The Entrepreneurial Mind

Anita over at Small Business Trends posted a summary of a survey conducted by Yahoo Small Business. It looks like technology is on small business people's minds these days. Although the survey is sponsored by Yahoo, it was conducted by Harris. It still could be slanted by Yahoo's involvement, but is interesting even with this possible bias.

"In a survey of over 1,000 small business owners, the following activities were listed as the most beneficial to the growth of their company, in order of importance:

Hiring more employees (19%)"

Technology can certainly level the playing field a bit, and can create opportunities that could not exist without its support. However, just as I used to tell small businesses that not all of them needed to be in the Yellow Pages (most usually thought they did), not all businesses today need to have a web presence.

Think like your customer.

If your customers look for your type of business in the Yellow Pages then be there with your advertising (restaurants still get much of their business from this source of information). If they look for your type of business on the web, then that is where you should be.

This is a transition time, however. Many businesses are finding that they have to cover multiple media for their message as customers are not all using the same source for product/service information. Some customers within the same target market are more technologically inclined while others still are not.

In this case, think like your customers.

NOTE: If you found the relatively low priority for hiring interesting, as I did, make sure to read my post from yesterday.

Posted by Jeff Cornwall at 07:35 AM | Permalink

In a land far, far away, over the sea....Carnival of the Capitalists is waiting for you.

Posted by Jeff Cornwall at 05:49 AM | Permalink

During the last economic expansion entrepreneurs constantly battled to find workers. Staffing shortages were the major challenge that the entrepreneurs who I was working with complained about. This recovery has created a new challenge: supply shortages.

Why are inventories so low? Businesses have been slow to ramp up production during the current expansion even though the economy was clearly picking up. Just this past weekend, I was talking with small businessman who said that even though their revenues had increased dramatically this past year they still had not really expanded their work force since their post 9/11 layoffs. They were falling behind on some orders, but he was still not sure they should add staff or inventory.

The current expansion has seen an unusually slow employment recovery. Why? In large part it is because we are still waiting for the other shoe to drop. Entrepreneurs remember that after the 9/11 attack, those businesses that were already running lean and tight were the most likely to survive the dramatic shock on the economy that followed. There is a general, yet usually unspoken fear that there will be another ?event?. So they are being very cautious. They don?t want to be caught with large inventories and bloated payrolls if the terrorists strike again. Entrepreneurs have a general sense of confidence in the economy, but they just don't trust that events will allow it to continue.

This caution has led to the current shortages in supply. As the economy has gotten red hot, the capacity is just not there to meet the growing demand. Russell Sheldon, a senior economist at BMO Nesbitt Burns in Toronto, states in a commentary published in the Nashville Business Journal that these shortages are widespread. ?Inventories at all stages of production plunged relative to sales in the initial months of this year. All three levels - manufacturing, wholesalers and retailers - are very short on inventories.? I see it in my neighborhood where construction has slowed due to material shortages, while demand for new houses is stronger than it has been in years.

Sheldon and other economists warn of what these shortages can create. It is demand-pull inflation. Many entrepreneurs had not experienced an economic downturn before the recession that began in early 2001. Even more of them have not known of the challenges that inflation can create for business leaders. The last serious period of such inflation was 1979, when we saw prices grow at a double-digit rate. I remember, as I had just finished by MBA in finance from Kentucky and very few of us in that graduating class could find meaningful work.

Hopefully the Fed can keep inflation in check this time. We learned from the inflationary periods of the 1960s and 1970s that panic over rising prices only made inflation worse. So we all must do our parts to keep inflation under control. Knowing why we are facing this challenge may help toward this end.

But, things are no longer as predictable and simple as they once were. The attacks of 9/11 were aimed directly at our economic system. And they got a direct hit. We are at war. The war has come to our shores, and the enemy intends on attacking the very foundations of free enterprise and our way of life. In many ways, entrepreneurs are the economic foot soldiers of this part of the war. And much more is at stake than simply their businesses.

Posted by Jeff Cornwall at 05:41 AM | Permalink | TrackBacks (6)

Carl Schramm of the Kauffman Foundation has written an article for Foreign Affairs in which he advocates more focus on entrepreneurship in the global economic development puzzle.

"The United States, using its own direct-aid programs and its influence over development agencies, has encouraged other nations to adopt the features and institutions of post-Cold War American capitalism. But this approach -- the so-called Washington consensus -- has often yielded disappointing results. Many economies in Latin America, eastern Europe, and elsewhere are stagnant or backsliding, and most of the world's poorest economies show few signs of new life. Going forward, the American economic model should not be abandoned, as some development economists advocate, but it must be improved. The current template is incomplete. In particular, it fails to reproduce a vital element of the U.S. economy: support for entrepreneurship."

There should be three main areas of attention in such an effort, I believe. First, governmental regulations that stifle entrepreneurial activity in these countries must be eliminated. This includes the lengthy process of "licensing" these businesses that entrepreneurs face in many developing countries. At times, this can become the requirement of bribes and other payments to gain approval to operate.

Second, business education needs to focus on entrepreneurship. And it needs to be available and accessible by a wide population. For example, in South Africa most entrepreneurship education either takes place in the community as adult education or in two year schools where people learn a trade and then go out to start their own business.

Third, and definitely the most challenging area, is culture and society's view of entrepreneurship. Even in developed countries such as Germany and England, entrepreneurship is not a part of the cultural core like it is in the US. My friend from England, John Thompson, a professor who has written a very successful book on entrepreneurship talks about it in such a fundamentally different way. He talks about the need to drill deep within the countryside to find potential entrepreneurs, give them confidence and knowledge, and convince them that this is a noble profession. Certainly this is a very different experience than mine. I feel some days, like I have to beat off the potential entrepreneurs calling on me with a stick! Changing culture takes a long time. But the first two areas of attention, education and government policy, can both go a long way to changing culture over time.

