A growing number of companies are using “dynamic” pricing

Schumpeter: Flexible figures.  as printed in The Economist Jan 30, 2016

chameleon

 

A growing number of companies are using “dynamic” pricing

IF A cynic is someone who knows the price of everything and the value of nothing, as Lord Darlington observes in Oscar Wilde’s “Lady Windermere’s Fan”, then it is getting progressively harder to be a cynic. A growing number of companies keep their prices in a constant state of flux—moving them up or down in response to an ever-shifting multitude of variables.

Businesses have always offered different prices to different groups of customers. They offer “matinée specials” for afternoon cinema-goers or “happy hours” for early-evening drinkers. They offer steep discounts to students or pensioners. Some put the same product into more than one type of packaging, each marketed to a different income group.

Dynamic pricing takes all this to a new level—changing prices by the minute and sometimes tailoring them to whatever is known about the income, location and spending history of individual buyers. The practice goes back to the early 1980s when American Airlines began to vary the price of tickets to fight competition from discounters such as People’s Express. It spread to other airlines, and thence to hotels, railways and car-rental firms. But it only became the rage with the arrival of e-commerce.

The price of goods and services sold online can be varied constantly and effortlessly, in accordance with the numbers and characteristics of those making purchases, and factors such as the weather. Competitors can be monitored constantly, and their prices matched. Amazon updates its price list every ten minutes on average, based on data it is constantly collecting, according to Econsultancy, a research and consulting firm.

The practice is spreading to physical retailers, which are installing electronic price displays and borrowing pricing models from e-retailers. Kohl’s, with nearly 1,200 stores in America, now holds sales that last for hours rather than days, pinpointing the brief periods when discounts are most needed. Cintra, a Spanish infrastructure firm, has opened several toll roads in Texas that change prices every five minutes, to try to keep traffic moving at more than 50mph (80kph). Sports teams, concert organisers and even zookeepers have embraced dynamic pricing to exploit demand for hot tickets and stimulate appetite for unwanted ones.

The dynamic-pricing revolution provides plenty of benefits for businesses. Besides helping them smooth demand (which can spare them the cost of maintaining extra capacity for peak times), it makes it easier for them to squeeze more out of richer customers. Travel websites have experimented with steering users of Apple computers—assumed to be better-off than Windows PC users—towards more expensive options. Airlines have been caught charging loyal travellers more for a ticket than infrequent travellers, on the assumption that they are more likely to be on a work trip, so their employer will probably be paying. The technology is far from perfect: ever since buying a coffee machine online your columnist (who is not good at newfangled tasks such as clearing browser cookies) has been inundated with offers for coffee machines, as if the purchase was proof not of a need that had been satisfied but of an insatiable desire.

Even if the technology becomes more sophisticated, there are two risks for businesses with dynamic pricing. The first is psychological resistance: companies’ reputations can suffer if they offend customers’ sense of fairness. Uber encountered a backlash when it increased its prices eightfold during storms in New York in 2013. Such “surge” pricing makes perfect economic sense: drivers are more likely to go out in hostile conditions if they get paid more; and many customers would prefer a high-priced ride to no ride at all. But these arguments cut little ice when prices run counter to people’s sense of equity. So, in this week’s snowstorms in New York, Uber capped its surge prices for its regular taxis at just 3.5 times the normal fare.

Psychological resistance can be fierce when companies use data collected from their customers to charge them more. That is why, in 2000, Amazon quickly dropped a scheme to charge some customers more for DVDs based on their personal profiles, and why it has trodden carefully since. Customers are learning to play the game. Some are searching for flights from an internet café instead of their living-rooms, to get lower fares. Others are piling goods into their online baskets and then failing to click “buy”, hoping this will prompt the seller to offer a better deal.

Price-fixation

The second risk with dynamic pricing is that it ends in a race to the bottom. Companies that sell online have long been caught up in a war for the top slot on price-comparison sites: even being cheaper by a penny can make all the difference. Physical retailers are being caught in the same logic: those adopting dynamic pricing are mostly doing so to avoid being turned into mere showrooms by customers who inspect the goods but then buy online. The Nebraska Furniture Mart constantly watches what competitors such as Amazon and Best Buy are charging, and updates its in-store electronic displays each morning to meet its guarantee of offering the lowest price. This is obviously good for customers. But getting fixated on prices can distract businesses from seeking ways to make their products and services so attractive that customers will be less fussy about their cost, as the most successful purveyors of luxury items, from Ferraris to Hermès scarves, do.

