Facebook launched in 2004; LinkedIn during 2002, Instagram 2010 and they were acquired by Facebook in 2012.
By 2012 business and academic literature were universally exhorting the new paradigms for business value presented by social media. For example, academic literature such as this was appearing… “Can Facebook be an effective mechanism for generating growth and value in small business” John Hopkins Journal of Systems and Information Technology Report dated 27 April 2017.
In addition to this general acclaim, the explosion of informed gurus earning huge sums from consulting to and coaching or teaching small and medium enterprises how to use this medium, had successfully created a myriad of subordinate industry segments.
Now in 2023 when discussions with the owners of these predominantly “on-line” businesses occur – seeking to harvest this purported business value – what are the facts according to the market.
Fact one – Social Media Enterprises are now your de facto landlord.
Social media provides certain “accommodations” such as a large shop front they call a platform, and access to passing traffic – they explain it as products that help you find and connect with people, groups, businesses, organisations.”
But when you “signed-up” did you read the rental agreement, or did you pay any legal person to do so on your behalf?
All user agreements with Instagram, Facebook, LinkedIn and YouTube; irrespective of whose agreement you read, was about 5,500 words, and unsurprisingly each provided the user very little in terms of legal rights.
You now know (and importantly so do the prospective buyers of your business that they can: –
- At their own discretion, close and delete your account.
- They don’t have to tell you, enter into a dispute resolution process nor reimburse you for out-of-pocket expenses if it makes a mistake; let alone pay you damages.
This means your landlord can kick you out and you have no legal rights, and not enough money and time to rectify this.
To compare this with the rights granted to you in respect of a physical premises or a shop-front; would you buy a business that was renting premises that it had no legal rights to occupy and where the landlord can kick you out at any point in time?
Fact two – No risk Insurance
A tradies vehicle is insurable, so are the tools of trade; equipment and other tangible assets, including premises that you occupy.
Business Insurance is a measurable and quantifiably cheap risk mitigation expense available to businesses.
There is no chance of getting an insurance company to pay out if mega corp social media co shuts you down. This risk is non-transferrable.
Fact three – Uncertainty of Tenure
These entities are in fact closing, deleting and yes destroying businesses in greater numbers consequent to their development of AI.
Look at these recent newspaper headlines:
“Aussie business owner slams Instagram as account deactivated, costing $50,000 in lost bookings” … sighted February 2023
“When will Facebook stop killing small businesses” … sighted February 2023
“Ten Influencers destroyed by Social Media”…. January 2023
The issue is not that you can’t make money – because you can, and the high returns you make… well that is closely correlated to the very old economic truism known as the risk-return trade-off– this investment principle states that the potential return rises with an increase in risk … according to this risk-return trade-off; higher profits occur only if the investor also accepts that the possibility of losses is also higher.
The truth is what you now know about the risks of using social media – the prospective buyer of your business also knows.
What are the smart business owners doing?
Risk Mitigation in the following steps.
Building Blogs, Vlogs and investing in their own high-powered front facing websites
Swiftly gathering and taking client data into their own CRM and not relying on social media to the exclusion of other outbound (old-fashioned maybe) communication strategies.
Systematising their communication strategies so they occur regularly at low cost.
Conclusion
The imposed compliance obligations are vague and randomly applied – No one knows with certainty what compliance is!
No one is going to inform you what the new AI wants or needs!
The rule is – when risk cannot be quantified the business will not be bought!
Do you want to know more? Kevin Lovewell is an Accountant and Registered Business Valuer – his role as a Board Member of the Australian Institute of Business Brokers requires he speak on the topic of Valuation Theory and Practice to professionals who use and read valuation reports.
Kevin Lovewell
M: 0401 308 385
P: 1300 551 757
E: Click here to contact Kevin Lovewell
Member & Registered Business Valuer
Australian Institute of Business Brokers
Jessica Holbrook
P: 1300 551 757
E: Click here to contact Negotia Group
Business Analyst
