Impact Lab summarizes a study that appears in the June issue of Family Business Review in which the author finds that family businesses experience better financial performance than non-family firms.

Professor Jim Lee said family firms tend to experience higher employment and revenue growth and are, overall, more profitable than non-family businesses. He says his study suggests the average profit margin for family firms was 10 percent, 2 percent higher than non-family companies.

Most of us think of family businesses as being Mom, Dad, sister Sally, and cousin Fred. Prof. Lee looked at a very different type of “family business.” His sample was Fortune 500 businesses that still have the founding family having a significant presence in the company. I know, I know, this is a blog about entrepreneurship, not corporate America. But, the study does raise an interesting issue that is relevant for all businesses from small to gigantic.
I wondered why these businesses would have better performance. Were they smarter business people? Not likely. Were they in certain types of businesses that performed better? No, because he controlled for those other variables.
Then I started thinking about the chapter I just sent to my co-author earlier this week. It was about the virtue of prudence in entrepreneurship. We argue that prudent entrepreneurs are those who understand that their role as a business leader is one of stewardship. From a theological position, we are all stewards continuing God’s creation here on earth. From a more pragmatic perspective, we are stewards of the resources we have pulled together from a variety of sources: money from investors and/or lenders, labor from our workers, time away from our families, space from a landlord, materials from our vendors, and so forth. As entrepreneurs, all of these folks trust us to use the resources given to us wisely and effectively.
You will often hear entrepreneurs talk about the heavy responsibility they feel when an investor hands them a check. It is no longer just the entrepreneur’s money to lose, but now someone else has said, “I trust you to use this money to build a successful venture.”
By being good stewards, by being prudent, we think twice about how we use this precious resource that we have been given to build our business. We think long and hard about whether what we are spending will really build sales and profits. Good stewards are good bootstrappers. We look to be effective, but by spending the least amount of money that we can.
In today’s public corporation there is not just a separation of ownership and management, there is a total disconnect. We see CEOs from public companies spending money like drunken sailors. If fact, some might argue that they are spending money like politicians in Washington! A million dollars here, a billion dollars there. But who’s counting? My co-author Mike Naughton talks about the disconnectedness between capital and communities in today’s culture as a contributing factor to this absence of stewardship and prudent actions in business.
But, maybe in the public firms in this study, where there is still a large presence of the family still associated with the business, there is a stronger sense of stewardship. Money is not some commodity that comes flowing in from people they will never meet nor be personally responsible or accountable to: it is still in large part the family’s money they are spending.
This study at least hints that good stewardship in business is not only a morally good act, but financially good, as well.

I am getting ready to take a little vacation. In an article at Inc.com, Ivy Sea recommends that we should treat our vacations like sabbaticals.
Sabbaticals in today’s world refer to an extended time completely away from one’s normal work. At a university, this is usually either a semester, or in some cases, an entire year. In the corporate world, we hear of executives taking exotic sabbaticals. Some companies (Timberland and Men’s Warehouse, for example) even have a form of sabbatical in their company benefits. For an entrepreneur (or a recovering entrepreneur now teaching entrepreneurship), the thought of an extended time away from our business or work is unimaginable, impractical, or even impossible.
Sabbatical comes from the word Sabbath. If we look at the Biblical roots of the Sabbath, we see that it means the day of rest. But the intention was to not only rest the body and the mind, but also to refresh our souls.
If we look at our time off as simply a day to recharge our batteries to get ready to rejoin the battle, we are missing the point. It becomes simply a day to be physically removed from our workplace, but never completely mentally (or in today’s world electronically) away from our work. For so many of us, vacations blur with our work. We are never more than a cell phone or an e-mail away. People never think twice about intruding on our time off. Our minds never fully get rest, and our souls, well, we plan to deal with that in a meaningful way in some distant future.
So if we can’t take extended time away, and our time away never really seems to be time away, how do we really get a sabbatical from our business or our work?
Ivy Sea’s article from Inc.com offers some insights:
Use the term sabbatical
Words can be very powerful. If we call our two weeks away a sabbatical rather than a vacation, it clearly tells others and reminds ourselves that this is much more than just a physical time away from our work.
Be clear about your goals and intentions
If we go in without a plan, old habits will prevail and it will just be another time away from the office. Commit to actions that will help rest your mind and your body, and refresh your soul. but, set modest goals so as not to recreate the often frantic nature of work. A simple plan is often best.
Prepare your business
This can be one of the more difficult steps for an entrepreneur. It means that you must not only delegate the authority for people to act while you are gone, but to make sure they have the knowledge and confidence to keep things moving ahead without you. A lot can happen even in a week, so make sure that your employees are ready for whatever they will face. Don’t fall into the trap of frantically getting it all done yourself before and/or after your time away.
Prepare your self

