You don’t need an inner-city address, Caren will help you tackle money matters in the ‘burbs, through a better understanding of all the important issues – investing, superannuation, budgeting, tax, insurance, mortgages, gearing, shares, managed funds, small business, food, home, fashion, travel, and much more.

A fun and entertainingly educational forum, specifically designed for Australian “suburbanites".

Monday, June 17, 2013

“Would you like shoes with that?” How the banks are selling credit cards to our kids!

In our last 4 Ways Bulletin I included an article on teaching our kids about credit cards.  Since then I've been quite shocked to learn exactly how hard some banks are pushing credit cards on them.

A few weeks ago our 19 year old Ashlee received a marketing call from one of the 4 major banks where she holds an account.  It was a fairly young guy who was extremely friendly, asking her about what she was doing at uni and how she was going etc.  He then led the conversation to how she really should have a credit card.  First he used scare tactics - did she realise she'd never be able to get a home loan without a credit rating and a credit card would help her with that?  But then he went in for the real kill - "haven't you ever seen a pair of shoes you really wanted but couldn't afford..."!!!!!!

Terrific!  In one sentence, this guy had tried to undo years of us teaching our kids the value of saving for what they need, any not going into unnecessary debt.

When Ash explained she needed time to think about it, and might look at it in her uni holidays, he told her she shouldn't really wait when she could do it now, and told her he was putting her through to a Financial Planner, presumably to "seal the deal".  Again, the chap was very friendly when he started chatting to Ash, but when she explained that she really didn't want to commit on the spot, his attitude changed quickly and he all but hung up on her.

Some facts about Ash:
  • She is only 19;
  • She is studying Accounting at uni and does not have a full-time job;
  • She has just $50 in an account with the bank that called her;
  • She does love shoes;
  • She did go online afterward and applied for a card herself, but thankfully was declined!
As you'd imagine, finance is a fairly common topic in our household (1 Financial Adviser + 1 Accountant = wild family fun times) so Ash told Mick and I about the whole ordeal over dinner that night and we were able to have a frank discussion about the pros and cons of credit cards.  But I shudder to think about how many kids might get into credit card debt before anyone even realises they'd been given the card!  Or should I say "sold" the card.  Because I'm sorry, but if you dangle shoes in front of most females as the proverbial carrot, that's a hard sell!!!

I'd really like to encourage all parents to have the credit card conversation with your kids before the bank does.  To that end, if you didn't catch my article in the 4 Ways Bulletin, just click here as it highlights some important issues everyone should know about the so-called "fantastic plastic".

Talk soon,

Wednesday, June 12, 2013

Did you know there are only 4 ways to grow your business?

It may sound a little simplistic, but there really are only 4 fundamental ways to successfully grow your business - in other words to make it more valuable:
  • Increase the number of customers (of the type you want to have);
  • Increase the number of times customers come back;
  • Increase the average value of each sale;
  • Increase the effectiveness of each process in the business.
It's interesting to contemplate the fact that all of the business development strategies you might implement will fall into one of these 4 categories.

Any other strategy that does not belong in one of those 4 ways, for example cutting costs, may help you temporarily, but it won't grow your business.  Cutting costs won't make your business more valuable unless you turn around and re-invest the money into one of the 4 ways.

These 4 ways work best when used together in an overall strategy, but the mistake many companies make is to focus on just one of these 4 ways, and thus miss out on significant growth opportunities.  In particular, many business owners focus on winning new customers, often ignoring the other (often less expensive) ways to grow their business.

Let's look at an example of how the 4 ways can work together for you.

Let's say you have a customer base of 1,000.

1. You are able to increase the amount of inquiries (and thus new customers) by 10%. This means your customer base would increase to 1,100.

2. You are able to increase the number of times each customer purchases from you during their lifetime by another 10% (e.g., from once to 1.1.)

3. You manage to increase your average sale (or transaction value) by 10%, taking it from $100 to $110.

4. And improvements in your business processes have allowed the first 3 increases to occur.

Sooooooo, assuming everything else is equal, does it make sense to say that overall business would grow by 10%?

Well simplistically it looks like the business grows by 10% BUT something completely different happens.

When all 4 areas are increased by 10%, it has a multiplier effect of 33.3% - or $33,100 more income!

ie. 1,100 x 1.1 x $110 = $33,100

That's a pretty dramatic effect on the bottom line for a relatively small increase in each area!

For a handy reference diagram on the 4 ways to grow your business, just click here.

And if you'd like to hear more details about the 4 ways to grow your business, click here for a recording of my most recent "You & Your Business" radio segment on 98.1 Radio Eastern (or ask me about a one-on-one session to help identify the 4 ways you could grow your business.)

Talk soon,