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July 29, 2005 |
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I am honored and humbled to be included in Forbes Best of the Web in the category of Small Business Blogs. Some of my favorite spots on the web are also on this list, including:
Small Business Trends
Duct Tape Marketing
Church of the Customer
Fresh Inc
BusinessWorks
Small Business Brief
If you are a regular here at my site, please visit these other outstanding blog sites.
If you are here from Forbes, welcome!!
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The US House voted in favor of the Small Business Health Fairness Act...for the eighth time....It seems that the US Senate has yet to see the logic of this bill.
This legislation would "make health insurance more affordable for small-business owners and their employees by allowing them to band together across state lines to purchase Small-Business Health Plans," according to the NFIB.
Small-Business Health Plans would level the playing field by giving small business the same access to cost benefits that Fortune 500 companies and unions have enjoyed for decades.Rep. Sam Johnson (3rd dist.-Texas) sponsored yesterday's bill. "It's time to increase the insured and give small business the same access to affordable health care that big business already enjoys," Johnson said. "As I like to say, 'If it's good enough for Wall Street, it's good enough for Main Street.'"
The bill would allow small businesses to band together to negotiate for better rates and plans. Is this a fix for health care? No. But, it is a temporary reprieve for small businesses and their employees.
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Put this in the "I never thought I'd see the day..." category. StartupJournal reports that VC money is flowing back into Internet deals according a survey by National Venture Capital Association, PricewaterhouseCoopers and Thomson Venture Economics.
In the first quarter, venture investments in Net-related startups rose 36% to $753.8 million from a year earlier....The jump in spending followed a 30% hike in the fourth quarter and a 17% rise in the third quarter.While the magnitude of the spending doesn't yet compare with the Internet bubble, VCs say they are increasingly convinced big money can be made on the Net. They also claim to be seeing better thought out businesses with substantial revenue and none of the speculative ideas sketched on napkins that attracted money during the spending heyday five years ago.
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July 28, 2005 |
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Those who own S-corporations (the most common legal form of privately owned businesses) be warned. Inc.com reports that "Internal Revenue Service officials announced on Monday that the organization will examine 5,000 randomly selected S corporation returns from the tax years 2003 and 2004 as part of a new study to determine the reporting compliance of the business entities."
The IRS tells you to have no fear, since this they are not looking for criminal behavior. However, ther are looking for non-compliance, which can become quite an expensive mess to untangle for many small business owners. The IRS case law is complex and often ambiguous, which means that hours and hours of CPA and legal time may need to be used to come back into "compliance."
From Inc.com:
"For those companies that happen to win this lottery, this will be a real thorn in their side," said attorney Richard Colombik of Tax Law Solutions based in Schaumburg, Ill. "Statistical audits tend to be much more in depth: They take more time to collect the data, and for those companies that choose to hire representation, they probably will be more costly," he added. In response, Friedland said "the audits in this study will be very similar to a standard exam, neither more or less intensive."
Given past IRS behavior, LLCs and partnerships will be next in their "compliance examiniation" cross-hairs.
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July 27, 2005 |
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The actions of state policy makers directly affect business starts and closures, according to a study released today by the Office of Advocacy of the U.S. Small Business Administration (SBA). Using sophisticated spatial modeling (geographic analysis) the report finds that entrepreneurs make decisions about starting and closing businesses based not only on conditions in their current location, but on conditions in neighboring states. The result is that states with conditions more favorable to small business see an increase in entrepreneurial activity.
Among the findings:
- Higher bankruptcy exemptions in neighboring states lower the probability of starting a business in the state of residence.
- Lower taxes in neighboring states increase the probability of business closures in adjoining higher tax states.
- Businesses in states with Self-Employment Assistance programs, which encourage transition to entrepreneurship for the unemployed, are less likely to shut down. These programs exist in seven states.
(Source: SBA Office of Advocacy).
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July 26, 2005 |
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The National Dialogue on Entrepreneurship offers a couple of examples of Washington's increased interest in entrepreneurship in our economy. While this may at first sound like good news, I am concerned that over time it may lead to increased meddling by bureaucrats in D.C. in the entrepreneurial process.
