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February 29, 2008 |
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As an entrepreneur, I always hated the month of February. Why? Because it had 10% fewer days than many of the other months, which meant that it generated 10% less cash flow for my business.
So in honor of the extra day we get every four years, I want to wish a Happy Leap Day to all of you entrepreneurs out there!
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February 28, 2008 |
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The SBA Office of Advocacy's Regulatory Review and Reform Initiative, or r3, is designed to identify and address existing federal regulations that should be revised because they are ineffective, duplicative, or out of date. r3 is a tool for small business stakeholders to suggest needed reforms.
Out of the 82 suggestions they received, the ten rules and regulations that the Office of Advocacy has chosen to target for reform can be found here.
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February 27, 2008 |
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A sticky issue for many small employers revolves around who is an employee versus who is an independent contractor.
Many smaller companies use independent contractors to keep employee expenses lower. Independent contractors are engaged for specific projects, so there are only costs to the company hiring them when there is specific work to be performed. In addition, independent contractors do not have to be covered under workers’ compensation insurance or other employee benefits, and the company does not have to pay the employer portion of Social Security and Medicare taxes.
However, the Internal Revenue Service and the courts have established strict guidelines on who can be considered a true independent contractor in recent years. This has come in large part because of employers who used the status of independent contractor on people who were really employees simply to reduce their costs by saving on benefit costs and the expense associated with the employer Social Security match. The status of independent contractor versus employee is not guided by a specific law, but by a series of court cases. There is no simple checklist, but rather a growing list of criteria that help determine independent contractor status. Therefore, a certified public accountant or an attorney should be consulted to help assure that a business is in compliance with the current interpretation of this area of tax law.
According to the Internal Revenue Service, "A general rule is that you, the payer, have the right to control or direct only the result of the work done by an independent contractor, and not the means and methods of accomplishing the result."
Additional guidelines on who can be considered an independent contractor versus an employee are as follows (from the IRS website):
- Individuals will likely be considered employees if they receive ‘extensive’ (note that the definition of this term is left up to interpretation by the IRS) instruction on:
* how, when or where to do the work they will perform
* what tools or equipment to use
* where to purchase supplies and services
- Individuals will likely be considered employees if they receive training about required procedures and methods.
- Individuals will likely be considered independent contractors if they:
* make significant investment in their work
* do not get directly reimbursed for expenses
* have the ability to make profit or loss on their work
* receive no benefits from the company, such as health insurance and paid vacation.
In the past, the IRS would allow people to be considered independent contractors if they met some portion of these rules. But over time the IRS has gotten much stricter in their interpretation. Now it is generally considered that all of the rules must be met to classify an individual as a true independent contractor and not an employee. Written contracts between the company and the individual that clearly define the relationship using the above criteria can also help support that a person is a true independent contractor.
What happens if you get this wrong? Significant interest and penalties for back taxes not paid for starters! So, again, don't try to work this all out on your own -- get help from your CPA or employment attorney.
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In addition to eVenturing, which I have referred to many times over the past couple of years, the Kauffman Foundation sponsors another good resource for those interested in entrepreneurship . The Entrepreneurial Research & Policy Network (ERPN) at the Social Science Research Network provides access to over 4,300 scholarly articles through a fairly user friendly search engine. The articles are more of the academic flavor, but many have some interesting insights for anyone wanting to learn more about entrepreneurship.
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February 26, 2008 |
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Melissa Chang has an amusing post about the less than desirable personality traits -- paranoid, obsessive, and delusional, just to name a few -- that many entrepreneurs exhibit from time to time (or for some, all the time).
While the most important trait of an entrepreneur must be his or her flexibility and adaptability, it's also true that people who found start-ups often have some less-than-stellar qualities that help them be successful in their ventures.Here's a look at 10 qualities that some entrepreneurs share that may help them be great at starting a company, but not so great at existing in normal society.
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I completed my MBA degree in Finance from the University of Kentucky in 1980. While I was happy to be finished, in many ways it really didn't mean much for me in terms of job prospects. After all, people with twenty years of experience and an MBA were getting laid off all around. Those of us in the MBA program had contests to see who could get the most rejection letters from the resumes we sent out (one guy amassed over 150 letters).
This was a time of a very weak economy that was coupled with high inflation -- it became known as stagflation. And the more the Carter administration tried to do to fix it, the worse things got.
We were used to periods of inflation that were followed by mild recessions that cooled things off a bit. But not this time. This was a time that had a very different set of conditions. Consumer confidence was low, which fed the recession. But forces outside of our control (the Middle East to be exact) kept pushing energy prices higher. This plus strong unions that continued to fight for increases in pay and government meddling in what should have been free markets created run-away inflation.
I worry that the signs are there for a return to a similar mess.
