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Friday, December 10, 2010

THE FOUNDER’S DEN: Consolidation Era

The time frame we sit in is known, by economists, as a consolidation era. If you look back on the last twelve years from a charting perspective, you can notice some very basic things. We experienced a huge bull run, or incline in the market, with the dot com business which led into the year 2000. From there we have seen a tremendous bear run, or decline in the market. In the real estate world we witnessed one of the best times in industry history through 2007, and since have seen one of the most discouraging real estate markets in our country’s lifespan. This trend, a huge rush upward and then a huge fall, is consistently followed by a 7-12 year period where the markets do not move much. They go up and down but generally stay within a certain range; this is called a consolidation era.

In these times of economic turmoil we see many of trends that are consistent with each other. Some examples include rising unemployment, the power of the dollar decreasing, and shared-space businesses. The shared-space business is a simple concept: two separate companies sharing space to provide their goods or services. If this concept seems foreign, think back ten years ago and consider the gas station business. Could you stop and fill up while you waited for your favorite sandwich artist to make you a turkey on wheat from Subway? Were you able to go to Wal-Mart and buy your groceries, clothing, home goods and a number two combo with cheese from McDonald’s? Of course you couldn’t, it was not a consolidation era.

So what does this mean to you? Why is this so important to understand? The reasons are numerous, and we could discuss them for days. However, in this article I am going to cover three main points and give you some advice on how to leverage your business accordingly. It is important to do the following things to optimize the current economy:

  1. Acquire talent

  2. Profit by affiliation

  3. Locate inexpensive growth opportunities

In eras like the one we are experiencing today, we realize that businesses are going to shut down. The economy has a way of squeezing the weak out of the market, which should be seen as an opportunity for those that are still in business. A business closing means that people will be out of work (talented people), furniture and computers will go on sale for fractions of the cost, and new office space will open up. So how do we take charge and make something positive out of something so negative?

First, remain aware of the local talent that may be sprouting up after one of these businesses closes down. This decade’s employment scenario will include thousands of superstars on the market with nowhere to place them; this is a rare and wonderful opportunity for employers. Individuals that have lost their jobs in this economy accept and understand that they will not make the kind of money they have made in the past; this is just a fact. Use social networking tools like LinkedIn and Facebook to monitor an audience and locate who is out there. Make sure you have your ear to the street and listen to the problems in your community, it will not only help your business but it will allow you to help your community.

Aside from being able to find new talent, many doors will open for you to find more value. The more value you add, the more successful your business will be. The more value a customer sees in your product or service, the more often they will buy from you. Look to find ways to profit by association in 2011. Find ways to use the consolidation era to your advantage instead of resisting it.

Welcome those companies that used to be competition and work together. Find companies that offer a service or a product that can add value to your offering and cut a deal to work as a team. Create a powerful team of relevant offerings that will ultimately drive revenue through your hands. Find a complimentary business and ask them if you can assist in their marketing efforts by opening your book of business to them as a referral network. In times like these, it is just as important to find ways to offer savings as it is to show ways to create profits. If you own an accounting firm and are hurting, go to a local financial planner that could use a boost in his marketing and send clients their way in exchange for a shot at their customers.

Look to new methods of distribution as a way to profit by association. There are so many ways to expand your wings and explore creative solutions it’s staggering. Use the internet and offer your product through affiliate sites, open an e-commerce store, share links with businesses online to create new orders and so on. You can also look to the market to find these avenues in the real world.

For example, I have a friend that owns a candy store in the mall and he came to LWI for advice. We suggested he launch an e-commerce site and start using social media as a way to promote, and it’s working. I also told him to contact another friend of mine that owns a party store. The candy store now offers party supply materials and custom ordering through a store portal, while the party store is offering a ton of new candy to their customers thirty miles away. They both realized that they could work together instead of competing and that they had built in channels to provide a new product to each other through their product carriers. This is profiting by association.

Profiting by association is a simple way to increase reach, revenue, opportunity, and growth. It also happens to be an inexpensive way to expand your business in the blink of an eye. We will go more in depth on this topic and include additional real world studies in upcoming newsletters in 2011. Have a great holiday and remember; always use your vision, not just your sight.

By Eric A. Rice


The Founder's Den

The Founder’s Den is a collaborative group of successful entrepreneurs, attorneys, investors, tax professionals, and advisors who are committed to sharing their knowledge, expertise, and resources to improve the environment for rising startup businesses. The Founder’s Den Members come from a variety of professional backgrounds and business sectors, and are focused on leveraging their wisdom and experience to offer advice to young companies, and in select cases the Den serves as an incubator for promising ventures who are in need of support to turn their plans into reality.

Eric Rice is a successful entrepreneur and has built a number of businesses in sectors ranging from financial services to gaming. He is currently the CEO of LWI, a non-traditional marketing firm specializing in social media and online branding.

Eric Rice

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The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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