PHILOSOPHY: Business
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PHILOSOPHY: Business |
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Business is the act of trade among people who use their specialized abilities to increase wealth, some of which may be kept and much given as part of the trade. The trade itself will increase wealth as it distributes it among those who can better utilize it. It is this specialization which confers the advantage which makes money, the ability to do something more efficiently than someone else. This process in human terms involves:
You will likely find, as I have many times, that these six items rather complicates your intent to simply run a business. Perhaps you already have the basic skills for something that will form the core of your business, technically, but can you exercise those skills easily? In the amount needed? Have you already developed the network of people needed? These six items can protract your business development by as many times. For most of us, the greatest hurdle is our own minds. We're intimidated by our new plans to "go pro", even though it's hardly more complex at this stage. We fear success. We fear failure.
In our myriad forms of commerce, we barter, mislead, and coerce each other a hundred ways a day in our efforts to survive and make society work. As one of the famous "robber barons" said, everyone is selling something. We either kill and eat our own harvests and hunts, or we barter our products and services to arrive at same. This point cannot be overstated: Everyone is in business. Even if we are independently wealthy, we must barter for goods and services to live. Interviewing for a job is simply a subset of business. We are grooming our marketing skills to sell our own services to a prospective employer. Looking for a job is simply a small, specialized subset of business as a whole. Usually, we are not trained for it, so it is no wonder we tend to feel rather lost when we face the prospect of starting our own business. If we have some dream of what society can be, we might work to achieve that. Unfortunately, rulers have never really enjoyed the thought of people being too free. When Henry Ford introduced the assembly line to America, a shift in education to prepare people to work at this new wonder occurred. Alas, this subtle brainwashing occurs to this day. The truth is: (1) We create ever more huge amounts of wealth with the help of technology and mass production, and have more opportunities than ever, (2) we are educated and trained to be assembly-line drudges, (3) wealth-building and business is a matter of training and attitude, and (4) it is perfectly possible to build a sustainable business without growing at 25% per year, abusing those we trade with, or destroying the planet and its people. If I have a regret in this life, it is that I was a product of the assembly-line culture, and I wish I could somehow have grown up in a more enlightened world and not been allowed out of high school until I learned how to start and run a small business.
Power-brokers and world-class investors have the training and attitude to build businesses, but as a rule, it is an extreme form skewed toward a wealthy few. In this arena, corporations must grow at a certain rate or perish, and they must corner the market. Compassion for the worker doesn't enter into this equation. That's not the attitude we must take when starting a garage-business if we seek to maximize the benefit of group effort and sustain its benefits, small business seminars notwithstanding. Most of the money supply is controlled by these few, but they (usually) don't create much wealth. It's extraordinarily difficult for most of us to break away from our peasant training, though. Ideally, each one of us should be thinking of ourselves as a "free agent", even when we're trading "just" our skills, and have a healthy sense of self. Unless you have unusually good discipline which allows you to set up a small, professional business doing something you might not particularly care for, you will be like the rest of us, prey to our drifting interests. How do we start and begin to build a garage-business?
Begin with what you have and like. Use your passion, skills, and interests, and build on them over time. These interests give our life and careers direction.
Frequently consider, in order to acquire the free-agent trader mindset, what you have which might be turned into something marketable. You may not notice much at first. The mindset is a separate issue from your product, so don't confuse them and "throw out the baby with the bathwater".
You must work to change your self, your habit, your thinking patterns, and your priorities. It's never too late to change the direction of your life and you must not be afraid to make changes, sometimes radical, if there are rational reasons for doing so.
Don't worry about plans and infrastructure yet. Just have that first product sample or service skill to hand when you're ready to sell it. When you get a customer for your garage-business, then you can set things up. A small business can be set up very quickly. You may decide you do need some structure, and that's fine. Do what you need to, but don't feel it's always necessary to the Nth degree. Ninety-nine times out of a hundred, that first customer's $19.95 to you can be dealt with on a one-off basis before you are fully prepared. Don't worry about success, you've gotten started and that's the important thing.
Remember, you are a free-agent trader with a marketable product you provide others, motivated for reasons you understand. Enjoy!
