a check list of activities, such as in the template in the next Worksheet. Every business will have a different checklist so it’s important to make sure yours is comprehensive and suitable for your unique business situation. When you are monitoring cash flow you can spot when cash is likely to be tight. The sooner you notice this, the sooner you can do something to prevent the disaster of running out of cash. Look at what cash came in over previous weeks and months and make informed estimates of what is likely to come in. It can help to make best, mid and worst-case projections for what is expected.

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Worksheet - Regular Financial Tasks Here are some examples that you can include in your template: Every day activities:-

a. Bank cash and cheques (unless you have a cash based business, try to move customers to other forms of payment). b. Check bank balance c. Check cash flow – what is due in and out in the next few days and weeks. d. Send invoices as jobs are completed, not at the end of the month.

Weekly activities:-

Credit control – This is essential to maintain cash flow. If an invoice remains unpaid after the due date, send weekly reminders until it is paid. Many simple accounting packages will send automatic reminders but failing this your cash flow chart will remind you. It’s important not to let payments get out of hand. Often a phone call will get a better a result than a written reminder. if there is a problem, the sooner you know about it the better.

Monthly activities: –

a. Review cash flow - a monthly review as well as a weekly one will help you to make projections for the year. b. Tally invoices that have been sent during the month c. Pay suppliers d. Reconcile bank statements. A reconciliation compares what the bank has recorded compared with what you have recorded in your accounting program. This helps to identify discrepancies and picks up things like bank charges that might not appear elsewhere. e. Prepare management accounts. These can be simple calculations that show how much you are spending on a particular item, e.g. office supplies. You can also compare actual expenditure to budgets or compare one month against another to pick up seasonal variations or trends. f. Breakeven calculation. Take total income and compare to total expenses for the period. At the breakeven point, no profit has been made, nor have any losses been incurred and it is a good indicator that action must be taken to improve profits in the next month.

When you are monitoring cash flow you can spot when cash is likely to be tight. The sooner you notice this, the sooner you can do something to prevent the disaster of running out of cash. Look at what cash came in over previous weeks and months and make informed estimates of what is likely to come in. It can help to make best, mid and worst-case projections for what is expected.

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Everday Activities Task Responsibility

1

2

3

4

5

Weekly Activities

1

2

3

4

5

Monthly Activities

1

2

3

4

5

Knowing your financial situation helps you to make clearer decisions on what you need to do in any

situation.

When you’ve completed all of these steps you’ll have a great understanding of how to make sure

your business stays profitable.

There are five Worksheets for this lesson


Worksheet - A simple Cashflow template

Worksheet - Fixed and Variable Costs

Worksheet - Focus on the most profitable activities

Worksheet -14 Regular Financial Tasks

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There are three extra resource sheets: Accounts, VAT, Corporation Tax, PAYE etc Sources of Finance How much is an Ice Cube Worth?

Resource Sheet: Accounts, VAT, Corporation Tax, PAYE etc. All businesses need to prepare some sort of accounts, either for legal purposes or in order to understand how the business is performing. Personal tax and corporation tax can only be calculated using accounts but the accounts for each business differ dependent upon its size and the appropriate accounting and taxation regulations. Most small companies and LLPs (Limited Liability Partnerships) do not need to file full accounts if the turnover is less than £6.5m and they meet other balance sheet and employment criteria and most can also submit unaudited accounts. These exemptions do not, however, remove the obligation to prepare full accounts for shareholders. To manage any business, especially through stages of growth, some form of basic bookkeeping is an essential minimum requirement.

Many business owners ruin their evenings and weekends by doing basic bookkeeping. While it is essential to know the numbers in your business it is hugely beneficial to employ a bookkeeper to present you with the figures you need. If you are doing your own bookkeeping and it isn’t something you enjoy or something that comes easily to you, work out how many hours you spend on this job and how much a bookkeeper would cost you to do the same job (usually a lot less than your time is worth). This usually proves that a good bookkeeper is worth every penny, especially as they will also save you a lot in the more expensive fees an accountant charges.

