The Entrepreneurial Mind

I have been writing my advice to entrepreneurs on what they need to do to weather the current and near future economic storms. But just what are they all actually doing? A new poll from NFIB offers some insight.

Here are a few of the findings:

- 20 percent of small employers have reduced, postponed or cancelled a planned investment or reinvestment in the last six months; the slowing economy is the primary reason in more than half of these cases. They are becoming much more prudent in their resource commitments for expansion.

- Increased marketing and sales activity is a common strategy to combat an economic downturn. However, this is one of the least frequent approaches a small business owner uses. This is a big concern to me. Now is not the time to reduce marketing efforts!

- 44 percent of small business owners are spending more time at their businesses today than six months ago.

- Over the past six months, small business owners are highly likely to have become more attentive to their cash flow and inventory status. This is key, and should also include cutting overhead and debt.

Posted by Jeff Cornwall at 10:39 AM | Permalink | Comments (2)

Most often entrepreneurs measure their work in terms of time. I have been as guilty as anyone.

When I was lead my seminar for entrepreneurs owning high growth companies I always start with a discussion of why they are all in my class. The answers seem to involve the number of work hours that each entrepreneur is putting in his or her business. "Sixty hours." "Seventy hours." "Eighty hours." They each drift into this familiar litany.

One time one of the entrepreneurs in class looked perplexed through this discussion. When it came to his turn, he said, "I must be doing something wrong. I never put in more than 40 hours. My business has been growing every year and we have good profitability. I always seem to have time every evening for my family." You could have heard a pin drop. It was like he had broken the worst taboo of entrepreneurs.

Over the next several weeks we learned his secret. He was an engineer by training, and looked at his work as an entrepreneur with the same process/outcome precision that learned in his professional training. He measured his success in terms of outcomes and results, not in terms of hours worked or sacrifices made.

Many in the class began to admit that they often put in time that had no purpose and no direction. They said it made them feel like they were doing something to deal with all of the uncertainty that comes with growing a business.

Ben Cunningham sent me a link to an article in Behance Magazine that reflects on the issue of results and effort:

We often assume that the number of hours spent at work are an indication of one's effort, interest, and accomplishment. However, in reality, the greatest ideas and the execution of these ideas happen in spurts. The best ideas often do not require a lengthy conception, and the most productive days are seldom the longest.

Good advice!

Posted by Jeff Cornwall at 06:46 AM | Permalink | Comments (2)

Imagine moving to a foreign country where the people speak a different language from your own. While you may be able to get by for a while without learning the language of this country, you will be severely hampered. Asking for and receiving simple information will be a tedious and frustrating task. For example, assume you want to go to a movie. How do you get to the movie theater? How do you order a medium box of popcorn? What are the actors in the movie saying? More complex tasks are even a bigger challenge. Imagine trying to rent an apartment. What does the landlord expect from you as a tenant? The contract she is requiring you to sign is completely unintelligible to you. Even an interpreter will only help so much. Your interpreter can translate, but the process is slow. And it would be impossible to rely on your interpreter all of the time.

Accounting is called the “language of business.” Much of what is communicated about a business is done in this financial language. And yet to many entrepreneurs this is a language as foreign to them as the language was to the traveler in this story.

This summer I am learning this "cultural experience" from the opposite perspective. I am teaching our required graduate Entrepreneurship course. But instead of teaching it to our MBA students, I am teaching to a section that has only graduate students in our Master of Accountancy program. As I teach them about entrepreneurship, I now appreciate that many of them experience my world of entrepreneurship as a strange and confusing place.

Their world is order and precision. Mine is change and chaos. Their world is historic measurement of what has happened. Mine is the hope and dreams of what might be. Neither is better or worse, and neither is right or wrong. And in today's entrepreneurial economy we need each other more than ever.

We teachers always like to say that we learn as much from our classes as do our students. This summer I know I am learning much more than my students. Given the importance of entrepreneurs really knowing and understanding their numbers, I know that what I learn from my accounting students will help me to better prepare my entrepreneurship students for the for their frequent and critical trips into the Land of Accounting.

