The Entrepreneurial Mind

Although it does not technically start until sometime in February, 2007 is the Year of the Pig. Here are some quotes about pigs and the wisdom they offer for entrepreneurs.

Pigs and Business Ethics: I learned long ago never to wrestle with a pig. You get dirty, and besides, the pig likes it. (George Bernard Shaw).

The next time you are tempted to follow the lead of a less than scrupulous competitor, especially when it comes to an issue of ethics and your integrity, remember this saying. And also remember that if you you wrestle with too many pigs in the mud, you might start to like it as much as they do.

Pigs and Lawyers: Lawsuit n. A machine which you go into as a pig and come out of as a sausage. (Ambrose Bierce).

When it comes to legal issues, "an ounce of prevention is worth a pound of cure" (a quote than I believe is attributed to Henry de Bracton). Avoiding litigation is never completely possible, but there are some common sense ways to avoid becoming someones sausage. Develop a strong shareholder agreement before you start your business. Continue to develop your personnel systems, and spend a little money on an employment attorney along the way to improve your litigation protection. Develop strong contracts with your attorney. Be honest and always do what you promise to do.

Pigs and Taking the Entrepreneurial Plunge: The difference between 'involvement' and 'commitment' is like an eggs-and-ham breakfast: the chicken was 'involved' - the pig was 'committed' (anon.).

I see too many new entrepreneurs, especially older ones, try to find the easy transition from a job to becoming an entrepreneur. In the world of entrepreneurship, at some time you have to accept that you are like the pig when it comes to breakfast!

Pigs and Finding Opportunities: One has a nose. The nose scents and it chooses. An artist is simply a kind of pig snouting truffles. (Igor Stravinsky).

Most good business opportunities are right there under you nose....

Pigs and Fame: Fame is like a shaved pig with a greased tail, and it is only after it has slipped through the hands of some thousands, that some fellow, by mere chance, holds on to it! (Davy Crockett).

Although it is often unspoken, many entrepreneurs seek fame as one of their goals Be careful what you pray for -- fame often comes for the wrong reason, and your fame can soon turn into infamy. Also, the better known you become, the more competitors you will attract.

Pigs and Exit Planning: You can't fatten the pig on market day. (John Howard).

Building value in your business is a long-term process that takes consistent commitment. There is no magic that can make your business more valuable at the time you are ready to move on. You build a little bit of value every day over many years of hard work.

Happy New Year! As my father likes to say: Pigs get fat and hogs get slaughtered. In 2007, be the pig!

Posted by Jeff Cornwall at 07:05 AM | Permalink | Comments (5)

If you need some tips on bootstrapping ideas for your web startup, and I mean A LOT of ideas, Aviva Directory has a post Little Known Ways to Brand on the Cheap: 99 Tips for Poor Web Startups.

Posted by Jeff Cornwall at 09:16 AM | Permalink | Comments (7)

The Global Small Business Blog has a good list of books to help in your global strategy for 2007.

Posted by Jeff Cornwall at 09:13 AM | Permalink

Worker Bees Blog offers the Christmas week COTC.

Posted by Jeff Cornwall at 09:08 AM | Permalink

A CHRISTMAS PRAYER
by Marty Robbins

If all my prayers aren't answered
then Lord, I understand
There's others more deserving
Others Lord who need a helping hand
I pray you'll guide and keep me
Ever near the light
And so My Deepest Thanks My Lord
Upon this Christmas Night.

I will be spending the next few days with family and friends as we celebrate Christmas. Have a blessed and merry Christmas.

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

eVenturing has put together a summary of the various collections they have put together this year. Each collection offers how-to's, stories and tools on a topic area critical to entrepreneurs. They are building a site that can serve as an on-line resource library for entrepreneurs with businesses at all stages of development. Thanks to the Kauffman Foundation for supporting this project.

Posted by Jeff Cornwall at 07:50 AM | Permalink

Dear Santa,

We Capitalists from all over the world have been very, very good this year. So here is our list for this year....

-- We would like lots of new customers.

Scott on Money wants easy movie rental returns for all of Blockbuster's customers.

One man band sees an important marketing lessons in the painted poinsettias from Home Depot that you'll see under so many Christmas trees this year.

