bizthreads.net: Business Information for Entrepreneurs by an Entrepreneur

Dear Buzz,

“I own a successful offline retail business. I see so many people moving online, especially selling information products. Should I consider doing that?”

Josiah

Dear Josiah,

Thanks for the question. I'm glad to hear that your offline business is successful. There are many people moving to online models of business — which isn't news to anyone, of course. But what's interesting is how often I see businesses move away from their core offerings when they go online. Someone might sell tractors offline but go online and sell e-books or some other digital product. Why is that? Is it because everyone else is selling that online, too? It is because of the high profit margin potential? 

Whatever it is, let me encourage you to stick to your core offering. If you're selling products, sell those products online. Set up an eBay store, create your own website, do whatever. But, before you jump in and start selling digital products, make sure that those digital products support your core offering.”

I have a secret that I'm telling the world: I'm fascinated by house flippers. They are the folks who buy a home that's a little (or a lot) run down, fix it up, and resell it for a (substantial) profit.

I'm so fascinated by these hammer-swinging entrepreneurs that I could be considered an almost loyal viewer of the many house flipping shows on television. It's interesting to me to compare the professionals in the show Flip This House to the amateurs in Property Ladder.

The professionals are very careful, plan everything out, and price the product according to the market. Of the shows I've seen of Flip This House, the professionals always seem to earn an impressive profit.

On the other hand, the amateurs in Property Ladder take twice as long by doing the work themselves (to save money from hiring a sub-contractor), make poor choices in decorating, and price the house much too high. Then they end up sitting on the house for some time and paying the carrying costs. It makes for much more entertaining television.

It's an interesting lesson in one of the oldest vices of humankind: greed. In an effort to do things the cheapest way possible AND to get the highest resale dollar out of the home, they make poor decisions that end up costing them too much.

I'm fairly blatant on this blog and on MoreBusiness.com about not being the low cost provider (that is: competing on price by shaving your profit margin razor thin). But let me also suggest that being the high cost provider (by inflating your profit margin) — without the right strategy — may not be good for your business.

In a recent blog I talked about viral video and the benefits to a business. This interesting piece of news came to my attention recently and I thought it was only fair to post the other side of the equation.

Here’s an example of Viral Video gone wrong.

Lonelygirl15 was a vlog (a video blog) of a teenage girl posted on YouTube. It gained quite a following as she interacted with life and recorded her thoughts for all to see. Recently, though, after months of success, she was exposed as being someone other than what she claimed.

She wasn’t a teenage girl sharing her life with others; she was an aspiring actress on a set. After the “fraud” was exposed, there seemed to be a lot of spin from the creators of the vlog over its purpose.

At the end of the day, it seems that the viewing public still prefers to know if they're watching fact or fiction BEFORE they start watching. And it also suggests that a little scrutiny from the market is the ultimate arbitrator of the success or failure of a venture.

If you do think about viral video, be sure to think through your plan very carefully.

I don't have Skype… but I hate to admit it. I'll eventually have to get it because colleagues always ask me to communicate with them on it. But there are two reasons why I don't have it.

The first is this: http://en.wikipedia.org/wiki/Skype. I realize you can't trust everything you read on the Internet but this has me concerned enough to think twice before I use it. Some of the things I'm concerned about include (quoting from Wikipedia):

• Keeps chatting on the network, even when idle
• Blind trust in anything else speaking Skype
• Skype makes it hard to enforce a (corporate) security policy
• SkypeOut can be more expensive
• The continuous access pattern does not allow the disk to enter “sleep” or “idle” modes while Skype is active, even when offline

Other reasons were mentioned but these 5 are my biggest concerns.

The second reason is anecdotal: Every time someone has called me (on my landline phone) from their Skype, the quality has been low, the delay between talking has been painfully long (even on local calls), and some of the time I'm put on hands-free, which means that my voice is coming out of the computer speakers and I can hear myself talking. All of these things are very distracting to having a real conversation with someone.

I love new technology and I love to see it leveraged for better business use. But to me, Skype just isn't there yet. Right now they're on version 2.5. I'll wait a couple more versions before I look at it again.

Some have called 2006 the year of the Internet video . (In fact, one person posted that prediction on October 19th, 2005.) From what I can see, they're right.

I used to receive the odd joke or link in my email from friends. This year it's all been video. When you combine the omnipresence of cameras in cell phones with wireless Internet connections and sites like Google Video and YouTube, you get a recipe for nearly immediate videos posted online.

Companies are using video, too. They create advertising in the form of videos that could potentially “go viral.” They don’t have to be expensive, just creative. In fact, a clever commercial that is ONLY posted online can earn you more business for less than a commercial that is paid to air on television.