Confidence is low. We saw it the last couple of weeks in surveys of investors that I blogged about. Now we see it in consumer confidence surveys. From the Wall Street Journal:
U.S. consumer confidence slumped in February, accelerating a decline that began in January, according to a report released Tuesday.
We also see signs that inflation is not easing in spite of the slowing economy. Also from the Wall Street Journal today:
Meanwhile, U.S. wholesale prices surged in January and core inflation also climbed above expectations, according to more data revealing price pressures amid the economic slowdown.
Once again, energy and wages are at least partly to blame for the inflationary pressures on our economy.
And what about the third ingredient for a potential economic disaster? Rather than following the course that took us out of the mess the last time -- cutting taxes and freeing the free market from governmental control -- we hear cries from Washington that they will fix problems we face in a different way. How?
The Democratic front runners both want to increase taxes, take profits from the oil companies (a sure way to push prices even higher), and put government in control of health care (another recipe for even more inflation in this sector). And McCain? Every bit of evidence is that he is a big government Republican and will likely follow a similar path as both of the Democrats.
Hang on to your cash! Keep your debt burden as low as possible! And get ready to hunker down for a rough couple of years!
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February 25, 2008 |
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Sam Davidson offered a good distinction at his blog between the traditional non-profit and the emerging social ventures that do not choose to take the non-profit route.
For the first time, students can focus on what it means to build a business that is focused on multiple bottom lines, focusing on serving the community while running their operation. No longer are students forced to choose between operating a greedy business or working for an altruistic nonprofit. Now, students can live and work in that lovely overlapping Venn diagram of a place where their need to make a living can coincide and address the largest needs of the world.
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The cover article for Entrepreneur magazine this month looks at the "people, trends and events that matter most for your business." They call them "the influencers."
In the hustle and bustle of starting a growing a business we can lose sight of the big picture. The trends and changes that created the opportunity for the business in the first place can just as quickly take away our economic advantage.
While I am not sure I agree with all of their choices for the top 25, it is worth a read and some careful reflection. Opportunities in the dynamic world in which we live can be quite fleeting.
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The Angel Capital Association reports on their latest survey of angel investor attitudes. It seems that angels are not quite as gloomy as their VC cousins (see my post on their mood from last week).
Angel group leaders expressed optimism about the climate for investments in early-stage businesses in 2008 in a recent survey by the Angel Capital Association (ACA). This optimism comes despite recent news about the slowdown of the US economy and follows a year in which investment activity stayed level with 2006.
You can read a summary of their report here and find the summary statistics from this survey here.
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February 22, 2008 |
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James Pethokoukis at US News and World Report suggests that we may be nearing the end of a twenty five year economic boom -- and there seems to be plenty of blame to go around:
America's 25-year superboom has been driven by 1) reduced regulation/more competition, 2) lower taxes, and 3) the end of the Cold War, which allowed capitalism to spread across the globe....Yet right now there are calls for 1) a "timeout" from free trade, 2) more industry regulation, 3) high-cost mega-spending projects for the environment, and 4) higher income, investment, and payroll taxes.
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A newly released study from the Office of Advocacy of the SBA authored by Rafael Efrat documents the pervasiveness and the magnitude of the tax burden among small business owners in bankruptcy. The data suggest that the tax burden is more pervasive among small business owners in bankruptcy than among consumer petitioners. While less than one-quarter of all consumers in the bankruptcy sample reported tax debts, more than half of individual small business owners reported owing some tax debts.
This is more evidence that we need to tear up the current income tax code and replace it with a simple and less burdensome approach.
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Three of the eight finalists in this month's ideablob competition for the best idea are Belmont students offering up social ventures. The winner will receive $10,000 from Avanta to help develop their venture.
Here are Belmont's three finalists (in alphabetical order of the student's name):
Noah Curran's Turning Actions into Good (winner of "Sprint 1") is a web-based non-profit charity which revolves around the kindness of strangers. The concept allows anyone to participate in a charity, regardless of financial status. Here is how the process works: Become a free member. Print off pre-made TAG-cards. Commit an act of kindness. Give the person a TAG-card which asks the stranger to do another act of kindness and go to the website to report about the deed that was done to them. After submitted, viewers can vote for the most touching act of the month. The leading vote getter would receive a cash prize.
Janice Dotti (winner of "Sprint 1") wants to create a completely fair trade, completely organic coffeehouse that sponsors social justice causes while taking care with the environment. In addition to serving fair trade coffee, she will also only use fair trade sugar, tea, and cocoa as we educate our consumers on how their buying habits affect the working poor in developing countries. Every month, this coffeehouse would sponsor a social justice cause--promoting awareness to customers about worldwide issues of injustice. This coffeehouse will also have free wifi, live music, local art--all with a community emphasis.
