The Entrepreneurial Mind

Here are my predictions for the world of entrepreneurship (and beyond) for 2004:

1. Production in US factories will increase at .5 percent per month throughout 2004.

2. The federal government will begin to significantly shift policy toward recognition of the importance of entrepreneurship in the US economy; including significant agency restructuring that favors the SBA.

3. The Green Bay Packers will win the Super Bowl.

4. Unemployment will drop well below 5 percent by the end of the year.

5. Bush's re-election will signal a true shift to conservatism in the US.

6. The University of Kentucky will make the Final Four.

7. Republicans will take true control of the Senate in the fall elections, thus ending the filibustering of judicial nominations.

8. Several more states will pass regulatory fairness legislation in 2004, thus easing the economic burden of unnecessary regulation on smaller businesses.

9. Belmont University will make the men's NCAA basketball tournament.

10. New business start-ups will increase every month throughout 2004.

11. Deflation worries will subside, as moderate inflation returns.

12. Interest rates will increase by 1.0 points by year end.

All bets are off if the War of Terror takes a bad turn, but I also predict significant progress on this front by the end of the year. This will lead to a very optimistic mood by the beginning of 2005.

Posted by Jeff Cornwall at 03:18 PM | Permalink | TrackBacks (5)

It has been twenty three years since the 1980 passing of the Regulatory Flexibility Act by Congress, which was established to create a level playing field for small businesses facing federal regulations. In 1996 this law was given more backbone with the passage of the Small Business Regulatory Enforcement Fairness Act, which adds the teeth of judicial review to regulatory fairness. However, a gaping hole exists in regulatory fairness. Many states have not followed the federal government's lead on this critical small business issue.

As of July 2003, regulatory flexibility is fully active in only seven states. Thirteen states, including my new home state of Tennessee, have no regulatory flexibility statute in place. The remaining thirty states have various degrees of regulatory flexibility in place.

So why is this an issue? A 2001 study by Crain and Hopkins found that small businesses spend $7,000 per employee in regulatory compliance. This is $2,500 more per employee than large companies are forced to spend. Much of this disparity is from the impact of environmental regulation compliance. The study found that small businesses spent over four times as much as larger firms per employee on environmental compliance. However, tax compliance is also a disproportionate burden on small businesses, costing them over twice as much per employee as larger companies. These disparities create a clear disproportionate burden on smaller companies, putting them at a decided competitive disadvantage.

A specific example of the impact of one-size-fits-all regulation is cited by the Office of Advocacy of the Small Business Administration. The state of New York had passed regulation to enhance safety requirements for trailers and towing on state highways. Not a bad idea, especially for any of us who have ever been scared half to death by unsafe trailers swaying wildly behind an old pick-up truck as it is being towed down the highway. However, the law as written also regulated a farmer wanting to tow a manure spreader across a highway from one field to the next! The law was modified to exempt farmers in such cases, which saved these small business owners approximately $120 million. Any of us who have even owned a small business can probably give similar examples.

To push this important reform ahead, the Office of Advocacy of the Small Business Administration drafted a report entitled Small Business Friendly Regulation: Model Legislation for States. This effort has already made progress, as twelve states introduced new legislation in 2003. This legislation would simply create procedures to analyze the availability of more flexible regulatory approaches for small businesses. Any significant new regulation must go through an economic impact review of its impact on small business. The model legislation also creates judicial review similar to that recently enacted at the federal level to assure compliance.

Over 93% of all businesses in every state in the union is a small business. This web log has cited numerous studies as to the economic engine that is entrepreneurship in the USA. The Office of Advocacy web site offers a review of the level of regulatory compliance in each state. It also provides information on how to move such legislation ahead in those 37 states that do not have full regulatory fairness legislation in place.

This issue was recently brought to my attention by Bill Hobbs through his blog site.

Posted by Jeff Cornwall at 01:56 PM | Permalink | TrackBacks (1)

I will be taking time off with family and friends for the Holidays. Have a Merry Christmas!!!

Posted by Jeff Cornwall at 12:40 PM | Permalink

An entry I wrote entitled "Glass Half Full??" was picked up by the Nashville Business Journal as an op-ed piece. Since this is rerun season on television, I thought I'd give you this link as my version of a blog rerun.

Posted by Jeff Cornwall at 12:38 PM | Permalink

Health Savings Accounts, which were part of the recent Medicare bill, are a welcome bit of reform for entrepreneurs struggling to deal with the escalating costs of health care. However, there is still great concern that health care is the one issue that could put a damper on the current entrepreneurial economic recovery.

As Jack Faris of NFIB correctly asserts, what is also needed is for the Senate to act on the measure already passed by the House that would allow the creation of Association Health Plans. This mechanism would allow small businesses to band together to better afford health care plans.

