Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.
Author: Jeff Cornwall
Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.
Dr. Jeff Cornwall is the inaugural Jack C. Massey Chair in Entrepreneurship at Belmont University in Nashville, Tenn. Dr. Cornwall's current research and teaching interests include entrepreneurial finance and entrepreneurial ethics.
There are many really good business opportunities that never make it past paper. Would-be entrepreneurs agonize over every detail of their plan to the point that it never gets off the ground, or they miss their window of opportunity.
One of the virtues that Mike Naughton and I are writing about in our new book The Good Entrepreneur is prudence, which entails being good stewards of the resources we have at our disposal. Entrepreneurs who agonize over getting started are often concerned with being good stewards of their own resources they plan to put into their business and of the resources they will get from friends, family, other investors, and creditors.
But there are two critical errors that one can make when looking at how the entrepreneur manages their resources. One error is being careless, reckless and wasteful with resources. In this case the entrepreneur spends money without thought often on things that will do little to create sales and grow the business. For example, they lease expensive space or build huge and opulent buildings, they pay themselves huge salaries, or they hire more staff all that the business cannot support. They burn the investment on things that will not create a sustainable business within the time that their seed resources will carry them.
However, another error is to not ever put those resources to use. It is like the parable in the Bible of the man who buried the money that was entrusted to him, never putting it to use. StartupJournal has a case study of Gary Doan and his innovative design for a network router that illustrates this error.
He proudly showed it off at trade shows and to industry reps. Amid the late 1990s tech craze, he raised some $19 million from investors over a couple of years. “We got feedback from all sorts of places, what it should look like and how it should be different,” he recalls. His 70 engineers on staff continued to refine it with every new review. “It most definitely took too long to get out the door.”
I tell entrepreneurs that they often have to be comfortable with a plan that is 80-90% ready. The time it takes to perfect the plan is often time that will keep them from ever getting their business started. Here are some things to keep in mind if you are having trouble “pulling the trigger” to launch your business:
– Your business will most likely not look anything like your plan within six to twelve months. Your plan is a living document, not a blueprint that prescribes every step in detail for the entire life of your new venture. You will learn with each step along the way and that learning should inform and shape your planning as you go.
– You are most likely entering a dynamic market. That is usually what creates the opportunity you are pursuing in the first place. Be ready for what Peter Vaill call the permanent whitewater that you are about to enter. The assumptions you make today in your plan will likely look very different in a few months as your market evolves.
– You can never eliminate all risk and uncertainty, no matter how long you plan. That is part of the game. There will be surprises around every turn. Your success will be determined in how flexible and nimble you are in adjusting to all of these surprises. You cannot plan it all away no matter how hard you try. Entrepreneurship will always have some risk. Plan for as much as you can, and then forge ahead.
Guy Kawasaki has a great post on “the dance” that goes on between entrepreneurs and VCs and venture capital forums and new product demos.
…entrepreneurs acting like they don’t need capital, and VCs acting like they don’t need entrepreneurs. (This dance is akin to acting prudish in a brothel, but I digress…)
He offers eleven great tips on what it takes to get the VC’s attention at such an event. You only have a few minutes, so it is critical to make the most of it. It is worth a read for anyone raising money, hiring employees into a start-up, or trying to make a sale.
(Thanks to Bruce Schierstedt for passing this along).
It is often assumed by the uninformed that the only reason for becoming an entrepreneur is to make a lot of money. While making money is clearly a fundamental goal for entrepreneurs, profit is not the only metric they use to measure their success. Just ask any entrepreneur how their business is going and you will begin to see the richness of how they measure their successes.
For some entrepreneurs, success is measured by the jobs they create. When I was asked about our business, the number of employees we had grown to was always at least part of my answer. My partners and I took pride in creating good jobs in an industry that was not always kind to its workers.
For others success is measured by the satisfaction of their customers. A famous local coffee shop owner here in Nashville, known as “Bongo Bob,” takes great pride in creating coffee shops that have a sense of community for his customers. The number of “regulars” who come into his stores indicates to him that he is doing well in his business. Reell Precision Manufacturing, located up in Minne-so-cold, measures success in terms of creating “an environment that fosters human development and provides for the common good”. Their policies reflect this commitment and they find ways to asses whether they are reaching this goal.
