The Entrepreneurial Mind

A common question I get asked is, "Are there any grants out there for start-up businesses?"

The assumption is that the government gives out grants for businesses. While there are a few government sponsored grant programs for specific demographic groups or for specific types of businesses (for example, the SBIR program), they are not very common and not accessible to most entrepreneurs. To me, their relative obscurity is a good thing, as it is just one more step toward socialized entrepreneurship -- bureaucrats picking winning industries or using entrepreneurship to shape social policy.

We are, however, starting to see some private sources of start-up grant money. Universities are starting to set up grant funds for their student entrepreneurs. We have established a small fund here at Belmont this year. Donors like the thought of being able to help nascent student entrepreneurs as they try to start their businesses in their dorm rooms and in our hatchery program. We are able to offer our student entrepreneurs small grants that are targeted for a specific need they have in their fledgling businesses, such as a small piece of software, printing costs for things such as business cards, etc., etc. The students are not under a contractual obligation to pay us back, but agree "on their honor" to replenish the fund and help to grow it when their business becomes more successful and has the money to do so.

Micro-lending programs are growing in their popularity and success around the globe. These funds (often private) give out similar funding, usually in the form of loans. They are not grants, but are still designed to assist those who would never get a dime from a traditional bank or investor. Most recipients are in poverty and see free enterprise as the best means to gain economic independence.

Now the founders of Facebook are launching their own version of this type of program. From Rueters:

Online social networking phenomenon Facebook Inc said on Monday its backers have created an unusual $10 million fund to dole out grants to start-ups with ideas for innovative Facebook applications.

Facebook is working with its primary venture backers, Accel Capital and The Founders Fund, to create a way for people with new ideas to receive an initial funding grant of $25,000 to $250,000 that does not require the entrepreneur to give up any equity in the business they create, as venture capital does.

They fund projects that contribute to Facebook. These ventures can be for profit or non-profit.

We are also seeing more limited projects like Bang Ventures and their "You be the VC" popping up. And last year I wrote about venture capital firms holding open forums for all comers to present their ideas (I admit, I was a bit cynical about this one until I interviewed a VC running one of these events).

Although not yet widespread, these types of private efforts hold the best hope for the efficient and effective spread of free enterprise at the grassroots level. Let's keep government out of this important economic function.

(Thanks to Sarita Stewart and Natalie [I Just Got a Promotion] Wozniak for their suggestions toward this post).

Posted by Jeff Cornwall at 06:12 AM | Permalink

Kauffman's eVenturing has put together yet another great collection of resources for entrepreneurs. The latest is on outsourcing. It has the latest thinking and ideas on how best and when to outsource.

Posted by Jeff Cornwall at 04:18 PM | Permalink | Comments (1)

The National Dialogue on Entrepreneurship summarizes an interesting new report indicating that angel investors are liking the deals they see these days:

In its Confidence Report earlier this year, angel groups belonging to the Angel Capital Association predicted that the quantity and quality of entrepreneurial investment proposals in the coming year would surpass 2006 levels. A mid-year check by the ACA shows that those predictions were not just idle boasts. Fifty percent of survey respondents expressed that their group's deal flow had continued to increase in quality and quantity during the first six months of 2007, and most of the remaining respondents said that deal flow was similar to 2006.

The report also suggests that the informal system of financing, with angels usually getting in early stage and then handing off to VCs for later rounds, seems to be working more smoothly from their perspective:

Angel groups also expressed optimism regarding relationships with venture capitalists. A majority of angel group leaders (73.7) thought that the relationships between VCs and angel groups had improved in the last three years. Reasons given for the improved relationship with VCs included: market segmentation, increased understanding about their respective roles in early and later-stage financing, better deal structuring, and good company referrals, among other things. Forty-four percent of the angel groups in the survey had established partnerships with VC firms to expedite co-investments or follow-on investments.

Posted by Jeff Cornwall at 09:53 AM | Permalink

Imagine a world where all you have to do is send out an invoice and customers quickly send you the money they owe you.

Wake up and smell the roses! That world only happens in your dreams. Collections are one of the most important, and at times most challenging, aspects of any business that depends on accounts receivable for cash flow. I am amazed at how passive many small businesses are about this issue. They seem to be afraid to upset customers. My advice is this -- if they are not good at paying you probably don't want them as a customer.