Determine what you need to do to shift your thinking from vacation to sabbatical. Without this mindset management, it’ll be difficult to achieve the goals that you’ve set.

That is why our worship services on Sunday start with prayer. It is a time to get our minds and our souls ready. For your sabbatical you should do the same: prepare your mind and your soul to be refreshed.
I will be back in about a week. We are off to the Land of Cheese. I hope that my time off will be, at least in part, a short sabbatical and not just a vacation.

One of my regular visitors asked me to write a post on multi-level marketing (MLM). His question: Is it a legitimate business?
Multi-level marketing is a system where people make money by getting other people to become “distributors” for a product. While some money may be made by actually selling the product, most money is made by creating layers and layers of people who are distributors working under your distributorship. You make the most money by the inventory and fees these folks pay as they sign up. The deeper the layers go beneath you, the more you can make. Some have called this a pyramid. Laws have been passed to limit the pyramid-ness of these businesses, but as always, businesses adapt to the new restrictions.
In a strict sense I guess you could say your distributorship is a business. It takes in money and spends money, and often the distributor incorporates to capture this activity.
In my definition of what makes up an entrepreneurial business, I think this is not a legitimate business.
First, it does not create real economic value. In this sense, it is not unlike the dot.com’s. Their only purpose was to raise money and cash in before that system fell apart. If you get in early you may be OK, but the late comers rarely do very well.
Second, for most of the participants it does not create wealth or even income in any significant way. I know there are exceptions, and even a few MLM companies that have found models that seem to last. But so many have come and gone, leaving people with garages full of product that will never sell.
Third, although each distributor is called “an entrepreneur” in many MLM models, they never have the chance to grow a real business that satisfies real customers by selling them a product over time that has value as their primary source of revenues. They also add no economic good through building employment. The distributorships never grow, evolve, and take form like a traditional business can and usually does.
OK, I know I have just opened a Pandora’s Box with post, but you asked…..

Jason offers his thoughts on my post from Monday about success at A Thought Over Coffee.

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.

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.

I have seen a sharp increase in the percentage of young women entering our entrepreneurship programs. For those young adults between 18-25, family and parenthood are critical elements of how they plan to view their success in life. Many of them believe that they can create a better balance between their family and professional aspirations through entrepreneurship. Many young mothers are looking to home-based businesses to achieve the an ideal balance.
Any home-based business creates challenges in setting up boundaries between work and family. StartupJournal has a feature on a young mother who has found some simple rules to help make this balance work:
– Teaching the kids to respect the office and work time.
I like to call this the “Beaver Cleaver’s Dad Rule.” On the old Leave it to Beaver TV show Beaver’s Dad, Ward Cleaver, had this formal office in their home. The kids knew to only go in their when invited, and if they were invited it was usually because they were in trouble.
– Keeping office stuff in the office.
This rule applies to both the parent and the kids. The stay-at-home-parent needs to have clear boundaries between their “work place” and the rest of the home. The kids need to learn that all of the cool stuff in their parent’s office is not for their latest art project.
– Controlling the phone.
One of the cute things most three year olds do is to try to answer the phone. They learn by imitating their parents. When there is also a business phone in the home, this cute trick can lead to embarrassing moments. Using a dedicated cell phone for the business line that only the working parent controls is one way to help get around this issue.
– Maintaining a schedule.
Set clear hours for “going to work,” even if it is only in the next room.
– Managing client perceptions.
Eventually the kids will make enough noise to be heard over the phone. Let customers know that “home” is where you work up front.
– Staying motivated.
It is easy to get distracted when working at home. Playing with your spouse and the kids can sound like a lot more fun than the project you are working on. But, remember that your business is important for the family. It helps to pay the bills.

