Developing seasonal pricing strategies - Robert Bates & Co

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Developing seasonal pricing strategies - Robert Bates & Co
Q4 2020

             Strategies
             for managing
             your business

                                                 Developing seasonal pricing strategies
                                                 A seasonal pricing strategy will help            to wait until your peak period is over and
                                                 you minimise loss of cash flow in low            your premiums do not drive away customers
                                                 periods and maximise profitability in            looking for better value. Look to the market to
                                                 peak seasons.                                    help you strike the right balance to maximise
                                                                                                  the benefits of seasonal pricing.
                                                 Changing your pricing will help you
                                                 capitalise on your target market’s spending      Holiday based strategies
                                                 habits. Keep in mind that creating a
                                                                                                  The customer influx in Christmas and the
                                                 marketing campaign to bring awareness to
                                                                                                  New Year is an opportunity for you to tap
                                                 your price change or seasonal deals will be
                                                                                                  into the spending season with your pricing
                                                 critical in meeting your business objectives.
                                                                                                  strategies. Advertising seasonal deals well in
                                                 Consider the following steps to get the most
                                                                                                  advance are essential to reaping the benefits
                                                 out of your seasonal pricing strategy.
                                                                                                  from your price change and gaining an edge

INSIDE:                                          Know your customers                              on your competitors. Offer incentives like a
                                                                                                  gift wrapping service, loyalty credits or special
• Insolvency reforms to support small business   Previous buying patterns should influence        deals on your most popular products. In the
• What is Organisational Culture?                campaigns. Tailor your pricing to the needs of   post-Christmas sales look to your competitors
                                                 your target market, and segment your market      to see how far you should discount your
• Tips to upscale your business
                                                 and develop a range of pricing strategies to     prices to capture the largest market segment
• And more                                       maximise customer engagement.                    while keeping your profit margins high.

                                                 Pricing for low and peak periods                 Reuse and recycle

                                                 Your pricing strategy should accommodate         Seasonal pricing strategies and their
                                                 fluctuations in customer demand. Break your      accompanying marketing campaigns can be
                                                 year into low, mid and peak seasons. While       costly. In order to reduce costs, reuse past
                                                 offering an off-peak discount may boost          marketing campaigns that were successful
                                                 your profits by incentivising your customers,    and recycle them only if they are still
                                                 increasing your premiums in peak season          relevant or need a few minor amendments.
                                                 will help you capitalise on high customer        Assessment of pricing strategies should be
                                                 demand. Experiment with pricing so that          ongoing to ensure your business is up to
                                                 your discount does not encourage customers       date with your customers’ spending habits.

                                                                                                                     Liability limited by a scheme
ROBERT BATES & CO                                                                                                    approved under Professional
                                                                                                                     Standards Legislation.

 Level 2, Suite 4,             EMAIL                              PARTNER                 Business Growth Solutions
 90 Phillip Street,            info@rbcaccountants.com.au         Robert Bates            SMSF Accounting
 Parramatta 2124                                                  Sharon Hewitt           SMSF Advisers Network Authorised Representative
 TEL (02) 9891 9388            WEBSITE                            CLIENT MANAGER          Financial Accounting
                               www.rbcaccountants.com.au          Urwik Patel             Corporate & Personal Taxation
                                                                  Maria Rinaldi           Xero Silver Partner
Developing seasonal pricing strategies - Robert Bates & Co
Business Matters  Quarter 4, 2020

Mitigating conflicts of interest
Conflicts of interest are often a trigger            Common examples of conflicts of interest            communicated to employees verbally and re-
for workplace tension and gossip,                    in business include:                                enforced through discussions.
reducing productivity and damaging                   •    Recommending a friend or family                A good code of conduct will reflect the
employee relations.                                       member for a job position.                     culture and values of the business, provide
                                                                                                         information on how workers can expect
                                                     •    Employers not disclosing that a
                                                                                                         to be treated and how they are expected
                                                          candidate being considered for a job
                                                                                                         to behave. It should be accessible to
                                                          is a friend or family member.
                                                                                                         all employees, be well organised and

   Tips to upscale
                                                     •    An employee starting their own                 comprehensive but also easy to understand.
                                                          business that provides similar products        This can be achieved by providing situational

   your business                                          or services, especially if a non-compete       examples, answering common questions
                                                          agreement has been signed.                     workers may have, and avoiding technical or
                                                                                                         legal jargon that may be confusing.
                                                     •    Working for a competing company.