One strategy is to outsource collections of A/R, or even to hire a factor. Factors are expensive, often charging 5-7% of your accounts. That can amount to the same as borrowing against these accounts at an interest rate of 70-100% annual interest rates.

The Wall Street Journal reports on new software programs that allows small businesses to keep collections in-house and under your control at a reasonable cost. There are several options out there, so make sure to find the one that fits your needs and your business situation best.

Posted by Jeff Cornwall at 06:12 AM | Permalink | Comments (2)

I have the honor and pleasure of having Joe Keeley here on campus as our Entrepreneur in Residence this week. Joe is founder of College Nannies and Tutors, headquartered in Minnesota. From their website:

We serve the short and long-term childcare needs of today's working families as well as foster the growth of children's education and development through our experienced nannies. Our services are designed to provide busy parents with the childcare support they need at each developmental stage of their child's life. We provide a safe and easy means for families to find a qualified nanny to work in their home.

They currently have over franchise locations operating or under development in 13 states.

Seven years ago Joe was a sophomore at the University of St. Thomas where I used to teach. He wandered into my office with what he thought might be a way to make some extra cash during the summer. He was working as a nanny for a family in Edina, MN. Several families in the neighborhood told him that they would pay him money if he could find a college student to be a nanny for their kids. The next summer Joe continued to nanny, but also placed 12 college students as nannies for a $300 finders fee. Thus was born his concept.

He worked on the business while a student in our program. And when he graduated took the risk of running the business full-time. During the first year he entered every business plan competition he could find. He says that he generated more cash from awards in his first year than he did from revenue from the business. But, that cash was enough to make it through the start-up period. It got him to the point where he had a proven business model that attracted the investment capital he needed to scale up the venture.

What a thrill it is to be able to have a former student come to campus to teach our current students.

Here are some of the lessons Joe has learned over the past seven years that he shared:

- The importance of a business's revenue model. This is the hardest part of planning a business, but in the end is the most important. Getting the revenue model right assures the cash flow you need to survive the difficult early years. Joe learned that his original model of only getting placement fees was too limiting. He eventually found a way to employ the nannies and take a percentage of each dollar they billed out.

- Think! -- Knee jerk reactions are not a good strategy. Impulsive decisions rarely work out very well. As Joe told our students, the old wisdom of the importance of sleeping on a major decision has always served him well.

- Investor relations. Investors should offer so much more to your business than just their money. Their expertise and connections can often be as valuable as the cash they bring into the business. Joe added a partner to his business after he graduated. Although the partner infused needed capital, he says that the experience and wisdom that his partner has shared has brought even more value to his business.

- Scalability - what's right for you? Know your own personal aspirations and build a business model that fits what you want out of your business and the life style you want to live. Not every entrepreneur aspires to build a national company.

- Remember the 3 M's Joe told our students to evaluate their ideas on: 1) Money - how much to start, how much returned, 2) Market - is there one? How big?, and 3) Me - does this fit with your personal goals, values, interests? Are you passionate? Those of you who read this blog regularly know how important I believe this kind of thinking is when evaluating ideas.

- The importance of creating long term value. To build real value you need to build a business that can run without you. That requires systems. Joe has a goal of removing one task from his job every six months by building a system to make sure that task will get accomplished by someone in his organization.

- Finding the balance between putting out immediate fires and "fire proofing" projects. This is sound management advise for any business.

Joe has learned his lessons well. Although I am proud of all that he has accomplished in business, I am even more proud of the level of integrity he has shown at each step along the way.

Posted by Jeff Cornwall at 12:27 PM | Permalink

My column this week in the Tennessean encourages entrepreneurs to translate their ethics and values into concrete actions in their businesses.

While business ethics is getting much more attention in the press, in the boardroom and in the classroom, I am concerned that our definition of business ethics is sliding into a legalistic world of rules compliance.

Whether it's in everyday life or in the business world, we have to be careful not to boil morality down to a simple list of don''s that serves as a checklist of how to be ethical.

Business ethics should so much more than a list of rules to follow. It should be a much broader set of standards of how we treat one another..

