Good Time to Open Up Shop? (insurance, small business, contractor, debt)

[AsymptoticFaery]

I guess the business plans or aspirations of many Americans will either have to be put on hold or change direction as a result of the economic difficulties.

For discussion: How well would a new business venture or start-up do in this failing economy?

How about a franchise investment or brick and mortar shop that offers services and merchandise unrelated to lifestyle necessities.

Some people believe that the only kind of business that might succeed at this point in its initial years is something that deals with necessity such as insurance, financial consulting, mortgage management, employment agency or recruitment and so forth...rather than a food business, a bakery, a clothing line, a jewelry shop, a game development studio, a salon, an art gallery or anything else along those lines.

Would you start a business at this point as an alternative to company employment and if so what kind of business would it be and why? If you are in progress of starting one, are you keeping the direction you had planned or changing the kind of business you plan to build?

For those that would not seek entrepreneurship is it because you never had an interest or you changed your mind due to the current economic climate?

If you are a freelancer, consultant or independent contractor of any sort, how does the economy affect your networking and client opportunities...your business aspirations and plans overall?

[Humanoid]

I really don't think the sorts of questions someone starting a business right now should be asking are dramatically different than they those that should be asked during a more normal economy. The fundamental question is do you have good reason to believe there is a demand for your product/service?

The people that believe that the only kind of business that might succeed at this point is one that deals with "necessities" tend to be the people that are broke and believe the world is going to go back in time 200 years economically speaking (You know, so everyone matches their standard of living).

I'm not necessary in the progress of "starting one" right now, I've been doing this for 3 years now part time. I was expecting a recession 2 years ago, so our plans haven't dramatically changed over the last 3 years. We primarily had a "wait and see" approach and have responded to reduce sales and kept very lean (Very careful with taking out debt and increasing our fixed costs). We actually just paid off our are business debt with the sales from the holidays. Profit wise we haven't seen that much growth over the last year and I think its largely attributable to the recession. Anything we do to expand seems to just replace lost sales else where.

Oh, and we aren't doing anything that is a "necessity", but we also aren't targeting a luxury/premium market. Also, we do business nationally/globally. Around 35% of our sales are international. Speaking locally, I would be very caution in starting a new business in California that derived most of its revenue from local clients.

[sunsprit]

As I see a regional need for a food service related business right now, I'm working on a start-up.

I've been lining up a leased facility, equipment purchases, state/fed food compliance, labor pool, experienced consultants/management in our niche, marketing on the internet and by networking, and operating/capital funds from my banker.

IMO, I think it's a good time to get into business if you've done your homework and can find products/services for which there is a demand that you can fill while maintaining a positive cash flow that justifies the time/effort/investment.

We'll see if the business I'm working on makes it. Will know more over the next month if it's feasible to start operations over the next 4-6 months.

[AsymptoticFaery]

I personally think it's a great time for more consumers to put their purchasing power in local economies - supporting their communities, supporting the small business structure and networks around their area, supporting local services and goods, strengthening the financial flow within their communities and being able to still contribute to keeping an active market.

Over the last couple of decades, we've seen more consumers put their purchasing power into very large corporations. I don't think people should for example stop buying a coffee from Starbucks or stop buying books from Barnes & Noble or getting electronics from Best Buy, I just think that some of those purchases should more often go to local businesses.

Instead of getting that daily coffee from Starbucks, why not visit "Steve and Lisa's coffee joint" down the street...a place that offers a good coffee and a good atmosphere but doesn't necessarily offer all of the perks a Starbucks have.

Instead of buying produce from Ralphs or Albertsons all the time, why not look up local farmers markets in the area and buy from them to keep them going strong. They stay in business and you support the economy...just locally...however all of this local support still makes an impact on the national level.

I think this is how Americans should begin redefining and restructuring their shopping values and habits. respectively.

The mega corporate era is killing the the local economy because they take up most of the business revenue pie chart.

They do offer jobs and they have a place in our economy, but Americans need a way to feel like they are in control again or that they can be directly active with how their money is invested from bottom to top. Local businesses are also great at offering jobs to people in the area. The businesses can certainly larger, but they won't be a detached and sociopathic Walmart.

So there are businesses that currently exist and I think it's a great time to look into startups or business ventures that specialize in servicing and supporting the areas they exist in.

Maybe this strategy could work.

[Humanoid]

Originally Posted by AsymptoticFaery

I personally think it's a great time for more consumers to put their purchasing power in local economies - supporting their communities, supporting the small business structure and networks around their area, supporting local services and goods, strengthening the financial flow within their communities and being able to still contribute to keeping an active market.

