Saturday, August 30, 2008

Why This May Be a Great Time to Buy a Business

Times are challenging. Consumer confidence is down. Credit is tight. You'd have to be crazy to buy a business in this environment right? Maybe not.

First, there are a few preconditions: Make sure you have enough cash on hand to do effective marketing. One of the most common mistakes of new business owners is to grossly underestimate the need to advertise. Even loyal customers need to be reminded of your existance on a regular basis, and new customers are always essential. Second, find something you're really interested in. You're going to be immersing yourself in it. You don't have to be an expert in the field. I know plenty of people who have successfully purchased businesses in fields they had little or no experience in, but you have to like what you're doing. Third, if you're going to buy an existing business, get one with a good reputation and location. The main advantage of buying rather than starting is to take advantage of an existing client base.

Why is now a good time? Recessions come and go. Seasoned business veterans have learned how to deal with them. But, it's hard work. Margins are lower, budgets are lower. Basically, you have to work your tail off for limited return until the economy recovers. People who were considering retiring in a few years anyway may well decide now is the time. Real estate values are lower and lower sales figures in recent months may justify a bargain purchasing price. The name of the game in business is buy low, sell high, but few people actually practice it. Most people wait until the economy is humming along nicely to jump on the bandwagon, setting themselves up for a rude awakening when the inevitable slowdown arrives. Getting in at the bottom of the cycle can help you develop efficiencies and good cash flow discipline habits right off the bat.

Take advantage of the seller's experience. You may have some great new ideas you want to implement. Some may work, some may not, but somebody who has kept a business running for decades through good times and bad has valuable insights and wisdom to share. Try to make at least a few weeks of consultation part of the package.

If you're shopping for a business of your own, don't wait until things turn around. You'll only be adding to the purchase price. If you're going to be in it for the long haul, you'll need to learn how to operate in a sluggish environment anyway. If you have the working capital and the drive, this could be a great time to get to it.

Tuesday, August 12, 2008

What Constitutes a Right in a free society?

The term "right" gets thrown around and misused a lot in our society. Questions frequently come up, such as "Is health care a right?" "Is education a right?" It may seem a tough question to answer, but the litmus test for rights is really quite simple.

Nobody has a right to another person, their time, their labor, or their property. A legitimate right is something one can have without any action being taken by another. In fact, in most cases rights are simply prohibitions on stopping you from doing something. You can excercise the right to free speech, free association, freedom of worship, without any action being taken on my part.

Education, health care, food, shelter, etc, are all nice things to have, but gauranteeing them for you would require that someone else provide them. Slavery is inconsistent with a free society. Therefore any product or service that requires the labor of another cannot be a "right".

You have the right to bear arms. You don't have a right to handgun. (you have to buy your own). You have the right to free speech. You do not have the right to an audience or a forum. You have the right to free assembly. You do not have a right to free meeting space. You have the right to freedom of religion. Society does not owe you a church.

Although we like to think of rights as being "inalienable" and something we are "endowed with by our creator", they really mean nothing unless/until we as a society, recognize and enforce them. We could make declarations that everyone has a right to health care, education, housing, food and other basic needs. Doing so would require that we also compel someone to provide the money, the resources, the time, the labor and everything that goes into producing and distributing these "rights". Naturally, this would require that the production and distribution of such goods and services be mandated, overseen and regulated by the government. Call such a society whatever you want, but you certainly couldn't call it "free".

Monday, August 4, 2008

Remote Storage DVR Decision - The Courts Got One Right

There are two extremes in the intellectual property rights arena. One that believes all recorded media should be free and one that believes that every time you hum a song you should pay the recording industry a royalty. Common sense got lost in the shuffle.

There is hope however. A US appeals court overturned a lower court decision barring Cablevision from developing a system that would allow users to record video from their TV on Cablevision servers. Content providers argued that it would amount to uncompensated rebroadcast of their material. The court rightly concluded that since the consumer decides what to record, when to record it and when and if to play it again, Cablevision isn't rebroadcasting anything. They're just selling storage.

We've actually taken some giant steps backward in the recorded media arena as far as consumer rights. In the good old days, before cd's and iPods and dvd's you could record just about anything you wanted and play it back when you wanted. You could record songs off the radio on your cassette tape and you didn't have to register the five tape players you might want to play it on with Steve Jobs. Incidently, if you're looking to break the chains of ITunes, Amazon now offers unrestricted mp3's at the same price.

Another, perhaps bigger concern in the industry is that people wont watch the commercials. The standard model of showing bits of content interrupted by commercials works very well. But it is not a constitutionally protected business model. Let the market find a new one. Restricting innovation to preserve the current one is counter-productive.

As for the artists, if you don't believe you're being fairly compensated for what you produce, don't produce it. When I buy a hammer, I don't pay an extra fee if I loan it to my neighbor, I'm not restricted as to how many times I get to use it, and I don't have to tell you where I'm going to store it.

There is lots of potential in the remote storage market. Artistic content is the tip of the iceberg. File storage and remote applications are the logical progression for the mass market. Google is one of the few companies that seems to understand that the future of technology is in enabling information flow, not restricting it.

Here's a hint for those who still don't get it. A typical song download costs 69-99 cents. Many companies will pay several times that per click for traffic to their sites. What if the song was free, but you had to go to an advertiser's site to download it. Hmmmm?

This case will likely wind up in the Supreme Court. Nothing is more counter to a free society and free markets than the restriction of information flow. There's more at play here than whether or not Miley Cyrus makes another 20 million dollars this year. Does a product provider or the government have the right to tell you how, when and where you're going to use the product? Hitler and Mousellini seemed to think so.