Posted by Jeff Cornwall at 05:27 AM | Permalink | Comments (1)

Belmont University's most recent Regions Outstanding Undergraduate Entrepreneur of the Year, Cameron Powell founder of River Rock Media Group, continues to have success with his business. He recently was contracted to shoot a video for Dolly Parton, who is trying to reach a broader audience through an expanded use of the web as a promotion tool for her music.

You can see the video here at Dolly's website.

Posted by Jeff Cornwall at 04:47 PM | Permalink

Read Nathan Griffith's essay on why Social Security reform is so difficult in the US today at our LockeSmith blog.

Posted by Jeff Cornwall at 05:52 AM | Permalink

There is a good article on the importance of succession planning in family business at KraftCPA's on-line newsletter:

Succession planning is important in any business, but it's sometimes overlooked in family-owned operations. This is a big mistake. There are numerous former family-run companies that no longer exist due to poor or no succession plan.

The plan needs to be well thought out and discussed with everyone affected. Don't just assume that a son or daughter will want to carry on the family business. Even if your children say they will take over, they may not have the true desire required to continue a successful operation.

We see a lot of these issues in students who are considering, and being considered for, taking over family businesses. There is often a communication breakdown, with lots of unrealistic or inaccurate assumptions by parents and children. This type of planning requires long-term, open, honest conversations about what the future will hold for all involved.

You can find the full article here.

Posted by Jeff Cornwall at 05:11 AM | Permalink

The story of the dry cleaners who got sued for $67 million by a judge for losing a pair of his pants has taken a sad turn. From the Washington Business Journal:

The Chung family said it closed one of its dry cleaners in D.C. after losing money fighting the high-profile lawsuit involving a missing pair of pants.

South Korean immigrants Jim Na and Soo Chung, who operated Custom Cleaners...for seven years, were sued in 2005 by D.C. administrative law judge Roy Pearson for $67 million for mishandling a pair of pants.

The amount in the high profile case was later lowered to $54 million.

Despite winning the suit that went to trial in June in the D.C. Superior Court, the Chungs spent money fighting Pearson and ultimately had to close the store, according to a press release issued by their attorney.

Pearson is not giving up on his attack on these small business owners. He is appealing the court's ruling, so the case goes on and the legal costs continue to grow for the Chung family.

Karen Harned, executive director of the National Federation of Independent Business Legal Foundation, had this to say about this case:

"Small-business owners, like the Chungs, live in fear every day that they will be the next victim of a frivolous lawsuit and could possibly lose their business. For the Chungs, this fear has become a reality - forcing them to close the doors to Custom Cleaners. Even after they were victorious at trial, the costs and pressures of the ongoing lawsuit have now taken the business that they worked so hard to maintain and operate. It is disgraceful that our legal system operates this way. Outrageous litigants should not be able to use our judicial system to take advantage of innocent small-business owners.

"NFIB hopes the D.C. government will follow through with the proper proceedings to ensure Mr. Pearson is no longer entrusted with the authority to make legal decisions on behalf of the people of the District of Columbia. Removing Pearson's robe as an administrative judge is a small, but important, step towards changing the system so that the courts are no longer used to kill the American dream. It unfortunately is too late to save Custom Cleaners. However, we hope this regrettable story will help the public and government officials realize that tort reform is needed to prevent these types of frivolous lawsuits from killing another small business."

I could not agree more! I hope they do remove the judge from the bench for this despicable act. If these efforts are successful, I can see the headline: Judge Exposed -- Loses His Robe and His Pants.

Posted by Jeff Cornwall at 10:23 AM | Permalink

I share some of the latest news -- and not good news, I might add -- on the current push for new public economic policy coming out of Washington at the LockeSmith blog.

Posted by Jeff Cornwall at 11:00 AM | Permalink

Ephren Taylor will be speaking this afternoon at Belmont (5:00 in the Maddox Grand Atrium -- 4:30 reception). He started his first business venture at age 12, when he began making video games. By age 17, he built a multi-million dollar technology company; GoFerretGo.com. At his current venture, City Capital Corporation, Taylor oversees over $150 million in assets, serving a diverse client list ranging from Wall Street investors, top executives, professional athletes and even entertainment icons. Quite a resume for a young man still in his early twenties!

