The Micro and home based business (HBB) sell their product in a number of ways and each has advantages and disadvantages. To improve your sales you must understand what is best for your circumstances and type of product.
1) Many decide to go from retailer to retailer, trying to convince them to buy their wares. The advantage of this method is that you meet your potential client face to face and can begin to build a relationship. There is a saying that no one knows your business as well as you do, therefore you should make the best salesperson, as you are more committed and passionate than anyone else is likely to be.
The disadvantage is that this takes an enormous amount of time away from developing your product and your business. It can often be frustrating and expensive if you do not get the sales due to your lack of experience as a sales person.
2) An alternative many choose is to use an Agent or Distributor to sell on your behalf. The advantage is that these people should have skills in selling and that your time is freed up from undertaking this task. But what should be a simple answer to your problems can be fraught with danger. First you must understand the difference between a Distributor and an Agent.
A Distributor purchases the product from you and takes ownership of it. They usually have an agreed territory and they expect a large discount (often 30-50%) to enable them to put their mark up margin onto the price and still retain the wholesale price. You get the best results when you and the Distributor work together and agree on marketing strategies.
An Agent is a Sales Person and usually sells for more than one Vendor. You set the price and trading terms. The Agent usually gets paid a commission, but can also receive a retainer. Once a sale is made you distribute the goods and invoice the customer.
3) At some point many Micro and HBB operators decide to take a stand at a trade fair where retailers attend to find new product. There are a number of fairs held in the major cities specialising in different products e.g. Gifts; Homewares; Children/Toys etc. They are usually only open to the trade, meaning that you have to be a registered business to attend. Many are very strict re entry and require more than one article of proof that you are a business. Retailers, wholesalers, agents and distributors attend these fairs to source new product.
You can exhibit your products, but usually cannot sell direct to the visitors. Visitors place orders which are normally sold via a Proforma Invoice. This simply means that when the order is ready for distribution an invoice is sent with the word Proforma added. A covering note says that the order is ready and will be distributed on receipt of payment. These Trading Terms must be explained to the client when the order is placed.
The most positive aspect of participating in a trade fair is that in a compact period of time, you have retailers from all over the country, attending looking for product. If you are set up correctly, and understand how to get the best from these fairs, you can take good orders. This saves you an enormous amount of time trying to make sales from knocking on doors. With a well designed survey, you can also gain valuable information from your potential clients, making the future development of product (R&D) much more targeted and relevant to their requirements.
The negative aspect is that this is a very expensive exercise. Not only do you have to pay large dollars for the stand, you also have the cost of support material e.g. brochures, catalogue listing, extra lights, furniture/displays, travel and accommodation (if you are exhibiting interstate) let alone the cost in time while you are out of your business. You really do need a second person to assist you at the fair as well.
4) Many artists who are also HBB often decide to leave their work on consignment with a retailer. This is often the only way you can get the retailer to offer your artistic product to the consumer, due to the high price and the individuality of design of the products.
But it is important that you realise that you are taking all the risks; you bear the cost of production; there is no cash flow; You have no control over the safety of the product or quality of display; and there are added costs in time of administrating the placement and sale of product. It is essential that you have a Consignment agreement in place with the retailer.
It is a positive that you have the opportunity to have the product seen by the consumer and it is a good way to test what the consumer actually likes and will buy, and at what price point.
But there are many more negatives to consider. It is time consuming to keep a track on all outlets and product; strict bookkeeping is required; product is often treated badly by the retailer (after all it is not their product, they have not paid any thing for it); a great deal of stock has to be made without any payment, creating cash flow problems; loss of stock is prevalent
5) Undergoing an advertising campaign to raise awareness and create a demand, resulting in sales, is tried by many Micro business operators and a few HBB operators. It is a costly exercise for Micro/HBB to undertake an advertising campaign. It is therefore very important to know who your target market is and what media they use when sourcing specific product/services (print, radio etc.), if an advertising campaign has a chance of working.
The positive aspect is that sales can result which are easy to measure and monitor. You can also tailor the ads to target a specific market and can create a brand or image via the ads. The negative side is that advertising is usually expensive and only works well when there is a saturation strategy in place.
6) You may also decide to license your Intellectual Property. Micro businesses often have valuable intellectual property that other companies would like to access. If you dont want to sell the property, you can license it.
The greatest protection a Micro business has when deciding to license is to choose a company that is large, reputable and has a number of licenses already in place. They cannot afford to act improperly, as to do so, would damage their business reputation.
When negotiating for the first time with a company where you have to disclose your intellectual property, have them sign a commercial in-confidence non-disclosure agreement.
The positive aspect is that licensing allows you to produce a range of product you normally could not afford to do. It also allows for extra marketing and promotional opportunities, via the licensee. A license will gain you a larger market share as product is sold to the licensees retail contacts.
The negative side is that the Licensee is usually the wholesaler. They may or may not be the manufacturer. Consequently the finished product is not likely to be exactly as you envisaged. The licensee invests money and time; you invest intellectual property and time. However you are partners in this relationship. Therefore you have to consider the licensees restraints and difficulties when assessing the finished product.
The royalty you can receive is comparatively small (5-10% is usual) and it can be quite costly to set up meetings and co-ordinate licensees (if you have more than one).
7) Network promotion is by far the most common type of sales activities that the Micro/HBB operators indulge in. The Micro business sector excels at selling by building their network and promoting themselves via the network they have established. However you should never set out to make sales while you are networking new contacts. Sales may be the result, but networking is primarily about making contacts and building relationships that will eventually lead to sales.
The most positive aspect of networking is that it is very cost effective the main cost is in time. It also has a unique domino effect you often end up doing business with your initial contacts network. It can also develop a feel good situation, which creates a caring, trusting environment in which business can take place
On the negative side, it is very time consuming and is a long-term investment results are rarely short term. It is also difficult to measure the outcome, unless you have a plan in place.
Whatever sales method you decide to use, just make sure you do your homework and choose the method that best suits your business.
Barbara Gabogrecan wrote Biz-in-a-Box to enable you to check that your business is on the right track. There are ten working Modules and dozens of templates that you can use when chosing the way you want to sell your product e.g. Consignment agreement; agent's agreement; confidentiality agreement; etc. www.mnbsolutions.com.au then THE AUTHOR