The Entrepreneurial Mind

See my commentary on Bush's plan to rescue the subprime mess at our new blog site, the LockeSmith Blog.

Posted by Jeff Cornwall at 08:59 AM | Permalink

I am pleased to announce a new blog called the LockeSmith blog. It is a joint effort of three of us here at Belmont. There will be periodic posts by Prof. Nathan Griffith (Political Science), Prof. Mark Schenkel (Entrepreneurship), and me. Here is the mission of the blog:

The Lockesmith Blog hopes to play an important role in the growing resurgence of the scholarship of classical liberalism through the exploration of the principles of individualism, private property and the free market, the rule of law, and social toleration.

The blog carries on the work started by Dr. Larry Hall, former Dean of the College of Arts and Science here at Belmont University. Larry was Nathan's mentor while here at Belmont, so it is only appropriate that he make the inaugural post.

We hope you enjoy this new blog. I will still be doing most of my ranting and rambling here at the Entrepreneurial Mind, but will also do cross-posts at the LockeSmith site. Please add the LockeSmith blog to your favorites and sign up for a regular feed so you don't miss a post.

Posted by Jeff Cornwall at 09:13 AM | Permalink

I had the pleasure of giving a guest lecture today based on our new book, The Good Entrepreneur (co-authored with Michael Naughton from the University of St. Thomas). It is so affirming that today's students are looking for more out of their business than simply cash. Don't get me wrong -- they want to be financially successful! But they also want so much more out of their lives and view an entrepreneurial career as a path to reach all of their goals in life.

In our discussion today we talked about the question: "Who is the good entrepreneur?"

Traditional entrepreneurial virtues have been thought of in terms like ambition, ingenuity, diligence, perseverance, tenacity, and self-discipline. While these virtues are necessary for building a financially healthy and successful venture, they ignore the fundamental purpose that leads many people to become entrepreneurs.

When we survey entrepreneurs and ask them how they define success in their businesses they will include things like building a certain type of culture in their businesses and creating good jobs for people in the same breath as building profits and wealth. Building a culture that reflects our intention of how we want to treat employees, customers, and other stakeholders in a way that is consistent with our core values requires that we broaden how we define entrepreneurial virtues. It does not mean that the traditional virtues listed above are unimportant or irrelevant -- quite the contrary. They are necessary to create a financially successful business. But they are not sufficient to create what we call a truly good company.

Being a good entrepreneur challenges us to think about the virtues that define our character. Character forms with each act and each decision we make in our business. It is formed by the opportunities we choose to pursue, who we choose as business partners, who we hire, our product and market decisions, and how we engage our local communities. Every business decision or action we take, no matter how small, can shape this character.

The executives at Enron did not wake up one morning and suddenly decide to cheat their employees and shareholders. In all probability their actions were the culmination of a career of actions and choices that shaped who they became as people, which dictated how they would act when it came to the big decisions that led to that company's demise.

We choose to look at entrepreneurship in our book from the classic cardinal virtues of prudence, justice, courage and temperance.

Prudence refers to being good stewards of the resources we pull together from others to build the business. We understand the obligation we have to those who give us their money, their labor, their business, and ultimately their trust. The good entrepreneur does not take that trust lightly.

Justice refers to treating people fairly. For example, if our employees help us create profits and wealth, it is just to find ways to share that with them be it through compensation, profit sharing, phantom stock, stock options and so forth.

Courage doing what is right in spite of the added risks and challenges that this path in life creates.

Temperance is understanding that we are more than entrepreneurs. We are spouses, parents, friends and citizens. We need to take actions that lead us to be good in all that we do. That may mean that we temper our ambitions to make sure we have time for family and friends.

So who is the good entrepreneur?

The good entrepreneur is intelligent and technically competent. She is a good steward of the resources and gifts she has available. She is prudent.

The good entrepreneur builds strong relationships in his family, with employees in his business, and in the broader society. He does this by being just.

The good entrepreneur overcomes obstacles in building her company, but does so without ever compromising what she knows to be truly right. She does this with courage.

The good entrepreneur moderates his work ethic with rest. He does this through temperance.

I will be writing more on all of this as our book comes closer to being released next year by Regal Books.

