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(Josh Tabin on Jul 28, 2008 11:27 AM) Will the RSS feed change as well? ADMIN: Yes. New RSS feed is here: http://www.drjeffcornwall.com/atom.xml

VCs tend to be more geographic in their investing -- they tend to favor deals closer to home. It reduces their risk, as they know more of the players in their area and it is easier to keep an eye on things.

And VCs in each region or even each city will often focus on just a few industries or even a couple of segments within those industries that they know well. Again, it is a way of reducing risk, since they can understand, evaluate, value and forecast a deal better if they have experience and knowledge in a specific industry segment.

A case in point can be seen here in Nashville. Much of the wealth in this area came out of health care -- and specifically health care services and management. the health care giant HCA created a lot of wealth here in Nashville and spawned many deals formed and/or funded by its former executives. Wander too far from health care services or management and the money gets harder to come by. Even medical devices are harder to fund here because the money does not have experience in that segment.

And move too far away from health care and it even gets tougher. There is a great example seen in an article from Business Tennessee magazine:

Four months ago, Tim Estes stood at a podium and lamented how much further up his company—Brentwood-based Digital Reasoning Systems -- would have been on the high-tech food chain had it just been located on either of the country's coasts. The 28-year-old entrepreneur declared that the 15 or so Midstate venture capital firms are too timid or unimaginative to risk anything beyond recycling the same old health care services model over and over again. "Why not link evidence-based medicine and informatics?" he asked. "[Health care] data is essentially the crude oil. Refining data is seven times more profitable than pushing it around. This is inexcusable. We should be leading this."

So this entrepreneur is planning to pick up and move where the money is for his Web 3.0 business deal.

(Thanks to Jim Stefansic for passing this along).

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(Toilet Paper Entrepreneur on Jul 26, 2008 12:53 PM) With our firm, Obsidian Launch, we almost exclusively work with companies in our back yard. There is no way that technology can replace the effectiveness of regular face time. - Mike Michalowicz

To participate, contributors may submit their ideas until November 15. Here is a link to the submission site. The second phase of wiki-based collaboration takes place between November 16 and December 15. The online VINE community will select finalists and a jury of experts will award the grand prize.

This competition was funded through a grant from the John Templeton Foundation.

Here is a link to get additional information about the S.E.VEN Fund.

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(pooja on Jul 24, 2008 5:50 AM) Hi , This is Ayesha Lakhani, great to see you taking this initative. I am also serving a similar cause on Endpoverty by 2015 in India. I am voluntarily working with the United Nations on its Millennium Development Goals. Join this and check the latest discussion on Poverty Line........ http://www.orkut.co.in/Community.aspx?cmm=47234928 thanks.

However, I have gotten a lot of questions lately about what caused the change from my formerly rosy outlook to what more than a few of you have termed my new personality of "Professor Doom."

I believe that things have gotten seriously off track. Why? My immediate concern is that the inflation genie is out of the bottle. As a result, I believe that we will have at least a few years of difficult times ahead of us. Once inflation takes root, as I believe it now has, there are no quick and easy solutions.

On top of these short-term worries, I have several growing concerns rooted in more macro, fundamental changes
occurring in our society, culture and economy.

First, we never seized the opportunity to create a true shift in our tax policy in this country. We know that lower taxes and a simple tax system help entrepreneurial economies grow. Our tax policy in the US is rooted in the mid-1900s. The role of taxes are to raise the funding needed to provide for the basic constitutional functions of government. But over the past 60 to 70 years taxes have become a major tool used to shape culture and implement social policies. More recently taxes have become a mechanism to direct economic behavior in directions decided upon by politicians and bureaucrats at all levels of government. We now see this at work in the entrepreneurial economy.

Second, for several decades entrepreneurship was growing below the radar in our economy. But as entrepreneurship became more dominant in our economy, politicians and their minions just could not keep their hands off. It grew and prospered so well when they left it alone. But now they are convinced that entrepreneurs cannot possibly do their work without support from governmental agencies bloated with career bureaucrats who have never had to make a payroll. We are quickly headed toward a policy of socialized entrepreneurship.

