The jobs recession is here: Time to get to work - Janszen

[Andreuccio]

Re: The jobs recession is here. Time to get to work.

Actually, that sucker was 17 pages when downloaded. I just read the punch lines. Come on, I have a young family and pregnant wife! (And work ain't no cake walk right now.) I want it all packaged with a bow. Do you know how many crazy tomes Sapiens recommends? Hee-hee.

I won't even go into what trying to keep up with Rajiv's stuff is doing to my life at the moment.

Agreed, Sapien's must either be one hell of a speed reader or he's got Cliff Notes on some pretty obscure texts.

Still, I think you really are working too hard. This one's pretty easy. You're looking for one South American country and one Central American country. Start reading. When you've found one of each, stop. You're done.

Maybe no bow, but giftwrapped.

[gasull]

Re: The jobs recession is here: Time to get to work - Janszen

This may strike readers as counter-intuitive, but a recession is the best time to start a new business. You might think the opposite is true, because investors are freer with money and customers spend more during booms. On the other hand, talented labor is dear, fixed costs like rent are high, and competition is fierce. Companies that start in recessions tend to be well differentiated, with dedicated teams, and a powerful will to fight the odds. They are inherently stronger than the me-too companies you see form at the tops of economic cycles that pile into an already crowded market only to disappear in the next downturn. If you work for a company and you see a customer problem that day in and day out is ignored, start to write down a list of the things you'd do differently for that customer if you were running the show. Develop contacts with that customer, so if you are laid off and decide to start a company later you can approach your contacts for "advice" on your business idea. That first conversation may eventually turn them into your first customer, if they are willing to engage with you to refine your service or product idea. A second customer will follow the first, and within a few years you will have a business that's ready to take off when the economy turns around. That is how most entrepreneurs you have heard of have succeeded. Think you need a fancy business plan and venture capital to start a successful business? Nonsense. All you need is a good recession.

A recession is an opportunity. Don't miss this one.

This is the most interesting part of your post. I wish you develop this idea further in another article.

[FRED]

Re: The jobs recession is here: Time to get to work - Janszen

This is the most interesting part of your post. I wish you develop this idea further in another article.

There is a long section in EJ's upcoming book The New New Deal (Penguin) the covers the topic. Stay tuned!

[Jay]

Re: The jobs recession is here. Time to get to work.

Agreed, Sapien's must either be one hell of a speed reader or he's got Cliff Notes on some pretty obscure texts.

Still, I think you really are working too hard. This one's pretty easy. You're looking for one South American country and one Central American country. Start reading. When you've found one of each, stop. You're done.

Maybe no bow, but giftwrapped.

It wasn't the countries so much as I wanted the impact of the changes and how it relates to possible currency issues facing us now. That is what I really wanted.
Cheers.

[Andreuccio]

Re: The jobs recession is here: Time to get to work - Janszen

There is a long section in EJ's upcoming book The New New Deal (Penguin) the covers the topic. Stay tuned!

Maybe you posted this somewhere already, but when's the expected publication date?

[Andreuccio]

Re: The jobs recession is here. Time to get to work.

It wasn't the countries so much as I wanted the impact of the changes and how it relates to possible currency issues facing us now. That is what I really wanted.
Cheers.

Ah. That's a great question, but now you are asking a lot.
Cheers right back at you.

[mcgurme]

Re: The jobs recession is here: Time to get to work - Janszen

This may strike readers as counter-intuitive, but a recession is the best time to start a new business. You might think the opposite is true, because investors are freer with money and customers spend more during booms. On the other hand, talented labor is dear, fixed costs like rent are high, and competition is fierce. Companies that start in recessions tend to be well differentiated, with dedicated teams, and a powerful will to fight the odds. They are inherently stronger than the me-too companies you see form at the tops of economic cycles that pile into an already crowded market only to disappear in the next downturn. If you work for a company and you see a customer problem that day in and day out is ignored, start to write down a list of the things you'd do differently for that customer if you were running the show. Develop contacts with that customer, so if you are laid off and decide to start a company later you can approach your contacts for "advice" on your business idea. That first conversation may eventually turn them into your first customer, if they are willing to engage with you to refine your service or product idea. A second customer will follow the first, and within a few years you will have a business that's ready to take off when the economy turns around. That is how most entrepreneurs you have heard of have succeeded. Think you need a fancy business plan and venture capital to start a successful business? Nonsense. All you need is a good recession.

Great article, as usual!

Maybe it's prescience, or maybe it's just dumb luck, but about 8 months ago I went out and did exactly this. While I already have a full time teaching job, I saw an opportunity to take advantage of my skills in electric bicycles and sports utility bicycles, to start a business promoting these kinds of car replacements (Cycle9.com).