Posted by Jeff Cornwall at 10:13 AM | Permalink | Comments (6)

Oregon politicians seem to have an ambitious agenda to expand socialized entrepreneurship (this is what I call government funded and government directed entrepreneurship initiatives for any new readers). From the National Dialogue on Entrepreneurship:

The new Oregon Innovation Plan focuses on supporting place-based innovation capacity. It proposes to spend roughly $38 million to support initiatives in three areas: enhancing the competitiveness of existing industry, improving technology commercialization, and increasing the state’s overall capacity for innovation. Among the Plan’s specific recommendations are the creation of new angel networks across Oregon; the opening of new research centers for wave energy technology, nanotechnology, and drug discovery; and extensive new efforts to support existing firms in the manufacturing, food production, and seafood industries.

This is bad policy. The best thing the state of Oregon could do to increase innovation and entrepreneurship is to simplify and reduce taxes, and cut any regulations that are getting in the way of small business formation and growth. Use the $38 million to cut taxes. Also, angel investment networks don't need the government's help in getting started. Freeing up the market will spur business creation, which in turn attracts investment money. Finally, the worst part of this new policy initiative is to have politicians and bureaucrats pick winning industries. That is what free markets do best.

Posted by Jeff Cornwall at 03:35 PM | Permalink | Comments (3)

The Wall Street Journal has four good examples of how small businesses have used on-line marketing to boost sales. These case examples use Facebook, Video Demos on-line, Endorsements on-line, and YouTube as tools to enhance their marketing efforts. The article offers a clear summary of what these small businesses did, how much it cost and how well it worked.

Posted by Jeff Cornwall at 10:58 AM | Permalink | Comments (2)

It is always interesting to see what issues catch people's attention. The Wall Street Journal ran a story on serial entrepreneurs that generated several e-mails to me about this topic. From this article:

In 2000, Mr. Stewart published a study with two other researchers looking for common traits among serial entrepreneurs -- which he defined as those who had owned and operated three or more businesses. Of the 664 entrepreneurs studied, only 12% fit the bill. But those who did scored higher in all three categories examined: They had a higher propensity for risk, innovation and achievement. They were less scared of failure. And they were more able to recover when they did fail.

Beyond that, many serial-preneurs bring tactical advantages from their first venture to apply the second and third time around. For instance, they recruit top talent from their original companies to subsequent ventures. They double-dip financially, getting money -- and connections -- from people who backed their earlier brainstorms. Several lean heavily on a trusted partner for financial, professional and emotional support in whatever endeavor they undertake.

This was our experience with the health care ventures that we started in the 1980s and early 1990s. With each venture we started we learned from our successes and missteps. We became more confident in our ability to execute. There is much talk of the learning curve within a new type of business, but I am convinced that there is a start-up learning curve that cuts across specific businesses and brings down the time and cost of any new start-up you pursue. We also built a reputation that helped attract talent and resources.

By the way -- I want to thank the Journal for creating links that allow free access to such articles for bloggers to use for their readers. This has opened up more of their content to those beyond their subscribers.

Posted by Jeff Cornwall at 10:26 AM | Permalink | Comments (1)

The SBA has released their updated small business statistics. Here are a few of the highlights:

- Represent 99.7 percent of all employer firms.

- Employ about half of all private sector employees.

- Pay more than 45 percent of total U.S. private payroll.

- Have generated 60 to 80 percent of net new jobs annually over the last decade.

- Create more than half of nonfarm private gross domestic product (GDP).

- Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).

- Are 52 percent home-based and 2 percent franchises.

- Made up 97 percent of all identified exporters and produced 28.6 percent of the known export value in FY 2004.

- Small innovative firms produce 13 times more patents per employee than large patenting firms, and their patents
are twice as likely as large firm patents to be among the one percent most cited.

The number of new small businesses has grown steadily over the past few years. In 2002 there were about 570,000 new small firms. That number grew to almost 650,000 new businesses in 2006.

The new stricter bankruptcy laws have clearly had an impact. Bankruptcies in small businesses had been 34,000 - 39,000 per year for several years, but dropped to 19,000 in 2006.