Finally, Megan Lopez (winner of "Sprint 3") presents an idea to create an informational website about how to raise your child naturally. From recipes to exercise programs to do with your children. Childhood obesity is a growing epidemic in our country today. We need to instill habits in our children starting at birth, so they can maintain and carry them through for the rest of their lives. Organic Baby will be a tool for parents to use as a community blog, buy organic clothing and bedding merchandise, research the benefits of healthy organic foods, etc. She would later like to own her own baby organic clothing line.
Please go to ideablob and vote for our three finalists in this month's best idea contest! You can vote for more than one idea, but you can only vote for each idea one time.
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February 21, 2008 |
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Entrepreneurship Week is almost here again. It starts on Saturday. Where did the year go?
Like last year, I look at this week with mixed emotions. While I am pleased at the attention it draws to entrepreneurs in our economy, it saddens me that we relegate entrepreneurs to simply one week. After all, entrepreneurship is over 50% of the economy.
Having only our own week puts entrepreneurship right there in the mix with National Fresh Squeezed Juice Week, National Pancake Week, National Cleaning Week, National Condom Week (I am not making these up...), National Headache Awareness Week, National Fig Week, National Backyard Games Week, National Business Etiquette Week, Improve Your Home Office Week, National Pollinators Week, and National Chestnut Week.
Why not give us a whole month? That would at least put us up there with National Hot Tea Month, National Bird Feeding Month, National Umbrella Month, Prune Breakfast Month, National Stamp Collecting Month, National Sweet Potato Month, National Kite Month, National Sweet Vidalia Month, National Bikini Month, National Library Lovers Month, National Noodle Month, National Asparagus Month, Country Music Month, National Baked Bean Month, National Horseradish Month, and last but not least, National Pomegranate Month.
Any way....Happy Entrepreneurship Week!
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To those of you who deal regularly with venture capitalists you probably think this is the start of a bad joke. How do you tell when a VC is feeling pessimistic? Well, the University of San Francisco has created an index to measure the mood of VCs -- and as dour as they usually seem, their confidence plummeted during the last quarter of 2007. (I am a horrible joke teller, so if you have a punch line to offer for my hypothetical joke, please pass it along!)
"The Q4 Silicon Valley survey indicated a significant decrease in Bay Area VC confidence in the high growth entrepreneurial environment to its lowest reading in 4 years," says Mark Cannice of USF.
And the mood overseas is not much better.
"The China Q4 survey indicated a modest decrease in China VC confidence in the high growth entrepreneurial environment. This decrease was primarily attributed to a changing regulatory environment and inflated valuations."
Here is a graph that displays this sudden drop in the confidence of VCs.
So what does this mean?
- VCs will likely now look at each possible deal with even more scrutiny. They will become even more diligent in reviewing each deal and will likely be quicker to throw deals that give them any heartburn out the door.
- They will also in all probability offer less favorable terms to protect their returns. The assumptions they use to model growth will become much more cautious, leading to much lower valuations.
- And they will be quicker to pull the trigger on replacing management if the entrepreneur starts to falter.
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The Wealth Page Blog wrote a post based on my column on the need for entrepreneurs to seek wise counsel.
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February 20, 2008 |
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James Pethokoukis at US News and World Report writes that a President Obama would push for a global tax as a means for redistributing wealth. Wealth should not be viewed as a zero-sum game. If we really want to build wealth around the world let's help help them create free and open markets with strong property rights, low taxes and few barriers to business formation.
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February 19, 2008 |
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Dean Pat Raines writes about the growth in interest in social entrepreneurship within academia over at Belmont's blog Strictly Business. Speaking about our own program that launches next fall:
Next fall, Belmont University will begin offering a major in Social Entrepreneurship. The fundamental idea is to provide a practical academic curriculum to serve the fastest-growing segment of society--the millions of individuals that are creating a society of citizen change agents.
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Bill Hobbs sent along a great story that illustrates one of the most important lessons an aspiring entrepreneur can learn. It is the importance of finding a business that satisfies both the entrepreneur's needs with a true market need that is backed up by hard data.
From Latina Lista:
Carrie Ferguson Weir spent all of her professional life asking the hard questions. As a daily newspaper journalist, this Cuban-American Latina was accustomed to asking the kinds of questions that force honest responses.However, it wasn't until she had her own daughter and found herself wrestling with the age-old "working mother dilemma" of either returning to work after maternity leave or being a stay-at-home mom that Carrie found herself on the receiving end of her own interrogation.
What could she do that would give her the freedom to be a stay-at-home mom and a successful businesswoman?
..."The idea came as a lightening bolt out of nowhere," Carrie said. "I believe in those messages. The research that followed backed up the hunch."
