Business in Transition

 

Is your business in transition? How do you recognize it if it is? Better yet…what will you do about it? Often our business may be in transition, with obvious signs. However, if we do not pay attention to those signs, or are ignorant of them or even choose to ignore the signs there could be issues in our business. We could end up with less sales and decreased profits. We must pay attention to and learn from those signs during any transition times.

 

In late 1979, the entrepreneurial urge hit me and I quit my job to open a musical instrument store. Though we carried other musical instruments in small quantities our main push was guitars, focusing more on acoustic and acoustic-electric models. I was told music stores in general were a declining industry and that the guitar sales boom ended back in the early to mid-1970s. I’m sure they were right, but I did it anyway.

 

Although I owned the store for about two years, I closed it for reasons other than a declining market. Yet here in 2011, a good musical instrument store can still do very well. And we did well too. The key for us was to focus on a certain area of the wide musical market and concentrate our resources in that area. We did and thereby excelled in that area creating our own market so to speak. I believe it is a major key strategy for a store today to create a way to make significant profits in a so-called declining market.

 

In mid-2004, I began an online used book selling business with eBay and half.com (owned by eBay). I grew it as fast as I could as a one person show, and within a little over a year had 12,000 items online and a warehouse for storage.

 

The used book business is a huge market, including a huge number of sellers. As a result of this competition, sellers were competing over the lowest gross profit. That is a total waste of time and energy. It amazed me how many people tried to sell a book for $.75 to $1.00 while trying to make a profit on the shipping. The volume anyone would have to do at that ridiculous low pricing would require so much space and so many people, that I think it is impossible to make a profit. Yet people fought over the right to be the seller in this way.

 

My strategy was different. I wanted an average sale of $10 and I refused to even consider taking the time to list an item on the Internet and then sell it for a dollar. It made no sense. My strategy worked and to help make it work, I included an actual photo of each and every book so the potential buyer could see the real thing. Most of the other sellers didn’t take this step and it is understandable considering the low price. It worked very well. If a book was listed with 10 to 15 sellers at under $4, I would sell the same book for $10. In other words, what some were thinking was a declining market…I found a good profitable niche.

 

There were also other strategies that helped to turn the declining market into a growing market. Some of them were interesting pricing strategies, using things like free shipping, multiple purchase discounts and so on. Each of these that I used did their job and helped improve sales.

 

Then, something changed that created a somewhat faster declining market in used books. It is called The Kindle by Amazon.com. It was first offered for sale in November, 2007 and sold out in five hours. It remained sold out until April of 2008 with a selling price of $399. That was also the beginning of an approaching severe recession with many areas already in decline. Yet here was this new product selling for a whopping $400 and they were sold out immediately as well as for the next five months. It was an idea whose time had come and Amazon hit the bull’s eye of the target on this product.

 

At the time, I thought that price was ridiculously high for what it was as you also had to pay for the books. Plus they had limited titles available. Basically you had to be a well-to-do early adopter to buy it, and the sales proved that there were sufficient numbers in that category.

 

No big deal. A flash in the pan. A small market. No worries. But the ground underneath was shaking slightly. . .

 

Then in February, 2009 the new and improved version of the Kindle was released for sale and within a few months the prices began to drop. Now it was as low as $299. Okay, it is a larger market now, and I can see hope for it. . .

 

Amazon just kept moving forward and this time with the Kindle 3 version in two models. July of 2010 Amazon released the Kindle 3G for $189 and the Wi-Fi version for only $139, which will hold several thousand books. Now it is impossible to ignore. The product is spreading like wildfire with the titles constantly expanding. Amazon created an entire market in the book industry…created an entire market during an economic downturn, actually a far-reaching and deep recession. Yet they created an entire new market. Absolutely amazing!

 

In November of 2010, I became an owner of a Kindle 3G and I absolutely love it. It has completely changed my book buying habits.

 

I still own books; several thousand of them, and I have always loved books. They warm up a room just having them on display. Books are a ready source of knowledge and inspiration. They are relatively inexpensive. They last a good period of time. Yet, they are also heavy. They use up resources such as paper—and some might even say wastes resources. Books are hard to move. Can you imagine moving several thousand books?

 

They are nice to touch and it feels good to turn pages and use a bookmark to keep your place. For those bold people, you can make notes in the margins and underline or highlight good sections you want to remember. Of course, if you are thinking about reselling the book ever, marking in any way is out of the question. This devalues a book dramatically.