Posted by Jeff Cornwall at 06:40 AM | Permalink | Comments (4)

My column in the Tennessean this week looks at the challenges of having partners in a venture:

Partnerships in business can be one of the most difficult issues an entrepreneur faces.

Whom the entrepreneur chooses as a partner should be given as much consideration as which products the business makes or what markets the business enters.

Continue reading "Partners" »

Posted by Jeff Cornwall at 09:38 AM | Permalink

Parents calling professors about their college students' homework. Parents showing up in place of their college children for orientation. Parents going with their college graduated students on interviews -- and then calling the HR department to complain when their kids don't get the jobs.

These are but a few of the true stories about today's helicopter parents.

I am in wet Wisconsin this week for my in-laws surprise 80th birthday bash put on by my wife and her two brothers. While here I read a great editorial on helicopter parents in USA Today written by a "reformed helicopter parent."

And then when the kids made it to a decent college, many of us remained fixed in hover position. I still remember a few rounds of a paper on Othello from one kid, and another on the divine command theory from another.

The result: Little Susie has made it through four years at her respected university. Phew.

She's ready to launch, right? Not so fast. Many of these helicopter young'uns have absolutely no blooming idea what they should do next. They've been so busy with their internships and tests and labs that they've missed the essential purpose of all that frantic activity -- figuring out their passion, following a stream as it flows into a larger river and then jumping on a boat and seeing where it takes them.

Well said! We now have to introduce failure into our curriculum so our aspiring entrepreneurs have a clue as to what might await them -- they have no experience with failure as children of helicopter parents. Worrisome, no?

Posted by Jeff Cornwall at 08:14 AM | Permalink | Comments (1)

After giving a speech to a business group yesterday, I was reminded by one of the participants of an unexpected benefit of finding a safe little market niche. Many established businesses that you might normally think of as your competitors can become your sales force.

Find a niche that is a part of the market that established businesses don't really want to serve. The customers may be too small for their operation, or serving them may be just too inefficient for their size. I have seen this recently in new law practices, landscapers, healthcare, web design, food distributors, etc., etc. Look for needs to serve not just in customers, but also in the businesses already establsihed in the market.

What seems like crumbs to them can become your feast. Actively market to them. You will make them look good, as they will have an easy referral outlet for business that does not fit their model. That keeps them looking like a good guy to their referral sources.

Posted by Jeff Cornwall at 06:42 AM | Permalink | Comments (2)

From my column this week in the Tennessean:

One of the expenses that entrepreneurs are tempted to cut back on is marketing. However, a weak economy is not the time to cut back on communicating with your existing and potential customers.

Now that the economy has slowed, consumers are thinking twice about spending money. Employment is less secure and inflation is eating up more of the family budget on necessities such as food and gasoline. This creates a much more competitive environment as consumers are more careful about spending and much less willing to take on additional debt.

Posted by Jeff Cornwall at 05:22 AM | Permalink

Benchmarking is something that is a challenge for many small business owners. It is hard to get general information about specific issues faced by entrepreneurs as their businesses grow.

Denny Dennis with the NFIB Research Foundation has introduced a great tool called 411 Small Business Facts to allow for specific searches of all of the small business polls that they have conducted over the years. It is a great tool that allows us to tap into a wealth of information. I have been using this tool as I do research for my new textbook on Bootstrapping.

Next time you have a question about what other entrepreneurs are doing about health insurance, marketing, banking, etc., etc., you now have a tool to make finding out much easier.

Posted by Jeff Cornwall at 07:23 AM | Permalink | Comments (3)

Having endured more than my share of hurricanes and ice storms when I was in business in North Carolina, I like to pass along advice on how to protect your business against such events. The SBA issued this press release today:

As several states recover from the destruction and loss of life caused by recent tornadoes, floods and wildfires, and other areas prepare for the beginning of the 2008 Atlantic Hurricane Season on June 1, the U.S. Small Business Administration is urging the public to develop an emergency plan before the disaster hits.

