Executive Compensation in Entrepreneurial Companies

As a business grows, attracting key team members becomes critical to success. However, since you often can’t compete with the salaries that key people may be able to get from larger companies, you have to find ways to create value for potential team members beyond their monthly paychecks.
In a new collection at eVenturing, the challenge of compensation for key employees is examined. Once again, the folks at Kauffman have put together a great set of articles, stories, and tools to help owners of growing companies.

Loans and Investments From Family

My column this week at the Tennessean examines taking business loans and investments from family:

Family members provide funding for many different reasons. Some are motivated by altruism — they just want to help the entrepreneur get started and be successful. Others can be driven by greed — they see the investment as a way to ride on the entrepreneur’s coattails to fortune and fame.
But no matter what the reason they provide financial assistance, defined boundaries and clear expectations should be clearly established.

Selling is Key to New Ventures

Eric Flamholtz has it right in his book Growing Pains (now in a 4th edition, by the way). In an early stage business almost all of your focus must be on two things:
1) You must get your product or service properly aligned with the market. Our business plans offer our best guess about this, but the reality of the reaction from real customers tells us the truth of what will really work.
2) Selling! We must actively engage the market to gain a customer base. They almost never just “show up” at our doorstep.
Entrepreneur magazine has a great feature story on selling in this month’s issue. Included are several specific tips on such topics as selling to department stores, selling on eBay, selling expensive products, creating a buzz and so forth. It is well worth a careful read whether you are starting a new venture or simply trying to expand the sales of your existing business.

Information on Financing

A couple of useful pieces of information on entrepreneurial financing:
– A new study released last week by the SBA Office of Advocacy finds that bank size in local markets affects the likelihood of a small firm receiving credit more than it affects the amount of debt provided. The research provides evidence of the impact of the two lending methods, relationship and standardized, on credit availability to small businesses and finds that one method is not apparently better than the other. The study concludes that entry of giant national and regional banks and bank holding companies into local markets may have increased market competition for small business loans, with the primary banks exploiting the niche in relationship lending, while large, more complex banking organizations use standardized methods to supplement supply.
– BusinessFund.com published a great financing summary titled “Top 25 Alternatives to Venture Capital.”

More Thoughts on the Entrepreneurial Generation

The blog site Marginal Revolution has a post on the entrepreneurial generation and a link to an article he wrote for the New York Times.

American youths are so successful at entrepreneurship in part because so many older and wealthier people are willing to help them. The broader American success at philanthropy, then, lays the groundwork for American entrepreneurship. By global standards, Americans may have looser networks of friends and family, but Americans are more willing to help relative strangers, and this often helps business.

(Thanks to Ben Cunningham for passing this along).

New Guide for Music Entrepreneurs

There is a new resource for those interested in the brave new world of music entrepreneurship — and it is free. It is an e-book by Andrew Dubber called The 20 Things You Must Know About Music Online.
In the spirit of the new digital age Mr. Dubber, a lecturer at the University of Central England Birmingham, offers his e-book free of charge. All you have to do is provide your name and e-mail. To ease any concerns for digital security he offers the following:

Supplying name and email address to receive the e-book is an experiment in permission marketing, about which there will be a future New Music Strategies post. Personal details will be kept absolutely confidential unless express permission is supplied in writing to the contrary, and readers can expect a personal follow-up message around two weeks after downloading the e-book, in order to solicit feedback about the ideas contained within. This is to help develop the site and enhance the author’s research into Online Music Enterprise at UCE Birmingham.

He also offers the chapters as they were originally posted at his blog site if you prefer to read it that way. Either way, he has great information about the business of music.
Really, this e-book is for any business using a model that builds off of today’s digital world.

Socialized Entrepreneurship 2.0

The government wants to get its fingers into the new economy in a bad way — it is what I call socialized entrepreneurship. And, if some of the Presidential candidates get their way we could see this trend taken to a whole new level. James Pethokoukis at US News has a good summary of Sen. Clinton’s ideas on how the government can “help” innovation. All of her ideas involve more government programs and agencies that try to pick the winners and losers.
I guarantee you that any approach like the one outlined by Clinton will become a political circus, with special interests stepping up to get their pork. Entrepreneurship works best in a free market. Let’s keep Washington’s backroom deal making and politicking out of our entrepreneurial economy.