SCOTT GALLOWAY: Now’s the best time to start a business in over a decade. Here are the 4 industries I predict will soon explode.

Nazaré, Portugal by Getty
A surfer riding a wave in Nazaré, Portugal.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway explains how the post-pandemic economy will birth a new generation of leaders.
  • See more stories on Insider’s business page.

Post-crisis periods are among history’s most productive eras. London rebuilt after the Great Fire with grand new architecture, and Europe after the worst of its plagues underwent a commercial revolution. The Marshall Plan turned enemies into allies, fomenting peace and prosperity for over half a century. Leaders also emerge from crises. Ulysses S. Grant was a washed-up soldier without prospects until war broke out, but that war created the opportunity for Grant to save the Union and advance the cause of freedom. This is all to say: In the next 36 months, I believe our economy will birth a new generation of web 3.0 firms and leaders. Why?

I’ve started nine businesses. The best predictive signal for their success has turned out to be the phase of the economic cycle in which they were started. Put simply, the best time to start a business is on the heels of a recession. And while pandemic economics haven’t resulted in a garden-variety recession – in either its duration (short) or its recovery (K-shaped) – there are factors that make this the best time to start a business in over a decade. Specifically:

  • Unprecedented stimulus and savings resulting in a Nazaré-like wave of consumer spending.
  • A gestalt among consumers and enterprises to question the status quo, and be open to new products and services.
  • The emergence of new fields and the capital to disrupt traditional industries as immunities kick in and monopoles are broken up.

Nazaré

The massive waves of Portugal are a function of the Nazaré Canyon, a submarine valley 5,000 meters deep and 2,300 kilometers long that functions as a ripple polarizer. Ocean swells build up over thousands of miles and flow through this geological fault with a minimal dissipation of energy. I just read the last sentence and am wondering about the medium-term effects of edibles. Anyway, the greatest surfer in the world is just a freakishly strong swimmer with a fiberglass board – until the right wave comes along. The Nazaré Canyon generates the biggest waves, and therefore, the most potential for greatness.

Monster waves birth in the open ocean, but tectonic business waves begin with consumer spending. The combination of historic savings, government stimulus, and record asset appreciation is shaping a wave of consumer spending unlike anything we’ve seen since baby boomers decided consumerism was a virtue.

Scott Galloway

Similar to ocean swells barreling towards the Portuguese coast, the commercial opportunities powered by consumer spending will be shaped by business dynamics. And, as with Nazaré, there is a deep canyon that will convert this energy into the waves of change. That canyon is Dispersion, a fancy way of saying the supply chain, or route through which a product or service travels, is changing. Today, there are three big waves forming in the Dispersion Canyon.

HQ

Remote work will fuel massive opportunities. Over the next decade, we are going to see the most radical transformation of the American landscape since the freeway created the suburbs. This set will have two waves.

First, we will see a significant investment in residential real estate and communities. Commercial real estate is a $16 trillion asset class. If gross demand for office space declines by a third, we could see the GDP of Japan ($5.1 trillion) reallocated from office to residential real estate. Sonos, Sub-Zero, Restoration Hardware, and Slack – along with everything else that enables or enhances work from home – should benefit.

In addition, we will see a great repurposing of office real estate. Many offices will remain, but no company will need the square footage they previously did, and companies will look for increased flexibility. In New York City, the amount of vacant office space available for sublet has doubled since 2019 and, as of December, the commercial vacancy rate in the city was the highest it’s been since the Great Recession. In 2020, San Francisco went from the lowest office vacancy rate in the city’s history to the highest.

Some office towers will be remade as residential, while others will be flexed for multiple tenants (coming soon: Airbnb Office). Cities aren’t going away – young people and inherently collaborative activities will still want/need to congregate in person. But cities will be cheaper, younger, and more diverse, all of which are inputs for startups. At $47 billion, WeWork was overvalued; going public via SPAC at $9 billion, it might be a buy. Prediction: Look for WeWork to rise from the ashes of COVID.

