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.
For more examples of my work: www.bellbusinessreport.com
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Everyone is worried about the slow economy and the high prices that are driving us all nuts. Nightly news spotlights keys to help with gas and where to eat out.
Family oriented magazines are quick to tell us how to make a little extra cash. All of this is well and good, but I ran across a newsletter that made me scratch my head in wonderment, to say the least.
It suggested that this might be a good time to start a company because many are closing their doors and this would mean you would have less competition.
Advice on these types of issues is only wise if economically sound. In other words, does it adhere to economic principles? The person writing this newsletter obviously didn’t have a clue about economic competition.
In a competitive market things are going well if more businesses are opening. That means there are more sales available. If businesses are shutting down, this means a shrinking market and that it is definitely not a place to think about a startup. The basic misunderstanding is that people think that competition means you can’t get as much. Competition in all other parts of life means someone wins and someone loses. In an active competitive market there can be a lot of winners.
Startups require funding and that is nigh to impossible to come by these days with the state of the credit markets.
The other tip that I see in several places deals with real estate. We all know that the real estate market is a mess. Therefore, it is being advised if you have the money, invest since prices are lower.
The problem I fear is even more horrendous than has been talked about. I have a friend with a financed condo with a mortgage scenario so awful she may never be able to refinance, let alone keep the home she worked hard for. Not only did she buy with no money down, but she has two mortgages. One bank isn’t going to finance the total value of the property. Well, since she had the condo the value of the property has gone down $65K. Can you imagine?
She only had three more years before her mortgages change to adjustable rates. There are government programs out there to help. But the bottom line is no one can refinance when the value has gone down. That would leave her holding the bag for the difference. I can’t see property values recovering that much that fast.
I am sure as I know the sun is going to come up tomorrow that she isn’t the only one holding such a mortgage package.
This leaves the question for potential investors. You buy when the value is down. How long will it be before you can make a profit? There is no one out there with a crystal ball for the real estate market.
Keep your ears open on tips to help us get through this time. But ask yourself before jumping; does this make sense in the long run?
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For more samples of my work: http://www.bellbusinessreport.com
Filed under: Blogroll, Business Advice | Tags: communication, nuts and bolts
If you are still in the habit of using ‘corporateease’ when you write memos, brochures, pamphlets and other materials related to your business, it is time to get over it.
I was recently asked to write a direct marketing piece for an upcoming seminar for practicing real estate agents for their continue education requirements. I was sent the text of the brochure and came away pulling my hair and shaking my head. Phrases like “comprehensive technology strategy” were thrown around generously. Deployment and web marketing were also used.
The text seemed to all boil down to how to use the Net, specifically the Web, to get ahead in the real estate game. While we are at it, let’s make sure the rest of the office is on board. We are also going to show you how to do it cheaply. What the text tried to get across was simple, but the jargon made it difficult.
If your memos sound similar, you have a problem. There is another whole group of consumers, potential clients, etc., that don’t talk like that. It makes no common sense to rattle on with ‘corporateease’ that should have been abolished 20 years ago. Apparently, there is a group that didn’t get the memo.
Of course, another explanation could be that the loss of secretarial and assistants has thrown the efficient use of language back a decade or so. I spent many days as a secretary. The executive that could compose his own letters in anything sounding like logical English was as rare as an untapped source of oil.
If you are working in a corporate environment that rattles on like this, you can make some changes that will make the world a much better place.
It is my firm belief that one of the reasons corporate types revert back to this type of language is because the effect is confusing. I had to read this brochure more times than I want to mention to try and figure out what the actual important points were. The bottom line was the brochure really didn’t say anything specific. The wording infers that some sort of teaching will be happening. It doesn’t, however, say exactly what. So, if the seminar doesn’t go off well, the attendees really can’t complain.
The best way to describe what is lacking in this type of communication is the ‘nuts and bolts’ of the idea. I got that notion from an editor many years ago. “You don’t have enough nuts and bolts to get your idea across.” It was and still is very helpful advice.
If you are going over some written communication you are about to send out, ask yourself this one question, “Can the main point be summed up in a sentence or two?” If not, then you have some work to do.
On the cautionary side, most corporate folks and some entrepreneurs don’t like having their communications criticized. So, in order to affect any change, you are going to have move cautiously. Openly stating that a memo doesn’t say anything specific will only cause ruffled feathers. Change a few sentences into your own wording and eventually, light bulbs will flash.
