Marketing Help

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BUSINESS & MARKETING GUIDE

This guide has been written for the sole purpose of helping customers who have purchased any of the systems sold by JG ELECTRONICS on the road to success. This guide is not a general “how to” guide like those commercially available, but rather a more “intimate” guide, that shares many of the “secrets” that we employed to make our business successful. Many of the mistakes we made have also been documented, so that you do not make the same mistakes. Index Page

Setting up your business Taxes & other admin

2 - 4 - 6 - 9 - 11

3 5 8

Where to base your business from

Insurance matters

Managing telephone costs Internet, social-Media & advertising

11 - 13 14 - 15 16 - 22 23 - 25 26 - 27 29 - 30 31 - 36 28

Traveling and stock costs

Running costs, profitability & getting paid

Calculating the true cost of a printed item How to work out your selling price Golden rules when doing a print job Better artwork means more profit

How to get business

Differentiate yourself from your competitors

Marketing plans

38 - 39

Staff & staff remunerations

What to do if your products are not selling

41 - 42

Final Word

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Setting up your business

Owning your own business can be very rewarding, and yet can also be very frustrating. There are so many pitfalls along the path to success that we’ve made this, not-so-short guide to help you, the first time business owner along this path to success. Many first time businesses fail due to lack of knowledge and planning, and although this guide is not a substitute for a business course or diploma, it will hopefully be able to impart some knowledge onto you – after all why make your own costly mistakes, if you can rather learn from the mistakes others have made? Many people think you start a company buy some machines and the money starts dropping from the sky. It’s not as simple as this – apart from actually making the product or providing the service you also have a lot of government red tape to get through. Every year they say they want to cut down the amount of red tape but they do the opposite. Type of Legal Entity to form Before you start trading you need to decide whether you want to form a company or just produce your product informally from home. From 2011, the new companies act came into force, and the only type of small company you can form is called a private company, and the suffix “(Pty) Ltd” comes after the name. This new form of (Pty) Ltd does NOT need to be audited (audits cost a fortune), but still needs an accountant to produce financial statements at the end of every tax year. The new (Pty) Ltd must have a Memorandum of Incorporation which prohibits the offering of its shares to the public and restricts its transferability. CC’s no longer exist under the new companies act, but if you have one, it can be used indefinitely (or until some government official with nothing better to do, changes the law). If you’re just going to work from home part time and are not going to want to sell into the corporate world, and expect your yearly turnover to be under the threshold you need to register for VAT then not registering at all should work fine. There are however two main downsides to this” 1. You are trading in your personal capacity, although the admin is less, you enjoy little or no legal protection if the venture runs into trouble. 2. It can be difficult to raise finance – Many finance houses won’t finance that shiny new machinery you need if you’re not a company.

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A private company (Pty) Ltd is probably the best vehicle to choose, as it gives you some legal protection (legally you are just an employee of the company and can’t be sued in your personally capacity unless you have signed personal surety for any of the company’s debts or it can be proven that you have traded recklessly or have committed fraud). You will have a whole lot of paperwork to fill out (governments just love forms), but if you’re going to be dealing with the corporate world, it’s a necessary evil. Partnerships A wise person (wise because they had just got their degrees in the school of bad experiences), told me a long time ago, that if partners were such a good thing, God would have had one. Many of the people who have purchased printing systems with a partner who has provided the finance, have tended to end the partnership before the ink is dry on the purchase agreement. Although partners (particularly ones with money), can be very good for a business, unless both parties are absolutely clear with each other and with themselves the reason for the partnership, then the partnership is doomed from the start. Another important thing is that the personalities of the partners have to be such that they don’t antagonize each other. Some partnerships work very well and last for decades, most however don’t. Whatever course you decide to take, beware………… The biggest advantage of having a partner in the business is that should you die or become incapacitated, the business will carry on and your family will be assured of an income (as long as someone else also knows how to produce the products of course)

