HomeFAQHow Do You Start A Business?

Question: How would a person start a business?

Answer: I am going to assume that the reader has some idea of what is involved in starting a business in a POM economy. Though that will no doubt vary from place to place, especially if one goes from nation to nation.

The first thing you will need is a "business plan" as it is called today. You need to have some idea of what benefits your proposed activity will produce and how you will help bring about those benefits. To increase the parallels with the current POM economies, I will assume that one is opening a store to sell luxury goods. But please note that just going about the neighborhood picking up trash from the side of the street and sorting it for recycling would constitute a business and one would be paid for it even though only the one person were involved and no capital goods would be required and no cooperation from others.

You have identified a location, a product range, and potential customers for your shop. Now you need to acquire access to the shop, a supply of luxuries, and bring the shop to the attention of potential buyers. To begin with you have none of these things. So one of your first steps is to approach the owner of the shop you would like to use. Since the shop is his property, he has complete freedom to allow you to use it, to give ownership to you, to have it stand idle, or to give/lend it to someone else. That is his private property and you cannot compel him to give it to you. But, you do have your business plan. You tell the owner of the shop what use you would make of the shop, what products you intend to sell there, and what customers you would expect to attract and how you would attract them.

Now it is up to the shop owner as to whether to join you in this venture by giving or lending you the shop. His motivation could be almost anything. But one of the most likely sources of motivation would be the money he could reasonably expect to be paid if the shop is used as you describe. Of course, you do not control that payment. All you can promise is your best efforts to bring that about. So what does the shop owner have to go on in making his decision?

The most important thing is your reputation. You will want the owner to know your background (if it is a good one). Have you run any shops in the past? Did they make money? Have you made a lot of money previously, for if you did you would appear to have talent in that direction? Have others said good things about your character and abilities? Of course the computer system makes the providing of this information rather easy. The computer system can positively identify you and has readily available your complete earnings history. It has listings in complete detail of your experiences in earning money for each payment comes with a description of the benefit provided and your contribution.

If you are the only one asking to use the shop then the owner is likely to allow your use unless you have a bad reputation for irresponsible behavior. If there are many who would like to use the shop, then the owner will be able to pick and choose. But, in any case, you will note that the owner’s main concern is that the shop be used to produce benefits for others. The owner cares very much what you will do with the shop. The owner will be held partially responsible for your actions in using the shop. If your use causes harm that will cost the present owner possible future income.

Let us assume that some shop owner has granted you leave to use their shop on a loan basis. The owner could have given you the shop but in this case the owner chose to continue to assume responsibility for the shop and will see to its maintenance and security while you use it. Note that no money has changed hands (and it can’t change hands in a non-POM economy). You have offered the owner nothing except the opportunity to earn money. You and the owner are on the same team. If one of you benefits, the other must also benefit. If one loses, the other also loses.

Now you need to get access to a product to sell. Since only luxury goods and services can be bought with money, you will be seeking luxury goods to sell. Your options at this point are many. Every producer of luxuries is a potential supplier. But you probably have some particular type of luxury that you feel more qualified to sell. If you choose some luxury about which you know nothing you will not be able to provide much help to a customer and thus, you will make little or no money even if customers do buy the product. So let’s say that you are an expert in jewelry. You will have told and demonstrated this to the shop owner and will have pointed out how the shop is suitable for this product. But the owner will need to work with you in modifying the inside of the shop to make it suitable for your product. This will probably entail others working with you and the owner to modify the shop. Since the owner is responsible, he does the work of finding people willing to modify the shop. Now, those people as well are depending on you to make the shop succeed so that they will be paid. If you win, they win. If you mess up, they will earn no pay for this work they are doing either.

