Marketing is pretty simple. Sales. Well, not exactly.

I have spoken with many people, from business owners to HR personnel, about the subject of marketing. Many of the people in our conversations have a narrow view of marketing and generally relate marketing to sales.

Now, I would have to say marketing ranks at the top of any subject; and yes, nothing happens without sales.

Without sales, businesses do not need inventory, computers, delivery drivers, stockers and cashiers, computers, engineers, IT departments, accountants, etc. Yet the service of professionals and workers is not limited to business, nor is sales.

Sales must happen in non-profit business, schools and government institutions. These entities must solicit services or products to generate income. To give an example, the University of Texas at the Permian Basin offers a free, four-year education. Dillards, Best Buy and other retailers offer free services too. The idea is to get customers. Customers (students or the public) will spend money.

Other ways to solicit money is to ask for donations, investment money or get a loan. Even getting a loan requires pitching one’s self to the banker by showing personal financial statements or business plans in order for the banker “buy” your idea or needs. If you have ever been on a date or made a marriage proposal, you dressed up (or to the occasion) to promote yourself and asked the other person to go with or marry you.

As you can see, sales is in everything and eventually to close the deal, you must ask for the business, so-to-speak.

Going beyond sales, customer service and promotions, marketing includes more. Obviously, promotion includes sales and advertising, but also give-a-ways, rebates, etc. In order to know what amount of money or items can be given away or discounted, pricing is part of marketing and includes accounting functions.

The accounting side will take into consideration all costs, such as product costs, freight, commissions, rent, cost per mile (for delivery), utilities, depreciation, etc. in order to project the necessary amount of sales in relation to the changing margins from discounts and markup in order to break even or meet a desired financial goal. Therefore, to understand marketing, you must also understand accounting.

Moving from accounting and the pricing side of marketing, the next is place or distribution. The place is not just at the corner of 1st and Main, selling locally, but also includes the distribution of the products. Will you sell locally or regionally? Where does the supply come from? Imports, manufacturers, distributors, etc. Even manufactures must find their sources of materials, just as a bank has a pipeline for money and distributes throughout a channel. Speaking of distribution, will the products come by rail, LTL (less than truck load), ground or air service, etc. Do you buy by the box, case, or truckload. What are the dimensions of the container to know how the shipping will be priced so you can figure your costs? Service companies also distribute their products – fax, phone, e-mail, Fed Ex, online, etc. Can you download it? To sum it up, the place is a physical location but also a distribution method.

From distribution, pricing and promotion, the obvious thing to sell is the product itself. Is the product physical or a service. What makes one product better than another? Does the product satisfy a need or want and/or create a solution to a problem? Is there a demand for the product?

All products have life cycles…the initial or starting point, growth, maturity and decline. As a buyer once told me, “it’s not a sale unless it’s a saleable item” and a supplier stated, “don’t make my close-outs your close-outs”. Good points.

Ultimately though nothing happens without sales, but sales is just one aspect of marketing.

I was listening to a buyer ask the saleman, “Do I get a special non-profit rate?” to which the salesman replied yes.

That question has always been intriguing for a couple of reasons.

First, if I’m in line behind the customer getting the special rate for the same exact thing, why should he get a discount and not me?

We but the same things; we buy the same quantities, etc.

Just because a company says they are non-profit does not mean they do not make money. Non-profit companies have to make a profit in order to survive.  Without a profit on their products and services, payroll can’t be met and the utilities can’t be paid.

I’ve done business plans for non-profit companies and they buy products and resell them at higher prices, which is the gross profit.  Service prices are figured on the amount of people they serve and breakeven points on expenses too.

In reality, a big difference between the two business structures is a non-profit cannot pay shareholders; therefore, a solution is to pay more in salaries, which which is an expense, to disburse the profits.

Next, non-profits do not like to pay taxes.  Thus, the reason to be a non-profit is for tax status, not a goal for losing money.  The irony is for-profit companies pay taxes and can be a financial source for non-profit companies grant money, or subsidies.

Ironic maybe, funny – no.