If you are reading this, it is likely that you need to change your thinking somewhat to achieve your goals. It's vital you try to determine your real motivations or they may dissolve overnight and leave you confused. Do you want ego-strokes? Money? A unique product? A chance to play with your toys? Interaction with people? All of the above? Your enjoyment of what you are doing will provide the motivation to begin doing some of the less fun things, as you build your business slowly. We must take the bull by the horns and change ourselves, a process one school of thought considers to be the true alchemy. To accomplish any task, including being a businessperson, we must continually strive to become that person, because personality will drift in the waters of our psychological environment. Conscious control over the direction of one's personal development is taking is a precious thing. Most of us drift so much, taking for granted what we like and cursing our limitations.
You can change, but not easily. One approach is by trauma. Not recommended. It is crude and though the primitive things impacted by it are exceedingly important in our lives, it doesn't have the fine control we'd prefer. The other approach is to gently nudge the course of one's life through thought and action. It will take years for some things to change, but they will be noticed by those who have known you. Habits can be set with something on the order of three weeks of patient repetition. In my own case, while my core values are unchanged from my teenage years, I cannot begin to relate to the person I was so long ago. The process is never easy. For example, shamanistic disciplines, deep religious training, and martial arts use this core skill for the highest attainments of the human consciousness. The rewards run deep. Being able to know one's own mind and to change onesself brings a degree of contentment and calm to one's life. You're the person you are because you choose to be, and if personality drift (often ignored by people) changes you to someone else you have the skill and discipline to return to your chosen mindset.
What scuttles people's efforts is mistakenly thinking it's only difficult for some undefineable reason and that a change of habits or something is all that is required. It is much more complex than that, resulting in our not being aware of the invisible chains which bind our souls. We are pattern recognizers and pattern makers. We create ourselves in a complex milieu of psychological associations moment-by-moment. If you've suffered a trauma, if you've suffered under the yoke of a mental quirk, if something is so terribly important to some part of your mind that it frequently trips you up where you don't want it to, you have a goal for personal change. You don't "unlearn" something. That's too simplistic a model. Memories may fade, but not if you keep cutting the mental ruts deeper on a daily basis. Each thought and experience does change you, but if it involves an unwanted memory surfacing or an instinctual reaction, those mental ruts will drift with time to something they never were originally. Don't think you haven't changed. The simple truth is that each reinforcement of the memory pattern just happens to strike close to the core memory, so you don't notice the impact the reinforcement is having to change you, other than it seems to make the memory stronger.
The trick, then, is to build new memories in the shape you want them through new experiences without reinforcing the old thought patterns. For example, our emotional reactions to things. As you well know, you can hardly not react psychologically to a familiar pattern. Holding in one's emotional has detrimental effects on you, as well. We react because it is important to us. The trick is to reduce the importance in your mind for the duration of the impression. This will stave-off the reinforcement of unwanted memory patterns.
The downside of this approach is you will find it harder to care about things, which reduces your motivation. Not quite what you wanted to achieve. Clearly, a second component is needed. You must learn about what motivates and find what works for you. You must find new motivations and substitute for the one's eliminated by your reducing the importance of certain things in your mind.
One of the most powerful tools for motivation is doing something for others, which most of us find easier than doing things for our purely selfish benefit (like doing the dishes.) There was a large project involving computer software I was putting off for several years because it just didn't seem important enough to make the time (I'm not motivated much by money, by itself.) I really wanted to start the project, though. To break the deadlock, I called a friend whose vocation was software and told him I was making him my nominal "boss". That's all it took. I didn't need his potential managerial coercion. I was buried in that project for four solid months and only surfaced when other activities in my life intruded more.
Some people are motivated by riches to the point of mania and may be quite well-off financially. They may not be particularly good or stable personalities, but it got that much accomplished. I find that tight purse-strings can motivate me somewhat to get out and do something. The problem with this is fear as a motivator is primitive and takes you away from the creativity you need to develop a business. This I must balance with psychological comfort which is not motivating me to do much of anything. The artistic and technical stuff I do is motivating, so I find myself balancing my comfort level with creative motivators.
Another perspective is overcoming negative self-fulfilling prophecies. Others ideas about you reflect your confidence and actions. Try to develop positive thoughts and actions which others can pick up and support. You will gradually develop new habits and thought processes to support who others see you as, as well as how you see yourself. It can be very helpful to be around a successful entrepreneur for mentoring and peeking in on the processes which make them tick.
