When The World Changes Around You, You Must Change With It
Many times, when we are starting a business, we start with what we already know. We act as though the world we live in has always been the same, and that the business models that our former employers utilized are necessarily the best ones for us. A look at the history of the world’s climate should be enough to remove that idea.
Just as the Vikings found Greenland a warm and hospitable place 1,000 years ago, but were driven out by cold temperatures a few hundred years later as part of a changing climate, so too yesterday’s business models were built upon the social, legal and economic situation in the preceding years, and the business models of today are likewise built upon the social, legal, and economic situation of the recent past. What exists today may not work in a decade, simply because the world is not the same place today as it was ten years ago, and it won’t be the same place ten years from now as it is now.
Newspaper Example
Fifty years ago, publishing a newspaper was a high-margin business. The returns were high, and the barriers to entry were also high. This enabled thousands of local papers to support large editorial, production, and distribution staffs. But the world was changing. First of all, there had been two world wars and a global economic depression within the previous two or three generations, so the nation was now aware that people needed to be aware of overseas events. This really made wire services, such as UPI and the AP, an important part of a paper’s story collection process. Social and economic change was coming to the nation, too. And radio and the new thing, television, were starting to provide news at no cost to the audience.
Thirty years ago, the newspaper industry was starting to show the first signs of pressure. In major cities, the Justice Dept. started allowing two major local papers to share production (printing) and distribution operations, as long as their editorial operations remained competitors. Twenty-five years ago, the Los Angeles Herald-Examiner closed down, leading to an exceptionally profitable few years at their rival Los Angeles Times. But KNXT-TV2 (now KCBS) added local news broadcasts from 4:30 PM until the network news. Local AM radio stations KFWB (960 kHz) and KNX (1070 kHz) were and are all-news stations, with sports, traffic, and all the top stories of local or national significance covered every half hour. Again, this comes without any out-of-pocket costs to their listeners.
In the late 1990s, Time Warner, which is both a publisher and a broadcaster, saw the rise of the Internet, especially the World Wide Web, and knew they needed to be involved. They launched Pathfinder. Over the next few years, they and other media companies experimented with models: paid subscribers only, split access (some for paid, some for unpaid with memberships, some for anyone), ad-supported sites, and e-mail blasts (with or without an actual web-resident story). With few exceptions, none of those has worked out–the papers are looking for something with high enough returns to allow them to keep their cost structures, and it isn’t going to work.
Now you will hear publishers blaming the Web for their losses: “If it wasn’t for sites like Google and Yahoo plastering our headlines and story summaries on their sites, we’d be able to charge people to read our stories,” they say. Unfortunately, that isn’t really true. Google and Yahoo generally link back to the original site, so that people who choose to read it see whatever advertising or “buy a subscription” messages the paper chooses to put up. There are definitely content-stealing sites (they also plague bloggers, such as myself) but they aren’t the major reason that papers are in trouble–the world has changed, and they are still trying to live somewhere that no longer exists.
Rationale
In my business classes when I was in college, I learned that high returns tend to attract new entrants into the market. But they also seem to attract competition from “replacement products”. For example, if the price of automobiles gets too high, people can purchase other products and services to get them from point A to point B, including bicycles, motorcycles, skateboards, hang gliders, commuter rail lines, bus routes, running / jogging / walking and so on.
Likewise, high costs of entry tend to keep competitors out of the market, raising prices and profits. In the case of the newspaper industry, the high capital costs of printing plants tended to keep the number of competitors low. The broadcasting industry is also fairly capital intensive, what with the limited availability of licenses, the cost of transmitters and antennas, and the constant flow of electricity. Building a business in a field with high capital costs and high barriers to entry tends to be profitable, unless something changes. When change comes, it often sweeps away even entrenched companies.
Cruise Control
In effect, our entire business has been pretty much on cruise control … for the past several months we’ve been neglecting many important tasks and just letting our business coast. –Steve from MyWifeQuitHerJob.com
A successful business has a business model that is working. Such a business also has a number of other factors working on its behalf, including some that the owner(s) and manager(s) may not know about. For example, the United States automobile industry benefited from a combination of the legal environment, the economy in the 1900 to 1970 period, a huge unified market, and wide availability of (motor) fuels. It wasn’t necessarily the quality of their products or their management prowess that made Detroit the world leader in motor vehicles. When things changed, these companies started a long-term decline that continues to this day.