So you now contact producers of jewelry. This may be individuals with their own tools working with materials they have acquired for themselves or it may be, at the other extreme, a large "company" in which hundreds or thousands of people are cooperating to acquire the raw materials and convert them to jewelry. The people you contact will be the literal owners of the jewelry you wish to sell. Those who owned the mine, mined the ore, transported the materials, refined the ore, designed the pieces, cut the stones, all contributed their property and/or labor to produce the finished pieces that you hope to sell and gave them to someone who will decide who would be best to sell the jewelry. They, in turn, will consider you as a possible recipient of the jewelry for sale. They will be even more interested in your background and your reputation than the shop owner. The shop owner did not have to worry that you might take the shop and leave the country with it. But the jewelry is valuable and portable. It would be relatively easy to smuggle out of the country to some nation which used POM. So the jewelry owner would want to see that you were socially tied to the community and would have a lot to lose by leaving. If you were happily married and had children and other family nearby you would be less likely to leave. If you were operating a very successful business and making lots of money at it, the lure of stealing the jewelry would be lessened. If you had a reputation for honesty and dependability that went back to childhood you would be more trustworthy. So, if you are just getting started, you would probably not be trusted with the more expensive pieces. To begin, you would be trusted with only a few pieces of the less expensive sort. You might need to find several jewelry producers, perhaps some who were just establishing a reputation, in order to fill your display cases.

Note the parallel here with borrowing money in a POM economy to start a business. Exactly the same considerations are relevant to the banker as are relevant to the suppliers of jewelry. Are you of good character? Does the bank have a good expectation that you will not run off with the money? Does the bank have good reason to think that the business will do well enough to pay off the loan?

So we assume that you have now made all the arrangements for delivery of merchandise to your shop. What’s next? Do you intend to run the shop all by yourself? You certainly can if you like. You don’t have to have any accounting skills. There is no accounting to do other than keeping track of where the stock is physically. The computer system keeps track of what has been given to you and deducts what you have sold. You have no bills to pay or any income for the business. The business has no "books," so to speak. Therefore you do not need the services of an accountant or bookkeeper. There is no overhead to pay for things like utilities. There are no business taxes and no business regulations. What you do with your shop is none of the government’s business at any level and no representative of the government will care. There are no permits required and no OSHA regulations to pay attention to.

But you still might want someone to help with running the business, waiting on customers, keeping the floors clean, replacing burnt-out light bulbs, creating tasteful window displays. So let’s assume you want some help. How do you get it? You can advertise, letting people know that you want some help. But how do you motivate anyone to work with you if you can’t pay them, if you can’t offer them money? You do that in exactly the same way that you got the store owner and the jewelry producers to cooperate with you. You show them how they can earn money, how they can benefit others by working in the shop.

So let’s say that you have several people who would like to work with you. Since you have the shop owner’s permission to be there and since you own the stock (yes, the jewelry providers have passed ownership of the jewelry to you, officially, by using the computer system and it didn’t cost you a penny) you can allow or not allow persons to work with you. It’s your choice. So what factors will influence your choice of "employees" in this case? What do you bet you will want to be sure the person is trustworthy and knowledgeable about jewelry? But you will also want someone who has good taste. You wouldn’t want to have them sell an item to someone on whom the piece would not be flattering. You would want them to be able to be very useful to the customers because that increases you own pay. Remember that you are selling your service to the customers, not the jewelry. You are not being paid for how much jewelry people buy but for the benefit you provide.

Now you have everything ready, how do you attract customers? You advertise, of course. But you cannot pay anyone so how do you get the word spread about your new shop? There will undoubtedly be those who help shoppers find those items which will make them really happy. That is a very useful service to provide. It will greatly benefit consumers. It will make money more valuable and the public happier and thus reward the Payers in many ways. So you contact several of these shopping services. You and they are cooperating and work together so they will be seeking you out just as you are seeking them out. They will be difficult to avoid as opposed to being hard to find. Both you and they want to bring your shop to the attention of those who are in the market for jewelry and no one else. They will not want to annoy people by talking up your shop to those who don’t want your product since that would reduce their pay. In other words, not only will they do the advertising for you, you can depend on their doing that advertising very tastefully and tactfully. If you had any sense, these shopping services would have been one of the first contacts you would have made once the idea of opening a shop came to you. Their advice about the kind of shops that were most needed would be invaluable.

