The microphone was handed to me as I stood up. I had prepared the question beforehand so as not to fumble over my words or ask too general of a question. Up to this point, the town hall meeting with Dave Ramsey had focused primarily on the struggling economy and how we found ourselves in this mess. All of the questions focused on wealth preservation or retirement or 401k plans, etc. Certainly good and important stuff – but nowhere near what’s on my mind.
“Hi, Dave. Thanks for taking my question. With constant reports of recession, higher taxes and inflation, what 3 pieces of advice would you give to someone who is starting a business in this uncertain environment assuming the business was already debt-free?”
The reason for the debt-free caveat at the end of the question stemmed from wanting to get answers that would fall outside of what he normally discusses. If you’ve ever seen his TV show on the Fox Business Network, heard his radio program or read his books, you already know his feelings about debt. Yet, it can be easy to forget that Dave runs an incredibly successful business and can offer a lot of insight to entrepreneurs about surviving and thriving in different economic climates.
Over the next few days, I will share with you the 3 pieces of advice he gave me (with some editorial liberty taken) asI think they apply to any business regardless of phase of growth or economic and political climate. I’ll also add a fourth item that I think you will find valuable.
Principle #1 – People Are Still Spending Money – Understand Who and Why
“People are still spending money. They’re just spending it differently. If you need proof, look at Wal-Mart – I can’t even find a place to park when I go there.” – Dave Ramsey from a Town Hall Meeting at The People’s Church on November 3, 2008
The first thing Dave pointed out in his response was that there are still two segments of the market that are doing very well. The first is the low end of the market. People still need food, clothes, household supplies and technology. However, they’re turning to stores like Wal-Mart as opposed to those filling the malls. Uncertainty and fear are dictating the way people shop for the same items they’ve been getting every day for the last 20 years with little regard to price variance at different locations.
According to Dave, the other segment of the market that’s thriving is the higher-end luxury items. There’s a percentage of the population that feels less impacted by the slowdown. Those with higher net worth, higher income or who have cash to spend realize that right now is a great time to pick up those goods or services they need/want at potential discounts. While companies are looking to bargain to keep income rolling in, savvy consumers are taking advantage of them.
Want to know where things aren’t growing? In the middle of the pack. Often times, companies that target the middle of a market suffer when things slow down. Their products or services are too expensive for those looking to save money, but their quality and reputation can’t match those at the top.
Therefore, in a market like the one we’re in, businesses need to understand who is spending money and why. Who is the target market you are trying to reach? How are they spending? Why? How can you get them to rethink your product or service?
Part 2 Coming Soon…Stay Tuned!
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