The Entrepreneurial Mind

I highly recommend a published essay by Father Robert Sirico entitled "The Entrepreneurial Vocation". It is available on-line and only costs $7 with shipping. It is a provocative, inspiring, and compelling essay.

Posted by Jeff Cornwall at 07:23 PM | Permalink

Come one and come all! Join in the business book blog tour next week. This segment of the tour will be featuring Barry Moltz's book "You Need to be a Little Crazy". The tour will visit the Entrepreneurial Mind on Thursday, February 5th. Barry will be making stops at my site throughout the day to join in the discussion on his book and his premise that you need to be a little crazy to be an entrepreneur. It should be great fun! For all of the stops on this book tour next week, visit this site.

Posted by Jeff Cornwall at 07:09 PM | Permalink

BusinessPundit has an interesting commentary on corporate social responsibility in reaction to an essay in the Economist entitled ?The Two Faced Capitalism?. But this commentary addresses only half of the equation.

While I agree with many of the arguments of BusinessPundit, it is another example of the false premise that the only choice is either market forces or government regulations. Culture, guided by shared values, is the third force that keeps getting overlooked. At a basic level there are certain moral imperatives that can and should guide business decision making.

I agree that it would be ludicrous to blame Wal-Mart for the impact of their business model. If suppliers cannot compete within the marketplace, they will and should go out of business. We do not need regulators or judges passing judgment on such consequences of Wal-Mart?s business practices.

There are, however, more fundamental concerns that get overlooked if this is all the further corporate ethics is taken. For example, does Wal-Mart seek to equitably distribute the wealth it creates with all of those in the organization that helped to create that wealth? Many entrepreneurs have recognized that they could never have built their businesses without the hard work and expertise of their management and employees, and have found ways to share this success through real profit-sharing and better salaries.

The more we keep government out of the details of business the better. Markets work. But, that is only part of the equation. To assure that the social contract of market capitalism survives requires prudent, just, and moral actions on the part of its stewards. Otherwise we are at risk of society backing out of this contract.

Posted by Jeff Cornwall at 01:39 PM | Permalink

As the trial of Martha Stewart gets underway, it might be wise to look beyond the surface a bit. Yes, this is can be viewed as a story of greed, elitism, class warfare gone mad, jealousy, or simply corporate corruption. All of these spins have already been put on Martha?s case.

But I think it is also an important cautionary tale about becoming a publicly traded company. When a company goes public all of the rules of how the company has been managed change. It is no longer a private asset. Sadly, people like Martha sometimes never quite understand what that means to a business.

As a private entrepreneur doing deals, information can be one of your main currencies. Investors are secured, smaller companies are purchased, and businesses are started all with confidential information that offers some competitive edge. When a business goes public, it becomes a public good. It is no longer the entrepreneur?s to manage as she sees fit. It is no longer her private good. She is no simply a steward for the public which can buy and sell ownership in her business. And for this system to work, information must be a relatively level playing field for all participants in the transactions.

So is this something that Martha knew when her own firm went public? Did she simply have an innocent lapse in judgment in the case of her trading of ImClone Systems shares? Well her own history is not on her side. Her own company had a class action suit filed against it based on the trading practices of insiders during her own IOP.

For Martha, this may indeed be a tale of greed and arrogance. And that is a good lesson for all of us. But it should also be a lesson to all entrepreneurs that the kind of practices that they may be used to in running their company as their company change the moment their business goes public. They must understand that what was once their company is now simply a company that the public owns and which they now run for that public.

Martha never has understood that lesson. She seems to view her company and start-ups she invests in as still her company, with the IPO just being some form of financing. Going public is so much more than a simple financing technique. It is the transformation of what was a private good into a public good. It is the transformation from being an entrepreneur into being a manager and a steward for a publicly owned business.

Posted by Jeff Cornwall at 12:35 PM | Permalink | TrackBacks (4)

No matter if you are a software start-up, trying to build a consulting business, or creating a service business of any kind, you should take a look at this posting at startupskills.com. For any business that is selling services or software, this article correctly argues that you need to remember that you are not selling your software or service, but rather a solution to a potential customer?s problem. Their problem is something tangible and real to them. Your software or services usually are not. Therefore, sell to what they understand and to what will move them to act: a solution to their problem.