Operating your business successfully means taking an occasional look at your market and at the situation that supports your business. You want to understand what circumstances are contributing to your company’s success, so that you will be aware when changes could upend it. Your business model can be considered a simple sentence or two that describes how you make (or intend to make) money. For example, the model for Twitter, the popular “micro-blogging” service, could be described this way: get as many users as possible, while raising lots of venture capital, then figure out what to do about earning money. (NOTE: This probably won’t work for you, so don’t even think about it.) Anyway, remember that there is more to your success or failure than your good looks or smart decision-making, and if those things change, your business could be on the rocks like the auto companies were.
It is important that you have a clear idea in mind of what your business will do to make money, your business model. If your plan is to make money when people walk into your store to buy products, emphasize that in the choices and decisions you make. If your plan is to sell products to the stores, so the stores will have something to sell, then make sure to prioritize this in your decisions and choices. Your product line may change, your industry may change, but if you don’t understand your business model, you will still find it difficult to succeed.
It is unfortunate that someone who is starting a business enterprise needs to start out by thinking about legal issues, but such is our society. Some would argue that this is European-style democratic socialism in action. I would argue otherwise, that it is in fact a prelude to a more fascist-style society, a society in which a few favored corporations and their owners will function almost as an extension of the state.
Anyway, I’m not a lawyer, so I can’t give you any real advice here. What I can say is that you need to take care of incorporation or filing your fictitious name or whatever your state requires as early as you can. You need this before you can open a business bank account. (You are planning on using a business bank account, right?)
It is very important that you take steps to establish your business as a legal entity. Not necessarily as a corporation, but at least with its own finances and name (and the right to use that name in its geographical area for the industry it is in).
As you work through the various business forms and the advantages and disadvantages of each, you will find that balance of costs and protections that best fits your situation and temperament. This isn’t meant to be a detailed tutorial, but more of a call to action.
This really is not about a “business” as a multilevel marketing “independent marketing representative”, because the majority of such businesses are really not operated as businesses–having no existence apart from the individual(s) acting as the sales representative. This is about real businesses, the kind that hopefully will replace your job and income with something that you control. You have spent the last decade saying that you could do a better job of running things than Mr. Slate. Now is your chance to prove it.
If you are one who has said for years that you want to start a business, it is time to get moving. This is not the time to keep putting it off. With corporations laying off hundreds of thousands of American workers every month, you might not have much time left until you join the ranks of the unemployed.
There is no economic security except what you make for yourself (with God’s help, of course). Do not rely upon your pension, your health insurance, your bank account, your good credit, or your contacts in key positions to “be there for you” when hardship reaches into your life. They won’t be there. It is you and you alone. So if you are saying that you can’t afford to take a pay cut in order to establish your company, you are wrong.
Despite the better news in the economy, the truth is, we need to completely restructure the way we operate. There is no better driver for this change than small, locally-owned businesses–owner-managed businesses–being formed and built-up all across America. Healing our economy is not a matter of helping large, out-of-area banks and large, out-of-area corporations (LOOABs and LOOACs) escape the consequences of their mismanagement.
Start today. Find out what your state requires in order to establish a business. Set up an appointment with a local attorney to get advice and possibly assistance with the process. Secure the rights to use your chosen business name. Establish a business bank account. Register with the IRS and your state’s authorities. No more waiting.
I have been working on the launch of another business venture. This time I am acting more as an advisor. It is exciting.
As I talk to people in my regular job, I find that quite a few employees wish to be something more than employees. For those who have never been owner-managers, it is important that they understand that when you work for someone else, you can generally expect to get paid for the hours you put into it (assuming you’re on an hourly wage). When you’re “the man”, there is no pot of gold sitting around. You have to be willing and able to risk going without some cash if your business activities have not produced enough return for that time period. If you have employees, you have to ensure that they get paid for the hours they work, even if you do not get paid.
In other words, if you are craving security, if you think that owning your own company will insulate you from the ravages of financial pressures, you’re looking in the wrong direction. Business ownership is risky, it can be stressful, it can be financially difficult, and it can be time-consuming.
