The creation of the EEIG is an effort to develop economic activity throughout the EU and to create a single market offering conditions similar to those of a national market. It is designed to minimise the legal and fiscal difficulties that natural persons, companies, firms and other bodies face in cooperating across borders.

EEIG’s are regulated under SI No. 191 of 1989 – European Communities (European Economic Interest Groupings) Regulations 1989, and SI No. 447 of 2010 European Communities (European Economic Interest Groupings) (Amendment) Regulations 2010.

The purpose of the grouping is to facilitate or develop the economic activities of its members by a pooling of resources, activities or skills. This is intended to produce better results than the members acting alone.

It is not intended that the grouping should make profits for itself. The profits of an EEIG will be deemed to be the profits of its members and will be apportioned either according to the relevant clause in the contract or, failing such a clause, in equal shares. The profits or losses of an EEIG will be taxable only in the hands of its members.

To balance the contractual freedom which is at the basis of the EEIG and the fact that members are not required to provide a minimum amount of capital, each member of the EEIG has unlimited joint liability for its debts.

An EEIG must be formed in accordance with the rules described below:

• An EEIG can be formed by companies, firms and other legal entities governed by public or private law which have been formed in accordance with the law of an EU country and which have their registered office in the EU. It can also be formed by individuals carrying on an industrial, commercial, craft or agricultural activity or providing professional or other services in the EU.
• An EEIG must have at least two members from different EU countries.
• Each member has one vote, although the contract for its formation may give certain members more than one vote provided that no one member holds a majority of the votes.

An EEIG must have:

• At least two members acting collectively and
• At least one manager who must be an individual

The manager(s) represent and bind an EEIG in its dealings with third parties even where their acts do not fall within the objects of the grouping.

• The contract for the formation of an EEIG must include its name, its official address and objects, the name, registration number and place of registration, if any, of each member of the grouping and the duration of the grouping, except where this is indefinite. The contract must be filed at the Registry designated by each EU country. In Ireland, this is the Companies Registration Office. Registration in this manner confers full legal capacity on the EEIG throughout the EU.
• An EEIG may not invite investment by the public.
• An EEIG does not necessarily have to be formed with capital. Members are free to use alternative means of financing.
• An EEIG cannot employ more than 500 persons.

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The tendency is to think I’m new, I’m small, I can do it cheaper. But in fact there are four problems with this thinking.

1. One of the most common mistakes made by business owners is to underestimate their costs.
2. Small businesses generally don’t have the right attributes to be able to get significant cost reductions in comparison with larger and more established ones.
3. Unless you have significant sources of capital to fund your business over a long period, all your competitors have to do is drop their own prices until they’ve driven you out of the market.
4. Any cost advantage you do have is normally only temporary, as other businesses put energy into matching you.

That’s not to say it can’t be done, but just following a simplistic ‘price-low’ strategy without being aware of all the factors is likely to end in disaster.

The fundamental flaw in the ‘price-low’ thinking is that it’s not really sales that are most important to a business. It’s profit. And the prices you set can have a dramatic effect on profit.

Consider an example…

Pricing Example

Let’s suppose we’re selling widgets and our profit and loss account for the last month looked like this.

We want to know if we’d be better off by reducing prices by 10% or increasing them by 10%. So we do some market research and find out that:

• Option 1 – Reducing prices by 10% would result in a 20% increase in the quantity sold.
• Option 2 – Increasing prices by 10% would result in a 20% fall in the quantity sold.

Which option would you choose?

Most will plump for option 1. 20% more sales with a price cut of only 10% will surely be better. We gain more in volume than we lose in price so it must be more profitable.

Are they right?

Let’s check the numbers.

Is option 1 more profitable? No. In actual fact raising prices despite the fall in number of sales is €8,000 more profitable.

The business that pursues option 1 is making a loss and if that continues the business will fail. And as well as being worse off than option 2, such a business is worse off than if it had left prices where they were.

What does this all mean?

This isn’t an unusual example.

The general truth is that cutting prices may increase sales, but at the same time can have a catastrophic effect on your profit. This is because lowering prices generally means you have to significantly increase sales volumes to make more profit.

