Category: Strategy

Old school business model

Old school business model

I just saw a commercial for Rent-A-Center and thought to myself that their old-school business model is nearly a half-century ahead of the times.

Founded in 1974, Rent-A-Center is an American public furniture and electronics rent-to-own company based in Plano, Texas. The company was incorporated in 1986 and, as of 2014, operates approximately 2,972 company-owned stores in the United States, Canada, Puerto Rico, and Mexico, accounting for approximately 35% of the rent-to-own market in the United States based on store count.

“A convergence of trends—including the Mari Kondo-sparked enthusiasm for cleaning out closets, increased concern over the impact of climate change, and a movement toward smaller, urban apartments—has made millennial consumers more conscious of how many items they’re accumulating.“

Rent the Runway CEO Jennifer Hyman.

As you may know, companies are taking a similar business model and expanding it to other consumer sectors, such as clothing and jewelry. This model has already been applied to transportation with Lyft/taxis/vehicle leasing and with housing with Airbnb/hotels/apartments and intellectual property with game rentals/public libraries. Entering into the fray are companies like Rent the Runway, which rents unlimited designer styles to subscribers, and Fat Llama, which rents electronics (in the UK).

A convergence of trends—including the Mari Kondo-sparked enthusiasm for cleaning out closets, increased concern over the impact of climate change, and a movement toward smaller, urban apartments—has made millennial consumers more conscious of how many items they’re accumulating, according to Rent the Runway CEO Jennifer Hyman.

The spending habits of millennials, the largest single consumer group out there with 83.1 million (a full quarter of the U.S. population), was surveyed. The survey found that the main reason why they rent is to “test things before purchasing” at 57%. This makes sense with money being tight and space being limited, every purchase has to be scrutinized. The results of the survey are shown in the infographic below:

World Economic Forum: This is how millennials are fueling the rental economy

Old-school brands such as Play it Again Sports and Rent-A-Center are riding the boom of the change in consumer sentiment and behavior. Rent-A-Center’s revenue grew $9M between 2018 and 2019 to $2.6B, operating income ballooned an astounding $197M between 2018 and 2019 to $253M, helping net income to increase by $165M to $173M.

Adaptability is the most powerful trait

You have probably noticed the deluge of advertising that is targeted to the new reality of being at home. This is obviously a response to the global pandemic we are all being affected by. The following is a breakdown of what is happening and how your business can harness the post powerful trait: adaptability.

Adapt Through Marketing Strategy Marketing

Aired prior to the COVID-19 crisis but replayed recently Campbell’s realized that people are stockpiling canned food. Set to a wholesome and nostalgic soundtrack without pandering to panic buying, they capitalized on an opportunity to remind customers of a classic pairing. On a side note, the music choice was oddly relevant — Thank You For Being a Friend was the theme song to the ’80s sitcom The Golden Girls and the elderly are among the most vulnerable to COVID-19.

Also, more people are telecommuting and are realizing their home computers might not be suitable for work so Dell aired a commercial for one of their newest laptops. Peloton, home office chairs, etc. are all advertising the benefits of being healthy and productive at home. Also, mental health app Talkspace, Delta Airlines offering free flights for medical volunteers, online education, bidets, and more are using this opportunity to advertise their products and services.

Adapt by Seizing the Opportunity

Adaptability Charles Darwin - Your Startup Guru
Attribution-NoDerivs 2.0 Generic (CC BY-ND 2.0)

When disruptions happen, it is important to consider alternatives in order to adapt to the new environment. I have advised a new restaurant client to pivot their business model from a brick and mortar location to a commercial kitchen or food truck and adjusted their ad hoc financial projection model to reflect the pivot. Of course, depending on the stage of a business pivoting to a commercial kitchen or truck is not an option; which is why I always provide tailored consultations to each client.

Many people have a lot of downtime now with not having to go into work. It is a good time to take a break from watching the news and start mapping out the idea that you’ve been mulling. Who is your target market? Where will you be located? What are your startup costs? These are all questions you should know the answers to or be actively seeking if you are serious about taking the next step. If you do not know the answers or want a second opinion on, I always provide free consultation so send me an email. Afterwards, those pushup challenges on social media are also a good healthy distraction too from all the dire news.

These are better practices than gouging prices like that hand sanitizer guy.

sanitizer price gouging guy

Healthcare Strategy Consulting

Healthcare strategy consulting

Businesses face difficult decisions every day about what direction to go.  Eskenazi Health came to Your Startup Guru needing strategy consulting that involved an opportunity cost analysis and risk matrix to help their form their decision. We conducted an analysis that clearly mapped out their best and worst options which allowed them to strategically plan for the future.
Eskenazi Health is a comprehensive safety-net public health system with an acute-care hospital, a network of primary care centers, mental health services, community education programs, and many other services. Located in downtown Indianapolis, Eskenazi Health’s mission is to advocate, care, teach, and serve with special emphasis on the vulnerable populations of Marion County.