The oldest form of dynamic pricing was practised in ancient bazaars, where merchants would size up their customers before the haggling began. Those retailers might not have been able to compute as many different variables as today’s algorithms. But they still have something to teach today’s dynamic pricers about the importance of establishing trust and playing on desire. Cynical as it sounds, to understand a customer’s underlying willingness to part with their money you need to pay a good deal of attention to values.

SQUARING THE CIRCLE

SQUARING THE CIRCLE: Consumer Choice and Consumer Segments

square peg

I have been reading about market segmentation and choice. Howard Moskowitz’s research into tomato sauce as retold by Malcom Gladwell on the TED talks led to a big increase in sales by Prego.The company added new varieties to its lineup of sauces – chunky, garlicky, mushroom, and saw a big jump in sales.(http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce?language=en  Moskowitz’s conclusion was that consumers are not one great monolithic entity with one taste in tomato sauce. Therefore, the company needed to offer more varieties and in so doing dug deep into the market.

But merely offering lots of choice leads to lower sales. In Terry O’Reilly’s CBC Radio programme, Under the Influence, (http://www.cbc.ca/radio/undertheinfluence/limited-edition-brands-1.3021076) Terry recounted a test marketing of jam. When consumers were offered dozens of varieties and even inducements, like coupons, sales were still less than where consumers were offered limited choice. It seems that our human brain cannot cope with too much choice. Too much choice causes us to walk away shaking our heads.

How can we square the circle of too much choice simultaneously increasing sales and killing sales?

The companies that have been successful in adding choice already have a market presence. Reebok introduced its soft leather dance shoe in 1982, but gradually offered tennis shoes, basketball and then children’s shoes. There was a time lag as Reebok built its brand and consumer awareness of the benefits of supple leather footwear. Introduced all at once to the market, it could have been hard to sell a monolithic idea to a splintered group of people with altogether different needs and tastes. We are not all the same and so we all do not need the same product.

So how is it done? First create a presence in the market for 1 product or service that is the best or suits your target market the best. Dominate your market. Like the pub in the sitcom, Cheers, Everyone Knows Your Name. This is brand creation. Offer limited choice in that product or service. If you are offering more than 3 or 4 choices, trim. Only when you have some significant market share (you are measuring your market penetration, right?) can you start slowly adding other related versions to the original idea. Even after marketing leather shoes to dancers, Reebok is still best known for…  running shoes.

TURNING ON THE PROFIT TAP

tap

We should lament the passing of the Yellow Pages. Two decades ago, they were the only show in town and every small business had advertising in them. Every home had a copy. Every manager’s desk was within reach of a copy. Once a year, you spent 60 minutes deciding on the budget and the look of the advertising for the next entire year. Then you forgot about it and let the Yellow pages do the work.

It is less simple now. There are SO.. many avenues of advertising to your customer base. My marketing colleagues tell me you need to make contact 7 times, using as many types of contact as possible. And there are many possible points of contact; from LinkedIn, Facebook and instagram, to email blasts, newsletters, flyers, radio and TV.

But in the choice lies the problem for many small businesses. The choice requires that small business owners now find the time each week to devote to advertising and marketing. And we all know what happens when you get busy, right?

When a small business is finding it slow, the marketing taps get turned on – FULL. When they get busy the taps are quickly shut off. And the result is that sales rocket and then collapse –  rocket and collapse. And the impact of this cataclysmic cycle is that profits suffer. At the bottom of the cycle, we drop prices to get work in the door. At the top of the cycle, we never increase prices to recoup lost profit.

But what would happen if the marketing taps were ON, full time? Well, sales would increase. And at the top of the cycle the order books would be full. And when the workload becomes overwhelming and the orders are coming in thick and fast, what to do? We could hire more people, buy more resources. Or you could simply increase prices and make a lot more money.

So the question is: is it profitable to hire a permanent, if part time, marketing person to keep your company always in the face of your potential customers. Is there any choice?

Want to know more about how small businesses can cope with the social media octopus? Check out “5 Reasons Social Media is Easier For Small Business”  from Frithjof Petscheleit  http://tweet4ok.com/5-reasons-social-media-easier-small-business/.

 

 

Why Canadian Retailers are Slashing Prices

price tagA new survey suggests that nearly half of storeowners plan to lower prices this year in order to retain customers. Michelle DiPardo for Marketing || June 4, 2014

Nearly half of Canadian retailers (48%), plan on dropping prices this year to retain customers, according to the Canadian Retail Insights Report, released Tuesday by American Express Canada.