 Set realistic and actionable goals                  •    Posting to social media about the
                                                          business’ failures.
 Businesses should set realistic and
 actionable small goals which they can work          •    Romantic relationships between an
 towards, rather broad goals which provide no             employee and their supervisor.
 direction. Setting broad and unrealistic goals
 is demotivating and makes any progress              •    Accepting a favour or gift beyond the
 made seem insignificant. Every person in the             agreed amount from a client.
 business should be given a target to meet
                                                     The best way to avoid conflicts of interest
 over a reasonable timeline which contributes
 towards achieving a larger goal.                    in the workplace is to establish a code of
                                                     conduct that clearly outlines the standards and
 Establishing standardised and                       expectations of the business. It should cover
 automated processes
                                                     details of business policies and list everyone it
 Small businesses can make the mistake               applies to, including employers and employees,
 of ‘doing things as they come’ but this             board members, management, officers, and
 means that as business grows, adjusting to          contractors. This code of conduct should be
 high scale tasks is difficult. To avoid this,
 business should standardise all processes
 of work. Any individual placed into a role
 should be able to follow standardised
 procedure and yield a product which is of
 similar quality to the previous one. Investing
 money into automation tools is worthwhile
                                                     What is Organisational Culture?
 for this procedure. This can include
 automating management of social media,
                                                     Understanding what organisational                        formal procedures and guidelines and
 email, and customer relationships. Both of
                                                     structure is can help with making decisions              maintaining power structures.
 these will contribute to creating structures
 which support growth.                               about your business in all areas.                   The organisational culture reflects in all
 Identify competitive strengths and                                                                      aspects of the business. It can help with
                                                     Organisational culture is multifaceted, it
 weaknesses                                                                                              determining which potential employees
                                                     consists of the shared values, beliefs and norms
                                                                                                         may be more suitable than others and
 Recognising the strengths and weaknesses of         in the workplace, and determines employee
                                                                                                         the way that those in leadership positions
 one’s business is essential. Strengths will allow   interactions as well as customer interactions.
                                                                                                         communicate with employees.
 businesses to hone in on unique qualities
                                                     There are four types of organisational cultures.
 they possess which give them a competitive                                                              The way a business communicates and interacts
 advantage. Weaknesses will reveal which             •    Clan Culture: Focussed on collaboration        with their customers is also influenced by
 areas require growth so that changes can be              between teams to form a family-like            organisational culture. Businesses may desire
 made before upscaling takes place.                       relationship.                                  friendly and informal relationships, or formal and
 Network                                                                                                 reserved relationships. Communication methods
                                                     •    Adhocracy Culture: Focussed on
                                                                                                         may also change, such as preferring email
 Businesses should continue to develop                    creativity and innovation and open to
                                                                                                         interaction as opposed to utilising chat functions.
 relationships with service providers, sales              continual change.
 channel partners, suppliers and customers.                                                              Of course, the culture of an organisation can have
 Keeping an open mind about partnerships             •    Market Culture: Focussed on achieving
                                                                                                         overlap of the different types. More important than
 or potential collaborations could open up                goals through competitive drive
                                                                                                         focussing on one type of culture, is recognising
 different avenues of business growth.                    amongst employees.
                                                                                                         what works best for your business and trying to
                                                     •    Hierarchy Culture: Focussed on                 foster values and norms that embody that.
Developing seasonal pricing strategies - Robert Bates & Co
Business Matters  Quarter 4, 2020

