The Entrepreneurial Mind

Coyote Blog offers us this week's selection of posts for COTC.

Posted by Jeff Cornwall at 05:53 AM | Permalink

Sova Catering is a family owned business serving the Nashville, Tennessee area. Sova specializes in Kosher Cuisine and provides a wide variety of services, including full service catering, cooking classes, private dinners, Bar/Bat Mitzvahs, and weddings.

Kevin Alexandroni, Founder and Executive Chef, was Kosher trained in Israel and is a graduate of the Culinary Institute of America. Kevin graduated from Belmont in 2004. He was the inaugural recipient of the Union Planters Outstanding Belmont Student Entrepreneur during his final semester of study.

Since Kevin's graduation, Sova Catering has continued to grow. His wife, Theresa, recently left her job to become a full-time employee of Sova. Sova has hired two additional full-time and three part-time employees. They have opened a cafe at the Gordon Jewish Community Center in Nashville to showcase for their product and services.

"In honesty, I must say that I did not set out to start a kosher catering company," said Kevin about the start-up of Sova. "Initially I was trying to make some extra money while a finished my degree. However, it became clear that there was a demand for another kosher caterer in town. The actual creation of the company coincided with my participation in an entrepreneurship course at Belmont University. It was while taking that class, and working on another similar project, that we realized that SOVA was a feasible enterprise, catering (no pun intended) to a defined niche market."

Kevin and Theresa faced many of the typical challenges faced by many entrepreneurs. For example, they planned to bootstrap their business start-up. When trying to hire the right professionals, such as an accountant and an attorney, they found that many billed start-up entrepreneurs at their full rates and billed "by the hour" for even the simplest questions. They did not have the cash to pay professionals who would bill them using these common standards.

"Another set of challenges we faced was to try and understand the huge volume of regulations that different authorities required our business," said Kevin. "Federal, state and county governments all host an unbelievable amount of requirements on a new business. Business taxes, sales taxes, franchise fees, licenses, health department inspections, federal tax ID, tax exemption certificates, unemployment, payroll tax, Medicare, social security, insurance, disability insurance, and more. This does not leave much time to start a business. And you really can't make any mistakes by not addressing all of these requirements."

Kevin and Theresa plan to continue to explore ways to expand the services offered by Sova Catering, including a meal replacement program, a retail outlet, and a summer pool concession. They also hope to find ways to broaden their base of customers.

Posted by Jeff Cornwall at 05:46 AM | Permalink

New Dog Old Trick is back in the blogging business and he's now in Nashville. Welcome to town!

Posted by Jeff Cornwall at 06:46 AM | Permalink | TrackBacks (1)

One of the most facinating parts of entrepreneurship to me is how differently each entrepreneur views what success means for their business. It is so more complex than most on the outside will ever understand. A Business Driven Life offers a wonderful reflection on this topic in his post from Saturday, February 19, 2005.

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

If you haven't visited these two sites, Bootstrapper Notes and A Thought Over Coffee, you should check them out. Both are chronicling start-up experiences from an honest and personal perspective. This is reality TV meets blogging. They are both great and are regular stops on my morning rounds.

Posted by Jeff Cornwall at 06:30 AM | Permalink

Inc.com examines the challenges for small business in managing employee medical leave. One more program of good intentions colliding with governmental incompetence.

Entrepreneur.com examines the health insurance crisis. While some call it a crisis in health care, there is nothing wrong with health care in America. Our health care is the best in the world and getting better. The crisis is decades of a duplicitous relationship between big government and big corporations to try to artificially manage an industry.

NFIB looks at the latest on the social security debate. See my comments on the two issues above for my take on this mess.

Posted by Jeff Cornwall at 06:15 AM | Permalink

NFIB offers a few tips on business etiquette. Many entrepreneurs do not have the same exposure to these cultural mores that are second nature to those from the corporate cubicals. Remember, start from the left with your forks!

Posted by Jeff Cornwall at 06:07 AM | Permalink | TrackBacks (2)

Anita at Small Business Trends offers her thoughts on the piece I wrote earlier this week on Fr. Sirico's talk on our campus on "The Entrepreneurial Vocation."

Posted by Jeff Cornwall at 06:10 AM | Permalink

Since fundamental tax reform is not likely to occur, new entrepreneurs need to think about hiring an outside accountant to help with tax work (do not do your own taxes unless you give yourself haircuts and perform all minor surgery on yourself such as appendectomies and open heart surgery). Start-up.com has offers some good advice on this process.

Here are my tips:

1. Start with referrals from other professionals and entrepreneurs and choose two to three to interview.

2. See if this is someone you want to work with for the next several years, often during some of your most difficult times. Personal fit with you and your team is critical. You need to be able to be open and honest with your CPA. Pick someone you can trust.

3. If they know your industry that can be a plus, but is not as important as when you pick an attorney.

4. Get honest and clear about their billing policies. If you are a new business, many accountants will give you some initial discounts. To some degree fees can be somewhat negotiable. Judge how sensitive each one is to your cost constraints.

5. Note things like how quickly they return your phone calls. They should be in their sales mode so this is as responsive as they may
ever get.

And when you pay your bill each year to your accountants for their tax work, remember the opportunity we missed this year to really reform the tax system in America.

Posted by Jeff Cornwall at 05:50 AM | Permalink

From the Office of Advocacy of the SBA:

"Released at The Institute for Entrepreneurship, Leadership, and Innovation at the Howard University School of Business, findings of Dynamics of Minority-Owned Employer Establishments, 1997-2001 include:

- The four-year survival rate for non-minority owned businesses establishments was 72.6 percent. The survival rates for minority-owned businesses were lower, including Asian and Pacific Islander-owned at 72.1 percent, Hispanic-owned at 68.6 percent, American Indian and Native Alaskan-owned at 67 percent, and Black-owned at 61 percent."