Well you may think so but do consumers? I can tell you I don't care. Why purchase locally when I can not only save money on the sticker price but can avoid sales tax (which is rather draconian in CA) by purchasing online from another state?

Originally Posted by AsymptoticFaery

I just think that some of those purchases should more often go to local businesses.

The local best buy, Starbucks, etc etc are usually owned by local individuals. These are all franchises...whats the difference between them and and independent shop? One pays franchising fees and the other doesn't...

Originally Posted by AsymptoticFaery

Instead of getting that daily coffee from Starbucks, why not visit "Steve and Lisa's coffee joint" down the street...a place that offers a good coffee and a good atmosphere but doesn't necessarily offer all of the perks a Starbucks have.

I think you just said it, "doesn't necessarily offer all the perks a Starbucks have". People go to Starbucks because they do things right, if "Steve and Lisa's coffee joint" did things better people would go to them.

Originally Posted by AsymptoticFaery

Instead of buying produce from Ralphs or Albertsons all the time, why not look up local farmers markets in the area and buy from them to keep them going strong.

Or why not just purchase from Ralphs or Albertsons who purchase from local framers (its cheaper, when they do) instead of wasting a bunch of my time trying to figure out which local framer is good, work the grocery stores have already done.

Originally Posted by AsymptoticFaery

I think this is how Americans should begin redefining and restructuring their shopping values and habits. respectively.

I think Americans (and myself) don't care how you think we should begin to redefine our values.

Originally Posted by AsymptoticFaery

The mega corporate era is killing the the local economy because they take up most of the business revenue pie chart.

And why? Because they do things better. There is a simple way to bet a large corporation - offer a better product or service.

Originally Posted by AsymptoticFaery

So there are businesses that currently exist and I think it's a great time to look into startups or business ventures that specialize in servicing and supporting the areas they exist in.

I think you better not leave your day job. You don't start a business based on some utopian vision of what you'd like the world to be like... you start a business because you have good reason to believe there is demand for your product or service. If your business requires people to change for it to be successful you will fail in a matter of weeks.

Reqarding all this "shop local" stuff, the market place is completely moving away from this sort of thing. The younger are gravitating to online market places. These market places offer far more variety than you could ever achieve in a single local community, even a large one like Los Angeles or NYC.

[chet everett]

To the OP -- while there is plenty to debate about the what impact the overall economic conditions would have upon the various options that a potential start-up would face, I do tend to agree that the basics of supply & demand are a huge factor. If you have can do fill a need for you customers you can do well.

Start-up finances are always tough, and with the "flight to safety" and pessimistic outlook that is pretty pervasive that is going to be even tougher.

Personally I have worked for myself, but there are downsides to this. Division of labor is a big one -- certain people definitely seem better to certain kinds of tasks, in pretty much any company that has more than one person this becomes readily apparent. In my experience the people that are most successful as entrepreneurs / independent business people are those that can readily make connects, smoothly work them into a business oriented network, and quickly put negatives behind them.

Competition is pretty tough, but most businesses that fail tend not to be "competed to death" but from internal problems. Lack of adequate capital is huge. Most start-ups grossly under estimate how long it will take them to get to the point that they can generate enough cashflow to support the business. Thus it is extremely prudent to start as "small" as possible, probably even as "side business" so that the market can be tested. Families with two incomes can also provide a 'safety net', but of course this could introduce additional relationship stress...

I put some faith in the "mega trends" kind of things, but far more in the commitment to FIND A NEED and then a doing a very good, business minded way of meeting it. There are plenty of places to get tips about what makes customers come back to a business.


btw -- Not sure what another poster meant about certain franchises:

BBY Profile - Best Buy Co., Inc Profile - BBY Company Information - Best Buy Co., Inc Company Information
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[StealthRabbit]

Localization is becoming a potential viable business strategy as long as incent-ized customers with $$ are available, BUT it must be able to compete with WalMart or offer services and products they don't. (or as mentioned you have to change the sales culture to not be seeking the lowest price). Probably the businesses focused on basic needs will stand the most to gain, and of course WalMart and the big boys will be ratcheting profits in these areas, rather than getting them from 'discretionary' items. I wouldn't recommend having a store / service that sells discretionary stuff.

[Humanoid]

Originally Posted by chet everett

btw -- Not sure what another poster meant about certain franchises:

Wasn't really making a comment about Starbucks or Best Buy in particular. Rather, that many of the "big corporate" places people shop at are owned by local interests in the form of franchises etc. Although Starbucks doesn't franchise per se, it has plenty of stores that aren't company owned. Even when they are company owned they are usually run by a local division of the company.

Most of the bigger retailers tend to have company owned stores due to the capital requirements required to open a store.

