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Thread: Business 101 observations

  1. #1

    Default Business 101 observations

    I have been a businessman ever since high school and have run a few businesses that have been moderately successful, the most successful of which to date is Razer, which has revenue in the double digit millions (undisclosed as we are a private company).

    Over the last year focusing on CoolMiniOrNot, I have encountered businesses and read forums posts that to me, have unusual ideas about business. Rather than offer advice where it is not solicited or wanted, I thought a general post that speaks to the subject would be better.

    1. Father Knows Best (not)
    When your entire industry is moving in a certain direction (be it greener cars, e-books, miniature scale creep), going the other way is a strategy not for the inexperienced or under-capitalized. Certainly, if you make Ferraris you may be able to get away with a 10mpg exotic due to the extremely niche market Ferrari serves, but even behemoths like Toyota and Audi must bow to market realities and serve up vehicles that have better or even zero fuel consumption.

    To ensure "beating your own path" isn't in reality giving yourself a beating, you must know that the market actually exists in the size you need for your quirky products. Yes, the Internet is a vast place, and selling to the world is exciting, but your 50 regular customers aren't exactly going to put food on the table (unless, once again, you are selling $200,000 Ferraris). The only market research that is of any value is "how many did we sell?" or, even better, "how many did they sell?"

    2. Marketing is everything.
    Now, some of you may feel this is over-stated. "But Chern.... won't people find out how great my stuff is by word of mouth?". Yes, it's true, marketing without a good product is a recipe for failure. However, a good product without marketing is much worse, you spent presumably more money doing R&D to get a good product done, manufactured, only to fall flat on your face at the last mile. You'd probably have been better off just marketing a crap product (although this is not desirable either).

    As I've mentioned elsewhere, a good paintjob on an average sculpt will inevitably sell more figures than an average paintjob on a good sculpt, and I've got the numbers to prove it. Do not balk at putting your products in the best possible light.

    I've seen posts that I have found incredulous, akin to: "My descriptions are so graphic my customers don't need pictures, and they certainly do not affect my sales." Even Desktop Computers have pictures to help sales, miniatures you'd think would be in even more desperate need of pictorial help.

    A good website, announcements and advertising on high traffic sites all help drive sales to your products. Put yourself in your customer's shoes. Especially in the realm of luxury spending like miniatures, they certainly will not seek you out if they have no idea who the hell you are. In times of crisis, never scale back on marketing. That is a downward spiral of doom (less sales -> less marketing -> less sales etc until.... death).

    3. I want to eat your lunch.

    This is the most important thing to learn when you do your own business. Whatever you are doing, you have competition.

    If you fail to have enough product available for sale after *shudder* spending money on creating demand for your products, then you frankly do not deserve to be in business. Someone else is going to realize the demand is there ("I would really like to order this product", "Sorry ma'am, it's out of stock and the manufacturer is on holiday") and make a competing product. You did all the hard work educating everyone on how cool thingamabob is, and now someone else is going to pwn you.

    Never, ever, fail to satisfy demand, especially demand you create. This, incredibly, is the number #1 epic fail that I see everyday, and which CMON is sometimes guilty of.

    For example:
    I like Razer mice. I need to buy a new mouse. The new mouse from Razer is late. I buy, albeit reluctantly, the mouse from Logitech instead.

    Why does this happen? Why aren't your customers super loyal? Well, for one thing, they're your customers, not the other way round. Imagine, your customer loves miniatures, and has $50 to spend on figures..... but oops, you're out of stock. He isn't going to keep his $50 in his piggy bank, oh no... he'll go to the movies instead with his girlfriend, buy some popcorn, and possibly go out for dinner. And that'll be that. You didn't even lose the sale to a competitor, you lost it because your customer got bored. Which is the worst, worst possible business sin ever.

    4. I want you to share my lunch.

    In almost any rational situation, other business people would prefer to work with you, rather than against you. For example, many manufacturers sell to CMON to retail miniatures on to our userbase. Now, in theory they could keep all the retail profits for themselves, and in theory CMON could make miniatures in a similar theme, but on both sides of the equation we both make much more money by cooperating.