What business structure suits your business?
An important decision to make before                         obligations of the business                        directly to the corporation
you start a business is what structure                  •    Low-cost structure                            •    Members not liable for company’s
your business will run under.                           Partnership                                             debt (only liable if you breach legal
                                                                                                                obligations)
This will reflect into all facets of your business,     •    Share control and management of
so you should spend time understanding the                                                                 •    Complex business structure plus Extensive
                                                             business
implications of each structure.                                                                                 documentation and record-keeping
                                                        •    Each partner pays tax on the share of
                                                             net partnership income each receives          •    Wider access to capital
Sole Proprietorship
                                                        •    Minimal reporting requirements +              Trust
•     You have complete control of your
                                                             Inexpensive to set up
      business                                                                                             •    Expensive set-up and operation
                                                        •    Requires more documentation
•     Your business assets and liabilities are                                                             •    Formal trust deed outlining operation
      not separate from your personal assets            Company                                                 required
      and liabilities                                   •    Separate legal entity from its owners         •    Trustee responsible for yearly
•     Personally liable for debts and                        - all profit, tax, and legal liability is          administrative tasks

                           Entering a partnership: pros and cons
    Whether you are in the business game                 Consider the following advantages and             If a partner wishes to resign from the
    already or setting your sights on a new              disadvantages before starting or joining a        partnership, it is relatively simple to dissolve
    business venture, starting a partnership             partnership:                                      the partnership and recover their share.
    may be a high-yielding decision.                     Advantages                                        Disadvantages
    A partnership business structure is an               A partnership structure is easy and               This type of business structure carries
    incorporated business with 2-20 owners.              inexpensive to set up. Unlike operating as a      unlimited liability, meaning the business
    The individual owners work together to               sole trader, there is increased opportunity for   owners are liable for the debts of the
    achieve the goals of the business; sharing           income splitting, more capital available and      business and are subject to reasonably
    responsibility and profits.                          higher borrowing capacity.                        cover what is owed or risk seizure of their
    Partnership laws vary depending on your              Working as a team can also provide more           personal assets.
    state or territory. There are two types of           perspective than working as an individual.        Each partner is responsible for the debts
    partnerships - general and limited.                  High performing employees can also be             and liabilities of the business (with the
                                                         made partners.                                    extent depending on the type of partnership)
    A general partnership is where all partners
    are equally responsible for the day-to-day           From a tax perspective, partnerships do not       including the actions of other partners.
    management of the business.                          need to pay tax on their income. Each partner     This can cause disputes and friction
                                                         pays tax on the share of the net partnership      among partners, resulting in unfavourable
    Whereas, a limited partnership has at least
                                                         income they receive. Superannuation is a          circumstances. For example, one partner may
    one general partner who is responsible for
                                                         responsibility of the individual partner, as      have a differing vision or a different opinion on
    controlling the day-to-day operations and is
                                                         partners are not considered employees.            administrative control or profit sharing for the
    liable for the debts and obligations of the
                                                         Additionally, there is limited external           business compared with the other partners.
    business. The passive partners in this type
                                                         regulation and reporting requirements.            Although the process of adding and
    of partnership are called limited partners.
    Limited partners generally contribute a defined      Removing partners is generally                    removing partners is simple, partners will
    amount of capital, and their liability is limited    straightforward. The only condition is that at    most likely need to value partnership assets
    to the amount of capital that is contributed.        least two partners are left in the business.      which can be expensive.

                                                        We are here to help
                                                        Make use of us! This guide is merely a starting point, designed to help you identify areas
                                                        that might have a significant impact on your personal and business planning.
                                                        We are always pleased to discuss matters with you and advise in any way we can.
Business Matters  Quarter 4, 2020

Insolvency reforms to support small business
The government recognises that                                   its owners, while a debt restructuring plan is                   the ordinary course of the company’s business.
despite support to get through the                               developed and voted on by creditors.
                                                                                                                                  The temporary relief measures give businesses
COVID-19 outbreak, not all businesses                            Liquidation Pathway                                              needed breathing space and highlight the im-
are going to remain viable.                                                                                                       portance of working with financial professionals
                                                                 The costs of liquidation can consume all or
Many small businesses will have significantly                                                                                     as soon as required, ensuring that your small
                                                                 almost all of the remaining value of a small
increased levels of debt in order to remain                                                                                       business has the best chance of success.
                                                                 business, leaving little for creditors. Under
in business during the COVID-19 pandemic.                        the government’s new process, regulatory
The government is introducing a number of                        obligations will be simplified, so that they are
permanent and temporary measures to expand                       commensurate to the asset base, complexity
the availability of insolvency practitioners to deal             and risk profile of an eligible small business.
with this expected increase in the number of
businesses seeking to restructure or liquidate.                  Temporary Relief Measures Extended

