A social enterprise is the latest monthly $10,000 Ideablob winner.
Marci Bossow Schankweiler of North Wales, PA is President and founder of Crossing the Finish Line (CFL), a Blue Bell, PA-based non-profit organization that provides excursions for young adult cancer patients and their families. Schankweiler founded CFL after her first husband passed away from cancer at the age of 30. She plans to use the prize money to help fund a home for cancer patients near Orlando, FL.
Ideablob.com is an on-line community where small business owners and entrepreneurs are sharing business ideas in exchange for feedback, advice and votes from the community. The monthly prizes are sponsored by Advanta, one of the nation’s largest credit card issuers (through Advanta Bank Corp.) in the small business market.
“We are thrilled that the ideablob community picked a non-profit as this month’s winner,” said Ami Kassar, Advanta’s Chief Innovation Officer. “There are more than 1.5 million non-profit organizations in the United States, most of which are small and face the same daily struggles for survival as millions of small businesses.”
“We’ve been talking about securing a home near Orlando for a while and when I heard about ideablob.com I thought I’d put the idea out there,” explains Schankweiler. “There’s such a demand to provide young patients a respite from the traumas associated with cancer. Thanks to the support of the ideablob community, we now have the money to provide additional assistance.”
Go to ideablob.com to put your idea into the mix and to vote on this month’s ideas.
Is Web Changing the Nature of Customer Relationships?
The TaxingTennessee blog has a post about an interesting analysis at the Lunch Over IP blog based on Doc Searls’ The Cluetrain Manifesto. (Lots of links, I know, but this whole blog thing is supposed to be a conversation after all).
Searls makes the case that with advances in the Internet, markets have become “conversations.” It is a remarkable look into what he believes is the future of how markets behave. Click on through and read about his views. They are an important perspective on what our economy might become.
Past predictions were that the growth in the use of the Internet was leading to an era of depersonalization. Searls believes that the future is just the opposite as we move from the ‘static web’ to the ‘live web.’ As our on-line world advances it is leading to an even more personal relationship with customers. He goes so far as to say that advertising as we know it will soon cease to exist.
A good example of how things are changing on-line can be seen in this article from the Wall Street Journal.
Small online retailers are chatting up customers to get them to stick around on a site longer — and buy something.
A case in point: Backcountry.com, a seller of high-end outdoor gear and apparel. The retailer’s staff regularly talks live with customers online about the site’s offerings, as well as provides buying tips and addresses any service issue.
“It’s an interaction opportunity,” says Sam Bruni, director of customer experience at the Park City, Utah-based company.
The world is in a time of dramatic economic transformation. Every business owner must keep his or her entrepreneurial skills tightly honed. Small business may well be the ultimate winner from this transformation as markets shift from being mass markets to relationships with customers directly in charge of what they want.
Small business is best equipped to engage in this type of relationship. Entrepreneurs are best equipped to continually react and adjust to what will likely become a wild ride, indeed!
Update on Story of Inspiring Young Entrepreneur
I wrote a post early this month about an inspiring young entrepreneur, Louis Barnett, who did not let his dyslexia get in his way of success. Ben Cunningham sent along an update.
First, here is is a bit of history on young Louis from his website:
Louis Barnett is something of a wunderkind. The traditional rags-to-riches story has been told over and over, but then Louis’s story isn’t exactly traditional, more a case of self-belief and hard work.
After suffering from problems at school, Louis was diagnosed with Dyslexia Dyspraxia and a high I.Q. After this, he was taken out of mainstream education in order to be home educated, a decision that he’s now reaping the benefits from.
One day, Louis came across a book on cakes and decorations, which ignited a previously dormant passion for making handmade Belgian chocolate cakes. From cake decorating, Louis then moved into the tempering side of making chocolate, which in turn led to him producing limited quantities of chocolates for his family and friends.
Well, it seems his chocolate business is running smoothly (pun intended…). From the blog Nothing To Do With Arbroath:
The plucky confectioner has opened the factory and employed members of staff to help keep up with demand after his company “Chokolit” attracted worldwide interest.
He now has a website where you can order his yummy products packed in edible boxes. Clearly, he didn’t let his disability stop him from tasting the sweetness of success (sorry, but this pun was also intended).
Lack of Funding Most Common Reason to Bootstrap
Last week I started a conversation about why entrepreneurs bootstrap. The most common Reason? Because they have to.