    For example, Razer makes mice. Best Buy sells our mice. Now, no one in their right mind at Razer would say "Let's go set up 2000 retail electronic stores and compete with Best Buy so we get that juicy additional retail margin." Why? Well, we don't have enough money to do that, we don't have the management know how to handle big box retail and we have no desire to sell other people's products. Best Buy similarly isn't thinking of entering the gaming mouse space because they can just buy from the winners without worrying about creating R&D teams.

    Especially when you are aware that you have motivated and sufficiently capitalized potential partners and/or competitors in the same space as you are, do your best to make them your partners. The miniatures industry in particular has very little intellectual property (it's all Historical, Fantasy or Science Fiction tropes) and the low startup costs means there are almost no barriers to entry.

    Another real life example:
    Nintendo makes a super popular SNES console. Sony wants to play in the space. Sony approaches Nintendo and says, Nintendo, you are the experts, we have the money, let's work together and come up with a CD based system. Nintendo jerks Sony around a little and finally says, nahh... let's not, we're fine on our own. Sony then proceeds to develop the Playstation from scratch, spending more money than they would have working with Nintendo but completely destroying Nintendo's dominant position.

    EVEN WORSE, Sony now has more expertise than Nintendo in making consoles, making any future partnership extremely unattractive to Sony ("Gee... this isn't as hard as I thought it was"). Nintendo in effect, created their own competitor when they could have made millions more; why? Maybe they doubted Sony's resolve.... or maybe they were arrogant and believed only they knew the secret sauce to great home consoles.... which leads me to..

    5. You're Not Special.
    Everyday is a struggle. You have to be smarter, faster and more hardworking than your competition. Do not be your own worst enemy by believing your own hype and trying to go it alone. Even GW has realized this and is trying to rebuild their network of independent retailers.

    The miniatures industry, as I've said, has a very low barrier to entry. Every well run company in the vertical chain from manufacturer, to retailer, to specialized news site adds tremendous value because they know what they're doing and they're good at it (survival of the fittest, after all). Be on good terms with your partners and peers, and do not screw them over unless you really, really know what you're doing. Your product or service is ultimately replaceable. Your job is to ensure that no one has any reason to desire that happening.

    6. QQ less
    In business, it is important to leave emotions at home. You may decide that dealing with a particular supplier or customer is too expensive (either it takes too much time or money), and sever the relationship because of that. As long as this is a considered decision based on $, then make it. It may be right, it may be wrong but at least it was made for the right reasons. This does not come easily to new business people, and it takes practice.

    This is very important from a business discipline perspective because sometimes you may need to make decisions in literally seconds, especially when negotiating. If, in retrospect, the reason for any of your business decisions was "I felt like it", you have screwed up.

    I've seen companies post news about upcoming projects for no apparent reason (customer can't really do anything about it, and they frankly don't really care); control this urge to share until you're ready, your competition will exploit it if they are alert.

    That said, emotions are excellent tools for management and negotiations. I'm not suggesting you feel nothing. Expressing happiness and anger are necessary if you want to make a point. Just don't base your decisions on what you're feeling.

    7. The Internet is forever
    Before you write anything, anywhere, think first. If it is in any way, shape or form offensive or unpleasant, don't do it. Never commit words in anger to the Internet. Yell if you must in person or over the phone (and even then make sure you aren't recorded). Once out, these words will be forever unretractable. As a business person, you have partially given up the right to voice your opinion on anything (religion, politics, your competition). Always have nice things to say about your competition, you may be partners one day.

    This post is not public domain, do not reproduce without permission.
    Last edited by Chern Ann; 07-26-2010 at 03:18 AM.
    I like it firm and fruity!

  2. #2

    Default

    Interesting post CA, nice one Not that I'm in the business myself

    Razer mice eh? I do believe I've shifted a few of those Generally deal with SME requirements but the bosses occasionally want something snazzy for home use

    Cheers, B.
    My CMON Gallery Rank...