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Taxes and other Admin This section will briefly tell you about some of the regulatory “taxes” that you have to pay, once registered as a company. As these may change from time to time you should confirm these will your accountant when you register your business. 1. UIF – Unemployment insurance Fund – the company pays 1% and the employees pay 1% of their gross salary (deducted from their salaries by the employer). 2. SDL – Skills Development levy – A percentage of total salaries paid for the month – theoretically this “tax” can be claimed back to use for the development of skills of the employees, through sending them on additional training courses. Unfortunately claiming these funds (as with most government incentives) is a long and painful process. 3. PAYE – Essentially income tax on your earnings – Every year the amount below which you don’t pay anything is increased in line with inflation. PAYE, SDL, UIF are payable by 7 th of month, for the month preceding. Paying late means a penalty on the money you would have paid + interest. 4. Workman’s Compensation – Another one of those funds to “aid” the worker in the case of an accident at work – must register if you have more than 1 worker - this is basically a “medical” insurance policy administered by the state. They are great at taking your money but not great at paying out in case of a claim. 5. VAT – If your total invoiced sales are over R 1 Million per year you have to register for VAT but if your sales exceed R 50,000 you can voluntarily register. The advantage of registering is that you “claim” back the VAT on all your purchases (including stock), and most expenses (except entertainment and fuel) when you sell the finished product, your customer (in the case of corporate clients) also gets to claim the VAT that you charge them. Many corporates won’t trade with you if you are not VAT registered. The only disadvantage is that it’s more paperwork to do (but doing this admin, forces you to keep your paperwork up to date) and you will probably have to visit a SARS office in person for them to verify you are legit. 6. BEE and Employment equity – Smaller companies (SMME’S) don’t have to worry about BEE but can get an affidavit regarding their BEE status if they want to. Employment equity also doesn’t apply as long your turnover is below a certain threshold (under 50 staff and R 60 Million turnover).

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7. POPIA The protection of personal information act is another piece of government admin you

need to comply with. See https://popia.co.za/ 8. Promotion of Access to information act

Yet another law business has to comply with. A PAIA manual has to be made and submitted to a government department that will never read it but of you ignore it…. To keep up to date with the laws people who have never and could never run a business keep dreaming up see - http://www.dsbd.gov.za/acts-and-regulations Labour department inspections The labour department can inspect for you compliance to the various labour laws though this is only going to happen if you fire an employee and they make trouble for you with the labour department. To pass these inspections you must have all the labour law posters where your staff are working as well as keep an accurate record of days and hours worked, leave taken, sick leave used and so on. Capital Gains Tax and working from home If you are working from home, then you are allowed to claim the expenses from a portion of the house (the portion used for business) from your tax (as you are using it in the pursuit of income), but there is a potential downside. If you claim the expenses for a portion of the house from your tax, then you lose the Capital Gains Tax exemption on a primary dwelling for the portion of the house used for business. Should you sell your house, you pay Capital Gains Tax on the profit made between the purchase and selling price of your house. If you bought your house before 2001, then the value of your house as at October 2001 becomes the deemed “purchase price” in terms of capital gains. BEE and how it affects you Many companies (especially large corporates, and government departments), particular those that deal with the government (think tenders) need to purchase as much as possible, from Black Owned or Black empowered businesses. If you your turnover is under R 5 million per annum, then for purposes of BEE you are seeing as being BEE compliant. This limit also changes from time to time. A word of caution though, there are many companies out there who will charge you annual fee to give you a BEE scorecard, verifying your BEE status. If you are classed as an SMME, all you need is a letter from your accountant or affidavit verifying that your turnover is under R 5 million per annum.

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Where to Work from Do you want to work from Home, Office, Shop / Barrow (Cart) in Shopping center or Flea market? This is one of the toughest decisions you have to make – below are the advantages and disadvantages of all these options. Working from Home This is the cheapest option, and also the best option for any small business startup. You do have some restrictions in the type of work you can do from home. You can only really run an office type business, which doesn’t produce noxious fumes, huge amounts of noise, or dangerous emissions, so for the systems we sell you’re ok. Council bylaws generally allow you to work from home as long as the number of workers is only two or doesn’t exceed the number of occupants in the house, and also as long as the neighbors don’t object (so you need to be on good terms with them) – although truth be told unless your neighbour complains to council you’re not going to have “spot” inspection. The disadvantages of working from home are: 1. Unless you make a conscious effort to do so, your business life starts merging with your home life, and after a while you start feeling that you have no life. 2. Sitting at home working the whole day and then sitting in the same house after work can get frustrating (and boring). A simple solution is to work in a separate section of the house to what you live in (if at all possible). 3. Your customers all get to see where you live (which is not always a good thing). 4. Some corporate customers may have reservations in dealing with you (although if you always go to them instead of them coming to you, they will never know). 5. Unless you have a separate phone line, junk calls and customers will call you out of business hours. 6. Unless you have a separate entrance to the area you are working from in your house customers will be walking through your house.