There are two, and only two, good reasons I can think of for owning your own business. First, you find it tremendously stressful to have someone else’s decisions be the deciding factor in how much you earn, whether your employer will stay in business, whether the company will continue to produce the product or service that you are employed to create, or what tasks you will be assigned. If you crave self-in-control and hate others-in-control, you should be looking at starting your own business.
The other reason? You cannot find a job, cannot find a job in your field, or cannot find a job that will pay you enough to keep a roof over your head, clothes on your back, and food in your stomach. That is, economic necessity is driving you to take control of your own destiny. If this is true, then perhaps you should be looking toward owning a small business, at least until things change and you can get the job you want.
You have to have an internal locus of control, but not to the extent that you ignore the one who made you. No matter what else goes on, God is still in control. You do the work, attempting to make your business profitable, God enables your work to succeed.
Locus of control? What is that? Think back to your childhood. You and Jimmy were running in the backyard and you tripped and fell. Did you say, “I tripped and fell” or did you say “I tripped because Jimmy was chasing me”? Do you believe things happen in your life because your actions make them happen, or do you believe that others’ actions decide your fate? If someone else’s actions decide your fate, as far as you can see, control of your life is located outside of yourself. If your actions are the primary determinant of your fate, your locus of control is internal to yourself.
With an internal locus of control, you believe that you are able to make it happen. Therefore, you are far more willing to step up to the plate and do whatever it takes to make things happen. An external locus, on the other hand, leaves an excuse–that major retailer refused to carry my products, so I had to go out of business–and makes it easier to wimp out of doing what it takes.
I am pleased to be allowed to have some part in this enterprise. I’m hoping that it also gives me a reason to spend extra time with my granddaughter (her parents are involved in the venture).
So why did I call it “feeling the flow”? Because if you cannot feel excitement at the prospect of getting in the race and competing, maybe you should turn in another application to your local Gree-C Burger or the nearest nationwide retailer. You should feel excitement about being in control of your own destiny, your own wallet, your own future.
This isn’t for the sit-around-waiting-for-handouts crowd. This is for people that want to work hard, work long, and work smart. Working smart cannot happen when you have no control over what you do and how you do it (e.g., if you are like most employees), because someone else decides what you must do and often how you must do it. You have to be the one who asks questions: Is this the best way to perform this task? Is there another task that might better fulfill the purpose of this one? And you have to be willing and able to change your tasks and how you perform them if the result is better at accomplishing the purpose behind the task.
Here’s something else: This isn’t for the sit in front of the television crowd. If you are passive, if you are consumer-oriented, if your mind and actions are controlled by what the media promotes, go back to Gree-C Burger or that Big Blue retail chain.
If you are trying to launch your own business, get in the flow. Let yourself be excited at the thought of being in control of your life and your future. Then, get out there and do something about it!
And it was a welcome opportunity for us to realize, well, yes, it could be a very good time to start a business. In fact, we can now think of at least four compelling reasons why.
We can, that is, if and only if the business you’re hoping to start passes one major test.
It can sell more for less.
To be clear, we don’t mean a little bit more for a little bit less. In these recessionary times, a new business doesn’t stand much of a chance unless it provides a demonstrably superior value proposition than the market’s current offerings. Sure, not that long ago, you could still take a competitor’s service or product, tweak it or slap on a new feature or two, and persuade customers to buy it at a premium. But with everyone in hunker-down mode, the days of marginal up-selling are gone, and could be for some time to come.
I think there is even more to it. Right now, big, hierarchy-based organizations are frozen in fear. A smaller, locally-owned business (SLOB) is going to have to be more responsive to its customers or it will shut down even in the best of times. Now, this is the difference that can zoom you from worst to first in your local area.
Does your main competitor have to get someone in headquarters to approve of changes in the product, its pricing, or in services offered around that product? Is your competitor’s product imported? Can your locally-produced product present improved quality or a better feature set as compared to the competitor? (I’m talking about perceived quality: reliability, product lifespan. As for features, the only ones I’m talking about here are the ones that motivate your customers to buy your product instead of your competitor’s product.)
There are only 24 hours in a day so something in your schedule usually has to give in order to find the time to start your own business. When my wife and I first started our online business, both of us had full time jobs which left only about 3 hours of free time on weekdays and 2 full days on the weekends.