Contact us for help with you healthcare company.

See a need, fill a need

See a need fill a need - bigweld robots

Entrepreneurs often see a need through their own personal experiences and fill that need with their business idea.  This is a great strategy but sometimes doesn’t tap into a market large enough.

In episode #850 of Planet Money, The Fake Review Hunter, the host interviews Tommy Noonan, creator of SupplementReviews.com.  SupplementReviews.com is a highly popular website that provides unbiased user reviews of health supplements.  However, Tommy soon found that there were suspiciously positive reviews.  Because Tommy’s entire website was based on authentic user reviews, fake reviews became an existential threat.  After a lot of research, he found that some of these reviews were written by supplement companies.  He uncovered so many fake reviews that he started noticing a pattern, almost like a modus operandi.  They were often single product/brand reviews, used fake pictures, had lots of reviews in a short period of time, and/or only had one review.  Sometimes the “reviewer” would give positive reviews for one brand and negative ones to competing brands.

This is when Tommy had his a-ha moment.  If his website had fake reviews, others would also probably have them.  So he created another business that aligned with one of the juggernauts of the internet, Amazon.  Tommy’s site, which uncovers fake reviews, is called ReviewMeta.com.

How to find a need

As mentioned at the top of the post, most rely only on their personal experiences or that within their network.  Sometimes the need is obvious.  For example, at a 7-Eleven in Shirley, New York, one 7-Eleven sells more coffees than any other franchise in the US, all because of one store manager who knows virtually every customer’s name and greats them.  No special location mojo or customer flow algorithm, just old-fashioned customer service. You can read more about it in my post Competitive Advantage and Coffee.

Other times it is not that obvious.  In that case, you have to hustle differently.   How do you do more “work” when you’re already working to the bone?  Find efficiencies:  know your customers, know your competitors, and lower your expenses by working on learning more doing more research in episode #700 of Planet Money, Peanuts, and Cracker Jack.  In Boston’s Fenway Park, Jose Magrass is the top seller.  One year, on opening day, he sold 500 hot dogs, $2750 worth of hot dogs in a single game.  In fact, Jose has been the top seller for over five years.  Part of his secret?  He has a spreadsheet where he analyzes many factors beyond just the weather, such as what his competing vendors are selling and what fans are likely to purchase depending on the price of their seats.  For example, behind home plate diet coke sold better because possibly that is where the “vain people” sit.  That kind of analysis is impressive.

Sober Bar Financial Projections

Sober Bar Financial Projections

Your Startup Guru created financial projections for Sans Bar, a one-of-a-kind sober bar in Austin, TX.  Sans Bar’s mission is to provide a safe, sober environment for adults to celebrate life while promoting personal and social wellness.

With the help of our financial projections, entrepreneurs can see how much they need to make and save in order to meet their financial needs; in addition to many many other uses.  You can read more about the importance of a financial plan.

Contact us for financial projections for your bar.

The Importance of Planning

Proper planning can reduce excess inventory, cost mismanagement, and other issues for most businesses.  When uncontrolled, a business can face inadequate cash reserves and even bankruptcy.

To mitigate these issues, proper industry and market research coupled with financial planning for contingencies is crucial for any business.  Whether you’re in the ideation phase or are already up and running, knowing how much to allocate to the various activities a business engages in is difficult so contact me and let’s create a strategy that works for your business.

Festivals, Farmer’s Markets, Conventions, oh my!

music festival crowd

It’s summer and festival season is here.  Events are big business with over 87 million people attending trade shows, conventions, & conferences; while 32 million people attend music festival.  Some annual industry and market stats:

  • Trade shows, conventions, conferences
    • Number: 284,600 annually
      • There are 248 convention centers in the US with a total of 56.29M prime exhibit space.
      • The majority of conventions (21%) have 1,000 – 2,499 attendees
    • Participants: 87,728,000
      • Average attendee spends 8.3 hours viewing trade show exhibits
      • 81% of trade show attendees have buying authority
  • Music festivals, fairs, and other festivals
    • Number: 1,413 annually. Music festivals alone total over 800 annually
    • Attendees: Over 102 million people annually. 32 million people go to at least one music festival annually.
      • Attendees spend on average, $207 a year on live music events and digital music/streaming
      • 1/3 of all festival fans go to more than one festival per year
  • Farmers’ Markets
    • Number: +8,400 markets that convene regularly
    • Attendees: 310,800,000
      • Farmers’ market shoppers spend a mean dollars/week was $25.38
      • Shopper visit an average of 6.12 times/month

What It Means To You

Events are targeted.  So attendees are in your market, many in your target market.  Renting a booth, depending on the event, can be fairly inexpensive.  This is an economical means of raising awareness for your product/service for the following reasons:

  1. You are not locked into a commercial lease contract
  2. Can test the viability of your product/service
  3. Get targeted market feedback

Some of what you may need depending on the event:

  • Mobile merchant services such as Square
  • Email collection method
  • Banners and booth appeal
  • Ready-for-market product/service
    • Or compelling marketing materials (videos, images, samples) of your product/service.

