Harry Potter Economics

After reading this post, all I have to say is that it's a bad idea when a business, any business, depends entirely on one client, one company, one product. I guess those associated with the Harry Potter phenomenon are no different.

From Businesspundit.com. . .

Businessweek has a look at the twisted economics of Harry Potter. While the book has been a financial windfall for some, it's been painful for others.

What should be a pot of gold for Harry's business partners is turning into an empty cauldron for many of them. The most successful literary brand in recent history has made its author a billionaire, but others have not fared so well. Retailers, spellbound by the chance to reach millions of Potter-obsessed customers, are cost-cutting for market share to the point where many stand to lose money. For book publishers, the tsunami distorts results in Potter release years, creating wild share-price swings and a distraction from other parts of the business. Even Warner Bros. Entertainment Inc. (TWX ), which has made billions off the Harry Potter movies, saw sales and profits drop last year and in the first quarter without a fresh Potter offering in the mix.

When an industry relies on a few blockbusters for most of their profit, some participants will do whatever it takes to gain market share and use the blockbuster as a loss leader. Then it becomes a race to the bottom where the winner is whoever can sustain losing money the longest.

I've seen the "one major client" problem with credit unions who started out dedicated to only one company for their membership. When the company reorganizes, downsizes, merges, or closes entirely, the credit union is in a shambles.

I've also seen small businesses fold when their one big client switches to another vendor or shuts down the project altogether. High tech companies struggle when the technology advances, usually in one big leap, that leaves them far behind in the race, if not obsolete.

As the saying goes... "don't put all your eggs in one basket." Diversify your portfolio.

Seth Godin shamed me

Yes, Seth Godin has shamed me.

In a recent post on his blog, Seth Godin talks about how important it is for business people and business consultants to read business books and business blogs. He asks the following questions:

If you went to a doctor who told you that she hadn't read a scholarly article or taken any training since med school, would you stick around? What about a lawyer who doesn't read law journals or a dentist who never bothered to read up on the newest case studies?

With those questions, Seth shamed me into reading more. Don't get me wrong... I read, and I read a lot. And I love books. I own a lot of books. But I have to admit, I don't really read them. More often than not, I skim them, read bits and pieces, read chapters that really interest me at the time, but I don't really read them.

At the beginning of the year, I sat down and set a few goals for myself. One was to read at least one book a month -- 12 books during the year. I didn't specify that they be business books -- just books.

I recently participated in a survey for a grad student who's writing his thesis on the mind of the entrepreneur (scary subject). One question on the survey was "What goals do you have to help you become your Ideal Entrepreneur?" My answer: Read one book a month.

Like I said... I read a lot. Not just books. I read other blogs everyday. I have my favorites listed in my feedreader. I have e-newsletters I subscribe to. I get business publications and magazines. It's tough to keep up on all the information and opinions available, but I try. Sometimes I think I could have a full-time job just reading.

So I've renewed my commitment to really read at least one book a month. Every night before I fall asleep, I'll read for a few minutes. (Typically, I play solitaire on my pda to disengage my brain.)

So what am I reading now? All Marketers Are Liars: The Power of Telling Authentic Stories in a Low-Trust World by Seth Godin, of course.

Profits Straight to the Bottom Line

Pricing can be one of the most difficult challenges businesses face. Assuming that cost is the deciding factor in whether someone does business with them, many people simply choose to undercut the competition and price their products and services lower. This is a big mistake, as outlined in Wilson Ng's post Profits Straight to the Bottom Line.

Perceived Value: If price was always the deciding factor, we'd all drive a Kia.

If you look at the world’s most successful companies, whether it be BMW, Coke, Microsoft, Toyota, Apple, IBM, HP, Nestle, Starbucks, and others, you will find with utmost consistency that they are not the cheapest - and the definition of success is indeed that people pay a premium to do business with them.

Success is when you can charge higher than competitor, and customers still want to do business with you. If you work for a company, would you define yourself as successful if you feel that you only got the job because you were willing to accept a lower salary than everybody else?

Maximize Profits: If price was always the deciding factor, we'd all eat at Taco Bell and shop at Walmart.

The success of Walmart is not about lowering prices. It is about their ability to lower their cost thus increasing their ability to lower prices. In short, don’t offer lower prices, unless through volume or efficiency, you are able to have a roadmap in which you are able to lower your cost.

Ultimately, when determining your long-term pricing strategy, Wilson Ng encourages you to focus on 2 strategies: a.) increase the price that your customer is willing to pay you. b.) Look for ways to see how you can lower your expenses as a factor of per unit production, and if you can do that, then yes, it is a viable strategy to offer a lower price.

We don't need no stinking bylaws

A group of us are starting a 501(c)6 not-for-profit association for Denver pedicabs. I just need to say, "I hate writing bylaws!" Anytime you start a new business, the paperwork is always the worst part. I know, that's what you pay an attorney and an accountant for. They seem to like headaches like this. But no matter what - bylaws, business plans, financials - some of it you just have to do yourself.

Blegch! I feel better now. Just had to get that out of my system.

Small Business Trends for 2007

If you're a small business, I'm certain you've faced some of the employment trends/challenges highlighted in this blog post by John Mariotti. And if you're thinking about starting your own small business, you might get a clue about what holes you can fill by looking at the tips for solving some of these dilemmas.

And in another post, highlighting a study by Intuit on the Future of Small Business, you'll see diversity, the rise of personal business, and growth in entrepreneurial education topping the list of trends.

