Here’s What Happens When You Use A Penetration Pricing Strategy For Your Kansas City Company

Here’s What Happens When You Use A Penetration Pricing Strategy For Your Kansas City Company

As we all watched radar images from Hurricane Florence last week, and we all benefited from modern scientific pre-knowledge of these sort of events, I thought about what it would be like to have had no warning whatsoever about that kind of storm. Even 100 years ago, there wasn’t any kind of advance warning. Imagine that.

And it made me remember that old Russell Crowe movie (an under-appreciated one), Master and Commander. One of the memorable images of that movie was a brief close-up of an old sailor’s hands during a big storm, and the tattoos on them:

Hold Fast. A letter on every non-thumb finger.

Turns out this was a common enough practice in those days of seagoing warfare. When bad weather strikes, those old sailors needed every reminder they could get to keep their hands from slipping on lines, and to secure themselves to the rigging when working aloft in weather.

And, well, it’s the perfect segue for what I want to write about for you and your Kansas City business, today. Because I’m actually thinking of something very specific when I think about “holding fast” — and it’s not just your grip, or even your state of mind.

Here’s What Happens When You Use A Penetration Pricing Strategy For Your Kansas City Company

“Everything you’ve ever wanted is on the other side of fear. ” – George Addair

I discuss this all the time with my Kansas City business owner clients — how to price their services. You see, often we might hear consumers say, “Well I would buy it — if it were in my price range.” And that idea tempts many business owners or sales people to lower their prices — just to sell more products.

This penetration pricing strategy can be an extremely powerful urge.

However, as you already know, price reductions often create more problems than they solve. I’ve seen too many businesses (my clients) jump down to lower prices without consulting someone objective, only to see their revenues, profits AND business fall.

Here’s some of what you might see a price reduction create within your business:

* Decrease of net profits

* Customers rush to the purchase of lower quality products

* Increasing customer demands to drop the price even lower

* Requirement of even more sales to make up the difference in revenue

* Needing a larger quantity of products and inventory to make up for lower margins

And, in the end, there will always be someone willing to go out of business faster than you. And you can’t (nor should you want to) keep up with that.

Remember this: price is not a benefit. The close of a sale is usually not determined on the cost of your product. If you properly “sell” your customers and prospects, they will purchase your products/services no matter what price you determine.

That’s the plain truth — and you’ve probably seen it in your own purchase patterns.

If a customer or prospect doesn’t buy — and they claim the cost had something to do with it — you can guess they probably wouldn’t have purchased anyway.

As a small business owner, and marketer, your job is to sell your products and services. But the actual art of selling has nothing to do with the price of the product.

By the time your contacts find out about the price, they should be determined to purchase no matter what the cost.

So, find “real” benefits (value) to sell to your customers and prospects. Help them to see how great their life is with your product, and you’ve got a customer. Point out their current pain, and your contact will do anything to get rid of it.

Set your prices and hold fast. If you’ve marketed correctly, you will still have customers anxious to do business with you.

If you’d like to sit down and conduct an analysis of your pricing strategy, this is something which we’re very equipped to help you with. Give us a call ((816) 272-8151) or send me back a quick email through the email button at the top of the page…

Feel very free to forward this article to a Kansas City business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.

Warmly,

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Six Steps To Debt Recovery By Kyle Nagy

Six Steps To Debt Recovery By Kyle Nagy

Our hearts are with the Carolinas, and with the cleanup process that is just beginning over there. With all of the the flooding that is hampering efforts to get in and even evaluate the damage, we know this will be a long road to recovery.

The slow onset of these hurricanes is a mixed bag, isn’t it? We prepare for doom, but doom doesn’t strike at every point … and then there is the inevitable frustration with media and public officials who didn’t get it exactly right or aren’t doing enough or should be handling things differently.

It’s very understandable, but I think we could all benefit from extending grace to everyone involved. Hurricanes are hard to deal with, full stop. So let’s all do what we can to help, and avoid pointing fingers.

And last week I wrote about preparing to deal with potential disasters in your future, on the financial front. I realized after the fact that I didn’t spend enough time on the earlier portion of the note, which went into the steps I recommend for climbing out of a hole — “cleaning up from a financial disaster”, if you will.

So this week I thought I’d dig a little deeper into how I’d suggest you go about doing that.

Six Steps To Debt Recovery By Kyle Nagy

“It’s not whether you get knocked down. It’s whether you get up.” – Vince Lombardi

As I sat down to write this article, it made me think about some Kansas City clients that I’ve walked with over the years who fought their way — successfully — out of debt that would have crushed other families.

How did they do that? Today I’ll tell you.

Here’s something they did NOT do: Borrow money to pay off more borrowed money (and call it savings).

That only works for Uncle Sam, apparently.