Check out Google Video and Google “commercial” and see what comes up.

Delaney L. writes, “Buzz, I serve a niche in which I sell information to both realtors and home owners. How do you recommend I market to them effectively?”

Dear Delaney,

“You'd be surprised how often I'm asked this question. Many people try to ‘kill two birds with one stone' and market to two niches. I think if your business is going well then you should expand!

My first recommendation, though, is to master one niche and add products that meet their needs. If you do want to market to another niche or if you already market to another niche, I would recommend separating your efforts. After all, in most cases neither niche uses the same online search terms to look for your information or goes to the same sources to find what you're selling.

In your specific case, I would guess that the information you sell might be passed over by realtors who are afraid it's too “watered down” to appeal to home owners’ general interests. And, home owners may not buy it because they are afraid it's too technical and geared more to realtors.

I usually end up recommending that you start two businesses. Or, if that's not practical, create two websites with their own separate domains. If you want to leverage your name and reputation, create each business “as a division of” your original business. If you're still getting traffic to your original business site, have a single splash page with two links: a home owners link that takes them to your new home owners page and a realtors link that takes them to your realtors page. This will also allow you to measure the success of each side of your business.”

What do the following countries have in common?

• Equatorial Guinea
• Bosnia
• Liberia
• China
• Myanmar
• Ireland
• Mozambique
• Armenia
• Vietnam
• Bhutan

This list, with the exception of China, may be a “Who's Who” of countries that barely make the news today.

However, according to The Economist, these are the top ten countries in the world with the highest economic growth between 1993 and 2003 as measured by the average annual increase in GDP. Equatorial Guinea's average annual GDP was the highest at 25.9% each year over that decade while Bhutan's was 7.1% each year over that decade. Everyone else fell somewhere in between.

By comparison, the United States average was 3.3% and the world average was 3.6% during the same period.

What does that tell you? While there are many factors that can contribute to massive growth (or average growth, or mediocre growth), the reality is that there's growth. Growth can mean opportunity for the savvy business owner, including:

• Construction
• Infrastructure
• Computers/IT development
• Helping entrepreneurs market to the world

You might not be able to find half of these places on a map but they do have money. Do some research on them and consider the opportunities.

Everything we do in business is sales. Even if you're just handing out your business card - what you say, the way you say it, the way you pass your card, and what your card says about you - are all parts of that process.

Does all of your sales material work for you? Here's an interesting way to find out.

http://www.glyphius.com/

Now, I'm not mathematician but this software is supposed to help you write better sales content. It analyzes the content of the sales message — whether its' a sales page, a website, or whatever — and assigns it an effectiveness percentage. Many of us are not writers and (to be honest) that's reflected in many websites. Business owners want to be perceived as coherent and well-spoken so they should use any tools in their power to create well-written and effective sales messages.

It's important to be on the lookout for trends so that you can plan for the impact they may have on your existing business or the opportunities they could provide for a new one. Trendguide projects the popularity of new products and ideas by conducting online polls. So you can see what's popular based on how other visitors voted.

Trends Ideas contains thousands of articles on various industrial designs, consumer products, and architectural trends.

Google Trends shows a little of their search trends, including some powerful information about search trends by city. In addition, you can compare two or more searches to see which is more popular. (For example, type “cat, dog” into the search engine and see the difference.)

Every aspiring business owner should bookmark and review FedStats. This site collects statistics from other government agencies and displays them in one place. Put your tax dollars to work for you by reading the stats, interpreting, and cashing in on them!

This is one of many recent articles reporting a significant CEO shuffle:

http://seattlepi.nwsource.com/business/283880_boeing05ww.html?source=mypi

Bill Ford, CEO of Ford, steps aside (although he will retain a position on the board). Alan Mulally, former CEO at Boeing Commercial Airplanes, a division of Boeing, will become CEO of Ford. According to this article, Mulally was assumed by many to become Boeing's top CEO last year but instead that job went to Jim McNerney, formerly the CEO of 3M.

When I first read this article (and deciphered the many titles floating around) it sounded like Mulally was the one getting the short end of the deal. The quick timing of the shuffle as well as the fact that he was passed over for CEO last year made me think that.

But the more I thought about these events, the more I realized that good will come from them. It is always eye-opening to get an outsider's look… that's what makes consultants so valuable to have on hand: it's not always their expertise but rather their outsider's point of view.

In your business, do you have a trusted friend or mentor outside of your industry who you can talk to about what you do? They may give you inspiration that you never dreamed of simply because they're not part of your business. I have two: one's a VP at a large corporation; the other is the director of a tiny non-profit. Both of these people give me more inspiration and ideas than either of them realize because they are both outsiders.