Gordon Woolf's Blog

Start a business - but don't risk the house

Gordon Woolf suggests a slow start using market stalls and the trendy "pop-up store" might be the better way

It was a casual discussion: An acquaintance was unsure of his work prospects as the company he worked for had put off several people and rumours were that some more jobs might go. He told me that what he and his wife would really like to do was to start their own business.

They had got as far as a talk with an adviser at their bank and he had worked out what he thought they would need to start a retail business in a field they both knew something about, basically what had been a hobby for many years.

But the more he delved into the idea, the more money it seemed they would need: advance payments for rent, the cost of fitting out a shop, deposits with utilities such as the electricity supplier, and the few suppliers he had contacted were happy to provide the products, but only with advance payment and sometimes with substantial minimum order quantities in order to get the discounts they knew they would need to be competitive.

The bank was actually quite happy to provide a loan, but only if they secured it either with a second mortgage on their home or renegotiating their whole mortgage. Despite house prices dropping slightly in the area they lived (in part due to the job insecurity which was leading him in this direction) they had been paying off their loan diligently and had a good equity.

The stumbling block was that his wife was not prepared to risk their home on what seemed to him to be a project destined for certain success.

He was more than a little surprised with my reaction: "Good on her!" was the Australianism I used.

I did tell him the old story about a lot of new businesses failing in their first couple of years and of only a small minority still being around after five years. I did temper that with the added information that many of those were not really failures; they were ideas that people had tried and closed because they did not work out as intended, or even because family circumstances changed, but where all the bills had been paid. To try an idea and get out without any debts is not failure, at least not in my eyes.

The problem with this couple's plan was that they were intending to invest far too much, and being encouraged in that intent by their loan provider.

My suggestion was that while he was still at work, they should start small, with a stall in a couple of local weekend markets, and start a web site (perhaps using eBay) and hand out flyers and cards wherever they could.

As the business grew, as I was sure it would, he could take some of his accumulated holiday and long service entitlements to spend time seeking the bargains that are always around to people who have cash to pay for them. Even large wholesale suppliers will often be generous in interpreting those quantity discounts for someone who is prepared to pay cash. Maybe they won't split a carton, but you can ask for that 5-carton rate to apply on the single carton order if you are paying on the spot. (It could just be the few hundred dollars that means they can avoid going into overdraft to pay their four-figure power bill due tomorrow.)

This does mean that the new business needs a reserve of cash for these opportunity purchases. That cash can quickly disappear if it is going to pay the interest on loans.

Our budding retailers could also consider the latest trend for "pop-up stores". The very trend which has affected this couple's house value could also mean that there are empty stores in their nearby shopping areas. Landlords have become accustomed to insisting on long leases and ever increasing rental payments, even if they have to offer rent-free periods and subsidised fit-outs to get them, but those in strip shopping streets in particular may be willing to accept a rental for a few weeks with options of renewal. Landlords are by nature optimistic; they always think the market will pick up and their premises will be let long term in the next week or two, even if it has been empty for a year or more.

It is amazing how good a store can look with a few tables and boxes covered in crepe paper, but do get a lawyer experienced with retail leases to check out a lease before you sign it: that will be a good investment. You'll also find some good display equipment available secondhand, and watch the auction websites for the stock from failed businesses that is still effectively new. It could also be worth asking around retail stores. I found an Aladdin’s cave of rescuable display fittings in a shed behind a local department store.

It seems that "instant retail" is fostering other businesses to cater for the trend. I found a business in that name which hires display equipment and an online search for pop-up shop brings all kinds of entries from blogs to services intended to link renters with landlords.

So, my advice for the would-be new business entrepreneur is to start small, and start cheap. Put what money you have into finding good reliable suppliers of goods at prices which will give you the margin to gradually build up your business. You may need some good luck but I would suggest that you do not start with a loan.

PageMaker 7 goes better with Windows 8

Three years ago I wrote an entry here about successfully installing PageMaker 7 desktop publishing software in Windows 7. Well, now I am happy to report just a few, mostly expected problems in getting that software to work with the 64-bit version of Windows 8.
There are a couple of gotchas, but they were easily overcome.

GOTCHA 1:  Do not to try installing an Adobe postscript print driver in 64-bit.

However I did install Distiller 5.0 which then told me I needed a postscript print driver. I then saw that one of the options for a manual install of a printer to print to file was the MS Publisher Imagesetter so I selected that to print to file and PageMaker 7.0 created a PDF via Distiller with none of the problems I saw with Win7. The MS Publisher driver presumably came as part of the Office pack I have but I'd guess than anything which installs an imagesetter driver would work with PM. Other people's experiences welcome. 

