The Entrepreneurial Generation’s Answer to Social Change

When we first started talking about creating a new major in Social Entrepreneurship — it is one of the first in the country — there was much concern about whether 18-21 year-olds would have such a career path on their radar. Those in the Entrepreneurial Generation have one prominent characteristic that gave me confidence that such a degree would indeed resonate with them. They distrust large institutions.
They do not trust established religious institutions — they tend to be religious, but strongly favor newly formed non-denominational churches. They do not trust large corporations — they think they are unethical, place too much priority on work above family, and just do not believe that they can provide a stable career path. They do not trust government — they believe that the private sector is much more efficient and effective at solving the world’s problems.
So our Social Entrepreneurship major, which prepares students to tackle social problems through private sector solutions, seems to be taking root very quickly on our campus. Even though it does not even officially become a major until fall, we have several students who have already let us know of their intent to declare the major.
The New York Times ran a column that compared this renewed social energy in today’s youth with that of their parents’ generation in the 1960s — but with a twist:

With the American presidential campaign in full swing, the obvious way to change the world might seem to be through politics.
But growing numbers of young people are leaping into the fray and doing the job themselves.

The big government proponents, which typically includes the New York Times, would tell us that the problems of the world are too big, and far too complex, for any solution outside of massive government intervention. We like to talk about the War on This Problem, and the War on That Problem, as if the only solution is too overwhelm each social problem with massive amounts of money controlled by huge bureaucracies.
But the Times story offers several remarkable examples of today’s young social entrepreneurs saving the world one small problem at a time. And the author Nicholas Kristof goes so far as to end the story with this glimpse into the world the Entrepreneurial Generation hopes to create:

So as we follow the presidential campaign, let’s not forget that the winner isn’t the only one who will shape the world. Only one person can become president of the United States, but there’s no limit to the number of social entrepreneurs who can make this planet a better place.

(Thanks to Sam Davidson of CoolPeopleCare, a great example of today’s young social entrepreneurs, for passing this story along).

The Thrill of the Start-up

Diana Ransom interviewed me for an article she was writing about serial entrepreneurs for Smart Money’s Small Business website. There can be something addictive about the thrill of the start-up for many of us, including me.

Cornwall, an admitted sucker for start-ups, agrees. “In my eyes, nothing beats the challenge of the start-up.” He adds that this phase always offered a number of puzzles to piece together and opportunities to problem-solve. It was stressful, he says, but “as I saw that puzzle creating something that got sales and created jobs, it was [also] kind of cool.” In some ways, says Cornwall who is now the director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn., “I get more of that stimulation now because I get to interact with so many start-ups.”

Ransom also interviewed Abraham Zaleznik, a psychoanalyst and professor emeritus at the Harvard Business School, who offered this observation: “A juvenile delinquent is impulse-driven.” Likewise, he says, “a lot of entrepreneurs are impulse-driven.”
Ouch!! But it gets worse….

For business owners, the start-up phase presents a similar cycle of extreme stress and then, upon success, euphoria. However, the rub is: Your body tends to get used to this chemical reaction, and over time you may lose sensitivity to it. According to widely accepted research, future stressful situations may then require heavier doses of body chemicals including the stress hormone, cortisol, to dull the pain. Chronic exposure to cortisol can lead to ill health effects, among them depression, obesity and diabetes. And, it can also harm the brain.

Not all entrepreneurs, even serial entrepreneurs, fit this pattern. Those for whom there is nothing in their lives but being an entrepreneur, may fall into this self-destructive pattern. However, that is not unique to entrepreneurs. There are plenty of workaholic doctors, lawyers, artists, writers, executives, etc., etc., etc.
Temperance is important no matter what we do for a living. Don’t just tend to your start-ups — it is just as important to tend to your families, your friends, your faith, your hobbies.
Part of the hollowness that Zaleznik describes happens when the run of start-ups is over. If all the entrepreneur had in her life was her businesses, it is not surprising that she would feel depressed and unhealthy when she stopped starting new ventures.

Mistakes are Common When dealing with Problem Employees

Most entrepreneurs make major errors when it comes to terminating employees. Such errors can quickly become quite costly to even a small employer.
Fortune Small Business offers seven basic steps to start to develop a human resource system in a small business:
1. Know the law — entrepreneurs often do not know even the basics of employment law. We made the decision a long time ago in our program that all of our entrepreneurship students will take a class in Human Resource Management. Employment law is complex and can get even a small employer in deep trouble.
2. Develop a simple employee handbook
3. Don’t use employment contracts — most often they will hurt you, not help you as the employer
4. Keep careful and complete written personnel records — having clear and complete records saved me more than once when employees tried to fight termination
5. Don’t think that moving an employee to a new position can fix their poor performance or problem behaviors
6. Hire people more carefully in the first place — hire not only for skills but for fit in your organizational culture.
7. Be proactive — don’t wait too long to act on a problem employee. Entrepreneurs seem to have big hearts (and sometimes weak backbones) when it comes to problem employees. We think that if we just keep them on a little longer we can help them turn around their poor performance. Most of this is more of an attempt to postpone the inevitable — that is, firing the employee — then it is any realistic attempt to “fix” the employee. For the kind-hearted entrepreneur, by the time he finally admits that he should start to move toward terminating a problem employee, he has probably already waited several weeks or even months too long. In reality, such delays help no one. You are not doing that employee any favor. And you are hurting the performance of your business and diminishing your leadership stature with your other employees.

