Is It Too Easy to Start a Small Business?
Psychiatric Help: 5 Cents
Remember Lucy in the comic strip, Peanuts, who set up her psychiatric practice lemonade stand style, posting the sign "Psychiatric Help, 5¢." She dispensed her completely biased, unskilled, and unlicensed advice to any passersby who needed some help with a problem. Her reward was the delightful klink of nickels in her payment coffee can.
We chuckle (or shudder!) at the mere thought of a grade schooler shelling out psychiatric care to the general public. But I'll tell you that I often see a similar scenario play itself out in the real world of small business.
Addressing this very issue, the Advertising Specialty Institute (ASI), an association dedicated to serving the promotional products industry, hosted a debate between two of their staff members on whether it was too easy to start a distributorship (a company that sells imprinted promotional giveaways). On the one side, it was argued that making entry into the industry accessible can spur industry growth. The opposing side argued that ill prepared distributors end up wasting suppliers' time, making them a drain on the industry.
The Great Debate: Is It Too Easy to Become a Promotional Distributor?
Pros and Cons of Easy Business Startup
So who's right in the debate? Well, they both are. And the scenario over which they were debating is a common, and growing one, in many industries.
Other example industries where easy business startup can be an issue include the following:
Before self publishing became easy, accessible, and affordable for almost anyone, large traditional publishers controlled what books were published and read. Now that anyone can self publish through the likes of Smashwords and Amazon's Kindle Direct Publishing, publishing has become democratized, creating a subset of the larger traditional publishing world.
Pros: Allows anyone to have a voice and make money in the publishing arena. Also encourages publication of specialty books that meet the needs of niche markets.
Cons: With no filters and no barriers to entry, the market has been flooded with low quality books alongside those of greater merit. Sadly, this can damage the reputation of all books. Plus, it ups the level of competition which can confuse customers with too many choices.
Multi Level Marketing (MLM)
MLMs, sometimes known as network marketing companies, direct sell every imaginable type of product from clothing to beauty products to nutritional supplements. The small, usually home-based, operations sell in spite of the giant mega retailers such as Walmart, Target, and Amazon.
Pros: For consumers who are tired of buying from mega big box stores, this can offer them a more personalized buying experience with an MLM rep. Some of the products are also of high quality which can also increase consumer satisfaction. MLM reps can easily and quickly get into the business, sometimes for as little as $100.
Cons: With the barrier (financial or otherwise) set so low, reps can be totally uninformed or misinformed about their products, and about how to run a business. Especially for the sale of nutritional supplements and therapeutic products, this can be a serious problem if reps make wild and unsubstantiated claims about the efficacy of their products, which can up the liabilities for MLM companies.
Skilled trade technicians who have worked for established contracting firms sometimes venture out on their own, running their operations out of their garages.
Pros: For consumers who have very small contracting projects or repairs, these smaller firms could service them more cost effectively than larger contractors.
Cons: With little oversight and possibly operating totally under regulatory radars, these firms can present health and safety hazards to the public. These "garage" operations may also not carry proper commercial liability insurance to cover any potential damages to their customers' or public property and utilities. As well, these operations can be notorious for undercutting ("lowballing") reputable contracting firms because they are clueless about the true costs of doing business.
In metropolitan areas, taxi service has been a fixture for decades. Then ride sharing services arrived, allowing almost anyone to provide convenient and cost effective transportation to the masses.
Pros: This could allow people who have time available to make some coin with the driving skills and vehicle they already have.
Cons: Ride sharing drivers may not have commercial drivers licenses (as required for most other taxi and transport services) and may not have commercial auto liability insurance either. This can up the safety risk of these ventures for both passengers and the public.
Solving the Unqualified Small Business Owner Problem
But what can be done?
Government Intervention and Legislation?
Of course, governmental bodies around the world could make laws and regulations that stem the tide. But that in itself is a huge undertaking. And with government budgets stretched to the max for every conceivable cause and effort, solving the unqualified business owner problem is unlikely to become a priority anytime soon.
Another way to combat the problem would be provide better education about both employment and entrepreneurial career paths in high schools and colleges. But, again, with governmental budgets being pushed to the limits for all types of community needs and programs, this is also unlikely to happen.
Supplier Safety Net... Or Not
The group who I feel may have some power to influence the issue is supply chain partners. If they choose to serve inexperienced business owners, they may, by default, shoulder some of the burden of educating them about industry standards and practices. This may entail holding the line on policies and wholesale pricing which may turn away some sales opportunities. But it is a filter and a choice.
For example, when I got started in the promotional products business many years ago, I certainly didn't expect to get pricing breaks on my small purchases from suppliers. And I truly appreciated those suppliers who clearly communicated and stood firm on their policies.
I've also worked with clients who served both ends of the business owner experience spectrum, and both ends can be successful and profitable. Some had very high qualifications that disqualified many small business customers. Others fully embraced less experienced and super small operations as part of their business model. Again, suppliers need to decide whom they serve, how they serve them, and clearly communicate their policies and procedures to all customer prospects.
Survival of the Fittest in the Gig Economy
I see the issue of unqualified people going into business only getting worse. The freelance "gig" economy—getting paid for work or sales not tied to regular employment—will continue to be fueled by the likes of Fiverr, Uber, Zazzle, Etsy, Amazon, and the Internet at large. On the positive side, this presents a world of opportunity for those who are unemployed or underemployed.
But I've also felt the pressure from the unqualified gig players in my own editing and writing business. I have years of experience in the field and see some unlikely folks hanging out their shingles to do what's taken me years to master. I saw one of these posting on social media that she desperately needed to get up to speed on self publishing (within a couple of days, no less) because her clients needed help with it. I just scrolled on by that post. Sink or swim, baby!
Starting a business is easy. Staying in business is hard... really hard. Since I have little chance of impacting the unqualified business owner trend in any material way, I'll have to let the evolutionary principle of survival of the fittest filter the pretenders out of the market, while staying the course of providing professional and experienced service to my customers.
Starting a business is easy. Staying in business is hard... really hard.— Heidi Thorne
This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.
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© 2017 Heidi Thorne