In our example, to maintain a profit of €5,000 with a price cut of 10%, the volume of sales would have to increase by 50%. That means finding 1 new customer for every 2 you currently have! Would that be realistic?

On the other hand a price increase of 10% means you could afford to lose up to a quarter of your customers and you’d still maintain that €5,000 profit. That’s a lot less work for the same money!

Of course, every situation will vary depending on your profit margins, which is why it’s so important to do the numbers.

Is low pricing an impossible strategy?

Low pricing doesn’t automatically result in less profit. There are very successful businesses out there that are based on offerings at a low price.

Henry Ford with his Model T car, Ikea and McDonalds are examples of hugely successful businesses whose strategy was based on providing products at a low price.

But, and here’s the point, they made their products available for a significantly cheaper price and so tapped into a mass market. Their sales volume increased exponentially and so although the margin between sales price and production cost is tight they’re able to turn large profits.

The key for those businesses, though, is that they clearly understood how profits work. They didn’t just reduce prices and hope that increased sales would take care of the rest.

They carefully manufactured and designed their products, services and processes to be as efficient and simple as possible. Then these much reduced costs made it possible to set the low prices that attracted a mass market of customers.

So pricing low isn’t impossible, but it’s difficult. Why?

Most businesses don’t operate in the mass market. Unless mass market domination is the aim, pricing low is usually a faulty strategy that leads to unrewarded work, low profits and often losses. And it’s best avoided.

To see the effect on your profit of changing prices download the Parfrey Murphy App (http://parfreymurphy.ie/the-parfrey-murphy-app/) and simply enter your details in the ‘Increased Profit’ calculator. The App is completely free of charge and is available for iOS and Android devices.

The post Is Pricing Low A Good Idea? appeared first on Parfrey Murphy.

In fact, McKinsey, the global consulting firm, suggest that pricing has a bigger impact on a company’s profit than anything else.

How can you make sure you’re making the right pricing decisions that make you the most profit? Read on to gain insight into pricing anchors and then 4 tried and tested ways for you to successfully apply them to your business.

Pricing Anchors…

Anchoring is profoundly important to pricing for profit. Here’s why…

A product is never really ‘cheap’ or ‘expensive’. Instead customers actually see prices as all relative. People like to compare prices before deciding on a purchase.

For example, if you’re out shopping for a television, you’ll look at the different models and compare the price and specification of each. One might be 55 inches and cost €1500 while the other might be 52 inches and cost €1000.

In making the comparison you’d probably think the 52-inch TV is the better value option given the difference is only 3 inches. This is exactly what the store you’re purchasing the TV from want you to think! You’ve inadvertently anchored yourself to the €1500 TV so that the €1000 TV looks like really good value alongside it.

When you understand the value of pricing anchors, you can then see how important they are in tiered pricing. You’ll see how top-down pricing can be used very effectively to…

• show your buyer that you’ve provided different versions of the same product at different prices,
• while subtly driving them towards the price you want them to pay.

How then can you apply this insight to your business?

1. Collect 3-tiered pricing examples

Some of the most successful companies in the world use 3-tier pricing, including Easyjet, TripAdvisor and Starbucks. Look at how they do it and think about how this could be applied to your business.

2. Build a ‘pretend’ tiered pricing offer for your business

This should be in line with the pricing you have in place now. But put pricing anchors in place by offering one or two different pricing tiers to what you already have.

Obviously you need to consider what you would adjust in the product or service to justify the price differences.

The key is to have a top, middle and bottom price. It’s proven that buyers feel more in control if they have options to choose from. No one likes ‘Hobsons choice’.

3. Test and measure with real-life buyers.

This is very important as you’ll never know what works until you try it.

Don’t be afraid to get it wrong or worry about any criticism. All the feedback you get is good and will allow you to adjust, improve and move forward.

Once you start testing your pricing options you’ll soon begin to see which options deliver the best results for you and your business.

4. Keep testing

Make price testing something your business does regularly.

Once you’ve arrived at a tiered system you’re happy with don’t rest on your laurels. Keep testing it, changing it and making the necessary adjustments to keep your pricing sharp, your customers in control and happy and you one step ahead of the competition.

