PROMOTING THE SMALL BUSINESS
magazine
What is Promotion?
Promotion may be defined as activities,
including advertising, personal selling,
sales promotions, public relations, and
direct marketing, used by small business
owners (SBOs) to persuade prospective
customers to buy the company's
products or services
Promotion and Costumer Demand
Promotion and customer demand are
related in some ways. There are
instances when promotion increases the
total customer demand for the firm's
products or services.
Types of Costumer Demand
▪ Established Demand – Common Types of Salesperson
Purchases made by people as a
result of any of the following:
1. Positive experience with the
business’ product/service
2. Convenience of the location
3. Attractive appearance of the
firm
▪ Newly Created Demand
(Promoted Demand) – When the
business engages in any activities
designed to attract people to buy
from the firm.
METHODS OF PROMOTION
1. ADVERTISING
Advertising is any paid form of
nonpersonal presentation of ideas,
goods, and services by an identified
sponsor.
Common Types of Advertising
1. Print Advertising (ex.
ads, newspaper)
2. Direct mail advertising (ex. flyers,
brochure)
3. Television Advertising
4. Radio Advertising
5. Social Media Advertising
6. Outdoor Advertising
2. PERSONAL SELLING
Personal selling is that method of
promotion that is direct, personal and
often a face-to-face interchange between
the salesperson and the consumer.
❑ Order Getter – their task is to
increase the firm’s sale by selling
to new costumers
❑ Order Taker – their task is to seek
repeat sales from current
costumers
❑ Support Personnel – to facilitate
the selling function by locating
prospects, educating costumers,
building goodwill, and etc.
3.PUBLICITY
Publicity is a method of promotion where
news is generated about the firm or its
products or services and appearing in
print, broadcast, or electronic media and
not paid for by the firm.
Publicity is one of the promotional
methods which can be tapped by the
cash-strapped small businessman. The
only requirement is a prepared publicity Sales promotion is a method of
release describing any of the following: promotion other than advertising,
personal selling, and publicity that
▪ The existence of the firm and the
increase sale through temporary sale
products or service offered
incentives.
▪ The unique characteristics of the
Major Tools of Sales Promotion
new products or services of the
firm 1. Point - of - purchase displays
▪ The firm’s unique method of These are items used by the
selling the business sellers to attract attention, inform, and
persuade prospective customers to buy.
Publicity Categories
2. Premium
Positive
A special incentive in the form of a
▪ If a publicity event reinforces and
gift that is made available to customers
improves the brand image, it can
who buy certain products of the firm.
be termed as positive publicity.
3. Trading stamps
Negative
Sales promotion tools in which
▪ If it causes loss to the organization
customers are given in relation to the
through increased coverage and
amount of their purchase.
awareness, it can be termed as
negative. Other way to look at 4. Sampling and Demonstrations
publicity is :
Sampling to the process by which
Planned Publicity manufactures give away free samples to
introduce a new product. And product
▪ Publicists and PR teams plan
demonstration because customers are
proper publicity partnerships and
given the opportunity to observe the
tie ups through interviews, product
product benefits and performance before
placements, campaigns etc.
purchasing.
Unplanned Publicity
5. Retail Coupons
▪ Sometimes publicity can happen
- device that motivates consumers
without the company planning the
to buy from the retailer
same. It can be triggered through
some news article or something - coupon entitles the buyer to a
said in an interview. These days discount (or a free item)
with social media, there is a lot of
information available and many a
times we hear that a certain thing 6. Consumer Contests and
has gone viral. Sweepstake
4.SALES PROMOTION
 - consumers compete for prizes by
completing a contest
- sweepstakes require the
participants to submit some kind of entry
form but are purely games of chance
requiring no analytical or creative effort
by the consumer.
7. Rebates
Offers that return of money based
on proof of purchase
8. Trade Show
These are temporary exhibitions
of products and services
5.WORD OF MOUTH
a method of promotion wherein people
are encouraged to tell other people
products or services they have enjoyed.
Positive Word-of-Mouth
✓ competent employees;
✓ proper treatment of people;
✓ not overcharging;
✓ not using false claims in advertising;
✓ keeping promises to customers;
✓ having a good product or service;
and
✓ keeping customers happy.
6 Ways of Managing Your Business’s
Finances
1. Keep Your Finances Separate
-Be careful not to intertwine your
personal and business finances. Prevent
tax problems and other issues down the
road, especially in cases of bankrupcy.
2. Pay Yourself
-Don’t forget that the owner needs
a salary too. While you want to keep
investing money back into the business,
give yourself enough to live comfortably
on.
3. Plan Long-Term
- If you’re transitioning from a
more traditional job be sure to rethink
your personal retirement plan. You can
build security into your business from the
beginning.
4. Choose Emplooyee Benefits:
- Consider what benefits you’ll be
able to offer your team. This may not be
feasible from the beginning but consider
health and life insurance and vacation
benefits.
5. Stay Intentional
- Set short-term and long-term
goals with your business’s financial
management. Keep active goals and
always pay attention to performance
6. Save Early
- Owning your own business is
unpredictable and risky. Save as much
money in the early stages as you can in
order to build up an emergency fund for
unexpected costs down the road.
 MANAGING THE SMALL BUSINESS
FINANCE
Financial Planning for Small Business
What is Financial Plan?
A financial plan is simply an overview of
your current business financials and
projections for growth. Think of any
documents that represent your current
monetary situation as a snapshot of the
health of your business and the
projections being your future
expectations.
Components Of a Successful
Financial Plan
1. Profit and loss statement
This is a financial statement that goes by
a few different names—profit and loss
statement, income statement, pro forma
income statement, P&L (short for “profit
and loss”)— and is essentially an
explanation of how your business made
a profit (or incur a loss) over a certain
period of time.
2. Cash flow statement
Your cash flow statement is just as
important as your profit and loss
statement. Businesses run on cash—
there are no two ways around it. A cash
flow statement is an explanation of how
much cash your business brought in, how
much cash it paid out, and what its
ending cash balance was, typically per-
month.
3. Balance sheet
Your balance sheet is a snapshot of your
business’s financial position—at a
particular moment in time, how are you
doing? How much cash do you have in
the bank, how much do your customers
owe you, and how much do you owe your
vendors?
What to include in your balance sheet
Assets: Your accounts receivable, money
in the bank, inventory, etc.
Liabilities: Your accounts payable, credit
card balances, loan repayments, etc.
Equity: For most small businesses, this is
just the owner’s equity, but it could
include investors’ shares, retained
earnings, stock proceeds, etc.
4. Sales forecast
The sales forecast is exactly what it
sounds like: your projections, or forecast,
of what you think you will sell in a given
period. Your sales forecast is an
incredibly important part of your business
plan, especially when lenders or
investors are involved, and should be an
ongoing part of your business planning
process.
5. Personnel plan
Think of the personnel plan as a
justification of each team member’s
necessity to the business.
6. Business ratios and break-even
analysis
Business ratios explained
If you have your profit and loss
statement, your cash flow statement, and
your balance sheet, you have all the
numbers you need to calculate the
standard business ratios. These ratios
aren’t necessary to include in a business
plan—especially for an internal plan—but
knowing some key ratios is always a and satisfy ending inventory
good idea. requirements
• applicable for small manufacturing
Types of Budget Applicable to Small
Business

