Republican presidential candidate Herman Cain knows how to sell his ideas. He has brought important business lessons to his campaign from being CEO at Godfather's Pizza. Any type of marketing comes down to simple concepts that are easy to understand by the consumer and then repeated over and over again. His suggestion to simplify the tax code by implementing a 9-9-9 plan (9% for individual tax rate, 9% corporate tax rate, and a 9% national sales tax) has voters talking. Strangely enough, some sources have suggested that his tax plan was actually borrowed from a popular video game, SimCity. Others suggest that it was already part of a Godfather's pizza promotion!
In that tradition, here is the 9-9-9 plan all small businesses should follow to be profitable:
9% of revenue on sales and marketing promotion
In tough times, small business spend too little on marketing their brands and products. It's a convenient, but always a damaging budget cut. This is because businesses don't actually sell their products, but instead, customers buy them. The only time a prospect buys a product is when they have the need and they know about the company right then. Consistent marketing ensures a business will be visible when prospects are ready to buy.
Where to spend: The small business' marketing budget should be allocated for places where prospects are talking about the pain it solves. Consistently showing that the company is an expert who helps people solve their pain will bring a steady stream of new customers through the doors.
9% of all expenses are fixed overhead
High overhead expenses always kill businesses, especially during sagging sales. This 9 % overhead number needs to include rent, insurance, utilities, Internet and any people that are not revenue generating or "customer facing".
How to reduce overhead: Unless it's a retail business, think hard about needing a physical location. Internet collaboration tools make it seamless to work together online. Incentivize employees to opt out of health insurance if they can source it elsewhere. To further cut nsurance expense, shop around and increase deductibles. Evaluate the company's true risk. Many businesses are actually over insured! Examine every person at the company and their role. If they don't produce revenue, they are overhead. What would truly happen to the business if they left? Which other expenses can be made variable so they do not add overhead?
9% of sales for retained earnings or investment per year
Most business owners don't retain or invest enough capital in their business. They take it all out at the end of the year because they personally need the money or to reduce their tax liability. Unfortunately, many times this leaves their business under capitalized in January if they do not have substantial accounts receivables or cash on hand to fund the new year.
What to invest in: Investments in infrastructure or people that run the business need to be made every year. For example, does that entry level accounting system still work? Do free Yahoo accounts give the collaboration your staff requires? Is it time to stop managing everything and hire real leaders? Does the company's product line need to be updated?
What would be your 9-9-9 for running a profitable small business?