Posted by Jeff Cornwall at 10:03 AM | Permalink

This story in the Tennessean tells the tale of experienced entertainment industry executives trying to launch a start-up. As evident from this stroy, connections and name reconition alone are not enough to bring money to the table.

"(Carl) Kornmeyer, who was heavily involved with The Nashville Network and CMT during his Gaylord tenure, has decided to build a company from scratch in a big way, one seeking somewhere in the neighborhood of $100 million. The venture, called New Shoes Media, is exploring digital cable network and programming opportunities."

They are hoping to raise the money though local sources here in Nashville, but may end up chasing venture capital as well.

One piece of advice from this humble blogger: think about your "story". This is especially important as one moves away from the locals who know you. Why do I raise this issue with this start-up? Well, here is how they say they got the name for their new company:

"The company's name came before Kornmeyer, however. It reflects the gamble they are taking. 'Come on, baby needs a new pair of shoes.' And the dice go rolling across the table."

Not a part of the story that most experienced investors want to hear. Prudent risk taking is what they are seeking in deals. Rolling the dice is normally not the business they are in with their financing deals.

Posted by Jeff Cornwall at 07:02 AM | Permalink

From HobbsOnline:

"Online retailer Overstock.com, based in Salt Lake City, is now the largest source of private employment ... in Afghanistan. Wired.com has the amazing story of globalization's positive impact on the impoverished nation. Who knew that you could point-click-purchase and help America help Afghanistan win the War on Terror? And it's not just Afghanistan - Wired finds a trend."

Posted by Jeff Cornwall at 11:04 AM | Permalink

RM Cornwall (my Dad) sent me an article based in large part on a comprehensive study of the state of family business. He lives in Miami, where the vast majority of entrepreneurial ventures are family run. But, family businesses quietly comprise a major part of the US economy. Quoting a news release about this study conducted by faculty from Kennesaw State University, Loyola University Chicago, and Babson College:

"(F)amily-owned business accounts for 89 percent of total annual U.S. tax return filings. They generate 64 percent of the Gross Domestic Product. And, they employ 62 percent of the nation's workforce."

The study, which was released last year reveals some fascinating insights into this quiet giant. The researchers base their findings on surveys of over 1000 family businesses.

Family businesses are financially very healthy. They have seen a more than fifty percent increase in revenues since 1997, with an average of $36.5 million in revenues.

Family businesses tend to be run fairly conservatively. "Debt remains comfortably low. More than 25 percent of survey respondents report no debt other than trade payables, and another 30 percent have moderate debt levels, in the range of 1 percent to 25 percent of equity."

They are amazing stable in terms of family control. 90 percent report that family will still be in control in five years and 85 percent say that the successor from the current CEO will likely be a family member. 34 percent of these will likely be a woman. This succession is not some far off event for many of these businesses, as 39 percent expect a succession within five years. This is an unprecedented turnover rate for any class of business.

The study finds that the older generation does suffer from some denial about their own longevity and mortality.

"Only 62 percent of significant shareholders report knowing of the senior generation's share-transfer intentions. Such gaps in understanding are likely to impede the business' capital-needs plans for estate taxes and stock redemptions, as well as generate friction among family members. Further, respondents' plans to rely heavily on life insurance to cover most of the death-tax tab may be unrealistic, since 55 percent of respondents fail to conduct regular, formal valuations of company share value and, therefore, cannot accurately forecast estate taxes."

Even if your business is not now a family business, it may become one. Many of these companies were founded shortly after World War II and at that time had no definite plan to keep their business in the family. On the other hand, many entrepreneurs who hope to make their companies family businesses may not see this dream become a reality without careful planning. Generational transition is a tricky process that is prone to many stumbles and even failures.

Posted by Jeff Cornwall at 07:32 AM | Permalink | TrackBacks (2)

Home offices are certainly nothing new. I have had one on and off for most of my career. But with the boom in business formation, more and more new entrepreneurs are following this age old bootstrapper?s tradition of starting their business out of their home. According to the Wall Street Journal's on-line StartupJournal.com, "The number of full-time home-based businesses has risen 3.1% during the past five years to 9.9 million in 2004."

It can be the only way that many new businesses can save enough on the costs of start-up to make it during those dicey early months of operation. It takes many forms: the garage, the kitchen table, the basement, the bedroom, the dining room table, or some combination of these.

Even from the beginning it can create some real boundary issues. At this very moment I am violating one of the rules of our household. I have tried to agree to keep my working at home to my home office over the years. It forces me to set up some boundaries between work and home, even though some days they are the same place. But with the wonder of wireless, I sit here in my living room with the Golf Channel on in the background writing about the challenges of working at home.

As a business grows, it can very quickly take over one's home. I met yesterday with a couple of music industry entrepreneurs who just graduated from Belmont. While they have found that running their start-up out of their homes has saved money at a time when they had very little, it is getting very old very quickly. Josh, who does audio production for a new venture called Submerge Media, told me that his part of the business has now taken over two rooms in his home. Others talk about how uncomfortable it can be as they hire employees and they have to "report to work" around their dining room table. Privacy is certainly a casualty of this type of business arrangement, especially for the entrepreneur's family.

Eventually many of these businesses will "leave home". But, the transition can be difficult. The entrepreneur goes from no rent, to having to pay a fairly large chunk of money each month even for a small amount of office space. The commute time increases from the few seconds it takes to walk up stairs, to however long it takes to get to affordable and convenient space for the business. Certainly the up-side is that the garage is no longer full of inventory, the basement full of machinery, or the kitchen full of computers.

