The Entrepreneurial Mind

Here is the second installment from our student entrepreneurs:

After deciding on a name and color scheme for reverbmedia, we turned our attention to one of the most important aspects of any business?the equipment to run it. The kinds of equipment we would require could easily eat up our startup budget, so we began brainstorming ways to acquire it cheaper. We thought of contacting various warehouses and CD stores that had recently gone out of business, but pinpointing those proved to be harder than we expected. Several members suggested scouring the internet for equipment. One that was mentioned was E-bay.

A day or two later, I logged onto E-bay to just see what was available. I?ve never really been an E-bay fanatic, and in fact that was the first time I had ever seriously done any searching on the site (much to the disgrace of my internet-savvy generation, I?m sure). I was just doodling around on the site, looking at all sorts of music-related items, when I typed in ?music store?.

The first thing that appeared was the heading, ?Music Store in a Box.? I was amazed when I took a closer look at the offering. A music store had shut down in Colorado and the guy was selling all the equipment in his store. This included sixteen CD racks, a computer, bar code scanner, wall racks, DVD bins, music system, security system, numerous jewel cases?even price stickers! He offered pictures of each piece of equipment, and they seemed like they were in workable condition. Amazingly, no one had bid on it yet. The starting price was $500.

I immediately forwarded the link to Philip Reid, CIO (Chief Information Officer) and master of all that is e-mail, to see what he thought about it. After he gave it the go-ahead, I presented it to the rest of the group. Everyone was excited about this opportunity, but wanted to be sure that it was legit. So we checked the seller?s references and e-mailed him to inquire about the offer. After several rounds of e-mails to sort out shipping matters and to gain more detailed info about the equipment, we decided to bid on the gear. Every couple of days (and every day as the bid day got closer), we checked to see who had bid.

November 28th, 2002, at 10:30 am, we piled into Becky?s office to bid on the equipment. An ?E-bay Party,? we called it. We had doughnuts and candy to celebrate. The bidding would be over at 11:00am. We logged on and saw that by now, four or five bids had been made. The price was now a little over $1,000. We put in our highest bid and waited. As anticipation grew, we joked around and told stories. All the while, I obsessively pressed the refresh button to see if we had been outbid. At the one minute mark, everyone kind of went quiet, became serious. The price jumped a bit more, up to around $1500. We were still the high bidders. Thirty seconds on the clock. The refresh button gets hit nearly every second. Everyone is relieved each time the screen shows the big green checkmark that signals no one has outbid us. Ten seconds left, and the countdown begins. A few of us check our watches, and begin counting aloud.

?Bidding over. Highest bid: bluebu2001? the screen read. We?d won the bidding. The equipment was ours!

At only around $1800, this was a steal. Of course, with shipping the charges to us were greater, but even then, we racks alone were worth the price, not to mention everything else.

We went ahead and paid what we needed to and finished making shipping arrangements. The guy wanted a bit much for shipping, but things were finally worked out. The first hurdle was over. For a moment everyone could breathe a sigh of relief before heading out to Christmas break. But not to worry, there would be more to come. Everything would really begin when we came back.

Posted by Jeff Cornwall at 06:02 PM | Permalink

Although exit planning is important for all entrepreneurs (every good thing eventually must end), too many entrepreneurs view their business like a publicly traded stock. Jeremy Wright offers an example that is so common among many entrepreneurs: get in, get out, move on. Not only is this often financially unwise for the entrepreneur, the impact extends well beyond personal finances. Free enterprise involves a social contract that requires some level of responsibility by entrepreneurs to their communities. The quickest road to increased regulation of business is to ignore the role of stewardship that all entrepreneurs have in our economic system. And quick exits that focus only on short term financial gains move regulation and government scrutiny into the fast lane.