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Working from an Office / Small shop Advantages

1. Looks much more professional than working from home and make you like a bigger company than you may actually be which inspires customer confidence. 2. Your home life is completely separate from your work like 3. You don’t have to worry about the type of client that comes to your office as much as you have to worry about who comes to your home. 4. You have no limit on the number of staff you employ 5. There are some office suites, which employ a secretary to answer the phones for 5 or more of the small offices – so shared receptionist = shared costs. 6. You can have signage put up that will be seen by everyone driving past your place of business, thus advertising your products and services. Disadvantages 1. Your rent can be quite high depending on the location of your offices and the amount of space you take (although you shouldn’t need more than 20-30m2) 2. Your traveling costs increase (petrol to get to work + time + wear and tear on car) 3. Working too late too often will negatively affect your home life. 4. The office will just be a place to operate from. You will still need to go out and market yourself and your products. Shopping Centre Advantages 1. Shopping centers usually have high volumes of people walking through them, which means lots of feet walking past your store. 2. You don’t have to go out there looking for customers as potential customers are walking past your store everyday (although marketing yourself by doing some advertising is still a very good idea). 3. This type of product is something that appeals to the masses. 4. If you dress your window / barrow well, you can draw in these masses. 5. If you produce a quality product quickly, you can very soon be on the road to success – some stores are in shopping centers for years on end but they don’t just do printing but sell a variety of services.

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Disadvantages 1. Position is everything. If your store’s / barrow’s position is wrong, then your chances of success are severely limited. 2. Rent is insane in the bigger centers and they force you to work Sundays and Public holidays – a community shopping centre isn’t going to be as busy but you won’t have to sell you organs to pay the rent. 3. You need to know your equipment 100% and have the right equipment to get the job out quickly. - If you are not 100% familiar with the products you are producing and the equipment, you will end up driving your customers away. 4. Many people start their own business, as they don’t want to work for a boss. Then they open a shop and discover that the center’s management becomes their boss. 5. Some of the center’s rules can drive you crazy – they set the opening and closing times. If you find you have no business on a Sunday, well that’s just tough – the center is open, so you must open. If you open late or close early you get a warning. After X amount of warnings, they levy fines and so it goes. Flea Market Advantages The same advantages as the shopping center, with the exception of these added advantages: 1. The rent is far lower. 2. Your working hours are much more flexible. 3. The flea market is a mix between an office and a traditional shop. Disadvantages 1. The position of the flea market is critical. Before committing to a particular flea market, walk around and ask some of the existing stall owners what they think of that flea market. 2. You will need to market yourself – you cannot rely solely on passing trade 3. Some flea markets are just a dusty piece of ground with some stalls erected. When the wind blows, the sand causes havoc with your equipment. Then when it rains, the sand becomes mud. 4. You can only work weekends for so long…………………………

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Insurance Like it or not, but insurance is a necessary evil. Some of the more common types of insurance are briefly discussed here. Before committing to insurance, you should get the advice of a professional on insurance consultant. Key-man Insurance Should you drop dead tomorrow, Key-man insurance guarantees that cash will be available to cover the debts of the business (leases, bank overdrafts etc) and to provide the necessary funds for the recruitment and training of your replacement. Bear in mind that the bank will freeze the business bank account unless you have measures in place to prevent this (such as a partner, someone with signing powers etc.) – this is something that should be discussed with your bank and lawyer. Public Liability This is one type of insurance that has cheap premiums and which you cannot do without. This covers the public in the event of an accident while on your premises. For example, someone is walking into your office, slips on a just cleaned floor, hurts themselves, and before you know it you get a summons for R 100,000 or more (depending on the severity of their injuries and how many American TV shows they’ve watched). Some businesses (particularly restaurants and supermarket chains) are more vulnerable to these types of claims that other businesses. As more and more people watch American TV shows, they get the idea that pretending to fall and then “suing for damages” is a good substitute to working for a living. If you have public liability insurance, the insurance company will take care of all claims, and will expose any fraudsters. The premiums for this insurance are lower than other types of insurance. Life Insurance Pays out money to the selected beneficiaries in the event of your death however, one thing the insurance companies don’t tell you while they’re taking your money is that in some cases, should your death be crime related (hijacking, armed robbery etc), then they will ONLY PAY AFTER RECEIVING THE POSTMORTEM REPORT FROM THE POLICE, which can take anything from a few weeks to a few months. For this reason, always keep some money in a place (or account) that your family can access in an emergency should something happen to you.