A business model is the abstract form by which goods and services are traded. Recognizing a potential market can be vastly helpful because of the difficulty of doing real market research. If you recognize a need, you have done a simple form of market research--sometimes all a very simple business needs, like a lemonade stand on a hot day or popcorn at a fairgrounds. Filling that need well often requires some sort of innovation because what you intend to do is not or perhaps has never been done precisely where and how you will do it. When it all happens, you are the one who is doing it. Often, you will look back and realize your biggest innovation was recognizing the particular market need that day.
A business model is a pattern in the commercial arena which suggests potiential profit for those positioned to take advantage of it. Employers looking to hire employees is the business model we are likely most familiar with (and the one the would-be entrepreneur is trying to break away from.) The following quote from The Register, 2/6/2004, "US markets warm to Linux makers over SCO" by Ashlee Vance, illustrates this:
"The surge of Red Hat and Novell shares versus those of SCO is a bet on the Linux business model. SCO may win a large pay out and some revenue from its licensing operation, and we mean operation in the worst sense of the word, but Red Hat and Novell have their futures tied to the strongest operating system around.
All of the major Unix makers appear to have willingly handed Red Hat and Novell the Linux market. The two companies are poised to cash in from a Windows exodus and customers turning in their Unix gear for cheaper kit. This is a business model and not an experiment in litigation for profit."
Other articles discuss the hazards of trying to derive revenue from intellectual property (IP). Many of us entertain the fantasy of how we'd come up with a million-dollar idea, get it patented, and get rich. This is a seductive myth. While it is possible, it's far easier for a large corporation to do so than a garage business. Patents and trademarks are $1000-plus as a minimum if you want a decently-researched one. Then, it merely grants the holder the right to sue someone if you should happen to discover someone poaching on your intellectual territory. Patent litigation is far more expensive. Personally, I'd rather buy a house with that money. Court costs can be much higher. If you're up against a large corporation who wants to tie you up in court, there's really not much you can do. Typically, two big dogs go nose-to-nose in the corporate world by filing lawsuits against each other. Then, after their high-priced lawyers talk to the bean counters, they decide to settle out of court because its cheaper, and arrange a fair licensing. Very few companies actually get rich on IP alone. Most need the market experience in order to develop decent IP to begin with. Then too, too often, a company will seek redress in the courts because they cannot compete effectively in the open markets. In sum, it's important to learn but don't expect to make money in IP until you know very well what you're doing.
In the same vein, if there is something vital which differentiates your business from others, do not outsource it! The 2001-2005 trend of outsourcing is finally beginning to crumble with 44 percent of outsourcing companies not seeing any economic benefit and 70 percent having significantly negative experiences. The best way to hold on to the family jewels is to maintain them as company proprietary trade secrets. Companies which make money based on sound principles have innovating people at their core with good ideas. Companies don't innovate, people do. The company is a natural outgrowth trying to capitalize on that innovation. Economic advancement occurs when people specialize at doing a particular thing (this is a key principle in Adam West's The Wealth of Nations.) They get good at doing one thing only, perhaps, but they can trade these efficiently-produced goods and services for their other needs. There are "dot-com bubbles" being created to make money for a select few based on investment capital, but don't be distracted by those right now--you will understand their sleazy tactics better once you understand what creates and sustains each link in a solid business chain. Investment capital by itself doesn't produce profit.
Every field of business goes through its own cycles. Being naturally lazy, we'd like money for little work, and vendors are not omniscient. It is useful to recognize these cycles to increase your understanding of your market. Here is an example from the information technology markets.
Innovation, product, and customers are the three key areas of looking at business models. The following is a series of quotes, each one a gem, from Ken Olsen, founder of Digital Equipment Corporation, who was booted-out in 1992 and explained these fundamentals to a forum of entrepreneurs:
"The worst thing one can do is read the front page of the business section of The New York Times to figure out what they [the successful, robust companies] are. I guarantee every one of those is a failure."
"I say never go public with your company. The only trouble is there's often no choice."
"Owners today have no loyalty to the company. They don't care about the company or the country. They would do anything to have $1 more at the end of the quarter."
"My history has always been to solve problems. We rarely had the fastest computer. We did take the best care of customers."