Posted by Jeff Cornwall at 12:38 PM | Permalink | TrackBacks (4)

HobbsOnline offers more evidence for our current entrepreneurial recovery. He reports on data showing that the formation of LLC's (one of the most popular type of business entity for new ventures these days) hit an all time record in 2003 in Tennessee. This is not some statistic that has been steadily going up year after year. After peaking in 1998, the formation of LLC's in Tennessee plunged as a result of the Clinton recession in 1999 and did not really begin a robust recovery until 2002 under the current entrepreneurial economic recovery. We must be very careful not to become as myopic in our interpretation of the current economic conditions as most in Washington and Wall Street seem to be. This is a main street recovery, and is creating true economic empowerment for many new entrants into our free enterprise system.

Posted by Jeff Cornwall at 12:26 PM | Permalink

HobbsOnline has a link to another piece supporting the real story of this entrepreneurial recovery. This one is in the New York Times. There is hope....

Posted by Jeff Cornwall at 07:51 PM | Permalink

Entrepreneur.com continues the discussion of whether branding is a strategy that makes sense for entrepreneurial ventures. The article offers some pros and cons of branding that are worth consideration.

Posted by Jeff Cornwall at 03:57 PM | Permalink

An old adage in business is to make sure that you are dealing with the cause of the problem and not just its symptom. This article at INC.com applies this wisdom to entrepreneurial ventures. The author offers some great examples that should help any entrepreneur think hard about how she deals with problem solving in her business. Management by treating symptoms can become disastrous during periods of rapid growth. For example, cash shortages are a constant struggle for many growing companies, but many entrepreneurs simply try to find short term ways to raise more money, speed up receivables, or slow down payables. The root cause may be much deeper. It could be a pricing problem, inventory control problem, staffing problem at the root cause. Don?t just treat the symptom. Dig deep to find the root cause. Are you simply putting out fires?

Posted by Jeff Cornwall at 01:02 PM | Permalink

The SBA recently suspended their 7(a) loan program, which is the most widely used program the SBA offers. The good news is that this program is now back in business. The bad news is that although the program has begun funding again, it is now has a much lower cap and a much lower guarantee rate.

The program used to fund up to $2 million loans and guarantee at a rate of 80%. Under the new criteria, this program will only loan $750,000 and guarantee at a rate of 50%. The impact of this change can be seen by its impact on one entrepreneurial venture here in Nashville. As reported in today?s Tennessean, ?Ted R. Sanders Moving and Warehouse Inc. in Nashville thought they had a done deal in December when a lender approved a $1.5 million mortgage loan? funded under the SBA 7(a) program. Even though the program is back in operation, at least sort of, it no longer can support the kind of loan this business had been planning of for its expansion.

This recovery is, as we?ve pointed out time and time again on this blog site, an entrepreneurial recovery. If the Feds are serious about understanding and sustaining the current expansion, they need to not only pay attention to where the real job growth is occurring (as evidenced by the household survey), but support those programs that will expand this entrepreneurial recovery like 7(a).

Posted by Jeff Cornwall at 05:16 PM | Permalink

HobbsOnline blogs an entry from the RexBlog cite chronicling his visit to the White House. Sounds like the President was interested in how taxes affect the little guy and small businesses!

Posted by Jeff Cornwall at 08:41 PM | Permalink

The Miami Herald ran an interview this week with Treasury Secretary John Snow (thanks to RM Cornwall for the heads up on this fascinating article). In this interview, Snow gave me hope that maybe, just maybe, someone in the federal government actually is beginning to understand that our hope for the future lies in the entrepreneurial economy that has emerged over the past twenty years. This economic transformation has created the first entrepreneurial recovery we have experienced in modern American history.

Snow said, ?The top priority is education, making sure young people of America have intellectual skills. By that I don't mean just operating a computer. It's another level of intellectual attainment -- how to think through and solve problems?.We need to keep entrepreneurs and the spirit of [entrepreneurship] strong. You've got to let people fail, and don't make failure a lifelong stigma, which it is in Europe. I can't tell someone what the future holds, but it's going to be pretty good if we do the right thing.?

Unfortunately, Snow only partially gets it. He still is still somewhat baffled by what he sees as a lack of job growth. But, Snow is utilizing the old economy metrics that look only at the employer survey of jobs rather than the more robust, and accurate, household survey that captures the explosion of new business development and self-employment that is fueling the entrepreneurial recovery we are experiencing. (See HobbsOnline for more on this issue).