Posted by Jeff Cornwall at 01:24 PM | Permalink

This week has an impressive collection of posts for Carnival of the Capitalists. For those who have visited the Carnival of the Capitalists before, you will find this week's collection to be rich and diverse. For those who have not been to the Carnival before, I encourage you to take a look. Each week a different Web Log hosts the Carnival of the Capitalists. The rest of us send our posts for the week. It provides a unique collection of ideas and information.

Posted by Jeff Cornwall at 01:09 PM | Permalink

The National Center for Small Communities has put together a best practices guide for supporting entrepreneurial economic growth in small towns. This is a very comprehensive guide for effective and sustainable economic development. Here is the complete study.

Posted by Jeff Cornwall at 11:58 PM | Permalink

A report published by the Kauffman Foundation provides some fascinating data on entrepreneurial activity worldwide and a compelling agenda to help in the entrepreneurial revolution taking place around the world.

The findings of the study show that Chile, Korea, New Zealand, Venezuela, and Uganda have the most entrepreneurial activity taking place. The United States is near the top in entrepreneurial activity worldwide, showing a 10% increase in activity between 2001 and 2002. In fact, one out of every nine Americans is involved in entrepreneurial activity.

Eighty percent of entrepreneurs worldwide expect to hire more workers. This clearly more evidence debunking the jobless recovery myth. It also reinforces the trend that over the past twenty years net job growth has been almost exclusively the result of entrepreneurial ventures growing and expanding.

The bottom seven countries on the entrepreneurship rankings include Sweden, Netherlands, Chinese Taipei, Croatia, Japan, Russia, and Poland. Why are these countries not experiencing the entrepreneurial revolution to the degree of other countries? All of these countries, in one form or another have had significant government control or intervention in their economic systems. Russian and Poland are still trying to make the transformation to market economies after decades of communism. Japan bet its future on a centralized, planned economy that ended up stifling grassroots entrepreneurial activity. Sweden is an example of how democratic socialism reduces the incentive for innovation, entrepreneurship and risk taking. This has been a general criticism of the European Union of late.

The Kauffman Report offers some compelling agenda for fostering more entrepreneurial activity. First, the importance of education and training for potential entrepreneurs was clearly evident. Entrepreneurs do not succeed by accident. Study after study demonstrates that education of entrepreneurs can dramatically increase their success rates. Second, those countries that report more entrepreneurial activity have much more simple start-up regulations for new businesses. Reducing the complexity and cost of starting a new business breaks down the barriers of new venture formation. Germany, for example, is a country where the cost and complexity of gaining approval to start a new business is so complex, that many give up their aspirations for business ownership simply because of these regulatory hurdles. It can take years to make it through all of the processes and steps to even open the doors of a business the first time. Third, many countries will need to experience a true shift in culture before they see more entrepreneurial economic development. Clearly, such change will take time and leadership from a variety of sectors, including government, education, and even religious leaders who have not always been supporters of free enterprise in many of these countries. Finally, this study finds that rather than create more and more government programs to foster new business formation, the government should ?reduce the scope of economic activities managed by government.?

This report could be a watershed for the entrepreneurial economic revolution worldwide. Freedom creates entrepreneurial activity. Entrepreneurial activity creates economic growth. Simply put, to spur long-term economic growth, we need to help educate entrepreneurs and then get the government out of their way.

Posted by Jeff Cornwall at 03:39 PM | Permalink | TrackBacks (1)

Bill Hobbs offers his latest report on the myth of the jobless recovery. This includes some very powerful evidence of how well the economy is actually doing.

Posted by Jeff Cornwall at 06:48 PM | Permalink

Here is a quote that Dr. Susan Williams of Belmont University passed along to me. It describes so well the experience that many of us have gone through as our businesses go through periods of rapid growth and change. For me it describes both what I experienced and what our business experienced.

"Everything alive is surprisingly alive-- and on a twitchy, searching, self-aware, self-organizing upward journey. Such living systems periodically break into severe twitchiness and appear to fall apart. They do not. It is actually at such vibrating times that living systems are shaking themselves to higher ground. Transition to a higher order is universally accompanied by turbulence. The disorder and disharmony is a necessary activation of growth to a higher level. The greater the turbulence, the more often it will go into apparent disharmony in order to re-jiggle itself to a higher level." Ilya Prigogine, Nobel physicist.