Third, there are efforts around the globe that seek to change the current economic order. Some of these are economic forces that want to replace the US role as economic leader. If they could achieve this through the power of free markets I would say congratulations and job well done. But many are using noble issues such as environmentalism and social justice as smoke screens to hide their true intentions, which include gaining economic advantage or even crippling capitalism. Those countries that control much of our supply of oil manipulate us like a dealer controls a junkie. They use the power of supply and demand as a means of keeping us dependent.

Lastly, our drift toward socialism over the past several decades has changed our culture from one based on self-reliance to one based on entitlement and dependence. Given the momentum created by the policies of the past few Presidents, and given the platforms of the current two candidates, the growth of government's role in our lives will continue expand. Sustaining our entrepreneurial culture will become increasingly difficult if this trend is not reversed.

I am optimistic that we can turn things around. I just hope we have the wisdom and collective resolve to do so.

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(Jackson Miller on Jul 22, 2008 2:44 PM) It seems like you are just being religious about historical conservative political ideas. We get it, you like small government and think that taxes are evil. The thing is, you don't back it up. Talk about smoke screens. There are two sides to the coin. Using tax dollars to fix the US health care system would help entrepreneurs immensely. Not only would it provide a healthy work force, but it would also alleviate some of the risk of hanging your own shingle. I know you won't agree with that though because "universal health care is bad". The new deal is hear to stay and that is good for the entire country. As an entrepreneur I am having no problems working within that context. Oh, and as for foreign control based on oil, maybe we should have paid more attention to the environmentalists for the past 3 decades. But no, being religious about the motives made us blind to the problem. Way to go us!

(Jeff on Jul 23, 2008 9:48 AM) Governments around the world have a horrible track record when they try to pick winners in the economy. My stance has been developed by looking at the data over time. I don't "like small government". The evidence shows that less government involvement in markets and lower taxes are what spur economic growth. By the way. I never said I was against environmentalism or social jutice. Nothing coule be further from the truth. It seems that you have drawn an incorrect assumption here. My point was that people use these issues to hide agendas that have very little to do with the environment or the social condition. Perhaps you are "being religious" as you say (a strange choice of wording that you use, I must say) in how you interpret my words. To your other point -- I don't think universal health care is "bad". The evidence shows that government as the health care provider or even health care payor is inefficient and ineffective over the long term.

(Danny L. Newton on Jul 26, 2008 9:02 AM) Why is there so little outrage about the $500 million in subsidies given for the VW plant in Chattanooga? Manufacturing employment in the US has been going down since 1979 because of worker productivity. Tennessee industrial policy seemed to be working in 1956 but we are doing the same thing,only throwing more money at it, in 2008. From 2001 to 2006, the inflation adjusted annualized rate of growth of personal income from manufacturing was 2.56% versus a background inflation ate of 3%. This subsidy is going to have to be paid mostly from small businesses and other service industry jobs. If all state and local taxes are 8.5% of all personal income, I figure that the taxpayers will have to produce $5.88 Billion to get that much tax money back to the state and local government. This subsidy is the equivalent of buying the first two years of car production of 150,000 cars at $18,000 each. This overreaching for industrial output is also hard on our property rights since Cookeville and Putnam County are using eminent domain to move an unwilling seller off of their planned industrial park.

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.

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(Anthony Kuhn on Jul 22, 2008 10:42 AM) Dr. Cornwall: I so enjoy running into your albums during my reading of entrepreneurial and small biz blogs and I think these things that businesses are doing in times of tightening belts should be used at all times to help make the most of every $. If being more efficient and lean means being a more successful business, than efficiency should be a focus at all times and not just when things get tough!

(Lim Boon Chuan on Jul 24, 2008 1:36 AM) When the economy slows, even the largest of companies have to cut down on R & D, marketing and other misc expenditures. Even more so for small busines owners. It is very easy to say not to stop the marketing efforts but the problem is the small companies are struggling to survive, I won't fault them for cutting down on whatever expenditure so that they can continue. I have been through this so I can say that not that the small companies want to cut down on marketing. Problem is when you cant even feed your employees you have to cut down on whatever needed to have cash to feed them.

The stage of investment is one key to follow. When they shift to later stage deals as they have the past few years, it generally means they are taking a more conservative approach to investing, as later stage deals tend to have less risk. During robust times, or during speculative frenzies, they tend to move to earlier stage deals.

