$300 and 12 pairs of shoes
Some of our greatest successes (in the US, at least) happened almost by chance. By someone rolling the dice on fate or destiny or whatever. Take Walt Disney – in 1924 he was pretty much a down-on-his-luck cartoonist and on a whim he makes a cartoon about a little mouse he sees scurrying around his office. Next thing you know, he has a multi-million dollar brand, hundreds of artists and they all work in anonymity because everything that gets produced is a “Walt Disney Production.” Go figure.
Or take the Wright Brothers. How the heck are you gonna get out to the East Coast when you live on the other side of the USA? Of course! Build a plane (and then sell the patent to the US military).
You get the idea. Hey, nothing is that simple, but the point is, sometimes you just gotta do it. Follow the pang of hunger in your belly that makes you climb over that ridge. Sometimes, as Tom Cruise so eloquently said in the 1983 movie “Risky Business”, you just have to say “What the heck” (actually, his choice of words was a little more colorful, but this is a professional publication).
The land of the setting sun
Take Nike CEO Phil Knight, for example. In 1963 he parlayed $300 into a what would ultimately become a multi-bazillion dollar shoe company. Of course, things were a little simpler back then. Knight, on a whim, flew to Japan and talked himself into a deal importing running shoes. After some clumsy conversation with company execs, he walked out with a dozen pair of shoes to show as samples. Pretty sure you can’t just fly to Japan on a whim anymore and these days, Nikes are so expensive I don’t think you can even get one pair for $300 dollars, let alone one dozen. But I digress.
Knight would then spend weekends and evenings selling shoes to high school kids. Said Knight in an interview, “The idea was to get started. So we got 300 in and the next order was 1,000. That’s the way it got going. First year sales were $8,000. A far cry from the $30.6 billion brought in in 2015.”
Still the same playing field?
Every generation feels the one before it was “simpler.” I say it’s all relative. Knight didn’t have nearly the access to cash and partners and networking in 1963 as he does in 2016. But you play in your sandbox with the tools you have. Comments Knight, “The flip side of that is there are venture capital firms now. So you have access to money now that you never had in the 60s, so that makes it easier.”
Whether its running shoes or comic books, airplanes or automobiles, the entrepreneurial spirit is what makes the difference.
Now let me tell you you about an idea I have to make a pencil that never needs to be sharpened…
A special thank you to Greta Van Susteren her perfectly crafted interview with Knight.
Twisted American Dream: Study shows microloans aid predatory MLMs
(ENTREPRENEUR) If microloans are being given to start new businesses, let’s give to those who are starting their own businesses rather than MLMs.
Microloans were touted as a way to help people in poverty to find a way out. Yes, the interest rates were higher, 15% – 18% for some micro-lenders, but not as high as payday loan businesses where loan interests can soar to upwards of 400%.
When you live life on the edge of financial failure, microloans are supposed to offer a helping hand to those starting their own businesses.
Enter today’s flourishing MLM market, where participants are promised if they work hard and follow the plan, they can make their way to the top of MLM glory with its promises of riches, cars, cruise vacations, and more.
Microloan companies classify MLMs as small businesses and offer loans to those who can’t use cash as collateral with their own banks to secure loans. These microloans are used to buy MLM inventory and a dream.
Grameen America is one microloan company that allows MLM inventory purchases as part of their business loan program.
“Grameen America does not advise members about their business choice or refuse loans based on business type as long as borrowers can prove their funds are being used for business purposes and the business is legal,” Grameen America told Vox reporter Kelsey Piper in an interview for a May 18 story.
“It is our experience that our members know how best to put their business loans to use and the type of business they believe will be successful for them. Our data shows many members start off in one kind of business, e.g. direct sales, and then pivot into other types of businesses as they cycle through our program.”
According to a Grameen America study, women who took out these microloans saw a positive but modest increase in monthly net income, a small increase in savings and a Vantage-Score (a type of credit score).
Their study shows that 32.7% of their customers plan on starting or have started their direct sales or MLM investment.
The company does not differentiate the overall income success of entrepreneurs who start their own businesses from those who invest in MLMs so measuring the difference in success there is not possible. However, an AARP Foundation study found that 44% of participants dropped out after less than one year of working with an MLM.
With a loan interest rate of 15% – 18% for a microloan, failure could lead women in poverty to an even worse situation than where they started.
The microloan business is not new, and the results are not hidden. As investigative stories showed in 2016, microloans aren’t lifting women out of poverty.
Encouraging women in poverty to use the loans to buy inventory in an MLM is bad business for everyone. Financial experts and even some MLM companies make it clear going into debt to join an MLM is strongly discouraged. Microloans don’t change financial fundamentals.
The Grameen America study does show positives for the women who serve as their customer base. The study stated, “Overall, the study found it was not just increased income or just the loan that led to the program’s positive effects. The weight of the evidence suggests that women who experience life circumstances similar to those in the Grameen America program are likely to be more financially resilient in the face of unexpected challenges if they are offered more options to combine work and businesses, more ways to strengthen their peer networks, and more liquidity.”