I have two observations on this study. First, the public policy implications should focus on improving educational programs for these groups. Previous studies clearly show the power of education in improving survival rates in business start-ups. While I'd love to have them all come to Belmont, effective educational programs can be as simple as focused as workshops on planning and starting a business sponsored by local Chambers of Commerce, banks or community groups.

Second, these survival rates are phenomenal! Most studies from years past showed survival rates for new businesses in the 40-50% range. In entrepreneurs who have gotten training we tend to see 80-90% survival rates. This is the first study of the general population that finds survival rates in the general population of 60-70%. While this could be a measurement issue (this sample is drawn from census data), it could also mark a general improvement in survival due to better awareness overall about small business, more widespread access to information on managing new businesses, and/or a healthier economic and social climate for business survival.

Posted by Jeff Cornwall at 05:28 AM | Permalink

I write and speak often about how to manage growth successfully. It comes from my own experience of dealing with run-away growth in our business. But growth requires planning and momentum. Entrepreneur.com has a good overview of traditional means to stimulate growth in a small business.

Here is a summary of their list of strategies:

1. Introduce a New Product

2. Take Your Product to a New Market

3. License Your Product

4. Start a Chain

5. Turn Your Business into a Franchise

6. Join Forces

7. Go Global

Since symmetry is always a good thing, keep in mind my 7 Challenges to Effective Growth to go along with these 7 strategies to create growth.

1. Beware of the Growth Myth. Focus on growing profits, not sales!

2. Vision Drift. Don't lose your way.

3. Cultural drift. Managing the culture of your business is your job! If you don't manage it, your culture will take on a life of its own.

4. Resource crises. Securing the fuel to support growth can be a constant strain...cash, staff, space, equipment, etc., etc.

5. Systems crises. The mundane and the complex all need development. From accounts payable to planning, all systems must be put in place are made ready for growth.

6. Muddled structure. Make sure your structure makes sense for your strategy and your culture.

7. Disjointed strategies. Your business and your strategy need to be consistent. All aspects of your business must be consistent and geared toward meeting customer needs and expectations.

Posted by Jeff Cornwall at 05:58 AM | Permalink | TrackBacks (1)

The Nashville Business Journal wrote an editorial about our efforts here at Belmont to take entrepreneurship education across our campus.

"....Belmont University is eyeing an initiative to infuse entrepreneurial education into all its departments.

"More students are entering college with the idea of forming their own enterprises. Whether they ever start their own businesses or just work in someone else's, any training they receive that sharpens their critical thinking skills will only benefit them, their businesses - and all of us."

It is such a gift to work with students and colleagues across such a wide variety of interests and disciplines. We are grateful that the Coleman Foundation has given us the means to begin this initiative here at Belmont.

Posted by Jeff Cornwall at 05:24 AM | Permalink

Convergence in the technology world seems to be continuing to gain steam, and that means new opportunity for entrepreneurs who can take advantage of the changes that convergence creates.

That latest example is reported today at Red Herring.

"Handset makers at this week's annual 3GSM mobile industry gathering are emphasizing strategies to turn mobile phones into digital music players, technology one analyst predicts could be an 'iPod killer.'

"On Monday, Nokia took the industry by surprise when it announced that it had inked a deal to use longtime rival Microsoft's music formats in its handsets, with the aim of allowing cell phone users to easily transfer music from personal computers equipped with Windows XP software. The Finnish handset giant said it would release a music-centric cell phone using an open mobile music platform from Loudeye, which will let users browse, download, and listen to songs, with charges appearing on their monthly bill. Users would also be able to transfer songs between their cell phones, digital music players, and computers."

Such times are not for the faint of heart. While opportunities abound, today's star can become a dog in a few short months.

Posted by Jeff Cornwall at 06:09 AM | Permalink

Debate in the House of Representatives Small Business Committee illustrates the sharp divide that now exists between the two parties when it comes to government's role in small business.

From the Republicans:

"House Small Business Committee Chairman Don Manzullo (R-IL) today said the President's proposed budget for the coming year sets forth a sound plan to help small employers continue to grow and create jobs for Americans.

"During a full committee hearing today, Manzullo said he supports the FY 2006 budget proposal and endorses its priorities of making the tax cuts permanent, reducing the surging cost of health insurance, and fighting burdensome regulations which stunt economic opportunities and job growth in America.

From the Democrats:

"We believe that government should help small business owners achieve their goals - not stand in their way. That's why we want to make providing health care coverage for their employees more affordable, ensure that small businesses have the access to capital and technical assistance they need to thrive, open the $285 billion federal marketplace, provide targeted tax relief, and support trade agreements that open markets for small businesses."

The specifics of the Democrat's plans include incentives that are targeted for certain groups or specific industries, more spending for government agencies dealing with small business, more government spending that can be targeted for small business contractors, and targeted tax cuts.

The difference is clear. On one side favors less government intervention and across the board tax reduction. On the other is the government trying to pick winners through an expanded bureaucracy.

Posted by Jeff Cornwall at 05:45 AM | Permalink

Jay Conrad Levinson's Guerrilla Marketing has become the marketing manual for entrepreneurs who want to be effective bootstrappers.

Levinson offers his update for the 21st century at Entrepreneur.com.