There are stepping stones for many businesses. Incubators are always on option, especially for high potential ventures. More and more entrepreneurs find transitionary space with businesses set up to offer just that, such as HQ Business Centers or countless local office cooperatives. Other entrepreneurs take advantage of excess space that other businesses have through sub-leasing some of their space. As we expanded our health care business we often had to take more space than we needed at the moment and used sub-leasing as a temporary solution for our unused offices. Entrepreneurs coming out of university settings are finding that many schools, like we do here at Belmont, have created business hatcheries for aspiring entrepreneurs.

Although some businesses stay home-based businesses for years and years, many out grow their welcome. As Josh said about their growing pains at Submerge Media, "It gets a little weird meeting with clients in my bedroom!"

Posted by Jeff Cornwall at 08:56 AM | Permalink | TrackBacks (1)

This is a story about a business started by a couple of politically-minded, entrepreneurial young men. No, I'm not talking about Ben and Jerry's Ice Cream and their attempts to blend their left wing politics with their business. We've heard about that for years.

This story is about a couple of recent graduates from James Madison University who decided to start a right-leaning business called Bush Country Ketchup.

"While dunking our freedom fries in ketchup a few months ago, we came to a sudden realization. With each drop of ketchup we ingested, bottled by a company whose single largest individual shareholder is the wife of the Democratic Presidential Candidate John Kerry, we were indirectly making his wallet fatter. Bush Country Ketchup was created so "right-thinking" Americans could once again enjoy this condiment on our burgers and fries without the guilt associated with enriching an individual whose aspirations and goals are so clearly wrong for our country."

Hopefully these young men can stay true to their beliefs and not sell out like Ben and Jerry did.

Posted by Jeff Cornwall at 04:27 PM | Permalink | TrackBacks (1)

In addition to stimulating the economy, it now appears that the recent Bush tax cuts have helped stimulate an increase charitable giving. Hobbs cites the New York Times in this post that illustrates how the private sector will step up if given the opportunity. In fact, this pattern goes back to the Reagan tax cuts, according to this commentary from the Chronicle of Philanthropy cited in Hobb's article.

Posted by Jeff Cornwall at 07:35 AM | Permalink

Just when you thought we baby boomers were fading off into the sunset....WE'RE BACK!

High Tech is going to revolutionize the senior years for those of us born in the 1940s to 1950s according to an article in Red Herring (you will have to register to get to this site if you haven't done so previously).

"In the future, everything from cell phones to computers will be redesigned for users with limited manual dexterity, poorer eyesight, and hearing....Intel, MIT, and other research centers are working on sensor-rich environments that can monitor their inhabitants, helping people remember to complete tasks and watching for sudden behavioral or physical changes. "

My generation has built sizable wealth, and we are not afraid to spend it to make our lives more comfortable. Combine this with the trend to postpone or transition into retirement and you have a large group of aging people with tremendous disposable income.

Much of entrepreneurial opportunity comes from major changes in demographics, society and technology. In this case, we have a confluence of all three. A major demographic group is moving into a significantly different stage in life. We have created a society in which we expect to have our problems taken care of for us. And, the technological revolution is just waiting for more problems to chase with already developed solutions.

?Aging people may also become be a target market for home robots. In Japan, companies like NEC are hoping to create "nursebots" that can provide basic physical and medical assistance to elderly users?.(I)n their desire to stay healthy, elders will view almost all of their consumption choices through the lens of health. Health considerations won't be confined to diet or medical regimens: they'll influence choices in everything from clothing to housing. But because emerging technologies like sensors and smart dust will make it possible to build intelligence and monitoring capabilities into just about everything, it'll be possible for nearly everything to have a health monitoring or maintenance function. Indeed, this is such an important trend, culture historian and author Theodore Roszak predicts that "by the middle of the 21st century, every highly developed industrial society in the world will be a health care economy."

What does all this create? Another huge growth opportunity for entrepreneurs in high tech, software and life sciences. At one time there was a concern that the aging of my generation would drag on the economy. After all, the conventional wisdom was that our early parenthood years were our big spending years. As we aged, we spent less, and since we are such a big demographic bulge this was going to create a long term economic decline. Not true, it now appears.

Given the mammoth size of my generation and increasing longevity, this could be a huge entrepreneurial pot of gold for the next forty years. God willing and the creek don't rise, that is.

Thanks to Bill Hobbs for passing this article along.

Posted by Jeff Cornwall at 03:47 PM | Permalink

I have argued since arriving in Nashville that the entertainment industry is ripe for an entrepreneurial boom. Although the big companies in the industry are hurting, entertainment (especially music) is being made and being consumed. The manner it gets from the source to the consumer is forever changing. The latest figures on venture capital investment support this view. Entrepreneur magazine reports that entertainment is emerging as one of the hot sectors for VC's. Hang on to your (cowboy) hats...its going to be a wild time here in Music City!

Posted by Jeff Cornwall at 10:17 AM | Permalink

Free enterprise meets Luke Skywalker....well sort of.

Small Business Trends examines the entrepreneurial nature of the first private space flight, which took place yesterday. "This is not the kind of government-dominated space flight we've all been conditioned to expect for the past 40 years. This flight had all the earmarks of a startup venture."

The privatization of space flight. Hmmm....Could Social Security be next?

Posted by Jeff Cornwall at 06:38 AM | Permalink | TrackBacks (1)

The National Dialogue on Entrepreneurship has offered their choices for summer reading:

Thomas W. Malone, The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life. Cambridge: Harvard Business School Press, 2004

This is an interesting look at the new face of employment relationships. My take on this it that even if you are not planning to be an entrepreneur you better learn about it. Malone sees management become more a group of free agents that sell their expertise and services to many different companies. You basically better plan to treat your career like it is your own business if Malone is correct.

Nicholas Carr, Does IT Matter? Information Technology and the Corrosion of Competitive Advantage. Cambridge: Harvard Business School Press, 2004.

NDE has this take on this book:

"Carr argues that executives must now treat IT as simply another part of the business; it should no longer drive a company?s strategy. This also means that firms should spend less on IT, and that claim certainly doesn?t sit well with IT companies. Even if you disagree with Carr, this is a provocative book that will make you think about where IT fits in with your business or your local economy."