What Carrie had noticed was a gap in the baby t-shirt business when it came to exhibiting proud Latino roots.
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Start-up Nation has a new contest for all of you college entrepreneurs -- The Dorm-based 50:
Are you a college entrepreneur with a great business?
If so, you should enter the StartupNation Dorm-Based 50 ranking for a chance to be named one of America's top 50 college-based businesses of 2008.
You'll be joining some of America's most successful entrepreneurs who made their way to the top by combining "campus" with "commerce". Think Michael Dell, Bill Gates and more recent high-fliers like Mark Zuckerberg of Facebook and Brian Taylor of Kernel Seasons.
They are accepting entries through March 15th. Since they are dealing with college students, I hope their servers can handle receiving 99.9% of applications at the last minute that day!
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February 18, 2008 |
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Many of those who manage non-profits will tell you that it seems that they spend more time raising money than actually working toward their cause of choice. The competition for donations and gifts seems to get tighter every year. And so-called donor fatigue seems to be becoming almost epidemic.
That is why more social ventures are moving toward business models that are self-sustainable without reliance on the generosity of benefactors. Many don't even bother to set up non-profits due to their complexity and legal limitations. They are known as social ventures, social for-profits, or social businesses.
More evidence of this can be found in an article published at the Christian Science Monitor:
Traditional philanthropy and nonprofits generate a social gain, but they do not design their programs as self-sustaining business models. A charitable dollar can be used only once. A dollar invested in a self-sustaining social business is recycled endlessly.A social business is designed to be both self-sustaining and to maximize social returns like patients treated, houses built, or health insurance extended to people who never had this coverage. An investor in a social business retains an ownership interest to hold management accountable and to get the investment back over time, but no dividends are expected, and any profits should be reinvested in the business or used to start new similar businesses.
With the rapid growth of niche social ventures we can expect to see more social advocates pursuing the self-sustainable social business model approach.
(Thanks to Sam Davidson for passing this along).
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February 17, 2008 |
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Megan Lopez is the latest Belmont Social Entrepreneur to throw her hat in the ideablob ring.
An informational website about how to raise your child naturally. From recipes to exercise programs to do with your children. Childhood obesity is a growing epidemic in our country today. We need to instill habits in our children starting at birth, so they can maintain and carry them through for the rest of their lives. Organic Baby will be a tool for parents to use as a community blog, buy organic clothing and bedding merchandise, research the benefits of healthy organic foods, etc. I would later like to own my own baby organic clothing line.
Please go to ideablob and vote for Megan's idea! Even if you voted earlier this month this is a new heat and you can vote again! We hope to have three social entrepreneurs from Belmont in the finals this month!!
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The topic of my column this week in the Tennessean is the importance of seeking wise counsel throughout the development and growth of an entrepreneurial venture.
Entrepreneurship can be a lonely vocation. It can seem like you are alone when it comes to wrestling with the worries, fears, and uncertainties that are a normal part of owning your own business.However, such isolation should not be considered an inevitable part of the entrepreneurial experience.
Throughout the life of a business, the entrepreneur should consistently seek advice from people with experience and expertise.
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February 15, 2008 |
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The SBIR (Small Business Innovation Research Program) funding program is in jeopardy of not being renewed. From GenomeWeb Daily News:
The Federal funding program that supports small businesses that pursue innovations in biomedical and other high tech fields is in need of an overhaul, according to some industry representatives, and is set to dry up later this year if the US Congress does not agree to extend it. In an effort to press lawmakers to do something about the Small Business Innovation Research program, industry representatives held a sort of a cheering session this week on Capitol Hill that touted the value of the program to biomedical research.
One of the "cheerleaders" is Belmont alum Dr. Jim Stefansic, CTO of Pathfinder Therapeutics, Inc. (PTI). Here is part of his testimony before Congress:
Although PTI has overcome much of the technology and regulatory risk associated with bringing a new medical device to market, many other challenges remain to ensure that our technology can improve the lives of those suffering from abdominal cancer. It is important to note that these risks would not have been conquered without both the SBIR grants and the modest seed round investment in PTI. Both of these funding sources are described in more detail below.
Given that the expertise of the founders in successfully acquiring academic federal grant funding, we were encouraged by our seed round investors in the summer of 2004 to raise additional early-stage funds through the SBIR mechanism. With teamwork and considerable effort from all the founders, in early 2005 PTI was fortunate to land on our first attempt a fasttrack SBIR grant from the National Cancer Institute (NCI) to develop a commercial software and hardware platform for a variety of image-guided therapeutic applications that target cancer. As the principal investigator on this grant, I have been able to focus part of my time and energy on taking the technology from the founders in the academic setting to commercialization without being concerned about salary support and other R&D resources for my engineering staff. The $1.5MM in grant funds have been primarily used to develop the SurgiSight image-guided therapy platform and will enable PTI to grow from one specific therapeutic area (liver surgery) to the broader field of surgical oncology (kidney and colorectal) to the broadest field of general surgery (vascular/soft tissue applications throughout the body). The key to unlocking this potential is the stability and versatility of our software platform and its ability to seamlessly interact with multiple hardware configurations. This versatility will enable Pathfinder to release products that are amenable to applications that employ either an open or minimally invasive surgical approach.
