A Golden Oldie that's still a big hit

Some things never change.

I remember the radio dial being tuned to KIOA in a lot of places when I was growing up in Des Moines, and, even with all the choices we have for radio these days, 93.3 FM is still going strong.

When I'm putting together a marketing strategy for my specialty retail business, the Heart of Iowa Market Place, a print catalog is the marketing equivalent of KIOA -- still there, still going strong and still making people happy.

That certainly may come as a surprise to some retailers, especially those who have grown up in the age of websites, Facebook, Pinterest, Instagram, Snapchat and a million different mobile phone apps. But the truth is still the truth: Print catalogs live on because print catalogs are effective.

I'm a big believer in the value of print catalogs. Our current customers enjoy them and value them. Prospective customers respond very positively to them. And, we're certainly not alone.

A U.S. Postal Service study from a few years back shows that direct mail and catalogs actually build stronger online sales.

"Catalog recipients purchased 28 percent more items and spent 28 percent more money than their non-catalog counterparts, with direct mail percentages trailing only slightly behind," a summary of the study reads.

The study also noted a revenue lift of 163 percent for web sites supported by catalogs as opposed to those that were not. Sending catalogs more than doubled online sales. And catalog-based revenue was also over two times than revenue realized from recipients of only online communications.

That same study found that 84 percent of catalog recipients "feel it's easier to shop online with a catalog in hand."

Catalogs reinforce your brand. They're proactive. They take your products directly to customers rather than waiting for customers to come to you. In short, bulk mail can bulk up your website's muscle and, more importantly, your bottom line.

The next time you're listening to the radio -- better yet, the next time you're thinking about how to effectively market your products -- keep in mind the print catalog. It may be the marketing world's version of an oldie, but it's definitely still a goodie.

In fact, on my charts, it's nothing less than a No. 1 hit.

Take credit where credit is due

Tax creditAnother tax day has come and gone! Hopefully you took advantage of the HUGE federal tax credit for renewable energy.

A whopping 30 percent federal with no limit and 18 percent state with a $5,000 limit. The credit is set to expire at the end of 2016.

The average residential geothermal system costs $25,000


That’s a tax credit of
$12,000. 

Another federal credit is the Non-business Energy Property Tax Credit. It's not as good as the renewable. You only get up to a maximum of $500 for all years combined. This credit covers things like adding insulation, better windows, or a high efficiency furnace.

GeothermalRod Olson, Financial Care Professionals, says three returns over the past several years out of 600 returns annually have filed for the renewable credit. However the credit on one was large enough to wipe out the entire federal tax and some left for the next year. On the other hand, one in twenty file for the nonbusiness tax credit.

Dan Schwarz of McGowen Hurst Clark & Smith in West Des Moines says “We don’t see people filing for the credit. Probably an opportunity more could take advantage.”

The Congressional Research Service reported in March of 2014 that nearly 12 percent of all tax returns filed in 2011 claimed the residential tax credit. Not surprising, those with adjusted gross incomes of more than $100k (less than 3% of all returns) filed for more than half of the credits. The total tax credit claimed was $1.6 billion.

You can reach me at rsmith@smithmetzger.com and let me know if you will go for a credit next year. Or do you think it should be pay as you go?

How to finance your exit

There are numerous financing options for the business owner seeking to sell their business. For most business owners the key consideration is how to maximize the sale price. Some of the most common alternatives and issues are as follows:

Buyer Pays All Cash: This is the Seller’s dream. Buyer writes a check for the entire amount and the Seller goes to the beach. However, few Buyers have the cash and a sophisticated Buyer will not enter into this type of transaction. In addition, the Seller could be liable for significant tax obligations

Seller Financing:  Most transactions will have some form of Seller financing. And, in many cases banks will incorporate that requirement before they will do a loan. The banks logic is: “If you will not bet on the future of this business-why should we”? The issue for the Seller is making sure that they will get their money.  The Seller should demand at a minimum a financial statement from the Buyer(s) and require multiple signatures on the promissory note.

Traditional Bank Financing: Bank financing for a business loan typically comes with SBA participation for the loan. The bank will require 3 to 5 years of complete financial statements, collateral, appraisals, a business plan, often previous experience and possible performance requirements for the business and Buyer guarantees.

Private Lenders:  This is relatively new area for lending. It has many of the paper work requirements of a traditional lender but this type of lender is able to do loans which banks cannot do and does not require SBA participation. Interest rates are 1 to 2 percent higher than traditional lenders and the closing is usually quick.

Good Luck!

- Steve Sink | CBI and M&AMI | ss@phxaffilaites.com

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