However, even this measure may only be a band-aid over the mortally wounded health care system. Large corporations are working feverishly to push much of health care onto the government's ledger. Small business folks must be vigilant to assure that they are not left out of these discussions. Health care reform may prove to be a huge competitive disadvantage to small employers during the tight labor markets that will surely result from current long-term demographic trends if some of the models favored by large corporations win the day.

Posted by Jeff Cornwall at 04:01 AM | Permalink

A report issued 12/18/03 shows that leading economic indicators are up...again! Particularly of note: unemployment claims dropped...again!

Posted by Jeff Cornwall at 11:42 PM | Permalink

A report by the American Business Journal cited at the NFIB web site finds that the number of angel investors may have dropped by as many as 80% in the past three years. But this study should be looked at carefully.

Although certainly alarming, especially given the fact that the number of entrepreneurs continues to increase, this needs to be put in perspective. This report is based on a database set up to connect entrepreneurs with willing angels--for a fee. Many long-time angels would never put their names in a public or even semi-public database. Many of these angels may be newer to the game, and may not have been really ready financially or emotionally. From my perspective I see that deal flow at the angel level is beginning to move again, and many long time angels are getting back in the game. This study may just be one more artifact of the dot.com boom and bust. Never much real wealth there anyway.

Posted by Jeff Cornwall at 11:37 PM | Permalink

I recently wrote an entry called "Beware of the Nose of the Camel" in which I worried about Disney's growing interest in entrepreneurship. Well, that was nothing compared to this one!! All of a sudden the UN is getting interested in entrepreneurship. YIKES! The UN is one agency that could single handedly bring an end to entrepreneurial free enterprise as we know it!!

Posted by Jeff Cornwall at 10:27 PM | Permalink

Women Impacting Public Policy is an interesting organization that focuses on the interests of women entrepreneurs and small business owners.

Posted by Jeff Cornwall at 09:45 PM | Permalink

Although most entrepreneurs become familiar with the interaction of venture capital firms with companies they invest in, few really take the time to understand the relationship between the VC firm and its mysterious investors. This article offers a great insight into this side of the equation, which helps understand better how VC's think.

Posted by Jeff Cornwall at 09:05 PM | Permalink

As the end of the year approaches we all seem to kick into high gear to get everything done that we had planned for 2003. This article from Entrepreneur.com offers some great advice for all of us to consider. The seven steps can help offer some ways to approach a venture or our work with greater temperance.

Posted by Jeff Cornwall at 01:21 AM | Permalink

This week's Carnival of the Capitalists is up. It is full of interesting stuff as usual!

Posted by Jeff Cornwall at 01:05 AM | Permalink

The current entrepreneurial economic recovery is proving to be one with significant breadth. African American entrepreneurs may be among those groups leading this entrepreneurial economic recovery.

The FedEx study discussed in a recent posting found that while 53% of white Americans dream of owning their own business, 76% of African Americans reported such dreams (see slide six on this PowerPoint file). These were not dreams borne out of desperation, but rather out of realization of the true path to economic independence.

ING's Gazelle Index of African American high growth entrepreneurs reported a third consecutive quarter of higher confidence and expectations.

Posted by Jeff Cornwall at 11:23 AM | Permalink

Arnold Kling presents a compelling case for the new paradigm in career management. Careers, even for those who may not consider themselves classic entrepreneurs, and becoming more and more like entrepreneurial ventures.

Your set of skills and experiences are, in effect, your business. Your career becomes a series of exchanges with companies that may use you as an employee, a consultant, or some hybrid between the two.

So what does this mean, for example, to an unemployed techie? We teach entrepreneurs in the pre-venture stage a set of skills that help them align their ideas with the market reality to make sure there is a real opportunity. If there is not an adequate market and sufficient margins, they need to either adjust their idea to fit the reality of the market or move on to another idea. The same is true with a career. Look at your skills and experience and begin to scan the market to see what opportunities might fit. It could be simple outsourcing of things you did in the past as an employee, or it may be that these skills are now in demand in a very different type of job maybe in a completely different industry. It may take several iterations to get the right fit, but with a creative eye to a wide-open world I doubt that anyone can't find the right place for them at this time. Will it last? Probably not. Entrepreneurship is a process not an event. So, too, is career management these days.

Once on the right path, I encourage folks to develop a business plan for their careers. Think of each new job or contract as a stepping stone in some planned direction. Be flexible, however, as business plans are best when they are living, evolving documents. The best business, just as the best next step in a career, matches with your aspirations. That is, don't just take a job to get employed. Make sure it will meet your financial needs and your non-financial needs within reasonable limits. If not, you may need to move on to look at another opportunity. Or maybe it becomes a step to the opportunity that will meet those needs. A new business does not always meet all of one's needs right away. Entrepreneurs learn to be patient and deliberate as they move their way toward their goals.