"A marketing mind-set isn't just thinking about your brochures, signs, messages or packaging. It is the way you think about how all these activities and other things work together to achieve your marketing goals. It is about tying all your activity to the mission statement of your company or organization. It is about understanding your target market--who will buy from you, and why? It is the measurement of your plan, and it is about relationships with customers and prospects."

They also offer a helpful set of links to other articles on bootstrapping your marketing efforts.

Posted by Jeff Cornwall at 05:03 AM | Permalink

The Raw Prawn is this week's host of COTC.

Posted by Jeff Cornwall at 09:11 AM | Permalink

Linden Manor is a Nashville Bed and Breakfast located in the heart of Nashville, Tennessee. Linden Manor Bed & Breakfast is only blocks from Vanderbilt and Belmont Universities and Music Row. Catherine and Tom Favreau (Tom was class of 2003, Belmont MBA) established their business in a Victorian home that was originally built in 1893. Linden Manor B&B has been completely renovated and offers modern amenities.

Linden Manor Bed and Breakfast had been a dream of Catherine's for thirteen years. Catherine was a trailing military wife of Tom, who was in the United State Coast Guard. Upon Catherine and Tom's first B&B visit, Catherine fell in love with the B&B concept and announced to Tom the next morning that she, one day, would own her own B&B. Catherine and Tom were both business majors in college and often disused owning their own business. Tom and Catherine moved every two years with the Coast Guard and knew it was not feasible to own a B&B until retirement.

During those years, Tom and Catherine studied and researched the B&B industry. They attended conferences and seminars, as well as read B&B business journals and books on the subject. Tom was medically discharged from the Coast Guard earlier then expected and, when deciding what their further would be, there was no question what Catherine wanted to do. She had waited thirteen years for this opportunity and thus Linden Manor Bed and Breakfast was born.

One of the biggest challenges Catherine and Tom have faced with Linden Manor is the City of Nashville's zoning regulation limiting operations to three guest rooms. Linden Manor has the demand to fill 5 to 7 rooms with an occupancy rate of 70% but because of zoning it is only allowed to operate three rooms, which limits revenues and profitability. It is unheard of in the B&B industry, according to the Professional Association of Innkeepers International (Paii), for a three room B&B to be profitable. Linden Manor is running profitably on three rooms, but it is a constant struggle.

Catherine and Tom could not have anticipated how 9-11 would change the B&B industry, which is now struggling with an insurance crisis. Linden Manor's insurance rates have risen at a rate of 50% per year since 9-11. There is only one insurance company, known to the B&B community, which insures B&B's. As a monopoly, this insurance company is able to charge inflated rates. The challenge, perhaps the largest challenge in six years of operation, was to find an alternative insurance source with a more competitive rate in order to control costs and remain profitable.

After months of research and many phone calls, Catherine was able to secure commercial B&B insurance from another company at a much more competitive rate. Catherine believes that this relief in insurance rates may be only short-term, and is very concerned about another increase in premiums next year.

Catherine understands that she must continue to change, proactively, as the industry evolves. Her most important goal is to work with the city to change the B&B overlay that limits operations to three guest rooms and see if they will increase the limit to five rooms. She is in the process of working with her council person on changing the overlay and has the cooperation and support from other B&B's in the Nashville area.

Linden Manor shows us how small business owners must understand the macro forces that shape their industry, sometimes quite unpredictably and with very little warning. And even a small venture like Linden Manor can try to proactively have an impact on their environment, as seen by Catherine's efforts to secure more affordable insurance and to change local regulations that have an adverse impact on their business.

Posted by Jeff Cornwall at 05:25 AM | Permalink

This past week we had the great pleasure to Welcome Fr. Robert Sirico of the Acton Institute to our campus at Belmont University.

Fr. Sirico spoke about how the entrepreneur, endowed with particular natural talents, is the primary agent of economic progress in the modern world, and that even though a free society is highly dependent upon the entrepreneur for its material existence, the vocation of business is relatively under appreciated within the religious community.

"Instead of praising the entrepreneur as a person of ideas, an economic innovator, or a provider of capital, the average priest or minister thinks of people in business as carrying extra guilt. Why is that?" Rev. Sirico has said. The consequences of a divorce between the world of business and the world of faith is potentially disastrous for both worlds, he says.

Posted by Jeff Cornwall at 07:55 AM | Permalink | TrackBacks (3)

It is getting really competitive and really active in the industry that serves bloggers, and it appears that the blogging phenomenon is seen as having legs. Blogs have moved out from the fringes of news reporting into special interest blogs like this one. And while some aspects of blogging may be seen by some as a fad, corporations are now experimenting with how to use blogging effectively for internal and external communications. Blogging as soft marketing is now well entrenched.

Blogging software was front and center at the DEMO@15 conference. Red Herring, Yahoo Financial News, and the New Mexican all offer good overviews of this conference and the prominence of blogging products at this year's techie conference.

But as venture capital money and entrepreneurs flow into what was a cottage industry, what will follow?

I tend to agree with David Geller, an Internet company executive, who sees convergence between blogs and web sites in an interview published this morning at seattlepi.com. "Blogging is nothing but really easy-to-use Web publishing."

Creative minds and lots of money will lead to an explosion of ideas and innovations, and many of them will be looking for ways to bring together web pages, blogs, search engines, e-mail, and who knows what else. We will also see more video and audio being integrated into the mix as the entertainment industry goes kicking and screaming into this brave new world.

For example, imagine the convergence of radio, the Internet and blogging into a new generation of opinion sharing technology that brings talk radio into the new century. Bring this together with the amazing breakthroughs happening in devices that can serve these new markets and who knows what we will happen in the next few years...