Jim knows that I am not a big fan of programs like SBIR. I do not believe that it is the role of government to steer entrepreneurial activity and fund businesses. That being said, we are very proud of Jim and we are glad that he was able to leverage this funding to start what we know will be a great business.
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Advanta Corp. announced last night that Naomi Bar-Yam of Newton, MA has been named January’s $10,000 ideablob.com monthly contest winner for the best business idea. Bar-Yam is co-founder of the Boston-based Mother’s Milk Bank of New England, a newly-formed milk bank serving babies, hospitals and families throughout New England.
Bar-Yam garnered the support of the ideablob community for her idea to create a milk bank that would provide screened and pasteurized breast milk to premature and critically ill babies in the New England area. According to Bar-Yam, studies show that premature babies who receive banked milk are far less likely to suffer life-threatening complications and have much faster recovery rates.
"Our milk bank is in the startup stage and ideablob helped us get the word out," explained Bar-Yam. "The $10,000 prize will enable us to purchase equipment and educate the community about what we do and how we will help premature and sick babies."
Two Belmont social entrepreneurs have qualified for the February finals to be held later this month. Stay tuned....
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February 14, 2008 |
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Although they have diminished greatly since the government closed the tax loop hole that had led to widespread abuse, Employee Stock Ownership Plans (ESOPs) are still an exit option for some companies.
The Wall Street Journal profiles a small business that wanted to pursue this option, but got sticker shock when looking at the cost of setting one up:
Mr. Nikolich was ready to start easing out of Tech Image, the technology public-relations firm he had founded nearly 15 years earlier. He didn't want to sell to a much larger PR company, however, because he was concerned the new owner would slash his work force. And he wanted to stay involved in the business....Given those criteria, employee ownership felt like the right path.... But he quickly learned that the cost of setting up an employee stock-ownership plan could top $100,000 -- more than his 17-person company could handle.
Because of the abuse of ESOPs in the past, the regulatory hurdles have become quite high for small companies. Too bad, as many more small businesses might pursue this option for their employees if it was economically feasible.
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While government policies do play a roll in entrepreneurial activity, there is increasing evidence that culture plays a significant part in spurring entrepreneurial economic activity.
A newly released working paper from the Office of Advocacy of the U.S. Small Business Administration finds that American rural economies are as dynamic as their suburban and urban counterparts.
"America has an entrepreneurial culture and entrepreneurs are found in every setting. The lesson learned here is that rural America's resilience should not be underestimated," said Larry Plummer, assistant professor at Clemson University and co-author of the paper.
The authors' central finding is that the differences in the rate of establishment births and closures between rural, suburban, and urban areas, while statistically significant, is in fact quite small. That is, general business dynamics are not a function of geographic area.
So let's get government out of the way and let the American entrepreneurial spirit take wings.
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February 13, 2008 |
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The good folks at the Institute for the Future in California have issued their third and final installment of the Future of Small Business reports. This project was funded by Intuit.
Today, there are 26 million small businesses in the U.S. that generate roughly $5 trillion in annual sales. If they were a country that would make them the 2nd largest economy in the world! Those numbers will continue to grow over the next decade as small businesses re-emerge as artisans with even more economic force.
Artisans, historically defined as skilled craftsmen who fashioned goods by hand, will re-emerge as an influential force in the coming decade. These next-gen artisans will craft their goods and shape the economy -- through upswings and downturns -- with an effect reaching far beyond their neighborhoods, or even their nations. They'll work differently than their medieval counterparts, combining brain with brawn as advances in technology and the reaches of globalization give them greater opportunities to succeed.
This series offers a fascinating look at the future of out entrepreneurial economy.
Here is a link to the second installment.
Here is a link to the first installment.
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Free markets are neither inherently good, nor are they inherently evil. Entrepreneurial activity is not in and of itself a moral act. The ends that the entrepreneur pursues and how they pursue those ends defines the morality of their entrepreneurial efforts.
There are entrepreneurs who use their gifts and talents to build businesses that provide economic, social, and cultural benefits.
