Gordon Woolf's Blog

The need to make a profit

The radio caller was critical of banks, which is not unusual, but she put it in a somewhat odd way: 'I have to pay them interest, but what do they actually DO (for me?)'.

This may be partly the reason for the current Occupy movements around the world. To some youngsters it may just seem that if their parents run out of money, they just have to go to "the hole in the wall', but to those parents does it also seem that if they can buy computers, washing machines, furniture and so much more on "48 months interest free", why should the banks charge interest. After all they are only giving you money for a while, not goods permanently.

I know that doesn't make sense, but it kinda sounds logical.

The reason for the demonstrations that I have sympathy with is that it is no longer true that the rich are getting richer and the poor are getting poorer -- it is, some people have pointed out with figures and graphs, that the super-rich are getting richer, and that the rich and the poor are getting poorer.

I could claim that some of my best friends are millionaires, which is not quite true but I have known a couple well enough to visit their homes and have them visit mine. I don't envy them. Sure they make more money than I ever had but they do have to work unusual and long hours and the stress level is more than I would want, even though as a newspaper editor I once flourished on stressful work.

But we now have company directors who get pay increases by the millions and yet manage to do similar work for several companies at the same time. If their individual jobs were at the stress level of "my" millionaires, they'd have been dead long ago.

That's what I mean by things getting less fair. And therefore in general terms the Occupy movement has my moral support.

I'm not particularly blaming the chain store owner with his 48-months interest free and similar offers. The one I have in mind has said that people are stupid to accept some of the offers made in his stores as they don't suit everyone.

It is necessary for businesses to make a profit in order to reinvest but there is a big difference between making a fair profit and making the most that you can. Is the first aim of company directors to make the most profit for their shareholders or a profit which will ensure that the company continues to be viable into the future? Customers are important too, with the rest of the community needing at least a little consideration occasionally.

I don't think the unfairness claim can be made against more than a small number of the people who run companies -- it just seems like that sometimes.

Worst-case scenario: plan for it

In your business or even in life in general, have you worked out a worst-case scenario? It should be essential but I suspect too many people are unwilling to face the prospect of things going wrong.

Insurance salespeople will encourage you to consider what might happen if you had a fire, but few take it further than that, and the effects are often not those you can insure against.

Several recent reactions to changes in government policies, changes in the dollar exchange rate and surveys showing changes in consumer buying habits lead me to wonder yet again whether many business people ever work out what they'll do if things start to go wrong.

Those good at selling often overestimate their ability to sell -- but worst case is not always a lack of sales. As in the example I gave in the book Success in Store, it is also possible for a worst case to be caused by sales being too good. (Do you have access to funds to buy what you have sold, or, in a manufacturing business, the cash and/or credit to buy the raw materials?)

A lot of this is done with a spreadsheet. Just take the figures a bit further to the extremes. Yes sales in the convenience store we bought were poor, and even our own mishandling of customers might have been unable to make them worse, but what if road works started in the street outside and took way longer than were planned? I've seen that happen to others, and after putting off the staff and allowing for the lack of a need to buy stock, the overheads were still at a level which drew on all resources. (In the case I'm thinking of, the local authority was prepared to make a substantial contribution to promoting the strip shopping area when the work was done, but the businesses still had to get through to that point.)

The advertisement rate calculator included with my book How to Start and Produce a Magazine or Newsletter makes it easy to work out what would happen to income if a periodical publisher found all orders coming in for full pages instead of a mix of small and medium ads. But that is the kind of calculation which should be done with any business. I'm sure you've heard the joke about the business owner who admits that they are losing a dollar on every sale "but we make up for it in volume".

Retailers in Australia are currently trumpeting the benefits of a high dollar in lowering prices on imported goods, especially electronics. But have they worked out what they'd do if, over say a three or six month period, the dollar conversion rate dropped to half its present level -- which was where it was only a few years ago.

Computer retailers used to stock computers. Now few do outside of the demo stock on the floor. Not only did they learn to cope with price fluctuations but also with continuing upgrades in specifications. But a lot of stores went broke or closed because it was just too hard to cope.