Posted by Jeff Cornwall at 05:34 AM | Permalink | Comments (1) | TrackBacks (2)

"Gas Prices Rise in January: Higher gas prices could signal a tough year for small businesses dependent on transportation."

So reads the headline today at Inc.com. It is sad to see Inc become yet one more reactionary liberal media outlet that provides no context to important stories like this one.

"High gas prices may signal a tough year for businesses dependent on transportation, and businesses dependent on drivers. Small businesses in tourist towns, for example, would suffer when gas prices spike, both because fewer drivers may visit, and because those who do would have less discretionary cash after paying for gas."

Such hyperbole is a real shame from a source I used to find very informative and helpful for small businesses.

The truth is that gas prices have been cycling up and down over the last 12 months, as seen in this graph from a public site of AAA I found in less than two minutes of searching on the web.

Posted by Jeff Cornwall at 05:49 AM | Permalink

This weekend the conference called DEMO@15, which has become the launching pad for many a successful technology gadget, will be held in Scottsdale, AZ. Most of the new technologies are kept top secret leading up to this event, but Red Herring gives a sneak preview.

"Menlo Park, California-based Xfire is working with the next generation of networked multiplayer online games. British company Sonaptic creates 3D surround-sound audio for cell phones, and Palo Alto, California, company Avvenu has a service that enables users to access home-based media content, like music, photos, and video, from a mobile....If you thought liquid crystal displays (LCDs) and plasma display panels (PDPs) were the upcoming display technology, Irish company Ntera makes nanochromatic displays (NCDs), which are low power and flexible. Israeli company VKB makes an optical-based virtual keyboard....Australian company Digital Monkey has a software system, 'In the Chair,' which enables a musician to immerse in an audio orchestra setting."

It all makes a Luddite like me want to curl up in a corner....but, progress marches on. After all, I don't write this blog with a typewriter.

Posted by Jeff Cornwall at 05:10 AM | Permalink

I offered my critique of President Bush's agenda for entrepreneurs the other day in which I raised concerns about the lack of any real tax reform and too much government trying to pick economic winners in his plans. Karen Kerrigan at Small Business and Entrepreneurship Council adds her concern of the lack of attention by President Bush of the problem of over regulation of small business, of what she calls "death by a thousand cuts."

As I have said before, this second term is turning into a series of missed opportunities to help our entrepreneurial economy.

Posted by Jeff Cornwall at 08:25 AM | Permalink

One of a bootstrapper's most important mottos is to "keep overhead to a minimum." And one of their favorite techniques is to operate their businesses from their homes. A survey by the NFIB found that "even among those whose business is located outside the home, slightly more than one-quarter (26 percent) have home offices, such as a single room that is used solely for business purposes."

However, as seen in yesterday's Entrepreneurial Showcase, at some point many small businesses outgrow the home office.

Posted by Jeff Cornwall at 08:16 AM | Permalink | TrackBacks (1)

Strategic partnerships can seem overwhelming to many small businesses. But, Fortune Small Business offers a great example of how even a very small business can partner successfully with a large company.

"When the Discovery Channel's television show Animal Planet unveiled its line of pet food products at a Chicago trade show in October 2004, the real surprise was that all 35 of the tasty consumables on display were made by tiny Castor & Pollux Pet Works from Portland, Ore."

Posted by Jeff Cornwall at 08:09 AM | Permalink

Many small businesses overlook grants that are available for some small businesses to help fund start-up or expansion related expenses. And unlike loans, grants do not require repayment.

Many grant programs are funded through tax dollars, which makes many small business owners feel a little uneasy (and a few can be outright hostile toward any government funded programs). Some of these government programs, such as the SBIR program through the NIH that funds technology related R&D in small businesses, can potentially provide millions of dollars.

For those who are not interested in government hand-outs for their businesses, there are some private foundations that provide grants to small businesses. From the NFIB:

"(C)haritable organizations tend to be in favor of a particular cause, and if your business in any way furthers such a cause, the organizations will provide funding to help you.

"If you're a woman or a minority, you should check with organizations that are dedicated to business development within your community. Women business owners, for example, might find funds by checking with the Women's Business Center."

Posted by Jeff Cornwall at 07:20 AM | Permalink | Comments (2)

Weekend Pundit is this week's host of COTC.

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

Submerge Media is an example of the new breed of music business entrepreneurs who are finding success in the shadow of struggling industry giants.

"Submerge Media is a full-service media company that strives to be an all inclusive media provider for its clients by offering what an in-house creative service department would offer. By integrating a consistent design throughout each medium, Submerge provides their clients professional, recognizable, and unique branding."

Craig Countryman (video), Josh Davis (audio), and Chip Hayner (graphic and web design) had all been active as independent contractors in the music industry in Nashville while students at Belmont University. While in school they had gained respect for each other's work and had, from time to time, referred clients to each other. Their original plan was to develop a referral system to support each other as they became established in the industry. But, they began to believe that a company that could integrate audio, video and design services from a single source would be able to offer the music industry the same consistency as when these services had been performed in-house before the recent cutbacks in the music industry.

By bringing audio, video and web-based graphics together in one company, they intended to stand out from the large number of independent contractors working on Music Row in Nashville. They would be able to provide a single "look" to a client's entire media package and eliminate the hassle of coordinating the various components that comprise the entire music "product."

Craig, Josh and Chip graduated from Belmont University in May of 2004 and on June 1, 2004 Submerge Media was officially formed as an S-Corporation. The three founders had something else in common beyond their passion for the music industry. All three wanted to build a business that reflected their Christian faith in the work that they performed for each client and they are growing and building their business with a culture that was based on their shared values. However, they do not want to limit their customer base by specializing in the Christian segment of the industry music. They work in all music genres, while keeping true to their Christian faith.