A business plan is a step-by-step description of how to take advantage of a business model. A clear-cut plan is invaluable if you're seeking a business loan. It is also very helpful to you directly since it does, after all, outline every necessary step. It is not mere salemanship hogwash (unless, perhaps, you're business model depends on fraud.) It will, ideally, detail each major milestone, your sources of capital and the amounts, tools you need to obtain, services you need to contract, how much money you expect to get as a return on your investment on a rough timeline. Basically, it is a description of the actual, practical process steps. No daydreaming is allowed here. A well-written (and researched) business plan is pivotal if you're looking for outside investment from venture capitalists or savings & loan associations. A good business plan is pivotal also because it forces you to write down the details of how your business is supposed to work by knocking-over the key hurdles in your path. You can't hand-wave this; you can't be completely uncertain how it's to be solved, because this is it, this is where you have to start to get real, this is the real thing and not a dry run.
A business case is a rational justification of one or more elements of a business plan. A change to a business plan demands the same kind of step-by-step proof that makes up the rest of the business plan, because you have a reasonable expectation that any changes must actually result in a working business plan. For example, widening your product's market considerably if you make a particular change to the product.
Never forget that each change to a working business plan needs a business case made for it. Do the research. Prove that it is a marketable product. As Andrew Orlowski comments in The Register:
"It's a reminder that when companies throw technology at a market and then forget how people actually use it, success is far from assured."
In particular, you must consider that business begins on your doorstep with an agreement between your company and its personnel. This includes you. Commerce is occurring at this level, first and foremost; are those involved getting what they expect? Proper motivation, therefore, must exist for everyone involved. Motivating the yourself is covered mostly in the section above concerning "Changing the Self". You have a bit more latitude with yourself as the prime mover. With others, don't fall into traps which purport to be "advances" in business thinking, such as are sketched in this article from The Register: 'Expect to be fired' says AT&T Wireless' Mr. Motivator. In fact, improvements in management practices are reflected one-to-one on the bottom line, with IT investment having only a quarter of the impact, as it says here. So, if you want profits to go up, give your workers better working conditions and hire management that knows what it's doing.
It has been shown that workers are more productive in a larger, cleaner, kinder environment. This is primarily a stress issue, but also is practical: (1) perception of how management treats them, (2) reduced stress concerning practical matters like safety in the workplace, (3) freedom from harrassment, (4) sufficient tools to do their jobs, (5) good communication among workers and management, (6) aesthetically pleasant workspace. One would think that the last point has the least impact, yet the stats for engineers in large offices, small offices, and cubicles is really quite amazing.
Beyond the question of where to set up your business, be aware that the communications improvements brought about by the Internet and mobile phones has changed the face of business. This article makes mention of how European executives, and perforce knowledge workers, have become more flexible concerning where and when they can be productive. Two-thirds were part of a virtual team and a third had primary colleagues at remote locations.
The Internet has proven to be a far-reaching boon for the full range of business from international to store-front mom-and-pops to no-overhead SOHOs. A computer with an Internet connection and a hosted domain can be all the store-front you need. Of course, you still need a product, to provide service to your customers, and network in your chosen field of expertise.
This is where you find out for real what the market opportunities are, the competition, problems and solutions, and whether you're cool widget would likely even have a viable market. It is tricky because you need to sell without selling, that is you need to find out who would actually buy your product if it was available (though in some cases you will pre-sell your product to some people.) Among the things you need to research and write down are:
Perhaps the most important first cut in finding your customers is recognizing the difference between the early adopters and the average consumer. The technophile will put up with problems in order to enjoy the new toy. The average consumer has better things to do with their time. In fact, a balanced personality cannot possibly spend the time demanded by all the things which come into their lives. Unless the technophile is your target market (like the earliest adopters of personal computers), one needs to create a product which is close to an appliance--pretty much turnkey. This is commented upon here concerning the move to Linux computer operating system and questions the "ship it, then fix it" business model.
A recent discussion I had concerned the historical re-enactor versus the actor. The historical re-enactor tends to put up with more discomfort in order to achieve the satisfaction of historical accuracy (for the more scholarly customer) compared with an historical actor who has less need to adapt to the hardest path (for the more entertainment-oriented customer.) The historical re-enactor is like the early-adopter technophile. The market is much smaller but is very real, as well as distinctly different from its larger cousin.
