Starting a Business In Bad Times

An inventor sent me this article. It shows how to take advantage of the downturn and start a successful business. Read on...

By Joan Lefkowitz, Accessory Brainstorms

"Few can believe that suffering, especially by others, is in vain.Anything that is disagreeable must surely have beneficial economiceffects." - John Kenneth Galbraith

You might think that during times of economic recession consumers arein no mood to experiment with, or purchase inventive products.Counter-intuitively, starting a business or launching an inventionduring a recession can be one of the smartest moves to make- dependingof course, on if you take certain factors into account. Looking atpast recessions and consumer psychology can give us ideas on the typesof inventions that can succeed during an economic downturn. Let's walkthrough some of these themes that appear on the psychologicallandscape during a recession.

Nesting

Let's start with how people are feeling during these uncertain times.Recessions can generate fear and uncertainty in the minds of people.All around, people are watching others suffer economic hardship,losing their jobs and homes. A result of this is a mindful gratitudethat they are not that person they see struggling on the nightly newsor in their neighborhood. An appreciation of what one already has, asopposed to what one can attain becomes paramount.

That's why many inventions that do well during hard times have to dowith comfort, organization and do-it-yourself products. Nesting relates to all things related to the home; personal possessions,making oneself more comfortable and secure, improving homeenvironment, and making one's life more functional. It's also a knownfact that during recessions, many people have less disposable incometo spend on going out, so home entertainment and gaming items arealways popular. An example of an inventive gaming product introducedduring this recession is The Sega "Project Beauty" virtual realityvideo game (designed for Nintendo DS), which helps women try outdifferent make-up looks via their TV screen.

The Magic Fur Ball helpstake care of your clothing and laundry by removing people and pet hairfrom fabrics in the dryer. Lumbarwear is a soft undergarment thatsupports core and back strength, while providing comfort to thewearer. Tag Tamers is another product that enables comfort byrelieving the itchiness of garment labels and eliminating the need tocut them out of clothing. By the way, replenishment products such asthis are great for repeat sales. The stylish Shoe Seen is atransparent shoe pouch that helps people organize and store theirfootwear. All of these are products that satisfy that urge for nesting.

Competition- "Looking Good is Feeling Good"

People are looking to improve themselves to compete in a tougher jobmarket. They become acutely more aware of their own presentation andappearance, viewing the world as a more competitive, rather thanfriendly place. A recent `Do-it-Yourself' beauty invention that's ahit in the market is the ZENO PRO Acne Clearing Device (uses heat toclear blemishes), which despite retailing at over $100 saves moneythat would otherwise be spent at the dermatologist. Another example ofa grooming tool that's time and money saving (no trips to the salon!)and makes the consumer look good is R.E.M. Spring, a battery-freefacial hair remover. Slimpressions is a shapewear product designed toslim a woman's arms, back and midriff. These products help people lookgreat, and also are created to deal with ongoing beauty issues.

Survivor

Where once people saw life as a progression of economic milestones,lowering expectations during a recession to "just getting by" becomesroutine. Products that emphasize survival in the economic storm shouldbe central in the minds of inventors. For example, Steam Buddy ironthat replaces dry-cleaner wrinkle-removal (plus, you don't have todrag out the ironing board) costs about $20, but saves the averagecustomer $100's in dry cleaning bills over the course of a year.Re-usable items that replace disposables, such as Zorbeez absorbentcloths that are used in place of paper towels, will also appeal tomoney-strapped consumers.Back in the 1960's, there used to be special areas in departmentstores that sold "Notions" or problem-solving personal products. Todaythese types of products that emphasize personal preparation arethriving on the internet, and in mail order catalogues.

Examples include Hollywood Fashion Tapes, double sided clear tape for "fashionemergencies", and Bosom Button, a discreet jewel-like pin which allowspeople to wear clothes with embarrassingly low necklines, or turnscarves into skirts.Escapism…and HopeRecessions can cause collective anxiety and panic within the public.