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Asset Insurance (for fire and theft) If you ae working from home you must disclose this to the insurance company and disclose which items are business assets. Carefully scrutinize your policy, and be aware of that the myriad of reasons that the insurance company can use to not pay your claim. Insurance companies are out there to make a profit, not to be your friend (no matter how much they might claim to the contrary). You need to be sure to insure your assets for their true market value – over insuring just means you pay higher premiums, under insuring means that should you claim, the insurer, will either only pay up until the insured amount, or may say that your assets were under-declared by 50%, so they will be paying just 50% of the loss (if it’s lower than the total insured value). Also be very careful with their conditions. If your policy states that all windows need burglar bars, and when making a claim they discover that you have say a window 5m off the ground, that is so small that a bird couldn’t get into it, that doesn’t have bars, they will most likely repudiate the claim (a nice way of saying “get lost, we’re not paying”), on the basis, that you did not meet the conditions of the policy. Car Insurance Watch out for similar issues as above – If your insured car is involved in an accident, and you for instance have wider tires on the car than the specifications of the car state can be used, or your tires or shocks are worn, the insurer in well within their rights not to pay you out. You can insure your car for private use or businesses use. The insurance premiums for business use are higher, BUT if you insure the vehicle for private use and use it chiefly for business, and it’s involved in a collision while doing business, the insurer could refuse to pay. Other types of insurance (A small sample below).  Good in transit – Covers you for goods you are shipping to your customer (you could use the courier company’s insurance but the amounts they will pay are limited).  Kidnapping – With kidnapping on the rise there’s insurance for this too.  Sasria – This covers you for political riot and other similar risks a standard insurer doesn’t cover – Your insurance company will but this cover for you.  Theft of Cash - Covers you for theft of cash from your premises or when banking – premiums are high for this kind of cover.  Business continuity – If you have an unforeseen event and you can’t run your business (like floods, fires, sinkhole in front of your premises etc).  Tax Risk – pays for attorneys in case SARS comes knocking.

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Phone Costs While cell phones are an indispensable tool in business, they are can also be the road to financial ruin. Cell phone and related data charges are still ridiculously high by world standards and if you’re not careful, you could easily end up wasting a lot of money on cell phone charges. Since many people these days are using cell phones, it’s a really good idea to buy a cell phone package that gives you free minutes to reduce costs. If available in your area, use a voip (internet phone) service instead of calling a cell phone directly. This is the cheapest option for calls.

Internet, social media and advertising

In today’s world you can’t do without internet. You will need it to place orders, receive orders, make payments, check for payments, do your work and also advertise yourself. Print media is dead, it’s all online these days. It’s best to use a service provider that provides a physical connection to your home or premises as internet of this type is usually unlimited and works out the cheapest and most reliable in the long run. Wireless or mobile internet is an option but should be your backup solution and NOT your primary way to access the internet mainly due to cost and latency (this is the time delay before a transfer of data begins following an instruction for its transfer). The dangers of internet access are: 1. Unless you choose your connection type, service provider and connection with care you could end up with crippling costs. Some Internet Service Providers (ISP’s) offer you a whole host of benefits, while others offer you no added benefits at all. 2. If you have children (especially boys), they will surf the net for things you may not want them to have access to. 3. You can spend your entire life on the internet (especially on social networking sites like Facebook), and not do any work. 4. You can get a lot of viruses, ransomware and spam attacks (you must use an antivirus program at the very least with a paid subscription) and frequenty back up your data onto a drive you can unplug from your PC. FIBRE internet is recommended with a minimum speed of 20Mbps.

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Emails: 1. Avoid using a free email service provider (gmail, yahoo and so on) for you business emails as this makes you look like a very small player. It’s all about perception and the perception potential customers get isn’t going to do you any favours. 2. It’s a very good idea to have an email signature on your emails. This is a block of text that is automatically added at the end of emails. It typically contains the sender's name, contact information, and company logo. It can also have your social media and website links and is essentially free advertising for you. It also makes you look professional. Website – an absolute necessity: 1. A website with photos is your online catalogue of goods and services and is essential to show the products you make.. 2. Unless you are a website programmer, get a professional to make you a site. It doesn’t need to cost a fortune but needs to be built in such a way that Google’s bots can go through you site to index it so that when someone searches for a product you sell your website comes up. 3. SEO (Search Engine Optimisation) needs to be performed on your website on an ongoing basis so that your site appears when a potential customer does a Google search. 4. Link your site to a provider like shopify and payfast so you can sell online and take payments online. People these days tend to prefer to make purchases online – It’s well worth it to sign up for online sales. Social media (Facebook, Instagram and so on) 1. It is highly recommended to be on social media and showcase jobs you’ve done (always get your customer’s permission first before posting anything with their artwork though). In the beginning you can just take pics of a product and digitally ad an image. You can use AI apps like Midjourney to create unique images instead of copying a photo off the internet and risk getting sued. The AI generators are pretty simply to operate – you just enter text of what you want it to create. An example is “Light skinned man, black hair, with red beard, 1.8m tall, muscular”. 2. You must constantly update your social media pages else it defeats the purpose of having them. 3. Some suppliers only have a facebook page and not a website – This is a serious mistake as it makes them look like very small players. You want to look serious and professional even if you are just a one person operation.

