Small Businesses Can Still Flourish In An Economic Downturn

The following is a guest post by Daniella Graham of Giveacar:

Starting a new business is always a risky endeavour. But starting something new in the midst of a recession, based on an idea that has never been tested with your target market, can be suicidal. However, with a clear and strong concept and lots of commitment it is possible to create a successful enterprise even during economic turmoil.

In January 2010 recent university graduate Tom Chance started social enterprise Giveacar, a service that offers to take away your unwanted scrap vehicle and donate it to charity.

Chance had got the idea for the scheme during his studies when he had started to deal in old cars. Realising that people were willing to accept the smallest sums just for their unwanted vehicles to be taken away, Chance spotted a gap in the market.

Although car donation is an idea that has been going strong in the States for a while, in Britain it was non-existent. Chance, working out of his bedroom, created some initial interest over the internet and by word of mouth.

He began by donating the all proceeds from the scrappage or auction of the donated vehicle to charity. However, realising that he needed to grow his business he started taking a small percentage of the profits from the donation. After five months he was able to move out of his bedroom and employ another member of staff.

As awareness of his company grew and interest increased from the local press, more and more donations started rolling in. Today Giveacar is still able to give 75% of each car’s value to the donor’s chosen charity, with the remaining 25% reinvested. Just a year old, the scheme has already raised more than $300,000 for a host of charities around the globe.

Giveacar proves that there is success to be had during a downturn, and that a clear idea and lots of passion can go a long way.

To find out more about the scheme, please visit the Giveacar website at http://www.giveacar.co.uk/.

Motivation Revisited

I had written an article a few weeks back about motivation, saying that skills are more important than motivation.  What I mean by that is simply that sometimes companies try to motivate their people to perform, but the motivation alone is not enough to improve productivity.  People also need to know what to do.

The same could be said of an entrepreneur.  He might listen to motivational tapes or go to seminars, but without knowing what to do, he will just be spinning his wheels.  Most people need to take a pragmatic approach to being productive: First learn what to do, then motivate yourself to do it like crazy.  You may also what to revisite the “what to do” every so often to try to improve the skills you have.

Now if you improve your skills, but you are less than motivated to put them to work, of course nothing happens.  I personally think that results are motivating, so I will work hard to get to the first success, but after that the work kind of does itself, no need to add motivation.  Maybe you feel the same way, maybe not.  But regardless, to be successful you need to do as well as learn, no getting around it.  And usually you need to do much more than you originally think you do.  While this can be disheartening, it also presents you with a challenge that you can accomplish if you put the remainder of your heart into it.  People can do much more than they think they can.

Articles about motivation written by other authors:

Remarriage After Divorce

In the blink of an eye, that which you worked so hard for can be dissolved, leaving you out in the cold.  And while you may think I’m referring to a marriage between a man and a woman, this is actually a business blog, so I am referring to a business failure.  I used to say that the failure of my network marketing business was like a divorce and I wasn’t ready to be remarried.  So I went on to school in 2001, getting my MBA in 2009.  You may know this if you’ve followed my blog for a while.  You may also know that I formed an aimless corporation in 2008.  I wanted to start a business again but wasn’t sure exactly what.  I thought, well maybe I’ll start my own network marketing product company, but I wasn’t completely sure what I was going to do.

Since 2008 I have taken on some consulting, here and there, but in 2010 my decision to go into consulting full time was solidified with the pink slip.  I was laid off from my employer and I had enough luck to land, the next Monday, at another company doing full-time consulting.  Then I verbally signed a contract with a friend and did a few hours for him every once in a while.  This contract was dissolved a bit later, I guess you shouldn’t work for friends.  We were heading into the winter and it was the busy time for my other client, so I just went full time with them through March.  March is now approaching and I’m considering asking for another year, which I really don’t think is going to be a problem.  So I will be full time in my own business for more than a year as of June.  That is better than I did in my first business, when I was full time for about 6 months before I went back to work.  The difference this time is that I am “working”, i.e. selling time for money, so it doesn’t feel like I’m working for myself.

When we had our first business, it was a lot of work for very little initial return.  But by the time I quit my job, there was very little to do and plenty of money.  It was kind of weird.  I wasn’t prepared for the change.  After a few weeks, I knew I had to go back to work.  This was before the beginning of the end; I knew I wasn’t ready to be flooded with time.  But before I had quit my job I was so burned out.  We had worked our tails off, my mind was mush, very little sleep for a couple of years, virtually could not do my job any more.  Six weeks later, I couldn’t stand all the time.  Then within 6 months, virtually no more business.  It was painful.  I was very bitter and I “never” wanted to do it again.  We put in all that work and it was destroyed in a flash.