Your product, the goods or services you are selling, is a fantasy distinct from what you are actually doing or making. Daydreaming (after a fashion) is most certainly allowed here. Innovation and creativity are important factors in an excellent product. It is a series of associations you are trying to instill in people that show them the benefits of what you actually are selling them (the reality behind the mask.) Obviously, this mask can be carried to an extremely fraudulent degree. Once someone learns something, the associations created become part of our habitual thought patterns. We'd like our customers to imagine clearly the benefits which result from owning our product, to feel contentment and security when they see our product. Better yet, we want them to think of our product when they perform everyday activities. This is why so many ads hit the consumer on simple levels by catering to our innermost desires and fears to try and establish deep psychological associations. People don't buy the reality of a product, they buy a fantasy of what they think its benefits to them will be.
It's important to remember that amongst the marketing hype, there must be end value to the purchaser or else the customer fails to buy, the large-scale effect being termed a "recession". A recession can occur any number of ways, all of which lead back to the customer not wanting (or perhaps not being able) to buy. The money can be drained off anywhere in the consumer environment, including simply making things more unsettled, and the purse strings will be held tight. If your marketing efforts have convinced people they are buying fairy-dust and you've given them the benefit they were expecting from the purchase, you've achieved your goal of making your customers happy. One unhappy customer will counterbalance a frightening large number of happy ones when it comes to your reputation. Mighty few companies can really operate using "new sucker" tactics. Generally, they already have wide brand recognition and an effective monopoly on their products. Don't go there. Being a robber baron is graduate-level stuff and we're still in kindergarten here.
A product must be pitched appropriately. When selling to a businessperson instead of a household consumer, one must develop a business case which demonstrates the benefits to the business' bottom line. Any major change from what you already know works should be considered in terms of a business case and how it impacts your business plan, otherwise you're simply gambling randomly.
As much the providence of your market research as it is of supply and demand, price can make or break your product offering. In 1971, during a slow period for the electronics industry, the now-ubiquitous 555 timer integrated circuit was introduced. The prevailing wisdom of the time was to make your money quick. Instead, the marketing manager of Signetics, Art Fury, foresaw a market interest but introduced it for 75 cents instead of several dollars. Signetics sold half-a-million of them in three months. This was not a technophile's toy, but something engineers wanted to use in consumer products, and it was priced accordingly. The customers certainly didn't care that it was shiny-new, just that it was available and the price was right.
The other end of the supply chain, those with whom you barter. As Ken Olsen is quoted above as pointing out, customer service is what separates a successful business with a loyal customer base from the rest of the pack. The Internet has upped the ante somewhat by making people expect even more prompt service, with 20 to 50% of broadband users turning their backs permanently on a company within as little as three minutes. The so-called consumer is a theoretical model which rather de-humanizes the customer. By way of example, let us take a trade show or fair in which you are selling face-to-face with the customer.
When the customer first enters the general area, what do they see? We are patterned to first recognize danger and food, on a primitive level. If you are angry or upset, many potential customers will sense this on a subliminal (sometimes even conscious) level and will avoid you.
As the person gets closer to you, what is there first impression of you and your booth? You must present a positive, non-aggressive face, professional (or appropriate) enough for the environment. Is your business name and logo well displayed? Are your goods (or services) clear at first glance. Ideally, can a first glance convey something of what sets your business apart from the others?
Are the people intending to come over and look at your products or are they being a bit wishy-washy? If you are reading them correctly, a witty comment which is friendly and non-threatening can break the ice. People want to reach out and be a little social, but they don't know where you are coming from. If you present a personable, non-commercial, human face, people are far more willing to deal with you. On the other side of the coin, if you are busy reading or doing something people will tend to not want to disturb you unless they are determined. If you are simply not in your booth, you've lost virtually everyone. All you can hope for there is your name being somewhat more recognizable, which might have been better accomplished in another media venue.