Finally, just as with a good business venture, a career plan should have a clear and attainable exit strategy. Most of us will have up to five different careers (not just jobs) in our life times. So plan on a beginning, middle, and end for each career that you enter into.

Kling starts his essay with an excerpt of a posting from a very bitter unemployed techie. This person is still stuck in the entitled generation. Move on! This is now the entrepreneurial generation, and it offers so much more than a world that simply owes you a living.

Posted by Jeff Cornwall at 03:43 PM | Permalink | TrackBacks (1)

Here is some interesting data from HobbsOnline A.M. on the scope of the actual economic recovery and entrepreneurship's role in it.

This is not a jobless recovery. Rather it is an entrepreneurially driven recovery. We continue to have a federal government that does not quite get the transition taking place. We see this time and time again in public policy decisions and in how data is interpreted and communicated in an incomplete and misleading manner. I hope that this is nothing more than artifacts from the old economy. It is time for our government to understand and get road blocks out of the way of the entrepreneurial revolution taking place.

Posted by Jeff Cornwall at 09:36 PM | Permalink

This post on HobbsOnline A.M. gives details on the jump in employment in November--57,000 new jobs. However, this number does not include all of those who have chosen to pursue new businesses or become independently employed (e.g., consultants). If we include these folks the number jumps to 589,000! Oh well, that's only a bias of about 90% that will likely be overlooked by the media.

Posted by Jeff Cornwall at 06:25 PM | Permalink

The National Dialogue on Entrepreneurship has put together a nifty reading list. I have read some of these books and would recommend that you browse the list for possible fire side companions for the holiday season.

Posted by Jeff Cornwall at 03:47 PM | Permalink

I posted a link yesterday to what I thought was one of the most encouraging studies I've seen in a long time. FedEx found that 10% of Americans already own a business and 56% dream of it. Cool, right? Well I thought so. But it appears that some may not agree that this is such good news.

Bill Wellborn, editor of the Memphis Business Journal, finds this study to be, well, here are his own words:

"I was flabbergasted. I was floored. I was fairly shocked at this revelation." In fact, he believes that such entrepreneurial dreaming is a "threat to the US economy.' Why does Mr. Wellborn think that this study is so "shocking"?

His first concern is that companies like FedEx should be worried about what this means for their own employees. That horse, I'm afraid left the barn a long time ago. Part of the cause of this trend in attitudes about entrepreneurship is that the baby boom generation is the first to have the "corporate myth" (i.e., go to work for a big company and they will take care of you for the rest of your life) shattered. Our generation was laid off, down-sized, and generally treated like an expendable resource. We became known simply as FTE's in the companies in which we worked. And when a company had too many of these FTE's, the edict went out to cut that number to an acceptable level.

This reality hit home with me when I got back into teaching about six years ago. When I left university teaching in the 1980's, I had just started a new entrepreneurship program. It was an up hill battle to say the least. I had faculty screaming at me in the hallway that I was going to ruin the prestige of the College of Business with a program like this. "We are not here to prepare students to become a bunch of merchants, after all." I had parents calling me and accusing me of brainwashing their children. They didn't work all these years to pay for college for them to waste it on a degree in entrepreneurship. They were to major in business and go to work in a good solid corporation. These attitudes are part of the reason that I left academia and went into business for myself.

Fast forward ten years into the mid-1990's. I came back into academia only to find that the world had fundamentally changed. Our economy was no longer driven by the large corporations, but rather by entrepreneurs. Faculty welcomed my return, and parents (many of who had been down-sized themselves) were actually pushing their children to study and become entrepreneurs so they would never have to go through what their parents had over the past decade.

FedEx and other corporations may actually have to create a work environment that competes not only with other large companies, but with the real possibility of leaving that company and starting a venture. And yes, maybe some of these ventures may eventually compete with FedEx. I thought our system was based on the premise that competition is good! Such competitive forces are what make this economy vibrant and strong rather than being sources of its destruction.

Mr. Wellborn wonders what would happen if all that dream of starting a business all decided to act on this at once. It would lead to massive business failure, forcing everyone to work at Wal-Mart. If this actually happened, I suppose it would be a mess. But, it won't. And what we should do is look at the challenge that we now face to prepare America to be really ready to start a business when the right time and opportunity arise. We need to educate all Americans about entrepreneurship and economics. Although Wellborn throws out the worn out statistics of business failures, we have to at the same time recognize that those who are properly trained in business formation consistently succeed at rates of 80% or better after five years. (I know I keep harping on this, but bad facts take time to correct).

