Many folks end up becoming entrepreneurs because of a specific hobby, interest or passion. For example, many people enter the restaurant industry because they like to cook. However, they soon find out there is a lot more than good cooking required to make a restaurant succeed. Staffing, inventory management and customer relations all come quickly to the forefront of make or break issues these entrepreneurs face. Many are not prepared, and that is a big part of the reason why the failure rate can be so high.
I observed first-hand another industry that seems to have this same problem of life-style interests meeting the realities of business and market demands. My wife and I have been looking for a new kennel for our dog, Keb.
We used to have two dogs and our old kennel worked fairly well as they seemed to keep each other company. But now that we have only one dog, we are looking for a kennel that can provide a good experience for our dog. We travel most weekends during the fall to watch our daughter play volleyball (now for Belmont), so we want a good place for Keb to stay.
Some of the kennels we visited were clearly started by folks who love dogs. One day they must have said to themselves, “Hey, I love dogs so maybe I should start a kennel!” I find that these places seem to operate around the owner’s life style, rather than their customers’ needs and wants. They set hours that fit their own personal schedules and make policies that make it easier on them. Sometimes it seems that they even lose enthusiasm for their business after a few years in operation.
Other kennels we visited understand that they are competing in a market. Their primary goal is not to meet their own personal needs and wants, but those of their customers. They set hours, offer services, and interact with customers in ways that reflect that they truly understand what their clients want and need for their pets’ stay.
What is the lesson from this? Before you start a business, particularly if it is built around your personal interests and passions, you need to slow down and look at it as a business. Learn to think like your customer and build the business around that understanding. Be realistic on what the business will demand of you. Many service businesses need to be open all year, and sometimes every day, to meet the needs of the market. Be honest with yourself about your willingness and ability to make this kind of commitment over a long period of time.
Finally, remember that your business can only serve your own needs if it first serves the needs of your customers.
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.
Good Advice on Business Planning
One of my students, Erin A., passed along a great article from Entrepreneur.com that really summarizes effective business planning. If you are in the process of developing a plan I strongly recommend you take a look.
Some of the highlights include:
– “Don’t confuse cash with profits”
– Remember that it is not the idea that is crticial, but your execution of the idea.
– Don’t confuse a plan with business planning
– Be honest and be realistic
Coffee Shop Update
Our coffee shop entrepreneur and blogger, Jason, is making significant progress and is at the point of some critical steps in getting his business operational. If you haven’t stopped by his blog site to see Cafe Evoke’s progress in a while I would suggest a visit.
Technology and Small Business
Anita poses an interesting question at Small Business Trends.
What is the most significant piece of technology to impact small businesses worldwide? The computer? The fax machine? Desktop software?
She votes for the mobile phone.
As I think about this question, it brings to mind what a Luddite I really am. New technology always intimidates me.
But, then I let my mind wander a bit and think of the question more in terms of technology as a way to do things rather than just the high-tech gadgets that we all seem to focus on today. Dictionary.com tells us that the word technology comes from Greek. Its root means the “systematic treatment of an art or craft.” So what do small business owners benefit most from that is a systematic application of their craft?
If we look at what differentiates successful entrepreneurs from the unsuccessful ones, the most important craft is opportunity recognition. This is a process that we have learned how to systematize and teach to entrepreneurs.
Entrepreneurs who have the most success are those who are able to find a real niche in the market that offers enough of a margin to meet their needs and aspirations. Successful entrepreneurs understand the importance of “failing on paper.” They carefully assess their idea to make certain that it has an adequate market and enough profit margin before they ever launch their venture.
As more and more entrepreneurs are being trained worldwide, it is this one skill, this one technology, that is having the biggest impact on their success.
So I respectfully suggest that the most important technology is not a gadget, but a process that has become systematized and taught to more and more aspiring entrepreneurs. Gadgets are nice, but they come and go and are really only marginally responsible for business success.