The findings represent a dramatic increase from the original study conducted two years ago, which found that only 35% of those surveyed would reduce prices to promote loyalty.

The report—which surveyed 375 Canadian businesses in the gas, grocery, pharmacy, restaurant, fast food, apparel and general retail sectors—focuses on what’s top of mind for Canadian merchants, including their industry and business outlook, challenges, growth strategy, and customer loyalty and acquisition.

“Canadian merchants are clearly serious about cultivating and maintaining customer loyalty, and they’re reducing prices to get them in the door,” said Jennifer Hawkins, vice-president and general manager of merchant services, American Express Canada, in a release. “As a result, I expect we’ll see increased competition among retailers across all verticals as they fight to retain and reach new customers.”

Across verticals, the report revealed that beyond simply slashing prices, 83% of Canadian businesses will offer sales, promotions or discounts as the top strategy to promote customer loyalty, with general retail, apparel and grocery ranking highest.

Canadian businesses are split when it comes to focusing on either acquisition or retention as their key business strategy. Gas, fast food, and general retail are all working on reaching new customers, and pharmacy and grocery are putting their efforts into retaining current customers.

Customer service continues to be of vital importance for all sectors, with 89% of retailers agreeing they need to put more attention into customer service.

The acceptance and use of new technologies in retail continues to grow with 72% of Canadian businesses agreeing that e-commerce is helping their company attract a new type of customer, with the general retail and apparel sector driving growth, ranking it a top priority for the year ahead.

Commissioned by American Express Canada and conducted by Nielsen, the survey was conducted between March 17 and April 3, 2014.

This article originally appeared at MarketingMag.ca.and re-printed by Profit Magazine

IBM predicts the return of local brick-and-mortar retail to prominence over e-retailers

IBM’s “5 in 5″ series presents ideas about how life will be affected by technology over the next half decade. A video series provides the highlights, including this one that predicts the return of local brick-and-mortar retail to prominence over e-retailers that have been “spanking” them for years.

watch video at http://www.profitguide.com/industry-focus/retail/will-brick-and-mortar-retail-prevail-in-the-end-60600?

IBM’s release says:

“This year’s 5 in 5 explores the idea that smart machines will learn, reason and engage with us in more natural ways–helping to amplify human abilities, assist us in making good choices–big and small, and help us navigate through life.

Within five years, we predict buying local will beat online. Savvy retailers will use the immediacy of the physical store to create experiences that simply can’t be replicated by online-only retail. Watson-like technologies and augmented reality will allow physical stores to turn the tables and magnify the digital experience by bringing the web right to where the shopper can physically touch it.

Brick-and-mortar retailers may still drive a significant majority of retail sales, but online sales are growing faster. Physical stores, once seen as a negative, will become a big positive. Their proximity to the customer will give them the advantage of integrating the immediacy of physical shopping with a magnified digital experience inside the store.”

It’s true that Watson’s offspring could drastically change a physical store’s shopping experience, but presumably any digital tool that a sales associate could use in-store could also be used by the shoppers themselves while they’re sitting on their couch. IBM says augmented reality, for example, could enhance the retail experience. Why not put that tool online and make it accessible from home? Virtual tools aren’t tied to physical locations.

For every company like IBM that offers tools to draw you back to the store, there will be a dozen online startups using the same tools (plus a few innovations of their own) to drive their own business that isn’t hampered by overhead costs like staff, rent and building insurance.

Originally appeared at marketingmag.ca

6 easy steps to emptying your business wallet

In the early 1980’s, when I began operational work with businesses, there was a conventional attitude to inventory control. This wisdom measured inventory control by looking at the relative cost of money and the interest charged against having that inventory on the shelf. That attitude saw the creation of robust ERP systems to help managers like me.

Because the recent price of money is so cheap, that business calculation has taken a knock; but the curtain is now drawn back revealing another way to measure the effectiveness of inventory control.

Consider that you have $10,000 per year with which to purchase housewares inventory. And let us suppose that 90% of that inventory sells during the year. At the end of the year 10% of the original $10,000 is still on the shelf. $1000. Theoretically, that means that in the coming year, only $9000 is available to purchase inventory. At the end of that year, assuming 90% sells, the will be $1900 worth of unsold inventory on the shelves. It does not take long to realise that all the cash will shortly be locked up in unsold inventory. The table and chart show how that works.