But this leads me to a few questions for EJ or the other list members here:

- Starting a business takes capital. Often for a small business, this means expanding one's home mortgage, because banks don't give unsecured loans to new businesses (or perhaps any businesses in today's market). Yet many of your previous recommendations have been "get out of debt". I often find myself grappling with this issue. How can one decide how much debt to take on as part of a new business, in this economy?

- We are presently located in a low-cost lease situation, but it is not an ideal location. We'd like to move into a better location in our local college town (Chapel Hill, NC). However, the rents there haven't come down at all recently even with the economic downturn - they are still at or above the levels of a few years ago. Some folks here think they won't come down, because we are a college town. But I am very hesitant to get stuck with a 5 year lease at a premium rate, when the economy is headed south. Do you think that some locales might defy gravity and keep their rents high?

Again, thanks a bunch for your insights.

Morgan

[c1ue]

Re: The jobs recession is here: Time to get to work - Janszen

Morgan,

Don't commit a lot of funds to space.

Go further out.

One suggestion which I employed: via the county recorder's office or your own experience - go around to buildings which are empty and which have been owned by the same person for a long time.

In CA - the property taxes on these is very low so there is really almost no limit to how long the rent can be.

If your cash flow is good, you can keep an eye out for a better spot.

Of course, I speak of manufacturing vs. retail. Retail is going to be a different equation. But even then you may have medium to short term sublease opportunities.

[EJ]

Re: The jobs recession is here: Time to get to work - Janszen

Great article, as usual!

Maybe it's prescience, or maybe it's just dumb luck, but about 8 months ago I went out and did exactly this. While I already have a full time teaching job, I saw an opportunity to take advantage of my skills in electric bicycles and sports utility bicycles, to start a business promoting these kinds of car replacements (Cycle9.com).

But this leads me to a few questions for EJ or the other list members here:

- Starting a business takes capital. Often for a small business, this means expanding one's home mortgage, because banks don't give unsecured loans to new businesses (or perhaps any businesses in today's market). Yet many of your previous recommendations have been "get out of debt". I often find myself grappling with this issue. How can one decide how much debt to take on as part of a new business, in this economy?

- We are presently located in a low-cost lease situation, but it is not an ideal location. We'd like to move into a better location in our local college town (Chapel Hill, NC). However, the rents there haven't come down at all recently even with the economic downturn - they are still at or above the levels of a few years ago. Some folks here think they won't come down, because we are a college town. But I am very hesitant to get stuck with a 5 year lease at a premium rate, when the economy is headed south. Do you think that some locales might defy gravity and keep their rents high?

Again, thanks a bunch for your insights.

Morgan

Congratulations on the new business. The secret to success for any reseller business is to maximize margins and minimize costs by getting exclusivity from the best manufacturers on the most desirable products in as large a geographic area as you can, then keep fixed costs at a minimum – e.g., no long term leases if rents are declining – and manage cash flow and inventory carefully, even if your business appears to be expanding rapidly. Never let manufacturers load you down with inventory, no matter how deep the discounts in the "sweet" end of quarter deal. Good luck!

[mcgurme]

Re: The jobs recession is here: Time to get to work - Janszen

Hi Clue,

Thanks for the input. We do a bit of both retail and (very light) manufacturing. But the retail component is very important to us right now, and being where we are just doesn't bring a lot of direct exposure. It is a great idea to check the recorder's office - will definitely do that.

In the future, we plan to get more heavily into the manufacturing end, as the cost of imports continues to increase for all the reasons discussed in many threads here. But that will take time to develop, and perhaps when that becomes a significant part of our business, we can do that at a separate location.

Morgan

Morgan,

Don't commit a lot of funds to space.

Go further out.

One suggestion which I employed: via the county recorder's office or your own experience - go around to buildings which are empty and which have been owned by the same person for a long time.

In CA - the property taxes on these is very low so there is really almost no limit to how long the rent can be.

If your cash flow is good, you can keep an eye out for a better spot.

Of course, I speak of manufacturing vs. retail. Retail is going to be a different equation. But even then you may have medium to short term sublease opportunities.

[mcgurme]

Re: The jobs recession is here: Time to get to work - Janszen

Congratulations on the new business. The secret to success for any reseller business is to maximize margins and minimize costs by getting exclusivity from the best manufacturers on the most desirable products in as large a geographic area as you can, then keep fixed costs at a minimum – e.g., no long term leases if rents are declining – and manage cash flow and inventory carefully, even if your business appears to be expanding rapidly. Never let manufacturers load you down with inventory, no matter how deep the discounts in the "sweet" end of quarter deal. Good luck!

Hi
Thanks! Great advice. We have definitely been doing some of this - getting exclusive territory on a number of up-and-coming products from reputable manufacturers. And we have been modeling cash flow carefully in anticipation of the downtime (winter months).