A lot has changed since then.  In addition to my consulting, I am starting to build a network marketing business again.  This with a company I’ve been associated with for 18 years.  I signed up when I was 28 years old and did a little bit, but when success wasn’t instantaneous, I quit trying.  But I did renew the membership every year.  Then we started our “first” business in 1997, our first successful business at least.  So I came back to my original network marketing company full guns last year and am actually doing pretty well.  It’s a lot of work but it’s growing.  I’m happy to be doing it again, and this time I don’t think I’ll have problems with the company.  It’s a little weird to be using the same muscles again after all this time, but the memory is still there, and I feel like I’m actually pretty good at it.

Have you ever had a major business failure, and what did you do to come back from it?

Small Changes With Big Results

Sometimes being a business person is similar to being a painter of paintings.  It’s the smallest details that make the biggest differences.  And you have to pay attention to all of those details, at least at first when you are just getting started.  The customer’s perception of your company and your product are at stake… so what kinds of things should you worry about?

The internet is a tale of two cities.  One dark and desolate, and one bright and populated.  What is the difference between the two places?  The most minor of minor things.  And it may not be anything you’re thinking about.  Is it design?  Is it speed?  Is it wonder?  Is it usefulness?  The answers: Maybe, maybe, maybe, and maybe.  It seriously depends on what your target visitor wants and what your target visitor expects.  And then, you have to give them even more than they expect.

So then it all comes back to marketing right?  Well… yes, and no.  It is very important to know what your customer’s (or visitor’s) requirements are.  Then you must really get into their mind.  Deliver innovation where innovation is not possible.  Smooth out the jagged lines or fill in the gaps of the customer’s requirements with what they really want, before they know they want it.  This is really where the art in business comes in, knowing the unknowable, doing the unthinkable, being the best in a catagory of no equals.

It all comes down to creating something that draws in visitors and customers like a magnet.  They can’t help themselves, they are drawn to your business.  They may not even be sure why.  It’s all of those little details that mean so much.

Make sure to check out other business leaders and their obsession with detail.  People like Howard Hughes, Sam Walton, and Bill Gates.  They built their obsessions into empires.

What Is Motivation Without Skills?

Be positive! Try harder! Work longer! Be agressive! Wind yourself up and what do you get? A lot more of the same thing. Not selling? More not selling. Not growing? More not growing. Spinning your wheels? Faster spinning. Beating your head against a brick wall? More headaches. Wondering what’s wrong with you?

Let’s take a break from being worked up today and develop some skills. Don’t just do something harder, learn how to do it smarter. And once you get your skills down, motivate yourself like crazy! You know what though? You aren’t going to have to wind yourself up, your results will motivate you. Perhaps getting to that first yes through all the no’s may need a bit of motivation, but that first yes will energize you!

There are plenty of great books that will teach you the nuts and bolts of selling, recruiting, managing a business, or whatever your dream is… make sure you get a good source. Ask professional sales people who they would read and they’ll tell you. Or find somebody else that does what you want to do and ask them who to read.

So yes, we probably need some motivation… but we also need the skills to back our motivation so that we’re not just doing the same ineffective tasks harder. We need to be smarter too. Who is your favorite author and what did they teach you?

The Importance Of Focus

My son Jeff and my daughter Chelsey have big dreams.  Jeff is finishing up his last year as a drama student and wants to be a screen actor.  He has already been an extra in a handful of movies.  Chelsey wants to be a country music writer and artist.  The interesting thing with these two is that Jeff has a rich, deep voice and could have been a singer, and Chelsey was accepted as a drama student to a high school academy.  I taught each of them that they had to focus and concentrate on one dream for now, because they will have to put a ton of effort behind their dream to make them a success.  So they made their choices and are shooting for their big dreams.  And they are going to stick to their focus as long as it takes them to be successful in it.

Many business people tend to lose focus.  Not that they change their goals, but that they don’t stick to a particular plan.  For instance, a business person might set out to advertise in magazines but decide later to also advertise online.  Sometimes doing too many things at once is not a good idea, because it tends to create a lot of unproductive busyness.  For instance in our example, managing online advertisements is different than managing magazine advertisements so it might be difficult to keep a handle on both.

Good focus in business does make things kind of boring.  If you are finding yourself with less activitiy than you’d like, perhaps you can turn it up a notch, but following a specific business plan makes more sense than adding a bunch of different parts on.  So instead of trying to do 5 other things, do more of the things you are already doing.  If you’re the kind of person that gets bored easy this may seem like a drag, but keeping our focus is important and will help us achieve our dreams.