Since all three of them were initially working out of their homes, one of the biggest challenges they faced was communication and coordination of their work. They met face-to-face every Monday and had daily contact by phone, email and text messaging to schedule jobs and discuss business issues. A local coffee house served as their favorite meeting place.

But, increasingly they recognized the need to move into a shared office space. Although these working arrangements had kept their overhead low, it was beginning to create personal strains for each of them and was creating noticeable inefficiencies in their work together. While billable hours were critical for creating cash flow, they also needed time to work on the business. They found that these two demands were often in conflict.

So, in January of 2005 Submerge Media moved into common space that includes a studio for audio production. By finding space away from Music Row (the heart of the industry in Nashville), they were able to stay within their budget. And, by combining a small SBA loan and careful attention to bootstrapping to equip and furnish their new space, they could offer the level of quality that their clients expect from them.

Since moving into their new space, Submerge Media has experienced continued growth in sales and improved operating efficiencies. They seem to have discovered a balance between the need every start-up has to keep overhead low, while at the same time assuring that they have the tools and space they need to be a quality player in the Nashville music industry.

Posted by Jeff Cornwall at 05:25 AM | Permalink | TrackBacks (1)

Bankers are by design a rather conservative lot. So when entrepreneurs get all starry-eyed about growth opportunities bankers are usually not a significant part of the financing mix for these high-growth businesses. This seems to be the scenario going into 2005 according to Inc.com.

"Small American companies are raising their revenue forecasts for the coming year, and may avoid bank loans and look into non-traditional financing, a new PricewaterhouseCoopers survey reported this week.

"The survey, which focused on 'trendsetter' firms -- 360 fast-growing private companies with revenues between $5 million and $150 million -- during the fourth quarter of 2004, paints an optimistic picture of the economy. Margins were up for 31% of companies surveyed, and down for just 15%, while 24% increased their prices (7% decreased them)....
32% of those surveyed expect to look at non-bank financing, including angel investors (an option for 18% of CEOs surveyed), venture capital (18%), private placement (15%), and IPO (3%)."

The picture this paints is of optimism and aggressive growth, which is where the entrepreneurs surveyed intend to direct these newly raised funds. The greater focus on non-bank funding reinforces this robust outlook.

Posted by Jeff Cornwall at 07:37 AM | Permalink

Economic conditions for small business remained strong in the fourth quarter of 2004, according to the Office of Advocacy's newly released Quarterly Indicators: The Economy And Small Business. The report shows real gross domestic product (GDP) up 3.1 percent in the quarter and up 4.4 percent for the year.

"Economic conditions for small business continued to be strong in the fourth quarter of 2004," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. "And for the year, GDP growth of 4.4 percent is good news for small business. In the fourth quarter alone businesses added over 600,000 net new jobs. The outlook for the small business economy remains bright."

(Source: SBA Office of Advocacy).

Posted by Jeff Cornwall at 07:30 AM | Permalink

My assessment from last month that any chance that we will see a major overhaul in our tax system is fading fast looks to be coming true. The NFIB, a major lobbyist for small businesses, unveiled their legislative agenda this week. Their focus on taxes will be on "simplification" and tax reductions--but, no major tax reform. I assume that they decided to take what they thought they could get on taxes out of the second Bush term.

The wasted, non-productive expenses that small businesses must face to comply with the current tax code will not be changing any time soon. We should have seen this coming. The tax compliance industry is large and powerful and true tax reform is not a major concern of corporate America, so once again their interests will prevail.

Neither party has entrepreneurs at the top of their concerns. Given the role that entrepreneurs are playing in our economic growth, their misguided priorities should be a concern for all of us.

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

I had just gotten through my first trans-Atlantic flight about four years ago (my wife and I have always been road trip people) to attend an international academic conference on business ethics and public policy. I arrived at the conference site in Barcelona more than a little jet lagged. The opening session, which featured several prominent European officials and policy wonks, had just begun. I put on my translation head sets to hear what was being said. There was a German fellow talking about the European agenda for the 21st century. I then heard him utter the phrase that has forever since echoed in my head and haunted me: World Tax Organization.

I had hoped that this was just academic talk. There could never really be a World Tax Organization. Right?

Wrong. This past week, French President Jacques Chirac called on the international community to move toward a world tax to distribute wealth from rich countries to poor countries.

"'France is demanding an awareness and big step by the international community in the area of development aid,' Chirac was quoted by his spokesman as telling a cabinet meeting....The French leader underlined a goal of the United Nations fixed five years ago to cut global poverty in half by 2015.

"To achieve the aim, 'the only way today is to manage to put in place a sort of international tax, as France has suggested', Chirac said."

What sort of international tax, you ask? Well Chirac has all kinds of ideas how to create a world level of taxation according to a report in WorldNetDaily.

1. Increase official aid or Overseas Development Assistance-ODA from its current 0.2 percent of GDP to the targeted 0.7 percent.

5. Ask countries that "maintain bank secrecy to partially compensate for the consequences of world tax evasion through a levy of flows of foreign capital in and out of their territory to help the poor."

At the end of January, Chirac had also proposed a world tax to fund the fight of the AIDS epidemic.

"French President Jacques Chirac has proposed the creation of an international tax to help fight AIDS, saying such a measure could raise $10 billion (540 million pounds) each year."

How would this all be enforced?

Chirac has a plan for that as well, according to the New American.

