Business advice

It still isn’t the economy
September 30, 2008, 7:03 pm
Filed under: Business Advice | Tags: , , ,

Many average folks think when the economy goes bad, it’s ok to lay the problem at the feet of those in Washington.

The government didn’t cause this mess. We did. We, meaning consumers who bought into the no-money down mortgage scheme. And, that’s what it was, a scheme. All sound minded investors know that ‘homeowners’ have no incentive to keep their home or care for it if they haven’t invested any of their own money. Yet, millions eagerly agreed to sign on the bottom line. Consumers are not investment aware enough to know that the value on their home might go down instead of up. Everyone else involved with the deals were happy to pocket their commissions and didn’t bother to worry they might be close to being out of business a few years down the road.\

No one seemed to have a clue as to what the domino effect would be on not only our aggregate economy but the economy of other countries that were dumb enough to buy some of these mortgage back securities. Oh what mess we weave for ourselves when we only have our eye on the here and now.

Mortgages and credit in general are going to be difficult to get for a long time to come. Creditors are going to be more choosey about who they agree to back in mortgages, business loans and credit cards. They are finally waking up to the fact that a great number of the customers they funded are probably never going to pay them back.

The future has to be different for consumers and lenders. Consumers have to cut way back on their credit spending from here on out or they will find themselves on the street and/or in bankruptcy court. We are such a credit-oriented society that this is not going to be an easy task. Bad habits are hard to break.

Ironically, the ones that are going to be hurt the most by what’s coming are those with 9 to 5 jobs. Employees tend to think that their paychecks will continue as long they want them. This gives rise to the notion that it is ok to charge everything under the sun.

On top of that, home equity loans have been used in the past few years for frivolous purchases. So not only are they messed up in the short run, but the long run picture is also a mess. Homeownership was supposed to be a way for the ordinary/middle class to save as well as invest. The only urge for ordinary consumers these days is how I can get my hands on cash or a new credit line so I can continue to spend.

Employee types misuse their credit and now will have bills they can’t pay. Job cutting isn’t over. What happens to the consumer with that debt and a home they can no longer hang on to? The park bench might be the answer.

Customers are going to have move backwards in their thinking. If you can’t afford it now, you can’t buy it. This, in the long run, will mean a decrease in demand and further shrinking of the economy. Once consumers get a hold on their spending habits, more companies will be either acquired or shut down. However painful this is, we grew an economy we couldn’t afford to keep going and now we have to face the consequences no matter what. If Congress does pass a bailout, it doesn’t mean that jobs will continue and things will be ok. It just means that more investment banks and other lenders will probably not go under. It will still be a mess for a long time to come.

Keep your nose to the grind stone when it comes to your buying habits and watch the business news to see if you need to change jobs before you are handed a pink slip.

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Is your money controlling you?
September 18, 2008, 2:25 am
Filed under: Blogroll, Business Advice | Tags: , ,

The country is in a widespread financial crunch. It would take quite a bit to find someone who isn’t having some kind of financial problems.

It’s very common during trying economic times for folks to decide the answer to their problems is to start a business. That’s a bad idea. It will open the door to the dilemma of who do I pay, my vendors or the grocery bill.

Before thinking of starting your own business, take a few things into consideration first. If you are living on credit in between paychecks, you need to examine your spending to see where you can cut back. It’s painful and frustrating, but it beats dealing with overdue bills and harassing calls from bill collectors. Don’t use credit cards for miscellaneous shopping. You know those few things you just have to have in between regular shopping trips. That bill can end up being huge at the end of the month.

Getting out of financial straits sometimes require sacrifice. If you are living in a home that you can’t maintain on your current cash flow, get rid of it. I know that isn’t an easy feat with the mortgage market the way it is. You may need to talk to mortgage companies to see what you can possibly do. There are usually folks willing to pay some monies in exchange for a quit-claim deed. Before you stop listening, I know how horrible and earth-shattering that sounds. In those types of situations, your home will not be the edge to get into another living situation. You may need to find someone to help you with financial requirements to shift into a rental situation. It ‘s better than sitting around waiting on a foreclosure notice.

