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Finding What's Cheap

Mike Masnick Techdirt

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November 5, 2008

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Business Forecasting 2012

Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.

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There are plenty of good reasons for small businesses to be worried or nervous about the financial tumult going on all around us these days, But as many of us here have been pointing out, there’s still plenty of opportunity out there. The trick is finding it. One important trick that I’ve found to be useful is to evaluate two key things in a market: what’s scarce and what’s abundant — and then learn how to leverage what’s abundant to make something scarce more valuable.

So, for example, in strong economic periods, money — in the form of investment capital or loans — is often “abundant.” Meaning that it’s a good time to raise or borrow money, knowing that it can be used to profitably invest in the business, to grow value and sell something.

However, in tough economic times, when the money dries up, some people get worried and assume that if money is scarce, so are most other business opportunities. Nothing could be further from the truth.

In fact, when economics times are good, and money is abundant, many other important things are scarce. Finding good, affordable office space is difficult. Finding good employees at reasonable salaries is very difficult. Yet, in difficult economic times, while money may become relatively scarce, these other things start to become abundant.

While it’s unfortunate for others and the overall economy, these massive layoffs we keep hearing about are an opportunity for a small and growing business to find great employees who are forced, by circumstance, to find new work. And, of course, there are other opportunities that can be found on the margin. In the last downturn, a friend of mine picked up Aeron chairs for $50/piece at a liquidation fire sale of a San Francisco dot com that went bust.

But the bigger opportunities aren’t just in what you buy, but in recognizing the changing market to see how you can be a supplier for various scarcities that companies need. Many companies are now worried about cutting back on their advertising budget — so if you can provide a more efficient way for them to advertise, that’s an opportunity.

So, basically, look at what’s abundant and what’s scarce (while recognizing these things can change rapidly in a dynamic market) and figure out ways to use what’s abundant now to make what’s scarce more valuable — and try to make sure you’re selling those scarcities.