I had a conversation last night with one of our student entrepreneurs. She was learning the hard way about the roller coaster ride of entrepreneurship. After experiencing one her best weeks ever last week, she was faced with perhaps her greatest challenge yet this week. I told her that this is what entrepreneurship is like. It is not the straight line of growth we predict in our financial forecasts or the realization of each milestone with the clockwork precision that our business plans envision.
Some describe it as being like a prize fighter. To make money you have to work really hard knowing that every once in a while you will get your brains knocked out. To me it is like my golf game. It is mostly just trying to move ahead by dealing with some good shots and some bad shots, some lucky bounces and some unlucky ones, and trying to do all of this without losing my soul.
Courage is the entrepreneurial virtue that keeps us level-headed during the highs and keeps us moving forward during the lows.
Fortune Small Business offers the inspirational tales demonstrating the courage of four small business owners who are rebuilding their lives and their businesses in the wake of last fall’s hurricanes.
Jason Perry, Out of the Box Web Productions, New Orleans, LA

Within days of Katrina, Perry faced a serious cash crunch. All through that giddy August, he had been borrowing heavily to buy the equipment to service his new client. He had purchased a phone system and two servers and had leased new computers from Apple and Dell. For all he knew, Katrina had wiped out all his equipment, and he had no idea how he’d make his lease payments.

Donald Ridings, ABS Computers & Satellites, Gulfport, MS

On the morning Katrina hit, Donald Ridings and his wife, Helen, started driving. They had a plan that was both vague and crystal clear: to get far away from Gulfport. The couple own an old New Jersey Transit bus that they’ve converted into an RV, complete with a bedroom, a kitchen, and hot and cold running water. They simply got on I-10 and headed east. “We had no clue where we were going,” says Ridings.

Austin Tindol, Gulf Coast Glycol, Gulfport, MS

The mood was giddy on Aug. 26 as Austin Tindol held a ribbon-cutting ceremony in Gulfport. It had taken 18 months to launch Gulf Coast Glycol, an outfit that recycles used antifreeze into reusable antifreeze. Tindol raised a glass of champagne, toasting (their)…a new family business….Within hours, an ominous note had crept in. Weather reports indicated that a hurricane was heading toward the Gulf Coast.

George Brumat, Snug Harbor Bar, New Orleans, LA

When Katrina hit, Brumat took cover in his third-story apartment about a block from the club….Soon the couch was rumbling and bouncing, says Brumat, and the walls were swaying in the 150-mph winds. Looking out the window, he witnessed “roofing tiles flying like sparrows and tall magnolias going down.”

These are just four examples from the thousands of small business owners in the Gulf region who are not giving up on their visions and their dreams. Although they have all suffered through the ultimate low point as entrepreneurs, they are all rebuilding their businesses.
These are the real entrepreneurial heroes. Keep them in your prayers.

Our favorite coffee-shop-to-be continues to have challenges in their start-up. Jason offers the lessons he has learned thus far in this post. It seems that every developer dreams of having a Starbucks in their building, which makes getting a fair lease difficult, at best, for small businesses like Jason’s.
The key virtue for a start-up entrepreneur is courage.
Courage to stick to your vision.
Courage to be true to your word and to your principles.
Courage to do the right thing, even if it takes you down a more difficult path.
Jason is showing us true courage in his start-up efforts. No matter what the end, he is already a success.