A report by the National Venture Capital Association casts a rather dark shadow over the economy to come. From the NVCA report:

"While the exit market remains challenged, the venture industry is operating under the same long-term philosophy it has adhered to historically. Venture firms are prepared to invest for 5 to 10 years and will stick with their companies through difficult times. That said, for the remainder of the year we will be watching first-time funding levels, which declined this quarter. This dynamic could very well be the result of the closed IPO window and will become concerning if the situation is prolonged."

Rather than going to new deals, more VC money is going into already funded deals to keep them afloat until an exit strategy can be executed.

While the IPO option has dried up, that is really not news. That change goes back to Sarbanes-Oxley. What the report does not say, but I believe is now a compounding factor, is that the main exit strategy of selling to a large publicly held corporation is declining.

Keep your eye on this. If corporate America continues to get conservative due to inflation, or worse yet stagflation, it will get even tougher to find early stage funding for high growth deals.

TrackBack (0) | ]]> Entrepreneurial Finance 2008-07-21T06:41:19-06:00 http://forum.belmont.edu/cornwall/archives/009959.html My column in this week's Tennessean: When people use the term "lifestyle business," they usually are referring to something small and even part time. I would argue that every business should be viewed as a lifestyle business. If you choose... 9959@http://forum.belmont.edu/cornwall/ My column in this week's Tennessean:

When people use the term "lifestyle business," they usually are referring to something small and even part time. I would argue that every business should be viewed as a lifestyle business.

If you choose a business deliberately based on your aspirations and values, you can create a business that is an intentional reflection of the lifestyle you would like to live.

Continued reading Your Business Should Match Your Lifestyle...

TrackBack (0) | ]]> Tennessean Columns 2008-07-21T06:32:01-06:00 http://forum.belmont.edu/cornwall/archives/009943.html Many of you know about the Four P's that make up a marketing strategy -- product, price, promotion, and place. Those of you who read this blog regularly or have had me in class also know about the Three M's... 9943@http://forum.belmont.edu/cornwall/ Many of you know about the Four P's that make up a marketing strategy -- product, price, promotion, and place.

Those of you who read this blog regularly or have had me in class also know about the Three M's used in assessing opportunities in entrepreneurship -- market, margin, and me (or mission for social and corporate ventures).

In our new book, Bringing Your Business to Life, Mike Naughton and I introduce the Two V's that together help make a "good entrepreneur" -- vocation and virtue.

Entrepreneurs who understand their work as vocation seek to not only serve themselves through their venture, but to also serve a greater purpose.

The entrepreneur has to define the success of his business beyond financial, technical and market achievements to moral and spiritual principles that reveal the business as a gift to others. This may initially sound a bit too moralistic and idealistic. We have found, however, that when entrepreneurs describe their success and satisfaction of their company with a broader criteria than merely financial gain, they are on the way to setting a foundation to building a company that is faithful to their deeper commitments. Some of the criteria include

- creating jobs in which employees can find security;
- generating and distributing wealth for their investors and their employees;
- developing a highly positive culture that attracts workers who see the business as a good place to work;
- maintaining low rates of employee turnover and high employee satisfaction;
- providing needed services and products with great quality, and so forth.

No matter what path leads us to become entrepreneurs, the only way we can be fully human in our work is if we see our work as an opportunity to give our talents to others in service to the good of society and to God.

Virtue includes those habits that define how we approach our work as entrepreneurs.

When a person works, he affects the inner landscape of his character. The issue is not whether he changes himself, but how he changes himself. And the key to understanding the significant revealing of his personhood is not found in the amount of revenues he has generated, or levels of promotions, or the percentage of market share he has captured. Rather, the moral and spiritual character of an entrepreneur or businessperson will be captured in the responsible relationships he has forged with others in the actions of running his business. More specifically, this can be shaped by the opportunities he pursues, who he chooses to do business with, who he hires, decisions he makes about products and markets, decisions about whether and how fast to grow, the corporate culture he builds, and his engagement with the community as a leader and/or citizen.

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(Andrew Wise on Jul 17, 2008 9:05 AM) I would also add vitality to that V-list. Personally working for myself and constantly innovating and creating value for others makes me feel alive. From those days when I worked for someone else, I just felt my spirit inside me die, and it wasn't until I decided to work for myself and blaze my own trail did I feel alive and full of energy. Now, everyday I can't wait to get to work and don't want to leave. If you can find someone working for "the man" that has this kind of vitality, sign me up :) Great read, thanks for sharing!