In general, with these issues, I’m a big fan of automation — but not in all instances.

[For example, do NOT “automate” your tax preparation process with off-the-shelf software. Especially of the “free” variety. We have to clean up so many mistakes made by these products (and their users!), that I cannot, in good conscience, recommend them.

Yes, I’m obviously biased. But the facts are the facts. Take a gander at this, for just one small example: http://www.customerservicescoreboard.com/TurboTax]

Anyway, moving on from that.

To answer some of the questions we occasionally get from Kansas City clients facing tough times, I’ve put together a step-by-step debt recovery process which we often help people work through.

1. First, pay more than the minimums

If you only pay the minimum payment each month, your bill could continue to INCREASE, even if you completely stop using your card. This is called “negative amortization”–where you think you are paying on your debt but the additional fees and finance charges are more than the minimum payment. The bottom line is: Pay more than your minimum or you will eventually be in debt over your head.  

2. Create an automated system

With online banking and automatic payment options, there are GREAT tools for ensuring you don’t mess up because of administrative chaos. If you feel you can’t manage all your bills by pen and paper, there are several good software programs available for keeping track of your financial records.

In fact, I recommend that you automate a payment ABOVE the minimum monthly payment, just to be certain that you start getting ahead of the game. Those minimum payments are rigged against you, and the only way to get ahead is to … get ahead. I have some more thoughts on automation in a moment.

3. Yes, you can negotiate

No, you do not need to be an attorney or other professional to negotiate with your credit card company (negotiating with the IRS, on the other hand, is a very different story!). The rising amount of consumer debt in this country has made creditors realize that they need to be more understanding of their customers — if they hope to get any money back. If you file bankruptcy they are only going to get pennies on the dollar, so they are often willing to make deals.

4. Proactively contact your creditors — in writing

Open communication always helps. Usually credit card companies get ignored and end up sending delinquent files to a collections agency. So they’ll actually appreciate your openness in contacting them, and may be more understanding of your situation. Proactively dealing with your debt problem, rather than hiding, will not only help your financial problem, but will make you feel better about yourself as well.

5. Develop a simple tracking system

If you are not able to pay the full amount of your credit each month, you should still pay something to stay on top of it. You should work off of a written budget so you know exactly where you stand. Some experts suggest that you divide your monthly debt budget by the percentage each bill makes of the total and pay that amount.

Here’s an example: If you owe a total of $1,000, and one credit card is $800 and the other is $200, and you only have $100 available to pay for that month… You should pay $80 on the $800 balance, and $20 on the $200 balance. This way you are reducing each debt by the same percentage.  

6. Do NOT be intimidated

No matter how forthcoming and honest you are, some creditors have been taught to be mean and downright nasty. Hang in there, and don’t let this tactic intimidate you.

Give us a call today, for help.

Until next week,

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Five Steps To Help Kansas City Families And Individuals Prepare for Financial Emergencies

Five Steps To Help Kansas City Families And Individuals Prepare for Financial Emergencies

With Hurricane Florence barrelling towards the southeastern United States, I’m reminded (again) about how the unexpected can put a big dent into a well-planned life.

And as a planner by nature, these kinds of slow-approaching problems (like hurricanes), are the sort of thing against which I’m always on guard on behalf of my Kansas City clients, family, and friends.

There’s a mountain of great information out there about the practicals of preparing one’s home and life for practical disasters such as what is facing the eastern coast, so I won’t touch on that today.

Instead, I thought I’d use this opportunity to give my thoughts about how you can financially be prepared for whatever comes, no matter your income level. I’ll give you some basic step-by-steps for getting ready for whatever life, nature, or even your own poor decisions might bring your way.

Before I get there, a reminder: Estimated taxes for the third quarter are due on Monday, September 17th (normally the 15th, but that’s on the weekend). If this applies to you, you know who you are. We’d love to help you, though, if you need a quick word of advice. Shoot me an email through the button at the top of the page.

Now, what can you do to prepare yourself for financial problems?

There’s actually quite a bit, even if your income is modest.

Five Steps To Help Kansas City Families And Individuals Prepare for Financial Emergencies

“It’s the little things you do that make the big things happen.” – Mike Dooley

I believe that nothing will better prepare you for emergencies, in advance, than doing the hard work in your mind and heart NOW, before they hit, to prepare.

That means recognizing that all of the best-laid plans in the world can go off the rails, even for the most meticulous planner (someone like me, for example).

But since my particular expertise is in areas financial (rather than mindset coaching, etc.), here are the steps — in order — that you should follow, such that whatever comes your way, you WILL be prepared.

1) First, put aside a BASIC emergency fund. I’m talking about $1000, tops. Set it aside in an account you won’t touch, and let it sit there.