VAT We may not like VAT, but we certainly can’t ignore it as it applies to most goods and services, and it is now one of the main sources of income for HM Treasury. It is essential, therefore, for any person starting out in business to give some time to thinking about VAT. By now, however, your turnover may be approaching the VAT threshold that will require you to become VAT registered, if your business hasn’t already. If you’re unsure what the threshold is, then visit http://www.hmrc.gov.uk/ to check as it’s often updated at the annual Budget. Let’s start with the Standard VAT Scheme. Once you become VAT registered, you’ll need to start adding VAT to the rateable items on your invoice. For the purpose of this exercise, let’s say the current VAT rate is 20%. This means that an invoice you raise that was £6,000 has now become

http://www.hmrc.gov.uk/

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£7,200. This extra £1200 belongs to HMRC, so if you haven’t already by this point, open a VAT account with your bank to put money aside for tax . At the end of each VAT quarter, you will need to file a VAT 100 with HMRC, which will calculate what you owe them. For example, if you’ve collected £66,000 of vatable income, £11,000 will belong to the tax office. However, if you’ve paid £30,000 in vatable supplies, then £5,000 will be money you’ve paid out that HMRC owe you. Once you’ve completed your VAT 100, it will highlight that the amount you owe will be the difference between what you’ve paid in VAT and what you’ve received – In this case, £6,000. If the VAT your paid over the VAT quarter exceeds the amount you’ve received, you’ll then be entitled to a VAT rebate. The VAT registration process mentions a number of special schemes. You should consider these as they are designed to help you. There will be cash flow benefits, and, in some cases, cash benefits. These are the Flat Rate Scheme, Cash Accounting Scheme and Annual Accounting Scheme. The Single Market is now 20 years old, with many small businesses trading with the EU and beyond. The VAT rules can appear quite confusing when it comes to dealing with exports and imports, so speak to your accountant to understand all the options available to you.

PAYE PAYE is only an issue if you employ people, but is still a requirement if you are a limited company and you, and/or your spouse or partner/s are the only employees. The HMRC describes PAYE (Pay As You Earn) as

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“…the system that HM Revenue & Customs uses to collect Income Tax and National Insurance contributions (NICs) from employees (including directors of limited companies). The tax and NICs is deducted throughout the tax year based on the employees' earnings and then paid to HMRC. You must deduct tax and NICs from employees' pay each pay period and pay your employer's Class 1 NICs if they earn above a certain threshold. Your payroll software should do this. You will pay these amounts to HMRC monthly or quarterly. You must submit a Full Payment Submission (FPS) online, on or before each payday, to tell HMRC about payments made to all your employees and confirm the tax, NICs and other deductions. Again, your software should do this each time you run the payroll to calculate PAYE. You will need to do this regardless of the amount you've paid them or how long they've been working for you. You must pay the correct amount, based on your FPS submission on time. If you don't you may have to pay interest or penalties.”

Real Time Information The latter part of this statement relates to the new PAYE reporting rules known at RTI (Real Time Information), which came into effect in October 2013. You absolutely must to make sure your payroll process is RTI compliant as HMRC will fine those that aren’t. The reason for this change is that a single Universal Credit is replacing most tax credits, a process that is due to be completed by 2017 and HMRC needs accurate information on pay and deductions to facilitate its introduction. To ensure your payroll is RTI compliant, you need to ensure you’re doing the following:

Check all your employee information is accurate including name, address, date of birth, gender and NI number

Have a record of the hours that each employee regularly works in a week Include all staff, even those under the Lower Earnings Threshold (LET) Ensure your payroll software is RTI-compliant Send a Full Payment Submission (FPS) to (HMRC) as previously mentioned.

Corporation Tax Corporation Tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies. Taxable profits for Corporation Tax include:

profits from taxable income such as trading profits and investment profits (except dividend income which is taxed differently)

capital gains - known as 'chargeable gains' for Corporation Tax purposes

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In, short, if your company or organisation is based in the UK, you'll have to pay Corporation Tax on all your taxable profits - wherever in the world those profits come from. The UK tax system isn’t the most complex but equally has many twists and turns. Your best bet is to surround yourself with some good advisors. Choose a bookkeeper and/or Accountant, who is qualified, who comes recommended and has your best interests at heart.

Key dates For sole traders these will largely revolve around VAT, PAYE if you employ staff, and your personal self-assessment tax return. Paper returns must be submitted by 31 October in the same year following the end of the tax year in April. Online returns and any payments due must be received by 31 January in the next year. Most partnerships will also be subject to the individual assessment of each partner’s liability. VAT returns and payments are due monthly or quarterly dependent upon which ‘scheme’ your business operates – most submit a return and payment quarterly but there are various options available, the most common of which is annual accounting whereby you pay monthly but only submit a return once each year. Once you are registered, these details are spelled out for you. Incorporated businesses – those trading as a limited company – have a number of other obligations as follows:-

a. Annual Return to Companies House – depends on date of incorporation b. Accounts to Companies House – nine months after year end c. Corporation Tax payment - nine months after year end d. Corporation Tax Return – 12 months after year end

Long before seeking new loans or additional investment in your business you must have control – nothing is really more important.