The post 4 Tried and Tested Ways To Ensure You Get Your Pricing Right appeared first on Parfrey Murphy.

Of course once you’ve done the analysis you need to come up with a strategy that will help you get an advantage.

Porter identified three generic or basic strategies that a business could choose between.

1. Cost leadership
2. Differentiation
3. Focus

This is about producing your goods and costs at the lowest cost in your industry. Then you sell them at the same price as everyone else and get the benefit of the extra profit. Or you use your cost advantage to sell them at a lower price to everyone else and so get more customers.

Normally this is a good strategy where you’re selling to a broad market.

Sometimes it’s possible to turn a niche market into a mass market by bringing the costs right down.

The classic example of this is Henry Ford. In his day, motor cars were a luxury only bought by the well-off. But by driving production costs down Ford was able to supply a car to the market that normal households could afford. Motor vehicle production became a mass market and Ford has been a wealthy company for decades.

To get cost leadership usually means that you need to be able to find a way to produce your goods or services in a more efficient way than anyone else, be able to get access to a unique source of lower cost supplies, or be able to completely avoid some costs.

It’s not impossible for smaller businesses to be cost leaders. In some cases their agility and willingness to make more sacrifices can be an advantage.

Generally speaking, though, cost leadership is a difficult strategy for a small business to pursue effectively in the long term.

2. Differentiation

Differentiation is about offering your customers something different, extra or special that they value. Your customers then see your product or service as better or different to your competitors and are willing to pay extra for it.

For this to work for you, then the cost of providing the extra value must be less than the price premium you’ll get. For instance, a free iPhone with every order of paper may be attractive to a paper buyer. But it’s highly unlikely they’ll be willing to pay enough of a premium for you to still make a profit.

A differentiation strategy often provides some protection from increases in prices from your suppliers. Your customer will find it more difficult to find a substitute and so will accept you passing on supplier price increases.

To make a success of differentiation, you need to have an innovative approach and be able to see what makes you – or could make you – different. You’ll also need to concentrate on sales and marketing so that you successfully communicate the extra value to your potential customers.

These are skills that many small business owners have or can develop. So differentiation is often a good strategy for them.

3. Focus

Focus is about concentrating on a niche market. And using either cost leadership or differentiation within that niche market.

By tailoring your products or services you’ll be in a better position to meet the unique needs of the niche market. They’ll be more likely to buy from you than buy a general market product or service that they then have to adapt. It also leads to a high degree of loyalty towards you.

To be able to use the focus strategy you need to know a particular market segment very well.

Focusing on a niche may mean a lower volume of sales, but those sales can often be more profitable because of the leeway the customer loyalty will give you in pricing.

Can strategies be combined?

In his work Porter argued that a business should only pursue one strategy, otherwise over the long-term there won’t be any competitive advantage won.

On the other hand, some feel that pursuing a single strategy doesn’t always work because customers aren’t one-dimensional. They’ll often look for a combination of factors – say a certain level of quality, design and price – to be present when they buy something.

It’s not an easy call to make, but certainly if you’re pursuing one strategy you need to make sure you don’t bring in elements of another strategy that will undermine you.

For example, suppose a business is following a differentiation strategy of making very high quality products. What will happen if it also tries to be a cost leader? At worst it will undermine its quality and at best its customer will be confused.

Which one should I pursue?

There is no one-size-fits-all answer to this question. It will depend on how you currently fit into the marketplace.

For example, if you find that you’re often being outbid or are losing sales to competitors based on price, consider why that’s happening.

Ask yourself questions like:

• Am I able to reduce my costs so that I can match my competitors’ prices?
• Will I be making enough profit if I do that?
• Do I have the funds to sustain that approach?
• Is there something I could add to differentiate my product or service that would make it more appealing?
• Is there a niche among my potential customers that aren’t being well-served by the market?

These questions and ones like them will help you to explore the possibilities and quite likely you will start to get a clearer idea of which strategy would be a good one for you.

There is, however, one strategy often employed by new businesses that’s a bad one. Look out for a future article on that subject.

The post 3 Strategies To Give You A Competitive Advantage! appeared first on Parfrey Murphy.