"Every threat, from wind storms, floods and wildfires, to power outages and computer system failures, reminds us to be proactive when it comes to planning strategies to survive a disaster and recover quickly," said SBA Deputy Administrator Jovita Carranza. "The catastrophic events of the last few years demonstrate the need for preparedness at the individual level, to diminish the risk to life and property."

The SBA stands ready to help communities recover in the aftermath of a disaster. Following the Gulf Coast Hurricanes of 2005, the SBA approved more than $5 billion in disaster loans to 102,700 homeowners and renters in the region. Businesses in the area were approved for 16,780 business disaster loans worth $1.6 billion.

During the past two years the SBA has been preparing to respond to major disasters by reengineering the Disaster Assistance program with a significant focus on customer service, direct accountability, and new technologies that have quadrupled processing capacity. In June 2007 the agency completed its Disaster Recovery Plan, which includes procedures to better handle future catastrophic disasters, and has begun testing this plan through simulations conducted with outside experts.

Disasters strike in all seasons. Since Oct. 1, the SBA has responded to 137 declared disasters, including those for drought. Of those, 118 are open at present.

Disaster preparedness for homes and businesses should include:

- A solid emergency response plan. Find evacuation routes from the home or business and establish meeting places. Make sure everyone understands the plan beforehand. Keep emergency phone numbers handy. Business owners should designate a contact person to communicate with other employees, customers and vendors. Ask an out-of-state friend or family member to be your “post-disaster” point of contact – a person to call to provide information on your safety and whereabouts.

- Adequate insurance. Disaster preparedness begins with having adequate insurance coverage—at least enough to rebuild your home or business. Homeowners and business owners should review their policies to see what is or isn’t covered. Businesses should consider “business interruption insurance,” which helps cover operating costs during the post-disaster shutdown period. Flood insurance is essential. To find out more about the National Flood Insurance Program, visit the Web site at www.floodsmart.gov.

- Making copies of important records. It’s a good idea to back up vital records and information saved on computer hard drives, and store that information at a distant offsite location. Computer data should be backed up routinely. Copies of important documents and CDs should be stored in fire-proof safe deposit boxes offsite.

- Protection of windows, doors and roofing. Installing impact-resistant window and door systems, or simple plywood shutters installed before the storm hits can enhance their ability to resist impacts from wind-borne debris. Hire a professional to evaluate your roof to make sure it can weather a major storm.

- A "Disaster Survival Kit." The kit should include a flashlight, a portable radio, extra batteries, a first-aid kit, non-perishable packaged and canned food, bottled water, a basic tool kit, plastic bags, cash, and a disposable camera to take pictures of the property damage after the storm.

More information from the SBA can be found at their website.

Posted by Jeff Cornwall at 09:35 AM | Permalink

In cleaning out the hundreds of e-mails that amassed during my recent vacation that took me off the grid I came across an interesting study. (By the way, I highly recommend a complete break from email, voice mail, etc. at least once a year -- you will be amazed at how calming it can be).

In the 2008 American Express OPEN Spring Monitor, they found a sharp contrast between business owners over sixty and the small business population at large as they manage their way through the current economic uncertainty.

The over sixty age group holds the most optimistic outlook among entrepreneurs surveyed, perhaps due to having endured downturns in the past. For these business owners the biggest challenge to growth is not an uncertain economy, cited by nearly one third of small business owners overall (30%), but the rising costs of doing business cited by 27% of over sixty year olds. Those of us over 50 (Let's be clear -- I am not yet in the over 60 crowd) have been through many economic ups and downs. We also remember the frustration and challenges that come with prolonged inflation. Younger entrepreneurs have no frame of reference for what inflation can do to small businesses.