  3. #3

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    Ha! I must say that it was a very pleasant surprise that my favourite mini site and my favourite peripherals company have sprung from the same mind! Cmon peripherals for the win!

    Lovely post, there's something missing though... This information is quite important no matter where in time you are so I'd love to see the post stickied somewhere on the site...

    Cheers!

  4. #4

    Default Common IT errors, or, don't reinvent the wheel

    This post was prompted by an ad I saw over at TMP, advertising services for programming wargames sites with an emphasis on ecommerce.

    Out of curiosity, I clicked through and found a simple page with a porftolio that had some well established names in the industry.

    The style of the site suggested it was a one-man operation, a small alarm bell but not necessarily a deal breaker. After more careful reading however, I found that this consultant was stating that all the ecommerce systems delivered by the firm were programmed from scratch, and implied this was a positive point.

    This is in fact not a good thing. At all.

    A few things you should know if you are considering a web presence:

    1. Internet technologies and payment standards advance extremely quickly, unlike retail Point of Sale environments Even ignoring bug and security fixes (which, as a computer user you will be very familiar with, your computer occasionally asking you to apply patches to the frequency of a few times a month), new features are introduced by your competitors at regular and frequent rate.

    2. IT investments for completely customized systems are non-trivial. There are as many off-the-shelf carts out there as there are ways of doing business. When you are starting out, or even if you have an established business, going about things a different way may not be ideal if it is not necessary.

    For example, paying someone to write accounting software from scratch rather than learning to use Quickbooks / Microsoft Money / Quicken is basically throwing money into a hole. Mostly, this is due to economies of scale and user input. It is very difficult for you to anticipate your own needs as your company grows, or know every single tax law or quirk. Similarly, a small consultancy is unlikely to know this either. Specialized companies who make it their business to deliver this software have teams that keep abreast of the latest technical and legal developments so that Quickbooks (for example) is always up to date, and as this cost is shared by millions of users and companies, you end up paying significantly less than a solution meant just for you.

    3. While one man shows are not necessarily bad things on simple jobs (like a quick web design, or simple customization of an existing cart) as they can be inexpensive, they are very bad things for large, complex projects that require constant upkeep and maintenance. You will be placing the operation of your company and possibly your entire revenue stream in the hands of one person. Even if he is a consummate professional with no life and never takes vacations, there are still vagaries of health, family emergencies, accidents and death that can and will disrupt your business. It is never a good idea to have the future of your company riding on how together some random stranger's life is.

    Some tips on carts:
    A quick google search for shopping carts will give you many paid and free solutions. Note that the free solutions will usually require some additional form of customization which may end up costing a larger sum than a paid solution could do out of the box.

    Things to look for:
    1. Inventory control
    Almost all carts support this except the most basic.

    2. Payment gateways
    The cart needs to support payment methods that you want to accept. Paypal support is common, and online credit card processing has specific requirements based on your merchant account and the country you are in.

    3. Ease of checkout
    Try out a few carts and see how the checkout does and whether this is acceptable for your customers. Guest checkout, and checkout with auto registration are important.

    4. Shipping support
    Some carts provide automated shipping support to USPS, Royal Mail, Fedex, UPS and other common carriers to calculate shipping costs.

    5. Extras
    Gift certificates, coupons, mailing list managers etc are all common.

    Do your research, especially paying attention to user reviews and you will be able to future proof your IT investment and focus on making money.

    Here's a list to start your search:
    X-cart (commercial, simple to complex)
    Prestashop (commercial, simple to complex)
    Zen-cart (free, simple to complex, lots of add ons)
    Shopify (commercial, hosted on their servers, good place to start without large investment. Expensive if you have lots of items).
    Magento (free-commercial, complex, enterprise level cart)
    Jshop (commercial, simple to complex, UK based company with European focus)

    edit: Bigcommerce (similar to Shopify)
    Last edited by Chern Ann; 08-26-2011 at 03:55 PM. Reason: added BigCommerce
    I like it firm and fruity!