Please give Will Pate a new friend next time he flies.

Wayne Hurlbert says we should solve our customers' problems this Holiday Season.

Charles H. Green says that all customers want for Christmas is for marketers to be trustworthy....

...and Pawel Brodzinski want success in negotiations for all.

We know the Internet is helping you make your rounds on Christmas Eve, because Yvonne DiVita tells us that Internet sales are soaring as high as your sleigh.

Big Picture Guy says that his competitors should be on your naughty list.

Ed has been making a list and checking it twice and says that pre-paid legal is naughty, not nice.

The New Business World says that China wants some nuclear power plants from Westinghouse under their Crhistmas Tree.

Paul's Tip to you this season is to increase your hourly rate....hey wait....I didn't even know you were on the clock, Santa!

-- We would like freer markets for people all over the world.

Brian Gongol wants you to bring jobs, not a higher minimum wage or welfare, to all of the good little teenagers around the world.

Bill Losapio thinks that the Federal Reserve should get a lump of coal....

...and Leon Gettler knows that politicians and the politically connected should get one, too. They've been naughty with hedge funds this year.

Michael Dawson is worried that you won't leave us higher housing values next year.

Jack Yoest will be giving thanks for the Rotary as he sits down to his Christmas feast. Please bring them something special this year.

Trent just wants folks to leave Wal-Mart alone.

David Tufte agrees with Nobel winner Prescott that the Night Before Christmas should read: "...not a creature was stirring, not even the Fed."

And Big Cajun Man would add: "...lower taxes to all (Canadians), and to all a good night."

Professor Bainbridge says that inside traders may not be such bad little boys and girls, after all.

James Hamilton reviews which of his predictions for this year were naughty and nice.

-- And LOTS of new gadgets, technology, and toys!

StayGoLinks wants all of us to have Non-spacial Internet in our stockings this year.

You may need to get your rankings up on Baidu and not just Google, according to Starling David Hunter, if you want all the good little boys and girls to find you next year.

-- And Santa, we would really, really like a business of our very own...and maybe a pony, too.

Dragon Slayer's Guide to Life has wrapped up ten lessons for the self-employed.

The Small Business Buzz wants a sole proprietorship left under the tree.

Ben Yoskovitz has five questions before you kiss Mommy under the Christmas Tree or before you go into business with a partner.

David Maister wants to give his wife's new website a plug for Christmas.

How about a music business for Soccer Dad?

The Freestyle Entrepreneur wishes all the self-employed a Happy Holidays!

-- We would definitely like some money for Christmas......

Marshall Lebovits has three questions to ask lenders to make sure they are good little boys and girls.

Bryan C. Fleming is helping lots of folks save up their money this year.

Free Money Finance says that the Financial Media have definitely not been good boys and girls this year!

Will Chen wants 100 personal finance blogs a dancing, and a partridge in a pear tree.

Long or Short Capital wants to spread love and joy, or at least love, this season through hedge funds.

Super Saver says we should have visions of college tuition dancing in our heads.

But, Hedge Fund Domain says that hedge fund manager Paul Tudor Jones has visions of Plum TV dancing in his head.

And Santa, Henry Stern wants you do know that the North Korean dictator Kim, has been a VERY, VERY BAD boy this year with his reinsurance scheme.

David Foster will be leaving you a plate of cookies, a glass of milk, and a huge natural gas find off India on Christmas Eve.

Joe Kristan knows that even Santa couldn't bring a Tax Court Judge stupid enough for this case!

Fat Pitch Financial wants us all to have some Pfizer stock in our stocking.

So you won't get lost as you and your elves toil in your workshop, Financial Options gives you a financial road map to follow this last week before Christmas.

-- ...and we would like peace on Earth...or at least peace among our employees.

Michael Wade wants you to put a professional introduction into our speakers' stockings this year.

It seems that Wenchypoo might rather have a lump of coal than a year end bonus.

And speaking of lumps of coal, Carmine Coyote warns against the leadership causes of employee burn-out.

Thanks Santa! See you in a week!!

Sincerely,

Your Good Little Capitalists Everywhere

Posted by Jeff Cornwall at 05:57 AM | Permalink | Comments (2)

Concurring Opinions has revealed a closely-held and carefully protected secret of academia -- how exams really get graded.