Getting control of your money is essential before starting a business. Instead of having one set up bills and priorities, you will now have two of everything. This kind of trouble brings chaos to families.

However, there is one slightly different angle that you can try for a year of so to clean up those bills. If there is no Avon lady in the area, sign up. Despite the fact that it is 2009, women still like Tupperware. There are various products sold via sales reps, even though the methodology has changed over the years. This types of ‘business’ functions help your taxes and overall financial picture many times without putting further burden on your and/or your family. Being a sales rep with these companies allows you to file a profit and loss statement as a part of your income tax return at year’s end. This means that a lot of expenses can be deducted and can help with your overall tax situation. This also means that it may make sense for you to change how many deductions you declare at work.

This type of business venture allows you to see just what it is like to run your own show before jumping completely into the water. If, after a time period, things are looking up and you feel as if you could run your own show full time, then it is time to take serious stock of what the future will bring. But, none of this can happen if your money controls you. Keep an accurate accounting of all expenses along with plans for the future is the only way to begin to get back the control you need for a profitable tomorrow.

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Big Guys versus the Little Guys
September 7, 2008, 7:35 pm
Filed under: Blogroll, businness advice | Tags: ,

Some people are just bound and determined to conclude that big businesses in any given market niche pose a dire threat to small business owners.

We have all heard the complaints railed against Wal Mart. However, did you notice the news stories that covered the towns where the small business owners got together and kept them from moving in?

Economic competition does not mean that someone is always going to win while the other one loses. Competition in the market is simply the opposite of a monopoly market. I am sure no one would be happy if the world’s markets were run like OPEC.

So, in this country, since the government-backed monopolies AT&T, etc., have been broken up, we have markets with many players. These players by the very nature of the game are going to be different sizes and styles. In order for any one of them to keep alive in a market, they have to be savvy. Getting one’s name out, dealing with pricing and services are the major issues.

Because smaller companies can’t offer as many products or services as the big guy it is falsely assumed they have a smaller chance of being successful. Not true. Think of an easily identifiable example. Big chain grocery stories cater to a certain niche. While they have customers in all their lines, just a block a way the same can be true of the neighborhood 7-Eleven. Why? 7-Eleven’s are convenience stores. They fill a niche for consumers in a hurry. When hurried, most consumers are willing to pay a little bit extra for getting in and out quicker.

7-Eleven Stores began operating under this name in 1945. Previously experiments had shown customers willing to pay more for small items when presented with the opportunity, instead, in those days, having to travel to a bigger store. 7- Eleven’s success has in no way decreased the market for grocery chains.

In Pasadena, CA, three bookstores operate successfully on the famous Colorado Blvd. There is a chain, a mainstay, and a Mom and Pop. All offer slightly different services and refer customers to each other when needed.

None of this doesn’t mean that a business somewhere isn’t going to fight unfair and try to gain an unfair grip on the competition. We all know that Wal Mart has some unsavory business practices. Bill Gates has been sued for allegedly trying to do similar things.

Then, there were the Robber Barons in the early 20th century who really didn’t care what they did to keep their huge share of profits. They are the reason we have anti-trust laws today.

The point is that those types of activities aren’t the norm. They are out of the ordinary and are dealt with via bad press and lawsuits.

This doesn’t mean that when shops open in your niche you wouldn’t have to work harder to keep your customers. Adding services, finding out what your customers really want and more marketing will be a part of the mix.

The current threats to small business are the tight market in the overall economy and constant talk of economic downturns. This is an aggregate economic issue, not one dealing directly with competition.

Economic competition is healthy for the market. It needs to be dealt with logic instead of emotional reactions to misconceptions about basic economics.

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