The Cash Budget

• an estimation of the cash flows
of a business over a specific
period of time
• applicable for all types of firms
The cash budget contains the following
main section:
1. total cash available
- cash available section
identifies the beginning cash
balance & the expected cash
receipts
2. cash disbursements
- lists all cash outlays for the firms
period except for interest
payments on short-term loans The production budget is the primary
3. cash excess or deficiency basis for planning the following:
- shown by subtracting cash 1. raw material requirements
available from cash needs 2. labor needs
4. financing 3. capital additions
- show the planned borrowings 4. factory cash requirement
& repayments including 5. factory costs
interests
5. cash balance
- result of cash available plus
borrowings less cash
disbursements
Production Budgets
• an estimate of the quality of
goods to be manufactured
during the budget period
• describes how many units must
be produced to meet sales needs The Sales Budget
 • applicable to service firms Current Assets
identifies each service and its - include cash & all other assets
quality that will be sold that will be turned into cash
• the services produced are within a year (receivables or
identical to services sold inventory)
Current Liabilities
For this budget, let’s assume a - bills that are due within a year
photography business offers three photo (accounts payable & other
packages: Package A (three prints – one short-term debts)
size), Package B (five prints – two sizes), Non-current Assets
and Package C (10 prints – three sizes). - assets that generally have a
Financial Analysis
• refers to the process of
interpreting the past, present,
and future financial condition of
a firm
• used to evaluate economic
trends, set financial policy, build
long-term plans for business
activity, and identify projects or
companies for investment
Basic requirements in making a
financial analysis of a small business:
1. financial statements
2. break-even analysis
3. financial ratio analysis
Financial Statements
There are three major classes of
financial statements that provide major
life of more than one year
financial data about a small business.
(plant & equipment)
They are the following:
Non-current Liabilities
1. Balance Sheet - debts with maturities
- gives a financial profile of a exceeding one year (long-term
business at any given point, liabilities)
showing its assets, liabilities, Net Worth or Equity
and net worth - the residual amount left after
- assets and liabilities that are deducting total liabilities from
indicated in the balance sheet total assets
may be categorized as either 2. Income Statement
current or non-current
 - operating profit plus other
income (interest earned from
investing idle cash) minus
interest expenses on borrowed
funds
4. net profit
- profit before tax minus the tax
liability

3. Statement of Changes in
Financial Position
- designed to explain the
financial changes that occur in
a company from one
accounting period to the next
- it highlights the increases &
decreases in working capital