Note: Anyone can call themselves and accountant so check qualifications and experience in your particular sector before engaging one and remember that a good bookkeeper can save a lot of money on accountants fees by presenting books that are easy to turn into a set of accounts.

There is also a separate information sheet on how you can access different forms of finance and a

case study about pricing in How much is an Ice Cube Worth?

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Resource sheet: Access to Finance Most small businesses start with the minimum of investment, usually from the personal savings of

the owner, their family and friends.

In order to grow, you may need to look for other forms of investment.

Finding business finance in any economic climate can be challenging but there are quite a few

different ways to access finance and more alternative financing options filling the gaps. The most

important thing to remember is that all of these methods take time so careful planning is essential.

Personal Investment / Equity

Most small businesses initially use funds provided by the founder and family and friends as either

loans or investment in equity (shares). A company can issue a number of different classes of share

with differing conditions and benefits and care should be taken – and professional advice sought – if

you plan to issue anything other than the most simple “ordinary” class of shares.

Bank Finance

Funds available from banks come in many forms with the most common being a loan or overdraft.

Loans are usually taken out for a specific purpose such as the purchase of new equipment and

overdrafts are often used to smooth the cashflow of the business month to month. Bank lending

often comes with high interest rates and may require a guarantee from the directors/owners or

need to be secured against property or other assets.

If your firm isn’t able to meet the security requirements but meet all the other bank criteria you

should consider the Enterprise Finance Guarantee – see: http://british-business-bank.co.uk.

Microloans and alternative finance

The lack of a credit history, collateral or the inability to secure a loan through a bank doesn't mean

no one will lend to you. Microloans are often so small that commercial banks can't be bothered

lending the funds. Microlenders offer smaller loan sizes, usually require less documentation than

banks, and often apply more flexible underwriting criteria. This is a growing sector but check terms

and conditions carefully.

Grants

There is a wide variety of business grants available from the government, local authorities, regional

development agencies and the European Union but it’s often a complex process to find a grant that

your business is eligible for and the application process can be lengthy.

http://british-business-bank.co.uk/

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Grant funding is brilliant if you can find something applicable to your business – there’s no cost other

than any initial fees, no repayments and no loss of equity – but the time involved can be significant

and you might need help from a specialist consultant and their fees can be significant.

There are lots of websites to help you search for grants such as: http://www.grantfinder.co.uk and

http://www.j4b.co.uk.

Asset Finance

Essentially this type of funding is similar to a loan – it enables you to purchase a specific item, such

as a car or piece of equipment, and spread the cost over a number of months or years – often

related to the useful life of the item. This type of finance is available from a number of specialist

lenders as well as the mainstream banks. Effectively you rent the item from the lender until the end

of the agreement at which point ownership passes to you. Interest rates can be high so check out all

the terms and conditions to be certain it’s the best deal for your business.

Invoice Finance

Funding secured against your outstanding invoices to customers or clients comes in a number of

guises and is provided by specialist lenders as well as most banks. It comes with a variety of names

and slightly differing conditions – invoice discounting, factoring and forward finance are popular

descriptions – and most providers have products appropriate for businesses of all sizes. One major

lender categorises businesses by turnover as: small – less than £300,000; medium – less than £5m

and large – above £5m and this type of funding is often useful in construction, recruitment and

export businesses. Some lenders have specialist divisions to cater for specific trades.

Crowd Funding

This relatively new form of finance is rapidly growing and there are now hundreds of crowd funding

platforms.

Some operate on a strictly equity based model – whereby hundreds of small investors group

together (in a crowd) to provide funding for a business in return for a small equity stake. Often quite

significant sums can be raised for the loss of very little equity. Examples of this type of platform are:

www.crowdcube.com and www.seedrs.com.

Some sites – such as www.indiegogo.com - offer the opportunity to gain funds from a large group of

contributors without loss of equity – you merely offer a number of different ‘perks’ related to the

size of contribution. These might be promotional items, your own product or service or some other

form of inducement. This type of site usually does well for businesses offering some sort of

community benefit or for individuals raising money for a relative’s operation for example.

http://www.grantfinder.co.uk/

http://www.j4b.co.uk/

http://www.crowdcube.com/

http://www.seedrs.com/

http://www.indiegogo.com/

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For crowd funding you will need to prepare an attractive pitch - usually including a short video – and

for the equity sites you will also need a financial summary alongside your pitch and a full business

plan available for perusal by serious potential investors.

Angel Investors

An angel Investor, business angel or informal investor is an affluent individual who provides capital

for a business, usually in exchange for equity. Angel investors often organize themselves into angel

groups or angel networks to spread the risk.

Resource sheet: How Much is an Ice Cube Worth?

Could an ice cube be worth $8?