"Chirac also espoused creating some sort of mechanism for monitoring 'world tax evasion.' This would undoubtedly require establishing a 'World Tax Court' empowered to punish violators of the international tax code. Such a tribunal would rely on UN resolutions for authority and would become a gargantuan bureaucracy of last resort without jurisdictional boundaries. Like the already-operational WTO and NAFTA courts, the proposed tax tribunal would operate completely without regard to any constitutional guarantee of trial by jury, due process, etc., and thus, with the aid of American power brokers, would make an effective end-run around the protections embedded in the Constitution."

Which Americans have come out in favor of this idea? None other than Bill Clinton and Bill Gates.

Be afraid...be very afraid!

Posted by Jeff Cornwall at 05:41 AM | Permalink

President Bush is highlighting a few of his second term initiatives as being important for entrepreneurs. As reported at Inc.com:

"'To make our economy stronger and more competitive, America must reward, not punish, the efforts and dreams of entrepreneurs,' President Bush said. He then proposed measures to reduce the number of class action lawsuits; pushed for Association Health Plans (AHP); and urged Congress to overhaul the tax code."

While overhauling the tax code is at the top of my list (well actually abolishing it replacing it is at the top of my list), it is growing clearer that the best we can hope for is some tax "simplification" and a push to make recent tax cuts permanent. The last big push for tax simplification under Pres. Reagan ended up being known as the full employment act for tax accountants, as it actually made the code more complex. This is in my view an opportunity lost.

Tort reform is clearly a good thing for business and society, but not really specifically an issue for entrepreneurs.

The NFIB explains how AHPs will work. "To improve access to health benefits for workers in small businesses, the president has called for legislation to authorize Small-Business Health Plans (or AHPs), which would allow small businesses to join together through industry and professional associations to purchase affordable health benefits for their workers."

The budget also looks toward health care savings accounts as a major health care policy initiative aimed at small business, including "$19.2 billion over 10 years in tax rebates for small businesses that contribute to their employees' Health Savings Accounts, to encourage more small employers to offer health benefits."

AHPs and health care savings accounts may be good ideas within our current system, but they are not the bold initiative from a conservative party with control of both the executive and legislative branches that many had hoped for during this term. Our health care system is not something that can be fixed by a little trimming and shaping around the edges. Bold initiatives, including eliminating a tax code that targets health care as a major social policy area for legislative micro-managing is a start.

The NFIB summarized a few additional central economic planning initiatives in the budget that may offer some short term benefit, but as most research now shows will offer little long term help.

* $10 billion over 10 years in tax incentives to create economic opportunity zones in areas transitioning to new and emerging industries.

* $210 million, an increase of $46 million, for assessment and clean-up of about 600 brownfield sites, to spur development in cities' former manufacturing areas.

Governments are not very good at picking and targeting economic winners. More emphasis on getting the government out of the way of free markets is what is needed to sustain our entrepreneurial economic expansion.

Posted by Jeff Cornwall at 06:20 AM | Permalink | TrackBacks (2)

NFIB released its first small business optimism index for 2005. The results were off a little bit, but still remain relatively positive.

"The survey, NFIB's 'Small Business Economic Trends,' shows that while optimism among owners dipped 2.4 points in January (to 103.7), that reading is one of the strongest in 30 years. Owners continued to report new job creation (although at a slower rate than in the fourth quarter) adding a net 0.07 workers per firm over the past three months. Employment increases were noted by 15 percent of those responding to the survey, while 11 percent reduced jobs."

Posted by Jeff Cornwall at 06:09 AM | Permalink

Arkansas small businesses will face a friendlier regulatory environment, thanks to an Executive Order signed by Governor Mike Huckabee. The executive order gives Arkansas' small businesses a voice in the state's regulatory process.

"Arkansas' small business owners now have a seat at the table when regulatory decisions are made," said Thomas M. Sullivan, Chief Counsel for Advocacy. "When their voice is heard, better decisions are made, and that means more jobs and growth for Arkansas.

The executive order implements elements of small business friendly regulatory legislation. The order encourages entrepreneurial success by requiring state agencies to consider the impact of their policies on small business before they issue final regulations.

By listening to small business, state agencies can ensure that small business resources spent on overly burdensome new regulations are instead available for hiring new employees and making new investments. At the same time, agencies still meet their regulatory goals, such as higher environmental quality, greater travel safety, better workplace conditions, and increased family financial security.

(Source: SBA Office of Advocacy).

Posted by Jeff Cornwall at 10:29 AM | Permalink

American City Business Journals issued their report on entrepreneurial hot spots.

Their methodology is quite simple.

"ACBJ used a four-category formula to rate local climates for small businesses, defined as companies with fewer than 100 employees. The categories were:

* Change in private-sector payrolls from 2000 to 2002"

You can link to a complete Excel file of the large markets, medium markets, and small markets.

In another report, the CFED issued their 2004 report card on states that they consider to be friendly to entrepreneurial development. But this report, as I pointed out last year, is fatally flawed in its operationalization of what constitutes "entrepreneurially friendly." Rather than base their rankings on true entrepreneurial activity, as in the American City Business Journals report, it is based on their own big government agenda.

CFED includes such measures as "income disparity between rich and poor", payroll employment rates, research funding allocated to universities, and other measures of government spending and just plain general meddling.

The evidence of what stimulates entrepreneurial activity, however, is to the contrary. Government actions get in the way of entrepreneurial development. CFED doesn't focus on entrepreneurial activity for most of their report, just those things that are part of their socialistic leaning policy agenda.