Ideablob Voting for January

ideablob.com has narrowed the January contestants down to the final eight. If you have not heard of it before, think of ideablob.com as American Idol for entrepreneurs via the Internet. People post their ideas on the ideablob.com web site, and visitors vote for their favorite idea. The winner each month with the most votes gets $10,000 for their business.
As some of you know, one of our students here at Belmont, Andy Tabar, is a finalist this month. Andy is a junior, majoring in Entrepreneurship. He has been working on his web development company from his first day here at Belmont. Here is a link to his business web page.
There is now a new round of voting for the finals. Even iff you voted before, you cn now vote again in the finals. If you did not, please take a few minutes to go to their site, register, and VOTE FOR ANDY!!!! It is quick and easy.
Here is where you go to register and vote. If you have voted before, use your same user name and password. Andy’s business idea is titled “Expand my global tech company”.
If Andy wins the final round of voting, he will get $10,000 to help him grow his business!!
PLEASE help out Andy on this. Pass this along to friends and family. The more votes we can get, the better his chances to win. Every vote counts!!
Thanks!!!!!!!

New Ventures Looking Global

The latest study released by the Global Entrepreneurship Monitor shows just how global the small business world has become.

In high-income countries and depending on the size of the national economy, 10-40% of early-stage entrepreneurs expect 25% or more of their customers to come from outside their country. GEM also found that the more burdensome a country’s business regulations, the lower the entrepreneurs’ expectations for growth.

This is not only an issue for entrepreneurs to ponder for their business plans or their strategic decision-making. It is also an issue for public policy.

“The world economy needs entrepreneurs,” says Babson Professor and GEM U.S. team member Kent Jones, “and increasingly, entrepreneurs depend on an open and expanding world economy for new opportunities and growth– through trade, foreign investment, and finance. GEM research confirms that new entrepreneurial opportunities in all countries will expand if trade, entrepreneurship and economic growth are fostered, especially in the developing world.”

The best way to foster the global reach of the entrepreneurial economic boom is through open, free markets, low regulatory barriers, and low tax rates. Previous GEM reports have supported this formula.
So to you entrepreneurs out there: Think Global!
And to you public policy folks and government bureaucrats: Everything you try to actively do to steer the entrepreneurial economy will only hurt it — resist the temptation to intervene and get out of the way!

Belmont’s Andy Tabar is Finalist in B-Plan Competition

TechKnowledge Point announced the ten national semifinal ventures coming to the 5th Annual Spirit of Entrepreneurship and Enterprise Development (S.E.E.D.) National Collegiate Venture Forum on March 14th and 15th at the Reagan Ranch Center in downtown Santa Barbara. Congratulations to Belmont University junior Andy Tabar for making the semifinals of this year’s competition. Andy is an entrepreneurship major here at Belmont.
The compete list of the final ten in this competition (in alphabetical order by venture name):
– Bizooki, LLC, Belmont University
– Nauti-Click Corporation, Emory University
– Navitas, Inc., University of Wisconsin-Madison
– Real Agent, Inc., University of San Francisco
– Second Breath, LLC, Union College, NY
– StudentBusinesses.com, Harvard University
– ToneRite Corporation, University of Florida
– Urogen, LLC, University of Central Oklahoma
– UV Force, Inc., University of California-Santa Barbara
– Zipperz Corporation, Westmont College
The vision of SEED is to help top collegiate ventures secure capital funding. SEED completes preliminary due diligence on dozens of business plans submitted by the December deadline, then invites the most promising ventures to present their business plans to a world-class panel of evaluators, early-stage investors, and product development and market-industry specialists. SEED attracts dozens of qualified investors to see the presentations (angel investors, hedge fund managers, private equity managers, venture capital fund managers, and investment bankers).

High Growth Sector Levels Off in 2007

The latest statistics from the National Venture Capital Association seems to suggest that the high growth sector of our entrepreneurial economy has leveled off. Venture capital firms raised just slightly more than they did in 2006 (up 2.6%). This was expected, since capital markets have tightened and many funds still have significant over hang of uninvested funds. Mergers, acquisitions, and initial public offerings were up a bit. These results are good in that we did not see a downturn in the venture backed sector. But, it is a further indication that the entrepreneurial economy is no longer showing the robust expansion we saw over the past few years.