(Thanks to Bill Hobbs for passing this hilarious post along).

Posted by Jeff Cornwall at 08:46 AM | Permalink

Professor Frank Hoy from the University of Texas at El Paso has published an excellent article which has a critically important lesson for family businesses (note: you can get access to an abstract, but need to pay for the full article). He argues that, like any mature business, family firms must find ways to innovate and even redefine their businesses if they are to continue to survive in the marketplace.

Does family matter in corporate venturing? Converting the question, can a family firm survive without corporate venturing? Life cycle theory contends that it is normal for an organization to form, grow, mature, decline, and die. Long-term survival, especially through multiple generations, would require renewal through innovation to avoid decay and death. Strategic corporate venturing may be the answer for many family firms. To innovate and prosper, a family enterprise must contend with multiple life cycles, rarely synchronized, any one of which may be in a decline stage at any point in time.

The business model that created the initial success for the founder in all probability will not allow the business to survive over the long term in a dynamic market. Some of the same processes of innovation that created the business in the first generation may need to be repeated by subsequent generations.

My experience with family businesses is that there can be two sources of resistance to innovation (or what Prof. Hoy calls willingness to change) in family firms. I often see resistance from the first generation, where the founder may bristle at any suggestions about "doing things differently than we have done them all along." But resistance to change may also come from subsequent generations, who may not have the entrepreneurial passion of the founder.

However, this article also got me thinking again about how we define entrepreneurship. The type of innovation Prof. Hoy refers to is sometimes called corporate venturing or corporate entrepreneurship. The argument for calling innovation in established businesses entrepreneurship is that it is the same basic process. And since we define entrepreneurship as a set of processes rather than in terms of a type of person, entrepreneurship can take place in a variety of different settings and contexts.

My concern is that this rather broad use of the term has led to the loss of any clear meaning to the word entrepreneurship. From a previous post in which I look at the issue of a definition:

Entrepreneurship has become sort of a generic term that describes all sorts of behaviors that involve being creative, being mischievous, being sneaky, breaking rules, not wanting to follow rules, and so forth. An example involving rules can be heard every day in large corporations. "I wish they would leave me alone. I am just being entrepreneurial." These people are not starting any businesses; they just use the term as cover for not wanting to follow corporate policy. I actually heard a criminal described on a newscast as being entrepreneurial because he was somewhat clever and creative in his crime. At least in American culture, the term entrepreneurship has become blurred into any one of a large collection of basically anti-social behaviors. But, I suspect from conversations I have had with friends and colleagues from around the world that is not uniquely an American issue. In some cultures they avoid the use of entrepreneur, because it has developed the connotation of a sleazy, cunning con-man.

This is what can happen when terms take on a more generic meaning. The term loses specificity and really begins to have no clear definition. Entrepreneurship has become a trendy term that can mean almost anything you want it to in many contexts.

I do not mean to diminish the importance of the lesson for family businesses in Prof. Hoy's article. The need for innovation and corporate venturing cannot be overstated for most aging family firms. But I do wish all of us would be more careful and narrow in our use of the term entrepreneurship. Let's keep entrepreneurship as the process of business formation by privately held ventures.

Posted by Jeff Cornwall at 06:49 AM | Permalink

Now that credit card companies have discovered the small business market, small business owners are taking on more debt.

The number of small business loans outstanding under $100,000 increased 25 percent between June 2004 and June 2005, according to a report released today by the Office of Advocacy of the U.S. Small Business Administration. The increase came mostly from credit card use by small business. The report also noted that the number of small business loans outstanding between $100,000 and $1 million increased 5 percent during the same period.

"Access to credit is vital for small business survival," said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. "That is why we produce our annual lending report, so that trends in small business finance are made clear. One evident trend is the increase in the number of micro business loans outstanding. Coupling that increase with the small increase in the dollar amount outstanding of those loans shows that the small business credit card market continues to be quite dynamic."

The report also ranks lenders in each state by their small business lending activities, as well as ranking large national financial institutions. The report includes data on American Territories as well as the states. A complete ranking of lenders, including prior annual reports, is available. Lenders are ranked on their overall small business lending, not by lending under SBA programs.