This could range from wondering if payment plans are available through to which credit cards you take.

Face the facts…

The reality of modern life is that many people don’t carry cash or use chequebooks. That’s especially important to realise if your customers are the general public. If you don’t have card facilities you could be missing out on a huge swathe of potential customers.

If you have an e-commerce website then make sure you have a wide range of payment options that you accept. For instance, take Paypal as well as credit cards.

What about the costs?

Some payment options will carry more charges for you. But consider this…

Which costs you more…

• A slightly lower margin on an actual sale made?
• Or losing the customer altogether because they don’t have the right payment type?

Would a small charge cover it?

And don’t dismiss the idea of adding a small amount for using certain payment types. Customers will often accept that one source of payment costs more than another, but still be happy to use it because of the advantages or convenience for them.

In other words, don’t let what’s really a pricing issue lead you into losing customers.

By accepting payment in as many forms as possible you make it easier for that prospective customer to turn into an actual one.

The post One Tip That Will Help You Convert More Sales appeared first on Parfrey Murphy.

But you ask; how do I get that growth?

The answer is to have a growth strategy in place. And in this article we take you through 5 proven growth strategies that will grow your business.

What’s a growth strategy?

Put simply it’s a roadmap for your business that shows where you are now and where you want to get to.

It details:

• The markets you operate in
• The type of customers you want
• The products and services you will offer to them
• And how you’re going to position yourself in the market to get those customers

It will also need to consider the risks and potential pitfalls and how you would protect yourself from them.

Having a growth strategy means that growth will no longer be left to chance. Without one you’ll tend to be the ‘victim’ of random opportunities. But the focus and attention a defined growth strategy brings allows you to grow in an orderly, reliable way.

There are 5 basic strategy areas for you to consider. They each carry certain risks, but they’re time-tested and proven to work in businesses of all sizes.

1. Market penetration strategy

This involves selling more of your existing products or services to your existing customers. It’s sometimes referred to as cross-selling.

Examples would be an electrical store selling additional warranties and accessories to customers buying a TV or laptop. Or a bank encouraging current account customers to take a savings account or credit card.

Often it’s an easy strategy to introduce because you don’t have to develop something new.

The problem can be that you become over reliant on a small group of customers who buy a high proportion of your services or goods. Then if that customer leaves you a big hole is left.

It can also be difficult to get to a position where your customers understand that you provide these other goods or services. Research and our own experience tend to indicate that customers won’t generally be aware of everything you can do. So you have to help them understand and this can be quite tricky. Why?

Customers tend to pigeon-hole the businesses they use for the one particular thing they buy from them. And can be surprisingly resistant to education that they could buy additional services from you. So a patient approach is needed which will yield results over time.

2. New markets strategy

This strategy is to sell your existing products and services into a new market.

You need to look at what you sell and whether it could be used in another industry. Sometimes these opportunities can present themselves to you.

For instance, in the late 1980s Alan Sugar agreed with Sky that Amstrad would build satellite dishes and receivers so that they’d retail for £199. He had no idea how to do it and had to start research and development. A major stumbling block was the dish part of the receiver, because the normal suppliers were quoting prices that were well outside Amstrad’s cost target.

Amstrad weren’t stopped though. They considered that a satellite dish looked a lot like a dustbin lid and so started working from that premise. British Steel Corporation agreed to provide the blank sheets for a matter of pence. And a company specialising in manufacturing panels for cars agreed to turn the steel sheets into dishes. The result was a satellite dish for a fraction of the price quoted by the normal makers.

Clearly making satellite dishes was a new market for both companies, but when Amstrad called the suppliers saw the opportunity and took it.

Why not consider the enquiries that you get. Are you contacted by potential customers from outside your normal customer base? What are they asking for? Could you make minor adaptations to your product or service and open a new market for yourself?

There are risks of course. It can be expensive to move into a new market with the advertising that’s involved. And if you’re a specialist in a particular market there can be risks that you dilute your expertise if you expand to other markets.

3. Distribution channels strategy

Distribution channels strategy looks at whether there’s another way to reach and sell to your customer.