And while you're there, Craig, take a look at the Pet Industry Trends for your awesome gourmet pet food and treats business - Colorado Pet Chef.

Business plan? Who needs one?

In a recent post, Guy Kawasaki references a Babson College study on alums who started businesses with and without business plans. Their findings may fly in the face of popular business [training] thought - and a lot of business planners may be unhappy. "...the study found no statistical difference in success between those businesses started with formal written plans and those without them..."

So the basic recommendation is that you not spend hours and hours on a formal written business plan unless you're going for money - like investors, loans, capital, etc. It can serve to improve communication and get your team moving in the same direction. I think the most important statement was, "A great plan won’t make a lousy idea successful, and a lousy plan won’t necessarily stop a great idea."

I've seen too many great ideas get bogged down in over-planning, over-thinking - what some people call analysis paralysis. For some folks, planning is safer than actually doing. There's real risk involved in starting a new business. You have to put your whole self on the line. That can be a very scary proposition.

Granted, I'm generally an early adopter who jumps in quickly (although age and experience has tempered that impulsive urge a bit - just ask my mom). I've learned to spend a little more time researching and analyzing the challenges and opportunities. Guy's recommendation to keep your business plan short and not spend more than 2 weeks on it fits perfectly.

After being involved in the start-up of several successful businesses (none with formal written business plans), I say "go for it!"

Which are you?

In his blog, Seth Godin asks the important question: "Which are you?" It's much better to be a "the" than an "a". Are you A realtor or THE realtor? Are you A salesperson or THE salesperson? Whatever your profession, strive to be THE, not A.

Google's Philosophy

I've been working diligently on redesigning the Whole Brain web site while I'm recreating my company and myself (more on this later). I was looking for some samples of a business philosophy because I want to include one on the new site when I ran into this one from Google. I thought it was very interesting to see how they think about what they do. Although it's lengthy, it's not terribly boring because it's written in a "google-style" -- friendly, conversational, open -- not a lot of fancy wording, just talk. See for yourself.

Lessons from the Lemonade Stand

For anyone in a management position -- whether you work for yourself or someone else -- these common-sense tips are a wealth of information! Included in these 101 little gems of wisdom are managing yourself, time, resources, people and more.

"Lessons from the Lemonade Stand: 101 Common Sense Management Tips"

And if you want to try your hand at running your own lemonade stand, check out this free online game: Lemonade Stand.

Life and economics are all about choices: play your way to success with Get Real! Or become a neighborhood tycoon as you run your own Lemonade Stand. Games from Moneyville.

One of the best seminars I've ever attended was The Accounting Game, based on running a lemonade stand. It was so much fun and a great way to learn to manage the numbers and read financials. (Yes, accounting can be fun.)

The Accounting Game : Basic Accounting Fresh from the Lemonade Stand

When Unproductive

Commentary to remember on the value of down-time. Again, by Michael Wade.

On those days when you feel unproductive: Consider that you may feel unproductive while actually being highly productive. Samuel Johnson, the author of the first dictionary of the English language, referred to himself as a "castle of indolence."

Work on something - anything - however small, so at the end of the day you can note one thing that was done.

Recognize that being unproductive can be productive. You may be subconsciously preparing yourself to be more effective when you eventually turn to the central task. You may also be refraining from rash action that would be harmful. As Secretary of State George Shultz put it, "Don't just do something, stand there."

We were not made to be speed-reading minute-fillers. We were designed to be distracted and to ponder; to mess around and approach problems from different angles. Few lives and careers proceed in a straight line; instead, they resemble mountain climbers who occasionally move sideways in order to gain the better grip or clearer perspective that permits them to proceed upward.

In short, there are days when "being unproductive" is the most productive thing you can do.

The Career Manifesto

When pondering your career, here's some food for thought, whether you're employed by someone else or yourself. By Michael Wade from Execupundit.

1. Unless you’re working in a coal mine, an emergency ward, or their equivalent, spare us the sad stories about your tough job. The biggest risk most of us face in the course of a day is a paper cut.

2. Yes, your boss is an idiot at times. So what? (Do you think your associates sit around and marvel at your deep thoughts?) If you cannot give your boss basic loyalty, either report the weasel to the proper authorities or be gone.

3. You are paid to take meaningful actions, not superficial ones. Don’t brag about that memo you sent out or how hard you work. Tell us what you achieved.

4. Although your title may be the same, the job that you were hired to do three years ago is probably not the job you have now. When you are just coasting and not thinking several steps ahead of your responsibilities, you are in dinosaur territory and a meteor is coming.

5. If you suspect that you’re working in a madhouse, you probably are. Even sociopaths have jobs. Don’t delude yourself by thinking you’ll change what the organization regards as a “turkey farm.” Flee.

6. Your technical skills may impress the other geeks, but if you can’t get along with your co-workers, you’re a litigation breeder. Don’t be surprised if management regards you as an expensive risk.

7. If you have a problem with co-workers, have the guts to tell them, preferably in words of one syllable.

8. Don’t believe what the organization says it does. Its practices are its real policies. Study what is rewarded and what is punished and you’ll have a better clue as to what’s going on.

9. Don’t expect to be perfect. Focus on doing right instead of being right. It will simplify the world enormously.

10.If you plan on showing them what you’re capable of only after you get promoted, you need to reverse your thinking.

Thanks, Michael!