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Is it Okay to Start a Business During Recession

November 20, 2009 By J. Angelo Racoma

It’s the big “R” word. Since the prime mortgage bubble (among other bubbles) burst middle of last year, a lot of businesses have been feeling the crunch. It’s not only small businesses and entrepreneurs who have been on the losing end. Even large corporations have been filing for bankruptcy. Big industries, like the American auto industry, had to be helped with massive bailout schemes.

Is it then a good time to start a business during recession?

The answer is a definite maybe. This is not necessarily the best time to be taking risky investments. However, if you plan your business just right, then you might be in for a successful venture. Here’s why.

It’s a buyer’s market. These days, the market is favoring buyers, and not sellers. In my experience trying to sell homes for a few friends, we’ve always had to contend with buyers’ offers. Because everyone else is selling cheaply these days (with the financial crunch), competition is tough.

Therefore, if you’re planning to start a business, you can expect good deals on assets, equipment and other things that a business may need (be it hardware or software). People are letting go of properties easy, and these are ripe for the picking.

Everything is cheaper. Related to the first point, many thing are cheaper in times of recession. Not only are buildings, assets and other products cheaper, even services are cheaper. Because a lot of people are being given the pink slip at work, many will be starting to freelance. Some would also agree to take jobs at lower rates than their previous ones.

If you’re planning to start a business, it might make sense to start now, while labor is cheap.

It’s the same with investing with stocks. Common sense might tell you not to buy shares of stock while prices are dropping. But long-term investors actually prefer to buy stocks while prices fall, because they consider the long-run average cost to be more important than the short-run returns. A lower long-run average cost, compared to a higher return (say, when you sell shares once the prices are back up) will give you some yield.

There’s no way than up. It’s a matter of perspective. When things are looking down, you should expect them to improve one time or another. If you start a business with a booming market, you might be facing tough competition from other people who have the same idea. But if you’re starting a business during a recession, then everyone else is thinking of survival or even subsistence–therefore, no one is really too keen on spending money to start up a a business and compete with you.

This is a maybe rather than a definite yes because this business strategy is not always applicable in all industries and instances. If you have extra money to burn, then by all means go for it. But if you expect banks to lend you money, then watch out for tough times–credit is expensive these days. But if you have a business plan that won’t involve much external investment, and if you can bootstrap your way into profitability, then starting a new business can be a worthwhile activity even with a recession.

Filed Under: General Tagged With: business, investment, recession, startup

The Case Against Monetization

October 26, 2009 By J. Angelo Racoma

Empty billboardYou’ve probably heard it one time or another. Monetize this … Monetize that … Monetize everything. In this cutthroat world of Internet businesses, web applications, new media networks and the like, everyone wants a cut of the pie–whether it’s in the form of advertising, subscriptions, commissions, or even sponsorships.

About four or five years back, I realized that the Internet was big business. And so I dropped everything I had going on: launched several blogs, joined ad networks, and looked for sponsors. After some time, I quit my day job and focused solely on making income from online sources.

But it’s not as simple as that. Most people would think that running a money-making website is easy as pie. Well, in some cases it probably is. If you have a great domain, steady traffic, and good products to sell, you can perhaps make it big on affiliate commissions. However, this might not always be sustainable.

For the rest of us, though, successfully monetizing a site requires time, focus, effort, and a lot of marketing. You would often see your revenues trickle in a few dollars (or cents!) at a time, until you reach that tipping point when your cashflow would be enough for the site to support itself.

And so here comes the case for or against monetization. Most experienced online entrepreneurs would advise people to focus on several things long before we think about monetizing our sites. Some popular words of wisdom I’ve come across include the following:

  • Brian Clark of Copyblogger would often advise online publishers to focus on writing good headlines. These are the first things that people see when looking at your content, and headlines could be a deciding factor on whether they will read on or not.
  • Chris Garrett, who used to edit Performancing advises to start slow, but steady. True, while Performancing essentially launched with a bang itself, its editors were mostly considered celebrities already. For the rest of us who are lesser known, then growing one’s site steadily would proably be better.
  • Problogger Darren Rowse advises to focus on a niche, rather than to spread yourself too thinly. A lot of blog networks have fallen into the trap of launching and running too many blogs about too many topics. Yes, it’s doable, but not always easy, and not always sustainable.