David Bornstein, How to Change the World: Social Entrepreneurs and the Power of New Ideas. Cambridge: Oxford University Press, 2004.

Social entrepreneurs are those people who channel their entrepreneurial passions into the non-profit world. A growing area of interest with many potentially very positive social implications.

Sharon Whitely, Connie Duckworth, and Kathy Elliott, The Old Girl?s Network: Insider Advice for Women Building a Business in a Man?s World. New York: Perseus Books Group, 2003.

Lindy Woodhead, War Paint: Madame Helena Rubenstein and Miss Elizabeth Arden, Their Lives, their Times, and their Rivalry. New York: John Wiley and Sons, 2004.

My instincts tell me that the entrepreneurial world is becoming more gender blind. I think if you focus on your own small network, you limit your possibilities.

Stephen Spinelli, Robert M. Rosenberg, and Sue Birley, Franchising: Path to Wealth Creation. New York: Prentice Hall, 2003.

Steve Spinelli was involved with Jiffy Lube and now teaches at Babson. Should be a good book for any interested in franchising your business. I do caution any entrepreneurs thinking about franchising their businesses, however, as many attempts have failed due to poor business models. Corporate overhead has killed many of attempts at growing a business this way. Also, before you decide to franchise your business take a look at all of the attorneys who specialize in this area. That should tell you something about what lies ahead!

Posted by Jeff Cornwall at 08:45 AM | Permalink | TrackBacks (2)

The weekly installment of Carnival of the Capitalists is up over at Business Blog World. Make sure to make a visit this week, as there are several useful posts on entrepreneurship and marketing.

Posted by Jeff Cornwall at 06:53 AM | Permalink

The economy is growing and employment is up all across the country. Good news, indeed.

But, what this means for small business folks is that it is time to start engaging in more deliberate and longer-term staffing planning. During the last big economic boom, the single biggest impediment keeping the entrepreneurs I was working with from growing was staffing problems. They could not hire the right people when they needed them to take advantage of a growing market.

So here are a few things to keep in mind:

1. Keep Staffing Forecasts Current. Even if you are a small business, you need to think down the road for the next two or three years to anticipate what your hiring needs may be. Forecasts should be updated every few months to adjust for changing conditions and the changing state of your business.

2. Base Staffing Plans on Milestones, not on Time. Never tie your staffing plans to the calendar. The passing of six months is not what will require you to hire new employees. Know what the triggers are in your business that will necessitate more employees. For example, it could be things like a certain number of clients, sales levels, or production levels for employees. More managers and supervisors it should be based on the number of first line employees each can effectively supervise. And don't forget the needs of support staff in areas like billing and sales.

3. Measure Your Employment Triggers. Work with your bookkeeper or controller to give you quantitative reports on your key employment milestone triggers, and insist that you get these reports regularly.

4. Never Just Hire Warm Bodies. Hiring someone just for the sake of hiring rarely works. Mediocre hires make mediocre employees. This will only postpone hiring the right people and force you to get rid of the dead wood you just hired first.

5. Know Your Hiring Lead Times. It takes time to get employees up to speed. Know how long it will take to recruit, hire, and train new employees for each position you are planning to hire so they can be ready to work when you really need them.

6. Don't Forget to "Close the Bank Door". The single best staffing tool you have is retaining the good employees you have right now. Create a culture that makes good employees want to stay with you. You may have to pay a little more that you'd like to, but it is much more cost effective that constant hiring and training. And staff shortages can be very costly in terms of lost revenues.

Posted by Jeff Cornwall at 10:31 AM | Permalink | TrackBacks (1)

Writing counts. I have known bankers, venture capitalists, business people, etc. who have all told me stories of throwing away material they have received simply because it is poorly written. I have done it myself. I have thrown away letters, brochures, business plans, and proposals when I find obvious mistakes in their content. It usually has to be pretty bad, since I don't pick up on these things unless they are obvious. This article at StartupJournal has some great tips on business writing.

My biggest pet peeve? Please spell my name correctly!! It is Jeffrey, not Jeffery or Geoffrey. And it is Cornwall, not Cornwell, Cromwell, Cornwallis, Cornish, Cronwell, Corwall (just a few that I have received in business correspondence).

Posted by Jeff Cornwall at 08:33 AM | Permalink

What is driving so many young people to pursue careers as entrepreneurs? Why are my entrepreneurship classes getting so FULL?? StartupJournal.com provides some insights into these trends. The article opens with Duke University, where they are seeing a reverse in this trend. But this is not the reality most of us are seeing at our schools. Duke has only graduate studies in business. Most if the boom in entrepreneurship studies has been in undergraduate programs, where students are not looking for a ticket out of corporate America, but are looking to take a road in life that will never lead them into the corporate world.

What are they looking for? They want more freedom. They seek a greater upside potential. They love the rush. They insist on the flexibility they can create through their own business. They like working for their own goals and their own measures of success in life. I can tell you that these students create an incredible energy everyday that I walk into the classroom. Their optimism and enthusiasm make my job pure joy.

Posted by Jeff Cornwall at 07:36 AM | Permalink | TrackBacks (2)

Setting prices can be a frightening step in a start-up business. Most entrepreneurs tend to set prices too low assuming that they have to price below the market to get business. If that is really true in your market, you are in a commodity market. Not a good place to be, anyway.

BusinessPundit offers a good perspective on pricing which you can check out here.

"It is difficult to know the "market price" when you are making a new market. Charge too little and you leave profit on the table. Charge too much and you may not have the cash flow to sustain yourself. This is why I am a big fan of "soft openings." I like a chance to feel things out with a small group of customers rather than explode with business from day one and not be ready to handle it. You only get one chance to make a first impression."