Even with our growing dependence on small business in the US economy, the regulatory costs for small businesses continues to grow. The average employer with 20 employees pays about $7, 647 per employee in regulatory costs ($1,304 of this is tax compliance). The average cost per employee for large firms is about $5,282.

Posted by Jeff Cornwall at 08:31 AM | Permalink

I have long been an advocate for small businesses not ruling out television advertising. Cable ads, which can connect a small business with a very targeted audience, can run for as little as $100-200 per spot.

One local business here in Nashville, Evans Glass, doubled their sales over about three years. The owner attributes most of this gain to adding television advertising to his budget. Mind you, this was a major commitment for a small business like his. He committed about 10% of sales to the television advertising campaign. In effect, this advertising strategy paid off almost ten fold in increased sales. We wrote a case study about this business, which is quite popular with our MBA students.

The Wall Street Journal reports that the production cost for television ads can now be cut even further with some new on-line tools.

Once considered prohibitively expensive, advertising on television is fast becoming a viable option for small businesses, thanks to new online services that provide everything from customizable templates for commercials to commercial-placement services.

There are several on-line services to assist small businesses in their advertising. The Journal article highlights these:

There are some things to remember when developing a television ad campaign. First, make sure that is where your customers are and make sure that this type of ad works for your business. Keep your ads clear, visual, and memorable. Quality matters in your ads, but quality does not always mean a high cost. Your ad should call them to act. And experts tell us that content sells products.

Posted by Jeff Cornwall at 02:24 PM | Permalink

I wrote a post a couple of weeks ago about the growing number of small businesses using blogging as a tool. The Wall Street Journal has a great article on the use of blogs by small businesses for improving sales.

Most owners use blogs -- which are easy to set up and require little technical savvy -- to drive people to their company Web site. But entrepreneurs also use them to get consumer feedback or answer commonly asked questions. And some blogs serve as stand-ins for Web sites as a way to describe what a business does.

One of the points they make is that blogs can be a great tool to increase traffic to a small business web site. Small businesses often don't even get enough traffic to show up on a Google search of the company name.

To see how a blog can change that go to Google and type in the following terms: "Jeff Cornwall", "Entrepreneurial", "Entrepreneurship Blogs." My site almost always pops up near the top on the first two searches, and I am usually on page one with the last one. I haven't had to pay anyone to optimize searches for these terms -- it has come from the traffic at the blog. A blog can be a great way to bootstrap increased traffic to a website.

Posted by Jeff Cornwall at 10:46 AM | Permalink

I have been really enjoying golf lately. And much of that has to do with technology.

I never used to play any woods. I found them too hard for me to hit. So I slogged my way around the course hitting irons. Luckily I hit them fairly well most of the time.

But this year I decided to make a change -- I guess it is an age thing, as I noticed my irons were not going as far as they used to.

First I tried one of the new hybrid clubs. What an easy club it was to hit! So I bought another, and another, and then another. I hit them all so well that I stuck my 1-4 irons (yes, I even carried a 1 iron) in the garage. Then I did the unthinkable. I started hitting one of those really big-headed drivers. I had not hit a driver since high school, and even then could not hit it very well. But, are the new drivers easy to hit.

Now you still have to make a good swing. They don't hit it for you. But when you swing well it goes farther. And when you are little off, you hardly notice and it still goes pretty far.

The same thing is true for technology in business. It can't make a poor business model work, or an incompetent manager any better. But the right technology in the right hands can improve productivity and performance. It makes you more efficient.

I still think it is wise to be a late adopter. All of these golf clubs have been around for a while -- many of you probably chuckled when I called them "new." I waited for two things to happen. I wanted them to get the kinks out of the new clubs, and I wanted the prices to come down.

That is also how technology can work best for a small business. Wait until they get it right and wait until the wild-eyed first adopters are done bidding the prices for the latest and greatest gadget up. I was one of the last people I knew in business to get a fax machine in the 1980s. But by the time I bought one they worked really well and the prices had fallen through the floor.

My new driver was a gift from a golf buddy. He got it at Wal-Mart for $19.96. I hit it as far as any $400 driver. And my hybrids were all last year model on close-out in the bargain bin.

