Category: EBIT


Andrew Bulmer

SVP and Managing Director

With the 4thquarter approaching for those companies on a calendar fiscal, financial executives are looking closely at the balance sheet to review inventory turnover. And if you’re in sales or marketing, many executives are looking closely at whether or not they will hit their forecasts.  If results aren’t where they should be, one contributing factor could be excess or obsolete stock.

The big question is how to offload this excess without taking a loss?  Historically, to avoid a complete write-off on inventory, it has been liquidated. However, margins suffer (often to the tune of a third of the asset’s original value for most organizations).

It’s no wonder many Fortune 1000 companies have embraced Corporate Trade as a strategic tool to maximize value on underperforming assets. Corporate Trade businesses, such as Active International in Canada, can offer up to three times the cash value that excess stock is worth on the open market.

With Corporate Trade (also referred to as Corporate Barter) the excess inventory is paid for in Trade Credits which can be spent by businesses on things like media campaigns – anything from television and digital advertising, as well as on conferences, events and corporate hospitality. This approach allows organizations to hit their inventory sales forecast for the year ahead and helps them to perform well in tough trading conditions.

Here are some tips for working with corporate trading organizations:

  • Experience is key – only deal with reputable, established Trade companies who have financial stability and wide breadth of trading relationships. This ensures that your company can get the full value of the Trade Credits, which is how you realize the value. Ask your Corporate Trade firm for Canadian customer references and case studies.
  • Local representation, global reach – if your business operates worldwide, partnLocal representation, global reacher with a Corporate Trade company with similar reach. You’ll be able to generate extra value for your media  spend in the countries in which you operate.  However, it’s important that your Corporate Trade firm also has a local presence, not only to better serve you, but to develop sustainable trade relationships with local media providers and other vendors.
  • Independent from agency-ownership – the value  of a Corporate Trade transaction is only realized once Trade Credits are spent, and only if the credits lower the cash outlay on rates you would have otherwise paid.  For example,  if you wish to spend your Trade Credits on media advertising, and you select a Corporate Barter company owned by a large media buying agency,  there is potential conflict of interest.   The company setting your media rates is also the company telling you  how much of a discount you’ll receive.   Independent Corporate Trade firms such as Active International, working alongside your media agency of record, act as the necessary check  and balance to ensure you’re receiving dollar for dollar value. The agency  sets the rates as they always do, Active applies your Trade Credits against  them.
  • Approved  resellers – it’s vital that a business sells excess inventory to approved buyers, otherwise they risk brand integrity.   Ensure your Corporate Trade partner has the necessary buyer relationships in place and that you sign off on final placement.

  • Reporting – always ask about reporting procedures before making  a deal.  You want to ensure you are  doing business with a Corporate Barter company who can provide you with  regular reporting on your Trade Credit usage.  See also Accounting for  Trade Credits.

As an industry, Corporate Trade has grown enormously in recent years. It is becoming more and more commonplace for financial, sales and marketing professionals to include it in their forecasting – rather than as a last resort. Corporate Trade really is a smart business solution for finance, sales and marketing professionals looking to hit their numbers without sacrificing margins.

For additional tips about using Corporate Trade for your underperforming assets, check out What Is Corporate Trade and The Top 6 Myths About Corporate Trade.

 

Your Turn:  Have you used Corporate Trade as a tool to hit your year-end numbers?  Tell us about it.

Andrew Bulmer

SVP and Managing Director, Active International Canada

Kimberly Armstrong

Kimberly Armstrong, Active International

Despite an uncertain global economy, one thing has remained on a steady incline –advertising investment. Zenith Optimedia’s ad spend forecast predicts a jump of $24 million in North America and almost $100 million around the world from 2010 to 2014.

Meanwhile, CXOs across North America are seeking ways to improve their cash flow and reduce operating expenditures. More than ever before, marketers are put under the microscope each month to produce results and deliver a positive ROI.

How does an advertiser effectively protect the integrity of their media strategy while being tasked with slashing their budgets to support corporate cash management initiatives?

Many are turning to Corporate Trade (or Corporate Barter, depending on your semantic preferences). Here are 7 reasons why they’re making a smart decision.

1. Trade Credits are a proven way to lower the cash outlay on your Advertising expense.

The Corporate Trade industry has established a 28-year old track record , growing currency of Trade Credits. Once you’ve obtained Trade Credits, you can use those credits to pay a portion of your invoice across a variety of business expenses, media being the most popular. .