This isn’t the “Dave Ramsey style” emergency fund; this is the basic version. And you’d be surprised — you can accumulate the $1,000 by saving only $10 a day for just over three months. This is the first step to getting yourself clear.

Because the fact is that most people get laden with debt because they don’t save ANYTHING, and use 100% of their take-home. Then life happens. Having this “mini-emergency fund” can help your mind begin the process of getting out of debt. Lay it aside, and don’t touch it, even for this next step…

2) Clear all that credit card debt NOW. Start with the smallest balance so you get a small win, and then work to “snowball” your payments: you’re applying the increasing monthly funds you have that are progressively freeing up with each monthly bill done away with. Then you tackle each of the next larger credit balances, one by one. These first two steps, having $1,000 and paying off those credit cards, will keep you from facing a financial emergency by starting out wounded and bleeding.

3) Now address your monthly cash flow. Once you’ve done the first two things (well, this step will probably happen as you tackle #2), set up a monthly budget so your day-to-day expenses are less than 65% of your take-home pay.

This is a tough pill for many in Kansas City. But it is life-changing.

The difference between those growing rich and those remaining poor is not the salary numbers — it’s their saving rate. This is when you start to save at least 10% in your retirement accounts and another 5% in taxable savings. Direct another 10% toward “unknown big purchases”. And here the fun really begins, because you can start giving to charity (10%).

4) Next, automate your better financial choices. Every month, have 10% automatically transferred into your retirement account before you receive your paycheck. Then I suggest that you automate the transfer of 25% of your take-home pay into an investment account a day or two after your paycheck is deposited.

We do this so that we can pay ourselves first. Your investment account will grow over time, and you can use it to pay for big emergencies and charitable gifts.

5) Get help to create a sound investment plan. This can obviously be the subject for years of study. Don’t try to “trick the market”. Diversify, be tax-advantageous, and most of all, get good advice from those who aren’t beholden to one particular line of financial products.

Now you’re ready for emergencies.

When you have the discipline to budget for small financial emergencies, you’re ready for the big ones. Now, when some unknown spending need strikes, you can take the money to cover the expense from your (growing) emergency fund. And you adjust your cash flow accordingly.

Obviously, emergencies are rare. So make your emergency fund an investable asset. Keep an emergency fund for several years and it should grow in value, giving you an additional emergency fund.

Here’s the truth: Whether you need it or not, being prepared for a financial emergency means peace of mind, flexibility and, ultimately, power.

Use it!

With gratitude for your trust,

Until next week,

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Three Key Money-Management Tips For College Students In Kansas City

Three Key Money-Management Tips For College Students In Kansas City

So, Labor Day is behind us, which means that the FALL is here. Football, cooler temps, pumpkins and more are in our future.

And school.

School is back in session in Kansas City — which for some parents is something to celebrate, and others something to mourn. Or a little of both!

And for the college-aged students among us, new worlds are opening up, new possibilities. But there are decisions that we make during college that can REALLY pay off, if we are smart.

In fact, I wish I had been smarter about a few of these back when I was college-aged.

This is for the college-aged among us … but also, well … none of us are exempt from being smarter when it comes to our money.

Oh, and a quick reminder: Estimated taxes for the third quarter are due on Monday, September 17th (normally the 15th, but that’s on the weekend). If this applies to you, you know who you are. We’d love to help you, though, if you need a quick word of advice. Shoot me an email through the button at the top of the page.

Three Key Money-Management Tips For College Students In Kansas City

“Life is the sum of all your choices.” – Albert Camus

It’s natural to be nervous about starting school. Many students quite understandably worry they’re biting off more than they can chew.

But the main problem that many in this generation are finding is that much of the worry about the college experience itself — classes, social life, housing, etc. — are dwarfed after the fact by big money mistakes that haunt college students for years.

Here’s hoping that these money-management tips for college students are taken to heart by those presently in that season of life.

Who is actually paying for college?

Many have their undergraduate education paid for by parents, scholarships, and/or loans in their name (or their parents’). If your parents are paying for your education, be careful not to fail any courses! If you fail a class required for your degree, you will have to take that class again, paying for it twice. It’s not worth it, particularly since it’s usually difficult to outright fail a class.

Paying for college yourself supposedly gives you ownership of your academic decisions while in school, but if you’re in a situation where you don’t have to worry about affording your own tuition, then consider yourself lucky.

There are oceans of articles now about ensuring you aren’t taking out monster loans for a degree with no real value.

Just google “anthropology major” and “student debt” and you’ll see what I mean. Carefully consider that college is much more than simply training wheels for the “real world”. The decisions you make about your course of study do, in fact, have ramifications for the first few years out of school and can set a course.

The good news, of course, is that when you ask many adults in Kansas City whether their career has been determined by their degree, they will tell you “no”; you aren’t absolutely limited by those choices. However, it DOES play strongly into your initial post-college years, and these years DO have a big impact on your eventual career path.