Higher education

The world’s most powerful lubricant of upward mobility (US higher ed) has morphed into a corrupt enforcer of the caste system. It has enjoyed 30 years of tuition increases matched only by the arrogance and self-aggrandizement of its leadership. COVID is the fist of stone coming for this chin. The pandemic moved 1.6 billion people into online education, and many will stay there. India’s largest edtech firm, Byju, is reportedly closing a $600 million investment, valuing the company at $15 billion, and Coursera is expected to go public at a $5 billion valuation.

Healthtech

The largest consumer industry in history is US healthcare. It’s also the most ripe for disruption. Imagine: Walking into a Best Buy to ask for help buying a flatscreen TV, only for the salesperson to hand you paperwork, for the 11th time, and ask you to wait 20 minutes before someone will help you. Only, you don’t have to imagine it, just think about the last time you went to a doctor’s office. At the doctor, you have to put up with this BS, because your health literally depends on it. Similar to higher ed, the healthcare industries have been sticking out their chin for years, raising prices while delivering worse outcomes. Healthtech startups raised $15.3 billion in 2020, up from $10.6 billion in 2019, according to Silicon Valley Bank.

Crypto

This is a $1.7 trillion asset class that could be $130 trillion (the size of the bond market), disperse trust (eliminate the need for inefficient intermediaries), and reduce human bias in the financial supply chain. Every generation gets its gold rush (social media followed the web, which followed the personal computer). Young people have the edge when it comes to transformational opportunities, as their brains still have the plasticity needed to comprehend new models. In my fifties, it feels like the part of my brain that I need to understand this sector is dying – along with the part that can mimic my father’s Glaswegian accent. Strange, right? But that’s another post. For now, I’m taking fish oils and speaking to experts. This week on the pod, we spoke with crypto investor Raoul Pal, and a few months ago, Michael Saylor lobbied me to buy bitcoin despite its recent rise to $19,000. Note: I didn’t buy.

How can I help?

A year ago, it would have been harder to be optimistic about entrepreneurs addressing these opportunities, as Big Tech was likely to move in and dominate every open space. But at the tail end of the last administration, we registered serious movement on antitrust enforcement. And now, the Biden administration has signalled that it will double down, bringing two of the most compelling voices for enforcement, Tim Wu and Lina Kahn, into the administration. The breakup of Big Tech – and the limits on its offensive efforts – will birth new lanes the size of the 405 (yes, I’m in LA today). Thursday’s Congressional hearings confirmed what many of us have been saying for years: Big Tech is bad for society, these firms lied to us, and they need to be broken up.

Big Tech isn’t the only segment of society that has benefitted from the pandemic. If you’re in the top 10%, much less the top 1%, the dirty secret of COVID is that many of us have been living our best lives. The deadliest crisis in American history has meant more time with family and Netflix, coupled with an explosion in wealth. The top decile of Americans works with zeroes and ones, and this work has only been levered by remote technologies. Furthermore, the representatives of the shareholder class in government (435 in the House, and 100 in the Senate) have used the cloud cover of the pandemic to funnel trillions of dollars into the market, juicing asset prices.

One thing the shareholder class can do is to invest in early-stage (i.e., seed) startups. I don’t enjoy seed investing. Almost every business idea I hear, I think, “This makes no sense, and will never work” – I also find early-stage CEOs and firms, similar to infants, needy and impossible to predict. Regardless, I have made (in the last week) two seed stage investments: Measured, a platform for weight loss, and ScholarSite, a Substack for academics.

Scott Galloway

Capital

Despite the broader economic slowdown, we are awash in capital, at every level. Wealthy individuals have by and large done incredibly well over the past year, thanks to the stock market run-up, and are looking for opportunities to invest. Tech-focused investors have done particularly well, and crypto has generated new bitcoin billionaires. Tech companies are important venture investors, and have more capital than they can use for core operations. The result? A record 225 US companies became unicorns in 2020. January 2021 saw the greatest total in venture investments in history, with $40 billion invested, and since the beginning of the year, over 60 additional private companies have achieved “unicorn” status. Meanwhile, the public markets are desperate for quality companies to sate the voracious appetite of SPACs.