In another field I went through some basic costings with a couple planning a restaurant. If successful it would have been a goldmine, but the most likely scenario was that they would be working their butts off for less than a living wage. Then I discovered that none of their forecasts included the cost of borrowing the admittedly fairly small sum they would have needed to get started. So, unless they started with queues outside their door on the first days they would have been going backwards slowly but certainly.

So think now of what could go wrong, and what effect it will have. If you cannot cope with that, you will be unlikely to cope with success.

Changes in the way data is stolen

Some interesting facts in the latest Verizon Data Breach Investigations Report, which, for the first time, for 2010, was a joint report by Verizon and the US Secret Service.

This applies only to breaches within the USA of course, but there are still some lessons for us all.

Firstly, of 84 "confirmed breaches of data security" investigated by the US Secret Service, 66% led to arrests. Not all got the publicity of Albert Gonzalez who was sent to jail for 20 years in March this year for stealing more than 90 million credit and debit card numbers. In fact some received no publicity at all as the companies from which the data was stolen were loathe to have their problems revealed.

Most thefts happened in-house: rogue employees such as programmers were involved in nearly half the cases, but they involved only 3% of the records stolen. In other words, the inside jobs were amall jobs. But the report warned about outsourcing:  "Organizations that outsource their IT management and support also outsource a great deal of trust to these partners."

And there was not a single case involving a foreign government.

SQL database queries were used in more than half the cases: programmed queries that pluck data from the system and send it to the requester. This is a bit like the queries you can set up in Access or the old DBase. It seems to mean that the real problem is in the programming used by a vast majority of businesses.

Keyloggers, the programs that record what users are entering via the keyboard, and which can be hidden in other programs or installed without the user's knowledge from compromised websites, and which are often used to scare users, accounted for only 1% of the stolen data -- down from 80% the year before. So the bad guys have found better ways to steal the info.

And what of the other big scare tactic: keep updating or you'll compromise your computer? Well, Verizon and the Secret Service could not come up with a single case which "exploited a patchable vulnerability."

One wonders however whether companies are keeping as close a watch on their data as we might reasonable expect. The report states: "Third-party fraud detection is still the most common way breach victims come to know of their predicament".

As Woody Leonhard states in the Windows Secrets newsletter: "Companies learn of breaches when customers report them. So if you think your data's been stolen, holler yer head off!"

Adobe v Apple: It's happened before

On the AppleInsider blog, Daniel Eran Dilger gives the background to the current Flash war with the comment "This all happened before".

His story and timeline of PostScript, the Laserwriter, TrueType, Aldus PageMaker, Macromedia's Freehand is almost all as I recall it and heard at the time from mainly Adobe insiders. The only statement I see which is a bit questionable is his assertion that Adobe did not realise when buying Aldus that the rights to Freehand did not come with the sale since they still belonged to the originators. Not until they bought Macromedia 10 years later did Freehand enter Adobe's fold.

However, if you think that lack of foresight (or what is now called "due dilligence" is impossible I can quote a tale from Australian media history. Our main TV weekly program guide which once sold a million copies a week was part of a publishing company sold off by News Ltd (which many years previously had been in the free-to-air TV business here) and ultimately sold to one of our major TV channels. After the final sale, the other leading TV company "revealed" that they owned 50% of the title. Within a week the magazine was being published by that company's publishing arm, from another city, with an entirely new staff.

Quite a blow for the other TV channel -- but I worked for that magazine several years earlier and as a fairly junior player I knew that the magazine was only half owned by the company publishing it. So I question how the money/management people did not know that essential fact when talking of multi-million deals. Could Adobe have not known about Freehand in 1994? Maybe.

It does not seem long ago that there were continuing email list discussions on the relative merits of true PostScript and the clones built in to printers. It dawned on most of us very slowly that the future lay in postscript interpreters resident on the computer, so slowly for me that the PostScript 2 laser printer I paid $5000 for (and $500 for each cartridge) we were unable to give away. It recently ended at the tip despite still being in working order.

The column is at:
http://www.appleinsider.com/articles/10/05/14/adobe_apple_war_on_flash_reminiscent_of_postscript_struggle.html&page=1