Many small businesses are fighting for their survival after the impact of lockdown. They need to carefully consider whether or not participating in Black Friday will do their business more harm than good. This point of view may come as a revelation to some business owners, but Black Friday may not make business sense for all companies.
Black Friday, (a term born in the 1960s when Philadelphia police in the USA complained about the shopping traffic) is a major annual event for the bottom line of major retail stores.
For any significant impact during the Black Friday hype, a business needs to offer its product or service at a substantial discount. By substantial, it means that providing a mere 10% or 15% will not be enough to attract a significant increase in revenue.
Furthermore, additional marketing efforts will be required to support a Black Friday campaign, so as to be acknowledged above similar efforts by competitors. These efforts will involve either a significant advertising budget or a considerable amount of time spent sending the same message indiscriminately to a large number of internet users, such as Facebook Groups. This type of “spamming” is a marketing technique which is not recommended.
How To Calculate If It Is Worth Offering A Black Friday Special
- Firstly, the small business needs to calculate what income is required during November to meet all of its financial obligations, plus a bit extra.
- Then, add 30% for luxuries because it needs to be worth all the extra effort and hard work that is going to be required during this campaign.
- Now, calculate the hourly profit required for an 8-hour day to generate the amount calculated in Step 1.
- Next, calculate the profit margin per product/service based on the regular pricing model. This should have already been done, but if not, now is as good a time as any.
- Then, calculate how many sales will be required to make the typical profit margin to get to the amount calculated in Step 2.
- Finally, should the discount be set at less 20%, estimate how many more sales will be needed to generate the same revenue per hour that was calculated in Step 2 to determine whether it is both practical and doable.
Is Offering A Black Friday Special Worthwhile For A Small Business?
- If the calculated profit margin is 25% or less on the standard pricing model, then rather cancel any potential Black Friday special offers.
- If the business’s Black Friday special is going to have everyone working harder for THE SAME amount of money, then rather cancel any potential Black Friday special offers.
- If the business’s Black Friday special is going to have everyone working harder for LESS money, then rather cancel any potential Black Friday special offers.
- If the business can find a smart way to produce more for less while making more profit, then by all means – jump on the bandwagon!
- If the business’s Black Friday strategy has a customer acquisition objective, rather than a profit objective, then by all means – jump on the bandwagon!
In short, before making any decisions about Black Friday, small businesses need to have a clear idea of their numbers and the objective of this type of campaign.