 

In December of 2010, I essentially closed my warehouse of books, donated the lot of them to non-profits and walked away. I didn’t close it because of the declining market, but at the same time I did. As I look back on the changes just since 2007 in the book industry, it is obvious that it is a declining market. At the root of that change is, in my opinion, the Kindle. Competitors such as the Barnes & Noble Nook are on the market as well. It is also obvious that the price will continue to drop.

 

It makes sense. The electronic book is far superior in many ways. In one very small and thin package, I can carry as many books as I currently have in my library. For sure, I cannot carry exactly those books because all of them are not available on the Kindle. But as we move forward, they all will be because it is such a powerful idea. As Victor Hugo so aptly put it, “Nothing else in the world. . . not all the armies. . . is so powerful as an idea whose time has come.” This was one of those ideas.

 

The recession caused far reduced book sales and I had less time since I was starting another business. There were other reasons to close the operation which had become unprofitable, but the far reaching reason to me is that there was such a small future in comparison and I lived through that transition.

 

 

Now I deal with many different businesses in consulting and marketing. I see some businesses that are in decline or struggling against the current of a declining market. There are ways around it for sure and we can help. But it also requires a stronger commitment and more tenacity and grit to swim that way, and I see many who don’t have those qualities. I can certainly relate to their position, but I also know there are solutions.

 

 

Some Solutions.

 

Change Markets?

 

One solution is to change markets. One can close one store and open another, change fields, or even just retire.

 

 

Focused Efforts

 

Another solution is a more focused effort. Think about Amazon.com, who was and probably still is the world’s largest new bookseller. They introduced a competitive product within their own business which at first might seem counterproductive. However, if you had the vision of where the market is heading or where it could head and then seized that opportunity, you can create a whole new market within your own market. This same thing can be done in a number of ways for many businesses.

 

We essentially did this in our Upward Trend business by creating the Trend Setter Package (www.trendsetterpackage.com). This revolutionized our business within our business to change direction and change the future of our business by focusing in a different area. In this case, we started as website builders with the goal of helping people grow their business. We saw a lot of sites that just didn’t work and we thought we could solve that from a sales-focused perspective. And we had some success in this. But as soon as the website was done, our clients moved on to their next project, leaving the website as a completed project but a neglected one as well. We had other tools for the Internet that would help clients, but most of them declined to use them thinking they were too costly for them. In any case, we could not fulfill our primary objective to help them grow their business that way.

 

Then we changed our thinking. Our focus changed to helping them grow their business utilizing a variety of Internet tools. We cut our prices dramatically and increased our services at the same time. Now we include a wide range of services into one package for a nominal fee each month and we keep all the balls in the air for them by continually marketing their company and doing most of the work. At first the idea seems non-profitable. But within a year it was obvious this was a game-changer as it changed our business dramatically and very quickly. We had to begin adding people to handle the work and haven’t looked back. Many businesses can achieve that same result by focusing in a different way within their existing business and perhaps even create a whole new idea of their business.

 

Another solution is to carve out a niche. Use the example of a music store where many of them try to cover too much of that market and thereby can only stock a small selection of items. A better strategy in a changing market might be to focus all those resources in a small portion of that business. So for example, they might trade with another music store or in various ways get rid of the vast majority of their varied offerings and then buy significant quantity in a focused area such as acoustic guitars, or such. In this way, they can become specialists in one area and not only create a new market for themselves, but by virtue of that focus create a much larger market; i.e., a regional market compared to a local market. They would also have to expand their influence to capture more of this focused market, but it could revolutionize their existing business as a result.

 

Let’s look at a very small scale store to put it in perspective. A store has $25,000 worth of inventory in a wide range of products or offerings. If they were to put that same $25,000 into just one or two of those products, they could effectively become a leader in that market segment and expand from that point.

 

Using an example of a music store, let’s say you had $100,000 worth of inventory including band instruments, guitars, amps, sheet music, accessories, sound equipment, drums, drum accessories and more. Now, take that same $100,000 and focus it on acoustic and acoustic-electric guitars and related accessories and you can change that business from jack of all trades to acoustic guitar experts. Take that one step further and focus on one brand and you become a multi-state regional market leader in that segment. It is the power of focusing on a niche, or a portion of a market.