Break-even Analysis
• a means to determine at what
point in a business activity the
total revenue equals expenses
• above the break-even point, the
business will be making a profit;
- shows the revenue & other
below it, the firm will incur a loss
income, expenses, and net
income for the small business Calculating the Break-even Point
covering a period of time
(usually one year) 1. calculating the break-even point in
units
Four different profit measures are found 𝑭
𝑩𝑬𝑷𝑼 =
in most income statements. They are the 𝑷−𝑽
following:
2. calculating the break-even point in
1. gross profit
pesos
- sales minus cost of goods sold 𝑭
2. operating profit 𝑩𝑬𝑷𝑷 =
𝑷−𝑽
- gross profit minus operating ( 𝑷 )
expenses
3. profit before tax Where P = price per unit
F = fixed costs
 V = variable cost per unit 2. activity ratios
- provide a glimpse of how
Example effectively the firm is using its
Given: assets
Price per unit of product = a) accounts receivable turnover –
₱50,000 relates accounts receivable to
Fixed costs = sales & shows how many times
₱3,500,000 the accounts receivable is paid
Variable cost = ₱450,000 off during the latest accounting
Units sold = 120 period
Variable cost per unit = ₱3,750 𝑨𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝒕𝒐𝒕𝒂𝒍 𝒚𝒆𝒂𝒓𝒍𝒚 𝒔𝒂𝒍𝒆𝒔
𝑭 𝒐𝒖𝒕𝒔𝒕𝒂𝒏𝒅𝒊𝒏𝒈 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆 𝒂𝒕 𝒚𝒆𝒂𝒓 𝒆𝒏𝒅
1. 𝑩𝑬𝑷𝑼 = 𝑷−𝑽
3,500,000
= 50,000− 3,750 The average collection period must also
𝑩𝑬𝑷𝑼 = 𝟕𝟓. 𝟔𝟖 𝒖𝒏𝒊𝒕𝒔 be calculated along with the accounts
receivable turnover to determine how
𝑭 long the accounts receivable are
2. 𝑩𝑬𝑷𝑷 = 𝑷−𝑽
(
𝑷
) collected.
𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒔 𝒓𝒆𝒄𝒆𝒊𝒗𝒂𝒃𝒍𝒆
₱3,500,000
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝒄𝒐𝒍𝒍𝒆𝒄𝒕𝒊𝒐𝒏 𝒑𝒆𝒓𝒊𝒐𝒅 =
𝒅𝒂𝒊𝒍𝒚 𝒔𝒂𝒍𝒆𝒔
= ₱50,000−₱3,750
( )
₱50,000 𝒂𝒏𝒏𝒖𝒂𝒍 𝒔𝒂𝒍𝒆𝒔
𝑫𝒂𝒊𝒍𝒚 𝒔𝒂𝒍𝒆𝒔 =
𝑩𝑬𝑷𝑼 = ₱𝟑, 𝟕𝟖𝟑, 𝟕𝟖𝟑. 𝟕𝟖 𝟑𝟔𝟎 𝒅𝒂𝒚𝒔

Financial Ratio Analysis c) inventory turnover ratio –

• used to spot trends (good/bad),
get a better way of handling cash,
and forecast the effect of
operations on profitability
Classifications:
1. liquidity ratios
- reveal the firm’s ability to pay
debts as they become due
a) current ratio – measure the
ability of the firm to meet current
debt
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
measures the number of times
inventory turns over during the
year
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒕𝒖𝒓𝒏𝒐𝒗𝒆𝒓 =
𝒄𝒐𝒔𝒕 𝒐𝒇 𝒈𝒐𝒐𝒅𝒔 𝒔𝒐𝒍𝒅
𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒃𝒆𝒈𝒊𝒏𝒏𝒊𝒏𝒈+𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝒆𝒏𝒅
( )
𝟐
3. profitability ratios
- measure the overall financial
performance of a firm
a) net profit margin on sales –
show how much after-tax profits
are generated by each peso of
sales
𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕
𝑵𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕 𝒎𝒂𝒓𝒈𝒊𝒏 =
𝒔𝒂𝒍𝒆𝒔

b) quick ratio – measure a firm’s

ability to pay its debts on time b) rate of return on equity –
𝑸𝒖𝒊𝒄𝒌 𝒓𝒂𝒕𝒊𝒐 = measures the rate of return on
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕𝒔 𝒍𝒆𝒔𝒔 𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 the book value
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝒏𝒆𝒕 𝒑𝒓𝒐𝒇𝒊𝒕
𝑹𝒆𝒕𝒖𝒓𝒏 𝒐𝒏 𝒆𝒒𝒖𝒊𝒕𝒚 𝒓𝒂𝒕𝒊𝒐 =
𝒆𝒒𝒖𝒊𝒕𝒚
 4. leverage ratios
- measure the extent to which a
firm relies on debt financing
a) debt ratio – compares the total
liabilities of the firm to its total
assets
𝒕𝒐𝒕𝒂𝒍 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑫𝒆𝒃𝒕 𝒓𝒂𝒕𝒊𝒐 =
𝒕𝒐𝒕𝒂𝒍 𝒂𝒔𝒔𝒆𝒕𝒔

b) debt-equity – compares debt to

equity
𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
𝑫𝒆𝒃𝒕 − 𝒆𝒒𝒖𝒊𝒕𝒚 𝒓𝒂𝒕𝒊𝒐 =
𝒆𝒒𝒖𝒊𝒕𝒚