According to Snow?s view of this recovery, ?There isn't as much hiring as you'd like to see. We do see existing establishments not reducing jobs. What we haven't seen is the other side [hiring]. Frankly, it's a little bit of a mystery. Whenever we've seen a recovery this strong, we've seen a pickup in jobs.?

Let?s hope that Snow is simply stuck in the outdated economic theories he studied while a doctoral student at Virginia. I?d hate to think that the relationship between the federal government and corporate America is so duplicitous that it can?t, or won?t, embrace the entrepreneurial revolution that has already taken place.

Posted by Jeff Cornwall at 02:21 PM | Permalink | TrackBacks (9)

I have had the pleasure to work with a group of staff, faculty and students to plan a new program here at Belmont to enhance the study of entrepreneurship. The university has generously provided us with three prime retail spaces in our new Curb Center building. One space will open this Friday. It will house Boulevard Art and Design, which is a cooperative program with our Art Department. It will feature a retail art gallery and a graphic design business. The second business, opening around March 1st, will be reverb media. reverb will feature new and used CD's and DVD's, with a focus on music produced and/or performed by Belmont students and alumni (which includes Trisha Yearwood and Brad Paisley, just to name two). The students launding this business have decided to chronicle their story for you in my blog site. Click on the "Continue reading..." below to see their first installment.

When I first heard that Belmont would be setting up stores for students to run businesses in, my first thought was that we needed to do a music store. Like 99.9% of people here at Belmont, I?m a music fanatic. I wanted a place where I could feed my auditory addiction without even leaving campus. I didn?t really think much about it after that, though.

An entire semester later, I heard about an Entrepreneurship Club opening on campus. Like most people, I thought it would be cool to own my own business someday. However, I thought the club would be like all the other clubs I?ve ever been in?you sit and discuss the latest happenings in the field, and listen to an occasional speaker or two. Um, that didn?t happen.

I was a little shocked to learn that this entire group of people had not only latched onto the exact same idea I had (probably long before I did), but they were actually going to make it happen. The first thing we did was set up a retail space committee that would be separate from the rest of E-Club. They would hold separate meetings on Monday afternoons in Dr. Cornwall?s office to develop the business. Originally, seven or eight members were part of the committee.

One of the first things the committee set out to do was come up with a name for the business. Inspired by the great view of Nashville?s glorious skyline streaming in through the windows of Dr. C?s office, we began tossing around ideas?names like The Belmont Pulse, Sound Phase, Sound Exchange, Sound on the Curb, and AudioEcstacy (um?yeah).

Finally it was Joe Drake who hit upon the name reverb. I thought it fit well with the kind of store we were doing. We were selling CDs that had been used before; this would be at least the second time listeners would be hearing them. It?s the same with reverb?after the initial sound, the first reflection that hits the ear is echo. The second reflection to hit the ear is reverb. We tacked on ?media? because we thought we would eventually expand the business to include other types of media, including DVDs, music magazines, etc. It also just sounded cool. Thus, the name ?reverbmedia? was born.

--Jessica Phillips

Posted by Jeff Cornwall at 06:53 PM | Permalink | TrackBacks (11)

BusinessPundit (Go Wildcat's, indeed) has a great discussion on the role of strategic decision making and entrepreneurship. He hits it right on the head when he says that for the entrepreneur, strategy and execution must be linked together as one. That has been my experience as well.

Posted by Jeff Cornwall at 10:17 PM | Permalink

The most confusing and frustrating relationships for many entrepreneurs are those with bankers. It can seem like banker speak a completely different language to many entrepreneurs. In fact, it is not so much like a language difference as it is a difference in culture. To understand bankers, entrepreneurs must learn about the norms, customs, and values that are part of this banking culture.