There are a handful of great advice out there, and these range from the very new to the very old. If you notice, my links span one, two or three years back. That’s because online entrepreneurship goes through the same cycles, and the same experiences year in and year out. Now the piece of advice that I would add is this: you shouldn’t be in a hurry to earn.

The best earning blogs, websites and web apps out there probably started out as hobbies, academic research, or something that was intended to scratch an itch, so to speak. Consider Google. Consider YouTube. I know I have a handful of personal blogs that I’ve either sold off or successfully monetized through advertisements. But I try to start clean–without sponsorships, without ads.

I think the best reason for not jumping into the monetization bandwagon too early is the matter of trust and public perception. Think of it this way: when you read a blog that has a clean, fast interface, don’t you prefer it to a blog that’s full of ads popping about here and there? Even if some advertisements are discreet, it still says something about a blog if it were ad and clutter-free. And to me, at least, it’s most especially a turn-off to see a poorly-written and poorly-maintained site that looks too commercial.

This doesn’t mean you should not plan ahead, though. Further down the road, when you’ve achieved your intended readership, traffic level, and authority, you can then start monetizing your site. It could be sponsorships, links, AdSense, or any other means. The important thing is to focus on quality, because that increases the earning potential of your site.

Image credit: flickr/westm

Filed Under: General Tagged With: business, launching, Monetization, planning

Small Businesses Should Make Better Use of Social Media

October 15, 2009 By J. Angelo Racoma

Social Way A recent report by Reuters cites a study conducted for Citibank Small Business that found out majority of small businesses do not use social media for business purposes. According to the survey, 75% of the respondents don’t find social networks and mediums like Twitter, Facebook and LinkedIn as useful in expanding their business networks or generating leads. 86% has responded that they don’t even use information from social mediums as a source for business advice.

I say small businesses stand to gain much from using social media in their day to day operations.

Granted, most small businesses out there are probably brick-and-mortar operations, which have a small sales, manufacturing, service or other activities as its main source of income. Some of these may be home-based or freelance/professional basis. Indeed, many small businesses go on by without the need to engage social mediums on a day to day basis.

But social media can definitely help small businesses expand their network, and do marketing at lightning speeds at dirt cheap costs. Offhand, here are a few benefits of social media that I think small businesses should consider.

Viral marketing

For any business, there’s nothing like a viral marketing campaign done right. Word of mouth, after all, is a very effective tool in the dissemination of information, especially if it’s done among people who are considered to be connectors. The real measure of how effective a small business can do viral marketing is not by the number of people whom you can share information with. Rather, success can be determined by the importance and influence of the people you share this information with. Social media users who are influential and trusted are better at word of mouth marketing, especially if they are within fields of interest relevant to your product or service.

Market research

Not all businesses can afford to hire marketing consultancy firms to determine market trends and do research. The Internet is rich with this information, to some extent. For instance, you can use Google Trends to spot trends in user interest for certain keywords and phrases. You can look for product reviews to find what customers are looking for. You can even search for mentions on Twitter and on blog review sites to find what people are saying about your industry or product.

Custmer relations

In the eyes of a consumer, the best companies are those that are transparent with their dealings with the public. It’s best for any business to build up trust with the consumer base. One of the ways you can do this is by being accessible from all possible channels. Most businesses already have a website. But having a contact form that lets you receive emails might not be enough. If you bring your conversations online–like through a blog, forum or Twitter, then you have a better chance at resolving possible problems even before they happen. If you’re lucky, passionate users might even build interest groups themselves, and it will be the community that does the support for your clients.