Gläce Luxury Ice apparently is. You can choose from the

traditional cube shape called G3 (G-Cubed) or

the Mariko sphere, pictured here.

Sweep away all the hyperbole of the purity of the water,

the re-sealable pouch that avoids contamination, the

melt rate and the hand crafted surfaces and what you’re

left with is ice that anyone with a freezer can make for a

few pennies.

Does is sell? Yes it does, to people who put on luxury

events.

What does this mean?

Do some people have more money than sense?

No. It means that price and value are perceptions.

When you sell ice at $8 a cube what are your really selling?

http://annhawkins.com/wp-content/uploads/2014/06/ice-cube.jpg

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You’re selling hedonism, decadence, self-indulgence.

You’re not selling frozen water.

Pricing extremes are important to profit.

You can’t be the cheapest in the market unless your whole business is geared to price control and

volume (think Ryan Air).

You can be the most expensive if you know exactly what you’re selling.

If you go with mediocre, your profits will be mediocre.

Every product or service has something other than price to distinguish it from the competition –

even if that is only the words you use to describe it – the perception you create.

Figure out what that is.

Figure out who will pay for it.

That’s your market.

Go get it.

Gläce Luxury Ice is the world’s leading premium drink-ice brand. Our proprietary manufacturing process creates a zero-taste(TM) profile ice which, unlike traditional ice products, allows the consumer to maximize the beverage experience. Our elegant design provides minimum dilution and maximum cooling, greatly enhancing enjoyment at the point of consumption. Gläce Luxury Ice provides consumers with a top-shelf choice for ice that matches their premium spirit selection.

Traditional machine-ice, generally made with local tap water, may contain upwards of 150 impurities and carcinogens, resulting in poor tasting and potentially unhealthy ice. In contrast, Gläce Ice is an engineered product protected in a re-sealable package, ensuring a sanitary chain of custody from origin to enjoyment. As a premium, branded product, Gläce Ice provides a unique, consistent experience for the consumer who demands the best. http://www.glaceice.net/

http://www.glaceice.net/

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An interview with the Glace Ice CEO.

Roberto Sequeira , creator and CEO behind Glace Ice emigrated from Nicaragua when he was fourteen, not speaking a word of English. Here, he discusses his business strategy and how UCLA Anderson taught him some of the most important tools for entrepreneurship that he still swears by today.

“I’ve always had the inkling to be an entrepreneur, even after receiving my undergrad degree in engineering from Fresno State. The inspiration to start my own company came in George Abe’s Entrepreneurship and Venture Initiation class. The class was encouraged to come up with a business idea. Instead of just coming up with a product, I thought ‘what if you could design the ‘perfect’ business?’ (Niche, high margin, relatively easy to start, scalable) After exhausting most consumer products, (watches, cars, clothing, shoes, foods), we arrived at water and then naturally, ice. (Our) group worked on that project then everyone went on about to their own respective careers.

One year after Anderson I decided to focus on Gläce Luxury Ice full time. I own the company but I built the brand with a lot of help from classmates, colleagues and friends.

I learned two really important lessons in business school. In Prof. Cockrum’s entrepreneurial finance, the professor drew a big circle with all the components of a business and he said, “This is the wheel of business, and cash makes this wheel go around.” There’s no lack of ideas in business school, the brightest minds will give you solutions but you can’t even print a business card without cash.

The second most powerful tool in business is that of the voice of the consumer. Whenever an article would come out about the importance of ice in cocktails and my friends would share it with me I’d ask them to email the writer and tell them about my brand. If you are an interested consumer and you e-mail a company, your e-mail will get read. Editors won’t read your e-mail if you’re promoting your own product. It’s the readership that makes all of the difference in the world when trying to get your product noticed

Everybody thought that starting a luxury brand business in late 2007 was crazy, but the people who I was marketing to were not necessarily affected by the recession, so I figured if we can do well during this time, imagine how successful we could be after (the recession) is over. Luxury begins when necessity ends.

No one should make you feel guilty about achieving success. If you earned it or inherited it there is no shame in having it… so long as you didn’t steal it. This was an important point to make, so it was important for me to make the Gläce Luxury Ice brand have a responsible component. So I decided that we’re going to take a portion of our money and donate to charities, some in Nicaragua, some in Africa and Honduras. There isn’t one specific organization because it’s nice to be able to control the scope and places we help. They’re all water quality improvement-based charities in the Third World, like our project in Honduras building ‘pilas’ with Water Brigades. There isn’t a fixed percentage we give and we do it once a year based on how much we make in that year. It’s easy to give when you have lots… but doing it when starting a business requires commitment and diligence.”

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