But remember that nothing in life is final. So don’t go into $200K of debt for something about which you may later change your mind.

Open a Roth IRA.

These retirement accounts were brought into existence about 20 years ago in 1997. And if students before that point had had a way that they could put money away for retirement in a tax-advantaged account while they were in such a low tax bracket, they might have taken advantage of the opportunity.

Then again, they might not have. It’s hard to imagine retirement before you’ve officially begun a career, but it’s harder to argue with long-term investing in the stock market — even in these times of economic uncertainty. Many have interests that lay elsewhere aside from investing, so they don’t necessarily think about having a secure financial future. I’m not going to go on and on about the power of compound interest here, but suffice to say — it’s incredible when you start in college.

Avoid credit cards.

The credit card companies are (still) vultures on college campuses. And having a credit card without a job is asking for trouble.

One particularly sneaky aspect of college-geared credit cards is the introductory offer. Even with the CARD Act passed a couple years ago, the fine print on these deals are heavily weighted AGAINST the college student, and (of course) in favor of the banks.

Further, here are some other quick pieces of advice for the soon-to-be financially-savvy student:

* Use credit cards sparingly

* Pay all credit card balances in full

* Get the best deal on a checking account

* Start saving

* Keep track of your spending

* Set a limit on entertainment

* Shop at second-hand stores

* Keep an eye out for free money

* Get a part-time job with tips

* Walk or ride a bike — don’t drive

* Avoid the tax on stupidity

* Look for student discounts

* Don’t eat out all the time

Had I known what I know now about compounding interest and the tendency for the stock market to increase over time, not just theoretically but from experience, I’d be in an even better financial position right now.

And it’s not about having more money, it’s about having more options for doing the things we like to do.

And that kind of thinking is best served while young.

Until next week,

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

Implement Kyle Nagy’s Tax Planning Strategy To Pay Less On Taxes This Year

Implement Kyle Nagy’s Tax Planning Strategy To Pay Less On Taxes This Year

It’s true — there are certain people for whom this note doesn’t apply. There are those who are perfectly fine paying the amount of tax they pay every year, thank you very much.

However, since YOU have chosen to invest yourself in our services (or at one point considered it), you are probably in the second group: those who would love to pay less in taxes, THIS year.

If that’s the case, well, there are two main things you need to understand:

Nagy’s Irrefutable Fact #1: Our tax system is not fair.

It is too true — the Elon Musks, Warren Buffetts, Mark Zuckerbergs, etc. operate under a vastly different system than most “regular” taxpayers. This is NOT because they are politically-connected (though they are), but because of the people they have who do wonders on their behalf.

And the sooner you quit complaining about those who *seem* to be connected … and make the decision to JOIN their ranks, the sooner you will pay less in taxes.

Because all of those people, and other people like them, understand the second fact…

Nagy’s Irrefutable Fact #2: A tax return is a report, NOT a strategy.

Yes, we’re pretty good at coming behind with our magic brushes and cleaning up the mess made by many of our Kansas City clients in their finances and taxes. But there is a much better way to fly.

It’s called tax planning strategy, and it’s essentially comprised of three parts:

1) Strategic review:

Assess the current situation, and identify short-, mid-, and long-term strategies to lessen your taxes, and grow your income.

2) Implementation:

This can be a little tricky (especially if you do it yourself), because there are bound to be accounting and local regulatory questions which arise. We recommend that you stay with your same team who developed the tax strategy so they make sure you’re doing what you need to do.

3) Proper compliance:

There are plenty of people out there who will give you “the secrets to paying less taxes!!!” — but are they willing to put their name on a dotted line and defend it? If not, RUN from these people. They are hype artists. Or worse, they know that their advice will lead to a fraudulent return.

The main thing to understand is that in order to REALLY get your tax situation improved, you MUST plan ahead.

Otherwise, you’re just cleaning up a mess that was already made (and can’t be fixed) when filing your tax return.

This is all especially true with the brand new 
tax code in place for this year.

The good news is that there is still plenty of time to do some great work on your 2018 taxes, even now that we are headed into the final quarter. We have a pretty full couple of months ahead of us with extension returns, but we can still schedule a time to talk about ways to better your tax strategy now, so that we aren’t just cleaning up after a mess.

Call my office this week: (816) 272-8151 (or reply to this note through the email us button at the top of the page) and request one of our limited Tax Planning Saver Sessions. During this session, we will analyze your current situation and identify clear action steps for the last quarter of 2018 — designed to save your bottom line hundreds (or even thousands).

You CAN control your tax strategy … and we can help.

Until then…

Kyle Nagy

(816) 272-8151

Kyle P Nagy, CPA

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