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Advertising Advertising 1. Without advertising your business isn’t going to do well at all. Word of mouth will bring you business but not much. 2. Internet advertising is the most effective forms of advertising today. 3. Don’t waste your money printing flyers to hand out – The success rate of these is typically 1%. Think about how many of the flyers you see handed out daily at almost every traffic light you even bother to take not to mention even use. 4. Make stickers to put on every product you produce. When someone asks your customer where they got your product they often don’t remember but with a sticker on the product they will. Also the sticker keeps you in their mind for the next job. The sticker needs to be small and durable, ideally with a logo, company name and website address. 5. Google adwords is a very effective form of advertising (you pay google to appear near the top of a search for a particular product you’re promoting) BUT it can get very expensive. 6. Facebook advertising is much cheaper and works very well. 7. Instagram and Pinterest can also get you business if you post interesting thing you’ve done, things you’ve worked out and share them so others can also do them. 8. If you have the time, a youtube channel is also a good idea. You can make videos of interesting projects you’ve completed. 9. Marketing emails can work and do work but because of the POPI act you must get permission from your clients to email them. Don’t buy list of potential customers as these are generally a waste of money. You can email potential customers (once only) but your email should be a very short introduction and you need to ask permission to send them more information. Don’t just keep sending them emails because if they report you as a spammer you could be in for some serious trouble. Online forums There are loads of online forums out there, some are helpful some are not. Some are dedicated to sharing information on suppliers some just like to bash particular suppliers (sometimes they are pushing a particular agenda or are in bed with a particular supplier and so on). When you read something on a forum always do your own research too and don’t just accept the views as gospel. Beware of technical solutions to issues as you might end up making the issue worse and causing irreparable damage to your equipment.

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Traveling & Stock Costs Traveling costs can also cripple your business if you’re not careful. The choice of vehicle you use in the day-to-day running around of your business, and the way you travel will have an impact on your business costs, and ultimately on your profits. Beware of the following 1. When you start your business, you don’t have a lot of money lying around for stock, so there is a strong temptation to drive to your supplier for just a few items of stock. The problem with this is, that the further the supplier is from your location, the more money you will spend on just getting there and back, and thus the higher your costs will be and the lower your profits. The end result of this is that too much traveling for too little stock, will eat into your capital, and soon you will have no money for stock, signaling the end of your business. 2. Unless you need to go to the supplier yourself (for technical advice, marketing advice or just to see what’s new up close etc), you should rather work through a courier company, as by driving yourself, you are not only spending money on fuel and increasing the wear and tear on your vehicle, but you are also wasting time that could better spent selling. If it takes you say 45 minutes to drive to the supplier, 30 minutes to get your goods, and another 45 minutes to drive back, you could make more money selling for those 2 hours wasted, than the money spent on the courier. This said you should still visit your supplier at least once a month to look and touch new products. When looking at a photo online you don’t often get the best idea of how it might fit into your product portfolio. 3. The type of vehicle you drive and the ownership of the vehicle is very important. If you’ve registered a company, and the company owns the vehicle, then 100% of the expenses are tax deductible. VAT can also be claimed on the purchase price if it’s a 2-door bakkie or van (not on a passenger car). 4. If you are using the vehicle as your personal vehicle, then you are legally required to pay perks tax on the vehicle (calculated as 3.5% of the purchase price added to your declared salary monthly and you being taxed on the total value) for the entire time the vehicle is owned by the company irrespective of the value of the vehicle 5 years down the line. 5. You can also use your personal vehicle and claim the business mileage back from your tax but it’s essential to keep a log-book in this case which SARS can and often does request to see.

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6. The running expenses of your vehicle can bury you if you’re not careful. The vehicle used for deliveries / general running around should be a low-cost diesel bakkie or car, that is either locally manufactured or covered by a comprehensive maintenance plan (parts on fully imported vehicles are usually scarce and cost the earth). Stick to Japanese or Korean vehicles for reliability and durability All too often, the temptation is there for a new business owner to purchase a flashy German car (as the getting Finance from the bank is easier for a business owner than the man in the street). The justification is often that “If I look successful, I will inspire confidence in my clients and thus get more business”. This is not the case. By running an expensive car, you are:

a) Killing your business with increased vehicle costs (lease, fuel etc). b) Showing the customer that you’re overcharging them to afford the fancy car (most times the customer won’t even see your car anyway). c) Tossing money down the drain that could better be used on advertising, stock etc.