The non-profit company wants lower costs and tax exemptions, but who doesn’t?  What struggling business wouldn’t want subsidies?  (The ones who realize their taxes pay them, I guess.)  Receiving lower prices and taxes exemptions can allow the non-profit company to stifle or eliminate competition – the very companies paying taxes in the first place.

The next time I see something like this happen, I’ll be seeing the manager of the company for the last time because taxes subsidize many things and people, and so do my purchases.

About a week and a half ago, Friday the 25th I believe or Saturday, I was listening to Barney Frank give some quick responses to a Q&A session on the steps in Washington regarding recent financial legislation.

A couple comments Mr. Frank made referenced banks which would require them to hold more loans versus selling them on the secondary market. Another topic referred to YSP and mortgage brokers.

I’ll leave the second topic to be discussed in the chapter “The Banker’s Secret” in my book, “Barking With The Big Dogs”, but for now, let’s see if the new legislation is really good for you and me and America as a whole.

When I heard his comments, I immediately thought the comments are good talking points, but more to the story exists which probably won’t be heard on CNN or Fox.

So, here is my take on just parts of the recent financial overhaul.

The new recent proposed legislation requires banks to hold more cash on hand, and is not a bad idea. However, new changes may require banks to hold more mortgages too thus affecting the transfer of loans to the secondary market. (The secondary market is where mortgages are in investments such as mutual funds for example which the Average Joe may own.)

The secondary market helps the big banks and small banks and individuals too regarding the flow of money and money earned. However, small and regional banks may not have the ability to sell as many loans or do as much business, thus potentially hurting the local banking community.

If banking laws require lenders to hold loans and keep larger deposits, the changes could be a huge benefit to the largest banks since smaller institutions may not have the balance sheet requirements to compete. Holding loans also reduces liquidity, the free flow of markets and the ability to loan money to more people can diminish.

In my previous post, How To Make Money Going Naked, I described selling put options. Selling put options is a very safe and conservative way to make money and potentially own a stock or fund at a specific price versus the market price.

The price of the particular exchanged traded fund I wanted to own was around $28 per share last month. However, I was willing to purchase the fund at $25 per share, so I sold a put option set to expire in January 2011 and received a premium. (As a reminder, one option contract controls 100 shares.) Therefore, the net premium I received was the dollar amount of the option x 100, for each share. The net premium was $1.38, or $138 per contract. Three contracts mean I would receive $414 cash.

For every contract (option), I had $2,500 set aside in my money market funds to purchase the appropriate number of shares in the event the option exercises in the future. If I had one contract exercised, I would pay $2,500 and receive 100 shares of XYZ. If I had three contracts, I would pay $7,500 and receive 300 shares, and so on.

Rather than wait to see if I would purchase the shares six months from now or if the contracts would expire worthless in January, meaning I would keep the premium and not own the fund, I decided to close my position. By closing my position, I simply bought the option back.

Buying the option cost a net amount of $65, but I sold the option originally for $138, which resulted in a $73 net profit per contract. Taking $73 and dividing the amount by the money set aside ($2,500), I earned 2.92% on my money in one month. Further calculating the return, 2.92% x 12 (months), my return on investment, or money sitting in a money market fund, was 35.04% annualized!

Although the return is annualized and by stopping after only one month and potentially sitting on the money for a while, the investment beats many long term CD rates.

One last note on the option strategy; selling naked puts can be done in an IRA.

In the Chapter, It’s No Laffing matter, topics such as interest rates are continued. What may affect lending, however, is taxes and the Laffer Curve, not just lower rates. See if it is worth working much harder.

I was going over the financial feasibility study with a client today. When the conversation turned toward financial ratios, I brought up return on equity as I usually do.

However, something eye opening hit me during the conversation.

Before I talk about my discovery, let me mention topics we hit on first. You’ll want to pay attention this today if you are interested at all in making money on your investments, etc. If not, both you and future generations to come will miss out too.

When determining if the business was worth doing, we looked at cash flow. Cash flow statements are very easy to understand and it’s this simple…money coming in versus money going out. You can look at a personal checking account just as a business looks at their statements.

Next we discussed income statements. Income statements show business the items such as depreciation of assets on and other tax write-offs which reduce the taxable amount of income. The income statement, however, does not affect cash flow – money spent does. The income statement gives an idea about the net profits which are taxable.