  5. #5

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    In my opinion you left out "don't assume that because you are interested in X and have an extensive knowledge of X, you can necessarily make a go of it selling X". I've always assumed that this was one reason why interesting new FLGS's open... then close three months later with no warning. I guess internet sales might be more forgiving due to not having brick/mortar overhead, but if the proprietor has no idea how to run a business... still not good

  6. #6

    Default

    This was from an earlier post I made in 2008 and is still accurate:

    Games Workshop doing away with the independent stores and competing with them directly in the 90s was a huge mistake, and now GW is harvesting the bitter fruit of that horrible decision. It would be unimaginable for Marvel to open a "Marvel only" comics store.

    The expectation at that time must have been that without GW products the little independants would have died and gone away, but the only thing that did was open the door to new blood and new competition to exploit a retail network that GW had discarded.

    This would make an interesting MBA thesis / case study. How to completely destroy an effective monopoly by

    1. Creating a vertical chain with partners
    2. Shafting said partners
    3. Partners seek out competing product to survive

    The premise, to prove by presumably tracking down the older hobby stores, was whether GW miniatures were their primary revenue stream, and how they managed the switch.

    To illustrate, what GW did was worse than McDonald's suddenly telling all franchisees to take a hike and opening up next door. No doubt all the franchise business owners would have purchased a competing franchise to continue operating; some would have failed but those which were properly run would then become competition. It's worse because McDonald's doesn't have an effective monopoly on fast food, while arguably GW had monopolies (more than 80% market share) of fantasy and SF mass battle games.
    I like it firm and fruity!

  7. #7

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    Just to say this is a really interesting topic

    Throwing my own experience about carts into the mix - check out the back-end admin tool before you make a decision on what cart to go with. I've setup a couple of Zen Cart stores and a Magento store over the past few years and can safely say that if the product editing tool doesn't fit your specific type of products, you will end up wasting time (and time = money). Zen Cart is a prime example in that in order to add options to a product it is necessary to go into a separate screen to create those options with values. Also many packages are US orientated and don't cater for UK companies very well.

    pete

  8. #8

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    We used Jshop for many years and it's developed in the UK with enthusiastic community support. The only downside is that it's developed for the UK , hence third party apps and support for stuff like USPS shipping isn't properly coded.

    That said, I had a quick look at Shopify again and they've really improved their offer. $59 a month for 2500 SKUs, 1% transaction fee (above and beyond whatever you pay your own Paypal or credit card processor). It'll probably work out costing about 1/8 to 1/4 of an entry level system administrator if you have revenues of $25k a month.
    I like it firm and fruity!

  9. #9

    Default Plan for success

    This is just a quick note on starting a business. Plan for success, not for failure. What do I mean? Basically, build your business from day one on the assumption that it will grow to a substantial size, and try to anticipate and minimize these growing pains so that they do not become roadblocks to growth. If you fail because your product sucks, then it's all the same anyway, but it's particularly horrible to fail because your business was manageable as a 1 man show but unmanageable as a 10 man or 100 man one.

    A lot of businesses that start up plan for failure, i.e. unwillingness to incur essential expenses like accounting or marketing in a misguided attempt to save on costs. Some things, you just have to suck up and do, otherwise your business will always be just you, and it's obvious that doesn't float your boat since you're reading this.

    1. An LLC is a popular method of organizing a limited liability trading concern while having less paperwork to deal with. However, if you expect your company to grow rapidly, a proper corporate entity (i.e. a corporation with shares) would be a better choice in order to attract investors and capable partners. An LLC makes introducing new investors a tricky affair. In any event, even an LLC is better than a sole proprietorship. Never trade as a sole proprietor with unlimited liability; it's one thing for your business to fail (you can always build another one), it's another to lose your house and savings. If you're always worried about the roof over your head, your decision making will not be rational.