Always remember that efficiency is a simple ratio of performance over cost. Since I am not the brightest business person, and definitely not a very talented athlete, I always work on getting the bottom number of that ratio as low as possible. I wait for the cost of any technology, be it for golf, business or entertainment, to go down -- way down. That always puts the efficiency ratio in my favor!

Posted by Jeff Cornwall at 05:46 AM | Permalink | Comments (1)

Although printed training materials are still the most commonly used by small businesses, this artilce from the Wall Street Journal reports that more are turning to online training to help cut costs.

Posted by Jeff Cornwall at 09:59 AM | Permalink | Comments (2)

This will be a light week of blogging. We are on break this week between our summer and fall terms.

My column in yesterday's Tennessean looked at some of the basic human resource practices that can be used when bootstrapping a small business.

For most small businesses, employee expenses are the highest single cost. To help keep control over cash flow, the entrepreneur should keep a careful eye on payroll expenses and consider some bootstrapping techniques related to human resources. Entrepreneurs often try to hire people in advance of growth, assuming that it is better to have employees already in place when new business comes in. But this can put a significant strain on cash flow, as you are trying to carry more people on payroll than your current sales can support.

Posted by Jeff Cornwall at 07:27 AM | Permalink | Comments (1)

One of our alumni, Dr. Jim Stefansic, passed along an interesting article from TechJournal South on the current state of seed capital. It is not very encouraging for start-ups in need of early stage funding. The article cites high risk, too long of a time to a liquidity event, too much need for hands-on assistance, the inefficiencies of small seed capital investments, and investor pressures within the venture capital market as the reasons for VC movement away from seed round funding.

Posted by Jeff Cornwall at 08:25 AM | Permalink

eVenturing has a new collection on efficient manufacturing strategies.

What can growing manufacturing companies do to compete effectively in today's global economy? One answer is to apply the quality and efficiency techniques previously associated only with large corporations. Lean Manufacturing, Six Sigma, and, more recently, Six Disciplines are proven ways to reduce costs, improve quality, and maintain margins. Small to medium-sized growth manufacturers are now successfully employing these processes to stay competitive. This eVenturing collection offers insight into efficient manufacturing strategies that smaller companies can use not only to produce products sold directly to consumers but also those that meet the needs of larger clients requiring use of such strategies. Stories of individual manufacturers that have implemented "Lean (Buck Knives, for example) illustrate the challenges and rewards." Tools and templates provide a look at specifics of the process.

One of our alumni, Charles Hagood, has developed two very successful businesses (TAG and Healthcare Performance Partners) helping companies apply these techniques in manufacturing and health care settings.

Posted by Jeff Cornwall at 07:41 AM | Permalink

There are two key steps to building a strong workforce. Get good people in the front door and make sure they don't just walk out the back door.

Several recent studies have highlighted the difficulty that small businesses are having in finding qualified workers. That is, they are having a tough time getting workers in through the front door.

A new survey suggests that many small business owners have done an effective job of keeping their workers from walking right out the back door to another employer. According to a National Federation of Independent Business Small-Business Poll released yesterday on unemployment compensation, nearly half of all small businesses, 49 percent, experienced no employee turnover during the past 12 months.

In a period of low unemployment that is remarkable. Creating a positive culture, offering good working conditions and good jobs, and fair compensation all play a roll in retaining workers. It seems that many small businesses must be getting this right.

Posted by Jeff Cornwall at 07:05 AM | Permalink | Comments (1)

We are honored and excited to announce that we will be hosting a premiere of the documentary film from the Acton Institute, The Call the Entrepreneur, here in Nashville, TN.

If you are not in Tennessee or even in the US, there are several other premieres scheduled around the US and around the world.

UPDATE: Here are the details of our premiere:

Date: Monday, September 10, 2007
Time: 5:00 p.m. CDT
Location: Beaman Center, Room A/B on the Belmont Campus in Nashville, TN

Posted by Jeff Cornwall at 09:45 AM | Permalink | Comments (2)

David Evans, co-author of the book Catalyst Code: The Strategies Behind the World's Most Dynamic Companies has written a fascinating essay on the impact of blogs.