However, with increased use of debt comes more risk should the economy slow down. Just because entrepreneurs have access to funding does not always mean that they should use it.

Posted by Jeff Cornwall at 07:57 AM | Permalink | Comments (2)

The generation whose leading edge is just coming into the work force, the ones that many of us call the Entrepreneurial Generation, are sick and tired of the simultaneous bragging and whining that we Baby Boomers constantly offer up when talking about our work and careers. They are the children of the tale end of the Baby Boomers -- and they are angry and they want to make changes in our culture.

One of my students offered this comment to a post I wrote on Character last summer:

There are many things that help forge our character and values. My generation, from what I've seen, is really focused on keeping family first, even before career. Some say that this is because we watched so many baby boomers screw this whole family thing up. My take on it is that because the baby boomers sometimes grew up wanting, they determined in their minds that their families would want for nothing. Unfortunately, my generation has all they want, but grew up with workaholic parents who were absent in their lives. I believe we're searching to find that balance between family and career.

Penelope Trunk, who writes a blog called Brazen Careerist, offered her take yesterday on a Harvard study on "extreme careerists" (who are most often Baby Boomers):

I cringe every time I read an interview with a "Successful Mom" who works a 70 hour week and can miraculously balance her kids and husband's 70-hour week as well. All of this womens magazine [stuff] is self-reported, and what mom or dad is going to stand up and say they are destroying the kids by working long hours?...

Here's what the Harvard Business Review article should have said: The long-standing practice of baby boomers to have dual-career families with no one home for the kids is bad for the kids, even if the parents are enjoying themselves. Fortunately, the post-boomer generations recognize the problem and plan to not repeat it.

And if you think her words sting, make sure to read the comments that follow her post!

Cal Thomas' quote on the mess we Baby Boomers have left the generations that follow us are worth repeating:

My generation has been obsessed with making money and acquiring things in place of investing necessary time on marriage and children. The message the kids get is that if marriage is mostly about accumulating wealth and acquiring stuff, they can do that without getting married.

Family trees are beginning to resemble kudzu...

Other countries and cultures around the world are not the only people ready to rebel against today's American culture -- so too are the young adults who are inheriting it.

Posted by Jeff Cornwall at 06:14 AM | Permalink | Comments (6)

Currently in the US we have almost 20 million people in the US who are classified as "self-employed." In the past, we thought of these folks holding jobs such as house painters or consultants (a.k.a. "people between real jobs'). As I have written before, this is no longer the case.

An article from yesterday's USA Today is a great example of the changing nature of self-employment in our emerging entrepreneurial economy.

Fed up with rising labor costs, a new generation of entrepreneurs is launching millions of tiny companies differing from business in the past: They don't want employees.

The trend, building since the late 1990s, hit a milestone this year when the number of these microbusinesses reached 20 million -- one for every six private-sector workers, a new analysis of government data shows.

In place of paid employees, owners harness new technologies to outsource work, often linking up with other like-minded entrepreneurs to get jobs done in a virtual assembly line spanning the globe.

And as I wrote in an earlier post today, those small business owners who do have employees, are planning to add even more.

(Thanks to Ben Cunningham for passing this along).

Posted by Jeff Cornwall at 07:39 AM | Permalink | Comments (3)

Almost one out of five small businesses plan to hire new employees over the next three months, according to the latest survey from the NFIB. With the exception of the "dot com" boom, the survey indicated the highest job-creation level in its history: during the next three months, 18 percent plan to create new jobs, while only 6 percent plan reductions, yielding a seasonally-adjusted net 19 percent (net 12 percent seasonally unadjusted) planning to create new jobs. Job-creation plans are positive in all industries. In addition to these new job openings being planned, more than 50% of the small businesses surveyed report trying to fill existing positions. But, they continue to report difficulties, with 80% report few or no qualified applicants.

Traditional business media seems to be a collectively puzzled by our true economic conditions. Why given the bad news coming out of so much of traditional corporate America do we still have such strong employment and a growing economy? The answer -- when you only focus on half of the economy you are going to miss some important data. GM lays off 10,000 workers and it is major headlines. Small businesses add 100,000 new jobs and it goes almost unnoticed.