First is a story on an update of President Bush's recommendation for a major update of federal economic development policy under the Strengthening America's Communities Initiative (SACI):
An advisory committee released a report last week...offering recommendations for new Commerce Secretary Carlos Gutierrez....Specific recommendations include: increasing technical assistance funding for innovation-based strategy development; requiring long-term, innovation-based, regional and community development strategies as a prerequisite for follow-on federal assistance; the replacement of entitlement grants with performance-based challenge grants within 10 years; and, to create effective forums for propagation and sharing of best practices in economic and community development. The program will consolidate dozens of existing federally funded programs.
While consolidation may make sense on the surface, I see in our future a large agency trying to guide and shape entrepreneurial behavior in our economy. When power is centralized in government, more control is soon to follow.
The second example comes from an update on the House of Representatives Committee on Science. The committee framed its discussions around entrepreneurship and innovation in a rather narrow manner. There was strong representation of large entities who innovate, but no apparent representation by entrepreneurs. The witnesses included the Chairman of Cisco and a Vice President of IBM. While innovation by large entities is a good thing and needed in our economy, it is not entrepreneurship in my understanding of the concept.
IBM and Cisco and huge public companies. Entrepreneurship, in the definition I think works best, involves private ownership. This example demonstrates the next rule of Washington. When money starts flowing toward a certain priority, big business will find a way to get a prime spot at the front of the line.
Of course Cisco and IBM testify that they need more federal money to be innovative. What a surprise....
All real entrepreneurs need to create businesses and jobs (as we know from almost all of the research on this topic) is less government involvement and a fairer and simpler tax system. But, in Washington they will define supporting entrepreneurship as creating a new agency and pumping millions and millions of dollars into corporate welfare to public companies.
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July 25, 2005 |
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COTC can be seen at Political Calculations this week.
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Richland, LLC is a custom steel manufacturer and industrial contractor located in Pulaski, TN. It employs 65 people and has projected 2005 sales of $6.2 million. It is a service business that combines modern know-how and old-fashion work ethics. Since opening, the company has provided custom steel fabrications as well as becoming an industrial contractor with experienced craftsmen in machinery moving and installation (in and out of the United States), mechanical piping, electrical installation, concrete (forming and finishing), and machine coolant systems. Richland, LLC's products and services are used in the construction of automotive manufacturing, wastewater treatment, heating and cooling systems and other end-use industries. Jim Greene (Belmont University MBA '04) recently succeeded his father as President of this family business.
Jim is an engineer by training. He began his career working in large engineering firms, doing substantial work with NASA, DOD and the telecom industry.
Jim knew that he needed to distinguish himself from the rest of the engineers in the market to continue to advance in his field. He considered getting a graduate degree in Engineering, but decided that an MBA would differentiate him best. He chose Belmont because it has "high quality and an entrepreneurship program." In fact, he liked it so much that his wife started her MBA, as well.
After graduation, Jim was still employed by a large engineering firm, but knew he wanted to set out on his own. It was a contact of his father's that got him started. His father had been contacted by a German firm called GoGaS that was manufacturing a new high-capacity infra-red burner for use in the paper industry. Using new technology to burn at a higher temperature and with the same efficiency that is currently on the market, this burner can save substantial time, especially when one considers that a single hour of down time in the paper industry can cost $100,000 to $1,000,000. When Jim realized the opportunity offered by this product, he quit his job and was on a plane to Germany the next day.
The German firm held a 9 year patent on the device, and Richland, LLC was offered the exclusive distribution rights for all of North America. His challenge now is to market and distribute these burners through the new product line they have created called GoGas by Richland. Putting his entrepreneurial skills to work, Jim saw applications for the infra-red burner in other industries. Richland, LLC recently completed testing for use in the custom mold industry, where he discovered that the new design system can cure molds up to four times faster than conventional methods. Given this initial success, Jim is confident that Richland, LLC will find many other industries for this product.
Jim projects sales from their GoGas line to reach $3 to 4 million by 2006. Industry experts fully expect this technology to dominate the market in 10 years, meaning that Richland, LLC and its exclusive rights will be well positioned for success.