But there are also entrepreneurs who although they may build personal income and wealth, they do so in the pursuit of ends that can actually end up being destructive to society. In our soon to be released book, Mike Naughton and I describe this type of entrepreneur as follows:
But the most enduring counterfeit of prudence are those who confuse being prudent with being cunning. They can be highly efficient, technically competent and have a great sense of timing, but their purpose is only for themselves. To have technical skill without good ends can unleash a powerfully destructive force in society.
Sarah Brown sent along a story from Time that may fall into this category:
...40% to 50% of first marriages still break up. In the spirit of American ingenuity that can find a way to make a buck out of even the worst situations, a cottage industry has sprung up to help people cope with and often celebrate this passage from one part of their lives to the next. "Once divorce gets so common, the human approach is to treat it like another aspect of life," says sociologist David Popenoe, co-director of the National Marriage Project at Rutgers.
Please know that I do not pretend to know what is in the hearts and minds of the entrepreneurs who have launched businesses in this newly discovered market niche. But, I think that most of us can agree that the break-down of families has been a less than positive force in our society over the past thirty years.
What do these entrepreneurs sell? Here are a few examples from the article in Time:
Business for products aimed at the newly divorced, from greeting cards and postbreakup getaway packages to custom-made cakes and joke gifts like wedding-ring coffins, is booming. New Orleans resident Renee Savant bought a hearse, thinking she would rent it out for over-the-hill-birthday celebrations. But since she began her service last October, the hottest demand has come from clients who want to ride around as they and friends celebrate the death of their marriages. "I would never in a million years have thought the fad would be divorce parties," says Savant.
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February 12, 2008 |
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The National Federation of Independent Business Index of Small Business Optimism fell 2.8 points in January to 91.8 (1986=100), the lowest reading since January 1991.
But some of the underlying numbers related to employment are not as weak as one would expect to see when optimism is so low.
"The Index is sending a recession signal," said NFIB Chief Economist William Dunkelberg, adding, "But by comparison, this January reading is more of a recession in expectations than in hard economic data. Hiring plans and job openings are much stronger today than in 1991" (emphasis added).
So why the long faces on American entrepreneurs? It may be that they have heard the negative drum beat from the media (and some politicians) and believe it must be true. Their condition is not so bad, but from what they hear everyone else is falling on hard times, so things must be bad. Don't underestimate the psychology that can drive economic conditions.
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One of the highlights from the International Franchise Association meeting was the chance to hear Colin Powell give a keynote speech.
The part of his address that hit home most with me was when he talked about his personal transformation.
He described the feeling of going from one day being the Secretary of State, with his personal entourage and body guards, his own jet at his disposal, people calling him all day long hoping to get even the briefest bit of his time -- to the next day simply being Colin Powell, average citizen, sitting at his kitchen table wondering what to do with the rest of his life.
Like many entrepreneurs who exit their businesses, he felt a real sense of emptiness.
He thought about jumping right back into public life, but his wife said 'no' to his thought of running for office. She made him take time to determine where he should next with his life. To think of other ways he could use his gifts and experience. My wife reacted the same way after we sold our business. I was ready to jump right back in and do another deal. But, The General and I were both put in "time out".
Both of us benefited greatly from the wisdom of our wives. I found my way into teaching, and have found so much fulfillment. The General now is involved with a venture capital firm, leads various charities, writes books, and benefits from lucrative speaking engagements.
What I think I enjoyed most from General Powell's address was seeing how genuinely happy and healthy he looked. He is having fun!
I am a firm believer in the importance of seeking wise counsel. Both General Powell and I are blessed with the wisest of counsel -- our wives.
Thanks, Honey, and Happy Birthday!!
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February 10, 2008 |
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So why all the attention to entrepreneurship in the social sector? According to Harvard Business School professor Jane Wei-Skillern in an interview published in Working Knowledge it is because the more traditional approaches to solving social problems have been "falling short." From Working Knowledge:
An entrepreneurial approach, they say, allows social organizations not only to maximize value from limited resources, but also to leverage resources beyond the organization's direct control through a creation of networks.
This in depth interview by Sean Silverthorne is definitely worth a read.
(Thanks to Sam Davidson with CoolPeopleCare.org for passing this along).
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February 08, 2008 |
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Matthew Bandyk at US News interviewed me for a column he wrote on how the Stimulus Package will impact small business in our economy. I told him that I doubted the package would work and that a recession was probably going to happen either way. On the other hand, I am more worried that it will work. The pressures for a large burst of inflation are still out there -- wage, healthcare and fuel price pressures and falling interest rates. If we over-stimulate the economy right now, we may end up in an even worse condition economically. Either way, be it a recession or a period of inflation, I see a tough period ahead for small business owners in America:
But Congress has chosen a different stimulus strategy, and while small-business owners will appreciate the extra cash, many are heading into uncharted territory. "There are a lot of young entrepreneurs who have never really experienced a deep recession," says Jeff Cornwall, director of the Center for Entrepreneurship at Belmont University. "And almost none have experienced a period of inflation, so they're not really sure what those words mean in their day-to-day business." They may be about to find out.