2. There are many things your business can trade in exchange for Trade Credits.

Companies often think that they only reason to use corporate trade is to address a problem, however, in the normal course of business, many things happen. Packaging gets redesigned, weather is unpredictable, fashions change. As a result, the types of inventory that can be traded in exchange for Trade Credits is virtually unlimited. And it’s not just limited to inventory. Here are a few examples:

  • Re-branded product
  • Last season’s clothing or accessories
  • Perishables e.g. groceries
  • Product labeled with expired promotions
  • Outdated electronics or technology such as mobile phones and personal computers
  • Obsolete capital equipment including old machinery or furniture
  • Excess or problem real estate
  • Unwanted, costly, sponsorship commitments
  • Debt owed

3. By reducing your cash costs, you can redirect the “savings” towards other programs you’ve wanted to launch.

Let’s face it – as marketers, we never have a big enough budget.  All too often that really big, really innovative  idea is trimmed back because of budget concerns.  Whether you’re a client side marketer or leading an agency, bringing a strategy to the table that puts more dollars behind those big ideas is a good thing.  And with Corporate Trade, you’re not just limited to traditional media.  Advertisers can use Trade Credits across virtually any medium available in the market thanks to the strong relationships with media providers.

4. You can start turning those tough agency conversations around.

How many tough conversations have you had with your agency around resources and budget?  How many times has your agency been sent back to the drawing board? With agencies being marginalized every day, it can be challenging to maintain the level of true partnership you want (and need).  Corporate Trade puts money back in your pocket, empowering your agency to execute your brand to its fullest potential.

5. You don’t need to sacrifice your need for flexibility.

As a Corporate Trade / Barter partner, it is understood that many businesses require adjustment to schedules with limited advance notice. For example, at Active International the process is customized to the needs of our clients and has been designed to accommodate changes to specs/schedule.

One of Active’s clients, a leading home & garden retailer, makes many media buying decisions based on the upcoming weekend’s weather. They rely on Active to be flexible and accommodate schedule changes with very little notice. It’s no wonder they’ve been a client of ours for over 20 years.

6. You’re a Global business? No problem.

At least not if you count on an established, global Corporate Trade partner. You’ll find that good Corporate Barter firms also allow the flexibility to transfer trade credits from country to country.  Companies like Active International have presence in 14  countries around the world. This means that inventories can be distributed outside your local market, avoiding channel conflict and expanding your distribution channels. It also means you can use your Trade Credits globally.  Give your international sister company a call; they may already have Trade Credits available to transfer to you.

7. Your CFO will love you.

Trade Credits help to improve business-wide cash flow while avoiding loss on significant assets.  In fact, your Trade Credits can also be used and transferred to other areas of the business.  At leading firms such as Active International, count on the widest depth and breadth of fulfillment areas where Trade currency is accepted – including business expenses such as travel, freight, and retail merchandising.

Your Turn:

How are you balancing business cash flow requirements with the integrity and scope of your advertising plan?

Cheers,

Kimberly Armstrong

Active International

Regardless of your business sector, you’re likely accountable to a forecast.Scott Miles

Generally speaking, a short-term (quarterly) forecast ties into a mid-term annual forecast that’s part of an even longer term growth strategy. Of course, you’re always reporting forecasts and your results: whether informing shareholders about performance or discussing goals and achievement with the board, forecasts are of great interest.

So, what happens when you’ve reached the end of Q2 and you’re tracking behind on an annual forecast?

“Bring in sales and stop the bleeding.”

“What was our advertising cost last quarter?”

“Is our agency getting us the best advertising rates?”

“We need to employ cost management measures.”

Clearly, individuals in positions of leadership at major companies definitely aren’t as panicked and reactive as those quotes make them sound. But the sentiment rings true – in order to catch up on short-term goals it’s not uncommon for company leaders to hastily slash longer-term investments like brand awareness advertising and exploratory R&D spending.

A company should not have to sacrifice long-term initiatives to make up for short-term challenges. Scott Anthony on the HBR blog network outlines three great tips for business leaders to keep in mind when they are pacing behind in the short-term.

Of particular interest are the following:

1) Ensure that short-term actions to improve profits don’t impair long-term capacity to grow

2) Find out how to do more with less

One way to satisfy both is to explore how your business can truly engage in inventory management by putting a stale asset or an inventory pain to work. In real terms, when an asset reaches the point where its marginal cash return via liquidation appears to be the easiest conceivable short-term option, consider a more tactical approach.

Corporate trade (aka “barter”) makes it possible to restore full wholesale value of a stale asset in the form of trade credits used to support your marketing budgets and offset your cash outlays.

Use excess inventory to pay for a portion of your media budget rather than hammering your media agency for lower rates. Or maintain presence by using distressed inventory to offset a portion of your in-store displays rather than cutting marketing budgets.

Catching up in the short-term doesn’t necessitate abandoning the long-term.

Cheers,

Scott Miles

Client Relationship Associate, Active International

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