Things I Learned on Vacation

There’s nothing like a trip to a place that’s heavily into tourism to validate the law of supply and demand.  For example, the price of a gallon of unleaded gasoline in Branson, MO is as much as 40 cents/gallon more than it is just 30 miles north in Ozark, MO. 

When people go on vacation, they seem to lose all consciousness about what things are supposed to cost.  Or maybe they just don’t care.  It’s only once a year and they’ll worry about the bills when they get home.  When was the last time you bought one of your kids a pop-gun or a hill-billy hat?  Under normal circumstances the answer is probably "never".  For that matter, most kids wouldn’t normally be caught dead in a hill-billy hat.  Yet you see kids and even some adults proudly sporting a pointy felt hat with a corn cob pipe sticking out of the side all over town when you’re on vacation.  You just know that hat will never again see the light of day once the wearer gets home.   The same  can be said about coon-skin caps, cowboy hats, and baseball caps with all kinds of odd sayings on them.  And, don’t forget the T-shirts.

If some band you’ve never heard of shows up in your town and charges $50 a ticket to see them, most normal folks will pass.  But the tourists line up to get those same $50 tickets to see that same unknown band and are happy to get in.  Don’t get me wrong.  There are some very good entertainers in Branson, people you have heard of and would gladly pay top dollar to see wherever they are.  But there are also some no-names who seem to do quite well.

Nobody in their right mind would pay $8.00 for a beer or $7.00 for a soda……unless they were at a Major League Baseball game.  Then, the sky’s the limit. 

The point is that value, like beauty, is in the eye of the beholder.  The retail value of anything is exactly what the customer is willing to pay, no more–no less.  And sometimes, price is no object, like when you’re on vacation.  But, it’s not just vacationers who make these decisions.  Every consumer does it every day.  Our job is to determine what that value is and price our merchandise accordingly.  Cost-plus pricing was fine in our grandparents, maybe even our parents, day.  But if you use it today you’re losing sales some of the time and leaving money on the table other times.

Some time back we did a series of posts on pricing.  If you missed them, or if you’d just like a refresher course, look for the "Categories" section in the right-hand column of this page and click on "Pricing".  If you have any suggestions or additions, please let us know.

By the way, is anyone interested in a slightly-used hillbilly hat or a pop gun?  If so, let me know.

A Pretty Good Week

It’s always a good week when you’re on vacation, but it’s an even better week when there’s good news waiting for you when you get back.  As we’ve discussed here before, a blog "carnival" is a blog that reposts what it considers to be the better posts available that week on its particular subject matter.  Last week four different carnivals chose our post, Not So Smart After All, for publication.

Carnival of Small Business Issues is a Canadian carnival, from Halifax, Nova Scotia.  It’s always interesting to get new ideas from a different perspective.  Our northern neighbors have the same issues and concerns that we do.

Carnival of Small Business and Startups is a relatively new carnival.  This is just its second edition, but it includes some very good posts.  You should give it a look.

As the name implies, One Man Band is primarily intended for single-person, on-line businesses, but many of the posts are just as valid for larger businesses, too.  They hosted Carnival of the Capitalists last week and were kind enough to give MYOB their Second Click-Through Award.  You’ll have to check it out to see what that means.

Last, but certainly not least, The Carnival of the Entrepreneur, hosted last week by s-proprietor.com, chose Not So Smart After All for inclusion. 

Blog carnivals are a great way to find new sources for valuable information.  We always appreciate it when one of our posts gets included and encourage you to check them all out.

Doing Business Locally

An article available on the American Independent Business Alliance’s web site entitled The Benefits of Doing Business Locally is a must-read for anyone concerned with their local community.  The article begins:

From
rural to urban areas, an ever-growing chorus of citizens laments losing
a sense of community.  This trend is considered symptomatic of our loss
of community orientation, but could it also be a primary cause?  And
how is our economic well-being impacted?

The article goes on to point out the social and economic void that’s created when local businesses disappear. 

Local governments are often pursuaded to give public funds and tax
breaks to national chains based on the promise of new jobs and tax
revenues.  What the officials fail to understand is that the new jobs
aren’t new at all.  They’re just replacements for jobs that are lost in
the area.  Often these "new" jobs are part-time at lower pay and with
less benefits than the jobs they’re replacing.  The increased sales can
also be an illusion as they just replace sales that were already
occurring in the marketplace.

A 2003 study on economic impact in Austin, TX concluded that for
every $100.00 spent at a national chain, $13.00 remained in the local
community while $45.00 of every $100.00 spent with a local business
stayed there.

Originally posted May 23, 2006]

Small Business Myths

In this past Sunday’s Napa Valley Register, writer Beth Pratt exposes 8 myths about starting and running a small business. 

1. Over 95% of small businesses fail.  In the
1990s there was a report that said 95% of all new restaurants fail.
Somehow, like the old "telephone" game, this statistic somehow got
applied to all small businesses.  According to the Small Business
Administration 2/3 of new small businesses survive at least two years.
Over 1/2 survive at least four. 

2. The government will give you cash to start a business. The SBA will guarantee a loan, but the government isn’t in the business of making loans.

3.  My favorite.  Small business owners are rich and get to take it easy.  No comment needed.

4.  I’m a good cook so I should start a restaurant.
Feel free to insert any specialty in place of the word "cook" and any
type of business in place of "restaurant".  As we all know, there’s a
big difference between doing any other type of work and running a
business.

5.  Failure is bad.  Most successful business owners will tell you that they failed many times before they became successful.

6.  Small business owners, with few employees, don’t really have to worry about federal and state labor laws.
As you know, it just isn’t so.  In fact, lacking human resource and
legal departments, small business owners may have more to worry about
than their larger counterparts.  This is one you’d better take
seriously.

7.  You need a lot of money to start a business. It depends on the business, but getting the money is usually not an obstacle to getting started.

8. Money will fall out of the sky if you have a great idea.
Money’s never easy to come by, but hard work and persistence are
usually more important than the idea.  Edison had lots of great ideas,
but he had to work awfully hard to make any of them successful.

[Originally posted November 2, 2006]

Service Before the Sale

I’ve
heard more than one dealer (in various industries) make the statement
that if someone buys something from a big box store, they’d better not
come to this dealer for service.  It’s not an unreasonable thing to
say.  After all, the big box made the sale (and the profit), they
should handle the problems.  Why should I help them by helping their
customer?

Seth Godin answers that question in his post, A Friend in Need.

The past is past.  There’s nothing we can do about it except start working on the next sale.  Customers expect service after the sale.  Service before the sale will make them say "WOW!"  Isn’t that what we’re really looking for?

[Originally posted November 22, 2006]