The result will be, of course, that the company finds itself less and less able to purchase new goods. There may not even be the room on the shelves or in the warehouse to store more purchases. From the customer point of view, the company will be stuffed with dust covered inventory. The company has ground to a halt.

If the dead inventory is converted to cash at even 20 cents on the dollar, you can use that cash to buy goods that will sell and buildup the cash available for further purchases.

Does this ever happen in real life? Yes is the simple answer. A decade ago, the company I managed had $600,000 of inventory of which 30% had no sales in 6 years. This strapped the company for cash. There were items on the shelf due to ordering errors and for which there was not even a market for more than 150 miles.

Recently, an office furniture company called me about their cash problems. They badly needed $100,000. But in their showroom and warehouse they had inventory totalling almost double that. The solution was to have a huge sale and convert everything to cash.

Remember that cash is king and being without it leaves you at the mercy of creditors, suppliers, and landlords. With cash, you have a chance. Even selling goods below cost and converting those goods to cash is better than sitting on mountains of unsold inventory. 

Written by Andrew Gregson, Senior Partner at Floodlight Business Solutions and author of Pricing Strategies for Small Business (2008).  1-888-959-0752  www.floodlight.ca. Floodlight Business Solutions, where we help you drive profits.

 

Thinking twice about price

WHEN bosses promise to make their companies more profitable they usually say they will do so by increasing sales or cutting costs. But a third road to profits is rarely mentioned: putting prices up. Managers often fail to ask how they might do better at plucking the goose to obtain the most feathers with the least hissing. The spiel from the management consultants who advise companies on pricing—whether specialists like Simon-Kucher or giant generalists like PWC—is that it is now more vital than ever to be smart at it. In today’s austere age many businesses cannot depend on rising sales volumes to lift their profits. As for cutting costs, most have already pared them to the bone. Prices are all that is left. And a business can do a lot with clever pricing, to boost its share of the limited spending-power that is out there.

Makers of high-tech products such as smartphones can opt to add whizzy new features and push up prices. In the case of luxury goods, their exclusivity is a large part of their appeal, and this in turn is a function of their price, so firms usually have scope for limiting supply and charging more: Ferrari, a sports-car maker, and Mulberry, a purveyor of posh bags, have both recently signalled that they plan to do just that. But raising prices by making products better or more exclusive is a strategic decision, open to only a few types of business. For all sorts of mundane goods and services there is much that can be done tactically, the consultants say, to charge more for the same thing.

Second, companies need to remember that, as the late Peter Drucker, a management guru, once put it, customers do not buy products, they buy the benefits that these products and their suppliers offer to them. So, businesses that fail to identify what benefits they are offering each type of customer are likely to be undercharging some of them. Equipment-makers who sell to other businesses can be especially prone to a “cost-plus” mentality, in which they charge the same margin to everyone instead of identifying those that are less price-sensitive and finding ways to earn more from them. Oil companies, for example, can suffer huge costs in lost drilling time if a pump goes down, so pump-makers could charge them a premium for guaranteed same-day dispatch of spares.

Airlines have learned to “unbundle” their product, charging separately for baggage and meals and increasing their overall takings. But industrial suppliers may still charge the same to customers who never call their technical helpline as to those who ring it daily. Makers of everything from aircraft engines to lorry tyres have gone further in selling benefits rather than products, by offering “power by the hour” contracts in which customers only pay when they use their goods. The suppliers earn more overall, while their customers preserve scarce capital.

A third route to charging more is to manage customers’ expectations better. In the early 2000s executives at General Motors were told to wear badges with “29” on their lapels, as part of a disastrous plan to get back to a 29% market share in America. This merely reinforced car-buyers’ assumption that GM would offer them whatever discounts it took to shift its metal off the forecourts, putting the firm on the road to bankruptcy. (Last year its market share fell to 17.5%, its lowest since the 1920s.) Once customers know that a firm’s price list is a work of fiction and that it will resort to discounts as soon as sales dip, it will be a long haul to get them used to paying full price, let alone accepting increases. Simon-Kucher’s consultants praise DHL, a logistics firm, which spent years drilling into its customers that whatever the economic conditions there will be a rate rise each year.

You’ve been framed

Fourth, there are lots of simple presentational tricks that almost everyone is wise to but which still, miraculously, work. Restaurants add some overpriced wines lower down the menu to make the ones at the top seem reasonable. Makers of ice cream offer “33% extra free” rather than “25% off” the cost of the regular size, even though these are arithmetically the same thing. Buyers at big industrial firms are just as susceptible to such “framing” when reviewing a list of widget prices.