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I posted recently about the two Belmont students who are in the running for this month's ideablob.com competition. Good news! They finished one and two.
Noah Curran's idea finished in first in the preliminary heat and Jancie Dotti's fair trade coffee idea came in second.
Both will be in the finals later this month!
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I am blogging today from Orlando at the annual conference of the International Franchise Association.
It seems like an ideal opportunity to write about an article in the most recent issue of the Journal of Small Business Management that looks at franchising and business failure rates.
Professors Michael and Combs find that franchise restaurants have significantly higher success rates that stand-alone independent restaurants. This seems to be due to the structures they provide and the access to key resources.
So if you are going to start a new restaurant, a franchise may be your best bet to reduce risk.
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February 07, 2008 |
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Marginal Revolution has a post on a paper that suggests that Brazilian entrepreneurs. The authors of this paper report the following:
We find that family characteristics have the strongest influence on becoming an entrepreneur. In contrast, success as an entrepreneur is primarily determined by the individual’s smartness and higher education in the family. Entrepreneurs are not more self-confident than non-entrepreneurs; and overconfidence is bad for business success.
The paper also reports that social networks help determine who becomes an entrepreneur, but not how much success they will enjoy once they start their ventures.
These findings are certainly consistent with findings in other places around the globe. Culture and family background point you toward a career as an entrepreneur, but your wits and education are what lead to success.
Culture plays a major role in fostering entrepreneurship. Culture begins with the family and then extends to the community. This study suggests that family and social relationships are the strongest predictor for entrepreneurial activity. Note the lack of any findings on the importance comprehensive government planning in this paper!
Of course, there are those out there who seem to interpret these findings as evidence that entrepreneurship is only an avenue for the economic elites. The blog Stumbling and Mumbling sees it this way).:
In other words, what makes an entrepreneur is access to capital - the sort of access that comes from having a wealthy background.
We all know where this type of perspective often takes us.
It is a long stretch to conclude that since entrepreneurs often come from successful parents, it must be the capital they give to them that makes their children more likely to become entrepreneurs.
Access to capital does not correlate very highly with entrepreneurial outcomes. That is, more money at start-up does not predict more entrepreneurial success. If that were true I would suspect that venture captialists and angels would have much higher than the typcial 10% success rates that they often see in their rather sizable investments.
It is more likely that these economically successful parents have instilled ethics and values in their children that reinforce the importance of success, self-reliance, and education.
(Thanks to Nathan Ratcliff for pointing me toward this discussion).
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February 05, 2008 |
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The thought of adding executives can be overwhelming to entrepreneurs who own fast growing companies. In fact, even the thought that they need "executives" can be mind bending. Which position should I add first? How do I know what type of talent I need?
What can help with this is to create a Team Development Plan.
- Start with a self-assessment of your strengths, weaknesses, and skills. Keep doing what you are good at, and add folks who can pick up your weak areas. If you strength is marketing, build a team that complements this strength.
- Develop a plan that allows you to work on your business and not just in your business. This means you not only add people to your team, but you must work toward creating a whole new "job description" for your role.
- Before you run out and hire outsiders, assess the potential of current team/staff to take on more responsibility. It is almost always cheaper to grow your own talent. However, most of us overestimate the abilities of our employees to grow into these new roles quickly enough. And some just really won't want the added responsibilities.
- Based on an inventory of all of your management needs over the next few years, create a plan to train current staff and bring on new talent with clear priorities and milestones. Timing is everything. Bring people in too soon, and it creates an overhead drain that can badly impact cash flow. Bring them on too late, and the company may not be able to handle the challenges of growth.
- A word of caution. Don't just look for people with the right skills and experience. Make sure each new team member will fit with your culture. The right fit with your culture can be just as important as their technical abilities.
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February 04, 2008 |
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Since the devastating Supreme Court decision on the Kelo case, there have been efforts across the US to help shore up property rights. The absence of strong property rights has been shown to be an inhibiting factor to entrepreneurial economic development. Entrepreneurs are not as willing to take a risk with their investment and capital if they do not believe that their property rights will be protected by the government.
An important victory in securing property rights has just occurred in New Jersey.
The Superior Court of New Jersey issued a critically important decision to private-property owners in a case dealing with the state's interpretation of how properties can be deemed "blighted" and consequently ripe for eminent domain takings. To the delight of property owners, the Superior Court overruled the trial court's decision and held that the law only allows a property to be deemed "blighted" in narrow circumstances.
