How NOT to Start a Retail Business

Issue #2003

WEALTHY: Where to go when other investments are headed for trouble (Andrew Gordon)
HEALTHY: A simple step to make your brain function better (Jon Herring)
WISE: Alexander Pope on getting started

ALSO IN THIS ISSUE:

5 ways to find out if your business can fly (Michael Masterson)
Feedback Friday: ETR readers on hype in advertising, part 2
It’s Good to Know… about energy-efficient lighting
Add "pule" to your vocabulary

== Highly Recommended ==

The Only Three Ways to Grow a Business

Did you know that there are only three ways to grow a business?

1. Increase the number of customers.
2. Increase the average transaction value.
3. Increase the frequency of repurchase.

Find a way to maximize each one, and your business will experience an astonishing rate of growth.

In his "9 Pillars of Business Growth" program, acclaimed consultant Jay Abraham outlines hundreds of proven, frequently unrecognized, and almost totally underutilized ways to grow these three key areas of your business. If you own a business (or would like to), be sure to take a look at Jay’s program.

- Patrick Coffey

ETR Insider Report: When Investors Choose Cash, This Portfolio Gains

By Andrew Gordon

The Dow dropped over 400 points on February 27th. Some stocks fell so fast that our streaming quotes couldn’t keep up. I kept peeking at our INCOME portfolio all day – more curious than nervous over how it was doing.

As soon as the market closed at 4:00, Charles Delvalle, my colleague and INCOME contributor, sauntered over and gave me the news I was expecting: "Our INCOME portfolio did fine today. A couple of our international holdings were affected, but overall the stocks held up."

"And which stocks did best today?" I asked.

"Our MLPs (Master Limited Partnerships) did great. Barely hiccupped."

Again, the result I expected. "Yep," I replied. "And the best is yet to come."

I suspected that a flight to quality (returning to conservative investments with lots of safety but no huge returns) would ensue, and I was right. Both of our MLP stocks are up more than four percentage points since.

Sticking with dividend-paying stocks -one of the first groups to benefit from market corrections and/or uncertainty – is one of the best ways to keep your portfolio strong in good times and in bad.

[Ed. Note: With Andrew at the helm, ETR's INCOME service,. is making good on its promise of at least 14 percent total annual returns from safe, stable stocks that give you cash every quarter (and sometimes every month).]

"Fools rush in where angels fear to tread."

Alexander Pope

How NOT to Start a Retail Business

By Michael Masterson

I don’t normally recommend getting into retail. (To learn why, reread ETR #152.) But if your dream is to run a brick and mortar business, you can learn a lot about what not to do from one entrepreneur’s mistakes.

Yesterday, in the middle of writing a chapter of my new book, Ready, Fire, Aim, I got an unexpected visit from Matthew, my nephew. He wanted to talk to me about a business he was thinking of getting into. It happens that the chapter I was writing was about starting a new business – specifically, about how important it is to focus on sales. "What a coincidence," I thought. I stopped what I was doing and listened to his story.

Matthew told me he had always admired handmade jewelry and had dreamed of having his own retail store. Out of the blue, an old friend called him last week to say that he was starting a business selling South African jewelry in the U.S. and he wanted Matthew to be his partner.

"He’s a really good guy. I’ve known him for years," Matthew told me. "He has lots of contacts in South Africa. And he will put up most of the money. He has another business, so he needs someone to be his partner in this one. He said because I know so much about handmade jewelry, I could do the job."

I have to admit, I have a soft spot for Matthew. He is family, after all, and his happiness is important to me. I knew he was hoping I’d approve of his opportunity and I didn’t want to disappoint him. "It sounds like a great idea," I told him. "And I am sure you would be very good at it. How do you plan to sell this stuff?"

Matthew looked at me like I was speaking Afrikaans. "What do you mean?"

"I mean, have you done any thinking or taken any actions that would help you figure out how you can sell this type of jewelry – who might want to buy it, how much they are willing to pay, what sort of pieces they would like?"