The pricing experts make it sound so easy. But there are of course limits to how far firms can go in tailoring their prices to the customer without appearing sneaky. Last year Orbitz, an online travel agency, was criticised for offering a costlier selection of hotels to people browsing its site on an Apple Mac because it assumed they were richer than PC users. Although a firm’s customers may not notice the odd price rise slipped in here and there, they will eventually notice if their overall bill starts to swell: Tesco, Britain’s biggest grocer, is now having to offer expensive discounts to win back a damaged reputation for value.

And sticking to a pricing strategy takes guts. The irony, confides a senior management consultant, is that firms like his have such a taboo against letting go of a client that they are the worst at taking their own advice to be fearless in asking for more, and walking away if they do not get it.

Economist.com/blogs/schumpeter

Pricing Lessons – How to Sell more Healthy Food

broccoliI am extracting the pertinent information on pricing food, from a learned article by two INSEAD  researchers called “Does food marketing need to make  us fat?” ,.

Most food is still sold as a commodity which has brought with it a steady decline over the past 50 years in the relative cost of food. We spend less on food as a proportion of our income, certainly in North America, than previously. But does price or discounting influence purchasing?

The authors pursue a number of studies on the effect of price on purchase decisions that are important for the savvy businessman.

In the long term.

The average price elasticity of food consumption is low at -.78. We need to eat to survive! But, long term low retail prices for food, especially fast food, have resulted in people consuming more, as measured in the increasing rates of obesity.

But higher prices can lead to reduced consumption.  A 10% increase in the price of fast food leads to a statistically correlative reduction in obesity of 0.7%.

Pricing is a stronger motivator in a buying decision than nutritional labelling – a strategy that sometimes backfires because nutritional labelling is often associated with no flavour or just bad taste.

“The only exception to the rule that higher prices reduce consumption comes from a study showing that higher prices at an all-you-can-eat pizza restaurant led to higher consumption of pizza, probably because of the psychology of “sunk costs,” which leads people to try to eat “their money’s worth.”

In the short term

In the short term, significant price reductions can lead to measurable increases in consumption.

“Probably the best evidence of this comes from a randomized controlled field experiment involving 1,104 shoppers. This study found that a 12.5% temporary price discount on healthier foods increased the purchase volume of these foods by 11% among the low-income consumers who received the coupons. The effect persisted even 6 months after the promotion had been stopped. “

This is important because low income shoppers mind their pennies and are motivated to buy as many calories per dollar as they can.

Interestingly, “price deals can influence the speed of consumption even when the food has already been purchased. This should not, in theory, influence consumption because the cost cannot be recovered, no matter when, or how quickly, the food is consumed. Nevertheless, studies have found that people accelerate the consumption of products perceived to have been purchased at a lower price.”

Observation – quantity discounts lead to stockpiling which accelerates consumption. The quantity purchase of some foods displaces the purchase of other foods. Because it occupies shelf space, we eat more of it. This effect also persists even 6 months after the initial discount.

Recommendation – offer “buy 1 get 1 free”

*** However, the discounts on healthy food did not reduce purchases of “vice” or unhealthy food.

So, if you want people to buy healthy foods, do not discount unhealthy foods.

Observation – consumers prefer price discounts to bonus pack on “vice” foods, but prefer bonus packs to price discounts on healthy food.

Recommendation – offer “free quantity” promotions. That means Larger Package size on healthy foods like fruit and vegetables.

The points that are important to food retailers in order to increase sales and profits are:

  1. Keep the packaging of “vice” foods to smallest sizes and lower the price.
  2. Package healthy foods in larger quantities and keep the prices higher.

 

(Nutritional Reviews. 2012 October; 70(10): 571–593.  Published online 2012 October 4. doi:  10.1111/j.1753-4887.2012.00518.x PMCID: PMC3495296 Does food marketing need to make us fat? A review and solutions Pierre Chandon and Brian Wansink)

The 3 keys to get your price

On February 2, 2013 the CBC aired an episode of Terry O’Reilly’s program, Under the Influence. The theme of the program was about choice and about how a customer makes a decision when a marketer gets a product in front of you, the buyer.

Do I buy or not?

Given too many choices of products or services a customer will simply NOT make a decision and walk away.