Entrepreneurs over sixty are taking actions that show they learned from their past experiences with inflation. Although they are generally more optimistic, they are nonetheless being more cautious in their business decisions:

- 27% of business owners over sixty report plans to hire over the next six
months vs. 38% of small business owners overall; 58% of business owners aged 18-34 report plans to hire

- 42% of business owners over sixty report plans to make capital investments over the next six months vs. 53% of entrepreneurs overall

- 43% of entrepreneurs over sixty are willing to take on a financial risk to grow their business vs. 51% of small business owners overall

Posted by Jeff Cornwall at 07:49 AM | Permalink | Comments (1)

Matt Bandyk, a reporter at US News, has started a new blog on entrepreneurship called Risky Business. Matt's blog takes a similar balance of practical ideas with public policy issues that impact the entrepreneurial economy as I have tried to do at this blog. It is definitely worth a read.

Posted by Jeff Cornwall at 08:05 AM | Permalink

My column in Sunday's Tennessean outlined some basic steps to help entrepreneurs weather the current economic storm.

Posted by Jeff Cornwall at 07:13 AM | Permalink

I've been told that I have a face for radio and a voice for newspaper......

That being said, you can hear an interview I did for the podcast Patrons of Change here.

For those of you who are technology challenged just click the "play" button directly under the title. I say this only because it took this Luddite blogger about 10 minutes to figure out how to make it play....

Posted by Jeff Cornwall at 02:43 PM | Permalink

Last evening we went to hear a group of songwriters at the Bluebird Cafe here in Nashville as part of the Folk Alliance (their website is folk.org, which seems to be down this morning as I write this post). One of them performing last night, James Lee Stanley, is one we first heard over thirty years ago -- I blogged about him a couple of months ago.

What a wonderful evening of music and an affirmation that the music industry is alive and well. The three featured songwriters had all been writing and performing since the 1970s. Are they rich and famous? No. Have they been making a living pursuing what gives them passion? Absolutely.

There is a good lesson here for entrepreneurs in any industry.

Too much attention is given to celebrity and fame. We see it in entertainment and more and more we see it in the world of entrepreneurship. The vast majority of our economic growth is coming from entrepreneurs working in small businesses across the country. It is hard work. It is not very glamorous. But, it has created economic independence for these entrepreneurs and the people working with them.

The same is true in music. There are thousands of songwriters and performers toiling away out there. Many are fortunate and have become successful enough to make a living at it.

The vast majority of entrepreneurs will not reach the heights of Gates, Dell, Jobs, and others whose little ventures grew into empires. In fact, most won't even make their local list of "leading entrepreneurs" in their community.

But, most entrepreneurs don't really care about fame and recognition. That is not what drives them. That is not how they measure their success.

What a blessing it is to be able to share in real success -- the songwriters who continue to hone their craft -- the entrepreneurs who pursue their passion and find fulfillment in the businesses they create.

Posted by Jeff Cornwall at 07:04 AM | Permalink

Last evening we went to hear a group of songwriters at the Bluebird Cafe here in Nashville as part of the Folk Alliance (their website is folk.org, which seems to be down this morning as I write this post). One of them performing last night, James Lee Stanley, is one we first heard over thirty years ago -- I blogged about him a couple of months ago.

What a wonderful evening of music and an affirmation that the music industry is alive and well. The three featured songwriters had all been writing and performing since the 1970s. Are they rich and famous? No. Have they been making a living pursuing what gives them passion? Absolutely.

There is a good lesson here for entrepreneurs in any industry.

Too much attention is given to celebrity and fame. We see it in entertainment and more and more we see it in the world of entrepreneurship. The vast majority of our economic growth is coming from entrepreneurs working in small businesses across the country. It is hard work. It is not very glamorous. But, it has created economic independence for these entrepreneurs and the people working with them.

The same is true in music. There are thousands of songwriters and performers toiling away out there. Many are fortunate and have become successful enough to make a living at it.

The vast majority of entrepreneurs will not reach the heights of Gates, Dell, Jobs, and others whose little ventures grew into empires. In fact, most won't even make their local list of "leading entrepreneurs" in their community.

But, most entrepreneurs don't really care about fame and recognition. That is not what drives them. That is not how they measure their success.

What a blessing it is to be able to share in real success -- the songwriters who continue to hone their craft -- the entrepreneurs who pursue their passion and find fulfillment in the businesses they create.