First and foremost is the need to understand what bankers consider a bankable business. It has very little to do with those things that get entrepreneurs excited about their own business, such as opportunity, upside potential, and vision. To a banker, a bankable business is one that will pay back its loans with very little chance of anything going wrong. So rather than getting excited about untapped markets or product innovations, bankers look for things like cash flow. In fact, what bankers look at in a potential business loan are these three factors (listed in order of importance):

1. Does the business have more than enough cash flow to support the loan repayments? Note that this criterion says ?more than enough?, and not just ?enough?. Most bank loans will require excess cash flow that equals several times the actual loan payment. And remember, they like to see this cash flow already in place, not projected in the future within a business plan.

2. Do the owners have enough income and wealth to pay back the loan if the business does not prove to be able to pay back the loan? Forget about the corporate veil of protection from creditors when it comes to bank loans. They will require personal guarantees and personal financial statements from the owners and their spouses. This may go away after your business becomes very successful, but plan on this for the foreseeable future.

3. Are there business assets that can be used, as a last resort, to pay back a loan? Banks don?t want to try to collect your accounts receivable, sell your inventory, or liquidate your equipment. Don?t assume that such collateral is what banks like to see in a business loan proposal. This is usually a last resort backstop from a banker?s perspective.

Bankers? values are based on the fundamental belief that risk is bad. Where an entrepreneur seeks situations to prudently pursue risk, bankers want to eliminate almost any trace of potential downside risk. It is not that bankers only lend money to people who don?t need it, it is more the case that bankers only lend money to those that they are very confident will repay it.

Entrepreneurs can help reduce risk for bankers through the many programs offered by the SBA. One program that is often overlooked is its 504 loan program that can be used for the buildings and equipment that a business may need to help grow. Understand how your business addresses the three criteria listed above, and become familiar with programs such as those offered through the SBA or any local economic development agencies before you begin to meet with bankers so you can position your proposal to them within a context that minimizes the perception of risk.

Posted by Jeff Cornwall at 02:45 PM | Permalink

Carnival of the Capitalists is up for this week. Visit it here.

Posted by Jeff Cornwall at 01:49 PM | Permalink

Entrepreneurship is a phenomenon that lends itself to metaphors. The experiences can be so overwhelming, so new and so complex that it can be easier sometimes to think about it all using a metaphor. As I?ve written about before, I like to think about the experience in terms of golfing. Others have compared it to marriage, a chess game, or being ping pong ball in a game of table tennis. During the growth period in our business, I often likened the experience to that of the life of heavy weight boxer. There were months of boring preparation and conditioning followed by minutes of adrenalin, rush, and terror when the actual match occurred. Here is a comparison of entrepreneurship to surfing that someone recently shared with me. Whatever your metaphor, it can help create sense out of a life that can at times feel like chaos (yet another metaphor!).

Posted by Jeff Cornwall at 02:22 PM | Permalink

WASHINGTON, D.C. ? "Just in time for Valentines Day the Office of Advocacy of the SBA offers the top 10 reasons to love small business, the heart of the American economy.

Top 10 Reasons To Love Small Business

10. Small businesses make up more than 99.7% of all employers.

9. Small businesses create more than 50 percent of the nonfarm private gross domestic product (GDP).

8. Small patenting firms produce 13 to 14 times more patents per employee than large patenting firms.

7. The 22.9 million small businesses in the United States are located in virtually every neighborhood.

6. Small businesses employ about 50 percent of all private sector workers.

5. Home-based businesses account for 53 percent of all small businesses.

4. Small businesses make up 97 percent of exporters and produce 29 percent of all export value.

3. Small businesses with employees start-up at a rate of over 500,000 per year.

2. Four years after start-up, half of all small businesses with employees remain open.

1. The latest figures show that small businesses create 75 percent of the net new jobs in our economy."

Source: Advocacy of the U.S. Small Business Administration (SBA)

Posted by Jeff Cornwall at 08:10 PM | Permalink

At his blog, CRM Mastery E-Journal, Jim Berkowitz discusses the differences between positioning a product in the market versus the ever popular notion of branding. Branding is making customers aware of a product name so they grab that product based on this name awareness. Positioning entails making customers aware of the attributes of your product during the actual decision making process for a purchase. Positioning is usually much less costly and works much more quickly.