Jim's career change has been eye-opening. Jim has been faced with the challenges of taking over the leadership of a successful and thriving business. At the same time, he has been leading the launch of the new product division GoGas, facing its unique challenges of dealing with customs and international law.
"I have learned more in the last 3 months from the Division Managers and Richland, LLC management than I could have learned in 20 years in my old job."
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July 23, 2005 |
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The Bureau of Labor Statistics released a report this past week on regional and state employment and unemployment for June showing that non-farm payroll employment increased in 43 states. So what does the media focus on? The fact that another large employer scaled back its workforce (see examples here and here and here).
Why are jobs growing even though these large corporations are cutting their workforce? It is because job growth has been coming from entrepreneurs and they have been more than making up for any loss from the old economy. In fact, entrepreneurs have created over 77% of all new jobs over the past twenty years.
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July 21, 2005 |
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Many folks end up becoming entrepreneurs because of a specific hobby, interest or passion. For example, many people enter the restaurant industry because they like to cook. However, they soon find out there is a lot more than good cooking required to make a restaurant succeed. Staffing, inventory management and customer relations all come quickly to the forefront of make or break issues these entrepreneurs face. Many are not prepared, and that is a big part of the reason why the failure rate can be so high.
I observed first-hand another industry that seems to have this same problem of life-style interests meeting the realities of business and market demands. My wife and I have been looking for a new kennel for our dog, Keb.
We used to have two dogs and our old kennel worked fairly well as they seemed to keep each other company. But now that we have only one dog, we are looking for a kennel that can provide a good experience for our dog. We travel most weekends during the fall to watch our daughter play volleyball (now for Belmont), so we want a good place for Keb to stay.
Some of the kennels we visited were clearly started by folks who love dogs. One day they must have said to themselves, "Hey, I love dogs so maybe I should start a kennel!" I find that these places seem to operate around the owner's life style, rather than their customers' needs and wants. They set hours that fit their own personal schedules and make policies that make it easier on them. Sometimes it seems that they even lose enthusiasm for their business after a few years in operation.
Other kennels we visited understand that they are competing in a market. Their primary goal is not to meet their own personal needs and wants, but those of their customers. They set hours, offer services, and interact with customers in ways that reflect that they truly understand what their clients want and need for their pets' stay.
What is the lesson from this? Before you start a business, particularly if it is built around your personal interests and passions, you need to slow down and look at it as a business. Learn to think like your customer and build the business around that understanding. Be realistic on what the business will demand of you. Many service businesses need to be open all year, and sometimes every day, to meet the needs of the market. Be honest with yourself about your willingness and ability to make this kind of commitment over a long period of time.
Finally, remember that your business can only serve your own needs if it first serves the needs of your customers.
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Red Herring reports on a new study released by the National Venture Capital Association that found that venture capital and private equity funds are raising money at a torrid pace.
Forty-three venture capital funds raised a total of $6.07 billion for investment in startups during the second quarter. Last year, during the same three-month period, venture firms raised $3.23 billion for 55 funds, according to a study by Thomson Venture Economics and the National Venture Capital Association.
Although the number of venture funds has dropped, the total amount raised has nearly doubled. The average fund size has increased to $141.3 million, up from $58.8 million a year ago.
This is remarkable given the near death of IPOs since Sarbanes-Oxley became law, making reporting requirements too costly for smaller public companies.
The outcome that venture capitalists are betting on is buy-outs of funded ventures by large, public companies.
Inc.com says that more money continues to go to earlier stage ventures.
This influx of cash has enabled VCs to put more of their money in start-up and seed capital. Over 50% of the money invested in new funds will be used for early-stage investments, which accounted for around 45% from 2002 to 2004, said Daniel Benkert, a senior analyst at Thomson.
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July 20, 2005 |
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One of my students, Erin A., passed along a great article from Entrepreneur.com that really summarizes effective business planning. If you are in the process of developing a plan I strongly recommend you take a look.
Some of the highlights include:
- "Don't confuse cash with profits"
- Remember that it is not the idea that is crticial, but your execution of the idea.
