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.

Entrepreneurship in the East

The National Dialogue on Entrepreneurship seems, at times, to be rooting for the “rest of the world” when it comes to entrepreneurial economic development. This week they focus on the east.
First, they offer a provocative teaser for a briefing they have next week by the author of Three Billion New Capitalists: The Great Shift of Wealth and Power to the East, Clyde Prestowitz. (More on this in the next week or two).

While the United States is still commonly accepted as the world leader when it comes to entrepreneurial innovation, the emergence of market economies in China, India and other nations in the East may have already begun tipping the balance of economic – and geopolitical power – away from the U.S.

Perhaps, but those of us old enough to remember the economic forecasts of the 1970s and 1980s heard the same song and dance about Japan and their centrally controlled strategic plan for their economy. By creating such a plan Japan would soon dominate the world economy. Well, they found out, not unlike the Soviets, that centrally planned economies are doomed to burn-out while those fueled by market-based entrepreneurship continue to transform to meet changing needs and demands.
But, wait! NDE tells us this week not to count Japan out. They have discovered entrepreneurship!

According to the latest edition of the Japan Entrepreneur Report, a new e-zine covering new business activity in the country, Japan is poised for a boom in new entrepreneurial ventures. In the newsletter, Allen Miner of Sunbridge Corporation argues that the Japanese economy is now at a critical turning point. As the information technology industry moves away from general-purpose computers to digital consumer devices (like the iPod and specialized cell phones), Japanese businesses and innovators are well positioned to prosper. Japanese firms excel at design and at customer responsiveness. These traits will aid them in capturing new markets in coming years.

I guess the authors of this e-zine weren’t paying attention thirty years ago….
And watch out for New Zealand, “one of the world’s most entrepreneurial countries.” Except there is one problem, as pointed out by Inc this month. New Zealanders seem to be a little too laid back to create real entrepreneurial economic development. It seems to be a land of lifestyle entrepreneurs. But have no fear; the New Zealand government (with its strong socialistic roots) is planning to step in and save the day. All they need is a good old-fashioned government program to turn this situation around.
I know it disappoints many, but the US is still growing, innovating, and leading the world. What is the biggest risk to this? Not some government planned initiative from the east, but our own government creeping toward more and more restrictions on free enterprise.

A Frightening Reminder

The frightening events of yesterday in Great Britain should serve as a reminder of what can happen during a time of war. I have made many entries that highlight the importance for small businesses of being ready for the next time terrorists hit. As most experts reminded us yesterday, it is not a matter of if, but when. Here are a few of the points I have made in the past that any small business should keep in mind:
– Have a disaster plan in effect. Whether it be terrorism, hurricanes, earthquakes, or whatever, be prepared with a plan. It can make all the difference for you and your employees and for your business.
– Implement a security plan.
– Manage your cash, debt, inventory, and overhead carefully. Be flexible in all of this and have contingency plans ready.
Remember that entrepreneurs are the economic foot soldiers in this war, and it is a long term commitment. Remember the words of Winston Churchill, “You do your worst, and we will do our best.”

Data on Entrepreneurial Venture Survival Rates

Ask an average group of people what the survival rate is for entrepreneurial ventures and the figures you usually get are 10-20%. The truth is much rosier than common wisdom assumes.
As reported by the National Dialogue on Entrepreneurship, a new study from the Bureau of Labor Statistics “examines the survival rates of new businesses started between 1998 and 2002. It finds that 66% of new establishments started in 1998 were still operating two years after they started; forty-four percent were still operating in 2002.” The only sector that showed significantly lower rates was the dot.com group, which crashed during this time. Factoring that group out and we are getting closer to the 50% figure that most experts believe to be an accurate estimate.
Studies examining entrepreneurs who have had training and/or education in entrepreneurial skills consistently show a much higher success rate (as high as 80-90%).

Living Trusts are Tool for Family Business Succession

Succession planning in a family business involves several critical issues, one of which is transferring ownership through a family trust. NFIB has a good summary of this approach.
“A living trust is an estate-planning device that bypasses probate. It’s a separate, legal entity, like a corporation. While you are alive, you would be the trustee and beneficiary of the trust. You would run your business just as you do now. The only difference? A trust that you control would own the business.
“Because it is your trust, not you who owns your business, there would be nothing to probate after your death. Because your child is the successor of the trust, or the beneficiary, he or she would end up owning the business without going through probate.”

He’s on a Mission

Mission statements can be a real conundrum for most entrepreneurs. They are so excited about what they do and want to capture every little detail when asked, “So, tell me about your business.” So in response, many an entrepreneur will go on, and on, and on…..
The key is to capture your business in a succinct, yet powerful statement that can communicate to the world who you are. Now there is a blog site, Man on a Mission, dedicated to mission statements. It is a great place to explore examples of mission statement and good practices in developing your own.

More on Changes in VC Focus

In addition to the shift to niche markets and start-ups I wrote about yesterday, Entrepreneur.com says that there is a definitive shift away from just high-tech toward more low-tech and even no-tech investments by many VC firms.
“Behind the headlines, many VCs are investing in low-tech (or no-tech) companies that offer prospects of rapid growth, job creation and excellent economic return. In fact, well-managed companies in any industry can score VC dollars if they know where to look.”
They offer profiles of three examples: a supplier of “air-powered guns called “markers” for the sport of paintball”, a sewing company, and a cosmetics company. An interesting read and a good lesson in what investors really want: growth potential and sound leadership.

Attracting Key Staff

Growing companies find the need to add key managers, but often find it hard to offer competitive salaries. Does that mean they cannot compete? Not necessarily.
One of the ways that smaller companies can compete for staff is to make them convenient and flexible places to work by offering perks that employees want. StartupJournal has a good overview of the types of conveniences that many growing companies offer, including on-site laundries, haircuts or car services. Many of these the employer simply has to make them available, as the employees pay for the actual services provided, so the cost is minimal.
There are other ways to attract good talent. I found that just listening to what the employee really wants and being flexible in how you structure the offer and the job can be very effective.
There was a manager I wanted to hire to run a new program we were starting, as he was one of the best in our industry. He worked for a large, national company. I knew I could not match his salary, but I did not give up.
I got to know him and found out what he was really looking for in his career and in a job. He wanted to have more control over his department. That was easy as we were small and our structure was quite decentralized. He wanted to have some real ownership in the business he worked in. We could do that, too, as we set up separate corporations for each new program we started and we had already planned to offer a small ownership stake for the right manager.
There was one more thing he wanted, however, and it was clear it was a deal breaker for him. His current employer had very strict rules on vacations and holidays. He was a Viet Nam veteran and had wanted to go to Washington, DC each Veterans Day to remember his fallen comrades. His current employer’s rules did not make it possible to guarantee that, and he had missed the last two Veterans Day observances. So, in my offer I promised him that he would be guaranteed Veterans Day and one work day on either side of it off each and every year (they were counted as vacation days). That was all it took to convince him that we were the best place for him to work. He came to work for us taking a significant cut in base salary from what he had been making before.
I also find that being able to work in an entrepreneurial company with a team that is excited and committed to what they are doing attracts many managers to smaller companies. So when you interview prospective management candidates make sure to use your team as not just part of the interview process, but to sell the prospective employee on the benefits of working in your company.
Finding management talent in the first place can be a daunting challenge. For example, where should you look to find a Controller, a Marketing Director, or a Human Resource Manager for your company? I recommend using your network. Talk to your CPAs and your attorneys. Talk to your advisory board. Talk to other entrepreneurs that you know. Talk to people you trust in your industry. That is usually the best way for entrepreneurs to get a good pool of candidates for their growing businesses.