Executive summary
Sky Skateboards is a viable business enterprise with a high potential of good performance and long-term success. However, careful analysis of the model and strategies used in the management of the business indicate several prevailing issues that inhibit the growth of sales and expansion of the company. The common issues affecting Sky Skateboards include ineffective and inadequate marketing, poor record keeping, poor pricing strategies, and inappropriate cost allocation controls. Also, the business faces a major challenge of poor accounting and poor controls; this is a legal malpractice as it distorts accurate taxation.
Analysis
Sky uses a poor business model to run her Skateboards business and hence ends up in several challenging situations. For instance, Sky is split between the idea of pursuing her career or running her skateboards business. If Sky run the company effectively such that the company generated enough revenue to employ other employees, she would not be worried about the course of action to take. She should employ a business strategy to run the business separately as she continue studying. A cost-benefit analysis on Sky Skateboards indicates that the business is losing revenue through extreme cost-cutting strategies. (Investopedia 2020) For instance, Sky would generate more revenue for the company by employing a colleague to do the designs while she undertakes the managerial work.
Sky Skateboard’s business model does not capture the target market effectively and is poorly planned to make profit. Sky designs quality skateboards by prices them at a considerably low price. For instance, she should price the premium skateboard at $150 each and sell the other designs at $125 each. The business would attract investments and increase its revenue margins. An effective pricing strategy is the one that matches the willingness of the customer to pay and the value of the products provided. (Indeed editorial team, 2020). Sky should use different pricing strategies to increase the selling prices of the skateboards and increase the revenue of the company. For instance, increasing the price of the premium skateboards would attract more sales since the consumers would value Sky’s product design to be of high quality. Alternatively, she should use price discrimination to increase her surplus and revenue depending on the willingness of the company to pay.
Proper record keeping is essential for any healthy business enterprise. The performance of Sky’s Skateboards is wavy and unpredictable since the business lacks proper records. Sky does not know the costs and revenues for the previous year which is risky for the business. Therefore, she cannot understand the specific cost drivers that are generating losses or profits for the company. Sky should record her costs accurately so that she can divert the cost objects to revenue maximizing streams later in the upcoming periods. The costs incurred in the business should be divided into three categories. (Corporate finance, 2020). Direct costs include those incurred in purchasing the skateboards and designing materials, indirect costs include administration costs and electricity costs, while the overhead costs include printing and utilities expenses.
Business records are crucial for decision making of future production techniques, and are required by insurance companies, lenders, and government regulatory authorities. Sky’s Skateboards should have an accurate record of the accounting records such as journals, asset and liabilities, ledgers, monetary transactions, and documents to support transactions such as checks and invoices. Maintaining and updating business transactions will provide Sky with an insight of the general performance of the company. Proper records will also minimize the time for auditing, provide a backup for auditing purposes, and give the business tax benefits.
Sky’s Skateboards lacks an effective marketing strategy as she focuses on traditional strategies of distributing newsletters that is costly. The cost of printing the newsletters is $300 while she has to deliver them on a monthly basis just to get a 10% increase on the sales. Sky should focus on the 6 P’s of the marketing strategy: product, price, place, promotion, people, and presentation. (Maryville 2020). Product is the commodity that is sold in the market. Sky should employ a pool of talented employees that are innovative and talented to create more creative designs that will increase the sales revenue. Implementing effective pricing strategies will increase the revenue of the business. There exist plenty of opportunities in the places that Sky can sell her products. She should consider buying a website to market her products online while still selling the products on a brick and motor store. Sky should expand the business to purchase the new machinery by sourcing other forms of capital such as from financial institutions.
Sky’s Skateboards should create an online presence to attract the attention of customers and make them develop an interest in the products of the company. The major social media sites that Sky should market her commodities include Facebook, YouTube, and Twitter. Sky should similarly start a vlog or blog that influences the buying behavior of the customers by emphasizing on education. Content marketing will avail the vital information to the specific target market and grow the desirability, visibility, and credibility of the business enterprise. She could also use internet marketing to drive e-commerce sales or create meaningful content that attracts potential customers to the websites of the company. Also, buying decisions can also be influenced by how the sales representatives present the product or how they relate with the customers.
Recommendations
Sky should develop an efficient business strategy by implementing six components into her business. The vision will define the objectives of the business and the appropriate measures towards achieving those objectives. The core values is what should and should not be done within the organization. Sky’s Skateboards should have a guideline used in conducting its transactions. Such principles include reliability to the customers, trust, good relationship, and making appropriate choices. Also, Sky will understand her business better by conducting a SWOT analysis that evaluates the strengths, weaknesses, opportunities, and threats of the business.
Sky should employ more employees and explain the means of increasing the operational efficiency of designing the skateboards. The plan of allocating the resources defines the areas that needs improvement. The business should also track the performance trajectory of the output and hence control the budget while keeping the goals and deadlines on track.
Sky’s skateboards should cross-sell more products by creating a wide variety of cutting-edge designs. The inclusion of new products such as skateboard shoes will improve the sales margin of the company. Improving customer service and product differentiation is essential. The business can highlight that it has superior styling and robust technology features, conduct in-depth research, and focus on customer referrals as a means of increasing revenue.
Conclusion
Sky’s Skateboards should improve on record keeping which is the major factor inhibiting growth and success of the business. The accounting records that should initiated include financial statements, transactions, and ledger entries. This will improve the efficiency of the business and solve most of the challenges that Sky is undergoing. Also, financial records will enable her get financing from lending institutions or shareholder capital that she can use to purchase the new machinery to expand her business. I strongly recommend on immediate implementation of the highlighted strategies to improve the health of the business enterprise and highly welcome any feedback. Some of the questions that I would need them to be addressed include alongside the feedback include the annual projected costs, revenue, and the annual marketing expenses incurred. Such relevant data can be used to align the business strategy with the prevailing market trends, double the revenue, and ensure long-term sustainability of the business.
References
6 P’s of marketing to grow your business. (2021, July 8). Maryville Online. https://online.maryville.edu/blog/6-ps-of-marketing/
Corporate Finance Institute. (2020, December 7). Cost allocation – Overview, types of costs, mechanism. https://corporatefinanceinstitute.com/resources/knowledge/accounting/cost-allocation/
Indeed Editorial Team. (2020, February 4). 10 business strategy examples. Indeed Career Guide. https://www.indeed.com/career-advice/career-development/business-strategy-examples
Understanding business models. (n.d.). Investopedia. https://www.investopedia.com/terms/b/businessmodel.asp
write