Rob also links to a great article at CFO.com about pricing strategies.

Posted by Jeff Cornwall at 07:16 AM | Permalink

The NFIB has released its small business optimism index for May. While it is off slightly, the researchers at NFIB are not concerned that this is a change in direction for an index that has been fairly robust. Part of it is probably related to a little inflation jitters and some may just be the energy cost spike that acted like a splash of cold water.

The authors of this study are still seeing 2004 as the strongest economy in over two decades. This is bolstered by Greenspan, who is not overly worried about inflation (and that says a lot!), and the recent drop in energy prices due to expanded production in the Middle East. And just when the economy starts looking so strong, the media turns the other way as reported by Bill Hobbs....

Posted by Jeff Cornwall at 07:02 AM | Permalink

A report on innovation in large companies issued earlier this year by Deloitte and Touche underscores that entrepreneurs are now in charge of our economic future. I have written and consulted about entrepreneurship in larger companies since the 1980's. The longer I look at organizational entrepreneurship, the more I become convinced that its impact is, at best, incremental. This report seems to back up my observations.

"The latest findings, based on research gathered from nearly 650 leading manufacturers worldwide, reveal that:

"'Our research clearly shows that a significant profit barrier exists in the manufacturing industry and this barrier is directly related to the failure of most new products and services, as well as the lack of priority placed on successful innovation practices,' says Doug Engel, director of Deloitte's U.S. Manufacturing Industry practice."

New research is showing that with education, independent entrepreneurs have success rates of almost 80 percent. Even with their miniscule budgets, they do a much better job of understanding their customers and perceiving the subtle, but dynamic forces of growing markets.

Why are larger companies so weak as entrepreneurial engines? My experience is that they cannot or will not make the changes it really takes to foster entrepreneurship in their companies. It takes fundamental changes in culture, structure, reward systems, and basic strategies to even have a chance at the transformations necessary to become entrepreneurial organizations.

When I have consulted with large companies in this area, they want me to "fix" the line managers. I am to make them more entrepreneurial. It is, after all, their fault that the company is not adapting to change. Most of these managers want to become more entrepreneurial, but it is the corporation itself that oppresses or undermines their efforts. When I have tried to get top management to look at the changes they would need to make to break down the organizational barriers impeding entrepreneurship, they have always balked.

The good news it that at the macro level this is not really a problem. We have had strong growth in new ventures over the past twenty years, now over 3.5 million new businesses a year. This is where innovation will blossom and how our economy will continue to expand.

Thanks to Bill Hobbs for passing this report along.

Posted by Jeff Cornwall at 07:11 AM | Permalink | TrackBacks (1)

Now we know for certain that this entrepreneurial economic recovery has hit full steam ahead. Europe is even seeing significant growth!

The European Venture Capital Association reports that in 2003 there was over 29 billion euros invested in over 7400 companies. What is even more encouraging about this news is that European VCs tend to invest smaller amounts of money in earlier stage firms than is seen in the US. While the European economy tends to lag the US, this high level of investment in early stage ventures should be a better leading indicator for the global economy than US VCs, which focus on larger investments in later stage financing deals.

Posted by Jeff Cornwall at 06:40 AM | Permalink

Due to a missing (and presumably now former) blogger, Carnival of the Capitalists for this week is a bit late in getting posted. It is now up and live!

Thanks Jay!

Posted by Jeff Cornwall at 05:06 PM | Permalink

Bank merger mania is back. Generally, this is not good for their small business customers. Mergers are pursued for efficiency, and efficiency often leads to less personal service. A recent survey of small business owners reported over at Inc.com found the following:

"According to a recent survey by Greenwich Associates, 30 percent of small businesses (those with annual revenues between $1 and $10 million) and 23 percent of midsize businesses (annual revenues of $10 to $500 million) said that merger rumors concerning the banks where they do business would cause them to consider reducing future levels of banking business with them. The reason generally given was an expected decline in service quality.

"The area midsize companies felt would be most affected was their banks' responsiveness to information requests, with 50 percent saying they felt this area of performance would be hurt."

The good news, which we recently discussed here at this site, is that there are many new community banks starting up in the wake of the bigger banks merging.

Not all mergers have bad outcomes for small business. When smaller community banks merge or banks with a more regional presence come together the outcome can be a stronger bank that can better serve the needs of a growing company. This happened when a regional bank we had moved our business to merged with another regional bank. We saw no change in service and a better ability to meet our expanding needs as their customer.

Changing banks can be disruptive for a small business, so take time to see what changes occur over the first six to twelve months post merger. If things start to change for the worse, remember what a former partner of mine once liked to say: "There's a bank on every corner. One of 'em will be smart enough to work with us."

Posted by Jeff Cornwall at 06:16 AM | Permalink | TrackBacks (2)

On the eve of the US Open golf tournament, I am struck by the consistent questioning of Tiger Woods? performance of late. Tiger is not winning as many major tournaments as he did a few years ago. In fact, he just isn?t winning as much as he used to.

The theories about this decline in golfing success are numerous. Among the most common theories are those that focus on changes in his life. He has gotten engaged. He is more and more active in outside activities such as his charity work. There are too many things that now take away from his golf.

What is most interesting to me is that there is always the implication that it is somehow bad that Tiger?s life has become more than golf tournaments. That he is somehow no longer great.

I remember an interview with his father years ago where he predicted that Tiger would not always be "only" a golfer. In fact, he predicted that Tiger would leave golf at a fairly early age. He saw in his son much more interest, passion and potential than golf alone could fulfill.

It is my hope that maybe Tiger is working on his goodness as a person these days. He is building a relationship with his fianc饠that will be the foundation of a good family. He is working to make our communities better places to live in through his involvement in various charities. Tiger Woods may be willing to sacrifice his professional successes, his professional greatness, to strive for goodness as a person.