Posted by Jeff Cornwall at 12:48 PM | Permalink

Although it may be too late to take some actions to benefit your tax situation for 2003, this article shows how many activities that already may be going on in your business can still have a positive impact on your 2003 taxes. Just as important, now is the time to start tax planning for 2004. It may be something as simple as a New Year's resolution to keep better or more organized records for your business transactions. Or, it may be a more comprehensive plan that recognizes the interplay between business decisions and their tax implications.

If you do not have one already, create a simple system to keep receipts, records, contracts, and so forth organized. It is tempting to try to short-cut this important process and simply create a system like I've been known to use. Incoming paper starts out in one big pile on my desk. Eventually, I sort the pile into several piles: a file pile, a read pile, and a ?maybe I'll get to this sometime? pile. When I do get around to filing, I have one big file called "expenses" or "taxes". I throw everything in that one file and then sort it all out later, usually when I'm getting panicked about getting ready for tax time. I wise old bookkeeper once told me that your goal should be to only touch a piece of paper once. Create a file for each type of expense, such as business meals or office supplies, and put any receipts or other records directly into that file the first time you touch it.

As tempting as it may be, do not try to do your own tax work for your business. The laws change too fast, you will miss too many opportunities to save taxes, and you expose yourself to too much risk. You can pay your accountant now, or you can pay her much more and maybe the IRS, too, later. Your accountant should not simply be a place to dump all of your records once a year to get sorted out. It is amazing how many decisions have tax implications. Engage your accountant periodically to keep her up to speed on your business. Such proactive tax planning will pay off over the long term by helping your accountant more effectively help you save in taxes as your business grows.

Finally, I have seen more than one entrepreneur whose tax situation had gotten way out of hand. It may have been due to sloppiness, it may have been a result of trying to cut corners, or it may have been ignorance of the importance of taking taxes as seriously as they should have. Whatever the reason, do not wait another minute. Ignoring such a situation will not make it go away. The problem will only grow worse. Sit down with a qualified CPA who works with business clients. As embarrassing or even frightening as it may be, it is critical to proactively get your tax affairs in order. If the situation is bad enough, it may require some negotiation with the IRS to develop a plan to get your business caught up and back on track. It may be financially painful, but the outcome will be far better than what will happen when, not if, the IRS discovers it on their own.

Posted by Jeff Cornwall at 12:32 PM | Permalink

When prospective entrepreneurs talk with me, many want to know what they need to learn about to improve their chances of success. I tell them that Vince Lombardi had it right: you have to know the basics. Blocking and tackling.

Blocking

First and foremost, they have to understand the language of business. A basic understanding of how financial statements work and what they mean is essential. Business people no longer need to know the mechanical aspects of accounting any more than students need to know how to do logarithms without a calculator these days. But they do need to know what the accounting function is telling them and how they need to use that to make good decisions.

Tackling

Second, you need to know how to sell. I always recommend that if entrepreneurs do not have experience selling they either need to get experience or learn about selling from an expert. Take a class, read a book, do something to learn about how to sell effectively. Entrepreneurs not only have to sell to their customers, but they have to sell their ideas to bankers, investors, creditors, prospective employees and so forth.

Posted by Jeff Cornwall at 06:22 PM | Permalink

Dr. Susan Williams, a colleague of mine here at Belmont, passed along this link to remarks that Fred Smith, Chairman, President and CEO of FedEx Corporation gave to a conference on entrepreneurship in the Dominican Republic in 2001. His five key points are as good a basic set of ideas as I have seen. Any potential entrepreneur would be well served to think very carefully about Mr. Smith?s words of advice.

Posted by Jeff Cornwall at 03:50 PM | Permalink

There is a discussion going on over at Bill Hobbs' blog that warrants some attention within the context of entrepreneurship. Professor Antler of Roosevelt University has theorized that tax cuts actually lead to increases in the unemployment rate. Not because they are a sinister force at work in our economy, but as an artifact of how we measure unemployment.

The logic behind this assertion is that tax cuts increase real wages, thus making entry back into the work force more appealing. More people decide to actively look for jobs, which leads to the temporary increase in the measured rate of unemployment (those actively looking for work). An interesting idea, but one for which at this point there is no empirical evidence.