Any small business stands to gain a lot with social media. Even if the benefits may not be direct, it’s a matter of extending goodwill and enhancing your presence in an ever growing community of connected individuals. Being active on Facebook, Twitter, in blogging and forums may not necessarily be able to directly result in added sales, revenues and expanded business. But by being connected, you can start building up a network and you can gain the trust of your audience.

image credit: flickr/caseywest

Filed Under: General Tagged With: business, customer service, Marketing, Social Media, twitter, viral marketing

Are You Assuming Too Much?

October 5, 2009 By J. Angelo Racoma

Magic 8 ball I love Gmail. I use it everyday. It’s the first thing I open whenever I launch my browser. I actually have several Gmail inboxes open at any single time–this includes my main “gmail.com” email and another Gmail for domains account. I also use the mobile Gmail application on my Nokia Series-60 phone. What I like is its seamless integration with Gmail features, like labels, seach functionality and address book. And since it’s a native Symbian application (and not Java), it’s fast.

But there’s one thing I don’t like about Gmail for mobile. Once you’re connected, it seems to assume you have a constant connection to the Internet. And therefore, in the even that I walk out of a WiFi hotspot’s range, my mobile phone incessantly asks me for a connection until either (1) I select a valid connection, (2) activate a new connection, or (3) turn off Gmail.

In case #1, I should be in an active WiFi hotspot, in the absence of which I have to resort to #2, which means I have to pay connection charges (minimal, but annoying if it accumulates unnecessarily). Since I don’t want to spend extra money on unnecessary connectivity, I often select option #3. However, since the software incessantly asks me for a connection, this usually involves some keypad calisthenics, which requires me to bring up the task manager, hit the “kill” button (the erase button on the S60) and hit the confirmation button. All this while shooing away the connection window every nanosecond or so.

What’s my point in all this? I think it’s all about a usability issue. These days, you would rarely see a piece of software that doesn’t bother you for an Internet connection to update something. In fact, most would rather just go ahead and initiate a connection without your knowledge. My issue here is about the software doing something on its own, and it’s something I would rather have it not do. Software these days are too smart that it makes you feel stupid. Sometimes you have to fight with it in order to maintain some semblance of control.

It makes me feel as if developers (and businesspeople who own the services) are assuming too much. Suddenly, everyone is assuming that we all have a running Internet connection wherever we go, whatever time it is, and that we don’t care how much we spend. Well, some of us want to keep our privacy, thank you. We want to be able to control when we get online, how we get online, and how much we spend getting online.

This would be a good question to ask yourself when you’re in the process of developing an application, or just about any business (online or offline). Do you assume too much? Do you do too much of the thinking for your clients or intended userbase? Is everything becoming too automated that manual intervention would suddenly become tedious and cumbersome?

Don’t take anything for granted. Just because you’re overflowing with bandwidth doesn’t mean everyone else is enjoying the same connectivity. Just because you have massive processing power doesn’t mean everyone else’s computer is fast.

This is the core of most usability tests–try to drop all assumptions and take take things afresh. Try to put yourself in the shoes of your intended client. Try to see things from the perspective of someone who knows nothing . Try to put yourself in his situation. Will your application or service still be as cool, interesting and usable as it is from your own point of view?

Oftentimes, it’s looking from outside that we can see as objectively as possible. When you assume too much, you tend to narrow your field of vision too much, and you could lose sight of the more important things.

Image credit: flickr/banlon1964

Filed Under: General Tagged With: business, customer service, development, software, Usability

How Do You Prepare Your Business for Disaster?

September 28, 2009 By J. Angelo Racoma

HurricaneDisaster strikes anytime. Sometimes, you can anticipate it. Sometimes, there’s no notice whatsoever, and you get caught off-guard.

