Washington and the Entrepreneur

A member of my Board of Advisors suggested that I post the article by Michael Malone from the December 21 Wall Street Journal, Washington is Killing Silicon Valley. The article is interesting on a number of fronts. First, it points out the role entrepreneurs have played in the job creation process. Second, it mentions that the exit strategy for too many business plans end with the magical words… “And then we’ll sell to Google.”

But what really interested me was the observation that because of the accounting nightmares in the last decade, Sarbanes-Oxley was created and this legislation “has essentially killed the creation of new public companies in America, hamstrung the NYSE and NASDAQ (while making the London Stock Exchange rich), and cost U.S. industry more than $200 billion by some estimates.”

This brings me to something I heard from my uncles many years ago…that when the government gets involved, you never know what exactly will happen. Now I have to believe that the writers of the Sarbanes-Oxley had all the good intentions in the world. Preserving and defending the investor is pretty noble, but unfortunately the old Law of Unintended Consequences has a way of rearing its ugly head and that’s what happened with Sarbanes-Oxley. And as we reflect on that, you have to wonder how the Law of Unintended Consequences will play out with the role the Fed and the U.S. Treasury has taken on in the current economy. That post won’t be written for some time to come.

Is This the Time to Start a Company?

I’m using the semester break as a time to play catch-up with some reading and came across a wonderful piece in the December Wired magazine. I’ve been telling my students that precisely because of the state of the economy, that this is a great time to launch or buy a business. In “Back to the Garage,” author Daniel Roth of the magazine comments that “With the world's economies apparently snowballing into a deep recession, it feels uncomfortably Pollyannish to see signs of hope. But for the bravest inventors and entrepreneurs, conditions are ideal to pounce on a business opportunity. In periods of economic turmoil, people are hungry and work cheap, and entrenched companies often concentrate on in-house cost-cutting instead of exploring new markets, which can explode with the next turn of the business cycle. “

As we watch the news or read the newspaper, we see examples of large corporation cutting back on everything from staffing, to marketing to R & D, which opens up opportunities for the entrepreneurial company. Now is truly a great time to launch a business. In the words of Priceline.com founder Jeff Hoffman, “Get up off the couch and start that company!”

Entrepreneurs and Marketing

Very interesting piece this week in the Wall Street Journal… The Secrets of Marketing in a Web 2.0 World. Anytime I see a business article with the words “secret” or “top ten” in the title, I usually avoid it much like I would a Cleveland Browns football game… but this article is different and worth your time to read. It’s particularly thought- provoking for entrepreneurs as we don’t have the staffing or budget of the big companies, so we have to find other ways to engage the customer and get them to be an agent of our marketing process.

Big News...The Recession is Here

It is now official…we’re in a recession. According to The National Bureau of Economic Research, the United States economy has been in recession since December 2007, which is when the NBER calculated that economic activity peaked. If you’d like to read the entire report, along with some interesting FAQ’s, follow this link and read about something your wallet has known about for awhile.

The Entrepreneur and the Credit Markets

Over the Thanksgiving holiday, we were in Santa Fe helping one of our daughters pack for a cross-country move. When I wasn’t buying boxes, packing them and then waiting in line to ship them, I had the chance to meet with a friend in the venture capital business. Listening to him talk about the difficulties that some of his portfolio companies were enduring thanks to the mess in the credit markets, spoke more clearly to me than hours of Congressional hearings. When the credit markets break (and I think we can now safely say that they are indeed “broke”), while it hurts all companies in the economic food-chain, it really hurts the entrepreneurs who are trying to start, grow or even sell their companies. The November 28 Wall Street Journal carried an article by Pui-Wing Tam that discusses the problems facing entrepreneurs and VCs alike. The article addresses entrepreneurial companies, but our current economic situation also hurts companies that don’t even consider themselves entrepreneurs. While visiting in Santa Fe, I noticed a number of small businesses that had been around for ten or more years, shutting their doors because of the slowdown in consumer spending. While our representatives in Washington deal with the banks, insurance companies and the automobile giants, the engine of growth in this country---the entrepreneur---is being ignored. It may be up to us to save ourselves…and our country. More about that on another post.