Posted by Jeff Cornwall at 07:04 AM | Permalink

My column in this week's Tennessean looks at the ins and outs of niche markets.

Generally, a niche strategy is a good way to enter the market for a new business. It usually takes fewer resources for the startup because of lower marketing costs and the ability to start on a smaller scale.

Success rates tend to be higher for niche businesses since they have less direct competition.

Without much competition, niche businesses often can charge higher prices, which allows for quicker positive cash flow during startup and better margins once the company is profitable.

But, entrepreneurs also should be cautious when picking a niche. Here are some things to consider.

My column offers five key tips for finding success in a niche market.

Posted by Jeff Cornwall at 06:05 AM | Permalink | Comments (1)

Could you use $100,000 for your small business? Check out Forbes Boost Your Business contest. You can find the official rules for this competition here.

Posted by Jeff Cornwall at 05:49 AM | Permalink

Monroe Carell, former CEO of Central Parking, talked to our students this morning about his journey of taking the eight parking lots his father owned and turning it into the largest parking company in the world.

It was interesting to hear him talk to our students about the importance of patience, especially given the impatience of GenY that I talked about in my recent interview with Inc magazine. He believes that patience is probably the most important trait of successful entrepreneurs. I agree. This will probably be the biggest lesson that the entrepreneurial Generation Y will need to learn if they hope to be success over the long-run.

Posted by Jeff Cornwall at 12:51 PM | Permalink

The music industry is facing an interesting puzzle these days How do you run a business where customers do not want to pay and they do not want advertising? From today's Tennessean:

Efforts to sell music by subscription have mainly failed.

Yahoo recently gave up on its Music Unlimited subscription service and sent its customers to Rhapsody, another struggling music provider.

But traditional radio's offer of free music surrounded by audio advertising also is being rejected by a generation that resents undesirable interruptions.

"They want to be the program director, and they insist that the program be free," says Jerry Del Colliano, a professor of music industry at the University of Southern California and a former executive at Top 40 WIBG in Philadelphia.

The big boys in the industry do what big boys do in any industry undergoing fundamental change -- they try to get the government to protect their interests. From TechCrunch (via Andy Tabar):

Warner Music, fully aware that the days of charging for recorded music are coming to an end, is now pushing for a music tax.

This isn’t the first time someone has called for a music tax. Peter Jenner argued for it in Europe in 2006. Trent Reznor said the same thing last year (as did the Songwriters Association of Canada)....

But Warner Music is doing more than just talking about a music tax. They’ve hired industry veteran Jim Griffin to create a new entity that would create a pool of money from user fees to be distributed to artists and copyright holders.

We may be witnessing the end of the structure of the music industry as we know it. The mass produced, mass marketed music is becoming a relic of the past. And what does the future hold?

The predictions from the Institutue for the Future about the future of small business might offer a glimpse into the future of music:

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.

What would a musical artisan look like? Probably a lot like James Lee Stanley.

My wife and I first heard James Lee Stanley at a "coffee house" in the 1970s when we were attending the University of Wisconsin -- Stevens Point (WAY up north!!). James Lee was one of many songwriters who made the circuit performing on college campuses at coffee house events. (As a note of Entrepreneurial Mind trivia, I played in a couple of coffee house sessions myself). The songwriters/musicians got a small payment from the school and were allowed to sell their record albums (for the younger generation -- that is what we used to call "vinyl").

Fast forward to 2008. One of my winter projects was to convert many of our old vinyl albums into digital. When I got to our collection of records from our coffee house days, I decided to "Google" the songwriters to see what happened to them. Many had faded into obscurity before the Internet was able to immortalize them in digital splendor.

James Lee Stanley on the other hand was alive and well and still making the circuit. He had survived as an artisan in the music industry. He's got a website. And he has a blog offering "tips, hints, clues and info for the artist in us all." His blog chronicles the life of a musical artisan offering his thoughts on touring, performing, writing, studio work, contracts, stringing guitars, and so forth. He still writes music, still records and still tours.

Why does he continue to perform for well over thirty years? Not for possible fame and not for financial wealth.