But nothing reinforces my assertions on the wrongness of their report than their honor roll:

Earning all As is:

* Delaware
* Massachusetts
* Minnesota
* New Hampshire
* Oregon
* Virginia

Most of these are "big government" states, which is what their report card really measures.

Posted by Jeff Cornwall at 06:08 AM | Permalink | TrackBacks (3)

Catallarchy is this week's host of COTC.

Posted by Jeff Cornwall at 08:04 AM | Permalink

"Entrepreneurial Showcase" is a new feature of this site, in which we will take a closer look at some of the entrepreneurial ventures founded by Belmont alumni and students.

The first Belmont entrepreneur to be showcased is Charles Hagood (MBA, 1993) who with his partner Mike Brown, founded The Access Group (TAG) in 1996. TAG specializes in lean manufacturing consulting, plant relocation, engineering services, industrial engineering, architecture and design, and maintenance reliability services.

After completing an MBA in 1993, Charles Hagood was still working as an industrial engineer in the aerospace industry. He had just been promoted to program manager of his company's largest project, the V-22 Osprey Aircraft, becoming the youngest program manager in the company's history of a military program. But even with this success, Charles began to realize that he did not want to work for a company for the rest of his life. What he really wanted was to work for himself.

So Charles soon left his employer and began work on his business plan. Mike Brown, who had been his supervisor, shared a similar entrepreneurial aspiration and eventually joined Charles as a co-founder of TAG.

Obtaining the first client in a consulting business proved to be a significant challenge, as they had nothing tangible to show potential clients. During their initial start-up, they decided to save as much of their precious self-funded working capital as possible. They decided to work out of Mike's basement and garage, with their PCs set up on folding tables they had purchased at Sam's Club. Charles joked that "Mike's Chihuahua became our Vice President of Security," as he announced the arrival of each UPS, mail delivery or visitor to their "corporate headquarters." Hagood added, "We were broke but were having a blast. We were never worried that we'd make it. The question was when."

Over the next several years TAG did become a successful venture, expanding their services and growing their staff. They never gave up their bootstrapping mentality, focusing on organic growth with very little use of outside funding.

TAG was named a Music City Future 50 company in 2001 and 2003, Chamber Business of the Year, and ranked the 15th fastest growing company in the mid-south by Nashville Business Magazine during this time.

An important part of the mission of TAG for Charles and Mike, is to not only make their lives better through the success of the business, but the lives of those around them better by giving back. Church sponsored mission trips are a regular occurrence for TAG employees and their families. TAG pays for the expenses related to these church sponsored mission projects for all employees and in some cases their family members. TAG employees and family members have participated in three to four mission trips a year around the world, including Asia, Africa, and the Appalachian region of the U.S.

Charles is currently moving TAG beyond its traditional focus on manufacturing with the formation of an affiliate business Healthcare Performance Partners. This new company focuses on helping health care companies apply lean techniques to their work environments.

Posted by Jeff Cornwall at 05:23 AM | Permalink

A paper from a dissertation written by Brian Wu of the University of Pennsylvania won the "Best Doctoral Paper" award at the annual meeting of the United States Association of Small Business and Entrepreneurship (USASBE) held in beautiful Palm Springs. I attended this meeting and offered a few highlights in recent posts. But, I have to admit I chose to highlight the speeches given by Denny Dennis (NFIB) on the future of real tax reform and Paul Orfalea (Founder of Kinko's) on his definition of success rather than this paper. Well, better minds than mine decided that this paper was of more interest than anything I wrote about from this conference.

First, Business Week wrote about Wu's paper (OK, maybe I am a little jealous that my dissertation never got close to this kind of attention).

"Researcher Brian Wu says they (entrepreneurs) aren't unusually risk tolerant. It's 'overconfidence in their ability' that allows them to take the leap."

Then BusinessPundit chose to ponder the question of whether entrepreneurs enjoy seeking risk or if they are taking care of their big egos based on Wu's research.

"My entrepreneurial ideals were really more work driven than anything else. I just find regular jobs so slow paced and boring. I never seemed to find fulfilling work. People say 'do what you love,' but what I love is to not do the same thing all the time, which rules out most jobs for me. Entrepreneurs get to wear many hats, and I like that."

Well, better late than never....My take on Wu's findings is that the best entrepreneurs are prudent risk takers. They need a strong enough ego to pull the trigger and commit to act on their idea. Also, a healthy ego serves us well as we suffer the slings and arrows that face us around every corner as we build our businesses. I don't think those that pursue a venture to satisfy an inflated ego get very far, as they tend to be the reckless ones who eventually make poor decisions simply to save face rather than do what's best for the business.

Posted by Jeff Cornwall at 06:35 AM | Permalink

I have written several posts about the movement to enact regulatory flexibility legislation at the state level using a model similar to the Regulatory Flexibility Act enacted at the federal level. The intent is to assure that regulations no longer place a disproportionate cost on smaller businesses. A new report shows the impact that the federal act has had. Small business has seen significant savings on needless expenditures related to their compliance with laws passed with large corporations in mind.

"Federal agencies that listened to the voice of small business early in the regulatory process saved America's job creators over $17 billion in 2004, according to a report issued today by the Office of Advocacy of the U.S. Small Business Administration. Report on the Regulatory Flexibility Act, FY 2004 details federal agency compliance with the Regulatory Flexibility Act (RFA). The RFA requires agencies to consider the impact of their rules on small entities and examine significant alternatives that reduce it."

This is $17 billion now available to grow small businesses, hire employees, add equipment, and reward entrepreneurs for the risk they take by investing in their businesses. It adds fuel to the engines of our entrepreneurial economy.