From there, we reviewed return on equity. A difference between return on equity and return on investment is different, but in short, the return shows how hard the money is working. In just a minute, I’ll demonstrate some simple math; but first, let’s look at the Rule of 72 as it relates to how hard your money is working.

The Rule of 72 will tell you how fast the money will double in value.

To figure the time, you will only need the calculator between your ears. If you know the rate of return, which is mentioned on the feasibility study ratios page – or a CD at the bank, simply divide 72 by that number. The answer will be the number of years for your money to double.

For example, if you earn 6%, take 72 and divide it by 6. The answer is 12. Your money will double every 12 years.

Now comes the eye opening part.

I was looking at a money market account paying .01%. That’s right, 1/100th of a percent. At this rate, money will double every 7,200 years!

Without reinvesting the interest earned and simply setting it aside, in order to double the money, 11,920 years will pass.

Looking at interest rates on CD’s at .25%, which are not uncommon rates, money will double in 288 years. Can you and your family wait this long? Mine can’t.

Don’t blame banks for offering low rates, there is more to the story and you can read about it in “Barking With The Big Dogs” which is soon to be released.

I tell clients all the time when starting a business, find the money first before signing any contracts. As much of a “no-brainer” as the previous statement seems, it happens.

I know people who paid rent for six months before getting the funding for their business. Fortunately, the time was only six months. Could you imagine being in a contract for three years at $1,500 per month without a business? You would be out $54,000!

Before getting the keys to the property, first do a business plan so see the feasibility of the project. Next, find the money.

When finding the money, where do you look?

As I’ve stated before in my article, “Why Small Businesses Can’t Get Loans”, only about 4% of money for start up business comes from banks. Some of the big banks (such as Bank of America as I am told) have blanket policies not to lend to start up business. Wells Fargo had an advertisement talking about new business owners having friends around in the beginning, but now the people are gone and Wells Fargo is there to help. Is this a way of Wells Fargo saying they don’t lend to start up businesses?

Some banks won’t make a commercial loan for under $200,000 as well.

When a bank doesn’t lend to start up businesses, this practice may be their policy; however, if the project is good enough, the bank can seek the backing of the SBA and still do the loan.

The SBA (partially) guarantees loans to bank. The idea is when a loan falls outside the banks normal lending practices and/or the client cannot get money elsewhere, the SBA comes in to help businesses get the funding. The SBA has been called “the lender of last resort”. Businesses do not deal directly with the SBA. However, the ultimate decision still rests upon the bank.

So where does the money come from?

55% – your savings

10% – relatives

7% – partners

6% – charge cards

4% – venture capitalist

3% – friends

3% – Angel investors

3% – mortgage property

5% – other

Now consider grant money.

Grant is money that does not have to be repaid.

Most grants however require matching funds meaning the recipient also has to come up with funds in addition to the grant money they are receiving.

Grants are usually available through public or private community foundations primarily granting monies to not-for-profit agencies and rarely, if ever, grant money to for-profit businesses. The grant money for small business may come in the form of assisting you with help and education, not direct funds.

WATCH OUT FOR GRANTS – some grant wording changes throughout the conditions to terms such as – grant – to loan – to equity position. In addition, to satisfy the conditions of a grant, you may have to spend the money received to do so, thus netting you no additional funds to operate.

When getting help from the government, there’s one thing you need to know right up front about getting money from the government…

They don’t have a single dime to directly lend to you for the start-up of a small business.

You may believe this statement to be untrue because of the way the term “government loan” is thrown around, and we hear about government loans all the time. (Refer back the the SBA. The bank is the SBA’s client, not the business.)

The bottom line is there is no direct money. But that’s okay…

If the government had to give money to any American who wanted to start a business, just imagine how much money they would have to collect in taxes to fund such a program.

Besides, a capitalist system works best when the government uses a hands-off approach with regards to the competitive market system. Having the government choose who gets funded and who doesn’t is socialism not capitalism.

Finally, getting a funding may not be as difficult as it sounds because money is out there. If you have a good plan, collateral, credit scores, etc., you can find money. However, be prepared to face rejection and get creative if you decide to follow your dream.

