Silent Night

Every day was Christmas for Michael Clark, but now the holiday’s over.
From the attic of his condo in Woodbridge, Va., the 38-year-old Web developer ran an Internet radio station that spun his beloved Christmas carols all year long. Then in March, a panel of federal judges sharply increased the royalty charges for playing music online.
Since then, it’s been one long, silent night for Clark and his hundreds of listeners at christmasmusic247.com. His site and hundreds of other free Internet radio stations already have shut down. (Jim Puzzanghera, latimes.com)

This Sunday night an entrepreneurial seedbed that was part of the digital revolution will go silent. A federal court decided in March that web-based radio stations would now have to pay a higher royalty (a 100% increase) — and for those still broadcasting after Sunday July 15th there would be a retroactive payment due covering the time back through 2006. There was a late appeal to the decision, but it failed this past Wednesday. The US House held hearings — what they always do when they know they can really do nothing about something — and as expected, did nothing.
So the countdown continues.
During time of change, those in the status quo fight change, while entrepreneurs embrace it. In the music business we have seen them suing 15-year-old girls over downloading music, and now we see them going after obscure webcasters.
Rather that embracing change and finding ways to turn it to their advantage, the status quo fights change at every turn. Eventually change always wins, but in the short run the preservers of the status quo fight on in quixotic fashion.
The entertainment industry is in a period of what my friend Peter Vaill calls permanent white water. If you fight the currents, eventually you will drown. The only way to make it to the bottom of the river is to follow where it takes you and try to avoid the obstacles and challenges that inevitably will pop up along the way.
white water.jpg

Another Study on Small Business and Technology

I wrote a post about the Intuit/IFTF report on small business and technology last month.
This week the International Office of the International Council for Small Business (ICSB) announced the results of a Global Technology Study conducted in collaboration with DELL Inc. The study included a 12 country survey of small business owners and decision makers and a targeted survey of international small business researchers, practitioners, and consultants conducted by ICSB. The study confirms that IT is extremely important in the growth of small businesses world-wide.
“The survey results reinforce the fact that small business owners and the experts both acknowledge the importance of IT on a global level,” said Rob van der Horst, President of the ICSB. “Small businesses are using IT for multiple reasons, to better serve their customers and also to better compete in the marketplace.”
According to the survey, covering Australia, Brazil, Canada, France, China, Germany, India, Japan Mexico, New Zealand, the UK, and the US, sixty-six percent (66%) of small business owners indicate that IT is extremely important to their business. At the same time, fifty-seven percent (57%) of small business experts, researchers and educators surveyed by ICSB state that IT plays an extremely important role in the growth of small businesses. The ICSB portion of the study also shows that eighty-eight percent (88%) of small business experts think that most small business owners could financially benefit from a greater awareness of IT options.
The No. 1 reason small businesses use technology is to better serve customers, followed by growth of their business and, finally, to enable them to better compete in the marketplace. Additionally, small business owners around the world indicate that when it comes to IT:
– They prefer simple service solutions because they do not have full-time dedicated IT staff and are, therefore, installing their most sophisticated IT products on their own.
– They do not have time to explore new IT products/possibilities.
– Their top IT Pain Points include: managing costs of technology, product complexity making them too dependent on an outside company for support, and issues with trial-ware installed on new computers.

When it is Time to Move On

As I have written many times, not every great idea is good business opportunity. That is why I believe that the single most important skill I can teach aspiring entrepreneurs is how to evaluate an idea and assess its promise as a viable business (most recently in a column I wrote for the Tennessean).
There is an article at Forbes by Wil Schroter that reinforces this point:

A while ago, you had an idea for a new company that would change the world. You stayed up all night feverishly sketching your plans for global domination.
Yet there you are, months later, still sitting in your cubicle, that brilliant flash a distant memory.
Wake up: Not every idea — even a great one — turns into a money machine. In fact, it’s often just as useful to know when to dump a good idea as it is to pursue one — if only so you can get to work on that next “great” idea.

He goes on to give advice that is consistent with my mantra on this: market, margin and me. All three have to work for an idea to really have a chance to make it as a business.
(Thanks to Matthew Nicholson for passing this along).

Tennessee Enacts Regulatory Flexibility for Small Business

A better regulatory environment is ahead for Tennessee’s 513,000 small businesses, thanks to a new law signed by Governor Phil Bredesen. Tennessee’s Regulatory Flexibility Act of 2007 will set the stage for a more transparent regulatory environment for small businesses in the state and encourage entrepreneurial success.
The Act requires state agencies to analyze the economic impact of a proposed rule on small businesses and to consider less burdensome alternatives that will accomplish the regulatory goal.
Thanks to the key business groups supporting the legislation, which included the National Federation of Independent Business (NFIB) and the Tennessee Jobs Coalition, which includes a number of leading member organizations.