Anyhow, the whole "buy local" thing appeals to a very small niche of people. Generally, the younger folks are gravitating towards the internet and online communities that provide a sort of virtual community. In this sense focusing on the past when so called "local businesses" existed in large numbers is a bit short sighted. These sorts of communities are being created in virtual space now....and they are national/global. A good example of this is:

Etsy :: Your place to buy and sell all things handmade

[AsymptoticFaery]

I think given that someone opens a local shop, of course they would need to be competitive. That's a no-brainer. They might not be -exactly- like Starbucks but they could still be a competent business offering a unique brand of service and merchandise.

I don't think many small businesses could compete with a Wal-Mart unless they were another Wal-Mart like company. Wall-Mart has its own universe at this point. Currently, it's up to people to decide what they want to do with their money.

As for online businesses, that's not something I need to be schooled on and I am also a very big advocate of that way of doing business, because I support home business startups in a large way, -depending- on what type of shop one owns or seeks to own. I love the handcraft/homemade business circle and I am glad more people are pursuing business startup this way too.

Some things are better sold online, other things aren't. I have a shop on Etsy that I make decent money from as well as do business online for my illustration work. As I mentioned, I am not at all against that. However, it was assumed. My previous statement wasn't absolute but I still think it has some merit.

If someone wants to open up a brick and mortar shop, it might not always be in their best interest to invest in a franchise necessarily especially given the type of service or merchandise they are looking to sell. There are certainly pros and cons to investing in a franchise, especially more so the latter right now. There are however, some indie franchises that might be interesting to look into. For example, a business up north in Seattle called The Chocolate Apothecary is looking to expand further this way in Southern California. They only have a few shops.

There are many areas where a small brick and mortar type business can do well. Location, location, location as they say. That's advice that will never go out of style.

A woman I know in my area/neighborhood owns a Cold Stone Creamery, she's going out of business soon and has to sell her franchise...not many people are buying from Cold Stone Creamery in this section of LA anymore...especially due to it's prices which the owner has no control over. The business isn't too well now corporately and she isn't the only one looking to sell her Cold Stone this year. Several are up for sell. This area used to be prime for those but that's slowly changed. Same thing with some of the Mrs. Fields brands shop unfortunately (TCBY).

You know where people are going rather than that woman's Cold Stone shop?

Local gelato shops around the area and a local ice cream bar/soda fountain not far from me. They designed it to be like those old ice cream/malt shops back in the 50s because that's what they grew up going to back in their day. Prices are cheap and the ice cream is made old-fashioned. It's also part of an old pharmacy.

[Humanoid]

Originally Posted by AsymptoticFaery

There are many areas where a small brick and mortar type business can do well. Location, location, location as they say. That's advice that will never go out of style.

Yes location is important, but a good location comes at a cost and isn't going to solve a poor business idea/model. The important question in regards to location is if the better location is going to increase your sales enough to cover the additional expense of being in that location. This isn't an easy question to answer.

Anyhow, so you think there are many areas where a "small brick and mortar type business can do well". So....the obvious question is...where are they? Are people too stupid to open them, they don't see the pile of money on the table? Many business that "seem like" they'd do well, won't because of fiscal matters. The rent may be too high to generate enough profit to make it worth while etc etc.

Originally Posted by AsymptoticFaery

A woman I know in my area/neighborhood owns a Coldstone Creamery, she's going out of business soon and has to sell her franchise...not many people are buying from Coldstone Creamery in this section of LA anymore..

Thats because the middle-class families in Los Angeles that went there don't have access to the home ATM anymore. People in Los Angeles are piled high in debt and its coming back to haunt them. All the businesses that were created to sale to this niche are going to collapse.

Additional, anybody that opened up a Coldstone thinking it was going to be long term has been under a rock. Businesses like this are fads...their popularity comes and goes within a matter of years. The money doesn't stay on the table long....

Originally Posted by AsymptoticFaery

A local ice cream bar/bakery a few streets away in West Los Angeles owned by an older couple. They designed it to be like those old ice cream/malt shops back in the 50s because that's what they grew up going to back in their day

How do you know that? Did you survey the people walking into this store and ask them if they use to go to Coldstone instead? This store could be serving a completely different niche, which sounds to be most likely the case. I mean you don't expect the same sorts of people to go into an old fashion ice cream shop that you do to go to a cold stone do you?

Also, West Los Angeles has many "artsy types". These people tend to be attracted to say....an old fashion ice cream store. But trying to extrapolate a general trend from this niche doesn't make much sense. There are only a few areas in the country that are like this. But, really I don't think its the "localness" of the business that matters rather its that the businesses target the niche. This niche isn't big enough for national chains to develop, only a few areas in the country have a high enough consideration of them to support local businesses.