(Robert Brouillette on Jul 18, 2008 6:50 PM) I would add VALUE to your list in the sense that a successful entrepreneur must be able to create value for his/her customers.

Bill Hobbs sent along a good post from The Executive Update that speaks to learning from failure.

[W]e tend to live in an avoidance society, where failure is often overlooked or ignored and we only focus on successes. That’s a mistake. Leadership comes from learning lessons taught by failure. People rebound from failure because they choose to learn from their mistakes.

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(D A Morton on Jul 18, 2008 5:03 PM) I fully agree. The lessons of failure often teach us more than successes. There is an overcoming of hardships that builds character and focus. However, these traits are more general life lessons and not necessarily leadership lessons. One can just as easily learn these lessons as a follower as they can a leader. So, why is thought to be a leadership characteristic?

And if you think I am the agent of doom (and I know at least a few of you do feel that way) read what Nouriel Roubini, Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business, has to say. (Thanks to Andy Tabar for passing this along).

TrackBack (0) | ]]> Public Policy, Economics and Entrepreneurship 2008-07-16T13:26:04-06:00 http://forum.belmont.edu/cornwall/archives/009939.html Ben Cunningham sent along a link to a great blog called Church of the Customer that focuses on building customer relationships. Nothing could be more important in these uncertain economic times. The blog authors offer a variety of helpful inform... 9939@http://forum.belmont.edu/cornwall/ Ben Cunningham sent along a link to a great blog called Church of the Customer that focuses on building customer relationships. Nothing could be more important in these uncertain economic times. The blog authors offer a variety of helpful inform on turning your customers into your sales force, using social media, and on how to build strong word of mouth.

Barking as a customer acquisition strategy is a relative affair, whether spamming bloggers with press releases, peppering a neighborhood with door hangers , dressing up a mascot to stand on a street corner, or pimping a new website on Twitter. Real marketing is designing elements into a business that will get the attention of customers so you don't have to yell.

Good advice for bootstrappers. This is a site worth bookmarking!

TrackBack (0) | ]]> Bootstrapping 2008-07-15T11:29:05-06:00 http://forum.belmont.edu/cornwall/archives/009933.html Once again Walmart has its finger on the pulse of American consumers. Just when inflation is kicking in and the economy softens they are seeing strong growth. How? They are listening to the customer. They are marketing aggressively and focusing... 9933@http://forum.belmont.edu/cornwall/ Once again Walmart has its finger on the pulse of American consumers. Just when inflation is kicking in and the economy softens they are seeing strong growth. How? They are listening to the customer.

They are marketing aggressively and focusing on prices and values. This is just what the consumer wants to here right now.

From the St. Paul Pioneer Press:

Sales in entertainment were strong at Wal-Mart, with flat-panel televisions continuing to run in the high double-digit same store sales increases. Some retail observers see Wal-Mart's aggressive marketing of inexpensive electronics as a threat to Richfield [MN]-based Best Buy.

The Pioneer Press article also reports on flat sales at Walmart challenger Target, which has not changed their strategy of shifting up in brand quality and to a more upscale approach to merchandising

We are seeing the same thing in the restaurant market. Value sells. McDonald's is showing strong performance with increases in same store sales. At the same time, upscale restaurants are closing left and right.

Also, many entrepreneurs I know in the service sector are experiencing pressure from their customers to trim back pricing or risk losing customers to low cost competitors.

The advantage that entrepreneurs are supposed to have is our ability to be nimble. Now is a time to be very nimble.

Listen to your customers. Think like your customers. Your reality in should be built on their perceptions. Inflation is scaring them. Rational or not, it doesn't matter. It is time to focus on pricing and value.

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(Sundi D. Hayes on Jul 14, 2008 2:11 PM) I've been listening closely to who mentions this and exactly what they are saying. Do you think, Jeff, that in all actuality upper-middle class are coming down to a true middle class level? We shop walmart regularly and the prices for standard items on the green side of the store are soaring (milk, cheese, produce, etc.) It seems to me the upper-middle class are finding a new home at walmart instead of the pricier grocery stores which is creating the appearance of satisfaction when actually the true middle class wallet is saying, "Hey! Wait a minute here!" Thoughts?