- Don't confuse a plan with business planning
- Be honest and be realistic
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Our coffee shop entrepreneur and blogger, Jason, is making significant progress and is at the point of some critical steps in getting his business operational. If you haven't stopped by his blog site to see Cafe Evoke's progress in a while I would suggest a visit.
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Inc.com reports on a study by the Center for Applied Rural Innovation (CARI) that finds that 20% rural Nebraskans are small business owners. This is a remarkable finding and one that supports the importance of entrepreneurship as a tool for economic development. The rural mid-west has seen a significant economic decline and population loss. If entrepreneurial activity can turn that around that will be a positive development indeed.
Most rural business owners turn to entrepreneurship as the only opportunity in a small town, said Cantrell. "You either have to leave an area you love to seek wage employment in a larger city, or you have to engage in an entrepreneurial activity," he said.
What is somewhat confusing to me is why both the study and Inc.com seem to then go on to focus on health insurance as a barrier. Now don't get me wrong; health insurance is a big worry for many aspiring entrepreneurs. But so is no access to capital, a lack of experience and knowledge in an industry, tax policy, and regulations. In fact, most of these will consistent rank much higher than health insurance as a barrier to business ownership. So why focus specifically on health insurance?
Interestingly, if you read the study you will find that the most significant barrier reported by the respondents was that being an entrepreneur requires "working longer hours" than traditional employment.
Why did the study only ask about health insurance and not about taxes, capital or other traditional barriers? Why did Inc.com report on the health insurance response and not the lack of desire to work long hours?
I am not exactly sure why CARI would bias a study this way, but I can wager a guess. First, there is a long history of mid-west farmers aligning with socialist policy (for example in Minnesota the liberal party is not called the Democratic Party, but the Democratic Farmer Labor party). Second, CARI is housed in the Department of Agricultural Economics at the University of Nebraska and most university economics departments tend to lean pretty far left. To their credit, CARI has several programs focused on entrepreneurship.
As for Inc.com, their political leanings have been well documented at this site. When forced to choose between their love for more government and their love for entrepreneurs, they will choose their love for more government almost every time. If the movement for federally funded health insurance ever picks up steam again watch for them to be front and center in support.
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July 19, 2005 |
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Anita poses an interesting question at Small Business Trends.
What is the most significant piece of technology to impact small businesses worldwide? The computer? The fax machine? Desktop software?
She votes for the mobile phone.
As I think about this question, it brings to mind what a Luddite I really am. New technology always intimidates me.
But, then I let my mind wander a bit and think of the question more in terms of technology as a way to do things rather than just the high-tech gadgets that we all seem to focus on today. Dictionary.com tells us that the word technology comes from Greek. Its root means the "systematic treatment of an art or craft." So what do small business owners benefit most from that is a systematic application of their craft?
If we look at what differentiates successful entrepreneurs from the unsuccessful ones, the most important craft is opportunity recognition. This is a process that we have learned how to systematize and teach to entrepreneurs.
Entrepreneurs who have the most success are those who are able to find a real niche in the market that offers enough of a margin to meet their needs and aspirations. Successful entrepreneurs understand the importance of "failing on paper." They carefully assess their idea to make certain that it has an adequate market and enough profit margin before they ever launch their venture.
As more and more entrepreneurs are being trained worldwide, it is this one skill, this one technology, that is having the biggest impact on their success.
So I respectfully suggest that the most important technology is not a gadget, but a process that has become systematized and taught to more and more aspiring entrepreneurs. Gadgets are nice, but they come and go and are really only marginally responsible for business success.
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July 18, 2005 |
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Find COTC this week at The Club for Growth.
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The patent process in the US is a mess. It is often too expensive and too complex for the average entrepreneur to take advantage of, but even when they do move ahead and go through the process the patents are not being protected as they should. It has become a political process favoring large corporations with lots of money.
Zachary Roth offers his analysis of the problem in this article from Washington Monthly.
