New Blog on Free Markets and Liberty

lockesmith_header.jpg
I am pleased to announce a new blog called the LockeSmith blog. It is a joint effort of three of us here at Belmont. There will be periodic posts by Prof. Nathan Griffith (Political Science), Prof. Mark Schenkel (Entrepreneurship), and me. Here is the mission of the blog:

The Lockesmith Blog hopes to play an important role in the growing resurgence of the scholarship of classical liberalism through the exploration of the principles of individualism, private property and the free market, the rule of law, and social toleration.

The blog carries on the work started by Dr. Larry Hall, former Dean of the College of Arts and Science here at Belmont University. Larry was Nathan’s mentor while here at Belmont, so it is only appropriate that he make the inaugural post.
We hope you enjoy this new blog. I will still be doing most of my ranting and rambling here at the Entrepreneurial Mind, but will also do cross-posts at the LockeSmith site. Please add the LockeSmith blog to your favorites and sign up for a regular feed so you don’t miss a post.

The Good Entrepreneur

I had the pleasure of giving a guest lecture today based on our new book, The Good Entrepreneur (co-authored with Michael Naughton from the University of St. Thomas). It is so affirming that today’s students are looking for more out of their business than simply cash. Don’t get me wrong — they want to be financially successful! But they also want so much more out of their lives and view an entrepreneurial career as a path to reach all of their goals in life.
In our discussion today we talked about the question: “Who is the good entrepreneur?”
Traditional entrepreneurial virtues have been thought of in terms like ambition, ingenuity, diligence, perseverance, tenacity, and self-discipline. While these virtues are necessary for building a financially healthy and successful venture, they ignore the fundamental purpose that leads many people to become entrepreneurs.
When we survey entrepreneurs and ask them how they define success in their businesses they will include things like building a certain type of culture in their businesses and creating good jobs for people in the same breath as building profits and wealth. Building a culture that reflects our intention of how we want to treat employees, customers, and other stakeholders in a way that is consistent with our core values requires that we broaden how we define entrepreneurial virtues. It does not mean that the traditional virtues listed above are unimportant or irrelevant — quite the contrary. They are necessary to create a financially successful business. But they are not sufficient to create what we call a truly good company.
Being a good entrepreneur challenges us to think about the virtues that define our character. Character forms with each act and each decision we make in our business. It is formed by the opportunities we choose to pursue, who we choose as business partners, who we hire, our product and market decisions, and how we engage our local communities. Every business decision or action we take, no matter how small, can shape this character.
The executives at Enron did not wake up one morning and suddenly decide to cheat their employees and shareholders. In all probability their actions were the culmination of a career of actions and choices that shaped who they became as people, which dictated how they would act when it came to the big decisions that led to that company’s demise.
We choose to look at entrepreneurship in our book from the classic cardinal virtues of prudence, justice, courage and temperance.
Prudence refers to being good stewards of the resources we pull together from others to build the business. We understand the obligation we have to those who give us their money, their labor, their business, and ultimately their trust. The good entrepreneur does not take that trust lightly.
Justice refers to treating people fairly. For example, if our employees help us create profits and wealth, it is just to find ways to share that with them be it through compensation, profit sharing, phantom stock, stock options and so forth.
Courage doing what is right in spite of the added risks and challenges that this path in life creates.
Temperance is understanding that we are more than entrepreneurs. We are spouses, parents, friends and citizens. We need to take actions that lead us to be good in all that we do. That may mean that we temper our ambitions to make sure we have time for family and friends.
So who is the good entrepreneur?
The good entrepreneur is intelligent and technically competent. She is a good steward of the resources and gifts she has available. She is prudent.
The good entrepreneur builds strong relationships in his family, with employees in his business, and in the broader society. He does this by being just.
The good entrepreneur overcomes obstacles in building her company, but does so without ever compromising what she knows to be truly right. She does this with courage.
The good entrepreneur moderates his work ethic with rest. He does this through temperance.
I will be writing more on all of this as our book comes closer to being released next year by Regal Books.

On-line Marketing

The Wall Street Journal has four good examples of how small businesses have used on-line marketing to boost sales. These case examples use Facebook, Video Demos on-line, Endorsements on-line, and YouTube as tools to enhance their marketing efforts. The article offers a clear summary of what these small businesses did, how much it cost and how well it worked.

Serial Entrepreneurs

It is always interesting to see what issues catch people’s attention. The Wall Street Journal ran a story on serial entrepreneurs that generated several e-mails to me about this topic. From this article:

In 2000, Mr. Stewart published a study with two other researchers looking for common traits among serial entrepreneurs — which he defined as those who had owned and operated three or more businesses. Of the 664 entrepreneurs studied, only 12% fit the bill. But those who did scored higher in all three categories examined: They had a higher propensity for risk, innovation and achievement. They were less scared of failure. And they were more able to recover when they did fail.
Beyond that, many serial-preneurs bring tactical advantages from their first venture to apply the second and third time around. For instance, they recruit top talent from their original companies to subsequent ventures. They double-dip financially, getting money — and connections — from people who backed their earlier brainstorms. Several lean heavily on a trusted partner for financial, professional and emotional support in whatever endeavor they undertake.