To Plan, Or Not to Plan

When I meet with prospective students and tell them about all of the cool features of our program, they inevitably ask me one question: “OK, but are you going to teach me how to write a business plan?”
We set business plans up on a pedestal as if it is the holy grail of entrepreneurship. Just look at BusinessWeek.com’s most recent special issue on entrepreneurship — it is all about business planning. The articles in this special edition include:

“The Right Business Plan for the Job”
“Before You Write a Business Plan ”
“Slide Show: The Best Business Plan Tools”
“Video: What the Business Plan Expert Knows ”
“How to Write a Winning Business Plan”
“Building a Better Business Plan ”
“How to Win a B-School Competition”

It is as if we are telling aspiring entrepreneurs that once they unlock the secrets of the business plan, the world of entrepreneurial wealth will come pouring out at them.
Sorry, but this is just not true.
On the other hand, there is now a debate raging as to whether we should even teach entrepreneurs about business plans. a growing number of experts now fundamentally question whether business plans even matter. It seems that some data suggests that business plans have no impact on the overall success of entrepreneurial ventures.
All of this — and I mean both sides of this debate — is missing the point.
Are business plans all you need to know to unlock the door to success? Of course not.
Is writing a business plan a complete waste of time? Also, not true.
So why do we teach about business plans? It is because they are a way to help organize what can be a complex and overwhelming array of issues. It is because it forces us to integrate our marketing plans, or operating plans and our financial plans into one, coherent story. It is because we need to put it all down on paper to make sure that we have thought of all of the important stuff that goes into a successful start-up. It is because business plans have become the standard for communicating about a business to those with money.
Will a formal business plan make you richer and more successful? Probably not. I know many entrepreneurs who never wrote a formal business plan for their ventures who have made a lot of money. But they all understood the importance of business planning. They just never took the final step of writing it down. While the business plan itself may not always be necessary, effective business planning always is.
Understand that the business plan is just a map. It is a map into an unknown territory. Our actual path in our business will likely look very different than our plan. But the plan got us thinking. It made us think about all the details. It helped us understand how all of the parts of a business fit together to make a whole venture. It helps prepare us for our journey and makes us better prepared to adjust to all of the surprises that we will face almost every day we’re in business.
Success will not be determined by the plan. Success comes from implementation.
On every golf hole I always start with a plan of how I should play the hole. Then I actually hit my shot. The wind may change direction. the ball might take an unexpectedly bad hop on the ground. Or — and this is most likely — I just don’t hit the ball the way I had planned and hoped. So the way I actually play the hole changes with the reality of each shot based on my execution and based on the uncontrollable events that are a part of any activity — be it golf or be it building a business.
But I still plan. I just know that I will have to adjust my plan each step along the way as I begin to implement it as I start and grow my business.

Growth is Never a Smooth Curve

The curves we draw to represent the growth of a business are misleading — in fact they are flat out wrong. They usually show smooth curves with revenues meeting expenses at break-even, then swooping us toward the heavens leaving ever growing profits in their wake.
The truth is that growth is a messy thing. It never follows a smooth path. The real curves that signify growth are jagged. Growth is lumpy, not smooth.
Growth requires us to make leaps of faith as we commit to significant new overhead, including more space, more equipment and more staff. With every new commitment to overhead, our break-even point increases accordingly. If we are growing fast in the early development of the business, this means that our point of break-even cash flow keeps getting pushed further into the future. Even if we have reached profitability, these new overhead commitments can quickly turn a business in the black to a business that is in the red.
Growth can stoke the flames of the burn rate that consumes our precious cash.
Growth in a business is good. It is a sign of that the market agrees with our dreams and our plans.
And in today’s dynamic economy, a growing business is like the shark — it has to keep moving forward, or it will drown.
The commitment to growth requires careful thought and careful planning. Never grow simply on faith and hope. Grow with a careful plan that tells you what challenges your decision to grow will create. Understand all of the chain reactions that growth creates for more space, more equipment, more parking, more computers, more people, more customers, and more cash.
Make your growth intentional. Some of our growth is, in fact, quite controllable. Never let your market completely dictate your growth. Sometimes pass up opportunity for the health of your business. Leave time for your business to adjust to its new level of operation — allow time for your business to “digest” its latest growth. This gives time for your cash flow and your systems to catch up to the higher level of activity.
Growth can be the best thing that happens to a business or the worst thing that happens. The more you understand how growth will impact your business and the more you take control of that growth, the better chance you will to make it through the two stages of any period of growth. You must first survive each growth spurt before you can thrive on that growth.