Thoughts of losing ones job, the home that the job pays for, and allits contents, are scary enough. It's common knowledge that during thegreat depression, the movie cinemas served as a great escape for themasses. Often those movies featured the lives of the rich and famous,in the most expensive and lavish of clothes and settings, a starkcontrast to the movie-goers reality. Bars and liquor stores alsoexperience an uptick in clientele. What is entertainment but an escapefrom the mundane.

Escapism is a search for hope and magic. Hope iswhat people need and crave most during tough times. People are lookingfor things to magically improve their lives.

Examples of "magical" and entertaining products include the "Roomba" robotic vacuum cleaner and"Change Rocks", the inter-changeable, multi-stone ring. Another suchitem is the Shower Bow Shower Curtain Expander, which creates a moreluxurious bathroom experience, by creating more space in the shower.People need little extravagances as opposed to big ones.Tips

For Inventions

Let's look through some of the hallmarks that make for good retail inventions:
It is functional and simple to use. It makes life easier, while makingthe user feel better, smarter, more efficient or more attractive. It'sfun to use. It retails for $40 or less, yet has an element of magic.It saves both time and money, and is reliable, durable, safe andperforms well. It is convenient to store.

During a recession, otherattributes of successful inventions would include items that helpconsumers repair/improve or re-use what they already own.The item should be visually and tactilely appealing, have a nice shapeand be made available in an attractive color, with smooth edges and aneven finish. Packaging should be compact and the product name catchyand memorable; logo and graphics are clear and easy to read. Photos ofproduct results should appear on the front of the package. Simple'how-tos' should appear on the back of the package.

What Wholesale Buyers are Looking ForMost inventions are currently sold to wholesale buyers and/or solddirectly to the public (through internet and TV commercials). Inselling to wholesale buyers, it is critical to keep in mind theirperspective. Wholesale buyers are on the lookout for something that will cut through the jungle of "stuff" already out there, that will sell itself, and is so novel it needs little to no advertising. In cash poor times, buyers are looking to tighten inventories bybuying and stocking less, and paying less for products in order toincrease profit margins, while offering value to customers. Some ofthe ways to appeal to a buyer and help them market your product are: Source for the best pricing on materials and labor. Keep size of theproduct to a minimum (which takes up less space on the store shelf).Provide alluring signage, displays and photos if the retailer permits.Offer live demonstrations and inventor "guest" appearances. Offer"how-to" videos to stores that will run them on the selling floor.Offer bonus booklets showing extra style or use options as a method ofsampling or giveaways. Create special price breaks to buyers if theywill "outpost" your product in multiple locations in a store. Provide periodic surprising new add-on products to keep the buyer interested, grow your solitary item into a full product line; and help theretailer satisfy consumers who are always looking for "what's next"(regardless of the economy.)


Why This is a Good Time for You, The Inventor

You may be unemployed, or in need of extra money. You may be scared totake that next step. You may have been waiting for the "perfect time"to launch your invention. But now is the time to put your idea intoaction. Now is the time to push yourself to compete, and complete yourvision. Take advantage of recessionary times. If your invention issuccessful during a recession, it can really thrive during good times. As Frank Sinatra's most famous song said, "If you can make it here,you can make it anywhere", we say "If you can make it now- go for it!"

Joan Lefkowitz (who knows how to spot a retail trend when she seesone, having represented inventors through her third recession), is anoriginal marketer of TopsyTail tm, and is president of ACCESSORYBRAINSTORMS, NYC, a licensing agency, sales representation andconsultancy for Fashion and Beauty Accessory and Lifestyle Inventions.www.accessorybrainstorms.com

Social Entrepreneurship

I attended a presentation on ITN America. It's an example of social entrepreneurship at its best. Social entrepreneurship uses business practices to solve social problems. The founder recognized a need -- transportation for seniors -- and devised a sustainable method of meeting that need. Read on...
ITN America – Independent Transportation Network

ITN CEO Katherine Freund has worked on ITN for the past 18 years. Other cities and areas are adopting her model.

Westport and its surrounding towns are considering starting an ITN in coastal Fairfield County. Connecticut already has two ITNs – Middletown and Enfield.