Location, Location, Location

In the 1800s businesses set up operation along rivers to make distribution more convenient. Eventually the preference for location switched to tie in with the expanding railroad system. In the mid 1900s the preference for location again switched to either being near the new Interstate highway system or near an airport. It seems that in the age of instant gratification that we now find ourselves living in, more small businesses are setting up operations in Memphis to tie into Federal Express’ main distribution center.
From the Wall Street Journal:

Many large companies have distribution centers in Memphis to maximize delivery time frames. But a growing number of smaller companies…are now moving to Memphis or adding a branch there to serve their customers faster. Small businesses are realizing that having a centralized distribution center in a city like Memphis can give them a competitive advantage. And it also provides a marketing opportunity, as companies pitch the logistical efficiency to potential clients.

Small Business Owners Losing Confidence in Economy

The latest survey from the NFIB finds small business owners losing confidence in the economy.
“Small-business owners have seen little to encourage them about growth,” said NFIB Chief Economist William Dunkelberg, “but there are few signs that the economy is ready to slip into an actual recession.”
Some highlights from this month’s survey”
– Hiring plans among small firms faded some in June, but job openings are historically high and unemployment remains low. Seasonally adjusted, job growth was flat compared to May. However, unfilled positions were reported to actually be a bit higher in June and still a concern for business owners. Of concern for future growth is the finding that fewer small business owners have plans for new job creation.
– Capital spending and future plans for capital outlays have both weakened, indicating a more cautious stance. This seems to be tied to a view that conditions will likely not improve over the next six months.
– Small business owners are taking care to manage inventories, with only 5 percent of owners reporting a gain in inventory stocks.
– Sales seem to be flat, with about as many owners reporting increases in sales as those reporting decreases in sales. But inflation is still a worry as more report increasing prices (31%) than report decreasing prices (13%). Profits have also gotten weaker for most small businesses. Any increase in prices is being eaten up by increasing labor costs. Another factor that causes me concerns about inflation.
– Finally, borrowing is down, which is yet one more sign of caution among small business owners.

Watch China

James Pethokoukis at US News writes that a new report from Goldman Sachs says that China is now probably the most powerful global economic engine and we all might be singing “Blame China” when the next recession hits our economy:

“So, what constitutes a recession in modern times, and when do they occur?…We suspect it would almost certainly involve a major economic slowdown in China. On almost any criteria (and topic), it is impossible to underestimate China’s positive impact on the buoyancy of world growth this decade. That said, our China proprietary indicators show no sign of an imminent slowdown. In addition, our various proprietary indices suggest that the underlying global macro environment remains favorable…Moreover, if we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data has been collectable for much of the world.”

I would add the following to a list of countries to watch: Brazil, Russia and India.

Hiring and Managing Those from the Entrepreneurial Generation

Although many in Generation Y (or those that many of us call the Entrepreneurial Generation) want to own a business, the odds are good that a number will never be entrepreneurs. They will need to find jobs.
But, the unique nature of this generation is proving make it quite challenging when it comes to recruiting and retaining them as employees.
Fortune on-line examines the unique nature of this new generation of workers:

“This is the most high-maintenance workforce in the history of the world,” says Bruce Tulgan, the founder of leading generational-research firm RainmakerThinking. “The good news is they’re also going to be the most high-performing workforce in the history of the world. They walk in with more information in their heads, more information at their fingertips – and, sure, they have high expectations, but they have the highest expectations first and foremost for themselves.”

To call the change in management philosophy a true paradigm shift may be a bit strong, but it isn’t that far from the truth.

Never mind that they often need an entire team – and a couple of cheerleaders – to do anything. For some of them the concept “work ethic” needs rethinking. “I had a conversation with the CFO of a big company in New York,” says Tamara Erickson, co-author of the 2006 book “Workforce Crisis,” “and he said, ‘I can’t find anyone to hire who’s willing to work 60 hours a week. Can you talk to them?’ And I said, “Why don’t I start by talking to you? What they’re really telling you is that they’re sorry it takes you so long to get your work done.'”

If you have even just one position in your business to keep staffed, you need to learn about the generation coming to age and entering the workforce. They will be challenging much of what you think you know about managing workers. This article is a good start.
Thanks to Rob Hill for passing this along.

Finding the Right VC

Entrepreneur magazine has an interesting profile of three entrepreneurs who successfully navigated the path to VC funding. Finding the right VC fit — if your business is really VC fundable — can build a working relationship that can benefit all involved in the deal. VCs are never simply sources of money — they almost always become an active player in the strategic growth of the business.