But, the challenge is, rents aren't declining, they are holding steadfast around here. So that poses a conundrum about what to do. We could just "wait it out," but then if rents don't decline here, we will have missed a lot of opportunity for better exposure at current rents. Anyway, I thought you could predict the future, to tell me what will happen here? ;)

But, again, thanks. It was in part reading all the stuff on iTulip that made me think this business was the right thing to do in the first place.

Morgan

[EJ]

Re: The jobs recession is here: Time to get to work - Janszen

Hi
Thanks! Great advice. We have definitely been doing some of this - getting exclusive territory on a number of up-and-coming products from reputable manufacturers. And we have been modeling cash flow carefully in anticipation of the downtime (winter months).

But, the challenge is, rents aren't declining, they are holding steadfast around here. So that poses a conundrum about what to do. We could just "wait it out," but then if rents don't decline here, we will have missed a lot of opportunity for better exposure at current rents. Anyway, I thought you could predict the future, to tell me what will happen here? ;)

But, again, thanks. It was in part reading all the stuff on iTulip that made me think this business was the right thing to do in the first place.

Morgan

Sorry, can only forecast markets that I know. Here in the Boston area I've stayed in touch with the agencies that helped me locate space for my last two companies. Rents had been rising since 2004 until recently, and are now declining, especially farther from Boston. There was a lot of over-building here during the boom. Outsourcing also reduced the need for office space. I have no direct knowledge of the local retail market, but judging by the preponderance of FOR LEASE signs at malls and other locations, the circumstantial evidence is that rents are under pressure. I don't know the special economic and supply circumstances in your area but I have a hard time believing that a consumer recession is bullish for retail rents even in the absence of over-building, although a seller's agent will always tell you rents are either rising or are about to. Hope that helps.

[jimmygu3]

Re: The jobs recession is here: Time to get to work - Janszen

I have no direct knowledge of the local retail market, but judging by the preponderance of FOR LEASE signs at malls and other locations, the circumstantial evidence is that rents are under pressure.

When we were kids, my brother and I used to play "count cows" on road trips. Yesterday my wife and I played "count the FOR LEASE signs" while driving around Atlanta.

[c1ue]

Re: The jobs recession is here: Time to get to work - Janszen

Morgan,

If your primary concern is traffic and retail space, one option you might consider is a small prime retail space with an inventory storage area farther away.

Of course, for the market you appear to be targeting - I would ask why the internet and the whole electronic sales thing isn't more effective.

I guess it would depend on your present and anticipated/desired volume.

[mcgurme]

Re: The jobs recession is here: Time to get to work - Janszen

Morgan,

If your primary concern is traffic and retail space, one option you might consider is a small prime retail space with an inventory storage area farther away.

Of course, for the market you appear to be targeting - I would ask why the internet and the whole electronic sales thing isn't more effective.

I guess it would depend on your present and anticipated/desired volume.

Hi,
Good questions, thanks.

The answer isn't based on purely business/financial logic. My business partner and I are doing this in part to have a positive impact on our local community. Our business is filling a real void here. In terms of pure profitability, it might make more sense to just do the internet thing and forego any expensive retail space. But, since we are doing this to make a difference, there are many customers who will never buy something like an electric bicycle or bicycle conversion kit sight unseen over the internet. Plus there is the question of support. We want to reach some of those folks. Nonetheless, while our store is doing reasonably well from walk-in sales, internet sales remain critical to the cash flow.

But anyway, if I were looking at pure profit, at least for now it would have been better to just seek out consulting gigs related to my day job (it's in an area of biotech). So a lot of this business is about passion, not money making. My money making goal is to have it be at least profitable enough that it is self-sustaining (and paying off the loans), so that it can continue to have an impact in the future. If I make money beyond that, it would be great, but not essential.

One other consideration is that having a real, physical store often brings us added legitimacy in the eyes of consumers and suppliers alike. It is very hard to estimate the impact of that overall, but it certainly does have a positive impact. It also gives us access to brands that will not allow sales over the internet, or in some cases only allow such sales in conjunction with a physical store.

I do like the idea of the dual location, and we had once considered that. So far, however, there aren't any decent, small spaces we've found that might fit the bill... we'll keep looking.

And in response to the other comments - it may be surprising, but there really aren't many "for lease" signs around here close into town, where it is walkable/bikable. There are more further out, but that's where we are now, and it is ironic being a bike store that is not in a bike-friendly location...

There was a story in the local paper about a long-established family pizza joint having to shut down because when their lease came due, the landlord upped the rent almost 2-fold, to around $30/sq ft. The landlord had no problem finding another taker at that rate... (for around here, that is high in a historical sense).

So, maybe we are in a gravity-defying zone? House prices have declined a bit here, but so far, no sign of commercial rents declining.

Morgan