Start-up Strategy Today

Imagine a graph in which over time both supply and demand were drifting downward. In this graph, supply is dropping at a faster rate than demand, and the rate of drop of supply is accelerating. Such a graph would visually illustrate that although both supply and demand are contracting, demand is actually expanding on net. Right now I hear people saying this is no time to start a business, and they cite falling sales at both the mass merchandisers such as Walmart and high-end such as Tiffany’s.

Also cited is the difficulty of getting finance. I believe it is true that both supply and demand is crashing in this economy. But that does not mean there is not a net expansion of demand that is overlooked by the nay sayers. There is actually unmet demand out there. I’ll explain how this is happening, and something you need to know yourself, and share it with anyone else planning to start a business, because this is not limited to import/export.

The key to the phenomena is debt. Does a given company have debt they cannot handle with the reduced sales, and lower profits on what sales they do get? If they can, they will survive. If they cannot, they go under, whether a retailer, a wholesaler, competitor or customer, high-end or low-end. If you cannot handle the debt, you are toast.

What is Crashing the Demand?

Circuit City is gone and Walmart and Best Buy will benefit to be sure, but Walmart and Best Buy are both weaker now too. This is true at the high end level as well. This just means the economy is adjusting downward to a more natural level, an economy in which there never should have been a Circuit City anyway. The printing of money and the easing of credit created a demand for things people cannot afford and don’t really want anyway, resulting in a particular kind of malinvestment called overinvestment..

But given some net reduction of demand at the high-end level, why are sales not rising for Tiffany’s if demand is, on net, widening?

Because Tiffany’s etc. are still offering boom time product selection. The product selection is for a the last economy. They are selling off their boom time selections and working through what is in the pipeline. People do not want the 75% off merchandise. As for perennial standard items, customers know they can get it later for less. Why buy now? Hence lower sales for those stores that would exist in a natural economy. It is not a lack of money, it is a problem of product selection that does not match current demand. So the problem for high end retailers to solve is where are the new products people would buy? That is where you come in.


What is Crashing Supply?


We are at the beginning of a process in which people and businesses who took on too much debt are trapped. Their capacity is tied up or lost. Some players are personally trapped, and it will be ten years before their credit is restored and they can operate again. Some are psychologically trapped... they believed they were smart and cannot understand what happened, and are afraid to go out again.

Add to this the government actions (there is no real policy, they are making it up as they go along) that have tied up lending and forcing perfectly viable businesses to close down for lack of lines of credit.

Demand for goods and services is falling, but specifically in the standard items category and at a slower rate. These elements are killing suppliers all along the chain:

1. Big discounts on what nobody wants anymore, so lower revenue and profits.
2. Standard items that will be around a while will be cheaper later if you wait.
3. Viable businesses that can’t get lines of credit.
4. Factories tooled and organized for what nobody wants.
5. Distribution in a manner nobody wants
6. R&D money diverted to more pressing issues.
7. Psychological blocks, people afraid to act in times of uncertainty.
8. Bankruptcy

Booksellers and car dealers are two good examples, but in every category these are the problems.

Solution

As suppliers go down with their boom times array of assets, they take capacity for innovation with them. At the same time, consumers are buying, but less, and more carefully. If they cannot find something that pleases them, they will hold on to their money. This widening unmet demand is where you belong, where you are needed to do good while doing well.

All industries are being hit tight now, so every industry is ripe for innovation.

Anyone who is listening to the customers, and redesigning for here and now, working in frequency, not volume, can both feed the widening demand that is not being met, plus come up with products for which people would in fact loosen their wallets, and thus retailers would welcome on their shelves. Start-up businesses provide

1. since it is new and may not be available later - buy now.
2. quantities are “test-level” so is not going to be discounted - buy now.
3. We carefully target by means of orders from customers exactly where people buy such things.it is where people buy such things.
4. it is fresh and new... lifts the spirits...it represents new when there is so much old still hanging around. - buy now.
3. We are financially stable, because we are operating within our means. We take advantage of excess capacity in furniture, equipment, space and logistics to better serve our customers. We even convert what was after tax costs to pre-tax expenses, to the extent allowable by law.

As for finance, the players are so keen right now that a factory that was once fully booked with 1000 customers is now serving 500, and would be keen to take you and 499 others on to feel out what opportunity there is in what is still the largest economy in the world. Whatever money you have in savings, or you can save in six months, that is all you need. You will self-finance with what you have.

This puts the entrepreneur, for the first time in at 30 years, on exactly equal footing as the established company, in fact, because of no debt, better than most. And rest assured the retailers you target have the time and are quite keen on helping you develop the products that will loosen the wallets of the few people who do walk through the retailers doors.

You know the rest from my book and classes.

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