The cause of the problem is easy to pinpoint. Over the last decade and a half, the patent office has been set up in such a way that it's an easy mark. The system overwhelms many patent examiners, operates under laws and bureaucratic incentives that favor applicants, and can potentially be hoodwinked by the unscrupulous. A recent Federal Trade Commission report, which laid out these criticisms, concluded that in key industries such as pharmaceuticals, software, biotechnology, and the Internet, the office now "hamper[s] competition that would otherwise stimulate innovation." For some companies, armed only with dubious claims, the patent office has become not something to fear but a patsy, as easy to fool as those elderly couples who send cash to the Nigerian prime minister's wife.
Mr. Roth offers a solution that is not one I would immediately embrace, as it sounds like an expansion of government. But it may be a necessary step as this critical governmental system has been hijacked and no longer works as it should.
Reformers propose various ways to fix the whole mess of problems that has ensnared the patent system. The most obvious fix would be to make the government subsidize the patent office again, instead of having the office pay for itself out of its own application fees. That would eliminate some of the financial incentives to green light patents. Given the mounting federal budget deficit, however, it's hard to see Congress suddenly turning down a source of revenue. Eliminating the count system, which encourages examiners to allow applications, is another obvious fix. The agency might still have an incentive to push through applications, but at least examiners would be somewhat insulated from that same pressure. Another wise move would be to hire enough examiners so that all complex patents are subject to the "second set of eyes."
Another equally worrisome aspect is protecting intellectual property in the international arena, particularly in China, and with international corporate identity theft.
(Source: National Dialogue on Entrepreneurship).
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July 15, 2005 |
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From the StartupJournwal:
Matthew Younkle was a senior at the University of Wisconsin in Madison when inspiration struck. What the world really needs, he decided, is a three-second beer.
He was not the first college student to dream of ways to get to his alcohol more quickly. What set Mr. Younkle apart is that he chose, soberly, to follow through.
Ten years later, Mr. Younkle, 31 years old, is president and chief technology officer of TurboTap, a company marketing a finger-sized nozzle that attaches to standard beer faucets and pours draft beer at least twice as fast as traditional systems do, and with less spillage.
From one Cheesehead to another I say, "Good job der hey!"
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Small businesses will have a stronger role in regulatory decision making if Congress passes the Regulatory Flexibility Reform Act of 2005 introduced by Senator Olympia Snowe (R-ME) this week, according to a press release issued by the Office of Advocacy of the SBA.
The Regulatory Flexibility Reform Act of 2005 modifies the existing Regulatory Flexibility Act (RFA) so that:
- Federal agencies will be required to review all 10-year old regulations for their current impact on small business. This will encourage agencies to update their rules, ensuring that regulatory protections reflect current conditions.
- The Executive Order that ensures that independent agencies comply with the RFA will be put into law.
- When federal regulations are implemented by the states, federal agencies will help state officials analyze the impact of those rules on small entities. States will gain insight into regulatory alternatives that will enable them to meet federal requirements while minimizing their impact on small entities.
"Senator Snowe is a true friend of small business," said Thomas M. Sullivan, Chief Counsel for Advocacy. "She clearly understands the unequal burden that small businesses face when complying with federal regulations. The Regulatory Flexibility Reform Act of 2005 is a positive step towards leveling the playing field for job creating small businesses."
Statistics from the SBA Office of Advocacy show that it annually costs the smallest of businesses $6,975 per employee to comply with federal regulations. That cost places a burden on small business that is 60 percent greater than costs incurred by large businesses.
Let's hope that the SBA and Senator Snowe also help restrict any impact of the recent Kelo Decision on property seizure.
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July 14, 2005 |
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While the iPod was not the product of an entrepreneurial company, it has helped to spawn a whole industry for entrepreneurs looking to create new products around the huge demand for this new technology.
From Yahoo News:
One company, Delarew Designs, is offering a line of handbags that sport built-in iPod pockets and holes on the ends for the music player's headphone wires.Another, Bluelounge, has created the Cableyoyo, an inexpensive cable caddy, which literally rounds up wires and stores them out of the way.
Still others are marketing different types of protective coverings for the music player.
These are just a few of the great examples of how entrepreneurs do not have to be the creator of a break-through technology like iPod to take advantage of the market that it creates.
(Thanks to Annie Whiting for passing this along).
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The Congressional Joint Economic Committee has released some impressive economic statistics:
- Payroll employment rose by 146,000 in June, and the unemployment rate edged down to 5.0%, the lowest since September 2001.