Posted by Jeff Cornwall at 06:43 AM | Permalink | Comments (1)

National Dialogue on Entrepreneurship has posted its "Holiday Books Issue." Several good selections recommended this year. My favorites from their list this year include:

The Entrepreneurial Imperative: How America's Economic Miracle Will Reshape the World -- And Change Your Life

Economic Turbulence: Is a Volatile Economy Good for America?

Purpose: The Starting Point of Great Companies

Posted by Jeff Cornwall at 10:26 AM | Permalink

Roger (not sure where Roger is from) e-mailed me about the age old question: are entrepreneurs born or made? As Roger said in his e-mail:

I am one of those that believe it's impossible to teach anybody how to become an entrepreneur because I believe that they are born and not made.

Although I have addressed this issue before, let me try a new angle. My answer is: neither.

First, although I continue to make this mistake, we should avoid using entrepreneur the noun in such discussions. I have written about the risks of viewing any career as a noun in an earlier post. By describing someone simply by what they do for a living misses so much about who they are as a person. I think this might be part of the problem with this on-going debate of nature versus nurture in the context of entrepreneurship.

Entrepreneurship is not in our genes. People come to pursue entrepreneurship by their life experience. For some of us it comes from our family upbringing. I caught the bug at an early age by being involved in family businesses (thanks Dad!). For others, entrepreneurship is the result of some career crisis -- often this means getting fired. Unemployment can be a powerful motivator. Pursuing entrepreneurship may be the logical way out of a frustrating career. Maybe they finally realize they hate their job, don't belong in a cubicle any longer, are sick of "working for the man," etc., etc. You get the scenario. For others, entrepreneurship comes out of an insatiable desire to pursue interests and passions in life. Self employed musicians or artists are great examples of this type.

Another factor that we cannot ignore is the role of our culture. As we see in so many studies, the culture in which we live is a powerful force creating start-ups and fueling entrepreneurial economies.

Entrepreneurship is much more passion than personality. We are not born with passion. It comes from our experiences -- our family, our work, our hobbies, the people around us, the gifts we have been given, and our culture.

But even though they are not born, I cannot make someone choose this path in life, or even inspire someone to pursue a career in entrepreneurship who is not already headed that way. The fire has to be in their belly. Once in a while I have to stoke that fire, or help them see that the fire is there. And when they feel that fire, my job is to help them have a better chance for success. By learning about the process of properly defining and aligning the opportunity, securing the necessary resources, planning the venture, and managing growth effectively, we can increase their chance of financial success by an average of about 50%.

Entrepreneurs are formed -- not born or made. Oh, drat! I made it all the way to the end before I used that pesky noun again! Let me try it one more time. Entrepreneurship is a career that comes out of our life experiences, and with some education, we can improve the success rates of those who start-up new ventures. Not quite as pithy, but hopefully your get the point.

Posted by Jeff Cornwall at 06:54 PM | Permalink | Comments (1)

When we first installed e-mail in our company in the early 1990s, I had to "pull the plug" on the system after just a few months. People were sending incredibly caustic messages, writing things in their messages that they would never say face-to-face. It was a new form of communication, and we had to take the time to train people on how to use it and how to be polite and courteous when communicating via this new medium before "turning it back on."

Fifteen years later it seems that people still don't have a clue on the effective use of e-mail communication. Web Worker Daily offered a wonderful tongue in cheek post on negotiating via e-mail that illustrates how little progress has been made.

In the new world of web work, you might find yourself negotiating by email over a job or project. Most of us know how to screw up phone or face-to-face discussions. Scotching plans by email requires a completely new approach.

Remember that email is asynchronous, impersonal, and only seemingly private. Use these characteristics to best advantage and you'll never have to deal with a pesky email-negotiated business deal again.

It would be even more funny if it weren't so true!!

(Thanks to Ben Cunningham for passing this along).

Posted by Jeff Cornwall at 09:02 AM | Permalink | Comments (1)

Eric from Canada e-mailed me the following question:

How exactly would you answer the question: "why should I work for your company when there is a bigger company offering me a great salary?"

I found that just listening to what the employee really wants and being flexible in how you structure the offer and the job can be very effective.