"Well," he said. "We have a few things."

He opened up a briefcase and started laying out all sort of papers on my table. I noticed an artist’s illustration of a company logo and designs for letterhead, price tags, and packaging. Also in the pile was information about import regulations, a letter from a real estate agent about office space, and a DVD that he urged me to watch.

I put it in my laptop, held my breath, and pushed "Play."

As I feared, it was an amateurish commercial for the imagined business. It had arresting graphics, a catchy soundtrack, and lots of photos of bracelets, necklaces, and earrings.

"Nice," I said as convincingly as I could. "What were you thinking of doing with that?"

"That’s what we wanted to ask you," Matthew said. "You are the one with all the experience."

"Right," I said.

Here I was, writing this chapter on the importance of focusing on sales at the very beginning of a business. How ironic that I should be interrupted by Matthew with a bag full of business baubles but not a single thought devoted to sales.

"How much money are you looking to spend to start this business?" I asked.

"I don’t know, but I think I will have to invest my life savings," he said.

"Would you be interested in a less-costly way of getting into it?" I asked him.

"Sure," he said. "But what’s the catch?"

"The catch is that you will have to work a little harder. To start anything new, you have to be prepared to put in both money and time. If you put in less money you need to put in more time."

"How much more time?" he wisely asked.

"Probably all you’ve got," I told him.

Matthew frowned, but then smiled again. "Sure," he said. "This is my dream!"

"Okay," I said. "Here’s my idea…"

What I told Matthew would apply to almost anyone interested in opening up a retail business. That includes any sort of store selling merchandise as well as restaurants, hair salons, day spas, etc. If you’re thinking of getting into one of those businesses, you might consider following this plan:

Don’t rush to sign a lease. Rental contracts are like marriage licenses. They feel good when you are heady in love but after reality sets in they may be expensive and restricting.
Figure out how to test your basic selling proposition – to find out if there is an active market for what you want to sell at the price you want to sell it. In Matthew’s case, there are several ways he can do that:

He can rent booths at local flea markets and art fairs on a daily or weekly basis and peddle his merchandise there. In most parts of the country (and certainly in Florida, where Matthew lives), there are all sorts of places to choose from – upscale, downscale, open-air, etc. Matthew should begin with one where he thinks his wares will sell the best, but he should try them all because his hunch may be wrong.
He should advertise on eBay, CraigsList, and other Internet-based vendor sites.
He should try to wholesale his merchandise to existing retails shops and make distribution deals with them. This may require him to discount his merchandise so severely that there will be little profit in it. That doesn’t matter. What he wants to do is find out if his jewelry will sell.
He should sponsor office- and home-based "jewelry parties," where small groups of women gather to look at the merchandise and buy what they want in a friendly, low-pressure atmosphere.
He could make deals with local restaurants that would allow models to show off his jewelry to customers in return for a commission. (This is done very effectively in a few of the better restaurants in my hometown.)

In trying out all these possibilities, Matthew will enjoy three benefits. First, he will discover which of his products sell well in what kind of selling situation and at what price. Second, he will learn how to sell his merchandise – the specific type of sales effort that works best for the type of money he wants to earn. Third, he will generate cash that he will desperately need to run his business.
Only after Matthew has a good year of experience selling in this sort of way will he be able to make other, less critical business decisions – such as those involving advertising venues and point-of-purchase materials.
If everything goes well for a year or so, he will have everything he needs to confidently sign a lease agreement. He will even have a good idea about where his store should be. And he will know exactly which products to stock it with and how to price and package them.

In giving Matthew this advice, I mentioned that my brother-in-law and his partners started a jewelry business this way about 20 years ago. They began by selling gold "by the inch" at flea markets. They graduated to discount malls and then finally upgraded to fancy malls and shopping centers. Today, they have stores in more than two dozen locations and generate more than $10 million in annual sales.

