The Global Economy and Business

Some time ago I promised to write about financing your franchise business. I think that today is a good day to start. My first “finance article” will be dedicated to small companies because:
-I like small business as they produce goods and provide services that big companies don’t even consider;
-for small business it’s much more difficult to find money and also to find the information about where to find it and how to apply; they don’t have a separate department dealing with credits and refinance in their structure. As a result small business owners with less than 10 people stuff very often have no time to look for the most attractive variant of financing.

Here in this article I’m going to speak about credit, finance and refinance opportunities provided by SBA (Small Business Administration). Certainly the first thing to be mentioned is that SBA is not a bank or financial institution. Their goals expand much wider than financial sphere. And in many cases they don’t give credits but provide guarantees for loans made by private and public financial institutions, government organizations and local authorities.

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SBA is a guarantor of loans. As a franchisee you may need it to increase your reputation in franchisor’s or lender’s opinion. If you need it would be right to apply for THE BASIC 7(a) LOAN PROGRAM
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Basic 7(a) Loan Guaranty
According to this program small companies (both new and existing) can get a guaranty from the official government organization to increase their eligibility to get loans. It means that there can be some situations when you apply for a credit but bank or other financial institution doesn’t want to finance your business for some reasons. Why can this happen? Maybe the banker doesn’t believe in your business idea or your professional skills to realize it. Maybe you don’t provide good collateral from bank’s point of view… Anyway they don’t say NEVER but need something extra to change their negative decision.
The procedure is rather simple. Small-business company turns to SBA, and they guaranty the loan given by commercial lending institutions. It’s important to say that even after that guarantee bank or financial institution is not obliged to give you a loan. But most American banks do, and there are some financial institutions that lend money to small business only under SBA guaranty. 

It’s a very flexible program as SBA will guarantee to loan for a wide number of business purposes. As they say you can get financing for:
-working or operational capital (it’s very essential for retail business to purchase the initial range of products);
-machinery, equipment, furniture and fixtures (usually the largest part of start-up capital);
land and building including purchase, renovation and new construction (as I think this one is not so important as you can get a loan through normal lending channels because real estate is a good collateral and most banks and financial institutions agree to finance them);
-leasehold improvements (not very important as it’s a usual practice when franchisor provides this, but it not than you can apply for this too);
-and debt refinancing (under special conditions).

The loan maturity differs for different purposes. For example, the maturity of the loan for working capital is up to 10 years, but generally up to 25 years for money spent to purchase  real estate.
(to be continued)

The art of advertising is to persuade people to buy your product or service. This requires a basic understanding of psychology, the needs of human beings and how those needs can be satisfied.

An American psychologist, Abraham Maslow, has suggested, those needs can be compartmentalized and arranged in the form of a hierarchy.

At the lowest level people need food, shelter, warmth and sex.

When these needs are eagerly satisfied, people begin to think about the safety of themselves and their personal possessions. Squirrels, when they have had their fill of nuts, begin to bury nuts in their winter larders, human beings have the same tendency, much to the relief of the insurance companies. Insurance appeals to those who would feel the loss of personal possessions, through burglary, flood and fire, and those who seek pensions and financial security generally.

Even when a human being does not feel under threat at the safety level, a new need emerges according to Maslow. There is now a need to be approved by other people, a need for love and respect. The advertising industry finds this a very useful area for its machinations

«If you want people to look at you admiringly, or enviously, you have to wear Jay boy Jeans - no-one else’s will do! » That is the message, in effect.

Or the advertiser might be trying to persuade you to buy a new car. «This is the tastiest and the best sports car in the market. It is faster, sleeker, more enviable, than anything else in the world. If you haven’t got one, or don’t get one pretty soon, the rest of the world is going to see you as a dead duck! »

And when we are largely satisfied at this social level, according to Maslow we simply move on to egocentricity. We all have egos, but what is an ego? It is a love of self. We look into the mirror and hopefully like what we see. Of course, that is not only in physical terms. We hunger for self-respect now that our lower level needs have been largely satisfied. That is another happy hunting-ground for the advertising agencies, for example «Diamonds are forever», or «Use Real Results from Diana Cosmetics! It fights wrinkles fast!»