The package of reforms features three key                        The government announced a further extension of
elements:                                                        relief measures to 31 December 2020. The tem-
                                                                 porary increase in the threshold at which creditors
Debt Restructuring                                               can issue a statutory demand on a company from
Currently, requirements around voluntary                         $2,000 to $20,000; and a temporary increase in
administration in Australia are more suited                      the time companies have to respond to statutory
to large, complex company insolvencies. The                      demands they receive from 21 days to 6 months.
new debt restructuring process will adopt a                      In addition, there is temporary relief for direc-
‘debtor possession model’ where the business                     tors from any personal liability for trading while
can continue to trade under the control of                       insolvent, with respect to any debts incurred in

                                                                 Small business delivery tips
            Important                                            Businesses that fail to meet their customers’                    consider offering a credit or discount to minimise

             tax dates                                           expectations of affordability and efficiency
                                                                 of delivery cannot remain competitive.
                                                                                                                                  damage to your reputation.
                                                                                                                                  Setting free delivery
                                                                 If customers see that a competitor in your                       Increasingly e-commerce retailers are offering
                                                                 market can offer the same product with a more                    free delivery. Consider the following strategies
    21 NOVEMBER                                                  convenient delivery option, your paying customer                 to meet market expectations without your profit
      Lodge and pay October 2020 monthly                         numbers will dwindle. You can adopt delivery                     margins suffering significant losses:
      business activity statement.                               strategies to make your supply chain a strong
                                                                                                                                  •      Charge for shipping in the price of the
                                                                 point and boost your customer satisfaction.
                                                                                                                                         good or service
    25 NOVEMBER                                                  Deciding on a courier
                                                                                                                                  •      Set a minimum spend to get free delivery
      Lodge and pay quarter 1, 2020–21                           Quit waiting in line at the post office to send
                                                                                                                                  •      Limit the locations for free delivery
      activity statement if you lodge                            your parcels and take advantage of technology.
      electronically.                                            MyPost Business will allow you to print                          •      Give free shipping for membership sign ups
                                                                 postage labels and arrange for next day pickup                   Offer options
                                                                 for a small additional charge. Independent
    28 NOVEMBER                                                  couriers may also be an option but make sure
                                                                                                                                  Delivery information must be clearly set out.
                                                                                                                                  You might charge for express delivery and
      Lodge and pay quarter 1, 2020–21                           you research their reputation and average wait
                                                                                                                                  assess how they would like to pick up their
      Superannuation guarantee charge                            time before partnering with them.
                                                                                                                                  package. Disclose any risk the customer
      statement - quarterly if the employer did
                                                                 Meet your delivery date                                          incurs, for example, if they want the package
      not pay enough contributions on time.
                                                                 Issue a clear delivery deadline and make sure                    left at their front door, to cover your liability.
                                                                 you meet it for every order. Give your customer                  State your return policy
    1 DECEMBER                                                   access to track the order for their piece of mind.
                                                                                                                                  A vague return policy can deter the customer from
                                                                 You should also have a tracking system so you
      Pay income tax for companies and                                                                                            giving you their business. State your policy clearly
                                                                 can recover the package or damages should it go
      super funds when lodgment of the tax                                                                                        and be upfront with any return charges that will be
                                                                 missing in the delivery process.
      return was due 31 October 2020.                                                                                             suffered. Consider whether a more lenient returns
                                                                 If your package is not delivered on time, respond                policy will be worth the costs of processing returns
                                                                 quickly, provide an apology or an explanation and                if it will secure you more customers.

This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any
      responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication. Publication date 20 October 2020
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