In my view, it’s almost always best to get into a new industry slowly and cheaply by figuring out how to test the waters without committing yourself completely to an unproven idea. That’s where my Ready, Fire, Aim principle comes into play. For Matthew’s retail jewelry business, it means:

GETTING READY by (a) identifying a way or several ways (in Matthew’s case, five ways) to test his basic selling idea and (b) stocking up on the merchandise he will need to make the test relevant.
FIRING by (a) selling his jewelry at flea markets and art fairs, (b) doing some person-to-person wholesale selling to find out more about how the industry really works and, hopefully, to establish one or two steady retail customers, and (c) sponsoring some party events to get immediate feedback from customers he can trust and talk to.
AIMING by making adjustments about product selection, packaging, pricing, and merchandising during the first year when such adjustments are easy and inexpensive to make.

You can’t test the basic selling dynamic so easily in every business. If you want to sell cars, for example, you have to manufacture them first. If you want to sell pharmaceuticals, you have to get FDA approval for your drugs. But even with such capital-intensive businesses, there is a lot you can do in the early stages to test the basic proposition: Can this business really work? Which ultimately means: Can I really sell these products/services at a profit?

[Ed Note: In just a few hours, Michael Masterson probably saved Matthew years of effort and tens of thousands of dollars. Imagine what Michael can do for your business or business idea when you spend five days with him at his upcoming business-building retreat. He'll be helping 25 to 50 ambitious businesspeople find and fix the holes in their businesses and dramatically increase their profitability. Find out more about this once in a lifetime opportunity here.]

== Highly Recommended ==

A $200,000 boost in net worth — and in quality of life!

“We began investing in real estate a little over 2 years ago. Since then, we’ve bought and sold more than 10 properties. We have amassed an additional net worth of over $200,000 in this short time. Real estate investing has allowed me the freedom to be home with my child when she was ill, and yet still obtain monthly income even when I had to take a few months off to tend to her illness. I would recommend it to anyone! It has definitely improved our quality of life…”

- Angie K., Omaha, NE

If you’ve been searching for the type of opportunity that doesn’t make you choose between financial success and quality of life, there is no path more proven than real estate. There’s no better time to begin your new life than now, with a special offer on Main Street Millionaire, ETR’s Real Estate Success Program.

Fish Oil Improves Intelligence and Learning in Children (and Adults!)

By Jon Herring

"Repeated activities create neural pathways between different parts of your brain. The more you practice a certain activity, the stronger that neural pathway becomes. These structural changes are the physical mechanisms of learning," Dr. Sears wrote that in ETR #1989.

This is the foundation for the concept "practice makes perfect." And the good news is that you can enhance the process even further by supplementing your diet with omega-3 fatty acids.

The BBC recently reported on a very small but remarkable study of children who were given fish oil supplements. The children took tests before they started taking the fish oil and again at the end of three months. During the study, researchers found that the children’s reading age increased by a year, their handwriting became more legible and accurate, and they paid more attention in class. And brain scans revealed that their levels of a chemical called N-Acetylaspartate (NAA) drastically increased. (This is the brain chemical linked to the growth of the nerve fibers Dr. Sears was referring to in that ETR article.)

Commenting on the results, the lead researcher said, "In three months you might expect to see a small NAA increase. But we saw as much growth as you would normally see in three years. It was as if these were the brains of children three years older."

Omega-3 fatty acids are absolutely essential for all of us, young and old. But they are especially important for children, whose brains are still developing. To ensure that you (and your children) are getting enough omega-3, consider taking a fish oil supplement in addition to eating fatty fish, grass-fed beef, eggs, walnuts, and flax.

Feedback Friday: Less Hype, More Value, Part 2

In Michael’s recent ETR article, "A Short Lesson in Quality Advertising," he made the case against "hypey" marketing copy. The article brought in dozens of e-mails from our readers – some agreeing with him, some disagreeing. We printed a sampling of their comments last week . Here are some more…

"I agree that the majority of the human race will be attracted to hype, as much as the analytical, skeptical mind does not want to see and believe it. I find myself as a complete skeptic and OVERANALYZER of everything and yet continue to read and buy into the hype."