You Must Watch This

I received this YouTube video today from Peter Grandich’s blog. In sending it around he included the following note:

“After another wild week in the financial markets, fears of losing our jobs, homes and what we think is so important to us, we could be tired, angry or depressed. How many of us receive emails daily from friends, family and business associates? Many of them are sent to bring joy, peace or a laugh. I received this email from a friend and I can honestly say no other email has ever surpassed what I got out of this one.”

As I sit here on a Sunday morning, I was so moved by the YouTube piece, that I felt compelled to pass it along. Please watch it.

A Time to Examine (and I Mean Really Examine) Your Costs

Interesting piece in today’s Wall Street Journal by Raymund Flandez about cost cutting techniques being used at some high-profile restaurant companies. These companies are facing many of the same issues as entrepreneurs in other industries… costs are going up at a time when top-line revenues are shrinking. Take a look at some of the methods that the foodies are using to cut costs and then consider similar areas in your own business. This is a time to attack costs with a vengeance and be sure to look outside the “usual” expense category suspects. Because this difficult time will eventually pass, use the economic downturn as an opportunity to recreate your enterprise into a more profitable business that will be prepared to take off when the economy bounces back.

Purchasing a Business

In talking to one of my Board of Advisors the other day, he mentioned that this is an ideal time to buy a business. I agree with him in that there are going to be many businesses out there with good employees and a good product, but with an owner who just wants to get out from under the pressure of running it. Certainly many of these businesses aren’t worthy of being purchased at the number that the entrepreneur wants, but there are also many that are worth of that second look. This is a buyers market, and if you are looking to purchase a business, remember that while this may not be a great time to get a bank loan, this is a time when the seller will most certainly consider taking back financing. An article last week in the Wall Street Journal by Arden Dale and Simona Covel considers that issue with some examples.

Boomers and the Next Career

Boomers…yes, that’s me and I’m sure a lot of you out there, are thinking of doing different things in our second, or maybe even third career. The Orlando Sentinel’s small business reporter, Sara K. Clarke, recently wrote on this topic. Even in today’s very difficult economy, I talk to people every day who want to launch an entrepreneurial venture; folks who want to try a different career; even folks who want to teach at the college or university level. To all, I wish you well and like the article says, if you have the passion…even in today’s marketplace…just go for it!

Election and the Entrepreneur

Before we move completely away from the election, it’s good to see that a few entrepreneurs were among the winners on Tuesday. Emily Maltby and Stacy Cowley's article in CNN/Money.com profiled a few entrepreneurs who are heading to Washington. Could this be the start of a trend and a way for small business owners to be heard over the roar of K Street?

Election and the Economy

The election is over and while most of the press is more concerned about who the next chief of staff is going to be, for those of us who are entrepreneurs, the concern is about liquidity, inflation, deflation and things that really concern our businesses. Every day I talk to entrepreneurs who feel that as group we’ve been marginalized because we’re not making big-time political contributions and we’re not a part of PACs. Jeff Cornwall in his outstanding blog on entrepreneurship reported that after the election returns were in, Todd Stottlemyer, president and CEO of the National Federation of Independent Business said, “While the composition of the Congress has changed, the obstacles that threaten small-business owners, employees and their families have not. Small businesses still face the lack of affordable health care, the threat of frivolous lawsuits, the burdens of over-regulation and a complex tax code. These issues don't have partisan labels.” Washington has to recognize that the country has changed and to help the economy, they have to make it easier, not more difficult to start and grow a business. Entrepreneurs are the hope for the economic revival of our country.

I Dare You To Answer This Question

There’s an old (and wise) saying that “a rising tide lifts all ships.” Even if you’re not in the boat business that particular phrase bears thinking about in today’s uncertain business climate.

Some of you came through the recent go-go years of our economy, and your businesses were lifted by hurricane flood surges! If you were in the right sector, it was relatively easy during that time to be successful…if you sold it, the customers would come and buy. It was easy to convince yourself that you were a great entrepreneur, sales and revenues were rising, customers were begging to give you business. You probably had all the answers about customer service, marketing, pricing, etc. If all you’ve known are great times, your business may lack what it needs to survive in our new and un-improved economy.