    2. Choose a company name that does not have an already taken .com domain. You'd think this would be obvious, but it bears mentioning. Even companies that have been in the industry for decades make simple mistakes like this, and pay through the nose later to oust domain squatters (either through legal fees or outright purchases).

    3. Pick providers and suppliers that can grow with you, and have the guts to move on if they can't. I have literally seen people kill their business rather than move important parts of their supply chain or services simply due to inertia or a misguided sense of loyalty. If they can't do the job, like any other employee, you have to fire them and find someone that can; your main responsibility is to your business and your shareholders, even if the only shareholder is you.

    4. Learn to manage people. Managing talent will become a core part of your job. Recognize your strengths, and be prepared to pay people to shore up your weaknesses. When you first start up as a one man operation, it will be necessary to bootstrap a lot of day to day functions. As your business grows, this will quickly become impossible. As the leader of the company, it is important to recognize what you're good at and stick to it: This is usually in the realms of product development, sourcing and/or marketing since you know your customers and product niche well. If you find you are spending more than 50% of your day filling orders or otherwise doing mechanical tasks, then you are probably hitting a bottleneck in your growth, and quite likely allowing your competition to catch up. A good way of figuring out what you should be doing is asking yourself what is it you do for the company that someone else couldn't be easily hired to do.

    Always try to pick people better than you at something; it is a common error of new bosses to hire someone they feel they can dominate or control. If everyone around you is mediocre, chances are your business will be mediocre too. Do not be threatened by people smarter than you, it is a privilege to work with them; take the opportunity to learn as much as you can from them, I know I did and continue to do so.
    Last edited by Chern Ann; 01-04-2011 at 01:23 AM.
    I like it firm and fruity!

  10. #10

    Default

    Addendum to IT, real life example of being your own tech support; a small miniatures firm recently had a webserver crash and restore from backup that didn't go too well; on top of installing Zencart which meant their cart was not available for 2 weeks, the server crash lasted another 4 days. Half a month without orders is a pretty major disaster for any company, and even harder to survive if it is your only source of income.

    Opinion: BigCommerce.com or Shopify.com would have ended up costing less for 2 years of hosting for the estimated loss of revenue setting up Zencart and this incident alone. Who knows how many more to come (updates, security patches etc?)

    Important: If you are hosting your own cart, and you are not on a dedicated server, your security risks are from other customers of your hosting service, who may not be properly secured. If they get hacked, then chances are, you will be hacked as well. Even if it is not a major security breach into your account (via file browsing your passwords etc), their compromised account is likely to be used to send out tons of spam or perhaps be used in a distributed denial of service attack; which means, of course, your IP address gets blacklisted. And that's assuming that your neighbors aren't even being intentionally malicious. Shared hosting is not a good idea for ecommerce!
    Last edited by Chern Ann; 08-26-2011 at 05:34 PM.
    I like it firm and fruity!

  11. #11

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    Thanks for useful advice and pointers, Chern Ann. I'm currently working on a project with a friend (still in its infancy, mind you!) and, whilst much of what you have said seems to be common sense, as the saying goes - there's nothing common about sense!

    Very informative and I will certainly bear your advice in mind.

    Cheers

  12. #12

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    This is a really interesting thread, I find it quite informative. Thanks a lot Chern Ann, and continue your good work.

  13. #13
    Newbie, please be gentle James Schardt's Avatar
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    Default

    I have learned more about general business in this thread than, well, anywhere else. Thanks.

  14. #14

    Default

    Well Chern it has been a while now.

    Do you have any further thoughts you would like to add to this thread? It has been one I enjoy revisiting every now and then and would love to see it extended.
    The Future Of Magic Wash is Klear

    supervike: This site is cake, the scoring is icing. Scrape it off if you don't like it, the cake is still delicious!!

    Dragonsreach: Oh my goodness, an Orrery and the Time Machine, at this time of the morning. I think I need a stiff cup of tea.

  15. #15

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    Additional thoughts, especially about Kickstarter, on my personal blog at http://chernann.com
    I like it firm and fruity!

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