GOTCHA 2: You cannot run scripts in PageMaker on the 64-bit version of Windows.

I suspect that PMscript.exe is a 16-bit program so if you need to run scripts, then 32-bit installation is the best you can aim for - probably via a program such as VirtualBox. However most of the Utilities in PM7 do continue to work.

GOTCHA 3: Do NOT install Adobe Type Manager. It isn't needed.

Win8 is happy with postscript fonts. The fonts you need for templates are in a folder on the installation DVD named Fonts > Template Fonts. To install them in 64-bit Windows 8, just select the .PFM files of those you want, right click and select "Install". There are many other fonts in the Fonts > Extra Fonts folder.

PageMaker remains essential to me for opening old files, especially books created before the advent of InDesign. However it can also be tempting to use PageMaker for a simple DTP job that does not need the power of InDesign. I'm pleased therefore that it can remain in mu arsenal. Despite it now being relatively ancient in computing terms it is still on sale on the Adobe website for $499, about half the price of InDesign CS6. 

 

How can they sell at 50% off?

As I write this the end-of-year sales are on and it seems every store in catalogs and on TV is advertising "50% off". How can this be legitimate? Does it mean I paid too much at any other time of the year?

My answers are: Yes, and Maybe.

Let us look at how retailing works. The retailer buys either from a manufacturer or a distributor. There will be standard discounts which will vary according to the trade and type of product. Basically it will also depend on how quickly the items are expected to sell and the risk if they remain unsold. For example, a newspaper or milk may be sold to the retailer on "sale-or-return" so effectively the retailer only pays for what they have sold, while the distributor takes back the day-old newspapers or the week-old milk. The retailer is expected to pay quickly but will always get a credit for the returns, often before the account has to be paid. That can mean they do not have any capital tied up but the percentage profit they make, whether calculated on the price paid by them (the cost price) or the price paid by the customer (retail price) is small.

On the other extreme, in the fashion industry, as it was traditionally, the stock changes either twice or four times a year, and has to be ordered well in advance of the changing season. When prices were stable the clothing store would bundle up the winter clothes as summer approached and store them until next winter. But fashions change and changes were encouraged by the trade, so the fashion end of the retail market would expect to sell the new season's clothes at a big mark up, at least double the price they paid to the distributor.

They would know that not everything would sell quickly but they needed stock in their store through the season. Their takings would become less as the season progressed and it was normal to offer discounts and, at the end of the season to sell whatever was left in a clearance, often at half price or less. That would mean they made no profit on the last items sold, maybe even made a small loss. But overall there would be a normal profit, provided they made the right decisions when they made the initial order. As an example, let's say they bought 100 dresses at $10 each. That's $1000 paid out. If the first 50 sell at $20, that's their cost back, and the remaining sales, let's say they all only sold in the clearance, at $10 (which is "at cost" or a genuine 50% off what they had been selling for, then overall they have made a gross profit of $500 on that original $1000. Out of that they have to pay all the expenses of running the shop.

The retailer buys most stock knowing that they are going to have to discount in the end so they buy on the basis that they must make a certain average margin across sales of the entire stock. Then they make guesses, based on experience, about how much of the stock they will be able to sell at "full price" and how much at various discounts. They then set up their "full price" (which might be +100% or even more of the wholesale purchase price) and their various discounts to give them -- on average -- the margin or gross profit they must make on selling the entire stock.

Now it starts to get complicated, because we have to cope with the opposing forces of increasing production costs, a rising currency conversion rate, changes in fashion and whether there will be a new, improved version of the product coming soon. With rising inflation and/or a falling dollar it will not cost $1000 to replace what cost they bought previously. It may cost $1050 or $1100, and those extra dollars have to come out of the profit from the previous season.

If changes are the other way, and the replacement equivalent will cost $900 or $950 then it may seem that retailer is doing better and has more than his $500 overall profit. We tend to have a well informed public and if it is an electronic product instead which is being cleared at "50% off" then even that apparently huge discount may not be enough, and so discounts rise even higher. The superceded TV or tablet may have to be almost given away once an announcement of the new version has been made. Much better to have sold it for whatever the retailer could get a few weeks earlier.

Things get even more complicated when a distributor offers increased discounts according to the quantity purchased. The savvy retailer needs to make a lot of calculations and include some informed guesswork to decide whether the extra discount is worth the added risk. If the extra discount is sufficient, then the retailer has to decide whether the incentive to the customer should be offered when he buys or after he has sold his expected number of items at what is now an additional profit. This decision may also be affected by whether the product has a use-by date.