An investment of R 8,000 on advertising for 6 months (R 48,000 in total), will put you on the map and can generate tens of thousands of rands worth of income, BUT that same money spent on car repayments will get you nothing in return, but 4 more years of the same repayments. Indirect Stock Costs You need to hold stock (minimum of R 3,000 to R 8,000 at a time). If you hold less stock, then you will end up having to order small amounts of stock on a very regular basis, and the cost of getting this stock (whether you collect yourself or use a courier) will ultimately cost you in the long run. Also you need to keep some stock of your primary sellers – there’s nothing worse than taking orders and finding your supplier doesn’t have stock. Making your own product vs purchasing ready made Sometimes you will see a ready-made product such as a tile stand and decide to make it yourself instead of purchasing it, but time is always against you so you end up not making it at all, or you spend all your time saving R 10 worth of product. You need to stick to what you’re good at. If woodworking and manufacturing is your forte’ then contact us and you can make things for us, otherwise stick to selling, and you will make more money that way. The same hold true with coating. You can buy spray coatings and try to spray your own items but you will never be able to achieve the same quality a coating company does – It’s the same as trying to paint your car with a spray can.

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Business Running costs, Profits, Payment Terms and Cashflow One of the areas, where many new business owners fall flat on their faces, is in not knowing the true cost of running their business. So what does it cost to run a business? You need to add the following costs (and any others you can think of) to work out your running costs. 1. Salaries – Yours – you are the most important person to the business and need to be paid accordingly, though in the beginning you should take as little as you can to allow the business to build up. 2. Wages – the staff – Start with unskilled or junior people who can start low and slowly work their way up. 3. Telephones / Internet (calculate the total amount, including line rental). 4. Depreciation of purchased equipment (your accountant can help you here). 5. Rent (if working from home, work out how the percentage of the house you use for business, and that is the percentage of your bond repayments that should be rent – even if you don’t actually pay the rent). 6. Vehicle Running costs (work on an AA rate per km for your vehicle). 7. Business and Vehicle insurance costs. 8. Water and Electricity 9. Advertising costs 10. Stationery and paper (for printing invoices etc) 11. Software costs – things like anti-viruses and many programs these days have yearly subscriptions. 12. Security Costs (if working from home, use a percentage of the house you use to work this out). Once you add all these costs up, you will have a good idea of what it costs to run your business, and you can see why it’s so important to make enough profit on the items you sell.

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Profits No matter what anyone says, you are in business to make a profit . To be sure that you are making a profit , you need to consider the following items: Markup vs Margin. Markup is the percentage by which you increase the cost price of an item to get to the selling price. Many people make the serious mistake of thinking that markup is the most important item to be calculated. Margin is the percentage of the profit divided by the selling price. This is a far more important number than markup. For example – we have a widget which costs R 10.00 – we mark it up by 30%, and thus sell it for R 10.00 + 30% of R 10 (R 3) = R 13.00. We now assume that since our markup is 30%, our profit is thus 30%, and we’re on the road to success. This is not the true picture. Our margin is the profit divided by the selling price = R 13 (selling price) – R 10 (cost) = R 3 divided by R 13 (selling price) = 23%. Why is margin so important ? 1. If you know your turnover, just multiply the turnover by the margin to give you, your gross profit in Rands. 2. You need to have a margin of 25%-30% or more if you are to survive in the printing business. Most large supermarkets only achieve around 11% but they are doing sales of tens of millions a month. The lower your volumes the higher your margins need to be.

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Quality vs price. In order to make the highest margin should you be buying the cheapest materials ? NO, absolutely NOT. Doesn’t sound logical does it ? Just because two items from 2 different suppliers look the same it doesn’t mean they are made in the same factory. As soon as something becomes popular everybody copies that item. Some are great quality, so are not. If your customer discovers the product you’ve sold them is inferior they are going to tell everyone they know not to buy from you. Statistics say that happy customers will tell 2-3 of their friends but unhappy ones will tell everyone they come in contact with. The kind of issues we had with cheap items (which is why we avoid them like the plague) are:  Hip flasks where if you put any liquid in them and left it for a couple of days the liquid would come out grey. Under a microscope we discovered the reason it was grey was because it was full of iron filings from the interior of the flask. This is a danger to human health – we had to destroy the entire stock of these.  Sports bottles with exposed screws on the cap where the screws would rust – also not a great testament to quality.  “Dishwasher safe” mugs which were not even close to dishwasher safe.  Mug which you could not print a full image top to bottom on without a void appearing somewhere in the print – It turned out the mugs weren’t straight.  Shirts that had a fungus growing on them which would given enough time render the shirt unhealthy.  Polymer keyrings where the image would start fading within a month of printing them.  Customer bought inks which were dirt cheap but kept destroying print heads – It turns out there was a fungus growing in them because the manufacturer wasn’t putting anti-fungal agents into the ink because they were too expensive. The list is endless. We’ve learnt the hard way that there is a reason a product is cheap.