What I know is that following your bliss is more rewarding than making a bunch of money at something you absolutely hate doing. I don’t feel that I’ve wasted my life or that I could have been more successful at something else. I love what I do and I love trying to get better at it and I love it that at my stage of life I still have so much passion for what I do and I love how vibrant and alive it keeps me.

So what is the future of the music industry? I hope it is not an industry propped up by government intervention as Warner Music would have it.

Instead, I hope that it is an industry sustained by talented artists -- and successful artisans -- who help us understand love, heart ache, happiness, sadness, joy, despair. I hope it is full of people like James Lee Stanley, whose view of success in his career is one we all can learn something from, be we musicians or be we entrepreneurs.

Posted by Jeff Cornwall at 10:12 AM | Permalink | Comments (1)

Some new entrepreneurs give the name of their new business almost no thought. Others agonize over the best name to capture the true essence of their business. I always tended to fall into the latter category. With one new start up we brainstormed and debated for weeks over the best name for our new program. But then, it often takes my family days to even come up with the a name for a new dog.

The Wall Street Journal offers several factors to think about when picking a name.

There's so much riding on a company's name. It has to stand out, and be easy to remember and look up. And the pitfalls are many.... [A] bad name can fail to engage customers, or become outdated as the company grows and adds products and services.

Some of their tips:

- Be unique

- Don't be obscure

- Don't be mundane

- Make sure it hasn't been used and is open as a domain name

- And test it out on objective outsiders

Posted by Jeff Cornwall at 01:28 PM | Permalink | Comments (2)

Michael Lee Stallard has just released a new e-book on the power of emotional ties in business -- he calls it the connection culture. Stallard's e-book is now available for downloading for free at changethis.com. Here is a brief description from the author:

I want to share something with you I've learned over the last decade of my life that I believe can be as helpful to you as it has been to me. In a nutshell, one of the most powerful and least understood aspects of business is how an emotional connection between management, employees and customers provides a competitive advantage. Unless the people who are part of a business feel a sense of connection -- an emotional bond that promotes trust, cooperation and esprit de corps -- they will never reach their potential as individuals, nor will the organization.

Posted by Jeff Cornwall at 06:02 AM | Permalink

Over twenty years ago, I participated in research that looked into factors that made some organizations more entrepreneurial than others. Of particular interest to me was why large organizations differed in their innovativeness and entrepreneurial activities.

We found that in general entrepreneurial organizations differed from what we termed "traditional" organizations in several ways:

- View of the external environment -- Entrepreneurial organizations seek to Identify opportunities. They tend to actively seek out change that can create new initiatives. Traditional organizations look at the external environment for threats to their core business, rather than for new opportunities.

- Strategy -- Entrepreneurial organizations have a more proactive strategic posture, while traditional organizations take a more defensive position focusing on protecting their core business.

- Control Systems -- Traditional organizations control primarily through expense-based budgets, while entrepreneurial organizations also look at longer-term business planning and forecasting to guide the business.

- Structure and Communication -- Traditional organizations tend to be hierarchical, centralized and formal, while entrepreneurial organizations are more decentralized and have informal communication flow.

In short, these organizations have fundamentally different cultures.

So the question then becomes can a business that has become "traditional" over time as it grows and matures become entrepreneurial again?

My experience in working with many large businesses on this is that very few are willing to take the concerted and long-term efforts necessary to truly change their culture. Most often, they simply asked me to "make their managers more entrepreneurial." But, without a supportive culture for innovation and entrepreneurship, these efforts are doomed to fail from the beginning. A few organizations have been able to change to a more entrepreneurial culture, but the larger the business the harder it becomes to make such a fundamental transformation.

My best advice is this -- if you have an entrepreneurial culture make every effort you can to preserve it. You do this by:

- hiring people with entrepreneurial orientations and who already practice "entrepreneurial thinking."

- reward innovative and creative actions independent of immediate success or outcomes.

- delegate, delegate, delegate.

- lead by example, making sure your words and actions speak loudly about your commitment to being an entrepreneurial business.