If it is true, I believe one could infer that there is a similar phenomenon at work for entrepreneurs. Tax cuts create more potential, or at least perceived potential, for real wealth for entrepreneurs since most entrepreneurs choose legal forms for their companies that tax them at the personal rate (i.e., S-corp, LLC, sole proprietorship, or partnership). That is, the potential risk for becoming an entrepreneur is off-set by higher returns due to the lower tax rates.

Antler?s Theory then comes into play. The government does not measure those creating new businesses among the employed. In a recent post I noted that when those working as independent consultants and start-up entrepreneurs are added into the job statistics the number of new jobs increased ten fold!

Let?s assume that Sally, who was laid off from her management position six months ago, has now decided that the time is finally right to start the business she has been researching. The economy is up and tax rates are down. Even though she is actively starting and even operating her new venture, the government still counts her as unemployed according to their standard measurements that get reported in the media. She doesn?t see it that way, and if included in part of the more accurate household survey of employment, she would say she is actively working. But not according to this widely reported statistic. Antler?s Theory at work.

I look forward to keeping up with this idea, and hope that someone can begin to find empirical evidence of this phenomenon. Stay tuned.

Posted by Jeff Cornwall at 02:13 PM | Permalink

The National Dialogue on Entrepreneurship has put out a summary on how they see the democratic candidates supporting entrepreneurship. Guess what? They all want to create more agencies and more federal programs!! Hard to believe, isn't it.

Here are some of the highlights (taken from NDE's newsletter):

Wesley Clark:

-expand the Manufacturing Extension Program

Howard Dean:

-create a Small Business Capital Corporation
-create a Universal Health Benefits program
-create a Fund to Restore America

John Edwards:

-create Economic Revitalization Zones
-create a Rural Economic Advancement Challenge Fund (venture capital to America?s rural communities)

Richard Gephardt:

-create a national health insurance program
-expand existing SBA programs
-create a National Development Bank

John Kerry:

-create a national health insurance program
-create a Small Business Opportunity Fund
-create an Office of Manufacturing at the SBA

Dennis Kucinich:

-create a Universal Health Care program
-create a Federal Bank for Infrastructure Modernization

Joseph Lieberman:

-create a national health insurance program
-create Worker of the Future Centers
-create NextTech, a new R&D consortium

Carol Moseley Braun:

-create a national health insurance program
-more money for public education
-stronger enforcement of affirmative action

Al Sharpton:

-create a national health insurance program
-three new Constitutional amendments to guarantee the right to quality education, health care, and to ensure full and equal voting rights

When will they learn that the biggest problem related to government for entrepreneurs is too much government, not too little. We need an agenda that says "here's how we'll finally get out of your way".

Posted by Jeff Cornwall at 04:16 PM | Permalink

There has been much speculation about a possible IPO by Google in the near future. Although this may be necessary to satisfy the VC's that backed the company, it is a step that should be taken with great care.

Things always change when a company goes public. The founders often think that this will not happen to their company, but I have never seen a case where, eventually at least, the pressures of the broader group of shareholders fail to win out over the desire of the founding entrepreneurs to keep things the way it has always been. The IPO puts the company in a fish bowl. All of the decisions that were made in private must now see the light of day. Unique companies become quite common as a result.

The lure of the ?big pay day? entices many to consider an IPO. For Google, it could mean billions of dollars in market capitalization. It may sound strange to ask such a question when billions of dollars are on the line, but here it goes: at what cost? The corporate culture of Google will change over time once they go public. It will have to. It is an inevitable outcome of an IPO.

The money that goes into their Googleplex headquarters will begin to come into question once the first hint of disappointing profits arise. The attention given to creating and maintaining such a unique place to work will begin to be criticized. What are they doing there? Are they are getting too soft in a competitive market? Why don?t they act more business-like? How can they expect to compete with management practices like that?

Eventually the market always wins out. Public companies must, by definition, focus only on one measure of success: short term profits. Corporate cultures, corporate citizenship, and so forth are only tolerated by the market until growth slows. Even if it is only a temporary slowdown, pressure will begin to mount for change.

I know they will never see my blog site, but on the off chance that they do, I hope that Google co-founders Larry Page and Sergey Brin pause long enough to ask themselves two questions. Why did they take such care to build such a unique culture at Google? And how much wealth is really enough, anyway?