For instance, if you sell your products through retail shops could you also sell direct to customers through your website?

Even businesses providing services can find ways to do this. For instance, one way would be to partner with other businesses that provide complementary services.

There are risks of course. Your reputation can be affected by the distribution channel you use. So if you try a new channel and customers get a poor experience through it then it could damage the whole business.

It will also require extra costs to set up the infrastructure in your business to manage the new channel. So you need to be sure it will pay for itself.

4. New product or services strategy

This is about coming up with an entirely new product or service.

It could be something completely new or it might be complementary to what you already do. For instance, a pilates instructor developing a spinning class.

This approach does carry some risks and this is well-illustrated by the Amstrad story above. There will be significant research and development costs, both in terms of time and money. And as with Amstrad you’re likely to encounter challenges along the way that will need to be overcome.

It’s important as well to invest properly in marketing research and to consider how the new product or service fits with what you already do. You don’t want to risk alienating your current customer base by diluting yourself too much. And potential customers may not see you as credible if your new offering is too far away from your current ones.

5. New products and services with new markets strategy

This is where you combine developing a new product or service and selling it to a completely new market.

This is the riskiest strategy because you’re dealing with the unknown on two fronts – knowledge about your offering and who your customers are.

You really need to be clear about the potential, and this justifies the risk. You almost need to think of this as an entirely new start-up business. In fact, creating a new business and brand is often the best way to avoid negative impact on your current business.

Implementing your strategy

Of course thinking and talking about a strategy is one thing. Actually putting it into practice can be another.

There are essentially two steps…

Step One…

The first step is to decide whether to:

1. Grow organically, i.e. you grow by using your own internal resources to add sales, customers and product lines, or
2. Acquire or merge with another business.

Grow organically…

Growing organically is slower, but the growth tends to be more reliable and may be worth more to you in the long run.

To grow organically you need to be prepared to invest some part of your time in developing the business and not just working in it.

Acquire or merge with another business…

Acquiring or merging with another business allows you to grow very quickly and see immediate benefits.

There can be difficulties though because of organisational culture and procedural clashes, which take time to smooth into a new united organisation.

Also, it’s not always as valuable as growing organically. One, because it will often add more heads to the table. For instance, in a merger you may have 2 or more business owners now looking to share a profit. And two, because there will often be some customer fallout from both businesses.

The great advantage though is that you get immediate access to skills, expertise and markets that would take you a long time to acquire on your own.

Because there are potential pitfalls, buying or merging with another business needs careful due diligence and planning. So we’d recommend getting plenty of professional advice before going too far down this road.

Step Two…

Once you’ve decided on whether you’ll grow organically or by acquiring or merging with another business, you need to plan for marketing.

To do this you should:

1. Consider the market – Find out everything you can about the market you’re targeting. Who is the competition and what are they doing already? What are the needs and wants of the market? You need to make sure that your products or services are going to meet these.
2. Identify your customer – Rather than trying to take every customer in the market you’re targeting, work out which niche will be best for you and the most profitable. What are they interested in? What are their problems? What is it that you’re going to do to help them overcome it?
3. Develop yourself – Develop and clearly understand what makes you different from all the competition. Why should a customer buy from you and not the competition?

Once you’ve identified the market, your chosen customer and your main point of appeal, you need to work out the best way to reach your target customers.

This might involve a mixture of using traditional and digital marketing methods. Don’t leave this to chance. Customers are a lot like the sea, always moving. So methods that work today may not be as effective tomorrow, which means you need to keep testing your approach to find out what works best.

Conclusion

Having a growth strategy in place will allow a business to grow in a focused and reliable way. It avoids leaving things to chance.

Weigh up the risks and decide which of the 5 proven strategies would work best for you.

Then implement that strategy. First, decide whether to grow organically or buy or merge with another business. Then develop your marketing plan so that you bring your product or service to your target customers.

If you’d like help getting a growth strategy in place for your business why not try us out? Give Seamus Parfrey a call today on 021 431 0266 and see how we can help you.

The post 5 Proven Growth Strategies To Grow Your Business appeared first on Parfrey Murphy.