You will be glad you did. Effective communication, with the right amount of nuts and bolts, makes every phase of business run smoother. Good communication saves money. A first reading that gets the point across gets the job done faster.
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Filed under: Blogroll, businness advice | Tags: creative financing, real estate, wrap-around mortgages
I have a candidate: creative financing. Creative financing began to show its ugly head in the late 70s and early 80s. Before it was used by ‘ordinary’ consumers Robert Allen made a splash on the real estate scene.
For those unaware, Robert Allen claims to be the first with the “No money down,” principle of real estate investing. He made a name for himself by proving he go into a town and sign a deal with no money down. What I don’t think he mentioned was that he had excellent credit and this wasn’t going to be his first purchase in real estate. Translated this means that he had collateral to offer as a part of the loan.
The other factor is simple. There was no way on earth Allen was planning on keeping those homes. He was going to flip them in the years when the value increased in big numbers every year. So selling in a short time for a higher price was how he made a profit. Good logic for him, but not for consumers wanting them as a long term investment or a home for their families.
That’s not happening now. It might not happen again for years. This equates to the fact that it makes no sense buying with no money down.
Initially, no money down was just the beginning of the history of creative financing. During those times, right after Prop 13, it appeared as if the ability to buy homes would be in a downturn for a long time. (Sound familiar.) Anyway, the prices were still horrific despite the caps promised by the passage of Prop 13. Interest rates also were out of sight. I remember the day prime rate hit 22 per cent. I don’t think mortgage rates ever got that bad, but they were up there in the double digits.
Fixed rates were close behind and no one was standing in line for a home mortgage that was going to cost double digits in interest for the next 30 years. Someone came up with adjustable rates. They were eased into the financial institutions. It didn’t happen over night. In fact, I remember the year California passed a law allowing banks to write mortgages with them, 1981.
The trick was then to get in and cross one’s fingers that when the balloon payment came due, oh yes, they had them; the fixed rates would be down enough so you could roll over into a fixed.
However, some owners were so eager to sell then when a potential buyer couldn’t qualify to finance the whole amount, after down payment, they agreed to carry a second. This became known as a “wrap-around” mortgage. Many times the amount of paper was for the total amount of the house’s value. In some cases, even more. When those folks’ money got tight, they simply walked away from the homes since they had no equity and no ties to the house. They only thing they lost by leaving was their credit rating for a good number of years. This is the history of creative financing.
However, loans, in that day, no matter how allegedly creative they were, still were based on some of the traditional guidelines. You know: proof of income, credit reports and how much you could logically afford for a mortgage payment.
Fast forward to today’s market. There was a big potential consumer base for home ownership untapped because of their bad credit and questionable income. Greedy folks started rubbing their hands together with the idea that after all, everyone is entitled to a piece of the American dream. They started writing loans with introductory interest rates and the dubious consumers were signing on the bottom line as fast as they could pass the paper across the table. They couldn’t afford to keep up those loans and now the credit market is suffering because of greed basically.
We have millions losing their homes. Congress is passing laws to offer government backed loans for those who are about to be homeless; another government bailout by any other name. Banks are going under and the mortgage industry will probably never be the same.
So if you want to find something or someone to place the blame it on, creative financing is a good candidate (along with greed). It’s time we got some common sense back in the world of financing. This litany of troubles is just another further example that it was thrown out quite awhile ago. If a loan in the long term doesn’t make common sense, then don’t sign. That’s the problem in a nut shell.
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It’s been brought to my attention that the increased scarcity of water is looming on the horizon as a massive problem.
This is a link to a list of articles on the subject: http://www.alternet.org/tags/water%20scarcity/ . Take a look at this long list and it will set you back a moment. I live in the Los Angeles area and the subject of water, do we have enough, and where can we get more is a part of the city’s history. When I hear mumblings about how this is going to be an issue again, I tend to put in the back of my mind, on the shelf of troubles that the rest of the world is going to fix.
Under this link, I found an article entitled, “”Those who control oil and water rule the world.” Think about it. If we stand back and let the major powers be the ones that deal with this issue, it will turn into a big mess. We all know how well they, the powers-that-be, deal with the ongoing scarcity of oil.