Key Points
· American households spend 25% of their income on transportation. 91% of people’s trips outside their homes are made in cars, 8% by walking.

· ITN is a local solution to the senior transportation challenge. It’s an example of “social entrepreneurship” – using an entrepreneurial business model to meet a social need.
o ITN started by discovering what the needs were and then designing a solution.

· ITN replicates private vehicle ownership using public and private resources in partnership.

· ITN uses technology (computers and telecommunications) to create an efficient system to use excess capacity in private vehicles;
o sharing rides, dispatched by a central office,
o driven by volunteers using their own cars or fleet cars that were donated,
o passengers pay
o volunteers are reimbursed for gas and maintenance on a per mile basis.
o Rides are available 365 days a year, 24 hours a day for any purpose.
o Riders get a 20% discount for sharing a ride and a 50% discount for reserving the ride 24 hours in advance.
o Scholarships are available on a needs-basis.

· Half the expenses of the organization are funded by fares. The rest comes from membership fees, donations from local businesses and corporations, grants from governments or foundations and an annual fundraiser.
o People can donate cars and get credits that they use to get rides or enable a relative to get a ride. Volunteering works the same way.

· Good for the local economy because it enables seniors to get out and shop, go to medical appointments and socialize (go to restaurants, movies, concerts, worship).

· Costs $125,000 to get launched and pay for the software. (It’s a bit like a franchise.)

· CT may have a $50,000 transportation grant available to help start such an enterprise.

· Connecticut insurance and livery laws have been changed to allow this.
o Drivers must have special license.

Laffer on Prosperity

Laffer had an excellent opinion piece in the Wall Street Journal yesterday. Laffer points out that our economy and stock market have done better with less government intervention and lower taxes. Reagan's and Clinton's administrations were the best for our economy in recent years. I'm hoping that because Obama has economic advisors from Reagan's and Clinton's administrations that he will follow their advice.

I've pasted the piece below. Hopefully, I'm not violating copyright laws. Here is also a link to the WSJ.: http://sec.online.wsj.com/article/SB122506830024970697.html

By Arthur Laffer

About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
David Gothard
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
The net national debt in 2001 was at a 20-year low of about 35% of GDP, and today it stands at 50% of GDP. But this 50% number makes no allowance for anything resulting from the over $5.2 trillion guarantee of Fannie Mae and Freddie Mac assets, or the $700 billion Troubled Assets Relief Program (TARP). Nor does the 50% number include any of the asset swaps done by the Federal Reserve when they bailed out Bear Stearns, AIG and others.
But the government isn't finished. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid -- and yes, even Fed Chairman Ben Bernanke -- are preparing for a new $300 billion stimulus package in the next Congress. Each of these actions separately increases the tax burden on the economy and does nothing to encourage economic growth. Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
I was on the White House staff as George Shultz's economist in the Office of Management and Budget when Richard Nixon imposed wage and price controls, the dollar was taken off gold, import surcharges were implemented, and other similar measures were enacted from a panicked decision made in August of 1971 at Camp David.
I witnessed, like everyone else, the consequences of another panicked decision to cover up the Watergate break-in. I saw up close and personal Presidents Gerald Ford and George H.W. Bush succumb to panicked decisions to raise taxes, as well as Jimmy Carter's emergency energy plan, which included wellhead price controls, excess profits taxes on oil companies, and gasoline price controls at the pump.
The consequences of these actions were disastrous. Just look at the stock market from the post-Kennedy high in early 1966 to the pre-Reagan low in August of 1982. The average annual real return for U.S. assets compounded annually was -6% per year for 16 years. That, ladies and gentlemen, is a bear market. And it is something that you may well experience again. Yikes!
Then we have this administration's panicked Sarbanes-Oxley legislation, and of course the deer-in-the-headlights Mr. Bernanke in his bungling of monetary policy.
There are many more examples, but none hold a candle to what's happening right now. Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.
Mr. Laffer is chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let it Happen," just out by Threshold.
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