His talk is open to the public.

Posted by Jeff Cornwall at 07:49 AM | Permalink | Comments (2)

Many entrepreneurship programs seem to see the need to offer separate programming for women entrepreneurs. The logic is that they face a different situation and have different needs.

However, in most of my conversations with women entrepreneurs I hear that they don't want to be treated differently -- they just want to be treated as entrepreneurs. This is particularly true among the young entrepreneurs we work with.

Entrepreneurship researchers also crank out study after study looking for "gender differences" in the entrepreneurial experiences. While some subtle differences can be observed, fundamentally the experiences and issues entrepreneurs face seem to be remarkably similar.

A new study was just released by the SBA on gender differences among entrepreneurs. The authors found differing expectations, reasons for starting a business, motivations, opportunities sought and types of businesses between men and women -- and these result in differing outcomes. They go on to recommend that such observations should be taken into account when comparing the outcomes of ventures across genders.

That makes sense, but so does taking account differences in age, life stage, life style, marital status, rural versus urban location, etc., etc., etc.

That is why I start out every entrepreneur in their journey with a careful reflection on their aspirations, goals, financial needs, and non-financial needs. The outcome of this discernment should be foundational in any business plan. The business should reflect what you want and need to get out of the venture -- it is yours, after all.

So if women tend to want to pursue a venture of their own to allow for more flexibility in their family life -- a common theme I see with many female students in my classes -- then so be it. My job is to teach them the processes and skills that will help them achieve their goals. And those are the same process and goals that I teach any aspiring entrepreneur, whether they want to retire at 30 or simply provide a family with supplemental income from owning a business.

Think of it this way -- the same basic tools and materials are used to build a small starter home that are used to build a 20,000 square foot mansion.

Posted by Jeff Cornwall at 05:53 AM | Permalink | Comments (2)

A frustrating part of business planning is the uncertainly underlying so much of what goes into a new venture plan. Estimating revenues and expenses requires us to estimate, approximate and sometimes even guess at many key aspects of our forecasts.

Although good research can go a long way to improving our accuracy, at some point we still need to make assumptions about fundamental forces that shape our revenue and expense forecasts.

A common mistake that many entrepreneurs make is to quickly treat all of these assumptions as fact. Whether it be psychological denial of the risks we are about to face or simply our unbridled optimism, we seem to quickly forget how agonizing the process of making these assumptions was when we formulated our plans.

However, this is a dangerous course. In fact, we should embrace our assumptions as they can prove to be one of the most powerful management tools we have as we start and grow our new ventures.

During the planning process the entrepreneur should make a list of assumptions. Every time an assumptions is made about revenues or expenses, it should be added to the list. Once we have a draft of a complete plan, go through all of the assumptions to determine which are fundamentally important to the success of the venture. Which of these assumptions are likely to be ones that will keep us awake at night worrying about what the future will actually hold?

Take the most important handful, certainly no more than five assumptions, and use these to develop a couple of scenarios for the plan. I recommend that you treat the initial plan you have developed as your best case scenario. Even though you have assumed it is what is likely to happen, experience shows us that most of the time we have been too rosy in our forecasts.

Take the key assumptions that you have isolated and develop an alternative set of financial statements that reflect a poorer outcome occurs for all of them. This then should become your most likely scenario that you share with outsiders.

Then assume the absolute worst case for each of these assumptions -- no matter how dire it looks -- and develop a third set of financials. This is your worst case. Most of the time it predicts failure. Get comfortable with the fact that this may occur. Failure is a possible outcome in almost everything we do in life, and in a new business we need to understand what this failure will look like. We will be better prepared to launch the business if we understand what is really at stake.

The power of our assumptions does not stop with the plan, however. Our key assumptions become among our most important management tools. Develop ways to measure the variables behind these assumptions and commit to measuring them on a regular basis, be it weekly or monthly. Make sure that you continue to measure and review them over time as the business grows. These measures may include pricing assumptions, order size, frequency of orders, labor costs, worker productivity, market share, or any of a long list of common assumptions we have to make in planning. Make sure you create processes for you or your staff to measure them and use them in your decision making and future planning.