The blogosphere is one of the biggest and most influential global industries created in the last decade. Technorati tracks almost 100 million blogs and estimates that about 20 percent of blogs are active in the sense that they were updated in the last 90 days. Hundreds of millions of people globally either operate blogs or contribute to them over the course of the year. With 1.5 million new postings a day, blogging likely consumes billions of hours of effort globally. According to comScore, blogs accounted for slightly more than a third of the 173 billion US Internet visitors in May 2006. All told blogs have become a significant source of competition for all of the on and offline businesses that make their living attracting eyeballs and selling access to those eyeballs to advertisers. The blogosphere creates vast amounts of news and opinion. It is one the major destinations of the many readers fleeing newspapers.

He goes on to examine the motivation behind all of this blogging.

(Thanks to Bill Hobbs for passing this along)

Posted by Jeff Cornwall at 10:58 AM | Permalink | Comments (6)

The NFIB's Chief Economist William Dunkelberg released this statement on small business job growth:

"Small-business owners managed to do some solid, but not spectacular, hiring in July. Sixteen percent reported increasing employment an average of 4 workers per firm, compared to 11 percent who reported workforce reductions averaging 2.4 workers. For all firms, this was an average increase of 0.4 employees per firm. Seasonally adjusted, the numbers are less impressive, with 14 percent increasing employment by 3.7 employees per firm, 13 percent reducing employment by 2.6 workers and, including all firms, a gain of 0.1 employees per firm. In construction, 20 percent increased the size of their workforce an average of 4.2 workers, and 12 percent cut employment by an average of 3.3 workers, producing an increase for all construction firms of 0.4 workers per firm (not seasonally adjusted).

"Twenty-three percent (seasonally adjusted) reported unfilled job openings, down three points from June. The decline in the percent of firms with unfilled openings anticipates an increase in the unemployment rate in the months to come. Thirteen percent of the owners reported that the availability of qualified labor was their top business problem, unchanged from June. Only taxes and the cost and availability of insurance received more votes for the number one business problem. No one likes high energy prices, but for service sector firms, this is not likely to be a top problem.

"Over the next three months, 17 percent plan to create new jobs (down three points), and 10 percent plan workforce reductions (up three points), yielding a seasonally adjusted net 13 percent of owners planning to create new jobs -- up a point from June. Fifty-four percent reported hiring or trying to hire new workers, 80 percent reported 'few or no qualified applicants' for their positions.

"That's a tight labor market," Dunkelberg concluded.

Since small business employs about 50% of all American workers, we need to keep our eyes on these trends.

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

Blogging has become a popular tool for bootstrap marketing. As of 2005, 10% of small businesses were using or were planning to use blogs for their businesses. Blogging allows for very targeted, personal contact with a customer base and can build strong customer loyalty.

Blogging can become a good public relations tool. It can set you apart as an expert in your field, which can lead reporters looking for content for their stories. I promise that I would never have been called by the Wall Street Journal, Business Week, US News, etc. for interviews had I not been a blogger.

There are some suggestions and cautions to keep in mind before you take the plunge:

- You need to be prepared to be consistent. Multiple posts each week seem the most effective at building a loyal following.

- Don't just hype your business. Avoid crossing the line and becoming too self-serving or self-promoting as blog readers will not come back to such a blog for very long. Find content that will be of interest to your audience. It probably would be best to either be general content about your industry or material that would interest your target market. For example, a law firm may write a blog on employment law.

- It takes time to do it well. Plan on several hours each week to do research and to write. It has to become part of your routine. I generally start each day very early in the morning on my back porch (after our morning walk) blogging.

- Be patient, as it will take time to build an audience. You need to work on this by sending links via e-mail to reporters, other bloggers, customers, etc. to build awareness.

- Need to be cautious about what you say. Remember that the WHOLE world can read what you say, including your employees, your competition, your banker, etc.

A blog site called Bootstrapper has put together a great list of blogging resources if you are ready to give it a try.