Clearly financial success is fundamentally important for all entrepreneurs. We need to make a living and most want to create wealth. But, profits can be viewed as a natural outcome of pursuing what each of these entrepreneurs view as their real success.
The Supreme Court may soon be getting into the debate over what constitutes a small business in the US as they decide a case that is before them this term.
From Inc.com:
The case, which was heard on Jan. 11, may not only have an immediate impact on small employers currently mired in lower-court battles, but could also help define small-business employment for more than half a dozen federal statutes — including the Americans With Disabilities Act and the Family and Medical Leave Act.
I wrote the other day about the importance of having a clear and compelling vision. Part of that vision should spell out the values and principles that will guide your business and define its culture. However, too often we see entrepreneurs who are long on rhetoric about their values, but fall short when it comes to putting those values into action day-to-day in how they run their business.
Our values should drive our specific actions toward each of these stakeholders:
– Toward partners, investors, family members
– Toward those who provide debt financing
– Toward employees
– Toward customers
– Toward vendors and other resource providers
– Toward competitors and industry
– Toward the community and society
You need to commit to specific actions and policies for each principle and stakeholder that are important to you based on your values.
For example, it is not enough to say that we are going to be open and honest. We should develop specific policies on who we are going to provide information, how much we will provide, and in what form we will provide it. We cannot realistically be open and honest about every aspect of the business to anyone and everyone. There is some information that employees just do not need to know and should not know. So define what this value really means and how you will put it into operation in your business.
As another example, saying you value your employees and want to create a family atmosphere in your business is a lofty principle. How are you going to bring this to life in your business each and every day is the challenge. You need to commit to specific actions and policies or the odds are that this principle will remain words on paper.
“How do I make the leap from my current job to the business I want to start? I can’t afford to just quit working, and my new business will take several months to make a profit.”
I hear this type of question quite often. For many entrepreneurs the transition from their current job to their new business becomes a real challenge. For some start-ups, there is no option beyond a clean break. The entrepreneur, for a variety of reasons, cannot keep her current job while starting up the new business.
However, for others, it can be possible to straddle the worlds of employment and entrepreneurship long enough to make the financial pressures more manageable. StartupJournal has a profile of an entrepreneur who was able to make a relatively smooth transition.
Entrepreneurs are told time and time again about the importance of having a clear and compelling vision for their business. But, what exactly goes into a vision and how should it be used?
An entrepreneur’s vision should include three main elements. First, the vision includes a mission statement, which should (in 25 words or less) define the product/service the business produces, the market for which it is produced and any specific and unique aspects of the business that will give it a competitive advantage (such as technology, customer orientation and so forth). This should become your quick answer to the question, “Tell me about your business.”
Second, the vision goes beyond the more objective description in the statement of mission to include the core values and principles that the entrepreneur intends to use to guide the business. It is through the pursuit of the new venture within the entrepreneur’s moral framework that he begins to address the purpose of his work. More specifically, this can be shaped by the opportunities he pursues, the people with whom he chooses to do business, whom 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. Each action we take shapes our character. These actions become habits — good or bad. The moral principles we bring to our business will become the seeds of the shared culture the business will have as it grows.
Finally, the vision also incorporates the entrepreneur’s aspirations of what outcomes are hoped for from the venture. An entrepreneur’s definition of success can go well beyond profit maximization to include a whole range of other factors, including employment in the community, ability to create balance with family responsibilities, bringing a needed service or product to the market, or creating a certain work environment for employees that is not available in other businesses.
Initially a clear and compelling vision is critical to keep you focused. We often get tempted to pursue more opportunities than we can effectively handle. It is also an essential part of attracting employees, investors, suppliers and customers.
As your business grows, your vision becomes a compass to guide decision making both from a strategic and from an ethical perspective. It helps create order and meaning out of the chaos that so often part of a growing venture.
A group of VCs recently gave Red Herring their top tech trends for 2006. This is interesting to note as it shows where they are planning to invest their funds.
1. More investment in green startups
2. Voice becomes free within data networks
3. Electronic technology changes from a growth engine to a commodity
4. China to become low-cost world innovator
5. Microsoft, SAP, and Oracle will lose dominance in software
6. U.S. on path to following the third-world
7. Biological sciences become popular in colleges
8. Most compelling technologies will help save time
9. Wires will disappear from the home network
10. Design will count more than ever