Read more about festivals and marketing.

Contact us to see what strategy works best for your business.

The importance of niche-ing

The importance of niche-ing cannot be emphasized in business. To clarify what niche-ing is, let’s start with a question:  How should new products/services be created?

A)  Make a novel, untested product/service, then find customers for the product/service

Or

B)  Find a group of customers, find one of that group’s unmet needs, then create a product/service to address those unmet needs

Answer:  B

Explanation:  The development process of the product/service will take time regardless of choice A or B.  However, with choice B, the likelihood of having to rework the product/service to make it more closely meet the needs of the target market is lower.  Also, with choice B, you have a better idea of the size of the target market.  Having a market large enough to grow your business is very important.  More on that is below.

A great example of choice B is Girls Auto Clinic.  Girls Auto Clinic is a brilliant combination of a female-focused auto repair shop and salon.

Importance of niche-ing - Girls Auto Clinic - Your Startup Guru

Founder Patrice Banks felt what many of us feel when car issues come up:

“I felt like an auto-airhead. I hated all my experiences going in for an oil change, being upsold all the time for an air filter,’ she said. “Any time a dashboard light came on, I panicked.” – Patrice Banks, Girls Auto Clinic Founder

Many people come up with business ideas like how Patrice did:  through personal experience.  However, what most people fail to consider is that their own experience might be too niche.  In other words, the market might be too small.  How do you know if your market is too niche?  Market research.  Market research is a process of analyzing factors such as demographics, purchasing habits, direct and indirect competitors, macro and microeconomics, and other elements.  As much art as science, thorough market research is a critical step before moving forward with any concept.

Launch and Grow Your Business

Finding your niche through market research is one of the many services Your Startup Guru offers at the most competitive prices in the industry.  Contact us, and let’s find your niche for your new business.

Market Adjustment in the Retail Space

According to a new Credit Suisse report, up to 25% of U.S. shopping malls may close in the next five years signaling a retail space market adjustment.

Market adjustment in the retail space leading to the closure of the New South China Mall

What are the reasons for the market adjustments in the retail space?  Of course, Amazon and online shopping are the most glaring causes.  However, another factor is mall overexpansion.  Currently, there are around 1,200 malls in the US.  Between 1970 and 2015, the number of malls grew more than twice as fast as the population.  That number is predicted to decline to 900 within the next ten years.

Brick-and-mortar retail stores will never completely disappear because of the needs listed above and because humans are social by nature; only the type and make-up of retail stores will change.  Pop-up stores (a strategy utilized with great effect by Halloween stores) will likely become more common.

Market adjustment in the retail space could impact iconic brands such as Macy's

Another consideration

The market adjustment may result in the closure of 300 malls over the next decade. What to do with the vacant buildings?  There is a lot of space that could be used for other purposes.  Maybe mall owners will lower their rental rates to continue use .  In some areas of Manhattan, retail rents have declined 10-15%.

More housing? Closures from major chains like Macy’s and J.C. Penney are pouring up to 37 million square feet of space back into the market.  That could reduce some housing costs however more expensive housing markets generally have greater discretionary spending. The discretionary funds are often used for shopping.  Also, the time and cost to demolish existing structures, rezone, and rebuilding them into residential properties along with their infrastructural linkages are not insignificant.

Some mall owners have indicated that vacant properties will be renovated and updated to attract new tenants and raise rental rates.

Market adjustments in the retail space requires new ideas to adapt to changes

What to do?

Who knows what the future will bring but keep in mind that juggernauts like Walmart, Macy’s, and Sears are affected, so starting a service or online store that doesn’t compete with what Amazon sells is a safer option.  Branding your own product (e.g., Bonobo, Dollar Shave Club), and controlling your own distribution is another option.  B2B businesses are insulated from mall closures as no one buys industrial components at malls.

Services such as dentistry, restaurants, car mechanics, and large difficult-to-ship products such as mattresses, etc. will remain (so far) an insulated industry.

Analyses such as what is shown above are a small and cursory part of the industry/market analysis and strategy consulting services provided to clients.

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