This was our experience with the health care ventures that we started in the 1980s and early 1990s. With each venture we started we learned from our successes and missteps. We became more confident in our ability to execute. There is much talk of the learning curve within a new type of business, but I am convinced that there is a start-up learning curve that cuts across specific businesses and brings down the time and cost of any new start-up you pursue. We also built a reputation that helped attract talent and resources.
By the way — I want to thank the Journal for creating links that allow free access to such articles for bloggers to use for their readers. This has opened up more of their content to those beyond their subscribers.

TV Ads are not Just for Big Business

I have long been an advocate for small businesses not ruling out television advertising. Cable ads, which can connect a small business with a very targeted audience, can run for as little as $100-200 per spot.
One local business here in Nashville, Evans Glass, doubled their sales over about three years. The owner attributes most of this gain to adding television advertising to his budget. Mind you, this was a major commitment for a small business like his. He committed about 10% of sales to the television advertising campaign. In effect, this advertising strategy paid off almost ten fold in increased sales. We wrote a case study about this business, which is quite popular with our MBA students.
The Wall Street Journal reports that the production cost for television ads can now be cut even further with some new on-line tools.

Once considered prohibitively expensive, advertising on television is fast becoming a viable option for small businesses, thanks to new online services that provide everything from customizable templates for commercials to commercial-placement services.

There are several on-line services to assist small businesses in their advertising. The Journal article highlights these:
tv ads.gif
There are some things to remember when developing a television ad campaign. First, make sure that is where your customers are and make sure that this type of ad works for your business. Keep your ads clear, visual, and memorable. Quality matters in your ads, but quality does not always mean a high cost. Your ad should call them to act. And experts tell us that content sells products.

More on Small Businesses Blogging

I wrote a post a couple of weeks ago about the growing number of small businesses using blogging as a tool. The Wall Street Journal has a great article on the use of blogs by small businesses for improving sales.

Most owners use blogs — which are easy to set up and require little technical savvy — to drive people to their company Web site. But entrepreneurs also use them to get consumer feedback or answer commonly asked questions. And some blogs serve as stand-ins for Web sites as a way to describe what a business does.

One of the points they make is that blogs can be a great tool to increase traffic to a small business web site. Small businesses often don’t even get enough traffic to show up on a Google search of the company name.
To see how a blog can change that go to Google and type in the following terms: “Jeff Cornwall”, “Entrepreneurial”, “Entrepreneurship Blogs.” My site almost always pops up near the top on the first two searches, and I am usually on page one with the last one. I haven’t had to pay anyone to optimize searches for these terms — it has come from the traffic at the blog. A blog can be a great way to bootstrap increased traffic to a website.

Technology Can Make a Difference, But Focus on Its Efficiency Ratio

I have been really enjoying golf lately. And much of that has to do with technology.
I never used to play any woods. I found them too hard for me to hit. So I slogged my way around the course hitting irons. Luckily I hit them fairly well most of the time.
But this year I decided to make a change — I guess it is an age thing, as I noticed my irons were not going as far as they used to.
First I tried one of the new hybrid clubs. What an easy club it was to hit! So I bought another, and another, and then another. I hit them all so well that I stuck my 1-4 irons (yes, I even carried a 1 iron) in the garage. Then I did the unthinkable. I started hitting one of those really big-headed drivers. I had not hit a driver since high school, and even then could not hit it very well. But, are the new drivers easy to hit.
Now you still have to make a good swing. They don’t hit it for you. But when you swing well it goes farther. And when you are little off, you hardly notice and it still goes pretty far.
The same thing is true for technology in business. It can’t make a poor business model work, or an incompetent manager any better. But the right technology in the right hands can improve productivity and performance. It makes you more efficient.
I still think it is wise to be a late adopter. All of these golf clubs have been around for a while — many of you probably chuckled when I called them “new.” I waited for two things to happen. I wanted them to get the kinks out of the new clubs, and I wanted the prices to come down.
That is also how technology can work best for a small business. Wait until they get it right and wait until the wild-eyed first adopters are done bidding the prices for the latest and greatest gadget up. I was one of the last people I knew in business to get a fax machine in the 1980s. But by the time I bought one they worked really well and the prices had fallen through the floor.
My new driver was a gift from a golf buddy. He got it at Wal-Mart for $19.96. I hit it as far as any $400 driver. And my hybrids were all last year model on close-out in the bargain bin.
Always remember that efficiency is a simple ratio of performance over cost. Since I am not the brightest business person, and definitely not a very talented athlete, I always work on getting the bottom number of that ratio as low as possible. I wait for the cost of any technology, be it for golf, business or entertainment, to go down — way down. That always puts the efficiency ratio in my favor!

Human Resource Bootstrapping Techniques

This will be a light week of blogging. We are on break this week between our summer and fall terms.
My column in yesterday’s Tennessean looked at some of the basic human resource practices that can be used when bootstrapping a small business.

For most small businesses, employee expenses are the highest single cost. To help keep control over cash flow, the entrepreneur should keep a careful eye on payroll expenses and consider some bootstrapping techniques related to human resources. Entrepreneurs often try to hire people in advance of growth, assuming that it is better to have employees already in place when new business comes in. But this can put a significant strain on cash flow, as you are trying to carry more people on payroll than your current sales can support.

Tough Times for Seed Capital

One of our alumni, Dr. Jim Stefansic, passed along an interesting article from TechJournal South on the current state of seed capital. It is not very encouraging for start-ups in need of early stage funding. The article cites high risk, too long of a time to a liquidity event, too much need for hands-on assistance, the inefficiencies of small seed capital investments, and investor pressures within the venture capital market as the reasons for VC movement away from seed round funding.