There was a manager I wanted to hire to run a new program we were starting, as he was one of the best in our industry. He worked for a large, national company. I knew I could not match his salary, but I did not give up.

I got to know him and found out what he was really looking for in his career and in a job. He wanted to have more control over his department. That was easy as we were small and our structure was quite decentralized. He could run the new program like it was his own business.

He wanted to have some real ownership in the business he worked in. We could do that, too, as we set up separate corporations for each new program we started and we had already planned to offer a small ownership stake for the right manager. Equity or equity-like incentives can be a way to defer compensation until you can afford it, and create an incentive that gets everyone pursuing the same goals.

There was one more thing he wanted, however, and it was clear it was a deal breaker for him. His current employer had very strict rules on vacations and holidays. He was a Viet Nam veteran and had wanted to go to Washington, DC each Veterans Day to remember his fallen comrades. His current employer's rules did not make it possible to guarantee that, and he had missed the last two Veterans Day observances. So, in my offer I promised him that he would be guaranteed Veterans Day and one work day on either side of it off each and every year (they were counted as vacation days). That was all it took to convince him that we were the best place for him to work. He came to work for us taking a significant cut in base salary from what he had been making before.

I also find that being able to work in an entrepreneurial company with a team that is excited and committed to what they are doing attracts many managers to smaller companies. So when you interview prospective management candidates make sure to use your team as not just part of the interview process, but to sell the prospective employee on the benefits of working in your company.

Finding management talent in the first place can be a daunting challenge. For example, where should you look to find a Controller, a Marketing Director, or a Human Resource Manager for your company? I recommend using your network. Talk to your CPAs and your attorneys. Talk to your advisory board. Talk to other entrepreneurs that you know. Talk to people you trust in your industry. That is usually the best way for entrepreneurs to get a good pool of candidates for their growing businesses.

To attract them to your business you need to listen to what they want beyond the salary, and find creative ways to put it all together. Once you know who you want, get into the selling mode and use all of the important attributes you know are important to them in your pitch.

Posted by Jeff Cornwall at 06:32 AM | Permalink

From National Dialogue on Entrepreneurship:

Last week, a new report was released by the Committee on Capital Markets Regulation, a private group of 22 prominent business leaders and economists, that recommends Section 404 of Sarbanes-Oxley (which requires extensive auditing of internal controls) be relaxed, especially for smaller firms. The report calls for a complete overhaul of how the Securities and Exchange Commission and other agencies regulate capital markets. Instead of focusing on enforcing specific rules, the SEC and other regulators should focus their work on general principles. The difference between "rules" and "principles" is often in the eyes of the beholder. So, expect lots of debate on this report's findings in the coming months.

My fear is any attempt to "simplify" will only make things more complex. Remember, the same major accounting firms that created the mess to begin with, then helped write Sarbanes-Oxley through their proxies on K Street in Washington, and now will likely be involved in shaping any reform. Any changes will require countless billable hours to interpret, no doubt.

Posted by Jeff Cornwall at 09:58 AM | Permalink | Comments (2)

I meet many MBA students studying Entrepreneurship who tell me they are planning to have a career as a venture capitalist. Guy Kawasaki recently wrote a post at his site offering some lengthy, but very good advice to young aspiring VCs. Here is his conclusion (edited to make it "G" rated).

Here's the bottom line: You should become a venture capitalist after you've had the [expletive deleted] kicked out of you. This will yield at least two positive results: First, you’ll stand out from the full-of-[expletive deleted] artists who entered the business when they were young. Second, you'll really be able to help your portfolio companies--which is what venture capital should be all about. See you in ten or twenty years.

It is similar advice that I offer to those who aspire to teach Entrepreneurship. Go out and be one, or at least work for one. A little miles under your belt and some wear on the tires goes a long way!

(Thanks to James Shewmaker for passing this along).

Posted by Jeff Cornwall at 08:45 AM | Permalink

Small business growth and decline tends to persist and is not easily reversed, according to a study released today by the Office of Advocacy of the U.S. Small Business Administration.

"We know that overall small business is a dynamic sector of the economy," said Dr. Chad Moutray, Chief Economist of the Office of Advocacy. "This study shows that the growing and declining firms tend to stay in the same mode over time. Consequently, policies that affect growth or decline can have an impact on small businesses over a longer term than originally anticipated."