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Cashflow Cashflow is the lifeblood of any business, and any business without a healthy cashflow will not survive for any length of time. To ensure that your cashflow is healthy, always ensure that: 1. Your customers pay you a deposit on every job. The deposit has to at least cover the costs of raw materials because if the customer doesn’t come for the job then at least you won’t have lost money. 2. You don’t give credit if you can avoid it. It’s not just your cashflow that will take a hit but you may well end up with added expenses to have a person to manage these accounts and call for payments when the customer inevitably “forgets” to pay you. 3. Make sure that your profit margins are high enough to cover your expenses. 4. If you have a product that’s not selling, discounting it should be the last thing you do. Try offering it in a bundle (people love bundles) first. 5. Don’t give discounts unless the value of the order justifies it. 6. Don’t buy items for your personal use out of company money. 7. Always pay out less money than the company receives. 8. Pay your expenses weekly so you don’t have a huge amount to pay out at month end. 9. Don’t buy equipment out of cashflow, rather finance it – take it on budget on your credit card if you can’t get finance. Yes it works out more expensive than paying it upfront but it’s no good having a shiny new machine and no money to buy raw materials for it. 10. Plan your trips so that you make the most of a trip out of the office and don’t waste money needlessly. 11. If you need to buy a specific product and the supplier further from you is cheaper than a supplier close by, calculate (using AA rates) how much it actually costs you to go to the cheaper supplier and if he saving exceeds this amount only then should you go to the further supplier. 12. Maintain your equipment according to your suppliers recommendations so that you’re not wasting money on avoidable repairs. 13. Don’t skimp on things like ink. Cheap ink which could damage the print head of your printer will cost you much more in repairs or replacement of your printer than you save on the ink.

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TIPS ON GETTING PAYMENT & KEEPING IT There are many different ways that you can choose to accept payment from your customer. Each method has its advantages, and things you need to be mindful of to prevent falling victim to fraud. Electronic Transfers Electronic transfers are the safest and cheapest type of banking transactions, but since the payment advice slip is generated by the client from his / her own PC, you should wait for the money to get into your bank account before releasing the goods. Anybody can make a piece of paper showing they paid money into your account, without actually paying anything into your account. Credit and Debit Card Payments If you want to accept Debit / Credit Cards, the bank will charge you anything up to 5% commission on the value of the sale. There also 3 rd party payment providers who compete with the major banks and may sometimes offer a better rate. In all cases compare not just the rate but also the monthly charges. You can elect NOT to accept American Express cards which is a good idea since American Express charge the highest rates in the industry. As your volume picks up there’s a great trick to force the bank to lower your rate. Asking them for a better rate doesn’t often result in them giving you a better rate but going to another bank and telling them you’re paying a lower rate than you actually are will often result in them giving you an even better rate. You don’t cancel with the first bank but tell them they are too expensive and that you got a better deal with another bank then don’t use their terminal for a few months. They will then come to you of their own accord and offer and even better rate. Playing the banks against each other is great fun and saves you money in the long run (we got our rate down to 1.1 – 1.3% by doing this exact thing). With credit cards there is a fair amount of fraud. To reduce your exposure to card fraud, insist on a chip card where the customer has to put in a pin. Customers paying by card should be present for the transaction.

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Debit Cards All Debit cards have a daily spending limit on them – just like an ATM card, (even though the customer may not be aware of it). If the card fails to get authorization through your electronic terminal, then there’s no other way to get authorization, as the debit card is a purely electronic transaction device. Cash Deposits into your bank account If someone deposits money into your account, wait one working day at least before you give them their goods to make sure there’s no collusion with the bank teller. If cash is deposited into your bank account, then the bank charges you around 1.4% cash deposit fee, but at least your money is safe. Warning – If someone calls you to place and order, doesn’t negotiate the price, and seems in an awful hurry to buy your products without any real understanding of what you’re selling, then sends you a deposit slip showing a cash deposit into your account, and wants the couriers to collect within a few minutes of paying, be very careful. There could be collusion with a bank employee to load a fictitious payment onto your account which will be reversed the next day. Warning 2 – A scam similar to the one above is also quite common, with the exception that the “Customer” deposits more money into your bank account than the value of their order, and then wants you to give them a refund of the balance. Don’t give refunds until you’re 100% sure that the money has cleared through your account . Also make sure the person you are refunding is the same person with the same account number used to pay the

money into your account. Checking cash received

One of the best things you can do is buy a UV lamp to check the money that customers pay you with. Under the UV, each different denomination note has different characteristics and colours. You can also get a money counting machine if you will be receiving cash on an ongoing basis. A money counting machines reads stored information embedded in the notes which isn’t easy to copy.