Imagine that, someone actually working on moving their lives ?from great to good?. If that is what is going on with Tiger, it should be a role model for all of us. I think we sell ourselves short when we only celebrate the great among us. It is much more important for humanity to spend more time celebrating the good.

Posted by Jeff Cornwall at 12:15 PM | Permalink | TrackBacks (1)

Anita Campbell looks at President Reagan's recognition of the courage and importance of small business over at Small Business Trends.

"Even today, two decades later, President Reagan's description of small businesses and entrepreneurs remains as accurate as ever: (1) No guaranteed income. (2) Must anticipate their customers' needs. (3) Must deliver before they reap the rewards. (4) Drivers of the economy."

Posted by Jeff Cornwall at 11:47 AM | Permalink

Along the same lines as President Reagan's take on small business, Rob over at BusinessPundit offers his view of the drudgery that many entrepreneurs face each day.

"They cold call. They clean bathrooms and mop floors. They make copies and fix computer problems. They answer phones. They fill out paperwork. They work weekends, and holidays. They have to, because their employees just want to work 40 hours and leave, and they can't afford to hire any more help."

And most of us wouldn't trade this life for the world!

Posted by Jeff Cornwall at 11:35 AM | Permalink

There is a new law that will have a profound impact on small business known as the "Check 21" banking law. For a full analysis of the pros and cons of this law for small businesses StartupJournal has a very thorough summary.

What jumped out at me is that the law changes the way checks are handled in the banking system (thanks in part to 9/11). Here is a summary from StartupJournal:

"For those unfamiliar with Check 21, the law was designed to facilitate the way banks move checks around the country. Currently some 40 billion paper checks are shuttled between banks each year by airplane and ground transportation before being cleared and returned to check writers in the mail.

"When the law takes effect Oct. 28, it could theoretically cut the time it takes a check to clear from days to hours. "

This looks like the end of check floating, which was always one of the most creative aspects of being an entrepreneur! How many days would it take for the check to the telephone company to clear? How many days would it take for our payroll all to clear? The art of float financing may soon be sunk!

Posted by Jeff Cornwall at 05:02 PM | Permalink

If you've ever even thought about taking your business public, or wonder why I rant so often about the beauty of staying private, check out Rob's post over at BusinessPundit about Cargill. This is a private, family owned company that would be one of America's biggest 20 companies if it were taken public.

Private companies are, indeed, different. Entrepreneurs make a huge mistake when they assume that an IPO is simply a financing mechanism. It begins a process of change the will forever alter the company culture and its purpose.

Cargill's Staley is an amazing CEO and has a unique challenge being an "outsider" CEO of this family business. I had the priviledge of getting to know him when his son was one of my students at St. Thomas. You could see how well he fit into Cargill's culture. It was clear that he was being groomed for the CEO role as much for his character as his business acumen.

Posted by Jeff Cornwall at 05:47 PM | Permalink

I am usually the eternal optimist. I guess that goes with the entrepreneurial territory. But, while I am upbeat about the positive power of free markets, I do worry both about collective greed and about markets without soul that seem to be more and more evident these days.

This economic system of ours is based on a fundamental social contract. If the system no longer creates jobs and supports local economies, we run the risk that socialism may pick up speed and private ownership may begin to wane as government takes control and even ownership of many of the means of production. On the other hand, it is not beyond the realm of my imagination to visualize a time when our moral fabric becomes so tattered that rather than living in a land where religion and morals serve as our fundamental guides within a land of free choice, forces may move to impose certain morality through the power of government and quickly take away many of the freedoms we now celebrate. Although it may seem hard to fathom either of these scenarios, both are real.

Why do I worry? First, the size of our government and its scope have expanded at an alarming rate for the past sixty years. As one pundit recently put it, we now have the choice between a steady walk toward socialism with the Republicans versus and full sprint with the Democrats. Much of this seems to be based on a growing materialism and collective greed that has infested our culture. Now don't get me wrong. I am a die hard free market capitalist. But, owning stuff is not the ultimate purpose in life. It makes the journey enjoyable, but it is not the end we should be seeking in our lives. We are merely stewards of all the stuff we are creating in this world, and should never forget the responsibility that places on us. And a government that promises more and more stuff for all, and more and more protection from any of life?s risks, is preying on our collective greed. It threatens to slowly, like the frog in the pot water that never realized the heat had been turned on the stove until it was too late, take away our economic freedoms.

Second, I worry that our culture has become so weak that we now have a market economy with no soul. Some of you may have noticed that my blog site (and I am in no way alone in this problem) has been the subject of repeated SPAM attacks. The latest assault on this site has been from pornographic web "entrepreneurs". Now as a free market kind of guy, I should understand that free market capitalism can be a bit messy at times, but hey, this is a world of supply and demand. Right? Just as owning stuff should not be the ultimate end for the individual, there is the need for a collective understanding on what goods and services create real benefit for our country and our culture. Now one way to control this is through the government stepping in. That just never works. It creates more centralized power, and we all know where that leads us. I don't want to live in a land like we saw in Afganistan before we liberated that country. Culture, which is fundamentally shaped by our shared morality, is the much better choice. Sadly, we seem to have forgotten the importance of culture in shaping all that we do including commerce.

Why is ninety percent of the Internet traffic involved with pornography? I think it has much more to do with the current state of our culture than any shortcoming on the part of our government to intervene. I am just a lowly blogger. It blows my mind to imagine that the modest traffic that comes through my site would even be attractive to the pornography industry as large as it is. But, it is so large and so pervasive that even the little tiny niche of the Internet that I inhabit is part of their ever expanding domain.

In a recent essay, Jordan Ballor suggests that the power of conversion can change all of this. That is, if more people embrace a morality that views things such as pornography as evil, it will eventually end. I hope he is right, because the alternatives are frightening, indeed.

