Spilldown Effects

On January 1, 2015, the European Union expanded its VAT tax to encompass any seller located anywhere in the world who sold any item to anyone in any EU country.

The spilldown effects of this decision have rippled through the business world and these effects will continue to be felt for some time to come.

Let's focus on a few fundamentals. Apparently, the new VAT tax:

• Has no floor (no sale is exempt no matter how small it is)
• Must be collected, processed and paid by every seller
• Applies to every type of business and every type of sale (no exceptions)

In three short weeks, this tax has had a noticeable impact on American businesses, particularly those in the small and micro categories.


The responses have been varied and occasionally startling:

• Some small businesses have simply closed their doors because they were unwilling to deal with the hassle of designing and maintaining a special system to support the EU's latest tax gambit. The new VAT policy is literally the tax that broke more than one camel's back.
• Some are refusing to sell to EU companies or residents and have posted notices in their online stores to this effect. They're working to offset lost revenue by expanding sales in non-EU markets.
• Some have increased all base prices, a decision that negatively affects every buyer, not just those in the EU. In some cases the increases have been dramatic, so it appears they want to recover the full tax amount and recover the ongoing costs of developing and maintaining yet another tax handling, reporting and payment system.
• Some are taking a "wait and see" approach. Meanwhile, they're compiling data from past EU sales to determine whether the revenues justify the time, expense and headaches involved. A number have admitted it's likely they too will choose to block EU purchases.

Readers who aren't small business owners are scratching their heads in puzzlement and asking, "What's the big deal?"

Those who are small and micro business owners understand. They already pay a wide variety of federal, state, county and local taxes in the form of income taxes, fees, licenses, permits, certifications, mandatory health care, property taxes, and much, much more. Many also function as unpaid sales tax collectors for their state, county and local governments.

Now, their businesses and work lives have become infinitely more complicated, because they must also function as unpaid tax collectors for a foreign entity.

Practically speaking, many small businesses simply don't have the time, money, people and resources to accommodate this mandate. Looking solely at the time factor, consider this: Recent studies indicate the typical small business owner in America works an average of 52 hours a week, and more than a quarter of all self-employed Americans routinely clock more than 60 hours a week.

Contrast this with the EU, where the average work week in seven countries is 35 hours or less.

American entrepreneurs are already working long hours to keep their businesses afloat in a challenging economy. It's easy to understand why some have run the numbers and concluded the cost of doing business in the EU far outweighs the benefits.

What's Your Real Sales Cycle?

How long does it take to close a sale?

From the time of first contact to the point where a sale is made or a contract is signed, how many days, weeks, months or years have passed?

Ask this question and you'll hear all sorts of figures tossed around: four weeks, six weeks from start to close, three months, three days.

Marketing | When Less is More

LessAccounting is an accounting and bookkeeping application targeted to small businesses with fewer than 20 employees.

The cloud-based app has an interesting value proposition: “All small business accounting software sucks, we just suck the least.”

You have to admit, it's an unexpected tactic.

Strategy | Ain't Broke? Don't Fix It

If it ain’t broke, don’t fix it. AMERICAN SAYING

Wal-Mart, the global model for low-cost, high-volume, big-box retailers unwittingly broke itself. In sports and politics, they call this an unforced error.

The retail giant for a time abandoned its roots, and tried to reconfigure its basic selling proposition. It altered its product mix and pricing to appeal to a new target customer group: hip, green shoppers with more disposable income.

What happened? Revenues dropped for seven straight quarters.

Price Pressure | Internal Forces Revisited

Naming the problem is the first step in solving the problem. BUSINESS AXIOM

We have, I believe, made a sufficient case for the existence of price pressure in all its varied forms.

Sometimes it comes from external forces and at other times internal ones.

With this in mind, we’ve captured 15 common forms of internal price pressure.

Price Pressure | External Forces Revisited

Nowadays, people know the price of everything and the value of nothing. OSCAR WILDE

Many sales and marketing pundits claim there is no such thing as price pressure.

Are these claims true?

Or are such claims just contrary, quotable and fundamentally flawed?

I'd argue the latter. What about you?

Sales | Sometimes Videos Do Add Value

Last week, in Sales | Do Videos Really Add Value?, we looked at the frustration sales videos can create in online buying processes.

The original task seemed simple enough. I wanted to evaluate a series of specific software and technology upgrades, make a decision to buy them or not, and move on.

What I found was a maze. Visit this page. View this video. Read this list. Visit another page. Study these comparisons. Search for the actual final price. Revist several pages. Rewatch the video.

Abandon the search, and do something productive.

Sales | Do Videos Really Add Value?

‘Tis the season when small businesses are focused on completing what must be done now, while they also prepare for the coming year.

Many are upgrading or investing in software and equipment as part of that effort. The goal is to resolve problems, add capacity or both. They’re ready to buy if they can find the right solutions, right now.

Explore alternatives. Find the best option. Buy it.