With this data you will have the means to catch problems as they are occurring and you are hopefully able to take action to adjust your plans as those problems are unfolding.

The alternative is to wait until the problems show up on your income statement. But, by then it may be too late. Income statements give us a view of our history. We need to be able to see how these assumptions are taking place in real time.

Posted by Jeff Cornwall at 06:23 AM | Permalink | Comments (3)

Anita Campbell shares some wonderful quotes on entrepreneurship at her blog Small Business Trends. Here is one of my favorites:

Joanna Meiseles, CEO, Snip-its Hair Salons for Kids -- "When I started my business I did not know what EBITDA was. I had no business experience. I was not a hairdresser. I just was a Mom with an idea, and I knew there was a customer need for a kids’ hair salon."

Make sure to check out the rest at Anita's site.

Posted by Jeff Cornwall at 09:00 AM | Permalink

Small business owners do not seem to be feeling the effects of the credit problems touted in the media, according to the August National Federation of Independent Business Small Business Economic Trends Report.

Regular borrowing activity was reported by 35 percent of owners surveyed, down one point from last month. The net percent of owners reporting loans harder to get in recent months rose two points to a net 7 percent, but this is still an historically low percentage. Readings as high as 12 percent were common in the early 1990s.

Only 3 percent of the owners cited the cost and availability of credit as their No. 1 business problem, far from the record 37 percent reached in 1982 and typical of readings for the past decade. Thirty-five percent reported all their credit needs met; 4 percent reported problems obtaining desired financing, typical of readings for the past few years. The net percent of owners reporting higher rates on their short-term loans was 14 percent (seasonally adjusted), two points above July, but one of the lowest readings since 2004.

Although tight credit does not seem to be slowing small businesses down, economic conditions have created
a very cautious attitude in small business owners according to this survey. Sales and profits seemed to be rather anemic. Capital and inventory spending was reported as weaker.

The one report that continues to worry me is that wage pressure still seems to be a problem for many small businesses. Those of us who remember inflation gone wild and past periods of stagflation (a recession and inflation all rolled into one big mess, as we had in the late 1970s and early 1980s) are keeping a wary eye on wage and other inflationary pressures in the economy.

Posted by Jeff Cornwall at 10:00 AM | Permalink

Home-based businesses and entrepreneurs creating virtual offices, which total in the millions in the US, have a new array of tools to connect with employees, colleagues and customers. From the Wall Street Journal:

Last year, Dave Novak sold $1.2 million of luxury steam-shower and bath equipment, importing wares from China and reselling systems for $2,500 to $4,000 apiece under his own brands, like American Steam and Rockstar.

And he did it from his 20-month-old son's bedroom in Fort Wayne, Ind.

Mr. Novak, 27, runs Novak & Co. LLC from home using a MacBook Pro computer and iPhone -- leveraging Internet-based tools that make the need for traditional office space increasingly obsolete for many entrepreneurs.

Google Apps offers services tailored for small business including communication tools, publishing tools, and web management.

Microsoft Office Live has three packages of services for small business that range from a basic package that is free to their premium bundle of services for $39.95 per month. (Please, all of you Mac-heads out there forgive my mention of the evil empire).

The upstart startupnation.com, the brainchild of Jeff and Rich Sloan, has a great set of tools and tips for start-ups of all types. They also link to Office Live as one of the tools at their site.

An important caution is to make sure that you won't quickly outgrow the tools you choose. Just as many of us have learned with our accounting software, migration to another set of tools is not always easy. Try to envision your needs for the next couple of years to make sure the applications you choose still work as your business grows.

Make software planning part of your business planning. Try to envision your needs at least two to three years into the future.

Posted by Jeff Cornwall at 09:24 AM | Permalink | Comments (1)

There are calls for Canada's floundering system of socialized entrepreneurship to become even more meddlesome. Read my post at LockeSmith for my post on calls for this disturbing shift in public economic policy to our north.

Posted by Jeff Cornwall at 06:48 AM | Permalink

In this week's column at the Tennessean, I write about finding the right business to start.