With Obama’s enormous requests for spending and the Congress willing to oblige and write the checks, Volker feels we need a new tax to pay for the expenses.

Spending is at 25% of GDP and the new taxes will come from income taxes, a VAT (value added tax), energy tax, carbon tax or whatever. These taxes seem to be a “good idea”. Corporate taxes are already among the highest in the world. No wonder why companies move overseas.

Speaking of oversea, I have a relative who lives in Sweden and when they came to America, I was told he and his wife are required to put their kids in daycare at the age of three. The income taxes are 50%; therefore, both spouses have to work. I don’t know about you, but I enjoyed playing with the kids when they were three versus letting someone else raise them.

But back to needing a new tax; in my opinion, cutting out the waste and backdoor deals, such as buying votes in Louisiana to get the health care bill passed, cutting out spending for free education and health care for illegal aliens, etc. seems to be a better idea.

If strategies such as the VAT are “poison” in the U.S. because they are a bad idea, and all of the European and Mexican ways of running a country do not work, why try it here? Why not fix the problems there instead of having the U.S. taxpayers bailout out everyone.

Unfortunately, what the American people want is not the agenda of Washington – redistribution is.

Getting money for a small business is not easy for many reasons.

First of all, owners and prospective owners need to cut through the sales hype.

Advertising my say the President has ordered banks to loan money to those who qualify, but in reality, the President can’t simply do such actions.

Banks have internal business practices and structures just as any other business operates. Did you know some banks won’t loan on start up businesses or until a business has operated for two years? Some banks won’t make commercial loans under $200,000. Not all banks or credit unions do commercial lending.

Not lending is not always a bad thing. When we put money in a savings account, for example, we want our money protected. In order for our money to be protected and safe, we should want to bank to make prudent lending decisions, not risky loans. Risk is more for investors and with the added risk, investors should reap the rewards knowing the potential losses could be great.

In addition, a bank or credit union has regulations to meet before a loan can be approved on top of their standard operating procedures. If a loan falls outside the lender’s normal business practices, or parameters, but wants to do the loan, the bank can seek the assistance of the SBA. The SBA has guidelines determining lending activities too.

Next, take secondary market issues. Many loans are sold on the secondary market. What may make lending difficult in the future, as we have seen in the past couple of years , is obviously related to people making money on investments. The market has been in the tank starting in 2007; therefore, no one wants to investing losing propositions.

Moving right along, consider taxes. In 2011, tax laws revert back to pre-2003 levels. Dividend rates will go back up to 39%! Higher taxes and less profits on investments may lead to lower values on investments due to lack of demand, thus people once again losing money.

Investments and dividends are not just for the wealthy or Wall Street execs, but also the average Joe’s IRA and 401k accounts, mutual funds, exchange traded funds, etc. (Check out my article, “Kissing retirement money goodbye“.)

So when looking for money, according information derived from the Small Business Development Center, only about 4% of the money for start up business comes from the bank – approximately 55%-65% comes from personal finances or relatives.

Other forms of money comes from selling assets, home equity loans, partners, investors, etc.

Grant money is for another topic, but basically there is not any grant money “for profit” businesses and the government isn’t a direct source of funding (or cash) for business, which is not a bad thing either; but I’ll go into this at a later time. In the meantime, consider what our taxes would be if the government provided loans to everyone.

In summary, the business idea and creating a business plan may take the least amount of time, but finding money could take months so be prepared and possibly be creative.

Talk has surfaced again about nationalizing retirement accounts.

With the government’s out of control spending and promises for entitlements which it can’t pay, one way to borrow money is through retirement accounts.

Obama and company want government retirement accounts, formally known as IRA’s and 401k’s, to fund the pensions, etc. We already have Social Security, but that isn’t good enough and is broke too.

The way to fund their obligations is by nationalizing private citizen’s accounts and paying paltry returns on our money. One way the government borrows money is by issuing Treasuries. Would our retirement accounts, containing stocks, mutual funds, exchange traded funds, etc., be reduced to containing low yielding Treasuries?

Take a look at my previous article, “How to double your money – slowly“. Only this time substitute the word bank with government. Or better yet, you can read Chapter 44 “Failure By Design”; it’s online HERE.