There are two types of seller's remorse. One kind is the emotional feelings that you are doing the wrong thing. It is not really rational, it is just that fear, insecurity, and/or uncertainty play tricks on your mind. Think Brett Favre. I would bet that rationally he knows it is time to move on from the Green Bay Packers (this is an American football metaphor for those of you outside the US). But, all he knows is football and he probably had not spent much time planning for what comes after his career in the NFL. I can empathize with him. I had a lot of the same kind of pangs of doubt when we sold our company.

The other find of remorse is one that happens because the sale puts you into a situation that is no longer fun. You are still in the company you created, but you no longer own it and now work for a boss. From the NY Times:

"The person who became my boss was the man I was negotiating with when I was selling my company," said Mr. Asterino, 46. "You're trying to maximize the value of your company when you’re selling it -- and then when the transaction closes, that individual is your boss. It was very difficult."

I knew I could not be happy with this type of exit, so planned carefully to craft an exit in which I not only monetarily exited, but physically exited, as well. Not all entrepreneurs have this option, but if you do I would strongly suggest you take it.

(Thanks to Jennie Bowman for passing along the NY Times article).

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(Lim Boon Chuan on Jul 11, 2008 1:52 AM) To use the word "remorse" is no understatement. For me parting with businesses I built from bare hands for years and years, watching them grow, nurturing them to size. Having to sell them not really to cash out but because, as an owner, you are fixed in your way, you need professional managers and owners to bring your loved businesses to the next level. But remorse it is, all the procedures and standards, the company culture was determined by me. To sell off a business is more than remorseful. It is like cutting away part of my flesh. After several painful experiences, normally what I do is, a year or two before the sales, I would start to wean myself away from the business, letting my assistants take over. So by then they are experienced enough to be in charge during the handover period and I can leave it to them without undergoing the painful handing over period.

(Mike Michalowicz (A Toilet Paper Entrepreneur) on Jul 11, 2008 11:10 AM) I experienced the 2nd type of remorse. It wasn't fun after selling my business. But it is truly financially rewarding.

(Q5 Webdesign on Jul 11, 2008 12:06 PM) Nice article, very interesting! Just the information I needed to know, thanks! Mark

(Bill Hobbs on Jul 12, 2008 2:37 AM) I saw the headline and thought you had written about Brett Favre.

(Paula on Jul 12, 2008 9:24 PM) I'm about a year and a half into my business. Last summer I had a project go so wrong I almost lost everything, and I realized then that I never want to part with my company. So I switched tactics... instead of branding everything with my company's identity, I'm creating products with their own separate branding. That way I can sell the product lines without having to part with my whole company. I don't have kids, but I can't imagine the emotional impact of selling one's business is much different than when a child gets married. Who knew??

(ach on Jul 23, 2008 3:18 PM) How did you find a buyer for your business? Did you use a broker, and if so what did he charge you? There are a ton of sites out there that purport to do it for no commission (www.biztrader.com for example), but i'm not sure if they're credible.

There is a growing interest in how business principles -- such as competition and entrepreneurial innovation -- can help fix what is ailing the educational system. There is huge resistance from teachers' unions and school of education in universities. But, parents, business owners, and civic leaders are beginning to say "enough is enough."

You can see more on this program and its goals here at the website of the sponsoring organization, Advance Baton Rouge.

TrackBack (0) | ]]> Social Entrepreneurship 2008-07-09T06:58:52-06:00 http://forum.belmont.edu/cornwall/archives/009890.html My post yesterday got a comment questioning why business owners are so worried about inflation and its affect on debt. During periods of high inflation, many small business cannot keep pace with higher costs. Their profit margins will shrink as... 9890@http://forum.belmont.edu/cornwall/ My post yesterday got a comment questioning why business owners are so worried about inflation and its affect on debt.

During periods of high inflation, many small business cannot keep pace with higher costs. Their profit margins will shrink as costs go up more quickly than they can increase prices. We are already seeing evidence of this.

When margins shrink, businesses may no longer be good credit risks for banks. Their cost of borrowing money goes up. Or in some cases, they may become out of compliance with the profit margins required in the restrictive covenants in their loans. The banks may force them to move their loans to another bank. That will mean the transaction costs for the new loan and typically higher interest rates.