As a result, we had to make some sacrifices in order make time for the business. To make matters even worse, my wife was pregnant so there were always certain days when she simply didn’t feel up to working on anything.
I recommend that you read the entire linked article first, then return here.
Okay, now that you’ve read it, I don’t have to repeat most of the same points. You know that you have limited time, limited energy, limited attention, limited space, and limited funds. If, as is likely, your business requires more of these resources, you will have to cut back on using those resources for other things. In the case of the family at MyWifeQuitHerJob.com, they had to make concessions and adjustments that included limiting television time. For you, it may be XBox time or Internet time that you have to limit.
Because every family and every business is a little different, I won’t presume to tell you what you need to include in your own self-examination. Simply look at the resources that you have available and compare them to what you would like to make available to the business. If the business is not getting as much of resource X as you would like it to get, examine your allocation of that resource. Every small, locally-owned business (SLOB) needs this kind of examination from time to time.
One of the biggest challenges for the CCCDC to overcome as they work to get Cincinnati’s downtown and uptown revitalized is the lack of a dense enough and sufficiently socioeconomically diverse population. The stores wait for people to move downtown before they commit to providing services, while people won’t move downtown until there are stores so they don’t have to trek to the suburbs for groceries.
Chicken, meet egg. Egg, meet chicken.
This is where trying to draw in outside resources fall flat. Unless there is something else going on that is beyond your control, basing your town’s development plans on outside investment and population influx is going to be a rough, and not often successful, endeavor.
The key to reviving Cincinnati, Ohio, is their local residents, local businesses, and local resources. Outsiders are not interested. In my own local area of California, the local town and cities have spent thousands of dollars over the past twenty years promoting the area to outside businesses. The result is that retail stores, gas stations, and restaurants (including fast food restaurants) have proliferated, with their substandard wages. Our population is still unemployed and underemployed, with many commuting fifty miles or more to obtain decent pay.
Troy, the author of this blog post, often talks about the local businesses and other quirks of Cincinnati that make it a recognizable place, distinct from similar cities around the country. I believe that this is the key to building up that city, just as it is the key to building up California’s Victor Valley. We cannot allow our cities to become giant strip malls, full of dozens of chain stores and look-alike knock-offs. We have to build locally-owned businesses, encourage local citizen involvement, and devote local resources to solving local problems. We cannot depend upon federal or state funds, nor on large, out-of-area corporations (LOOACs) to solve our problems for us.
«We cannot depend upon federal or state funds, nor on large, out-of-area corporations to solve our problems for us.»
This is where local politicians have to have guts. When every other city is spending its money trying to attract still another chain store to open a branch in town, a smart, locally-focused politician will be working to build up small, locally-owned businesses (SLOBs) and local non-profit groups. He or she will be trying to get local citizens to become involved, and to actually give them a voice in the choices that affect their lives. The smart, locally-focused leader recognizes that the best way to attract outside investment is for local businesses to prosper. The best way to attract an influx of residents is to have relatively low housing costs, but a high quality of life, including sufficient well-paying local jobs to support your local population plus extra move-ins. And one of the best things to do is to have strong community-based medical and substance abuse programs, as drugs are one of the leading causes of criminal activity and a large segment of the population has no health care insurance. These things gradually improve the local quality of life, relative to similar areas around the nation.
Like so many other things economic, it’s all about volume. Here in Corryville we have a few abandoned properties. Not a huge number, but one is too many. A house across the block from us is reported to have had no utilities since the 1970s! This is one of many properties in Hamilton County with an absentee owner. This doesn’t help the density situation because the owner isn’t interested in renting or selling–if they can be found–and some of these buildings just need to be taken down in spite of the architectural loss.
Again, with locally-focused, active leadership, such problem properties can be pruned. Forty years is a long time for a house to be abandoned. It should long ago have been either torn down or turned into a museum. Perhaps the current downturn will finally cause municipal governments to wake up and recognize that LOOACs have little incentive to stick with the city during hard times, while SLOBs will stay, sometimes even longer than they should, because with SLOBs the key concept is locally-owned, while LOOACs’ key concept is out-of area.