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Extending credit Extending credit is something you should avoid at all costs. If it’s a corporate customer (not the car dealership down the road) you won’t have much choice and a large company is not likely to stiff you but make sure of the following: a) That the person giving you the order is authorized to place orders of this nature (you can easily call the HR department to check). b) That you have a signed sample (always make 2 samples – customer signs both, you keep one, they keep one). This is essential so they can’t come back to you later and say what you delivered differs from what they ordered. c) Get a written confirmation of how long it will take for you to be paid. d) Find out who is supposed to get the delivery and make sure when you deliver that they sign acceptance of the order. e) Get the details of the department that deals with payment, send them the signed receipt and invoice and confirm that they have received it. In the case of smaller companies you should do a credit check on them – There are companies that do this as a business and for a fee with perform a credit check for you. (i) Make all customers getting credit, sign personal surety for the debt their company is incurring (see the back of our invoices for terms you can use)

(ii)

If possible, get credit insurance on the customer from one of the large credit vetting agencies – you can only do this if it’s going to be a customer you will be supplying on an ongoing basis.

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Calculating your true cost price per item You need to be able to correctly calculate your cost to produce an item, to be sure you are marking up your products correctly. The cost of the finished item is calculated by adding the following: 1. Cost of the item itself – say a Mug – costs R 20.00 + VAT. If you are registered for VAT, then work on all the costs excluding VAT (as you claim back the VAT you paid). If you’re not VAT registered, then your cost will be R 20.00 + VAT = R 23.00. VAT has no effect on the profit you make. 2. Cost of the freight to get the item to you (this is where it’s important to make sure that you get as much product as possible for the freight you are paying). The more items you courier, the lower the cost of each item will be (as the rate per Kg comes down). Divide the courier cost by the amount of items shipped. 3. Labour Cost – Take the money you are paying your workers, and divide that by the amount of product they can produce in a month. This cost is affected by the equipment you are using. Let’s say you have 1 worker earning R 6,000 per month. If they are using a low volume mug press, they can produce 40 mugs in a day, which translates to 800 mugs in a working month on average. This gives you a cost per mug for labour of R 7,50 (R 6000 / 800). In truth it’s not going to be this high as while waiting for a mug for example to print thy should be doing other jobs. From a purely cost perspective it’s cheaper to use shrink bags and an oven instead of a mug press for volumes as you can decorate more mugs at a time and a small oven will use a similar amount of electricity to a mug press and still give you or an employee time to do other jobs while the mugs are baking. The point I’m trying to make here is that you should have the right equipment for the quantity of work and type of work you’re doing as the cost of the equipment will save you from spending more on labour. A good example is a courier who needs to send a truckload of stuff to Cape Town but doesn’t want to buy a truck and only has a bakkie. The courier would need to make 10 or 20 trips to get the same volume of goods to Cape Town as the truck. 4. Electricity – Take the wattage of your machine that you’re using use the following formula to work our your electricity cost per hour – (Wattage / 1000) x tariff. Working example. You have a heat press rated at 2300W and your municipality charges R 2.85 per kw/h – 2300 / 1000 = 2.3 x 2.85 = R 6.56 cost of electricity per hour. From this you can see if’s best to print and prepare all your jobs for pressing so that as soon as you are done you can put the machines off and not waste money.

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5. Heat Tape – 11c per 3cm piece of tape. 6. Print Cost – the print cost can be split up into paper cost, and ink cost. Paper cost – this will be the cost of the paper you are using for the job. To save money try not to waste a whole sheet on a small print. Ink Cost – If you’re using sublimation ink, and printing the entire page with no empty spaces the ink cost is going to be in the region of R 8.74 / A4 page but as feew jobs in reality are 100% coverage it will be lower. One factor that can seriously impact ink cost will be the quality of ink you use and how often you use your printer. If you have ink that blocks easily or you don’t print often you will be wasting your ink on cleaning cycles and you print cost will be higher. 7. Wastage – the number of wasted prints and improperly produced mugs, t-shirts etc, will depend largely on your skill level. The more you work with your equipment, the higher your skills level becomes, and the less wastage you have. In the beginning, wastage levels of as high as 20% are acceptable, but with time, your wastage should drop down to around 2%. The provision for wastage is there to keep you safe in cases where a items don’t get printed right. By adding this provision for wastage into your costs, you are building a safety net, so if you do mess up a few items here and there, you still make money on the job. TIP : Do NOT make the mistake of telling any staff that they can get improperly printed items for free (since you can’t do anything with them) because they will often intentionally make “mistakes” because they want the free stuff. 8. Coverage & Size – There’s no need to print the largest image possible to cover the item you are decorating edge to edge as this not only increases your cost but also increases the risk of the transfer not being 100% as the edges of the product are never as flat/straight as the rest of it. 9. Maintenance / repair / replacement margin – It’s a really good idea to add 5% to your overall costs per job (all the items above added together) to cover repairs and maintenance of your equipment and this “cost” should be taken out of the money you get when you sell your item and put into a separate account that you don’t touch except when your equipment needs repairs.

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