The Fed will soon begin to use higher interest rates to cool off inflation. The cost of debt goes up. During our last period of inflation in the late 1970s mortgage rates hit 16-18%. Higher rates hung around late into the 1980s, when we still were paying 9% for a prime plus a quarter business loan.

Inflation of 2-3% we can handle. We have had a long period of solid economic growth with modest inflation. Younger entrepreneurs have never known anything else. What many of us think is coming is double digit inflation. That changes everything. Profits will be harder to maintain. Debt will cost more and can become much more difficult to secure.

Those who get out ahead of this will have a better chance to be OK. Those who do not will have a higher risk of failure. See this recent post I wrote on steps entrepreneurs should be taking to shore up their income statements and balance sheets to prepare for a period of much higher inflation.

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(Pizzamancer on Jul 9, 2008 6:15 PM) Thanks for addressing my earlier comment. I though I should throw another 2 cents out here as well though. You said here that "as costs go up more quickly than they can increase prices". What in the heck are you talking about? If you own a business and have a decision to raise prices or go under, that decision becomes one of the easiest to make. You raise prices. Customers buy gas, they buy things, and know that prices have gone up. If you lose some due to increased prices, it is the lesser of 2 evils, with the alternative being going under. Not many small businesses are capitol intensive. Most owners borrow money to get established or to expand. If you don't have a profitable model, and the future is uncertain, then you really have to think hard before going the expansion route. Inflation reduces your debt. Not on a $ basis, but on a % basis. Your debt gets easier to pay. Student loans get easier to pay off. Compliance and covenants on loans? That isn't even worth a reply, and I challenge you to find a single example where a bank "forced" a customer to move their loans to another bank.

(Jeff on Jul 10, 2008 11:16 AM) Pizzamancer, The reason that expenses go up faster than revenues for many businesses are plentiful. For example, your customers are also feeling the pressure of inflation so lean on you to hold the line on prices. Last night a business owner told me the story of how a big customer was demanding he cut his price by 10%. I experienced this in my businesses and I am seeing it again right now. I never said that businesses got in trouble because of their business model. People with business models that have been healthy are reporting declining profits because they cannot increase their prices quickly enough. Not all businesses, of course, but many. This is a particilar problem for small companies that supply big companies. Finally, you said, "Compliance and covenants on loans? That isn't even worth a reply, and I challenge you to find a single example where a bank 'forced' a customer to move their loans to another bank." I have dozens of examples that I have whitnessed over the years. They are making all payments and many are still profitable, but they fall below the acceptable ratios in their loan docs and cannot improve them in time to hold off the bank from taking action. Any business banker will tell you that this is something they have to do.

(Pizzamancer on Jul 10, 2008 7:53 PM) I am sorry, that just doesn't cut it. I worked in the largest business banking department of Wells Fargo for 2 years before opening my own business, and there was not a single case of a small business owner who had compliance issues and was forced to take out loans at another institution. Not one. Profits are down all over the place. That is easily verified by buying a gallon of gas, cheese or a pound of flour. Just because cheese and flour goes up by 140% does not mean that all pizza shops need to increase prices, it is the kiss of death not to though, although you would only need to increase your prices by 5% to cover the increased costs of doing business. If you buddy's company only has one customer and they want a 10% discount, well then they better find a way to cut other expenses if they want to keep the account. pretty black and white there too. Either that or try and increase the value of his product by 10% and keep prices the same. Give him some advice and tell him to tighten his belt for the next 4 years.

(Matthew Higgins on Jul 21, 2008 5:11 PM) Pizzamancer, What type of small business do you own? I think that you both are talking about different types of businesses. Pizzamancer seems to be referring to a small business such as a restaurant that services customers that need a commodity, such as food. In this type of business, yes, prices typically mirror a raise in cost associated with inflation. Jeffrey is more talking about the larger picture of entrepreneurship which is the other 99% of businesses such as those that provide services to large clients. I think what Jeffrey is saying is that those businesses that services larger companies are bound by contracts, whether it be with customers or banks. Inflation hurts those small businesses because large businesses will shop around for the small business that will give them the lowest price for what they need. In this situation the small business cannot raise their price, even though costs increase. In response to your other point about banks forcing a small business to pay their loan and move to another bank, all I can say is of course they can and do. In the loan docs banks put ratios that small businesses must meet. During inflation, some small businesses cannot meet these ratios and therefore have their loans recalled. At this point, yes, they must move banks.