Manufacturers make mistakes, especially with variations such as flavours or colours. They may make arrangements to advertise a "special" and give the retailer an incentive to have greater stocks at that time. The retailer with cash reserves may buy then knowing that he'll sell more "on special" and have sufficient left bought at the better price to cover normal sales for a period thereafter. This will not work if the manufacturer has packed the "special" with different wording, such as a date-limited competition.

My real estate friend was fond of saying "there's a price for everything". The skill was finding that price. To the savvy customer who does not mind having last season's electronic gear or fashion, and the product with an expired competition date may be at an attractive price in a clearance store.

If we are to continue to have suppliers in the future, whether on-line or physical stores, then it is not the profit on any individual item which matters, it is whether the retailer is making sufficient overall to pay for the replacement stock plus all the other costs, including a wage for the retailer, and thus progress into the next trading cycle.

This brief summary does not cover all the reasons why you can legitimately find products at "50% off", but I have a couple of further warnings: Beware statements such as "up to 50% off" where many items may be at full price or at a much lesser discount, and beware the second or third tier chain trick of have legitimate branded products packaged without a normal accessory or tool and compared with the price of the full item "elsewhere".

You should also consider reasons for purchasing other than price. Will the place you are buying from help if you have problems? Or just be willing to show you how a device works, or set it up as well as delivering it? Price isn't everything.

Gordon Woolf is a co-author of Success in Store: How to start or buy a retail business, enjoy running it and make money, available from Amazon and The Worsley Press.
 

How quickly do you reply to emails?

I have to admit that I tend to be tardy in replying to emails. Though I will reply quickly if I have to, I usually like to think about many replies and often, for the more complex replies, the response will come overnight or while relaxing with my tablet or a physical book.

However, I was somewhat concerned by a comment on a forum that people should not expect emails to receive a quick response "because they would not have got a quick reply when correspondence was by letter and what is now called snail mail."

I have memories of more than one mail delivery in a day and to a term that has now fallen out of use: "Please reply by return of post". Then an Agatha Christie mystery on TV had a plot which depended on a letter sent in the morning being delivered that evening, so I decided to find out a little more.

It seems that in cities such as London and New York the postman could go by each address as many as 12 times in a day and it was common to expect a reply "by return of post" meaning an expectation of delivery within a couple of hours and of a response a couple of hours after that.

Randall Stross covered the subject well in the New York Times back in 2010: The birth of cheap communications (and junk mail)

He states: "And, not unlike us, most Victorian letter writers seemed more concerned about getting a rapid response than a long one. 'Return of post' was an often-used phrase, requesting an immediate response, in time for the next scheduled delivery that day."

The real revolution in mail occurred not with email but with the penny post of Victorian times, well covered by Catherine J. Golden
 in her book "Posting It: The Victorian Revolution in Letter Writing" published by University Press of Florida.

This revolution soon spread to many other countries and letter writing came within the reach of just about anyone in society. Unfortunately, as a reviewer of this book commented, "Indeed, the revolution in letter writing of the nineteenth century led to blackmail, frauds, unsolicited mass mailings, and junk mail--problems that remain with us today."

The New York Times reported that 2000 “swindling establishments” were using the postal system "just after the Civil War".

So next time you take a little longer than you'd like to reply to an email or are upset by the amount of spam, reflect on these being problems that did not start with the computer. They began in Queen Victoria's reign, with the advent of the penny post.

I'm a Windows 8 convert

I'm now using Windows 8 every day, but not quite the way Microsoft intended.

It was supposed to be a slow conversion. I loaded it as a dual boot with Windows 7 (and then used iReboot loaded in the tray so I could reboot to the other OS at any time, and used EasyBCD to set Windows 7 as the default system. (Actually I set Ubuntu as a third option, starting from an entirely separate hard drive but that is now a very seldom used option).

The conversion from 7 to 8 came much quicker than I expected, being little longer than it took me to install most of the programs I needed: Thunderbird, Firefox (I'm not a convert to the new IE), KeePass, NoteTab, MS Word, InDesign, AceMoney, Skype and a few others.

But I had to get a Start orb back, and opted for Classic Start Menu, but that may not be a final decision. I like the Win-X menu choices and have not yet made any additions to the set choices from that, but I would like a means to get that menu with the mouse.