Carnival of the Capitalists
Find COTC this week at The Club for Growth.
A Wisconsin Boy’s Dream Come True
From the StartupJournwal:
Matthew Younkle was a senior at the University of Wisconsin in Madison when inspiration struck. What the world really needs, he decided, is a three-second beer.
He was not the first college student to dream of ways to get to his alcohol more quickly. What set Mr. Younkle apart is that he chose, soberly, to follow through.
Ten years later, Mr. Younkle, 31 years old, is president and chief technology officer of TurboTap, a company marketing a finger-sized nozzle that attaches to standard beer faucets and pours draft beer at least twice as fast as traditional systems do, and with less spillage.
From one Cheesehead to another I say, “Good job der hey!”
iPod Creates a New Industry
While the iPod was not the product of an entrepreneurial company, it has helped to spawn a whole industry for entrepreneurs looking to create new products around the huge demand for this new technology.
From Yahoo News:
One company, Delarew Designs, is offering a line of handbags that sport built-in iPod pockets and holes on the ends for the music player’s headphone wires.
Another, Bluelounge, has created the Cableyoyo, an inexpensive cable caddy, which literally rounds up wires and stores them out of the way.
Still others are marketing different types of protective coverings for the music player.
These are just a few of the great examples of how entrepreneurs do not have to be the creator of a break-through technology like iPod to take advantage of the market that it creates.
(Thanks to Annie Whiting for passing this along).
Economy Looking Robust
The Congressional Joint Economic Committee has released some impressive economic statistics:
– Payroll employment rose by 146,000 in June, and the unemployment rate edged down to 5.0%, the lowest since September 2001.
– GDP growth was 3.8% in the 1st quarter, matching growth of the 4th quarter. Forecasters see a continuation of healthy growth.
– Year-over-year Inflation in the “core” consumer price index, which excludes volatile energy and food prices, moderated to 2.2% in May.
– Markets expect the Fed to continue to raise its target overnight interest rate, which it has raised from 1.00% in late June 2004 to the current 3.25% in a sequence of nine quarter-point increases.
– The deficit is smaller than previously projected.
Is Universal Health in the Best Interest of Small Business?
Government mandated universal health care proposals are back in the news in the US. In an article at Inc.com, they make is sound like a good thing for small business.
Currently, bills have been introduced in 18 state legislatures calling for a universal health care plan. Small business owners who provide health insurance plans to their employees are paying particular attention to the debate, as a universal health-care system could help alleviate some of the rising costs employer-sponsored plans are facing.
Based on what data? Government mandated programs of any kind are a slippery slope. Passing a simple mandate that requires only basic coverage may save some small businesses money by not requiring rich benefits. But once in place, the lobbyists for this and that get to work and the plan requirements grow and grow along with the costs.
They also try to pull a shell game on workers to make it look like it is the business owner who has to pay and not them. But this is wrong. Small business owners have only so much money to pay employees. If there are more benefits mandated that will shrink the pot of funds available for salary. While the employees think it is a free benefit, it is merely an illusion as it comes out of the same finite amount of money.
Missouri Strengthens Regulatory Flexibility
Small businesses in Missouri have new protections against overly burdensome proposed regulations thanks to a bill signed into law today by Governor Matt Blunt. The new law strengthens Missouri’s current regulatory flexibility laws by providing small businesses with judicial review of agency compliance with rulemaking procedures. It also requires agencies to periodically review existing regulations that affect small businesses to ensure that they are still necessary.
“Adding judicial review is an important step forward for our state’s small businesses,” said Scott George, president and CEO of Mid America Dental & Hearing Center in Mt. Vernon, MO. “Now the law has some teeth, and that will help small business and state agencies work together to produce good regulations that get the job done without causing serious harm. It means a better business and job creating climate for Missouri,” he said.
It is a shame that the logic of regulatory flexibility was not enough to assure it was implemented effectively in Missouri. Bringing the courts in is adding a worrisome step in the process.