What do bottomless coffee, a public love affair and a digital camera in the bathroom have in common? They are all examples of the type of low-cost strategies that Mike Said uses to step up sales.

Mike was the one who introduced the idea of bottomless coffee to a well-known South African franchise. “It’s not how much value you add, but how much value you are perceived to add,” he believes. It costs only a few cents to provide customers with top-ups, but coffee addicts feel like they’ve entered nirvana. “It may seem crazy for a coffee shop to give its coffee away, but while the customers are sitting at your tables, they see waiters carrying delicious plates of food past them. And those dishes are yours, not your competitor’s.”

Also, don’t underestimate the power of intrigue. While owning a restaurant in George, Mike started running a small ad in the classifieds, reading Would you like to meet me for dinner at Mike’s on Friday night 8pm? Dave And a week later, Thanks, Cindy, that was incredible. Shall we do the same this coming week-end? Mike’s again. It wasn’t long before he had customers asking him about the ‘affair’ and whether the couple was indeed in the restaurant that night.

It is crucial to adjust your marketing strategy to your market, though. The patrons of a coffee shop seek a very different experience from the clients of a plumber, for example. Few people know what their home’s plumbing actually looks like or are at home while the plumber is fixing it. It’s therefore often difficult for them to tell whether the amount of value added justifies the size of their bill. For these types of service providers Mike recommends documenting the work procedure with a digital camera and including a few photographs with the invoice.

And above all, Mike reminds all small businesses that customers happily hand over their money to those who can make them feel happy.

Does it sometimes feel like you’ve earned less on your investment than the figures quoted by the insurer or the investment company? Chances are good that – from your viewpoint and using the calculation methodology that you’re familiar with – you did actually earn a different rate from the published return.

Are the investment companies cheating? No. In more mature industries (like ours) performance reporting is standardised and well audited. But in order to publish standardised figures, they can’t reflect the idiosyncrasies due to the fact that investors:

• time their contributions and withdrawals diffrently;
• negotiate different types of intermediary fees with their planners.

When they publish a 5-year return, for example, they’re assuming you invested a lump sum on the first day of the period they’re measuring, that you remained fully invested over the five years, and that you didn’t sign a debit order or added to your investment on an ad hoc basis. Also, they look at the incoming investment money from their viewpoint. In other words, if you invested R100 000, of which R2 000 was commission, you’ve only invested R98 000 on their books.

More relevant to you, and also the more accurate measure – catering for every investor’s unique scenario – is the actual annualised return a.k.a. the internal rate of return (IRR) on your cash flows. This methodology looks at all your cashflows and then determines what annualised effective interest rate a zero-cost bank account had to pay on your contributions to leave you with the same investment balance as the insurer or investment company’s pay-out at the end of your investment term.

Want to calculate the IRR on your investment but don’t know how? Don’t worry, our What Did I Actually Earn? calculator will do it for you.

Interest rates are low by South African standards, and investors with spare capital or borrowing power may be tempted to dive straight into the buy-to-let property market. Because you can’t go wrong with property, right?

It is to test sweeping statements like the above, that we’ve designed the Return on Property calculator to work out the expected long-term returns on your investment under different assumptions. This tool allows you to choose the bond rate, increase in rental income, increase in property maintenance costs and capital growth on your property that you think is realistic.

If you need help to complete the second input field of the calculator, relating to transfer and bond registration fees, you can download the The Real Price of a Property tool for a good estimate of up-front costs.

Just remember that the Return on Property calculator does not account for your unique tax situation.

Happy investing.