According to Maslow the ultimate need is for fulfillment. This would no doubt come when we have all that the advertisers say we so desperately need. For most of us it seems that day will never come! 

http://www.surfgopher.com

The first time I thought about religion and business after reading one of the fundamental books in management science “Management” by Michael H. Mescon, Michael Albert and Franklin Khedouri. The authors used the example of the Rome Catholic Church to explain that sometimes traditional organizations can exist without any improvements in management for centuries. I returned to this example more and more thinking about what would happen if the leaders of the Rome Catholic Church decided to make that changes (I mean only business and management spheres, and maybe personnel motivation or some marketing but nothing concerning religious doctrines). Will the organization operate better or worse? Will more people choose Christianity from other religions or Catholicism instead of Protestantism or Orthodoxy or other Christian direction? And in general, will more people start thinking about attending any church? Will using business instruments attract or antagonize people?..
 

Today I see a lot of churches from different denominations using business instruments. It works. They advertise on TV and radio, issue posters. They train their stuff to be good managers. They use interesting and sometimes even intrigue titles for sermons to attract different groups of people (more churches started teaching about money, business and investments). But what I wanted to emphasize they use franchise strategies to expand their influence.
 

Certainly, I do not want to say that this was invented in the 21st century. Mentioned before Rome Catholic Church has the outstanding number of congregations all over the world. And they continue to open more and more. But the main difference as I think is hidden in the procedure of opening the new ones. The initiative comes not from the leaders but from the prospective pastor. The leaders of the church motivate people to move to other cities, towns and countryside but the final decision is made by particular believer. The main church like ordinary franchisor provides him with start-up and current training, helps to solve technical problems and so on. The subsidiary church pays a royalty (usually it’s 10%), and everybody is happy.
 

Is it good and bad? As for me I think that it’s more likely good because being a part of a big church chain the young pastor has fewer opportunities to fall into heresy…

While thinking about modern trends in global economy I came to rather logical to my mind idea. Business needs to combine popular ideas or try to satisfy different wants together. I don’t say that I’m the first person who thinks about this. I only want someone with a creative power (not me as I’m too fond of exact sciences) to invent something that will improve our lives.
 

For example, one person invented a “sports-bar”. He combined the food (eating) with entertainment (ability to watch football or baseball matches, to talk to other fans – like at the stadium but in your town).
When I was writing this another thought came to my mind. Under the same title “sports-bar” we can see an extremely different idea. The businessman can combine the food with a sports training or fitness. Just at one place… I haven’t seen this before. And you? Just imagine: you cycle and eat pizza at the same time (certainly if you wish)…
 

Another good to my opinion combination of ideas is audio books. It takes together two different needs – education (as it’s important for career growth or example of entertainment) and free time (as it’s the thing of the greatest value in the modern society).
 

Healthful eating consulting plus retail selling also provides good opportunities for earning money. When someone explains you the benefits of healthful eating it’s almost impossible not to buy something fresh or full of vitamins and microelements!
 

I promise to think more about this synergy and add more ideas to this post (or will start a new one…). Any suggestions are highly appreciated too :-).

I hope to finish commenting franchise survey carried out by Franchise Recruiters Ltd. (FRL) today. If you read till the end you’ll know if I manage to do it. Check my previous article to know the beginning.
 
The next idea expressed by top franchise leaders was dedicated to old and branded franchise systems. In order to remain in a good position they have to prove that they are worth of it. Nothing can guarantee them a success in today’s fast-changing world. To hold their loyal customers they need to revamp, rehabilitate and regenerate their business systems. The respondents pay attention to the fact that most of the franchisors are concentrated on their first ideas rather than looking ahead an opening new products and technologies. It’s clear that they will face a rigorous competition.
As it’s mentioned it’s very important to adopt franchise business to demographic trends. Changes in today’s lifestyle and demographics help the development of the following business spheres:
-adult and senior day care,
-health care,
-home care,
-beauty, skin, aging treatments, and spas,
-different forms of entertainment.
 