Now, if you are having doubts that a water shortage is an issue, check out the link and look at the number of articles on the subject on just this one website.
Dams are needed in California and there is a chance the Las Vegas will run out of water completely. This doesn’t include the troubles abroad with droughts and famine.
One of the biggest solutions mankind needs in the next couple of decades is a more efficient way to utilize the water we have. We also need a way to provide more and just maybe a solution to an age old problem, how to use sea water to our benefit.
All of this is time consuming and costly. The party and government that comes up with efficient solution to these problems will be controlling the strings of the rest of the world.
There are some attempts already at easing this problem. This is a link to a story about a system that deals with saving rain water: http://www.prweb.com/releases/2006/12/prweb484772.htm
We all know that the world is fascinated with getting a jump on what the next big thing is going to be. I am here to tell you that is and will continue to be water.
Keep your eyes peeled on the news coverage and any techie potential solutions. If opportunities for potential investment crop up, don’t think twice before jumping in.
This is sure to be ongoing topic for the foreseeable future. I doubt the problems with water will ever completely be resolved.
Technology for delivering water will without a doubt one of the next big things.
For samples of my work: www.bellbusinessreport.com
Laura Bell
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You have to be under a rock if you haven’t read the news about our economy’s craziness. The stories overflow to every part of the newspaper. The economic slowdown seems to be on everyone’s mind. There was a whole section of the increase of food prices and how rice has become scare in the latest Business Week.
Small business owners are feeling the crunch. So the question is: who will stay afloat and who is going to close their doors.
The major issue is simple: can you convince your customers that they need rather than want your product or service. You may also have to rethink the major markets you target. I read several magazines dealing with direct marketing. I just came across a short piece saying that many are zeroing in on teenagers. Many teens have money to spend as long as times haven’t gotten so tough their allowances have disappeared.
There are certain products that consumers want, compared to need. These purchases slowdown when customers’ money gets tight. A good example is the ads all over television for new mattresses. We all know that if push comes to shove, a lumpy mattress problem can be solved by shoving a board under it. However, running an ad with a medical endorsement going on about how new mattress improves your sleep and health can put the ball back on your side of the court.
Eating out, car washes, high grade meat, vacations and a new wardrobe are all products and services that can easily become one of the things worried consumers will decide to do without for the time being. The substitution effect will take hold. Where can they get a product or service cheaper will be high on their priority list. Sales, enticements and constant marketing tools keeping you in front of your consumer is the only chance you have to keep him/her coming back during these trying times.
Keep in mind how much teens buy. They spend a ton of cash from allowances and extras they receive during divorce. Many have the ability to shop for their own clothes these days without resorting to bringing Mom or Dad along. Toss the idea around and see if you can find a way to add them to your market.
Product mix is also a key issue during recessions. If you are only selling appliances, you might consider adding refurbished models. If you decide to go that route, make a lot of noise about it with your marketing. You also might consider adding extended warranties as a part of the deal. Adding something to your product offerings is also a very legitimate reason for getting in touch with old customers to let them know about this change.
Finally, and not least. Don’t cut back on advertising. The only companies who stem the tide during slow times are the ones who continue marketing. This doesn’t mean that you can’t find a way to trim the fat out of your marketing budget. Interns and teenagers can be good substitutes for fulltime employees for marketing tasks.
Keep your eyes on the economic measurements. They are all over the media. You couldn’t miss them if you tried; and keep a sharp eye on your competition. It will pay off in the long run.
For more samples of my work: http://www.bellbusinessreport.com
Laura Bell
writer@well.com
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Filed under: Blogroll, businness advice | Tags: collectibles, investment, money, plan, saving
This is a good question to ponder when the country is awaiting their economic stimulus checks with baited breath. Consumers tend to think checks are going to keep coming. If you run your life on that premise, it means that you are planning on working until the day you drop dead. If you spend your life waiting anxiously for your next check, your money controls you.
Stop presuming that checks will continue to show up in your life as they can stop for a myriad of reasons. Nowadays, even government checks can be delayed.
I know. You are shaking your head wondering how to get control when all your money disappears as you soon as you pay your bills. Getting one’s financial accounts under control is a primary goal. However, it doesn’t mean that you can’t save. Nor, does it mean that you can’t put away unexpected rewards, such as the economic stimulus check. I know several working folks who are planning to use it for a vacation or new ‘toys’ they could do without.