The best salesmanship is not selling. Hard-selling simply confuses and alienates people because you are merely temporarily convincing them to do something they don't really want to by overwhelming their chi. I have seen this effect in action, wherein a vendor who is not physically intimidating simply comes on a bit to strong, too aggressively, approaching too directly and quickly, and chases people away. You are dealing with real human beings here who do not spend their days in purely logical thought. We are feeling individuals. The potential customer is mildly intrigued by your presentation, verbal and visual. Sometimes, a free gift (candy, pens, mugs, raffles, etc.) can tip the scales. Remember, though, that making a loyal customer is not that different from making a real friend. You are offering a mutually beneficial trade under pleasant circumstances, with the promise of fair consideration of future trade down-the-road.
The skilled businessperson knows that providing as much as feasible short of giving away the store returns customer pleasure, loyalty, and referrals many times over. New networking contacts more often than not occur at trade shows via both customers and other vendors. The mutual back-scratching occurs because of the recognition that no one person can own it (or provide it) all, and that referals to and from your network have a huge impact on every person's business connected to it as communication becomes vastly improved. A customer can enter such a network anywhere and be guided to the solution which (ideally) best suits their needs--certainly ten-thousand percent better than having no referal network at all.
"We make a living by what we get, but we make a life by what we give." --Winston Churchill
Once the customer is there, the presentation of your wares can commence. This can be as simple as acknowledging their presence. People appreciate the validation of their existence from you. It is considered common courtesy. You might say: "Let me know if you have any questions" and let them browse at their leisure.
If the person is more social or the product more confusing, the vendor might choose to draw them into conversation. There's certainly nothing wrong with a lengthy conversation totally unrelated to the product during a slow period of business. That customer will certainly be able to go away with a good impression how personable and human you are, someone worth being a customer of. Often, such a conversation will end in the customer actually choosing to make a purchase because of the bond created in good conversation.
Sooner or later, the conversation is going to make some mention of your product. Remember that every customer (and networking contact) is looking to have a problem solved. By finding out what that problem is and honestly positioning your product as the solution, you will get the most solid and positive reaction from the customer. It is not so far from the truth to say that vendors are always running around helping people solve their problems. The best businesses do this. "The more you tell, the more you sell" is a classic old adage. If the customer has not made up their mind, they are likely looking for a little bit more information about it to help them decide. Make as much information about your product as easily available as possible.
A good product practically sells itself because customers recognize its worth. But, that does not mean one ought to become lazy about it. No salesman usually results in no sales (excluding the highly automated Internet store, of course. But then, people have usually sought it out.) I have watched sales go much higher with a good salesman providing good service. Still, it is also true that word-of-mouth and a good product will help mightily. The combination of a good salesman behind a good product that is well-placed is unsurpassed.
Product placement can certainly make or break your sales. It's harder to sell sand than fresh water in the desert, yet there exists a significant demand for sand in the concrete industry (granted, generally met by direct ownership of a quarry by the company.) Target your market.
Closing your sale. If the price is too high, rather than lose the customer completely, ask yourself how much you can give and still make a profit, gain a loyal customer, and enjoy the positive customer referals. What is that worth to you? An accomplished salesperson can ask the customer at this point: "What can I do to make this work for you?" It is the classic trade haggle. It opens the door both ways, something our American culture is not as familiar with as in many other parts of the world.
Always thank people. An appropriate compliment is cheap and shows compassion. Rudeness often alienates potential customers for life. Thank customers, thank other vendors, thank organizers. Be a friend (or at least be friendly.) Profit is not everything.
Patents and trademarks give the holder legal use of the covered innovation or mark, each costing typically into three figures for good research, but it is up to the holder to protect them in court. Trademarks must be actively protected in various countries (every two to five years, depending) for them to remain valid. An excellent, informative, and down-to-Earth series of articles can be found on Don Lancaster's website in his Patent Avoidance Library.
Your needs will depend on what you do, but there are some general ideas.
The ad must be noticed. This is the whole point of advertising, whether it be a lot of broad advertising or a few very targetted ones. Sometimes you have to create an event just so you can issue a press release so you can be noticed. Sales and free give-aways are nice. Overall, you will have a more beneficial effect on your sales by giving more rather than being impossibly tight-fisted.
The ad must reach your target audience.
The ad must be appealing to your target audience. Not just in design, but presentation. Pop-ups, for example, have been proved to have an excessive annoyance factor and absolutely should not be used.
It helps to have contact information or directions.
A useful statistic states that people, on the average, need to see a website about seven times to become familiar enough to build that necessary bridge of trust in order to purchase a product.
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