Assume you have developed and sell a software product. To brand this will likely take extensive advertising in media your potential customers will watch. Awareness of a name takes repetitive and consistent promotion to engrain it in customers' minds so that when they get ready to sell, they think of your software by name and think of no other product. The ultimate goal is to make the name synonymous with the type of software that you sell.

Positioning has the goal of reaching the customer at the time of decision making so that you can inform them about your product at that point in time. This could be done for the software business through personal selling or a web site that customers go to when they need information for a purchase they are considering. The attributes of the product are highlighted to position this product among the array of options the customer is evaluating.

This article raises some important considerations for entrepreneurs operating small or medium enterprises as they develop their marketing plans and strategies. Marketing budgets are always tight for smaller businesses, and positioning a product is much more cost effective for creating sales than a focus on building a brand. It is simply a more realistic approach within their budgets. Real branding takes large, consistent expenditures, which most small businesses just don't have at their disposal.

Posted by Jeff Cornwall at 01:15 PM | Permalink

The National Dialogue on Entrepreneurship has a link to an article in the Washington Post about a new fund that supports first and second generation American entrepreneurs. Hats off to Blue Water Capital for taking the risk of creating this fund (specialized funds like this do not have a stellar track record). If successful, this could be a model for other parts of the country with large groups of entrepreneurial minded immigrants who recognize the power of free enterprise in this country.

Posted by Jeff Cornwall at 12:47 PM | Permalink

We are beginning to roll out some of our new programs in entrepreneurship here at Belmont. Here is a link (here is the continution of that article) to one of these programs in which students will be starting and running real retail businesses as part of a living lab. These projects involve students from our art, graphic design, music business and entrepreneurship majors all working together to start and run two new ventures.

Posted by Jeff Cornwall at 05:40 PM | Permalink | TrackBacks (4)

This week my wonderful bride of 25 years celebrates her birthday and my parents celebrated their 61st wedding anniversary. Both of these marriages have made it successfully, although sometimes stressfully, through entrepreneurial careers. I am delighted to report here that traditional marriage and free enterprise are both alive and well!

Posted by Jeff Cornwall at 12:22 PM | Permalink

Jon Hilsenrath writes in this article in startupjournal.com about more evidence of the impact, albeit underreported, on the current recovery. Hilsenrath reports that ??proprietor's income, excluding the farm sector, was up 8.6% from a year earlier. By contrast, the wages and salaries of individuals on corporate payrolls were up just 2.3%.? So there is growth in the economy, but it is not on the radar screen of the antiquated statistics used by the federal government.

The picture painted in the media showing hopeless unemployed wandering like some existential souls in a Camus novel into a life of self-employment out of desperation are not true. The data now shows that these folks, these entrepreneurs, are seeing growth in income that is twice the level of those within traditional jobs.

Hilsenrath goes on to report that while there are no national statistics on business formation, you heard it right, no national statistics, anecdotal evidence from Delaware and California show strong new business growth in 2003.

Once again, the most important force in this recovery, this entrepreneurial recovery, is being at best drastically underreported and most often unreported.

Posted by Jeff Cornwall at 11:56 AM | Permalink | TrackBacks (6)

Franchising is a common entry strategy into the world of entrepreneurship. For many, franchising is a safe a secure first step into business ownership. While for others, as this article from startupjournal.com illustrates, franchising can be an unsatisfying detour down the road to economic independence.

There are several very good reasons to pursue a franchise as a first time entrepreneur.

First, most franchises have a business model already in place that has been tested and refined. In most cases, the model must have already been proven to attract the financing that is necessary to launch most franchised concepts.

Second, the systems should be well established and ready to go. Much of the trial and error that first time entrepreneurs have to go through with their specific ventures is in the operating processes and procedures. The devil is most often found in the details, so having these systems in place at start-up can save time and money.

Third, a franchisor can provide significant help in marketing. Not only can the franchisee benefit from any regional or national promotion supported by the franchisor, but well tested content and strategies for local advertising should also be available.