Scott Galloway

Los Angeles & dispersion

I’m currently in Los Angeles and I’m channeling Michael Jordan. Hear me out: Just as MJ loved baseball, but wasn’t great at it; there is nowhere I enjoy more, and am less successful, than Los Angeles. I meet with agents, producers, and box office superstars who show me their sneaker collection and, over lunch at their house(s), tell me, “You are a genius, we must work together.” And then … nothing. I know this trip to the City of Angels will yield the same business (non)results. But that’s not why I’m here.

My closest friend’s mom, who cooked several hundred meals for me as a child, pre-teen, and teen, is struggling with dementia. I had lunch with her and her husband, who I have written about, today. During lunch, I’d grab her hand, and she’d look at me with surprise and then just smile. I’m not sure if in these moments she knew who I was, but I am confident she knew I loved her, and that was enough. I’ve let so much bullshit get in the way of expressing how I feel for people – some fucked up sense of masculinity or insecurity that to this day diminishes my ability to express true emotions.

There is a meaningful opportunity in the dispersion of HQ, education, and healthcare. There is a profound opportunity to register the finite nature of life and rebel against anything that gets in the way of letting people know that you love them, and how much they’ve impacted your life. I am a professional failure in my hometown of Los Angeles. However, there are people here who were generous with me, and whom I love. I need to get to LA more.

Life is so rich,

Scott

P.S. Section4, my EdTech startup, aims to to make elite business education more accessible with 2-3 week intensive “Sprints.” Our upcoming Sprint, Product Strategy, is taught by my NYU Stern colleague Adam Alter.

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How to prepare your business for unexpected disruptions and remain profitable through uncertainty

man getting into car ride share uber lyft
Business owners should be prepared for industry shifts, like how Uber affected taxicab drivers.

  • Per Bylund, PhD, is an assistant professor of entrepreneurship and at Oklahoma State University. 
  • He says businesses of all sizes should be prepared for unexpected disruptions outside of their control.
  • Make sure your business is consumer-oriented, and focus on keeping your company profitable.
  • Visit the Business section of Insider for more stories.

Starting a business and making it break even is an extremely difficult accomplishment. Kudos to entrepreneurs managing this feat. But running a business is also no cakewalk. No profitable niche lasts forever, and the more profitable it is, the slimmer the chances are that it will last. Many entrepreneurs, including those with seemingly safe businesses, lost everything when their industries were unexpectedly disrupted. 

The taxicab industry is a telling example. It was benefiting from protective regulations that effectively had kept competition low for decades, yet all it took was a couple of tech-savvy guys – Travis Kalanick and Garrett Camp of Uber – to upend the whole industry. Even though their business was not to provide regular taxi service, their innovation undermined that business. Uber and other similar services caused many taxicab companies to go bankrupt and the market value of taxi medallions to plummet. 

In other words, your business is not safe even if you are already making nice profits and the future looks bright. After all, even protected monopolies eventually get disrupted. What you need is to make sure you can stay profitable in the years and decades to come.

Profitability is to meet the future 

The key to profitability is to recognize what businesses are and do from the perspective of the whole economy. Businesses formulate strategies to position themselves with respect to each other and thereby earn profits. So the economic context matters, because it is within the economy that you run your business. It’s an obvious point, but what it means is rarely considered.

In the startup phase, the entrepreneur tries to find and populate a “gap” that allows the business to become profitable. But the same is true for the existing business, which must continue to consider its positioning to stay profitable. That’s what the old-style “Five Forces” framework helps you do – to position your business so that competitors, suppliers, customers and others have as little sway over it as possible. But there is more to it than positioning.

Profits are rewards for a job well-done. But to maintain profitability, your sight must be set to facilitate future value. After all, the line of production that you’re considering today will not be instantaneously available to your customers. The value they get from the goods and services you set out to produce will without exception happen in the future. In other words, profits indicate you did something right. But profitability is a matter of meeting the future. 

Customer isn’t king, but consumer is

The key to profitability is to imagine how you are contributing to making consumers better off. Note: “consumers” not “customers.” In our advanced economy, with two-thirds of all spending being business-to-business (B2B), your customer may not be the consumer. But the consumer is the user of the final product and therefore the one that determines its value. The consumer, therefore, determines also the value of all contributions in the supply chain, albeit indirectly. 