- GDP growth was 3.8% in the 1st quarter, matching growth of the 4th quarter. Forecasters see a continuation of healthy growth.
- Year-over-year Inflation in the "core" consumer price index, which excludes volatile energy and food prices, moderated to 2.2% in May.
- Markets expect the Fed to continue to raise its target overnight interest rate, which it has raised from 1.00% in late June 2004 to the current 3.25% in a sequence of nine quarter-point increases.
- The deficit is smaller than previously projected.
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July 13, 2005 |
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I was pretty hard on several small business sites for their lack of coverage on the Kelo Decision. After reading what Inc.com put out, I should have kept my mouth shut. I keep thinking that my perception that Inc has taken a "left" turn is just an overreaction on my part (not uncommon these days). But read on what Inc.com has to say:
While many vilify the ruling for weakening individual property rights, which they believe are the cornerstone of economic growth, others argue that small and medium privately held businesses are often the beneficiaries of urban redevelopment plans that depend on the use of eminent domain -- the power to take private property for public use.
I have three questions. Who are the "others" that argue that small and medium enterprises will be the benefit from this decision? What data do that have that small businesses are "often" the beneficiaries of government land grabs? And, who makes the decision on what small businesses should have their property taken away and on what basis are these decisions to be made?
They go on to state the following:
The perspective of local business owners affected by eminent domain is likely to be more nuanced.
I certainly don't think that this is the case for small business owners. Property rights are a fundamental building block of the free enterprise system that small business owners hold near and dear to their hearts. I can't imagine any of them saying that in this case it is alright for you to take away my property for someone else's business. How can such a black and white issue be nuanced, as Kelo crossed a clear line into a new era of expanded government powers?
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July 12, 2005 |
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Government mandated universal health care proposals are back in the news in the US. In an article at Inc.com, they make is sound like a good thing for small business.
Currently, bills have been introduced in 18 state legislatures calling for a universal health care plan. Small business owners who provide health insurance plans to their employees are paying particular attention to the debate, as a universal health-care system could help alleviate some of the rising costs employer-sponsored plans are facing.
Based on what data? Government mandated programs of any kind are a slippery slope. Passing a simple mandate that requires only basic coverage may save some small businesses money by not requiring rich benefits. But once in place, the lobbyists for this and that get to work and the plan requirements grow and grow along with the costs.
They also try to pull a shell game on workers to make it look like it is the business owner who has to pay and not them. But this is wrong. Small business owners have only so much money to pay employees. If there are more benefits mandated that will shrink the pot of funds available for salary. While the employees think it is a free benefit, it is merely an illusion as it comes out of the same finite amount of money.
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The NFIB reports that in addition to measures being considered at the state and local levels, the U.S. House is getting into the mix on the Kelo decision. In the wake of the Supreme Court's Kelo decision, private-property advocates in the U.S. House passed a measure that would deny federal transportation, Treasury and Housing and Urban Development funding to any project that involved the seizure of private property by a local government for economic development. U.S. senators have introduced a similar measure. To become law, the measure must remain intact through the budget process in both chambers and be signed by President Bush.
I am delighted to see that the NFIB has gotten interested in this critical issue for small business and hope that they can bring their influence into full force to help right this terrible wrong.
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Small businesses in Missouri have new protections against overly burdensome proposed regulations thanks to a bill signed into law today by Governor Matt Blunt. The new law strengthens Missouri's current regulatory flexibility laws by providing small businesses with judicial review of agency compliance with rulemaking procedures. It also requires agencies to periodically review existing regulations that affect small businesses to ensure that they are still necessary.
"Adding judicial review is an important step forward for our state’s small businesses," said Scott George, president and CEO of Mid America Dental & Hearing Center in Mt. Vernon, MO. "Now the law has some teeth, and that will help small business and state agencies work together to produce good regulations that get the job done without causing serious harm. It means a better business and job creating climate for Missouri," he said.
It is a shame that the logic of regulatory flexibility was not enough to assure it was implemented effectively in Missouri. Bringing the courts in is adding a worrisome step in the process.
