Impact of our environment - a business story

Mr Cheat Codes

Dear reader,

Understanding and spotting trends in the environment before moving forward on a business idea can be the defining factor whether it succeeds or fails.  I started noticing this when I went on holiday in Algeria back in 2018, looking at computer (gaming) café's. My cousins and I spent hours chilling there, and I had realised, it's been a while since I've even seen one of these!

In the "east" (Middle East and North Africa), computers are relatively expensive, especially where the majority of areas have lower salaries, this has helped the computer café industry stay alive in this part of the world. The culture has also played a large factor in this as in Muslim countries it is not common to have your male friends come to the house, given that women are more often home, and need to be dressed decently around male non family members. As a result this leaves a large number of the (usually younger) population looking for somewhere to go and hangout with their friends. Making a computer café the natural choice - think of the winters!

This is in direct opposition to what I had noticed in the UK. There was a time when not every home had a computer and this allowed computer cafes or even libraries to thrive in the "west", but as time went on they started becoming more and more obsolete.

Understanding how the environment can affect the venture you want to pursue

The best example of this is when the world came to a standstill during the covid pandemic. Masks and toilet paper prices went up 10x in the height of the pandemic. Some people opened business and invested significant amount of resources towards this but like with a lot of things, it had a short life cycle.

I like looking at less obvious choices when trying to commit to a business venture, one that still has similar demand. A good example of this is when my brothers started their first business in this time. They were struggling to find a driving test themselves as DVLA (where tests are booked) had closed for nearly 2 years.

My brothers noticed that there was an extreme back log in finding a driving test. When everything started easing and driving tests were now available to book they started specialising in finding driving tests by learning the market and assessing ways around the norm. They advertised on social media and got the word out that on average they could save a client 3-6 months in waiting time. After working on this for a while, they started partnering with driving instructors. Before long they were getting many bookings and couldn’t keep up with the demand. 

Momentum

An important thing to always consider is that whenever there is a significant change in the market this is usually temporary (in comparison to the speed to which the market changed). If you look at the personal protection equipment (PPE) industry, they absolutely skyrocketed and after 2 years of flooding the market with PPE the supply and demand has dwindled, making the industry as a whole over saturated (meaning you can't charge a lot for the product, which lowers the profit).

Some of these businesses stand the test of time, Groupon is a great example of this. Being born out of a recession its business model took advantage of a period where people were looking for discounts and cheap things to do.

Groupon stood the test of time because of a very simple concept, save people money at a time where it was needed.

Fun fact:

Lipstick sales in a recession actually go up. This is because where people had more disposable income, they were inclined to go on holidays or spend on the more luxurious parts of life, however, in a recession, they would treat themselves with something more affordable - lipstick!

As always, take advantage of a situation when it arises. Look out for what opportunities come up, but be aware that this may  just be a short term way to bring in some cash, and to always try and invest what you would get out of it. For example, those who invested in selling PPE masks, were they able to sell their stock, or did the demand slip before they offloaded?

Author note: the next post will be about how I analyse if something is a viable opportunity. This will be an in depth post.

Quote of the Day

"The quality of your life depends on the questions you ask yourself" - Tony Robins

Disclaimer:

This is not financial advice, nor am I a financial advisor. Please seek professionals before executing on any of the information provided in these posts as everyone's circumstances are different.

I ask that you please keep in mind that I am still young (28 years old) and will be sharing some hard facts about myself so do as Bruce Lee says "take what is useful and discard what is not".

Kind regards,

Mr Cheat Codes