Various studies on start-up funding report that 70-85% of all start-up capital comes from the entrepreneur, family members, and close friends. The reality is that traditional sources of external money — loans from banks and investments by equity investors — are just not an option for most start-up ventures. Venture capitalists actually fund very few businesses.
One recent study found that only 38 out 100,000 new businesses reported receiving venture capital funding. Another way of looking at that is that of all estimated 650,000 new businesses that will start this year, only 247 will have had funding from venture capital. Equity investors such as venture capitalists and angel investors place their money in high growth, high potential ventures that can result in very large returns over a relatively short period of time. Most entrepreneurial ventures, particularly small businesses, just do not fit the criteria that such equity investors are seeking.
Generally banks also do not loan to start-up businesses. As one commercial banker stated in one of our Entrepreneurship classes, “Bankers do not lend money to start-up ventures. Period.” To understand why, it is important to understand how bankers make lending decisions. Much of the money they keep on deposit is in demand deposits, such as checking accounts, which need to be available when people need or want their funds. When you write a check to pay your rent, you want to know that the money is in the bank available for your landlord to put into his account in his bank. Therefore bankers tend to be conservative when lending out money. They need to know that loans will be paid back, because they money for those loans comes from their customers who trust that their bankers will keep it safe and secure.
Bankers tend to only loan to established businesses that have a proven ability to repay the loan due to strong and consistent cash flow. They also like to see that the owners can pay the loan back personally if the business fails. They will ask for personal guarantees from the owners on any business loans. This means that even if the business fails, the entrepreneurs who owned that business will be held personally liable to pay back any and all business loans from the bank. Banks also like to see that a business has collateral that can be used to back the loans. This can take the form of equipment, buildings and land, inventory, and accounts receivable. New businesses generally do not have cash flow and have very few have assets to serve as collateral.
But, even without ready access to equity investment or traditional loans, entrepreneurs find a way to get it done. That is the power of bootstrapping.
Entrepreneurship in Iraq
I have had the pleasure to interact with the 502nd Infantry Regiment that is working to bring entrepreneurial economic development to Iraq. It is part of the story that is just not getting reported.
My main contact has been Major Tim Collier, on the right of this picture from Camp Victory, Iraq. He is part of team working to help rebuild the economy from the ground up.
The goal of this operation is to begin the rebuilding process of the basic economic infrastructure and to help develop distribution channels for trade.
The initial focus is on the carpet industry. One local business hopes to produce a world class reproduction of the famed Pazdyk Carpet, acknowledged to be the oldest hand knotted rug in the world. The plan is to knot ten of these carpets over the next six months.
Below is a picture of the loom being used in this business and the carpet that they are reproducing.
Helping to rebuild the Iraqi economy will be a slow process. By focusing on free enterprise and small business ownership, a future of sustainable economic growth is possible.
Why Do We Bootstrap?
I am working over the break between our fall and spring semesters on a new book on bootstrapping. It is a text that is part of a new Entrepreneurship series from Prentice-Hall. It got me reflecting a bit on why bootstrapping is such an integral part of the entrepreneurial experience. It is worn by so many entrepreneurs as a badge of honor. They beam with pride when they tell of the creative way that they have gotten things accomplished for their business when operating on a shoestring budget.
So why do so many entrepreneurs bootstrap their businesses? That is the question I ask at the beginning of the book. The answer to this question is not as simple as it might first appear. Some reasons for bootstrapping a business are borne out of necessity. Resource limitations are genuine constraint of many start-up businesses. The average start-up in the US only has about $10,000 in capital to launch their business.
But in other instances, the entrepreneur makes a conscious choice to be a bootstrapper outside of resource limitations. Whether it be to improve the performance of their business or be it borne out of the values of the entrepreneur, sometimes bootstrapping is a conscious management style. Many entrepreneurs start out of resource limitations, but make the choice to make bootstrapping part of their culture.
Over the next couple of weeks I thought it would be fun to blend my book writing and my blogging a bit. I will be making several posts reflecting on the various reasons entrepreneurs bootstrap.
Military Experience and College Education Predict Self-Employment
In a paper by Dr. Chad Mourtray released this week by the SBA Office of Advocacy, the study finds that:
– Prior military experience is the strongest predictor of self-employment, increasing the likelihood by 9.4 to 11 percent.
– Having some college education increases the chances of self-employment by 3.3 percent, a baccalaureate degree by 4.4 percent and graduate experience by 8.3 percent.