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July 11, 2005 |
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The National Dialogue on Entrepreneurship seems, at times, to be rooting for the "rest of the world" when it comes to entrepreneurial economic development. This week they focus on the east.
First, they offer a provocative teaser for a briefing they have next week by the author of Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, Clyde Prestowitz. (More on this in the next week or two).
While the United States is still commonly accepted as the world leader when it comes to entrepreneurial innovation, the emergence of market economies in China, India and other nations in the East may have already begun tipping the balance of economic - and geopolitical power - away from the U.S.
Perhaps, but those of us old enough to remember the economic forecasts of the 1970s and 1980s heard the same song and dance about Japan and their centrally controlled strategic plan for their economy. By creating such a plan Japan would soon dominate the world economy. Well, they found out, not unlike the Soviets, that centrally planned economies are doomed to burn-out while those fueled by market-based entrepreneurship continue to transform to meet changing needs and demands.
But, wait! NDE tells us this week not to count Japan out. They have discovered entrepreneurship!
According to the latest edition of the Japan Entrepreneur Report, a new e-zine covering new business activity in the country, Japan is poised for a boom in new entrepreneurial ventures. In the newsletter, Allen Miner of Sunbridge Corporation argues that the Japanese economy is now at a critical turning point. As the information technology industry moves away from general-purpose computers to digital consumer devices (like the iPod and specialized cell phones), Japanese businesses and innovators are well positioned to prosper. Japanese firms excel at design and at customer responsiveness. These traits will aid them in capturing new markets in coming years.
I guess the authors of this e-zine weren't paying attention thirty years ago....
And watch out for New Zealand, "one of the world's most entrepreneurial countries." Except there is one problem, as pointed out by Inc this month. New Zealanders seem to be a little too laid back to create real entrepreneurial economic development. It seems to be a land of lifestyle entrepreneurs. But have no fear; the New Zealand government (with its strong socialistic roots) is planning to step in and save the day. All they need is a good old-fashioned government program to turn this situation around.
I know it disappoints many, but the US is still growing, innovating, and leading the world. What is the biggest risk to this? Not some government planned initiative from the east, but our own government creeping toward more and more restrictions on free enterprise.
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COTC can be found at Multiple Mentality this week.
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July 08, 2005 |
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The frightening events of yesterday in Great Britain should serve as a reminder of what can happen during a time of war. I have made many entries that highlight the importance for small businesses of being ready for the next time terrorists hit. As most experts reminded us yesterday, it is not a matter of if, but when. Here are a few of the points I have made in the past that any small business should keep in mind:
- Have a disaster plan in effect. Whether it be terrorism, hurricanes, earthquakes, or whatever, be prepared with a plan. It can make all the difference for you and your employees and for your business.
- Implement a security plan.
- Manage your cash, debt, inventory, and overhead carefully. Be flexible in all of this and have contingency plans ready.
Remember that entrepreneurs are the economic foot soldiers in this war, and it is a long term commitment. Remember the words of Winston Churchill, "You do your worst, and we will do our best."
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July 07, 2005 |
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The Family Medical Leave Act (FLMA) is another example of a law that in principle, and more importantly in the headlines, makes everyone feel good. Of course employers should give folks a break when they need time off due to serious health problems within their family. Right?
The FMLA currently covers any employer with 50 or more employees, and requires that they grant employees 12 weeks of unpaid leave for serious health conditions of the employee or immediate family members. There is currently a movement to reform the FMLA to either lower the 50 employee threshold or even eliminate entirely. This flies in the face of other efforts to make regulations more reasonable for smaller employers through regulatory flexibility.
Regulatory flexibility for small business has made great progress at both the national and state level by forcing regulators to take a look at the relative burden that laws place on smaller companies. When laws place an undue burden on a smaller company, regulations are adjusted to make them more reasonable.
So why is there such an effort being made to expand the FMLA to include even the smallest employers? Are small businesses being unusually rigid in how they deal with employees facing health crises in their families? This does not seem to be the case according to a survey conducted by the NFIB.