That might be true, but with an over 40% failure rate for those investing in MLMs, the risk might not be worth it.
The next Amazon delivery partners are your corner mom-and-pop shops
(ENTREPRENEUR) Amazon has been stepping up their game, and their newest strategy is to include small business owners, mom-and-pop shops, and entrepreneurs.
The world is reeling from supply chain issues from missing menu items at your favorite restaurant to a nationwide baby formula crisis. Amazon is one of the largest retailers in the world and its adaptation strategy is a return to the basics: work with local, small-town retailers. Yes, you read that right. Amazon is taking a grassroots approach to getting the goods to outlying and underserved communities.
Amazon is aware that its shipping speed to rural areas sometimes leaves much to be desired. Shipping directly to a person’s home in rural areas without Amazon facilities nearby and fewer available drivers causes delays. Shipping to an Amazon locker in the nearest metro takes less shipping time, with the tradeoff being the consumer picking up the responsibility for the last leg of the process. This isn’t always a valid option for a lot of people. What if you don’t drive and you need that particular item immediately? Many members of these isolated communities may be elderly or have poverty barriers to traveling long distances. Low-wage workers often have trouble finding time to go out of their way. Sure, you could ask your neighbor or there are other services, but that isn’t providing equitable service to disadvantaged populations. That’s one of the reasons Amazon’s new strategy for rural delivery is so useful.
Not only do the packages get to their destinations fast, but small businesses working with Amazon add an income stream by playing a role in the package journey. For small businesses reeling from the pandemic and lagging rural economies, this work with Amazon offers an opportunity to pull in much-needed capital by doing something as simple as delivering packages in their hometown. They don’t have to drive all over creation, just in their hometown which will reduce carbon emissions. Right now, with the gas prices as they are, that’s a huge plus.
There are other pluses to this too. By working with small businesses, Amazon is bolstering rural economies and empowering isolated communities. They’ll have more purchasing power, which is a win for everyone. Amazon is actively helping small businesses and it’s a great reverse on the trend of forced obsolescence we usually see when big-box retailers are involved.
If you’re struggling with supply chain issues, consider taking a page out of Amazon’s book. Get in touch with local small businesses in your area and see if you can come to a mutually beneficial arrangement. If you are a small business, be open to partnerships and opportunities to diversify your income to help stabilize yourself in an uncertain market. It’ll help you both in the long run, increasing the resiliency of both businesses.
Having client difficulties? Protect yourself with an exit strategy clause
(ENTREPRENEUR) You want to keep around that one client that pays your bills but when they are difficult make sure you can run away from a gig gone wrong.
I am not a lawyer. Do not take legal advice from a news story.
Over at Hongkiat, Veronica Howes has a great piece about the rights that every designer should give themselves when it comes time to make a contract. It’s not just good advice for designers, though. Anyone at the mercy of the client revision deserves to know these tips.
Many of them are about making sure that the rights to your work are secured. That’s important! Work-for-hire has always been treacherous territory. But in the gig economy, when more people than ever are doing contract work, holding on to your intellectual property is important, if you can swing it.
But just as important? Knowing when to walk away — and having the freedom to do so. Having an exit strategy is important to everyone who has ever had a bad client experience, trust us on this one.
There are plenty of reasons you might need to do this. Creative differences, a work environment you weren’t expecting, or even just an unreasonable number of revisions. Obviously, you never *want* to lose work, and you never want to leave a client unsatisfied. But sometimes walking away is better emotionally and financially than finishing the gig.
Writing in a “kill fee” can help you do this safely. A kill fee is a guarantee that you still receive some compensation for the work that you did, even if that work wasn’t completed. It’s an exit strategy. If you sink a year into a project for a client and then they decide to move in a different direction, the kill fee makes sure that you didn’t just waste a year of your life. It’s an important safety tool for anyone freelancing.
The standard phrasing to include in the contract is: “Termination. Either party may terminate the contract at any time through written request. The Company shall upon termination pay Consultant all unpaid amounts due for Services completed prior to notice of termination.”
And it is worth talking about the specifics of the kill fee. Some may charge for hours already worked regardless of who terminates the contract, others may choose to keep a retainer, and so forth. Think that through and include it in your contract.
Now, let’s talk about revisions. Half the time, the reason you’d want an escape clause is that the work wasn’t scoped correctly in the first place. You need to be very clear about the expectations of the amount of work that’s going to go into a job.
Let’s say you quote someone a flat fee of $100 for a tiny project because you expect it to take you an hour or two. But suddenly, there are 12 people at the client’s office arguing over what the project should actually be, on a conceptual level, and you’re caught in the crossfire while they re-imagine the project you’ve already finished. The worst-case scenario here is that you’re stuck doing dozens of revisions, and with each minute you spend, your hourly rate just dwindles down to nothing.
Setting up an exit strategy with appropriate expectations ahead of time (in writing) can really save you here. Allot for one major revision of the work and some touch-ups, or maybe three rounds of revisions. Do whatever’s appropriate for your field and the scope of the work. But be sure that the expectations are clear, have it in writing, and be sure you’ve got that escape hatch at the ready if things go past it.
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