So relax. We don't need to look at this transformation as a bad thing. The glass is not half full (or shattered all over the kitchen floor as Wellborn seems to think). This is a new time in this country when we have the opportunity to reinvent our economy all over again into an even better, and more evenly distributed I might add, system than it has ever been before.

Posted by Jeff Cornwall at 01:26 PM | Permalink

FedEx has released its results from a survey it conducted about entrepreneurial intentions. It has some fascinating findings.

The survey sampled 1,000 Americans over the age of 18. Here are some of their findings:

* 56% of Americans dream of starting their own business (E.M. Couple this with 40% of college students who responded in another study that owning their own business is a major goal for attending school and we see an entrepreneurial revolution at hand).

* 10% of Americans already own their own business (E.M. Think of all the special interest groups influencing our public policy with much smaller numbers than this).

* 33% of Americans neither dream nor already own their own business (E.M. That seems to equate to about the total number of government employees nationally, if I'm not mistaken).

* 76% of African Americans dream of starting their own business (E.M. What a voting block this could become if we help make this dream a reality!!).

* Business owners are more likely to live in the South or the West (E.M. Just look at the voting patterns).

You can view the FedEx PowerPoint presentation of the survey results here

Posted by Jeff Cornwall at 12:03 AM | Permalink | TrackBacks (3)

Just as the last economic boom was fueled by entrepreneurs, so too does it seem that this recovery is being lead by the same crowd. The Wall Street Journal reports that the self-employed are leading this latest economic cycle.

The public policy implications of this are striking. Over 400,000 Americans just in this past year said "no" to relying on government hand-outs and "yes" to finding a way to making it on their own. Many of these new businesses will grow and begin to hire others. This is how free enterprise builds great economies. Just as the last economic boom started by Bush I was built by such entrepreneurs, so will the economic boom started by Bush II and his tax cuts.

Posted by Jeff Cornwall at 10:43 PM | Permalink

One of my favorite golf books that I read this past year was M Scott Peck's Golf and the Spirit. Peck talks about golf as a metaphor for life. I often look to golf as a metaphor for the entrepreneurial experience. Here are a few examples of what I mean.

Golf is often a game of luck. A bad bounce here or a good bounce there can sometimes make all of the difference in a round. However, even when you get a lucky bounce, you need to know what to do next to take advantage of the lucky break. The same is true in entrepreneurial ventures. Luck is often one of the most important sources of opportunity. But if you are not prepared to act when luck sends an opportunity your way, this lucky break, just like the lucky bounce, won't matter one bit. It will be wasted.

Ultimately, in golf you are on your own to call the rules. The same is true in your business. Most of the times when you can cheat, be unethical, or even break the law will happen when you are alone to make the choice on how to act. Just like the golfer who finds her ball in an unplayable lie and can make the choice of calling the penalty on herself or moving her ball when no one is looking, the entrepreneur has to make most ethical decisions with only herself to answer to.

Golf is a game that forces you to play your game within your skills. I don't hit a long ball. In fact, I don't even carry woods in my bag. So I have to rely on my short game to score. An entrepreneur likewise must learn to build a business that plays to his own strengths. He needs to learn to "play within himself" (sorry Ann!!!).

Golf is a game best played one shot at a time. Never get ahead of yourself in this game or it will cost you! The minute you start thinking a score you can shoot is usually when it all falls apart on you. View your business one day, one pay period, one year at a time. I have seen too many entrepreneurs planning, or even worse spending, fortunes that they have not yet earned. In the process they usually take their eyes off what is critical at the moment and can jeopardize the whole venture.

There are more of these comparisons, but that's enough for now...some day soon we can talk about "keeping it in the short grass", "putt like a kid", and many other truisms for golf and entrepreneurship.

Posted by Jeff Cornwall at 07:32 PM | Permalink | Comments (1)

The NFIB has two more good economic reports:

1. The economy in the third quarter rocked! What was most encouraging was that is was a more balanced report. Consumer spending was up, but so was capital spending and expenditures on software.

2. The Federal Reserve issued a report that showed strengthening in employment and in manufacturing. These are two indicators that had been lagging up until now. The National Association for Business Economics also reports stronger employment.

My prediction for 2004: Entrepreneurs will begin to report workforce shortages in several categories.

Posted by Jeff Cornwall at 07:15 PM | Permalink

Installment #8 of Carnival of the Capitalists is up and running on Bill Hobbs' web log. Be sure to visit this blog, as Bill has the best site for political commentary.

Posted by Jeff Cornwall at 03:04 PM | Permalink