I have installed a number of additional Apps but I find I seldom go to the Metro screen (just seen quickly at start-up as we move on to the desktop, and most of those I've tried I have subsequently uninstalled or just ignore... Some, such as Evernote and Skype are just better in the desktop version but that could change as things develop. However, once I'm in desktop mode, that is where I stay.

But on this same computer the start-up is several seconds faster, the close (from a shutdown.exe shortcut on the desktop) is faster and more consistent than the same shortcut in Windows 7.

I can see that in the future I will get rid of the Classic Start Menu orb and rely on Win-X (the Windows key, X combo) to access search, control panel, run, etc. At present the Orb is a security blanket.

In general almost all the programs I've used in 7 have installed without problems in 8, and so have my printers and all-in-one scanner/printer despite them being a problem with the earlier iterations of Windows 8. So far the problems have been with a ROM-I/O midi output/input for a Casio music keyboard and an ancient barcode program that has worked previously on everything since Windows 95.

So, as I said at the start, I like version 8 of Windows and it will now remain my daily OS with just the occasional need to go back, or persuade myself I need an equipment/software combination upgrade. However, the procrastination bug may hold sway on what is, after all, a computer that originally held Windows XP. 

A new future for newspapers

Will there be newspapers in printed form in the future? I think there might be with the recent development of digital presses which can print 40,000 complete newspapers in a 6-hour shift. That makes it conceivable to have several plants on the outskirts of a city distributing inwards and then outwards across the rest of the state. They might be a little more expensive than today's dailies but they will be serving a smaller readership and probably have fewer pages.

It is already possible to buy a copy of each day's Sydney Morning Herald each morning in Wellington, New Zealand, at around $12 a copy. Yes that's a lot of money but if you happen to be a Sydneysider on business in New Zealand for a week it is not ridiculous to spend around $70 for a week to have the news from a source you know available every morning within an hour or two of it being published in Sydney.

Latest circulation figures show that most metropolitan newspapers have dropped by around 25% in circulation in the past decade, but regional and country newspapers, while also down, can measure the decline in single figures. I do see an end coming for the free weeklies in suburbs where there is little sense of community. But in country towns I think we will have printed newspapers for many years to come; they have never been easy to justify in cost but that means their publishers get used to cutting costs. Digital presses could return the printing of small town newspapers to the communities they serve - and perhaps their ownership will return to locals too.

One man or woman with a copy of InDesign and a $1000 computer might need a $100,000 digital press (think wide-format sheet-fed inkjet) for a multi-page tabloid newspaper, but if you are happy with an 8-page tabloid that cost might be halved. And it is technology that while being relatively new, is available now. And as the newspaper starts to print so the website and smartphone/tablet apps will also activate.

This state has already seen the one-man newspaper businesses which had the press on the back of a wagon following the miners in the gold rush. We could see similar businesses resulting from the new technology, but there is a warning: some of those newspaper people had some pretty intense views. Balance was not one of their desires in editorial writing.

There are many websites with info on digital presses suirtable for newspapers but one of the good ones is at Print21.

Learning to be a shopkeeper the French way

"A Pound of Paper" by John Baxter is subtitled "Confessions of a book addict", but is more than a memoir of a collector and "runner" in the secondhand book market, it is worthy reading for anyone cocerned with retailing.

In a late chapter in the book, after he had moved to France John Baxter particularly compares French ways of doing business as a retailer with those of other countries he has lived and worked in -- Australia, England, the USA etc.-- but I see those not so much as nationalistic descroptions but rather comparisons between different types of retailing. And I suspect that many customers would rather do business with those who play retailing "the French way".

I quote...

When Napoleon called England "a nation of shopkeepers", he wasn't only sneering at their lack of military style; he was expressing the general scorn of all right-thinking Gaulois for anyone who buys and sells for a living....the blood of emperors flows in their veins.This puts a different complexion on the world of commerce in France. It explains, for instance, the less-than-cordial reaction of a café owner when a foreigner walks in, takes a table and waves for a menu. The café owner isn't in business. This place is his home, where he may, if it suits him, serve you a cup of coffee...

There is more, but I wonder whether we in other countries have lost the respect we should have for the small retailer.

It is not completely lost; on Sunday morning I instinctively asked the local café owner if we were not too late for breakfast at 11.30 (and of course we were not!) And I am still a little sad that the mobile phone repairer who asked another customer to show me how a feature of my phone worked; I gained an acquaintance that day and we still nod in passing even though the store has given way to a big franchise business. In the new store such a happening would be unthinkable.