The best business opportunities come from things people already know something about. They come from work experiences, hobbies and everyday lives. Find something from your experiences that is also a need for others. If you are lucky, it may be a niche that nobody has discovered. Or there may be competition, but existing businesses are not meeting the need of customers in that market. Either way, solving problems that you understand is the best path for a first business venture.

Don't overthink ideas. Just like Dorothy in The Wizard of Oz discovering how to get back to Kansas; the answer was right in front of her all along. And so are the best business ideas.

I also highlight the importance of passion, income and lifestyle in choosing the right business to start.

Posted by Jeff Cornwall at 05:48 AM | Permalink

Nathan Griffith rights a provocative essay about the notion of democratic deficits at our new LockeSmith blog.

You hear a lot in European Union circles about "democratic deficit." The argument--or perhaps more accurately, assumption--is that EU institutions are not sufficiently accountable to voters. I have to admit, the term has always disturbed me, though not for the usual reasons. I'm not disturbed that there is a deficit, though many EU folks get highly exercised on that point. Instead, I'm disturbed that we worry about there being enough democracy. (Or, as you're probably thinking now, I'm just plain disturbed.)

Posted by Jeff Cornwall at 08:56 AM | Permalink

Just a quick reminder to all of you in the Middle Tennessee region that this next Monday, September 10 at 5:00 p.m. CDT we will be hosting a screening of the new Acton Institute video "The Call of the Entrepreneur." It will be held in the Massey Board room here on Campus (in the Massey Business Building on Wedgewood). This event is free to the public.

Posted by Jeff Cornwall at 11:49 AM | Permalink

Rumors of the death of the business card have been greatly exaggerated.

At the dawn of the information boom the business card was one of the things we heard would soon go away. That has proven to be about as true as the paperless office they promised us!

Business cards are alive and well and still an integral part of business marketing and economic etiquette.

For many small business owners the business card is the only form of advertising they may have during their early start-up. Since they are still such an integral part of business relationships, it is important to carefully think through the design of your business card. So here are a few tips that should assure that your business card will have its intended impact on potential customers:

- Never cut corners. Although it is part of any bootstrapper's arsenal of marketing tools, and a relatively inexpensive tool at that, don't try to be cheap. Think about its design and how it represents your business. How you present yourself and how your business card looks and what it communicates about your business are the first impressions that any potential customer or client will take away from a meeting.

- Pay attention to the little things. In addition to design, the quality of paper, the color you use , and even extra touches like embossing can make a big difference. For example, I do not recommend printing your own cards. The paper will never be quite as good and the print will never look quite as professional as you can get from a printer. It is worth the extra few dollars to do it right.

- Include all critical data, but none that is useless. A business card should make it easy for the customer to contact you. If the best way is e-mail, highlight that. If it is your cell phone, put that in a clear and prominent place. If you are doing business out of your home, you may or may not need to include your address. If all business is conducted electronically and they will not be coming to your home, no need to include a mailing address.

- Include description, logo, and/or slogan. This can help make your card stand out and improve the odds it will be kept.

- Remember, it has two sides. You can use the back of the card to give them pricing information, a map to your location, a photo of the product, your logo, or to include catchy stuff such as useful trivia or clever quotes.

Posted by Jeff Cornwall at 08:26 AM | Permalink | Comments (4)

The post I made on the Oregon Innovation Initiative created several comments questioning my critical view of this set of policies and initiatives. I decide that our new blog LockeSmith was a better venue to use to respond. If you want to follow the continuing debate on this issue, please see this post at our other blog.

Posted by Jeff Cornwall at 02:54 PM | Permalink

Outsourcing has gotten a bad name in some circles. But, it doesn't always mean shipping jobs off to China or India. Outsourcing is also a tool that can use local companies to help jump start a business by using them to help make your product or provide part of your service until you can afford to bring these things in-house.

My Tennessean column this past weekend looks at the bootstrapping power of outsourcing.

Bootstrapping operating costs through outsourcing can help owners get to break-even sooner and improve profit margins as the business grows.

Outsourcing is a strategy that can work very well for a start-up and very small businesses. Rather than bear the cost of renting space and hiring a staff, these businesses utilize the excess capacity of someone else's business to make their product.

Posted by Jeff Cornwall at 07:11 AM | Permalink | Comments (2)