July 2006
You don’t need a lot of cash to be an effective marketer as food group SumoSalad proved last month. Gate crashing the launch of a new Krispy Kreme store, SumoSalad organised a salad lover’s protest against the iconic snack.
With branded T-shirt clad protesters waving placards reading “Don’t get fatter give up the batter” and “Donuts are like spare tyres”, the salad group tapped into community concern about obesity levels. While SumoSalad’s management suggest that the marketing campaign delivered an important message about obesity to doughnut fans, the strategy was a clear attempt to ambush the marketing efforts of a larger rival.
SumoSalad’s strategy was more than a publicity stunt; it was an effective reinforcement of the food group’s healthy lifestyle message. The strategy brought more attention to their store and corporate message than an advertisement in a newspaper and at a lesser cost given the value of the publicity created. While the protest is unlikely to convince Krispy Kreme aficionados to buy a salad instead, few locals will be oblivious to SumoSalad’s existence in their town.
SumoSalad’s management said that to compete with much larger international food retailers, they need to be clever about how they use their marketing budget. What the SumoSalad protest proves is that it’s possible to make an impact even when you’re up against a much larger budget. And, their strategy makes sense because a smaller rival will never be able to out spend a major competitor on advertising.
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What is ambush marketing?
Ambush marketing is when a competitor piggy backs on another business’s marketing campaign. Ambush marketers use the momentum of one marketing spend to promote their own products. Sponsorship is a common target particularly at major sporting events where one brand makes an unauthorised association with the event. Nike is a leader in the technique by avoiding major event sponsorships and instead, sponsoring individual sportspeople and buying advertising around an event.
The effect is four fold: Nike often wins the marketing battle despite not being an official sponsor; they undermine a competitor; reinforce their reputation as a non-traditional and ‘edgy’ brand particularly effective with generation X and Y; and spend less doing it. |
Effective marketing does not have to be as aggressive as the SumoSalad example. But for many small businesses it’s time to think seriously about where and how you spend your marketing budget and if there are better ways of reaching your audience than traditional mediums.
According to a recent Business Review Weekly survey, SumoSalad is the fastest growing franchise in the country with a growth rate of over 144 per cent annualised over three years. The franchise group’s revenue was reportedly $4.82 million in 2004/05. There are currently 17 stores with another 2 listed as “opening soon” on the website.
The June quarter BAS is due on 28 July for lodgement and payment. As it’s the fourth quarter BAS, it will need to be reconciled against your financial statements to ensure there are no discrepancies against what has been declared on your financial statements.
The June quarter superannuation guarantee contribution is due on or before 28 July.
The Australian Tax Office (ATO) has released a list of their top audit targets. The hit list includes:
- Low doc loans – Low document loans provide plenty of fodder for the ATO. Among the concerns is the poor return lodgement record of many of those with low doc loans. Over 14 percent of those with low doc loans reviewed by the ATO to date have outstanding tax returns. In addition, the ATO is checking on the gap between income declared to the ATO against income declared to the finance provider to secure the loan.
- Capital Gains Tax - Many people are forgetting about income they have earned from the sale of investment property, shares and other assets. To date, the ATO has targeted property transactions using data matching against state revenue offices, titles offices and the Australian Valuation Office. Now, share transactions are coming under close scrutiny with data matching programs planned for share registries and managed investment funds.
- Landlords – Rental property is a sensitive area for the ATO with the large number of rental property owners following the property boom of recent years. The ATO says that many landlords are not declaring rental income and are claiming deductions they are not entitled to. Key areas include: deductions for properties that are not genuinely available for rent; initial repair and renovation costs as repair and maintenance costs; deductions for legal and other costs that should be treated as capital expenses; and, deductions related to private borrowings or travel.
- High income earners – The returns of senior executives and directors from the top listed and private companies will come under increased scrutiny, as will those salary and wage earners who earn more than $1 million a year. Among the areas of concern flagged by the ATO are: high value options and share rights not being declared; large cash bonuses reported in annual reports not being declared on income tax returns; remuneration reported in annual reports not matching tax returns; and, large deductions incorrectly claimed.
- Work related expenses – Key areas of concern include incorrect apportionment of business and private use of items such as home office expenses; incorrect claims for clothing and laundry expenses; and, self education expenses for non-work related courses.
The new financial year came with a rush. Like many businesses, much of your focus is likely to have been around tying off June 30 accounts and seeing how everything finished up. While this is important, don’t let the new year get going without having all of your financial management tools in place. There are four things every business should have:
- An operating budget;
- A capital expenditure budget;
- A cash flow budget; and
- Your KPIs for the year.
Operating budget
You need to know what the year is going to look like. How much profit you will make, when you will be making your profit and how your income and expenses are likely to move about. Without this you will be under prepared for the year and need to manage by gut instinct or reaction to events as they occur. Get your budgets in place and then you can track performance against expectation.
Capital expenditure budget
This is about understanding and identifying how much you are likely to need for capital purchases throughout the year. This might be replacements or new plant or equipment required because of business growth or change. Most businesses have capital expenditure requirements but many don’t plan for them. When they occur they can disrupt your cash flow. Plan ahead. They are an essential part of your cash flow budget.
Cash flow budget
You absolutely need this. Cash is king and there is plenty of evidence that the Australian Taxation Office and large suppliers are taking a tougher approach on collections. Your cash flow budget needs to flow on from your operating and capital expenditure budgets.
You need to forecast the timing of money flowing in and out of the business. Make sure you include things like tax payments, loan repayments and dividends. And, plan around the cycles that can occur with BAS payments. If you are going to be tight for cash at some time in the year, talk to your bank early up.
KPIs (Key Performance Indicators)
These are a great way to manage the business. What are the key indicators that show your business is on track? It might be the number of enquiries, machine hours for a production business, on time delivery, customer complaints, or staff turnover. For most businesses you can measure performance around six KPIs. They are the key influencers of your business’s operating performance and should be capable of being easily tracked and managed. If you haven’t used them before give it a try.
For assistance to get your business running at its strategic best this financial year, talk to us today to arrange a time for us to work with you on your business’s budget and KPI planning.
Rover could be tax deductible?
In some circumstances, a dog can be tax deductible. If Rover is used to protect your business or business equipment (is a guard dog, stays at the premises, is required by the business), then the purchase price of Rover and the dog’s ongoing upkeep may be deductible as a legitimate cost of business.
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