This subtle point has important implications. Businesses that produce the final product must focus on what consumers want and, more importantly, what they will want in the near future. But the same applies for B2B to maintain profitability. If you produce for other businesses, the viability of your own business goes only as far as your customer’s. When they are no longer profitable, you are no longer profitable. 

To stay profitable over time, look beyond your customer and consider your contribution to the value of the final product. Even if your customer does not recognize it, you should meet the opportunity and innovate to offer your customer an upper hand. If you make your customers thrive, your business thrives. The key is to think about the consumer whether or not you serve them directly.

Microsoft is an example of how to apply this thinking. While the software giant caters primarily to corporations and large institutions, they look ahead and continuously innovate to make it easier for their customers to serve consumers. From software to hardware, Microsoft focuses on providing the tools for productivity. This empowers their customers to serve their customers and, eventually, the consumer. In other words, Microsoft indirectly facilitates value for consumers, which makes Microsoft’s customers competitive and profitable.

Whether or not your business caters directly to consumers, it should still be consumer-oriented. To gain and maintain relevance in the economy, which is necessary to be (and continue being) profitable, requires that you contribute to the value of the final good. The great mistake of the taxicab companies was to focus on their strategic positioning in the market over innovating to facilitate value for consumers. This left the market wide open for a new type of competitor playing by a different rulebook.

All businesses benefit from adopting a consumer-value focus.

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TAXES: Everything small business owners need to know in 2021

Black business owner entrepreneur
  • 2021 will be an important year for small businesses to file their taxes.
  • Tax credits and incentives can be an effective way to offset losses from a difficult year.
  • But very few small businesses take advantage of all the credits available to them.
  • Visit the Business section of Insider for more stories.

2021 will be an important year for small businesses to file their taxes, as many are still reeling from financial losses during the pandemic. But tax credits and deductions can be used to offset some of your costs.

Join us March 2 at 1 PM EST for a webinar on how small businesses can master their taxes. Our panel of tax experts will answer your questions, which you can submit here. Register for the live event here

Getting tax credits and incentives

Business tax credits and incentives can be an effective way to save money or offset losses from a difficult year, but many small businesses don’t take advantage of them because they’re unaware of what’s available to them. The first step to getting them will be finding what your company qualifies for. Then, you’ll need to regularly monitor compliance. 

Some examples of tax credits would be if you provide childcare services for your employees or employ disadvantaged groups, such as the formerly incarcerated, long-term unemployment recipients, veterans, and summer youth.

Read more: This tax season, businesses can get credits for creating jobs, providing employee benefits, and using green energy

6 important tax credits for PPP borrowers

Small businesses can take advantage of both federal aid under the CARES Act and certain tax deductions, including the employee retention tax credit and research and development credits. In addition, the energy-efficient building tax deduction and excise alcohol tax break were made permanent.  

The business meals tax credit, commonly known as the “three-martini lunch,” has been temporarily increased from 50% to a full 100% deduction.

Read more: PPP borrowers can now claim 6 important tax credits – a major change from the original rule 

More about the employee retention credit

The Employee Retention Credit provides up to $14,000 per employee for eligible businesses in 2021. Businesses are eligible to claim this tax credit if they experienced full or partial shutdowns due to government orders during the pandemic or can show a 20% drop in quarterly revenue compared with the same quarter in 2019.

Read more: A business tax credit for keeping employees may be more helpful than a PPP loan – and you could be eligible for both

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7 ways to prepare your small business and increase profits during peak holiday season

small business owner
Your website needs to be mobile friendly to capture the most customers this holiday season.

  • It’s time to start preparing your business for the holidays, especially if you want to maximize time, profits, and sales. 
  • Most people will be online shopping this winter, so it’s critical your website updated with new pictures, products, and a smooth and flexible checkout flow. 
  • Engage with your customers by responding to comments or reaching out to “abandoned cart” customers, and show off your excellent customer service with a self-help resources page. 
  • Visit Business Insider’s homepage for more stories.

