Business building tips Brisbane – threats that can wipe out a business

This is the story of Arthur, a Brisbane pharmacist.  After working as an employed pharmacist for a few years, he purchased his own suburban pharmacy.  The shop was located beside a doctor’s surgery.  In fact, as part of an arrangement with the doctor, the previous owner had built a doorway directly from the doctor’s waiting room into the pharmacy.  It was truly a captive audience!

All went well for a few months.  Arthur is a personable guy who made a real effort to connect with his customers.  He sought feedback from customers about what he should stock in the shop, other than prescription drugs.  He even greeted his customers by name after reading the name on the prescription – very clever!

A few weeks ago, tragedy struck, dealing Arthur a double blow.  Firstly, the doctor moved out from next door to a nearby regional shopping centre, to join a group of doctors who were locating next to a major pharmacy.

Shortly after, in January 2011, Arthur’s shop was completely submerged in the recent Brisbane floods.

I will be amazed if Arthur’s pharmacy business survives this blow.  That will be a real shame because my interest in this business has been as a customer who had always received excellent service.  This is one of many businesses I observe in my own neighborhood.

These are the kinds of events that are categorized as ‘threats’ when undertaking S.W.O.T. analysis (Strengths, Weaknesses, Opportunities, Threats).  Threats are not to be confused with ‘weaknesses’.  Weaknesses usually relate to skills and knowledge that are missing.  Threats are events that can kill or cripple a business.  They can occur suddenly, and are usually caused by nature, government legislation or reliance on one source (in this case – income).

I am not being critical of Arthur over the flood issue.  After all, when the last major flood hit Brisbane, he wasn’t even born.  Besides that, our governments had us believe that with new flood mitigation infrastructure, it would never happen again.

However, the previous arrangement between the doctor and the former pharmacy owner which was responsible for the majority of the pharmacy’s business is something that should have sounded alarm bells.

This is where business owners can get blindsided.  The relatively few business starters who actually undertake planning before taking the plunge are usually too focused on the opportunity and the upside.  They tend to ignore downside risk on the basis that it may never happen, and it certainly won’t happen to me.

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Until next time!


Don’t bet on the weather or politicians

If you are looking for a business building tip in Brisbane, don’t bet on the weather or politicians!

This is the story of Godfrey.  Godfrey is a very intelligent and entrepreneurial business man who saw an opportunity a few years ago.

A few years ago, Queensland, Australia’s north eastern sub tropical State, was headed for a drought.  The El Nino weather pattern had been forecast for some time.  Godfrey decided that in the face of drought, Queenslanders would need access to water.  So he decided to go into the business of manufacturing and selling water tanks in Queensland.

Knowing very little about the technical aspects of plastics molding, he bought a share of an extruded plastics business which then ceased selling its traditional plastics product line and ordered the construction of several large water tank molds.

His timing was excellent.  As higher and higher water restrictions were imposed in Queensland, both the State Government and Federal Government offered attractive subsidies for residents to purchase water tanks.

Instantly, residential water tank sales went ballistic!   Residents were effectively being paid by the government to purchase water tanks and store their own water.  Soon there were countless manufacturers and importers entering the market as demand outstripped supply.

Meanwhile back at Godfrey’s water tank factory, two twelve hour shifts a day still couldn’t keep up with demand.  He  decided to increase his investment and ordered more water tank molds.

Then it rained and soon after, the State Government changed the subsidy rules and later announced the phase out of the subsidies all together.  Tank installation rules changed and residential sales plummeted by 70% overnight and the demand for tanks quickly dwindled.

By this time Godfrey had made a significant investment in manufacturing assets, gearing up to meet growing demand.  When demand disappeared almost overnight, he was facing some serious survival problems.

So what really happened?  Godfrey rode the wave of success on the back of a change in government legislation.  It was also the reversion of that subsidy legislation that killed off consumer demand.

His business was built on the whims of politicians; a very dangerous strategy indeed.  The demand for water tanks hadn’t fundamentally changed.  The reality was that the government was giving money away.  When they stopped, the market returned to its previous state, except there were now far too many suppliers.

Five years on, the El Nino weather pattern has been replaced by the la Nina weather pattern.  Dam storage capacity has risen from a low 17% to a peak of 200% and widespread flooding has replaced drought.

A business building tip in Brisbane? – be careful betting on the certainty of the weather and politicians!

Until next time!