Posted by Jeff Cornwall at 05:37 AM | Permalink

All who work with entrepreneurs nag them about the need for an exit plan. Some are too busy. Others find the process too overwhelming. Still others are in denial.

Inc.com cites a study just released by PricewaterhouseCoopers that reveals how many entrepreneurs really don't have any exit plan in place or even in mind.

"In its survey of 364 CEOs of fast growing, privately-held companies called the 'Trendsetter Barometer,' PricewaterhouseCoopers found that 65% of the respondents said they planned to leave their company within 10 years. When asked about their exit plan, a majority of the respondents (51%) thought they would leave via a sale to another company. A measly 3% minority said they were counting on an IPO payoff. The survey's finding that CEOS have exit plans is hardly surprising: the fact that 43% of the respondents said they had done little or no succession planning is."

The findings did not surprise me. In fairness, fighting the daily battles that is entrepreneurship can cause many to slide exit planning way down the to-do list. When you are up to your behind in alligators it is hard to remember that you are there to drain the swamp. But, exit planning is important for every entrepreneur. I hope as more entrepreneurs are educated in the process of building successful ventures that we will see more pay attention to this ultimate goal for any private venture. Every entrepreneur must exit at some time--one way or the other.

Posted by Jeff Cornwall at 07:53 AM | Permalink

An aspiring entrepreneur, Jason Duncan, has a new blog site called A Thought Over Coffee. In this post he writes about my favorite advice to entrepreneurs about the key to effective marketing...."Think like your customer."

Posted by Jeff Cornwall at 06:11 AM | Permalink

There is an old saying that any publicity is good publicity. But, when it comes to privately owned businesses I would argue that this is not always true. One of the beauties of being privately held is that you do not have to open your business up to the constant scrutiny that comes with full public disclosure.

Apparently one of the owners of our local minor league (ABA) basketball teams has never learned that important lesson. Her name is Sally Anthony, and she owns one third of the Nashville Rhythm.

Before the start of the current season Ms. Anthony and her partners hired Ashley McElhiney, a former Vanderbilt standout player and Tennessee native, to be their head coach. It was thought by many to be a publicity stunt, as no woman had ever been the head coach of a men's professional basketball team, and McElhiney had no significant professional coaching experience. But, she proved to be an effective coach as the team has a winning record. This move was clearly good publicity.

After Matt Freije (a former Vanderbilt men's basketball star) was released from his NBA contract, the Rhythm picked him up for a two game contract. Again, a publicity stunt, but an effective one as he played well and brought people into the stands. Ms. Anthony was front and center at the press conferences announcing Freije's two game contract.

Then came the Saturday night massacre. As told by Joe Biddle, a writer for the Tennessean, "McElhiney had been ordered by Anthony not to play former Vandy star Matt Freije in Saturday night's game. It came during a phone call less than an hour before tipoff. Freije had signed a two-game contract and was completing his contract Saturday.

"Anthony never gave McElhiney a reason to bench Freije. As the coach, McElhiney decided to play her best player. Freije's contract had to be paid in full whether he played in the game or not."

During the middle of the second game of Freije's contract, Anthony stormed onto the court, started yelling at Coach McElhiney that she should bench Freije. Her language was so foul and she was so aggressive that security removed her from the arena.

Later Anthony fired the coach and the security guard.

The story is still not over. Anthony has reportedly been hospitalized and was the subject of a 911 call in which she was reported to have taken an overdose.

The business that is the Nashville Rhythm is now in peril according to Biddle from the Tennessean. "This may well signal an end of the franchise. The Rhythm ownership was shaky from the start. Some unknown 30-year-old rock 'n' roll wannabe serving as the face of an upstart pro basketball team isn't exactly a recipe for riches."

Not all publicity is good publicity, and some can even threaten your business. If you ain't already in the fishbowl of public scrutiny, for goodness sake don't willingly jump in! Or as one of my partners always liked to say, the entrepreneur's goal should be to become rich and not famous.

Posted by Jeff Cornwall at 12:14 PM | Permalink

Red Herring reports that Nicholas Negroponte, Founder of MIT Media Lab, is developing a business to sell laptop computers to help children in developing countries, using inexpensive components, the Linux operating system, and bulk sales (minimum order is 1 million computers). His target market is educational ministries in developing countries.

"Mr. Negroponte's idea is to develop educational software and have the portable personal computer replace textbooks in schools.... Negroponte has been interested in developing computing in the developing world for some time. He and his wife have funded three schools in rural Cambodia, helping outfit them with regular laptops and broadband connections."

Posted by Jeff Cornwall at 06:00 AM | Permalink

Fortune Small Business reports how an entrepreneur named Howard Berke and his company Konarka is using nanotechnology to potentially revolutionize solar power.

"Berke's vision is to use nanotechnology to make photovoltaics—the process of turning sunlight directly into electricity-cheap, lightweight, and widely available. Imagine molecules embedded on material as thin and flexible as plastic wrap, converting indoor and outdoor light into power-and doing it all without noise, moving parts, fuel, or pollution."

Berke is breaking away from traditional silicon technology and using organic chemicals placed onto a thin film. His approach is already finding application in the market.

"Konarka recently landed multimillion-dollar contracts with the Pentagon to deliver, among other things, a tent made of material that generates electricity from the sun, and a thin piece of film that soldiers can carry on the field to recharge the batteries in their cellphones, night scopes, and GPS systems."

This venture could be a breakthrough for both nanotechnology and energy production.

Posted by Jeff Cornwall at 05:06 AM | Permalink