The dispute involved a commercial property owned by BMIA, LLC in Belmar, New Jersey. BMIA had been fighting to keep its property, the Belmar Mall, from being condemned for a redevelopment project. The Belmar Mall is a commercial center that contains 20 mom-and-pop businesses, along with three major chain tenants.
Here is a picture of this so-called "blighted" property:
The trial court ruled that this property was located in an area in need of redevelopment. On appeal, the Superior Court of New Jersey determined that the trial court mistakenly relied on this finding in condemning the property for a redevelopment project. The Superior Court's decision reinforced that the New Jersey Constitution restricts government redevelopment to "blighted" areas. Further the Court said that finding an area in need of redevelopment does not show that the property reaches the "blight" standard. In New Jersey, a property is found to be a "blighted" area if it is detrimental to the safety, health, morals or welfare of the community. This was not the case with the Belmar Mall, and, therefore, the court reversed the lower court’s decision.
Hats off to the National Federation of Independent Legal Foundation for participating in this case.
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Belmont students have two ideas in this month's ideablob.com competition. Both are ventures based on social entrepreneurship business model. As of this morning they hold the top two spots in the voting.
Noah Curran's idea is called Turning Actions into Good, which is a web-based non-profit charity which revolves around the kindness of strangers. The concept allows anyone who feels compelled to participate in a charity, regardless of their financial status, a way in which to contribute. If people want to get involved, they can do it in a variety of ways. Whether it is through actions or through generosity, anyone can do an act of kindness. What makes all of this possible is the facilitation of the official TAG website.
Jancie Dotti summarizes her ideablob entry as follows:
"I want to create a completely fair trade, completely organic coffeehouse that sponsors social justice causes while taking care with the environment. In addition to serving fair trade coffee, we will also only use fair trade sugar, tea, and cocoa as we educate our consumers on how their buying habits affect the working poor in developing countries. Every month, this coffeehouse would sponsor a social justice cause--promoting awareness to customers about worldwide issues of injustice. This coffeehouse will also have free wifi, live music, local art--all with a community emphasis."
Join in this month's ideablob. And while you are there, vote for one of Belmont student ideas!
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February 03, 2008 |
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My column in this today's Tennessean is an expanding essay of a post a wrote a few weeks ago on leadership lessons that entrepreneurs can learn from Green Bay Packers head coach, Mike McCarthy.
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Bill Gates talks about the power of capitalism to use market forces to create real change in the world in this video clip from the Wall Street Journal.
(Thanks to Andy Tabar for passing this along).
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Tax policy is a critical issue for entrepreneurial economic development. What we know is that lower taxes and a simple system are what can help entrepreneurship thrive.
The Tax Foundation has an interactive tool that allows you to compare the various candidates' tax policy positions.
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February 01, 2008 |
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Sam Davidson of CoolPeopleCare sent me a link to a blog post that offers "10 Morning Rituals For The Healthy Entrepreneur". While these can feel a bit hokey at first, it is important to engage in this type of routine. It can be a key element for creating temperance in our lives. Work can so easily become all consuming, especially for the entrepreneur.
Reading this reminds me of the routines that I value that I have let slip a bit lately....
- Quiet reflection or prayer sitting on my back porch early in the morning with my first cup of hot coffee.
- Taking my daily walk with my wife (and our dogs, of course).
- Attending morning mass on the way to work.
Lent is right around the corner. I think I will commit to bringing these things back into my daily routine rather than try to find something to "give up" for Lent.
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Everyday Edisons, a PBS reality series chronicling modern inventors and the development of their inventions, announces its 2008 casting call schedule to be held in major cities throughout the nation in search of Season Three participants. The show considers all categories of invention, ranging from sketched ideas and simple concepts to detailed, patented designs and factory prototypes.
The Everyday Edisons panel of judges, including product development and patent law experts, will provide a forum for participants to present and demonstrate original ideas. The judges will select 10 to 12 inventors to be featured in the third season of Everyday Edisons, which chronicles the inventors as their concept is refined, produced, marketed and sold.
The remaining Everyday Edisons 2008 casting call schedule includes:
- SAN JOSE – February 16
- DALLAS – March 15
- CHICAGO – April 19
- NORTHEAST LOCATION TBA – May 17
Participants with factory prototypes or finished products will be reviewed by the judging panel, as well as representatives from major retailers, including Bed Bath & Beyond, Home Depot, QVC, PetSmart, Staples, The Sharper Image and buybuyBABY. Previous inventions featured on Everyday Edisons range from a convertible baby bag and kitchenware product to a family board game and construction tool.
Interested? Go to their web site here for more details.
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Just thought I would share a picture of a few of our students celebrating our recent National Model Program award from USASBE. They are all sporting new "I'm a Belmont Entrepreneur" tee shirts.