Pricing can be a difficult subject to tackle and even more difficult to get right, both for a multi-million euro company or the local hairdresser.

Buyers…

Buyers are now more savvy. They have more options and they can very easily compare your price to the competition. Therefore their expectations are much higher. But if you get your pricing right then you can tap into the higher profits your business could be generating.

Pricing…

William Poundstone recognises pricing as a much richer subject than most people imagine. And he provides a truly eye-opening account of how the pricing of products affects how we think of them.

He shows how behavioural decision theory has revolutionised the pricing strategies of major corporations. The book also includes details of many fascinating behavioural experiments. And it’s packed with real-life examples of why pricing is so important and the tricks that companies use to sell their products and services.

It’s a book every business owner and manager should read and start testing the insights.

To read more about the book and the power of profitable pricing then please click here.

The post Take Time To Find The Right Pricing System For You And Your Business appeared first on Parfrey Murphy.

It’s likely that whatever you are using works or you wouldn’t be using it.

There can, however, be a number of ways to reach your potential customers. And the best ways to reach them changes over time.

This means it’s good to periodically review your methods and try new ones. Then when you find something that brings some results, milk it for all it’s worth!

For instance, here’s 5 simple ideas to get you started.

1. Trade or hobby journal advertising

Are there any trades or hobbies that your business makes a good supplier for? Think outside the box. Perhaps there are potential trades or interests that you could specifically target.

An advert in a trade or hobby journal puts you directly in front of your target audience and already suggests a degree of specialism and trustworthiness to them.

2. Changing your trading/opening times

Are your opening hours the best hours for your potential customers?

If some or many of your target market work 9 to 5, then having 9 to 5 opening hours may prevent them from using you. Could you increase your customer base by opening early mornings or later in the evenings?

3. Signwriting

Could you put a sign on your vehicle? This allows you to promote your business while you go about your daily activities with no effort on your part.

4. Google advertising

Could you generate more visits to your website?

Google’s pay-per-click advertising means that for certain phrases you would be promoted in the search engine window.

Also consider investing in Search Engine Optimisation (SEO) which will help your website appear at or near the top of search listings.

5. Email Newsletters

Email newsletters are a low-cost and unpressured way of staying in touch with potential and existing customers.

You can explain your products and services and promote special offers. When done right, this can result in extra sales from existing customers as well as new sales from prospective ones.

Services like Constant Contact and MailChimp allow you to manage email addresses and send out mailings to all your subscribers.

The post 5 Ways To Generate More Potential Customers appeared first on Parfrey Murphy.

Would you allow a surgeon to operate on you or one of your children if they didn’t follow the recommended World Health Organisation (WHO) surgical checklist that has saved many lives in many countries?

So why do businesses allow certain mission critical jobs in their firm to happen without the pedantic, disciplined, committed approach to checklists that airline pilots and surgeons have?

Pilots and surgeons are some of the brightest and best trained people on our planet. But they use checklists at mission-critical moments in their jobs every day. They treat these checklists seriously. Why? Because they know they save lives.

Needless risks businesses take every day…

OK so perhaps nobody is going to die because you or one of your team ignored a checklist or didn’t take it seriously.

But you do run the risk of losing business or losing your reputation if you miss certain mission critical tasks.

Can you really afford not to take checklists seriously? Find out more by clicking here.

The post Are You Taking Needless Risks In Your Business? appeared first on Parfrey Murphy.

The right pricing structure can boost profit faster than reducing costs or increasing your sales volume. On the flip side the wrong pricing structure can shrink your profits just as quickly.

Pricing has the biggest influence on profits

And yet many business owners are still reluctant to investigate initiatives to improve price for fear that they will alienate, frighten or lose customers.

The result of not managing price performance, however, is far more damaging. Getting your pricing right is one of the most fundamental and important functions for any business manager and should be the first job undertaken.

Two studies by McKinsey & Co and A.T Kearny (global consulting firms), suggest that pricing has the biggest influence on the profits of a company.

Please click here to read the details of these studies.

Just think – what impact could better pricing have on your bottom line profits?

The post Can A 1% Price Increase Really Deliver An 11% Profit Increase? appeared first on Parfrey Murphy.