Posted by Jeff Cornwall at 07:08 AM | Permalink | Comments (2)

I wrote a post in 2005 about the boom in the pet industry and the opportunities it was creating for entrepreneurs. It seems that our obsession with our furry companions has not slowed down a bit. Last week's cover story in Business Week offered this example:

If there's still any doubt whether the pampering of pets is getting out of hand, the debate should be settled once and for all by Neuticles, a patented testicular implant that sells for up to $919 a pair. The idea, says inventor Gregg A. Miller, is to "let people restore their pets to anatomical preciseness" after neutering, thereby allowing them to retain their natural look and self-esteem. "People thought I was crazy when I started 13 years ago," says the Oak Grove (Mo.) entrepreneur. But he has since sold more than 240,000 pairs (a few of which went on prairie dogs, water buffalo, and monkeys).

Sorry boys, but not for you....

Keb and Delbert

Posted by Jeff Cornwall at 05:00 PM | Permalink

One common practice that many small business owners have chosen as a means of helping employees get health insurance is to encourage them to buy their own policy and then get reimbursed by the business. StartupJournal examines the pros and cons of this approach. The article suggests that a small business owner in Utah is the first to use this approach, but I have heard of many small businesses reimbursing employees for health insurance over the past couple of years.

How does it work?

The tax wrinkle used...involves something called a health reimbursement arrangement, or HRA. Employers set aside a certain sum every month, say $200, that employees can use for health expenses. The employer can write off the expense for tax purposes, just like traditional health benefits, and the money doesn't count as taxable income for the employee.

The tax advantages of HRAs resemble the better-known health savings accounts, or HSAs. Both plans are sometimes used by large employers that offer comprehensive benefits and want to supplement it by giving employees tax-free dollars for noncovered medical costs.

The key difference is that employees can use the money in an HRA, but generally not an HSA, to buy health insurance. That's why an HRA can be used not just to supplement health insurance but also to buy it.

At a business with generally healthy employees, an HRA plan, in effect, allows the owner to cover a good chunk of most people's insurance bills at a fraction of the cost of a traditional group insurance plan. The idea is especially attractive to small businesses that don't have the leverage to drive a good bargain for group coverage.

One of the shortcoming of this approach according to critics is that it can be difficult for employees with pre-existing conditions to purchase affordable coverage. Also, there are questions being raised about the legality of this approach to helping employees get health insurance coverage.

I believe that this is a positive innovation in the market. It has promise as a means to help move health care back into the free market. Each employee can shop for the level and type of coverage that they want to purchase. This is a much better direction than the calls for socialized health care we are now hearing from so many politicians.

Posted by Jeff Cornwall at 10:00 AM | Permalink | Comments (1)

Many small business owners are turning to tools like Google Earth as a bootstrapping tool to bid jobs and prospect for clients. These tools allow free access to areal images that can offer amazing detail of specific locations. Many of these tools are free, but some charge a small annual fee to get premium services.

From the Wall Street Journal:

Roofers aren't the only ones taking advantage of aerial mapping -- landscapers, pool maintenance people, real-estate agents and insurance companies are also using such services. In some cases, they're checking out specific locations where they're bidding for or working on a job. In others, they're perusing the images for signs -- such as pools or big lawns -- indicating homes that might be potential clients for their services.

Here is a sample of an image from one of these tools, zilow.com, which is geared toward real estate. The image is of Belmont University. My office is in the complex of buildings toward the top, right center of the image (the dark roofed building that looks like a backwards "L"). To illustrate that these images are very accurate, take a look at the parking lot to the right of the building complex in the upper right of the image -- you can make out cars in the lot. To illustrate that these images can be dated, those parking lots are now our new Inman Health Sciences building that has been open for about a year.

Here is the same image from Google Earth (also missing the new building):

To illustrate how these tools can be used, here is an example. We recently fenced in our backyard. We needed to get the fence stained, so I called a couple of painters recommended by the local paint store. One of them had to drive about 50 miles round trip just to take about five minutes to measure the backyard. He could have used one of these tools to get a view of our yard and placed a bid based on what would be a fairly accurate measurement. Since he could not see the fence this way, he would have been wise to make the bid contingent on the height and style of the fence being what I told him over the phone. The really bad news for him was that after taking over an hour to drive to my house to get the information he needed to make a bid, he did not get the job.

Posted by Jeff Cornwall at 07:23 AM | Permalink | Comments (1)