So you have everything up and running, customers coming and going, and the business is humming. Will your staff come to you and demand a raise? Will you keep them by treating them badly? Will you be thoughtful and considerate so they don’t go elsewhere to work? You will notice that since you are working with the staff and they are working with you, you are not their boss. You have no power over them. They are working voluntarily. You do not have to force them to do anything. If they don’t do a good job, you can seek someone else who will do the job better. You don’t have to worry about firing a poor worker because their needs are being met anyway. Their family will not suffer. The free market for labor is present. Anyone you like who wants to can work with you so long as you both agree to it.

But there is no contract between you and the shop owner. There is no contract between you and the producers of the jewelry you sell. There is no contract between you and the staff. Contracts are not necessary or useful. All parties are working toward the same ends. All parties are cooperating. So what if something happens to disturb this idyllic scene?

Let’s say that the shop owner decides that running a jewelry shop is easy and fun and that he can do just fine without you. He tells you that you can no longer use the shop. Do you have any recourse? Can you take him to court? No. You have no recourse and there is no case that you could make for damages. However, you are the one to whom the jewelry producers gave the jewelry so all the stock is yours and would go with you. The staff members were working with you and were happy to do so and they and the jewelry producers were making good money. So you have a staff and a stock of jewelry and a reputation for successfully operating a jewelry shop. Will it be hard to find another shop? No. Because you have already proven that you can make money for everyone who cooperates with you. You should be able to move into a larger shop with more advertising and hire more staff.

But what about the shop owner who kicked you out? Who will want to work with him? Who will trust him to not do the same thing to them? What people will want to help him redecorate the shop when the previous work suddenly stopped making money for the previous redecorators? What will such behavior do to his reputation? He will have punished himself and you will not have had to lift a finger nor said a word. The circumstances will speak for you and will speak loudly.

You remember how important reputation was in getting the shop in the first place, and how important to getting stock and getting people to work with you? Reputation is what controls people because, unlike today in a POM economy, one cannot run away from one’s reputation just by moving and changing one’s name. The computer knows who you are and what you’ve done. Sure, you can tell the computer to conceal your actions but then people are unlikely to trust you.

You will note that at no point is anyone telling you what you must do or not do. There are no laws to have to obey and no enforcement needed. The customer is safe because you can’t get his money. The only way you can get paid is to do something which benefits the customer. Your staff can only benefit themselves by helping you succeed. And they don’t just do what you tell them to do even if it is a dumb thing to do, they use their heads. After all, they don’t get paid for obeying you, they get paid for benefiting the customers so regardless of what you have told them to do they will do what seems best to them. If you are teaching your staff how to do the job well they know that you are on their side. You are not just trying to make them obey. This makes them much more likely to do as you ask.

What about if your business fails? What does failure look like? Well, the customers stop coming and your staff quits because they think they can earn more money doing other things. Your suppliers stop giving you jewelry. It is obvious that you should be doing something else. So you decide to close the shop. You give the unsold jewelry to some other store or back to the folks from whom you got it. You inform the shopping services and recommend other stores that might be available. You thank the shop owner for letting you give it a try.

You will have lost no money at all. Your family will not have suffered. Since you behaved responsibly in closing down, your reputation suffers but little. You have shown that even when you fail, you protect the interests of those who have cooperated with you. You give others good reason to risk working with you in the future. In other words, your failure has hurt no one. Though it did you no good in getting another shop somewhere else, the failure and the way you handled it will make it easier to start another shop. Not only did you learn from the first failure but you showed others that they would risk little in giving you another chance. You have more of a track record.

On the other hand, if you have success you can train a replacement to take over the day-to-day activities of your present shop and open others, recruiting and training staff. People will come to you not only for advice but to start stores in shops they own, to sell jewelry they produce, to train them for running jewelry stores. All your work in helping others get started will continue to generate income for you so long as those shops and those workers continue in the jewelry business. Your success breeds more success for you since it enhances your reputation. Just as today, having money makes it easier to get still more money.


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