Just this weekend, a tropical storm hit my country, bringing in a month’s worth of rainwater in just half a day. This resulted to flash flooding, which submerged 75% of the capital in flood waters. That’s 75% of about 20 million people in the metro and its surrounding areas. While the drainage systems here leave much to be desired, this level of calamity and damage has not before been seen. Towns that are relatively high saw flooding on the streets. Those in the flatlands, valleys and residences near bodies of water were not too lucky. Many endured getting their houses fully submerged underwater (yes, even two to three storey homes). Some lives were lost; a lot were displaced.

In cases like these, small businesses would surely be facing trouble. What if you had a store or shop, and all your inventory was spoiled? What if you were into building, and your equipment was destroyed? What if you’re in the transportation business, and all your vehicles were submerged and carried away in the current? These are typical in a brick and mortar type of business.

How about online businesses, then? Does calamity have a place in today’s connected world?

In my case, I lost my Internet connection for a span of a day and a half. I did not lose electricity at my home (which also houses my office and equipment). But with the loss of connectivity, I wasn’t able to respond to messages, talk to clients, meet deadlines, and the like. It’s a good thing that a big part of my online activities involves teamwork. Thus, while some of my colleagues are also residents of areas probably hit by calamity, some are living in other countries altogether. People across the globe can share the load, then.

With one’s business being mostly virtual, one would probably think himself invulnerable to storm, fire or whatever natural disaster will strike. On the contrary, though, even if your business is purely online, you would most likely be affected one way or another.

First is when your equipment or business premise gets damaged or affected. When Hurricane Ike devastated the Americas in 2008, some of the US-based datacenters we’ve been using were affected. Or at least the support personnel that manned the hosting company were all unavailable for inquiries and reports.

Second is when your communications infrastructure fails. This has been my experience time and again. One instance was when a storm hit about three years ago. We lost power for almost a week, and I had to rely on visiting WiFi-enabled establishments just to do some work. And apart from my weekend hiatus, just a few months back, underground Internet cables had been severed, resulting in loss of connectivity to a big part of the Asia-Pacific region.

Third is when you and your staff/colleagues are at risk. Calamities often don’t just pose risks to property. Rather–and more importantly–it involves risk to life and limb. Property damage is probably acceptable, but when you and your family are faced with life-threatening situations, then it becomes more serious. Even if you have to attend to business matters, you’d rather just take time off, and bring yourself and your family to safer ground. The lost productivity is just a small price to pay for safety!

In any eventuality, it pays to be prepared, and to make arrangements beforehand such that you minimize (or mitigate) risk, and have a backup plan for everything. For an online business, or even any business in which data or internet connectivity is an integral part of operations, here are a few things I can think of as part of one’s contingency plans.

  • Backup your data and store these in multiple places. Be sure to keep copies of your important data in safe places. Best if you have these in a format that’s not easily destroyed, such as by magnetism, shocks and breakage. If you have really sensitive information, you can store these in different servers across the world. Or in the case of server-intensive services, you can distribute the load across the globe. Suddenly, cloud hosting sounds like a good idea.
  • Have a backup connectivity plan. Most online professionals probably rely on broadband internet connection at home or the office. Most would have some form of backup plan, like a 3G-enabled mobile phone, a secondary connection, or even a dial-up account. It’s best to have at least two ways to connect, so if one fails, you have others as backup. Even if a mobile connection can be really slow, it’s still a good way to communicate with colleagues and clients, so you could explain your situation.
  • Offer help. Not everyone gets into major trouble during calamities. If you’re fortunate enough not to have been badly hit, it would only make sense to help others in whatever way you can. In terms of business and marketing, this generates goodwill. But of course, it also generates that warm, fuzzy feeling inside of you, knowing you’ve helped others in time of need. And knowing that after a disaster itself will come rescue, relief and rehabilitation activities, perhaps you could also help raise money for a good cause.

Disasters are usually a time when competitive barriers are let down and everyone tries to pitch in to help. Any business, even if it’s not rooted too much on physical infrastructure, would surely be affected one way or another. Are you ready for this?

image source: flickr/alpoma

Filed Under: General

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