My comments:
The survey shows the contradiction between main strategies of consumers’ behavior. These strategies are widely used in marketing while speaking about market segmentation. It’s evident that there are different types of people buying the same product. Each group of buyers has different reasons for purchase. The ones are driven by fad, fashion, and mood. They usually want to try something new. The others are very traditional and don’t change their tastes so fast. So if franchisor wants to develop his business he needs either choose the one group or to satisfy both.
The industries mentioned by respondents are rather predictable. There can be a lot of reasons why people become more self-oriented (exactly “self” not family- or community-oriented). Maybe this happens because of decreased role of Christianity and other constructive religions in the society in general. The advertising also influences the modern mentality saying that YOU are worth of this or that. Anyway the picture is very clear. People don’t want to take care of their parents and children themselves. Career plays the biggest role in dreams and aspirations. So the winning strategy is to provide people with more free time and with additional career opportunities (like better education on the one hand and better appearance on the other).
 
All the previous statements were dedicated to franchisors. But what about franchisees? The survey respondents decided not to avoid them. In the answers they pay attention to the fact that today prospective franchisees are “better capitalized, have better management experience, better education, and are increasingly diverse investors”. Also it was noticed that more and more seniors are coming into franchise business. They do not want rely only on government and social security. But most of them are not so aware in their talents to invent good and enough modern business idea themselves. The survey provides the following statistical information about older Americans: “the number of workers age 55 and above rose to nearly 24 million in 2004, up from 22 million in 2003, and from 20.7 million the year before. At the same time, the government is forecasting a significant labor shortage nearing the end of this decade. Franchisors tell us they want and need seniors as a reliable work force for years to come”.
 
In the same survey we found interesting information about so-called third party, not a franchisor and not a franchisee… For example, respondents notice that investors are considering franchise sphere to become rather interesting deal. They even called this a “new golden goose”. Why? Because of very short start-up period in many spheres. Think of it! Franchisor provides with a training program that lasts for 2 weeks. During the same time it’s possible for a franchisee to make all other necessary arrangements and he is ready to start! The only thing that can slow him down is money. So for both of them – investor and prospective franchisee – the goals are coinciding. They can start earning money very soon. TIME! It explains the investors’ interest toward franchise sphere, as I think.
 
Another third party is employees. Both franchisors and franchisees understand that employees contribute the biggest part to the company’s costs (directly and indirectly) and as a result to the company’s profit. When I say direct impact I certainly mean salary and corresponding expenses. As an example of indirect impact I will mention training expenses for every new employee.
At the same time for many businesses employees’ productivity influences the results most of all. That is why survey respondents expressed the opinion that franchisors of the next years will pay a lot of attention to different forms of health care insurance to their chain’s hourly employees. Also they will help to establish relations with banks opening accounts and contacting with financial institutions.
 
My comments:
I like this. When I’ve read this information I was thinking about inventing a high school program (or even senior school) to help franchisors and franchises to provide teenagers with the necessary information and to prepare them to their future jobs in that sphere… It can be based on “learning by doing” ideas and include a lot of practice…
 
And finally the last tendency was related to management. The top US franchise leaders believe that the previous years’ tendency will continue and more managers will be motivated not by strict annual bonus payments but by some reward programs depending on the results. As I understand that tendency is not a franchising innovation but overall trend in business.
 
Ok… I’m done with this survey. Will I get any comments on my comments?..

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Your favourite weblog -http://insurance.viaden.com/- found new author!!! Is it a good piece of news??? We will see… It was a really good and interesting blog and I will try not to spoil it. So, this weblog will be devoted to insurance, as before. It will be a kind of Live Journal where I will express my own opinion and comment on different events in the field of insurance.There is a good English saying: «Wise after the event». It means that it’s easy to give many pieces of advice after something happens. But it’s rather difficult to predict everything in order not to get involved in an unpleasant incident. And that is why you can be ensured against different risks with the help of insurance. And I will tell you about it…