Drs. Rich Perline, Robert Axtell, and Daniel Teitelbaum of NuTech Solutions wrote Volatility and Asymmetry of Small Firm Growth Rates Over Increasing Time Frames with funding from the Office of Advocacy.

The report followed up a study from 2005 that examined firm growth rates by size of firm and industry type. That report found that firm growth tends to be relatively more concentrated among fast and slow growth firms. The current study examined growth rates over a five-year period, using special tabulations of the Census Bureau’s Business File dataset.

This is important information given the fact that 50% of the GDP in the US is made up of small business activity.

Posted by Jeff Cornwall at 11:36 AM | Permalink | Comments (1)

Kauffman's eVenturing has another outstanding collection of materials -- this month it is related to strategic partnerships.

For entrepreneurs building growth companies, engaging strategic partners tends to be par for the course. The bottom line is the right partner can drive success for your company while the wrong partner can be stifling. This collection provides entrepreneurs insights on identifying, selecting, and negotiating with prospective partners and covers ways to manage effectively the partner relationship to maximize chances for success.

Pay particular attention to the "wrong partners can be stifling" part of this collection. Getting locked in -- and by locked in I really mean locked in -- with the wrong partner is more than stifling. Strategic partnerships are most often with large, established companies in your industry. They have enough resources and enough lawyers to make your life miserable if you do not do things their way. Do your homework. Get to know their culture, talk to other companies they have done strategic partnerships with in the past, and hire a really good attorney who is experienced in such matters to make sure the deal it fair.

Go in with your eyes wide open. Don't sit down to negotiate a strategic partnership unless you are ready willing and able to walk away from the discussions if things don't look right to you.

Posted by Jeff Cornwall at 05:12 AM | Permalink

There has been a lot written over the past month on Jeff Bezos' plans for Amazon. As Bezos explained to Business Week when he first unveiled his plan, he wants to transform Amazon the on line store into Amazon the engine of the entrepreneurial economy.

Bezos wants Amazon to run your business, at least the messy technical and logistical parts of it, using those same technologies and operations that power his $10 billion online store. In the process, Bezos aims to transform Amazon into a kind of 21st century digital utility. It's as if Wal-Mart Stores Inc. had decided to turn itself inside out, offering its industry-leading supply chain and logistics systems to any and all outsiders, even rival retailers. Except Amazon is starting to rent out just about everything it uses to run its own business, from rack space in its 10 million square feet of warehouses worldwide to spare computing capacity on its thousands of servers, data storage on its disk drives, and even some of the millions of lines of software code it has written to coordinate all that.

Here is how the Bezos plan was described in USA Today:

That's the future Amazon.com CEO Jeff Bezos hopes to set in motion with the company's new direction. If you tease out Bezos' plan, you get to a point where a high school cheerleader sitting at home with a laptop could theoretically harness computing power, design capabilities, manufacturing and distribution from around the world, and make and market a cute little pink hot rod that would compete against General Motors.

Now that the ink has dried on Bezos' plan, I'd like to offer my take on it. His assumptions show that he never learned one of the most important lessons of the dot.com disaster. He does not seem to understand that markets really matter. For example as Pets.com illustrated, just because you can sell dog food through the Internet it does not mean that there is a market for such a service.

Starting a successful business has two critical pieces. First you need a viable product or service that you can deliver. That is the part that Bezos is focusing on.

But second, you need a large enough market willing to spend enough to cover your costs and leave you a profit. The dot.com kids only worried about the first part and never paid much attention to generating sales and profits. Just because we can enable a "high school cheerleader sitting at home with a laptop could theoretically harness computing power, design capabilities, manufacturing and distribution from around the world, and make and market a cute little pink hot rod that would compete against General Motors" does not mean there are customers for her product.

I hope we are not setting people up for even bigger failures by making part of the process so much easier. My fear is that it will encourage more people to ignore the customer part of the equation and start businesses that are doomed to fail.