I do not believe this is just nostalgia. We need the level of shopkeeping where we do not just deal on price, the store where the two sides of a deal can be conducted with friendship and an acknowledgement that there should be a fair deal at a fair price.

An anglo-saxon suggesting we could learn from the French way of shopkeeping? I wonder what Napoleon would say?

*A Pound of Paper" by John Baxter, published by Doubleday, 2002

Think before you add a comment

Most bloggers that we know now filter comments so that they are all previewed and only those which mean something pass through to public viewing.

Most of the comments we receive go straight to the "delete" bin and a few are reported to our hosting service as spam. In the main these are obvious, comments with links to questionable sites, or with links to programs or movies that are probably paying those who direct users to their sites.

But some are more thoughtgul and at first viewing appear to be legitimate. Take the following:

Reading your article I have discovered answers for number of questions that have been troubling me for long time now. Its not easy to find professional publications on the web as many such publications are made by people with no knowledge of the topic. Your publication is excellent and definitively worth reading. I’ll sure be back to check for updates in few days.

The problem with that is it contains no worthwhile reference and could have been sent to just about any blog. Therefore I assumed it was spam and despite it appearing to be from a legitimate highschool address, it too got dumped. To the sender, Ged, I offer this advice: If you are actually reading anything on the sites you visit, then try to at least say something that looks like a genuine comment rather than some text which could be sent anywhere.

To others, I do welcome genuine comments, but I will not feel unduly concerned if you are among the bulk of visitors who read and move on.

As a writer, learn to listen

It was virtually my first lesson as a young journalist... and certainly the first which stayed with me for my whole career. If you are going to write, you have to learn to listen.

It is not just advice needed as a writer. It applies just as keenly if you are doing desktop publishing and have to produce the copy for a leaflet or advertisement. As a specialist in design, you are unlikely to be skilled in the field for which you are producing the design.

So, listen.

With a little prompting, everyone who knows their subject will want to tell others about it, but he or she may be concerned that they do not know how to use words, and the most difficult part of that will be to create the first sentence.

That's you job... to sift through your notes of exactly what they have said and to work out what are the key phrases. Often you will be best served by giving the information in the expert's own words - with just a little light editing.

If you don't understand something then ask, even if you think you may seem a fool for asking the obvious; it is far better to seem a fool to one person that to be proven one when thousands read your result.

I was brought up in what I've seen described recently as a city slum -- it was the area which was razed and rebuilt as the home of the London Olympics. I knew nothing about the country, but one of my early journalism jobs was on a farm machinery magazine. I was supposed to be doing editing and layout but with a tiny staff it meant I also had to go to agricultural shows. When I asked what was new I was likely to be told all about some fantastic new machine; at the very least I had to keep asking questions until the company rep or spokesman would point to something so that I knew which machine to get in the photograph. Much longer and I would have had to admit my ignorance.

Another common error is preparing too many questions in advance of interviewing someone for an article. I saw the effects of this with a TV news host who progressed from one prepared question to the next without listening to the answers until the politician who was being interviewed had cause to stop the interview with the comment "Didn't you hear what I just said?" He had given a direct answer to a question he had been avoiding in earlier interviews but this interviewer was left wallowing, and seemingly unsure what the previous answer had been.

So again, the answer is: Listen.

 

Cut-and-paste: why such a problem on a tablet?

I use a password safe program called KeePass on my PC and laptop in both Windows and Linux versions. This makes it easy to use complex passwords as all that is necessary is to drag the appropriate username and password from the KeePass window into any dialog in a browser which needs them. I was therefore pleased when I discovered that there was an Android version called KeePassDroid that could be downloaded freely from Google Play.

But that was before I discovered just what a pain it is to do a simple cut and paste on a tablet.

The instructions are given below.

1. Choose any record in KeePassDroid.
2. If the Username and Password fields are populated, notice two lock
icons in the status bar at the top of the screen.
3. Hit the home button, go into the browser, navigate to your web site.
4. Drag the status bar down and notice the two KeePassDroid rows, one
for username and one for password.
5. Touch the "Copy username to clipboard" row.  It will disappear.
6. Touch and hold the username field on the web site until the paste
menu pops up, and paste.
7. Repeat steps 4, 5, 6 for the Password.

I suppose I will eventually get used to doing it without the instructions sitting in front of me, but it does remind me of some of those descriptions which Mac users used to revel in showing how hard something was to do under Windows compared to the single action on a Mac.

Last time I had to enter a username and password on a website accessed from the tablet I swapped over to my laptop and did a simple right-mouse-key copy and paste in Windows.

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