- D.E.

"I agree with you 100% that I look for value and I hate hype. So far, I have been satisfied with what I’ve bought thru ETR. The one I love best is my purchase of your Accelerated Copywriting program. I happily paid for that product. Please keep delivering more value than hype and you’ll keep me among your happy clients."

- Ferdie Puente
Bogota, Colombia

"I felt the insincerity of the Christmas ad last November when I first read it. It’s definitely below your usual editorial level. The first ad is much more believable, and far more likely to receive a response from me."

- Florence Davis
Washington, TX

"I have come to automatically discredit overly hyped copy. I associate it with used-car salesmen tactics. It makes me resentful not to be treated as the intelligent, discerning person that I am."

- Jean Calvert
Greenville, SC

"I don’t have time to read through 5, 10, or 15 pages of hype. Just tell me, up front, why you want me to spend my money on your offering. I don’t need pretty colors nor do I require highlighted, bold lines of type."

- Richard Smith
Austin, TX

"I totally agree with your comments. I would love to see ‘Less Hype, More Value.’ Lately I’ve been inundated with ‘hype’ ads. I’ve taken to skimming the first few words of each paragraph and eventually just scrolling to the ‘bottom line.’ I’ve gotten to where I don’t even bother reading most of them."

- Emily Grider

"I have been an ETR fan for years now and always enjoyed it and admired the seeming wisdom and honesty it proclaimed. The articles you personally wrote were always the best. I have saved much of what has been published for my own personal thought-provoking archives.

"Thank you for your admission of guilt but, though it may have soothed your soul, it may not have done your PR any good. It makes one suspect all that you have done in the past and now we are wondering if you will be credible in the future. It is probable that your clients will now watch what you say very carefully. Perhaps that is good. I will serve as a watch for you to keep you guilt free and stress free."

- Winona Cole
Portland, OR

"Couldn’t agree with you more, Michael. In a previous life I was involved in sales and marketing for nearly 20 years. I did well and have always attributed this to never BS’ing my clients. If I felt my product was not the best fit for them, I would tell them so and then point them to the right one. I nearly always got called back at some point and made my sales then. Although I’m in a different field now, I still employ the same principle – do what’s right for the client. Monetary rewards aside, benefits of this type of relationship include trust, respect, and being able to sleep well at night."

- Jeff Greenwood
Lake Worth, FL

It’s Good to Know: About Energy-Efficient Lighting

Compact fluorescent bulbs are four times more efficient, use 50 to 80 percent less energy, and last up to 10 times longer than the more common incandescent bulbs. The compact bulbs are miniature versions of the fluorescent bulbs you see in offices, schools, and commercial buildings, but they give off a light similar to what you’re used to with incandescent bulbs.

(Source: the EarthEasy website)

== Highly Recommended ==

Turn YOUR Brain into an Idea-Generating Cash Machine

Want to know the same secrets that McDonald’s Ray Kroc, Microsoft’s Bill Gates, and Amazon.com’s Jeff Bezos use every day to keep their businesses at the top of their game?

It’s the most valuable money-making secret on the planet and the easiest to convert to cold, hard cash…

Take advantage of this unique method, made easy by a million-dollar idea superstar today!

Word to the Wise: Pule

To "pule" (PYOOL) is to whimper or whine.

Example (as used by Thomas J. McCarthy in an article about stay-at-home dads in America): "But my self-absorbed fretting and puling always come to an abrupt end with some surprise gift."

[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.

How NOT to Start a Retail Business

The Only Three Ways to Grow a Business

ETR Insider Report: When Investors Choose Cash, This Portfolio Gains

How NOT to Start a Retail Business

A $200,000 boost in net worth — and in quality of life!

Fish Oil Improves Intelligence and Learning in Children (and Adults!)

Feedback Friday: Less Hype, More Value, Part 2

It’s Good to Know: About Energy-Efficient Lighting

Turn YOUR Brain into an Idea-Generating Cash Machine

Word to the Wise: Pule

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