Posted by Jeff Cornwall at 05:07 AM | Permalink | Comments (3)

It seems that biotechnology has gone from the hottest growth sector to yesterday's news in a blink of an eye. Offshoring seems to be the culprit. From SignOnSanDiego.com:

Increasingly, the venture capitalists who fund new life-science companies are shopping for existing drugs to refine instead of backing scientists to make discoveries. When startups are created, they're often minimally staffed. More drug companies are farming out research work to scientists in China, India and Eastern Europe, where tasks are done more cheaply.

For California, the birthplace of biotechnology, the stakes are high. Of the estimated 260,000 Californians who work in the life-science industry, about 70 percent are employed in high-paying jobs in drug, medical-device or diagnostic-tool companies. In San Diego, an estimated 36,600 employees work at about 500 companies, according to BIOCOM, the local biotech trade association.

Many of the highly touted biotech start-ups of a few years ago just did not pan out. And many of these, just like the dot.com's before them, had over-hyped their potential. I remember more than one investor talking about this biotech or that biotech being the next "Microsoft" investment. So as investors began to experience the reality of the risks in this industry, venture capitalists tied to that industry shifted their strategies.

In an effort to revive Wall Street interest, venture capitalists shifted to creating companies that develop late-stage products or existing drugs that can be revamped to treat other diseases.

Such companies don't require the big staffs or laboratories lavished on San Diego's pioneer biotechs, which often took a decade or more and spent hundreds of millions of dollars to get a novel drug to market. Instead, drug companies are stretching dollars by farming out tasks to U.S. contract research organizations or cheaper offshore companies.

America seems to be re-living the story of the hare and the tortoise over and over, never seeming to learn its lesson. Most of our economic growth is not coming from venture capital backed high potential firms. Although those deals get the headlines, their true impact on the economy is marginal. Even in the best of times, venture capitalists only pick about one real winner out of ten investments, and most only make about three investments a year. High potential deals do have their place in our economy. They can bring us breakthroughs that can shape markets of even create new industries. But they are not at the heart of this entrepreneurial economy.

Our economic growth is coming from small businesses that are prudently growing their businesses one job at a time, toward the goal of creating a sustainable venture that will build wealth over the long-term.

(Thanks to Jim Stefansic for passing this along).

Posted by Jeff Cornwall at 05:51 AM | Permalink | Comments (1)

Show Me the Money is hosting COTC this week.

Posted by Jeff Cornwall at 05:48 AM | Permalink

Arnold Kling has posted his second and third essays building off the recent book by Carl Schramm, The Entrepreneurial Imperative. I wrote a post on the first essay that addresses entrepreneurial capitalism earlier this week.

In his second essay, one of Kling's points deals with the importance of strong marriages and families in supporting entrepreneurship. Strong marriages to Kling are not just a social issue, but an economic one as well in our emerging entrepreneurial economy. Kling writes:

My one experience as an entrepreneur demonstrated the importance of a supportive spouse. At one point, I was ready to give up altogether, and my accountant, to whom I went for advice, was equally pessimistic. Only my wife thought I should try to keep the business going.

Another point that Schramm makes is that in a dynamic economy, safety requires taking risk. Counting on a large employer to maintain your standard of living is ultimately an unsafe approach. At one point or another, most people are going to have to make career changes. One career possibility is starting your own business. Help from a spouse can be crucial. Some couples benefit by starting a business together. In other cases, the fact that one spouse continues earning a living enables the other spouse to launch a business that takes time to achieve profitability....

New businesses often fail, but many families are strong enough financially to survive such a failure. They simply pick themselves up and move on.

In his third essay, Kling looks at reforming education through the power choice brought about by entrepreneurial educators.

In my view, the key to improving education is removing entry barriers and allowing alternative schooling experiments to flourish. From this perspective, the politicians of both parties who are most strongly "pro-education" are in fact the biggest obstacles to improvement, since their policies serve only to entrench the educational establishment.

Well said. This has been a long-term interest of mine, and a topic that inspired me to write a book to help entrepreneurial educators who wish to create alternative educational settings that offer choices beyond the public schools. My book, From the Ground Up: Entrepreneurial School Leadership, offers a model to plan and develop alternative private and charter schools using the tools and techniques from the field of entrepreneurship.

Posted by Jeff Cornwall at 12:57 PM | Permalink | Comments (1)