Posted by Jeff Cornwall at 03:08 PM | Permalink | TrackBacks (5)

It is so sad to see what little support there is in Tennessee for such an important mechanism for educational reform: that is, charter schools. I have seen what can happen when these entrepreneurial educators get the support they need and deserve. Tennessee is ranked 32 out of 39 in states that allow charter schools by the Center for Education Reform for several reasons.

First, the state needs to strip away the regulatory barriers. This has proven to be one of the main sources of success and innovation in other states. Second, the issue of eligibility needs to get cleaned up. This is an issue of school choice, so a process is needed that truly lets families choose! Finally, the state needs to take control for granting charters out of the hands of the local districts due to their conflict of interests.

Once the process of granting charters is fixed, the state needs to support these entrepreneurs with training and education. I found from my work in this area in Minnesota that such training is critical to the success of these schools.

Posted by Jeff Cornwall at 03:06 PM | Permalink

First, I must make a full disclosure: I am an NFL owner. That's right, I own one share of the Green Bay Packers. As a life-long Packer fan, I want to thank the team, and particularly Brett Favre, for such an exciting season. We did not have very high expectations this year, so all of the end of the year heroics were frosting on the cake.

The Pack will be back next year!

Posted by Jeff Cornwall at 02:45 PM | Permalink

I have been getting more and more calls from folks thinking about opening up a retail business. This is typical as an economy begins to recover. Probably the single biggest risk, especially in the days of big box stores like Best Buy and Wal-Mart, is poorly manged inventory and pricing. We offer this classic article from the archives of INC magazine to any of you who are thinking about or acting on a plan to go into retail or are expanding your current retail operation.

Posted by Jeff Cornwall at 01:46 PM | Permalink

Once in a while the govenment gets something right. The Appalacian Reional Commission has funded a set of initiatives that are supporting entrepreneurship in this region at a grassroots level.

This program supports a variety of program that provide entrepreneurship education. Nothing will foster successful entrepreneurs more effectively than such educational initiatives.

Access to capital is also available throug the ARC. This includes SBA type lending through local banks as well as specialized micro-credit programs.

There is also support for regional economic development programs and small business incubators. Such infrastructure is crucial in areas like this to build awareness and provide an environment of support for these new entrepreneurs.

Posted by Jeff Cornwall at 12:07 PM | Permalink

Although warming up a bit, the venture capital market is no where near the scalding hot level of activity of a few years ago. This site gives a good analysis of the state of the venture capital world today.

Here are a few highlights:

-Prudence seems to be the watchword for venture capital investing in 2004. From the VC's I talk with, there is a more realistic view on their expected rate of return from investments to go along with their more prudent risk taking. This is indeed a good thing, as it may begin to open up more deals for businesses that could not meet the unbelievable expected returns of a few years ago.

-However, supply and demand may be a factor that pushes expected returns up a bit. Since the economy is heating up, there are more deals being created, which means there will be more demand for venture funding. Unfortunately for entrepreneurs looking for VC funding, investment in venture funds has been sluggish of late, so supply of money is down. Demand up, supply down leads to higher prices, or in this case higher expected returns from the VC's.

-Finally, IPO's are up. This should, over time, increase interest by large investors in putting money into VC funds. More IPO's means more liquidity and better real returns in the deal market which is a good thing for anyone investing in a venture fund. So by the end of 2004 or into 2005 we should see a better venture capital market for the entrepreneur due to more money flowing into venture funds. Supply and demand at work again!

Thanks to the National Dialogue on Entrepreneurship for passing along this information.

Posted by Jeff Cornwall at 01:47 PM | Permalink

Barry Moltz,s book "You Need to Be a Little Crazy : The Truth about Starting and Growing Your Business" is going to be the first what we hope are many books that will be featured on a "blog book tour". Moltz presents a realistic look at what it is like to take the plunge.

I encourage all of you to get a copy of this book and join in the discussion, which will begin on 2/2/04.

Posted by Jeff Cornwall at 01:05 PM | Permalink

The Kauffman Foundation has announced the eight universities that will be the recipients of its $25 million program to support entrepreneurship education. There are some wonderful programs on this list! Congratulations to all!!

Posted by Jeff Cornwall at 08:45 PM | Permalink

This article in USA Today illustrates the trend toward more support for entrepreneurship education in academic institutions. What were outlaw programs just a couple of decades ago are now becoming mainstream.

Posted by Jeff Cornwall at 08:34 PM | Permalink