 

 

Partnering

 

Another solution is to partner with others. So, let’s say you have $100,000 in inventory at your music store and you know two or three others with similar stores. Now become partners and you each now have $400,000 worth of inventory. I did this in the auto business in the commercial truck segment and it worked magic. You don’t have to actually buy each other’s business, although that is an option, too. But share your inventory availability in a relaxed way. In other words, help each other to help each other.

 

Partnering can take another path by referring each other business. For example, one doctor specializes or has great expertise or success in one field. He then sends some clients to the doctor that specializes or has great expertise or success in that field. It is mutually beneficial to the client or patient and the doctors at the same time.

 

When you partner with others, it will never be equal. Some partners will take more advantage than others. It’s just the way it is. Don’t be concerned. The availability is the most important. If you’re sharing inventory, work out ahead of time a cost plus arrangement that makes sense to the wholesale-minded competitor. This way each sale out has profit but not enough to cause the sale not to be made. It may not be your normal profit, but it is worth doing. In this way everyone can benefit.

 

 

Increase Your Expertise

 

Another solution is education and increased knowledge. Know more about what you do so that you can do it with more skill and create a higher demand for your particular expertise.

 

Many people get to a certain level and stay there. This can work well for a while, but will eventually limit your growth in a field. One sure way to improve your business is to improve yourself. Personal growth as well as professional growth is equally important.

 

You could take courses of study in your profession while operating your profession. Think about it like this: Who wants a doctor who graduates medical school as a doctor and then never again studies his trade? It is surely not a doctor I would want to go to, yet that is how many people feel about their professions.

 

As they say in the Army commercials, “Be all you can be.” That will likely improve your business and certainly your chances as success.

 

Don’t limit the seeking of knowledge to your profession. Of all the things that have served me, personal growth tops the list and has no competitor within range. Expand your own personal capabilities by expanding your knowledge. Improve your life with philosophy, psychology and even metaphysics. A better person creates a better enterprise.

 

 

Seek Assistance

 

Another way is to seek assistance. Hire a consultant, do surveys, focus groups, talk to successful people; in other words, seek help. Get ideas from others. Take advantage of those who can see your business from the outside in while you may be stuck seeing only from the inside out. They are dramatically different viewpoints and well worth knowing each.

 

Sometimes this costs money, sometimes not, but it can be of huge benefit to improving your operation and solving your problems. Get someone else’s perspective. You might even call competitors that are not in your market area and see if you can develop a relationship on the phone or periodically visiting them to gain their qualified, yet not prejudiced opinions.

 

This perspective can really put your business on a better track by having the outsiders seeing something that you aren’t seeing. It’s sort of like people seeing your right turn signal is not working, though you are clueless. Yet, when you find out, it changes things. Sometimes, these outsiders can easily see something that you have been missing and sometimes it may take a lot more communication. In any event, this process can yield great results.

 

 

Take On a Partner or Partners

 

Allowing others to come in and participate as owners in your business is hard to consider sometimes, but bringing in others to help you grow your business can be very beneficial as well. These partners may be financial ones, or they may be people with similar expertise but more skilled in some areas of business.

 

A great example of this is Colonel Sanders of Kentucky Fried Chicken fame. He began that business at many people’s retirement age of 65 and made a success of it to a degree. But he was not really skilled at running a big business and so another team ended up buying him out and then making him their spokesperson. This changed everything. The Colonel made more money than he ever did in his life and the people who came in turned that relatively small company in comparison into a huge hundreds of millions of dollars worldwide company. It is obvious that the Colonel would have never done this on his own.

 

I’ve known others who sold their interests and then became an employee of the company to their satisfaction. But, it need not be sold to achieve similar objectives. One or more people may be allowed to buy in and become partners to help you grow the business and make up for what you are lacking. We all can’t do it all.

 

I know in my own company that I can do part, but I cannot do it all. I am happy to give up portions of my company to others who have greater expertise in areas that help us as a whole be a far better company. I have a philosophy about giving away part of my company in order to gain in the long run. After all 100% of nothing is still nothing, where a smaller percentage of a company doing so much more business allows more profit to be made. And this will change most people to believers.

 

 

Summary

 

These are just a few of the ideas that can make a dramatic difference in any business. The first step is awareness. Being aware of your market and whether it is ebbing or flowing is meaningful. The second step is the decision to do something about it. Nothing stays the same. Everything is in motion. We cannot do the same things over and over and expect a different result and be successful. We must do something different. Perhaps one or more of these ideas will be of assistance.

 

by Terry Minion