Now, what I’m going to suggest you do right now is going to be unpleasant, but it could save your business during these “low tides.” Try to take a cold, hard, objective look at how your business operates, and answer this question: “Was I really a great entrepreneur, or was I just lucky enough to be operating during the boom years?”

Really put some thought into it: did you always offer outstanding customer service? Was your pricing competitive? Did you build long-term relationships? Was your product/service a good value? Did you watch your costs with an eagle-eye?

In tough times, customers expect great service, good value, and very competitive pricing. You should aim to give them more than their money’s worth. If you were used to just opening your doors and standing aside while customers flooded in, this new way of operating may take some work. Just because you were successful, don’t delude yourself into believing that you can operate in the same old way.

A Time To Do Good

Often times, good things happen when we do good.

Several years ago, before we sold our building materials business, I encountered a “mad moment.” Those of you who have owned businesses know that those moments happen when you realize that you’re spending incredible amounts of money on things that you just can’t believe. The mad moment I’m referring to here had to do with our holiday spending. I was stunned that when it came to cards, gifts for customers, vendors, etc. ---we were spending a ton of money. I decided at that moment to stop the insanity and instead decided to do something good with the money. So rather than sending cards and gifts to folks; we instead donated the money to a charity. Now in our case, my family had been sponsoring children through the Christian Children’s Fund…so that’s the charity that my company selected and all of the money that we would have spent on the holidays, we instead directed to the CCF. I sent to all of our customers and vendors a letter, along with a picture of one of the children that my company sponsored, and I told them that this is where our holiday money was going. And then something unusual happen…customers and vendors started calling me congratulating me on what we did. Most of these people never would have called after getting a Christmas greeting card from me, but they reached out when they saw the good that we were doing.

Thanks to the economy and the credit meltdown, this is going to be a tough holiday season for charities. Giving to non-profits is clearly down, so perhaps you might want to give some thought to changing around the usual way that your company deals with the holiday season. Besides doing some good for your community, you’ll also be doing good for the image of your company.

As a footnote…if you’d like to take a look at evaluating potential charities and how your contribution is spent, I’m including a link to the Charity Navigator. They aren’t the only source out there, but it’s one that I’ve used.

Not Worried Enough? Try This!

No, I am not going to talk about the economy. Or the stock market. What’s happened there is something that is too late to prepare for. We’re “there.” Let’s turn our focus to the future. Maybe if we peer very carefully into our crystal ball we can get a glimpse of coming attractions that will help us prepare for them. Kind of along the lines of “the early bird gets the worm,” or “a stitch in time saves nine.” A bit of research now could save you from walking off a cliff later!

You may have been noticing more talk about “peak oil” in the past year. Probably not recently, since all eyes have been on the disastrous economy, but certainly when oil was spiking up to close to $150. Lately, with prices down in the 60’s, it might seem like old news, gas prices have dropped, lots of experts blamed the price surge on speculators and we can go back to business as usual. What if those experts were wrong? After all, did any of them predict the “Blacktober” stock market debacle?

My daughter’s an ice hockey defenseman, and when I coached her I used to tell her “keep your head on a swivel.” That’s the same advice I’d give to today’s entrepreneurs! You’ve always got to be on the lookout for the next trend…good or bad. When you run your own business something’s always being tossed at you. Sometimes you catch it, sometimes you duck, and sometimes it smacks you in the head. In a great economy, it may have been mostly marshmallows flying at you, times were good, so if you got smacked by a few it didn’t matter. Nowadays though, hockey pucks and bowling balls are flying, and you don’t want to get winged by one of those babies! Rising oil prices could well be one of those nasty surprises.

Here’s a very important point: rising oil affects more than gas prices. It raises the cost of nearly everything in our country. Food (mechanized factory farms use petroleum-powered machinery, pesticides are petroleum-based, crops are transported using fuel, etc.), medicines, health care, every good shipped from overseas, anything plastic, the list goes on and on.