Sometimes you need to make adjustments.  Don’t think that having good focus means that you can’t make adjustments to your business plan.  When you notice something is not working as well as you like, it is ok to tinker with it to improve your results.  Just make sure to stick with the change long enough to verify that it works or that it doesn’t.  Sometimes the results of changes are a bit delayed.  And making all sorts of changes at once is not a good idea because if things get better you don’t know what worked, and if things get worse you don’t know what made it bad.

I have a friend who has a great core business but tends to like to create new businesses, like all the time.  Each new business has nothing to do with his core business and tends to distract him to such a degree that he really can’t put the time into his core business that it needs.  If you feel the need to create side businesses because your core business is so successful, create one new side business and make it successful or close it down.  Don’t leave a bunch of dangling businesses that will never be successful because you can’t give them enough time.  Just work on one and if it looks good, keep at it.  If it looks bad after some time, close it down and move on.

Focus is really important to success at anything.  Trying to do too many things leaves you scattered, sort of like “a jack of all trades and a master of none” as the saying goes.  Be the best at something.

Is Get Rich Quick A Myth?

Once upon a time we had a business that went from $0 to over $15,000 in monthly commissions in about 2 years.  You are probably saying to yourself that we spent a bunch of money to make that happen.  Nope, we didn’t.  In fact, we spent almost nothing… just had our web site.  We did have to react to requests from customer and distributor prospects with materials that did cost money.  But mostly the business we were getting was free to us.

So this means that there really is such a thing as getting rich quick?  Well, if you call 2 years quick.  And I can tell you from personal experience that this amount of money does not feel rich… it feels ok.  It takes away some of the worry.  But it is not rich.  It’s not like winning millions in the lottery or getting a jackpot at the casino.

How was this possible to go from $0 to $15,000 per month without spending tons?  Money like this does come at a cost to somebody.  The cost was the advertising our vendor was doing.  We were benefiting greatly from radio spots they did in every major market in the country.  And we were there when people did web searches on Yahoo.  And we were really, really good at building web sites at a time when there weren’t many selling the same product.  So we had a competitive edge that few could catch up with.  Don’t get me wrong, some other distributors were doing much better than us.

There were other costs too with this kind of growth.  The business consumed all of our time, and all of our freedom.  We tried to handle the flood of orders and requests ourselves without hiring.  We tried to make use of distributors we sponsored to take our calls and handle some of our orders, but this didn’t always work out.  So we invested a ton of our time and gave up a lot.

In the end, what went up so quick fell like a rock.  Many people experience this with a sudden windfall, you just aren’t prepared for the ins and outs of everything you’re going to have to deal with and you make mistakes.  In our case, the mistakes were made by our vendor but they had a major impact on us, and all of the other distributors.  I often joke that the vendor caused the 2000 recession.

As far as get rich quick schemes being offered by companies out there on the internet, they are mostly looking for people to take money from.  The best idea is to look for a good, solid, long-term business.

What Is A Business Opportunity?

To a seeker, a business opportunity is a way to make money.  To a company offering an opportunity, it is a chance to leverage somebody else’s time, talent, or money to grow the business.  Often opportunities are “sold” as having a specific income or potential income, but the risk and reward belong to the seeker as an independent business person.  In other words, the success or failure of a business opportunity is ultimately up to the seeker, regardless of how much help the offering company gives.

A business opportunity typically isn’t employment because employment does not have a major risk or the potential reward of operating a business.  You can hire an employee to run a business subsidiary but you monitor it to make sure it’s operating properly and will have to decide to close it if it cannot turn a profit.  A business opportunity, on the other hand, is at the sole discretion of the independent business person.

A company offering a business opportunity has very little risk if the independent business person is not successful but gets a major reward if they are.  As a seeker, a company is not just going to hand you money with nothing expected in return.  You will have to perform.  You may have very little direction, you will just be expected to create sales however you do it.  In return you may get a brand to use or some other benefit from the company, but they aren’t just going to dole out a bunch of money.

A get rich quick scheme is a way for a seeker to make money quickly.  Actually, it’s a scheme because there’s no such thing as “get rich quick”.  It’s usually a guise to get you to part with your money for very little in return.  A valid business would be an investment of time and or money for a return.  That return may be 30% or more, but it will still take a while to become profitable.  Often businesses can be profitable right away if you don’t count the time you invest.  It might also be possible to earn a profit right away if the independent business person has an uncommon talent or skill.  But generally you’re not going to be profitable right away and it will take hard work.

Most people who join a multi-level marketing company sell business opportunities.  Often this is all they sell, except for the product they sell themselves.  Selling a business opportunity is technically recruiting, which requires a somewhat different skill set.  Still, it is so similar to selling that I personally would not tell people that there is “no selling involved”.  I mean, when you are in business you sell something to someone, that’s what a business is.  If you recruit, product must still be moved in order to make a profit, and the better you can sell yourself, your customer, and your downline on the product, the more money you’ll make.