The holiday sales season is here, and if you haven’t already started preparing your business to maximize your time, you could be missing out on major profits. In 2019, over $135 billion was spent during the holiday sales season.

For most small businesses owners, particularly those in the retail and consumer products space, Q4 is their largest quarter for gross revenue. Yet, most small business owners are leaving money on the table during this time because they are not adequately preparing.

Read more: A 37-year-old entrepreneur created a card game right before the pandemic that became an instant hit. Here’s how she made 6 figures in revenue in less than a year.

Here are seven things you should be doing now to prepare your business for the upcoming holiday season.

1. Update your website

Online sales for my clients have skyrocketed this year. With everyone at home, online shopping is a necessity for most. Therefore, keeping your website up-to-date and easy to use should be one of your top priorities,

This could include updating your product photos, reviewing descriptions of your products and services, confirming your prices are correct or making necessary adjustments to shipping rates.

Also use this time to plan promotions or set up any promo codes that you will be using in your marketing during the holiday season (think Black Friday, Cyber Monday, etc).

2. Test your checkout process

If you haven’t done a test run of your check-out process recently, now is the time to do one.

Potential buyers are looking for a seamless experience and if the check-out process is clunky and cumbersome, you could lose sales. Just remember that one-click buying is now at consumers’ fingertips, so simplicity is key.

3. Consider additional payment methods

Most online businesses accept payments through credit cards, debit cards, or PayPal, which are great but customers are looking for increased flexibility and an easy buying experience.

For example, Apple Pay makes it easy for people to pay with their phone (online and in-person). After Pay allows you to offer payment plans to customers.  

Consider adding alternative payment options if it makes sense with your ecommerce system and makes it easier for your customers to shop with you.

Read more: Entrepreneurs say Instagram Stories have helped them sell products faster and attract customers from home. Here’s how they leverage the social media feature to grow their businesses.

4. Recapture “abandoned cart” customers

Cart abandonments account for $18 billion in lost revenue annually across ecommerce stores. It’s an astounding number.

Win back customers who fill their carts, but fail to complete the checkout process by sending abandoned cart emails.  

Send two or three fun, on-brand follow-up emails to remind your customers to head back to your shop and complete their order. You can set these up ahead of time and automate the process.

Reminding and incentivizing customers who have abandoned their shopping carts will build connections with your customers and increase your profits – with little effort on your part!

5. Mobile-friendly is a must 

A mobile-friendly website is an absolute necessity. 34.5% of ecommerce spending during the 2019 holiday season was made via smartphones.

Use tools like MobiReady to test your website on different browsers and devices to make sure it’s a smooth experience for the customer.  

6. Communicate clearly

Communication is always key, but during a pandemic, it is critical. Now is the time to communicate and educate your customers so they are informed on your business’ return policies, shipping delays, or deadlines, etc. 

One example of this are holiday shipping deadlines. 

Most online retailers have strict deadlines of when orders need to be placed to guarantee arrival by Christmas. Display these deadlines prominently on your home page or an announcement bar across the top of your site, highlight them in your check-out process where customers choose their shipping options, talk about these deadlines on social media and in your marketing emails.

Overly communicate important details with customers in a clear and concise manner.

7. Provide excellent customer service

Exceptional customer service creates loyal customers who are willing to refer your business to everyone they know. Poor customer service can also be magnified in the same way.

How are your customers engaging with your brand? How are they impacted? How could you make it a better experience for all?

For example, build out a self-help resource section on your website to reduce customer service inquiries. A FAQ page won’t solve every issue but it may minimize questions and give you a place to direct customers when needed.

Aim to strengthen interactions with your customers at every touch point. This includes responding to comments on social media, timely responses to email inquiries, and finding ways to surprise and delight them at different phases of their customer journey (sending birthday cards is one example!).

These seven strategies will ensure you head into the holiday sales season with a strong foundation. You’ll be able to easily layer in your sales and marketing strategies because your products will be ready, your site will be ready, and your company will be focused on providing a positive experience for your customers.

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