Fourth, many would-be entrepreneurs I meet with are struggling to find an idea to pursue. A franchise eliminates the need to come up with an original, creative business opportunity. If creativity is not your strong suit, a franchise may be a viable option to investigate. But, make sure to look at several options, as costs and quality can vary significantly between franchised businesses.

Finally, a franchise is a good option for someone who has an interest in a type of business, but who has little experience. Although specific experience is not always necessary for success, it does create a major advantage in certain industries such as restaurants.

With all of these advantages, there are several sobering disadvantages of franchising that should be carefully weighed by any aspiring entrepreneur. Lawsuits by franchisees against franchisors are actually a fairly common event. And almost every major franchise at some point in time establishes a franchisee relations committee to help deal with complaints and grievances from franchisees. In fact, both franchisees and franchisors both have their own national associations to deal with public relations and the mounting legal and regulatory issues facing this form of business. Beyond the contractual issues that arise in franchising, there are some fundamental business and personal concerns that many franchisees experience after it is too late.

One of the biggest sources of frustration among franchisees is that they perceive that the value added they get from association with their franchisor diminishes over time. A franchise will charge a significant monthly percentage fee (this can average about 7% of sales) associated with all that they offer in terms of systems, marketing, purchasing power, and so forth. Over time, many franchisors realize that they can be just if not more effective on their own without paying the monthly percentage of sales to the franchisor. This on-going monthly fee is often glossed over by franchisees during start-up planning, as they tend to think only about the initial fees and capital expenditures in their planning.

Another concern expressed by franchisees is that with all of the rules and standardized procedures, they tend to feel more like an employee than a business owner. Those who try to break away from the predetermined model and processes can face the wrath of the franchisor. Larger franchisors have entire staff dedicated to franchisee compliance.

A financial risk to consider is that many first time entrepreneurs can only afford newer franchised concepts, since well established franchises can cost hundreds of thousands of dollars to buy in. These start-up franchisors can begin to experience their own growing pains. Some don?t survive. In some cases they may take the franchisees down with them.

It is critical to understand all of the ins and outs of franchising as a general business strategy first. Then if the idea of a buying a franchise still makes sense, do your homework on the company and its concept. All franchise opportunities are not created equal.

Posted by Jeff Cornwall at 06:39 PM | Permalink

The NFIB site has an article which gives a good overview of the importance of stakeholder relationships for small businesses. The author stresses the importance of building integrity into every relationship a business develops as a critical part of building strong customer trust. A strong reputation takes hard work and time to build with customers. This article gives a nice outline of how small businesses can build a venture on a foundation of integrity.

Posted by Jeff Cornwall at 01:30 PM | Permalink

The Small Business Blog has a link to an excellent article at WSJ.com on the perils that small businesses must plan for when they face explosive and sudden growth.

Stories like this remind me of one of my favorite business parables: There once were two old dogs on a farm that spent their days chasing every car that passed by. Day after day, week after week, month after month, year after year, they chased cars all day long. Then one day they actually caught one. At that moment one of these old dogs turned to the other and said, ?Hey, we finally caught one of these things!! But what the heck do we do now????!!!?

Posted by Jeff Cornwall at 12:55 PM | Permalink

Q: Barry, as someone who road the dot.com wave I am surprised that you sing the praises of a very old fashioned, indeed some might even say rather boring type of businessperson, namely the merchant. Why the change of perspective?

A: One of the reasons I wrote the book is that I thought the term entrepreneur became too sexy. I like the definition since the French word does mean "To undertake with Complete responsibility". That covers it! But I think we need to come up with a new word so we can forget about the 1990's since they are not coming back. I use the word "retropreneur" since I think we have to go back to the way businesses have always been started. Through hard work, passion and and one customer need at a time!

Posted by Jeff Cornwall at 11:05 PM | Permalink | TrackBacks (1)

Q: One of my favorite lines in your book is this one: ?Running a business will bring out the best and the worst of who you are? (p. 125). What did you find out about yourself during your time as an entrepreneur that relates to this quote?