This type of behavior simply is saying to the universe that I will keep on working. I have absolutely no hope of ever putting my money to work. You either make a plan to put some of it to work, with more later, or you will be working until your funeral.
I know times are hard and money is stretched money is stretched to the point of snapping. My point is that you have to put money away, no matter what the circumstance. This is even more important when it comes to unexpected windfalls. You only spend that $600 on a vacation if you already have an investment plan in place.
This problem, of acting as if checks will continue is so widespread in this country that even the top-earners run up bills they will never be able to pay. They are under the illusion the good times will keep rolling forever. All you have to do to realize how nutty that idea is to look at the movie stars that have gone broke once shows were cancelled.
The lower end of the earning curve can start small. There was an interesting article in the business section of the Los Angeles Times just the other day on how one can find treasures at estate sales. Don’t shake your head until you investigate. Children start out with small stamp collections that eventually end up being passed on to the next generation. Collectibles can be a starting base for building wealth. They can be accumulated with small purchases in the beginning. Forbes used to have a section that talked about the ups and downs of the market value of various collectibles.
For the long term, one needs an investment or savings plan. Suze Orrman, the current national financial guru, continues to talk against using retirement money early. Whatever problem is bothering you currently should be dealt with other options besides taking out retirement funds. There are penalties, not to mention the loss of a nest egg for the down the road where the only sure thing may be a social security check. Once a retirement account is established, however, it can be used as collateral for a short-term loan without penalties.
Spend some time finding out how you can grow your money if you have only a small amount to play with. Online investment firms offer bank accounts which offer higher than normal interest rates. When you have enough put away, you can start trading a little at a time.
If you accumulate enough, open a CD, a certificate of deposit, and don’t crack it open, the first time something goes wrong. You can still buy United States Savings bonds and other investment bills issued by the US Treasury. Here is a link with more info:
http://www.savingsbonds.gov/indiv/research/indepth/ebonds/res_e_bonds.htm
If you feel the need to understand more about your finances, do some reading and then start a plan of action. You are losing money every day you put it off.
For more examples of my work: http://www.bellbusinessreport.com
Laura Bell
writer@well.com
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Got your business going? You then need to plan for the second generation.
We know that Bill Gates and company have a firm grip on that concept. Otherwise an operating system called Vista wouldn’t exist.
We are also aware all the cell phone companies are in the next generation race with all their might. They aren’t willing to allow someone else to beat them out with a new application. It has become an annual race. The techie media wait with baited breath to see what’s going to happen next.
Every business owner is not going to sell something as exciting as a new application for cell phones. It doesn’t matter. Once you are in a business and have a name for yourself, the world at whole is wondering what you are going to do next.
What comes next can refer to a new and improved version of your widget or just simply another application to the business you already have going. It boils down to expanding current sales. When it comes to the techie end of the world, it means convincing the folks to upgrade. All business is not going to be in the upgrading niche. However, it doesn’t mean you don’t need to plan for what you are going to do next.
I once knew a fairly successful computer guy who created personalized software for small business owners. The problem was he wasn’t able to take on a partner, which would have been necessary for expansion. A partner would have meant warranty policies sold to old and new customers. The way the business was configured it was next to impossible for expansion.
I heard the story from SCORE about a bakery owner who, in an attempt to shave costs, only hired non union drivers. The problem, they were only allowed to drive in the city or the union drivers would come down on them. The owner had planned to keep his business from growing.
Have a successful web design company? How about taking your knowledge to an adult education program and teach a class. Create your own CD that can be sold off your website. Folks are into ‘do-it-yourself’ projects. This way you would be bringing in cash flow from a niche you might never be able to penetrate.
Selling handmade baby products? Create a line for the toddler stage. That way you keep your original customers and open the doors for those who didn’t find you when their child was in the infant stage.
Planning for the next generation gives you a more than a better shot at staying in the game you started in your launch phase. Don’t fall victim to being so overwhelmed with this phase of your business that you fail to see what should happen next. If you can’t deal with the future planning, find a way to out-source it. We can’t forget that failing to plan is unfortunately planning to fail.
For more samples of my work: http://www.bellbusinessreport.com
Laura Bell
writer@well.com
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Business advice 