Sounds simple, doesn’t it? Not so fast.

Business Lesson 6 from Mr. Blandings

Building a house is the perfect metaphor for the challenges we face as buyers and sellers, consumers and producers.

Mr. Blandings Builds His Dream House (1948) highlights these parallels with brains, wit and humor.

The film shows how, from start to finish, almost everything that could go wrong does go wrong. It also shows how everyone at each step contributes to the snafus and confusion as well as the successes.

Business Lesson 5 from Mr. Blandings

Packed with talent, wit and charm, Mr. Blandings Builds His Dream House (1948) offers a range of valuable business lessons.

Every contractor, consultant and salesperson should watch it. Here’s the situation, as we tackle Business Lesson 5.

Blandings and the architect are reviewing final bills from the many trades and craftspeople who’ve worked on the house, which is almost finished. Blandings goes ballistic when he sees the bill for the pantry room floor, because it’s much higher than expected.

Is the contractor a crook? Is he taking advantage?

Business Lesson 1 from Mr. Blandings

Early in my career, a wise and seasoned executive told me he couldn’t see the future, but there was one thing he could predict with great accuracy.

Every major technology project took twice as long and cost three times as much as originally projected. Or vice versa.

He was right then, he's right now. In fact, skip the word “technology” and his observation is still completely on target.

Price Pressure | Market Forces & the Solyndra Fiasco

What do you get when you mix market forces with commodity pricing and a delusional business plan?

Answer: Solyndra.

As you know, Solyndra, a California-based solar panel manufacturer, filed for bankruptcy on Aug 31, and the company is currently under FBI investigation. At last count, US taxpayers lost half a billion dollars on that deal.

Goodbye Greenbacks, Hello Green Energy highlighted a few basic stats. The news is worse than that superficial examination indicated.

Price Pressure | Internal Forces

Things only have the value that we give them. MOLIERE

Internal forces are a very real factor in any price pressure analysis.

What is internal price pressure?

It’s when you’re so motivated to make the sale, close the deal or keep the customer, you:

Price Pressure | External Forces

End the practice of awarding business on the basis of price tag alone. W. EDWARDS DEMING,
14 Points for Management (1950)

Price pressure comes in all shapes and sizes, and from both internal and external forces.

Let's tackle the latter first. What is external price pressure?

Price Pressure | Death by a Thousand Cuts

Profit is not a dirty word …
JAMES RHODES, former Ohio governor

Price pressure can be subtle or blatant, mild or severe. Whatever its form, it’s an integral part of business.

It's easier to recognize when it comes from the customer or the marketplace. It’s tougher to recognize but equally damaging when it's internal and the wounds are self-inflicted.

In a recent discussion on price pressure, a client observed that salespeople often try to offset cost increases by adjusting the sales price at a straight dollar-for-dollar ratio. It looks good on the surface, but when you do the math, it’s a defacto reduction in profit margins.

Price Pressure | Self-Inflicted Wounds

In the 1987 film, Baby Boom, there’s a scene every business person can appreciate.

JC Wiatt, the central character played by Diane Keaton, accidentally discovers an untapped market. She’s delivering sample jars of homemade baby food to the rustic general store when some out-of-towners approach and ask about price.

First, she tosses out a low figure. Then, with each admiring “ooh-aah” from the group, she blurts out a higher number until she lands on a figure nearly double her starting price.

It was a true win-win scenario: The buyers got a great deal, JC got a great price. In the real world, however, such clearcut win-win experiences can be elusive.

Sales | The 6% Solution

It’s easy to be a starter, but are you a sticker, too?
MARGARET THATCHER, British Prime Minister

It’s difficult to be positive, productive and persistent (but not pushy) in the face of rejection. Nonetheless, this is the challenge the most successful salespeople confront and master every day.

How do they do it? What makes them different?

Price Pressure | Are You Holding the Line?

Price pressure is alive and well, and it's affecting every business and sector.

How do we know?

Last week, Bob Chapman, Sandler Sales coach, conducted a Price Pressure mini-workshop hosted by Dickman Industrial & Electrical Supply for the Sidney-Shelby County Chamber of Commerce.

Among the nearly 40 participants, the consensus was clear: Price pressure is present in every segment of the market place. We're all feeling it and we're all struggling to find effective ways to hold the line.

How Manufacturers Undermine Distributors

The manufacturer-distributor relationship is vital to many businesses, yet it’s fraught with challenges and conflicts.

We’ve examined distributor strengths and shortcomings in recent articles. Let’s take a look at some of the ways manufacturers undermine distributor relationships and damage their own sales channel in the process.

What the Worst Distributors & Dealers Do

A few days ago, we examined behaviors and results that characterize top-performing distributors and dealers. Let’s look at the other side of that coin.

What behaviors, traits and results characterize under-performing distributors and dealers?

This is the question Bob Chapman and I explored with a group of manufacturing executives. Many answers were quite predictable, others were more surprising.