A: It is easy to be a great leader when things are going well in your business. But you are truly tested as a leader and entrepreneur when things are failing. How do you pick yourself up and move on? You will truly find out what you are made of during this time as you stand at the edge of the business cliff realizing that the market does not care about you. Relay on your resilience, your passion and your support structure so you can fight another day.

Posted by Jeff Cornwall at 10:23 PM | Permalink

Q: Barry, you seem to cast a pretty harsh light on business partnerships. Why are business partnerships so difficult?

A: Partnership is marriage without the sex since it takes excellent communication. Don't choose a partner because you are lonely. Get a mentor then. Choose a partner that complements your skills. Have a legal agreement in place from the start to govern your relationship since getting into a partnership is much easier than getting out. I mediate a lot between partners that do not get along and it can be war :-(

Posted by Jeff Cornwall at 06:27 PM | Permalink

Q: What should every entrepreneur know about how entrepreneurship will affect his/her family? What advise would you offer to the spouse of an entrepreneur?

A: Regardless of what we think, running a business involves your entire family and their support is key to your success. Running a business is like driving a car around mountain road banging into the guard rails. Guess what? Your spouse is in the back seat turn around and blind folded (knowing less where you are going then you do). Your business sleeps in bed with you every night! Entrepreneurship is tough on spouses and families. But if you can share the good and bad times with them, they will carry you far!

Many people believe that we need to separate out our personal and business lives. With all the tools available today, I think this is impossible. We need to learn to integrate them together with some safe havens in our lives where we do not do business at all.

Posted by Jeff Cornwall at 03:46 PM | Permalink | TrackBacks (1)

Q: Barry, you argue against something that many entrepreneurs are taught from day one, that is, the value of networking. Why do you think that networking, as it has become known in our business culture is basically a pointless activity?

A: Too many people think that networking is sticking out your right hand to shake another person's hand and simultaneously giving them your business card. Immediately, they say who they are and what they want or are looking for. Real relationships are built over a long period of time. You need to build trust capital or relationship capital and that takes time and effort. Don't try to trade on relationships too soon. Always ask what you can do for that person before asking for yourself. As Tim Sanders says. "be a lovecat" but connecting people of like interests together.

Posted by Jeff Cornwall at 01:29 PM | Permalink | TrackBacks (1)

The Business Book Blog Tour has arrived!

Barry Moltz has put together an honest and revealing look at entrepreneurship. He has peeled back the onion and shows us some of the issues that entrepreneurs face that are not in text or how-to books. This is entrepreneurship in the raw!

One of the things I like best about this book is that he dispels some of the myths about entrepreneurship that I have talked about in my blog. For example, his story illustrates that entrepreneurs are in this game for a lot of reasons, but getting rich quick should not be at the top of our lists. Maybe in the back of our minds, but building a business with real value takes time. He learned this the hard way in the dot.com days.

Some of the topics that we will explore with Barry today on this stop of his tour include networking, family and business, business partners, entrepreneurship as a character building experience, and his concept of retro-preneurs.

This book comes from his heart, and he captures the emotional side of entrepreneurship quite well. Even if you haven?t read his book yet, join in the discussion. I am sure he will have some wonderful insights for all of us to think about.

Tomorrow the Blog Tour stops at Venturpreneur.

Posted by Jeff Cornwall at 01:23 PM | Permalink

Please stop by tomorrow. This site will host the Business Book Blog Tour. For a preview go to today's stop at Ensight.

Posted by Jeff Cornwall at 08:03 PM | Permalink

Whenever I talk to entrepreneurs, serve as their consultant, or teach them in my classes I always have one consistent message. They have to become financially literate to improve their chances of success in their ventures. In fact, I believe this so strongly that I wrote a book on the topic! Bradley Feld has written a summary of some of what he believes are the key aspects of sound financial management for entrepreneurs. Most of what he writes is right on target.

?Cash is king.? This is one clich頴hat every entrepreneur cannot be reminded enough! Choose your favorite metaphor for cash flow: life blood, fuel, engine, or wind in your sails (no pun intended). Without cash, you are out of business.