One of the keys is building the local economy around local resources. Turn off the spigot of incentives that taxes SLOBs and local residents more heavily in order to subsidize LOOACs that come into town. If it does not make sense for a large company to be there, let them go where it does make sense. Otherwise, your town can end up stuck with an abandoned building, where the big company closed their local branch once the incentives ran out.
I believe that giving away the town treasure to attract hundreds or thousands of minimum-wage jobs is a betrayal of the local tax payers and business community. If we instead spend those resources to make the area better for the people and businesses that are already there, we will avoid many of the ills that go along with these giveaways.
GREAT BARRINGTON, Mass. – Diana Felber brought her groceries to the checkout and counted out her cash – purple, blue and green bills that are good only at businesses in western Massachusetts.
Known as “BerkShares,” the colorful currency is printed by a nonprofit group to encourage people to spend close to home in the state’s Berkshire region. Customers who use the money also get a built-in 10 percent discount, since they can get 100 BerkShares for just $90 at local banks.
“I like all the ideas about local,” said Felber, a 64-year-old artist shopping at the Berkshire Co-op Market. “I also like that it’s a discount. Who wouldn’t like that?”
The BerkShares program is one of the most successful of its kind in the country, and it is attracting attention as other communities look for ways to insulate their economies from the deepening financial crisis.
I ran across this in my old hometown paper, the San Gabriel Valley Tribune. I wrote about it in today’s Owner-Managed Business. I am cautiously optimistic about this new tactic in the quest to strengthen locally-owned businesses and build local economies. I am wondering just how effective the local currency would be without the discount pricing. Are potential customers being swayed by the pricing (the main reason they choose that national retailer we nicknamed “Big Blue”), or are they persuaded that buying local means more money stays in the local area, where it is available for things like hiring your brother-in-law who has been unemployed for five years?
Future Standards has a little to say about this as well.
“In the last four years, there has been a renewed interest in local economy, local production,” said Witt, executive director of the E. F. Schumacher Society, a Massachusetts-based think tank focused on local production. “It just skyrocketed with the collapse of the global economy.”
With our emerging focus on building locally-owned businesses, this is the kind of thing that energizes me. It makes me want to wake up the local chambers of commerce and try to resurrect our local “Valley Buck$” campaign from fifteen or sixteen years ago. To be sure, there is a lot of work involved, but this should get you energized and looking for a way to get your local community working together on their own buy-local programs, with or without the local currency element.
The Crooked Bow Tie sheds some more light: “Widely used in the United States in the early 1900s, local currencies are a legal, but underutilized tool for citizens to support local economies.” Go there and read the whole thing.
I ask this question because I see people getting into this blogging industry and starting a make money online blog to make money. They think that is how money is made online. In all true honesty, if you think that you are an IDIOT. Yup you are. I have experienced and I am sure a lot of you guys will agree with me that blogs are not the direct source of income. It can become a main source of income but that is in a very long run. So what motivates you for the long run… It is actually a pain in the ass to get up and write daily or weekly. Why would you do it?
I’ve been blogging now for a couple of years. I very early ran into the “blogging for buck$” sites. I quickly noticed that they all seemed to be about–you guessed it–blogging for buck$. I also noticed that it was like the ads you see in those start-a-biz magazines. You can do this part-time, at home, and you’ll soon be living a life of luxury. Well, my take on the whole thing is this: I don’t want to work from home in my underwear. I want to produce products and services that benefit others, and to earn a fair income as a result.
Yes, search engine optimization is important. Yes, engaging, informative content is important. Yes, it is important to have advertising (it actually adds credibility). And if you want to have readers, promotional activities are also important. But if you want money, get a job at your local grocery store or something. If you are excited about sharing your area of focus, your personal life, and the inside scoop on what is happening in your business, start a weblog.
That said, I love the way that being on the Web enabled me to become–in some small measure–a publisher. It started with one ‘publication’ on Blogger, and one on WordPress.com. From there, it became two on each of those platforms, plus several on this domain. I still have my regular job, so there are months where I barely have the time (or connectivity, in some places I go) to post at all. But all in all, this has been a great experience for me. I feel that I am developing better communication skills, and that it is easier for potential employers or clients to find me and to actually see what I have been doing.