Often the pitch “no selling involved” is used to refer to distasteful selling, such as door-to-door sales or cold telephone calling.  Using these methods are typically not effective, so I would not do or encourage distasteful selling techniques.  Advertising can be very effective to build a business if done properly and is usually a much more fun way to reach people.  Those you talk to are already interested before they call so you typically don’t encounter harsh rejection.

If you do get involved with a business opportunity, make sure you know what will be required of you and what you will get from the company you’re going into business with.  Make sure you get it spelled out in writing.

Work At Home

I work at home.  I work at home all the time.  I used to work at home when I was employed, for my employer.  With technology these days you can do many jobs for an employer at home.  Or you can work for yourself at home.  So the first question is: Are you looking for a job or for a business?  Personally, I have been self employed now for four months and am very happy being self employed.

My self employment is consulting mostly, which is still selling time for money.  So it’s kind of like employment.  I work three days at the client and two days at home per week typically, not counting the time I’m working on the weekend.  If I work after hours it is typically at home.  I also have quite a bit of administrative work to do since I don’t have employees.  So I am creating my time sheets and status reports, keeping track of expenses, and ordering office supplies I need.  Stuff like that.

You can start a business at home if you like, and long term this makes the most sense assuming you are successful.  The game you have to play in business is about getting the most from your initial investment.  So you constantly have to work at saving money or getting more for the money you do spend.  Still, you are most likely going to spend more than you’re taking in when you first start a business, and will perhaps lack profits for 2, 3, or 5 years.  So you need to be able to handle the losses as you start out.

Many people start out part time in their business pursuits and work a full time job so that they can have an income while they are starting out.  This creates a time crunch especially if you have a family, so you often have to sacrifice things like TV time.  The last couple of weeks I’ve had a hard time even working out, so it can get kind of busy.  And if you do it right, your business will make you more busy than you expect.  Note that your business should drive you not the other way around.  The trick is to generate buzz or somehow have a constant inflow of customers.  Advertising is a good way to do this (free is best).

If you want to go the other route and work from home for an employer, you have to be aware that you are only saving yourself drive time typically.  You will still have to do the work.  If you have distractions around the house you may find that really difficult.  You should look for employment with some flexibility as to when you will work, so you can work after the kids go to bed for example.

Good luck to you and let me know how it goes…

More About Being A Bean Counter

Last week we talked about calculating a return on investment (ROI) from your recruiting costs, whether you are recruiting customers for your product or resellers.  Of course our return on investment calculation is just an estimate based on less than all the facts.  It is still an important calculation, though, and worth the exercise even if ultimately it is way off.  Why?  Because ultimately you want to know what your real return on investment is and you can’t wait for all the facts to come in.  So, you make an estimate based on what you believe, then you revise your number as reality sets in.

Why do you even care what return on investment is?  Return on investment is an important measurement for deciding if you time and money are being spent in the right way.  As a rule of thumb, a 20% return on investment is good for investments with substantial risks.  You can consider a business investment a substantial risk because there will be good times and bad times, and you might now be in a good time (in fact I think now is a great time).  So today your real ROI may be 20% and tomorrow it might be -5%.  So 20% is a good rule of thumb for ROI.

You might want to adjust this ROI for your risk level.  Let’s say that your ROI for new resellers is 18% but it’s likely their business will grow.  So 18% may be a very good ROI.  If your ROI is 8% instead, it might be a good ROI if your investment is US Treasuries that will always pay 8% (i.e. ultra safe).  But it would be an extremely poor ROI if your investment had any risk at all.  So risk is a factor in whether your ROI is a good number or not.

Your ROI is an important number to determine how much money you’ll need before your business begins making a profit.  For instance, you invest $100 per month for a year and your ROI is 20%, meaning you’ll make $20 per month or so.  It will take 5 years to begin making a profit if you never increase your investment.  If instead you sink your profits back into your business, you will earn $100 in revenue before hitting the 5 year mark but you’ll always lose $1200 per year.  You’ll need to back off on your investment to earn a profit.

If you do want to invest $100 per month in your business and reinvest the revenues for 5 years, how much money will you need?  $1200 per year X 5 years or $6000.  Do you have $6000 or can you get it over 5 years?  If not, you will need to borrow the money or find investors.  So the ROI is also important to determine if you’ll do it all by yourself or if you’ll need to seek help from others.  It’ll do this before you actually need the money, giving you time to work with your bank or pitching your relatives on your new business (to drum up investors).

So your return on investment number is important to estimate, then correct, as you initially grow your business.  What other calculations are important?

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