According to a 2004 NFIB National Small Business Poll, small-business owners grant virtually all requests for family and medical leave. Virtually all plans fall into one of two categories: the first policy is open-ended and allows the employees to come back when he or she is ready, while the second policy accommodates leave, but imposes some sort of time limit....FMLA actually infringes upon the delicate balance of employer and employee needs that it is supposed to help.
That's right. Small employers are finding it more difficult to offer the kind of compassionate support for their employees and their families under this the FMLA. I know this to be true from the vast majority of small business owners I have known over the years. Due to a combination of values, desired company culture, tight labor markets, and just plain common sense, most small businesses already offer generous support for employees in need.
When government steps in and makes blanket rules all of this must change. While the FMLA sounds simple, it has become in fact quite complex as it has been implemented. For example, take a look at this question and answer on the FMLA from a local Nashville paper, or at this site from the SBA that ultimately tells you that, "Due to the complexity of integrating FMLA with other policies covering absences, we suggest that you consult with your legal council or a human resources professional when updating your employee policies to incorporate FMLA. State laws, also need to be addressed." As an aside, isn't it just amazing that a government sponsored web site actually admits you that they really can't explain the complexities of a law to an educated citizens like you and me?
I hear time after time from entrepreneurs who find that laws like the FMLA actually limit what they can offer employees. It is a classic case of the minimum becoming the maximum. Rather than offer what we think our employees deserve or need, we must offer exactly what the government tells us: no more and no less.
We've seen it time after time: FMLA, Americans with Disabilities Act, mandated employer covered health insurance, and so forth. All of these massive laws seemingly were first proposed with good intentions, but have become entrenched parts of an expansive, mindless bureaucracy. Argue against any of these and you are branded as greedy, evil and heartless even if your intent is to be able to offer more than these laws require if the circumstance warrant.
All of these laws have gotten support from the public because they are offered as simple and fair programs. But, they are never simple and when looked at over the myriad of specific situations, rarely fair.
These laws may be made with good intentions. But we know where the road that is paved with such good intentions leads us....
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July 06, 2005 |
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Ask an average group of people what the survival rate is for entrepreneurial ventures and the figures you usually get are 10-20%. The truth is much rosier than common wisdom assumes.
As reported by the National Dialogue on Entrepreneurship, a new study from the Bureau of Labor Statistics "examines the survival rates of new businesses started between 1998 and 2002. It finds that 66% of new establishments started in 1998 were still operating two years after they started; forty-four percent were still operating in 2002." The only sector that showed significantly lower rates was the dot.com group, which crashed during this time. Factoring that group out and we are getting closer to the 50% figure that most experts believe to be an accurate estimate.
Studies examining entrepreneurs who have had training and/or education in entrepreneurial skills consistently show a much higher success rate (as high as 80-90%).
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July 05, 2005 |
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IPOs are down again for the second quarter of 2005 as reported by the National Venture Capital Association. Red Herring cites "flat-lining public markets and rising oil price" as two culprits, but these are just marginal issues that relate to a few possible IPO candidates.
The main cause of falling IPOs remains the chilling impact of Sarbanes-Oxley and the costs it places on reporting compliance for public companies no matter how small. Sarbanes-Oxley can lead to hundreds of thousands of dollars in compliance costs (those lucky accounting firms strike it rich again...) for even the smallest of public companies. It just changes the fundamental economics of an IPO to the point that many are looking for other exit options. One must look no further than the increase in M&A activity to see what is happening.
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Find COTC this week at CaseySoftware.com.
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Succession planning in a family business involves several critical issues, one of which is transferring ownership through a family trust. NFIB has a good summary of this approach.
"A living trust is an estate-planning device that bypasses probate. It's a separate, legal entity, like a corporation. While you are alive, you would be the trustee and beneficiary of the trust. You would run your business just as you do now. The only difference? A trust that you control would own the business.
"Because it is your trust, not you who owns your business, there would be nothing to probate after your death. Because your child is the successor of the trust, or the beneficiary, he or she would end up owning the business without going through probate."
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July 01, 2005 |
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Bill Hobbs suggests the following regarding the "Liberty Hotel" to replace Judge Souter's home under the Kelo Decision:
And this building would make for a fine corporate HQ and flagship hotel for the new hotel chain, doncha think?