Feld stresses the importance of getting then numbers you need to manage your particular business and of building a basic operating budget. These things should be in place from day one. Check and double check all of the numbers you have at your disposal to make sure you know where your business has been and where it is really going.

I was really pleased to read his recommendation that entrepreneurs finance their business appropriately. Don?t take a dime of loans or investments more than you actually need (with some reasonable reserves included in that figure). If it is available it will get spent, and usually for some sort of overhead that you don?t need and you can?t afford going forward.

Some of his advice, however, is not consistent with my message to entrepreneurs. He suggests using vendors to ?finance your business.? Most of these vendors are also small business people, so I always suggest to treat them like you want to be treated by your customers.

He also urges entrepreneurs to avoid personal guarantees with bank loans. Good luck! This must come from his world of venture capital. This is not feasible for everyday entrepreneurs. Personal guarantees are a fact of entrepreneurial life during the early years.

His last piece of advice should go without saying, but given how many entrepreneurs I have advised who have some how missed this important point, needs to be said again. Pay your taxes on time! The IRS means business and some of their agents carry guns. Accountants with guns: think about it.

Posted by Jeff Cornwall at 01:59 PM | Permalink | TrackBacks (2)

There is an excellent article by an entrepreneur named Alan J. Smith over at Kauffman Foundation?s EntreWorld web site on what lessons he learned from exiting his own business. One cannot over emphasize the importance of planning ahead for an exit, being fully educated about the options and their consequences, and being fully engaged in the actual exit process.

The first lesson he raises is to rely on experienced merger and acquisition experts to assist in the process of selling a business. I have seen too many entrepreneurs try to do most of the negotiations themselves or rely on attorneys with little or know experience in such transactions. Selling your business, particularly to a larger company, is hard ball. The devil is not only in the details, but also in the basic terms, the letter of intent, and every other part of the deal. Do not wait to bring these folks in at the end of the deal. The best your deal will look is at the beginning. During the rest of the process, the buyer will hack away at the deal trying to make the terms more and more favorable. If the seller gets greedy or tries to push the deal in their own favor, many buyers will walk away. So it is critical to meet with experts before any discussions begin, no matter how casual they may seem. The goal must be to establish the strongest and most favorable position at the beginning, because the odds are that that is the best the deal will ever look.

Mr. Smith?s second lesson learned is to understand how the process of selling works, so you can be fully engaged in the process. That is the only way that you will get the best deal possible. He recommends that you build a good story and market it well. Once the hook is set with a buyer, stay focused in the process with your experts because there are many critical points in the process that only you can decide. Your attorneys are there to look out for your best interest, but you must inform them of what those interests are so they can build them into the final deal. What role do you want to play after the sale? How do you want your staff treated by their new employer? What financial risk and exposure are you willing to take post deal (the deal is not over at closing as there will be hold-backs, earn-outs, and so forth)?

I remember how exhausted I was toward the end of the sale of the bulk of our business interests. I just wanted the attorney to finish it off and leave me alone. We had been down multiple paths of selling our business (some went off track near the very end), and I was ready to be done. But my attorney insisted that I stay focused, and for that I will always be grateful. Many important issues were negotiated in the final days and even final hours of the process.

Posted by Jeff Cornwall at 03:06 PM | Permalink | TrackBacks (4)

Dr. Smolira has an insightful critique of the cash flow board game at his web log. Check it out!

Posted by Jeff Cornwall at 02:49 PM | Permalink | Comments (1)

Come and visit the first stop of the Business Book Blog Tour. Barry Moltz is visiting A Penny For... today.

Posted by Jeff Cornwall at 01:25 PM | Permalink

Professor Bainbridge makes an interesting post in light of our discussion at this site on the differences between publicly held and privately owned businesses. While I have argued that entrepreneurs can, and should, integrate their values into their businesses, Professor Bainbridge argues that a public corporation is not a moral actor and cannot be held responsible as an entity.

Posted by Jeff Cornwall at 01:20 PM | Permalink