Posted by Jeff Cornwall at 08:05 AM | Permalink | TrackBacks (1)

The latest economic report is again quite robust. Here is the full report issued by the Joint Economic Committee.

Here are the highlights:

* Payroll employment rose by 248,000 in May, the ninth straight month of gains. Manufacturing jobs grew for the fourth straight month, and unemployment held steady at 5.6%.

* The economy grew at a 4.4% annual pace in the 1st quarter. Private forecasters see growth of 4.6% in 2004, the highest in 20 years.

* Energy prices, including gasoline, remain elevated and are expected to remain high at least through the summer diving season. Oil has rise to around $40 per barrel.

* First quarter productivity growth was revised up to 3.8%, accelerating from 2.5% in the 4th quarter of 2003. Real hourly compensation for the 1st quarter was also revised up.

Posted by Jeff Cornwall at 07:16 AM | Permalink

Rev. Robert Sirico has written a compelling essay about President Reagan's moral vision.

"I suggest that President Reagan possessed what many of the more ?sophisticated? members of the ?white wine and brie set? so clearly lack: a clear sense of moral priority. He would not be distracted from pursuing that moral priority despite the snickering and nay-saying, the disparagement and vile ridicule heaped upon him by the cultural elite."

Once upon a time I was part of this "white wine and brie set". I am grateful that I eventually saw the light. Like a religious conversion, such a transformation may give me even a greater appreciation for what I now believe.

Posted by Jeff Cornwall at 11:08 AM | Permalink

Not all is bad with globalization. This article
from Foreign Policy shows some potentially underserved opportunities in foreign markets.

Posted by Jeff Cornwall at 10:32 AM | Permalink | TrackBacks (1)

I have written from time to time about the need to look beyond the government controls versus free markets debate. Culture is an even more powerful force that can provide a context for our economic system that grounds it within a moral foundation. Here is an interview with Peter L. Berger on this topic that is fascinating. Prof. Berger is director of the Institute for the Study of Economic Culture and professor of sociology at Boston University. It was posted at the Acton Institute's web site.

Berger states the following:

"I think cases exist where there are tensions that individuals who are in positions of responsibility have to work through. That is the subject matter of business ethics, which is a complicated and I think worthwhile undertaking. But there is a primitive business ideology that being good, being morally virtuous, will always lead to economic success. That is simply not true. The life of Jesus of Nazareth if nothing else would indicate that he did not start a successful corporation.

"So I think the relationship is not that easy. It does not mean on the other hand, that in order to succeed in business one has to be a brutal, immortal person. No. But there is a tension there. I don?t think there are any easily formulated general rules on how to resolve that tension, but I know many religious people in the business world who will struggle with this and sometimes come up with creative solutions."

Posted by Jeff Cornwall at 07:43 PM | Permalink

After a few weeks of waiting for some software fixes to be put in place, my blog site is now open for comments! I felt badly about having to shut off the comments, but we were getting some really nasty Spam attacks. Let's just say that they were links to sites that are not what a Baptist university would want to see on one of their hosted blog sites!!

So, please have at it. I missed hearing from all of you.

Posted by Jeff Cornwall at 03:05 PM | Permalink

Business Week recently spotlighted its "100 Hot Growth Companies". My favorite part of the article was the acknowledgement by this bastion of the old corporate economy that it is the small companies that are driving things these days:

"Over the past few years, smaller companies generally have played an outsized role in bolstering a shaky U.S. marketplace. Strengthened by low interest rates on their borrowings and a focus on consumers who kept on spending, smaller players were vital to the overall economy in the recent down years. ``Small businesses have been a source of stability to a very troubled economy, and more recently a key source of growth,'' says Mark Zandi, chief economist of consulting firm Economy.com Inc. Just as important, the group has been an incubator of new ideas, some of which will undoubtedly change our world. Alumni of our Hot Growth list include network titan Cisco Systems (CSCO ), video game leader Electronic Arts (ERTS ), and such familiar names as Black Entertainment Television (VIA ), Papa John's International (PZZA ), and eBay (EBAY )."

Posted by Jeff Cornwall at 02:12 PM | Permalink

President Reagan was once asked the difference between a big business and a small business. He said that a big business is what a small business wants to become if the government would just get out of the way.

Rest in peace. His journey is now complete.

Posted by Jeff Cornwall at 02:05 PM | Permalink | TrackBacks (2)

Here it is, Carnival of the Capitalists for this week at the Window Manager. A great set of posts again this week. A couple to make sure to look at:

Professor Bainbridge (a very thoughtful and well-written site, by the way) looks at family business succession using the Mondavi wine business as a case study.

Small Business Trends has a post about the knitting boom going on today. Who knew?? A great example of how the simplest ideas are often the best. "Swing easy and it will go farther."

Posted by Jeff Cornwall at 01:57 PM | Permalink

There were a quarter of a million new jobs new jobs last month!

Here are the details:

"The Department of Labor reported today that payroll employment increased by 248,000 jobs in May following even larger job gains in both April (346,000 new jobs) and March (353,000 jobs).

"Highlights:

* Over 1.1 million new jobs have been created in 2004. If this pace of job growth continues, over 2.8 million new jobs will be created this year.

* Since August 2003, payrolls have risen by 1.4 million jobs.

* Employment continued to expand in manufacturing, rising by 32,000 jobs in May. There have been 91,000 manufacturing jobs created in the past four months.

* April statewide data from the Department of Labor also showed that the unemployment rate has fallen in 47 states over the past year.

Here is the full report and here is a quick look at the trends.

The entrepreneurial economic recovery rolls on!

Posted by Jeff Cornwall at 03:01 PM | Permalink

Entrepreneurial ventures can remind us of babies. They seem to need constant care and attention, and even if they don't for short periods of time we still worry about them. Although physical time off is possible, many entrepreneurs find they cannot mentally take time off from their businesses.