Posted by Jeff Cornwall at 06:43 AM | Permalink

I started, but then deleted, several posts about Brett Favre's retirement. Brian Leaf sent along a post by Jacqui Banaszynski about Brett from a journalist's blog called Poynter Online. Although she takes a journalist/editor slant, the lessons she takes from Favre's career aptly apply to anyone in a position of leadership, including entrepreneurs.

Here is a sample of just one of the leadership lessons from Banaszynski's post:

Favre loved the job. He brought joy to work every day and let it show. He dared to grin on the field and whoop when whooping was called for and get knocked down and pop back up laughing. There was almost always a smile behind the bars of his helmet, even when he was losing.

This is what I call the "shock absorber roll" the entrepreneurial leader needs to take on. No matter how bad things get, the entrepreneur has to be the "keeper of the faith" for the venture. In an entrepreneurial venture, most of the employees know how bad things are. The business is too small to keep many secrets. They look to the entrepreneur to give them confidence that they can get through the tough times, no matter how dire things might seem.

At some point I hope to capture my own thoughts on what we can learn about leadership from Brett's career. Thanks to Banaszynski for sharing hers.

Go Pack!!!

Posted by Jeff Cornwall at 08:28 AM | Permalink

Rieva Lesonsky, Senior Vice President and Editorial Director of Entrepreneur magazine resigned this week. She told me that she is starting a new venture called SMB Connects. Its website askrieva.com should be live at the end of the month.

Posted by Jeff Cornwall at 04:34 PM | Permalink

The flip side of the pricing post I wrote yesterday involves what I call apologizing to the market.

When we enter the market with prices well below the rest of the competitive landscape, we make a statement to the customer. "We are not as good as the rest, but hope our low price gets you to buy our product anyway." "Our quality is not up to the competitors' standards so we cannot ask the same price."

Set a price that puts you where you want to be in the customers' minds. "We are as good as the rest." Or, "We are better than the rest."

Once you position your product compared to the rest with your price, clearly offer them a temporary discount -- through a sale, coupons, etc. Make it clear that the discount is to introduce the product so they give you a try.

Posted by Jeff Cornwall at 07:04 AM | Permalink

Part of how we communicate about our products it through our pricing. A new study about placebos reinforces the psychological power of pricing. From Science Daily:

[Researchers] used a standard protocol for administering light electric shock to participants' wrists to measure their subjective rating of pain. The 82 study subjects were tested before getting the placebo and after. Half the participants were given a brochure describing the pill as a newly-approved pain-killer which cost $2.50 per dose and half were given a brochure describing it as marked down to 10 cents, without saying why.

In the full-price group, 85 percent of subjects experienced a reduction in pain after taking the placebo. In the low-price group, 61 percent said the pain was less.

Why the significant difference in the power of the placebo with the higher price?

Customers use pricing as a cue for the quality of the product or service.

There is a great example that comes from the story of a psychiatrist who tried to use pricing to phase out his practice. He was getting ready to move toward retirement. So he decided to double his rate for any new clients, assuming that nobody would pay that much for his services. But, the opposite occurred. Referrals and new patients came in at the highest rate he had ever experienced in his long career in practice. So he raised his rates again hoping this would do the trick and keep away any more new patients. However, you guessed it -- referrals increased even more.

It seems that when it is hard to objectively evaluate quality, such as the case with service businesses, consumers look to other ways to judge quality. And pricing can be one of the most powerful tools to communicate quality.

Posted by Jeff Cornwall at 06:01 AM | Permalink | Comments (1)

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.

Posted by Jeff Cornwall at 03:08 PM | Permalink | Comments (1)

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.

Posted by Jeff Cornwall at 02:32 PM | Permalink

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.

Posted by Jeff Cornwall at 04:05 PM | Permalink

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!

Posted by Jeff Cornwall at 05:18 PM | Permalink

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....

Posted by Jeff Cornwall at 01:27 PM | Permalink

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.

Posted by Jeff Cornwall at 02:34 PM | Permalink | Comments (4)

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!!