Which is why I find it so puzzling when one of those work-at-home companies contacts me, saying “We found your resume on Monster, and we believe you’d be perfect for our innovative money-making program…”. If you really read my resume, if you did a Web search, you would see that multilevel marketing, outbound telemarketing, and collections jobs are not for me. Yes, I will do some calling when I have to for my own business, but if you’re going to try to convince me that your job is for me, at least search on Google or Yahoo! to find out what I do before you contact me.
To answer Syed Balkhi’s question, would you still blog if you never got paid for it, yes I would. I have never gotten paid for it, and that was never my objective in the first place.
This used to be one of my favorite attractions at Disneyland. But it is more than that now. Why are we here? Are we here to exist for seventy years and then return to the dust of the earth?
Think about it–the question is valid. In a time when everything you know seems to be falling apart, you can sit back and passively let the LOOACs and the government ruin your future and that of your children and grandchildren, or you can actively pursue activities which will help your SLOB, your family, your neighborhood, and your city avoid collapse.
First of all, you have to remain positive, despite all the bad news you hear on the television. There are billions of people who live in huts with dirt floors, without electricity or running water. If you are not in that situation, you are better off than at least someone. If you foresee a foreclosure, you might just start putting your resources into being ready to move into a rental property by the time your lender brings the sheriff to your door. It is possible to spend thousands of dollars fighting an eviction out of fear of homelessness, when you could be positive and move into a rental with some of the resources you would otherwise squander on a hopeless court battle.
Secondly, you have to remain realistic. Have you ever met someone who has unrealistic expectations, who believes that everything will always resolve in the way he or she desires? What usually happens is the person is deceiving himself or herself, and the result is worse than it could have been because he or she refuses to accept a lesser (but still positive) outcome. Yes, I am a believer in Jesus the Chosen One (“Messiah” or “Christ”), and I believe that God is at work behind the scenes in every situation. But I remind you that millions of believers were killed for their faith, and they were killed in the most horrendous and painful ways imaginable. You are not better than they were, so you also are subject to undesired events sometimes.
Thirdly, trim away the fat. Are you eating out when you could be cooking at home? This is not the time for that. Buy yourself a recipe book and make a list of which meals you will try each week, then buy the items you will need for those recipes. Are you buying expensive toys? Are you still using your credit cards, instead of paying them off and holding them in case of emergencies? Are you spending hours each night in front of the television? Examine your behavior. You will probably find some areas where you can cut back without suffering too much. And those additional resources (this is not limited to money and time) can be used to help get through the crisis (e.g., paying off your debts), to help live healthier (e.g., walking regularly or joining the local gym), or to help someone else (e.g., your brother-in-law who has not held a job in three years).
Today, I had a discussion with some of my nephews regarding their roles in helping us make these businesses successful. I was clear about the fact that I don’t aspire to be a millionaire, about the fact that I’m not out to make a fortune on the backs of underpaid employees, and about the fact that as a Christian-owned business, I don’t expect to operate with the kind of routine dishonesty that often characterizes both small and large businesses.
We talked about a particular role that we need to fill, and about the fact that there isn’t any money available for the person filling that role. We discussed the economy, and its likely effects on our prospects and the difficulty of our tasks that are ahead of us. Lastly, we discussed not becoming a trap–that I wanted them to be free to leave and pursue whatever dreams they have, rather than getting trapped in a tiny company that doesn’t enable or allow them to do whatever they feel they should be doing.
Of course, we also discussed resource constraints. There are nearly unlimited desires, but limits on the time, the funds, and the skills available to pursue those desires. I’m hoping that this will be the beginning of a new way of thinking for them. They’ve grown up in a work and college-oriented household, but one in which there was little thought to preparing for future hardships. Now is a good time to introduce them to the concepts of hardship and preparation for it, before they graduate and find that they cannot even obtain employment at fast food restaurants, because there is so much competition for every available job.
It was a productive talk, I think.
It is the kind of discussion that I believe every small business owner needs to have both with his or her own descendants and with close nieces and nephews. Yes, I am doing this because it is my dream, but also because I am not going to be here forever. I want to leave something viable for the next generation to pick up and make even better.
I am currently reading a book called “The Three Signs of a Miserable Job”, by Patrick Lencioni. It is a fictional book, kind of a modern-day parable for managers. The main character learns over time about some things that can help make work into a place where the employees look forward to getting there each day. So as I talk with these high schoolers, I am trying to look at it that way.
