In Demand

Definition: In Demand
coveted: greatly desired

 Today, we will be looking at a common small business opportunity. We know that the foundation of economy is supply and demand, previously discussed in short in 'It Ain't What It Used To Be'.


The truth is; the international market in regard to supply and demand is already saturated.

The challenge entrepreneurs face is finding something locally that is in demand with a low supply. This task as daunting as it seems, isn't quite so difficult.

The easiest entrepreneurial way of starting a business is by buying cheap and selling high. Usually when purchasing stock, you aim at getting stock prices (reduced total price per item).

Sometimes it requires you drive an hour or so to get to an area where supply is high and demand low.

Lets look at a few ways of making money (from simplest to most difficult):

• 1. Get a JOB

Entrepreneurs:

• 2. Buy cheap, sell high.
• 3. Buy, process and sell.
• 4. Deliver a service.

Other:

• 5. Investments (requires a rather large investment to make it worthwhile)

But don't judge a book by its cover. For example, in regard to Buy, process and sell: You could buy real estate, fix it up and resell it, or purchase vacant land, build a property on it and then resell for profit. You could buy ingredients, make a product and then sell it. Or even buy paper and materials to make birthday cards you could sell.

Opportunity presents itself in the company of others. The easiest of the three entrepreneurial ways is to buy and sell, also requiring the least effort (most of the time, in comparison  to processing goods). Delivering a service usually has the highest profit margin, but the Do It Yourself market trend makes it very hard for entrepreneurs to enter the market.

When presented with such an opportunity, consider the market prices in comparison to quality and profit margin. Pricing the product is sometimes harder than making use of the opportunity.

Take for example: You get a product at 40% of the cost of similar products in the market, where the quality is about the same.

We must consider Perceived Value in estimating a price for our product. If our price is too low, then the perceived quality is low and people tend to want stuff that suit their needs. On the other hand, if the price is too high, people would rather buy the stuff they are used to.

Definition: Law of Demand
The lower the price of a service or commodity, the greater the quantity demanded.

Which is what we want, to make more sales on average to generate a larger profit and cash flow (in the case of local supply and demand).

Perhaps you are thinking; "now we have to do more work to get less money". Hidden from most entrepreneurs for far too long;

Generalization: Parkinson's Law
The demand upon a resource tends to expand to match the supply of the resource.

 You must be wondering what Parkinson's Law has to to do with pricing of your product. In Less Than Adequate - Part 1, I mentioned the notion of business lines. In short, it is the means to expand your product/business by adding more lines (products, services).

Consider this scenario:
You have found a place where you can buy meat (pork, lamb and beef) at nearly stock price, which is about 50% cost of market price. Later on, you discover a place to buy chicken at a similar cost ratio.

You saw this opportunity (low cost, good quality meat) as feasible (doable with what is on hand and in current circumstances) because your family are meat lovers or you live in a complex/cluster housing where neighbours know each other.

In essence, Parkinson's Law states if people allocated a budget to buying things (such as meat in this example), that they would spend their entire budget, instead of only buying the quantity they need.

So by expanding your business lines, you could make all or most of the sales people budgeted toward acquiring meat.

Another opportunity that presents itself by selling low with a high Perceived Value, is creating an opportunity for others to buy stock from you for cheap (budget price, but you still making good profit) and reselling it in their areas. Which means, you make your sales and they find customers and distribute the product with their own margin, meaning regular business.

Stay tuned for more tips & lessons on how to make money!

Feel free to leave a comment if you found this post helpful or if you  wish a specific topic to be addressed.

Adieu,
Shelah

It ain't what it used to be

A couple of years ago I overhead a joke in a parking lot. One woman was busy loading her groceries into her car when her friend ran into her.

Jokingly she said to her friend:
"I believe I've grown quite strong over the years!"
Her friend replied: "How so?" And she said:
"Ten years ago I needed a shopping cart to manuever my groceries. Nowadays, I just carry them under my arm."

Money ain't what it used to be.

  To understand what role money plays in our lives today, we need to go back. Way back!

Before there was money, people used to barter. Comparing Apples and Pears wasn't what it was about. Before money, there wasn't really a measurement of worth to compare items and services. Instead, they went by trading according to what they figured was 'good'.
This was primarily determined by supply and demand.

Definition: Supply and Demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, price will function to equalize the quantity demanded by consumers, and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity.

Although this is all good and true, it is important to recognize the fact that global trade didn't play such a big role. Supply and Demand was local - and in some cases still is today.

Today, this economic model plays an integral part determining the feasability of ventures.

Definition: Feasibility
feasible - capable of being done with means at hand and circumstances as they are

Let's face the fact; if it ain't feasible - it's not going to work. Being an entrepreneur and identifying an opportunity is needed to be succesful - more than often this opportunity presents itself when locally there is a low supply and a high demand.

Be it selling make-up or mowing lawns, opportunity is where the money lies!

Stay tuned for more tips & lessons on how to make money!