A study in StartupJournal.com reported that of the entrepreneurs surveyed "22% want to forget it all for a while and won't check back with their company, but 33% will be calling in -- or checking by e-mail -- once a day, 22% several times a day, 17% every few days, and 4% weekly. For one small group, 2%, perhaps staying at work would be more relaxing -- they'll be calling in every hour." Another article at the same site offers advice from a consultant on how to take time off from his business. But, his advice seems to imply that even proper rest is simply a way to improve performance when we get back to work.

Temperance is a virtue that is often forgotten about in today's 24/7 world. This article from Inc.com describes the problem quite clearly:

"So, do you really need to be at the office 24-7??The most dominant myth of this society is the Protestant work ethic,' says Al Gini, author of The Importance of Being Lazy. 'Entrepreneurs say, 'This is my baby. I have to do this myself with huge amounts of sweat equity.' They're right, but there has to be some moderation.' Gini advocates taking time to rest, recreate, and re-create, but if that only means a few days off, checking in constantly before plunging right back into an all-consuming schedule, what's the point?"

What's the point, indeed? Being at rest is not simply a means of recharging your batteries for the next round of work. Rest nourishes the soul. Rest gives us the opportunity to focus on many things that are, dare I say it, even more important than our businesses. Family, faith, and friendships are not respites from work. But we too often treat them simply like a time-out from work.

If all we do--work, rest, sleep, recreation--are simply means to improving the financial performance of our businesses, our lives are not really being lived well. My good friend Mike Naughton tells the story when he was giving a talk about celebrating the Sabbath. An executive in the audience spoke up and adamantly stated that he could never "give up" Sunday--it was his competitive advantage.

As summer vacations draws near, take time to think about why you are doing all that you do. Why do you work? How do you rest? If all of your answers come back to your business it is time to do some genuine reflection on your life. Business is exciting, invigorating, and even fun. But, it is simply a means and not the ultimate ends in our lives. Temperance in our work can help put such things in their proper order.

Posted by Jeff Cornwall at 02:47 PM | Permalink | TrackBacks (1)

There are more and more niche banks popping up like mushrooms after the rain. They focus on serving women, hispanics, etc., etc. There is a new one here in Nashville reported in the Tennessean that is focused on Asian immigrants and health care. These banks are playing a significant role in our entrepreneurial economic boom.

Posted by Jeff Cornwall at 02:42 PM | Permalink

Part of the mythology of entrepreneurship is that VC's play a major role in new venture development in this country. The myth has evry entrepreneur thinking there is a VC out there for them. I have met small retail start-ups that actually think they can get VC funding. (In case you still believe this myth yourself, there has never been a small retail business funding by VC money--ever!!). While VC's play an important role, I would even go so far as to say a critical role, they are a niche player. They only work with businesses that have large capital needs and show great promise of very rapid growth.

Anita Campbell has a fascinating post over at Small Business Trends that really brings this to life. She cites a report stating that in 2002 only 38 out of 100,000 new businesses had VC money behind them. That is .038%! She also links to an article on VC's over at Forbes.com that is worth a read.

What was most heartening was that she stated that entrepreneurs seem to be understanding that VC's are not part of the real world for most start-ups. Maybe the VC myth is finally becoming debunked! Over 80% of funding comes from the entrepreneurs themselves and their friends and family. Most of the rest comes from a variety of sources such as leasing companies, limited bank financing, etc. If I were to draw a pie diagram of this, VC's would be a really thin line at best. They are important, but not for the vast majority of entrepreneurs. I wish my fellow teachers of entrepreneurship would give up this myth and teach about what really funds most business start-ups. The VC process is complex and sexy so it makes great stuff for college classrooms. But, we need to get real and teach entrepreneurs about what is fact, not myth.

Posted by Jeff Cornwall at 02:14 PM | Permalink

It is encouraging to see that this year's Entrepreneur magazine Hot 100 companies includes many companies that have integrated strong values into their company cultures.

"At a time when each day's headlines seem to bring new corporate scandals to light, it's heartening to know that being "good guys" has paid off for our Hot 100 companies. We were impressed by the number of entrepreneurs in this year's listing who credited their success to their employees and spoke passionately about the importance of treating customers and staff well. Proving they not only talk the talk, but walk the walk, the number of companies offering employee benefits such as health insurance, 401(k) plans and stock options increased this year."

Posted by Jeff Cornwall at 09:40 PM | Permalink

Over at the Inc.com web site two articles caught my eye that seem to offer a problem and an alternative.

The problem: gas prices are going up and up and up, which is starting to pinch small businesses.

An alternative: new software makes virtual meetings over the Internet easy for small business people.

Although Inc.com didn't link these two stories, I thought it showed the power of the market to offer creative solutions for those willing to look hard enough. We learned that price controls don't work back in the Nixon era (I'm showing my age...). Gas prices are causing short-term pain, but let markets work and amazing things might develop! Maybe the market can begin to offer some alternative fuels sources and technological innovations. Who knows--maybe this crisis can lead us to a new and exciting era in our economic history. Every successful entrepreneur knows that out of chaos and change come opportunity.

Posted by Jeff Cornwall at 08:03 PM | Permalink

A report just out by the Joint Economic Committee gives some interesting insight into what happened to the surplus. For a quick overview this chart shows that increased spending and a weak economy are the two main culprits. Here is the full report. Even without tax cuts there would now be a deficit. And the stimulus effect of the cuts should more than offset there short-term impact over the next several years.

Posted by Jeff Cornwall at 05:44 PM | Permalink

The first Carnival of the Capitalists of the summer is posted at Small Business Trends (one of my favorite regular spots to visit, byt the way). A couple of my favorite posts this week are this one on tax cuts from Freedom's Fidelity and this one from Business Blog World about the right way to market on the web (read carefully if you have or plan to have a web site for your business!!).

Posted by Jeff Cornwall at 04:27 PM | Permalink