Quick background. Basically, “peak oil” doesn’t mean no oil…it just means the point at which we have used up half of all our existing oil supplies. Big deal you may think. We still have the other half. Here’s the rub: think about the phrase “low-hanging fruit.” It’s always easier and cheaper to harvest the apples that are closest to the ground. To get the higher fruit you need ladders, etc. and it costs more. That’s the problem with oil…the second half will be much more expensive to get out of the ground. Naturally, oil gets more expensive. I’m no expert, here’s a link to a site that will tell you more than you probably want to know!

Most of the mainstream doesn’t buy into peak oil. I leave you to do your own research. The point is, it’s a good idea to consider the issue. Whether oil prices slide lower or skyrocket, it’s going to affect your business. It will affect your raw material prices, transportation, shipping, utilities, etc. It will also impact your customer’s ability to purchase your products or services. If you see a trend coming, you can adjust and tweak your business plan to take advantage. The more you know, the more prepared you will be to dodge flying pucks!

Mentors

Last night we graduated the second group of women entrepreneurs from the ATHENA Power Link program. If you’re not familiar with it, ATHENA PowerLink is a wonderful program that mentors women-owned businesses. At Rollins College, we’re the host of this effort in Central Florida, but the program also exists in 26 other cities across the country through the work of ATHENA International. As I listened to our graduating entrepreneurs talk about their experiences in the program, I was struck by how such a simple concept---mentoring--- can product such huge dividends. I was quoted a few months ago in a story on mentoring in Entrepreneur magazine, and that piece is a reminder to all entrepreneurs that one of the best ways to build a successful business is to have mentors who can provide advice, guidance, and a swift kick to the backside when you really need it.

The First Generation

Marty Rubin, the CEO of Smart City, was on campus today for a lunchtime presentation to our MBA students. Marty touched on some very interesting points relative to the start-up and running of an entrepreneurial company. One point was what it’s like to live through the Black Swan moment in your enterprise. (For information on this, see Nassim Nicholas Taleb’s book on the subject.) The other interesting point was that the current group of students in college and graduate school are the first generation to be actively “teaching” their parents. I don’t know about you, but if I have questions about social networking, my phone, iTunes, or any such area of life, I go to my kids. I learn from them about music to listen to, TV shows to watch and movies to go to as well as movies to avoid. My parents on the other hand, until very late in life, never “learned” from me as I learn from my kids. For some interesting and enlightening reading on this generation, take a look at the book, Generation Debt by Anya Kamenetz

Start-Up Town

A good friend of the Center for Entrepreneurship, the CEO of Blue Orb, Pete McAlindon sent over this article from The American by Ben Casnocha on locating a start-up.

How Do You Find Those Darn Ideas

In my classes, students often ask how they can come up with ideas that will be the backbone of a successful entrepreneurial company. In the New York Times today, Mickey Meece’s piece Inspiration Can Be Found in Many Places But You Have to be Looking, addresses that issue with some interesting examples.

I like to think that starting with the problem, or the pain in the marketplace is the right place to begin. But most people need to train themselves to look for that pain. Start looking at your neighborhood and come up with things that don’t exist that you wish did. At first, as you’re training yourself to see the pain, don’t get overly concerned with practicality or cost issues; that can come later. Once you train yourself to look at your world from the perspective of finding a problem and linking it to a solution (pain and aspirin), the ideas will come much more naturally.

Angel Investing

Interesting post in the Wall Street Journal by Kelly Spors on the Five Common Myths of Angel Investing.

In this article, angel investing is really considered in its broadest sense including family, friends (and fools), all the way through to and including angels in formal investing groups. Thanks to the financial mess our country finds itself in, I think the coming year is going to be a very interesting one for early stage entrepreneurs looking for money, because potential angel investors are going to be presented by their financial advisors with lots of interesting opportunities, and investing in companies will be just one of their options. Unfortunately for the entrepreneurs, it will also probably be the angels riskiest option with the greatest potential for the ultimate investing disaster…losing all of their investment.