We are, in this modern world, bombarded by radio, TV, junk mail, and spam to make a decision and buy something. Instinctively we tune out rather than make a bad decision. This is because, according to Terry O’Reilly, we, as humans, have an innate ability to make a fixed number of great decisions per day. After that decision fatigue sets in.

There are deep parallels with how the same process of making a choice works in the pricing world as well. Do I pay this price or that?

In my observation with clients and in my own research, too many price points with the product or service that a company offers leads to decision overload. When one of our clients confronted his customer with 14 different price points on similar products, sales stagnated. The customer walked rather than make a decision.

To solve the problem, we reduced the list to 3 prices and sales improved.

Why 3 prices?

  1. A single price is a take it or leave it ultimatum. No one is comfortable with that and it is simple to say no.
  2. Two choices are still a bit black and white.
  3. Three choices appeals to our very human need to be in control, to make an informed decision that can be explained simply thereafter to a spouse or business partner.

Moreover, we could now create a price list for the client that went from good to better to best.

But in order to improve profits we deliberately made the middle product most attractive.

The middle product had a combination of useful but not too elaborate features. The middle offering was better that the plain Jane economy model. The middle product was not too high in price but certainly not the cheapest. Since most people equate quality with higher prices, we strategically placed the middle product to be an easy consumer choice. By the way, it was also the most heavily inventoried product.

This is the path to improve profits. Your company product and service must stand out but when the customer is considering the pricing decision, there must be a choice, just not too much choice.

To Build Your Business bring your pricing structure into 3 unique products lines with defined benefits for the clients to choose from and watch your sales and profits grow.

Article written by Andrew Gregson and Donald Robichaud

How to Borrow Money and Build Your Business

borrowing cash to save your business.

Turn your business around with the right borrowing strategy

The bank manager just phoned and asked for full and immediate repayment of the line of credit because the latest, (and they were late!), financial statements showed continuing losses and falling sales. The company’s assets are eroding fast and the bank wants its money back while it can.

Now you need to find money. How will you do that?

The following 5 points illustrate what a potential lender sees and how to improve your chances.

You are one of thousands lining up at his door to ask for money for your faltering business. So you must stand out. Lenders do not share your enthusiasm for your business. Every borrower makes unbelievable promises just to get that much needed cheque. The business owner has doubtful credibility because the business is in trouble and the owner is always to blame.

  1. You need a plan.  A written business plan, in order to be believable. You will need a business plan of at least 25 pages detailing your entire idea of how you will make the business work again. No false promises please – no lender will be interested in profit or sales claims that cannot be proven.

Lenders have no interest in a plan that merely returns a business to “normal”. Normal led to trouble once and now a radical change is needed.

The best radical change will be to illustrate a way to improve the business by a multiple (2 times or 3 times) and not a percentage.

  1. Business Turnaround – If you can turnaround your business, what is the big upside that shows a substantial increase in profits?  Will it result in more cash, more assets, no debt? How long will it take?

If the lender hands over a cheque:

  • How will you spend it?
  •  Will you take the cash and run?
  • Will you repay your mother-in-law’s loan?
  • Will the money be spent on things that will have an immediate return on the investment?
  • Or are you asking the lender to share in the risk and debt?
  1. Detail the use of the funds. Are you buying newer machinery? Investing in a new product line? Lenders have no interest in buying other people’s debt, so the debt will remain.

Handing over a cheque is not the problem for a lender. After all, their purpose is to get money out and working.

  • But how will they get the money back?
  •  Have you ever given credit (or made a cash loan) to someone and had load of trouble getting it back, writing off the interest in the end and feeling thankful that you got the original money back?
  1. Detail the exit for your lender. Give short time lines of under 3 years for return of capital. If you expect your lender to act like a bank and stay with you with lines of credit for the next 48 years, then go to a bank. Other lenders need to know how and when they will get their money back.
  • The lender wants to know what you are offering in return for the loan.
  • How is it secured?
  • Your home?
  • Shares in a stumbling  company?
  • Are you willing to give up control for a period of time?
  1. Be prepared and realistic in your offer to lenders.   Detail the security offered and what the asset is worth today and will be worth in 3 years.

There are no guarantees in the lending world that your request will meet with success. If you have by luck chosen a lender who understands your industry and you have a believable plan, you might just leave with a cheque.

At Floodlight Business Solutions we understand what it takes to convince a lender. Have you got a decent business that is in temporary trouble?

Give us a call to discuss your business turnaround strategies and we can help you Build Your Business.

Article written by Andrew Gregson and Donald Robichaud