Since we find that self-confidence and self-reliance are both important predictors of entrepreneurial aspirations, neither of these findings are that surprising. However, it is interesting to see that military experience was the single strongest predictor of starting a business.
New Look and New Features
Thanks to Paul Chenoweth (see his blog here) and the other folks at Belmont who worked to spruce up my site. Hope you all like the new look.
There is also a new feature at this site. We developed financial templates for our entrepreneurial finance text. They provide a relatively easy way to create complete three year financial forecasts for a new venture — income statements, balance sheets, and cash flow statements.
We have gotten very positive feedback from bankers and investors who read business plans with these detailed financial included. The spreadsheets force the entrepreneur to think through all assumptions that go into the revenue model. If done properly, this makes the business plan a much tighter and more credible document. It helps to ensure that your marketing plan and revenue forecasts are telling the same story — one of the most important aspects of a fundable business plan.
You can download these templates by clicking on the buttons in the left column. They are completely free to use! We created them for our students, but hope all aspiring entrepreneurs find them useful.
There are three versions of the Financial Analysis Spreadsheet. The first version is for businesses that have inventory. Examples of this type of business include retail, distribution, re-sellers, and manufacturing. The second version is for businesses with little or no inventory. Examples include service, consulting, health care, software, and engineering. The third version is for non-profit organizations.
The proper development of assumptions is key to getting the most out of these spreadsheets. Each assumption should be carefully documented and any changes in assumptions should be noted. The financial statement assumptions should come out of the business plan assumptions, with all assumptions being consistent and clearly tied together.
The use of the templates requires only a very basic understanding of the use of computer spreadsheets. No programming will be required. Simply enter data in the proper cells as instructed. If unusual errors occur when entering data, it may be the result of entering a space in the assumptions worksheet instead of a zero. In trouble-shooting this problem, make sure that zeros are entered into any “empty” cell.
There are two worksheets for each version of the template. One is for the assumptions, and the second is the actual financial statements worksheet. Yellow cells indicate data to be entered. Blue cells indicate model calculations. The worksheets will provide financial statements for three years when completed.
Federal Reserve is Grinch for Small Business Owners’ Christmas
We have been watching the growing pessimism of small business owners over the past few months as seen through the NFIB’s monthly survey. It now looks like the Federal Reserve is the Grinch that has stolen entrepreneurs’ Christmas.
Reaction by small-business owners to Federal Reserve rate cuts in September and October sent the National Federation of Independent Business Small-Business Optimism Index down 1.8 points to 94.4 in November — the lowest reading since 1993. Seventy percent of the index decline came from two index components, the outlook for real sales and the outlook for business conditions in six months.
“Things were looking good on Main Street until the Fed warned that the economy was at risk of sinking,” said NFIB Chief Economist William Dunkelberg. “That warning had credibility, and the logical response was to cut hiring, capital spending and other growth-related activities. And indeed that occurred in the last 12 days of September and continued into October and November. In general, small-business owner expectations that were on the rise before the Fed announcement fell after the announcement, and have drifted to lower levels since.”
One bit of good news is that the credit debacle that is behind much our current economic woes is not effecting credit conditions for small businesses. In fact, credit conditions continue to look normal. Regular borrowing activity was reported by 32 percent of the owners, four points below October but typical of readings since inflation ceased being the number one business problem 15 years ago. The net percent of owners reporting loans harder to get in recent months rose one point to a net 7 percent, typical of readings for the past several years.
Once again we are letting politicians and lobbyists set policy for the economy. The business missteps and outright greed from the mortgage and real estate industry is what created this mess. But, rather than let the market work this out, we are going for another bail-out.
Worst of all, these policy decisions coming out of Washington (including the President’s misguided consumer mortgage bail-out) are clearly hurting the one true and sustainable strength in our economy — the small business sector. If left to the market to sort out, we would have had a fairly short, albeit painful correction. However, the unintended consequences of the Fed’s actions and possible bail-outs from Washington will be the probability of a long-term hit on small business growth that could actually create the economic downturn these folks claim they are trying to prevent.
Equity Investment Requires 4.0 Grade Point
In this week’s column at the Tennessean I provide a summary of what it takes to attract investors to your business.
So what do these professional investors look for in a business when they make an investment decision?
We often hear that such investors will put money in an “A” team with a “C” idea, but not an “A” idea with a “C” team. That is, rather than investing in the next great idea, they invest in entrepreneurs with a proven track record of success in previous deals. However, the truth is that you will need straight A’s to get angel or venture capital money.