Making a Move

Planning for space can be a major challenge for growing businesses. The bootstrapping in all of us tries to avoid taking on too much space which inflates overhead costs. The swashbuckling entrepreneur in all of us wants to take on lots of extra space to accommodate all of the growth that we know is in our futures. My partners and I wrestled with this several times. In our first few moves we thought we had plenty of room for growth, only to find that by the time we moved in, we had almost outgrown the space. In a couple of later moves and market expansions, we over-estimated the growth potential and had to eat the added overhead our higher rents created.
An issue that often gets lost in this internal debate is the cost and hassle of simply moving a business. The move can be disruptive to business operations and can hurt worker productivity. Depending on the type of business and the nature of the move, the logistics can become a nightmare. What is interesting, is that the same disruptions can occur even when a business rearranges the space they already have.
StartupJournal offers some advice on how to make a move as painless as possible — not pain free, but maybe not as bad as it could be for all concerned.

Office relocation — even a move to a different desk — can stir up a mix of emotions. The key to successfully moving a business, or within a business, is in how the move is presented to employees, experts say.

This is good advice. Employees need to have “ownership” over the move as much as possible. If they do, they will go a long way to making the move smooth, quick, and relatively easy.

Future of Small Business

I had the pleasure of spending the day yesterday at the Institute for the Future in Palo Alto, CA, participating with a diverse group of people who care deeply about small business. Our participation is part of a project they are working on to try and forecast the future of small business in the US over the next ten years. I look forward to sharing the results of this project sometime in the near future. In the interim, I would welcome your thoughts on trends that will be shaping small business and what the future of small business looks like to you.
By the way, one of the participants in this discussion was Anita Campbell, one of my favorite bloggers. She hosts Carnival of the Capitalists at one of her blogs, Selling to Small Business. It was a highlight of this trip that I finally got to meet Anita in person. We have commented on each others’ blogs, e-mailed, and talked on the phone. But, even in the world of the wired, there is still something special about meeting face-to-face, shaking hands, and having an old fashioned conversation.

Self-interest Revisited

One of the most common criticisms of free market economic policies centers around the notion of self-interest, which is at the heart of free market economic theories like those espoused by Milton Friedman. These critics offer a cynical view of self-interest, likening it to greedy, self-absorbed behavior.
So what would Milton Friedman say about this? He addressed the issue of self-interest in a recent interview with Hillsdale College President Larry Arnn.

(S)elf-interest is what the individual wants. Mother Teresa, to take one example, operated on a completely self-interested basis. Self-interest does not mean narrow self-interest. Self-interest does not mean monetary self-interest. Self-interest means pursuing those things that are valuable to you but which you can also persuade others to value. Such things very often go beyond immediate material interest….If you want to see how pervasive this sort of self-interest is that I’m describing, look at the enormous amount of money contributed after Hurricane Katrina. That was a tremendous display of self-interest: The self-interest of people in that case was to help others. Self-interest, rightly understood, works for the benefit of society as a whole.

So, the entrepreneur who starts her business because she enjoys building a business that creates good jobs is acting out of self-interest. The entrepreneur who starts his business to bring to market a better way to treat a disease is acting out of self-interest. The entrepreneur who starts her business to establish a culture that is a more family-friendly place to work is acting out of self-interest.
The entrepreneurs I work with define success in terms of the common good more often than in terms of their own financial rewards. Sure, they all want to make money. But, they start their businesses for so many more reasons than just creating profits. Their self-interests are much broader than themselves.
The key to this all working properly is that these entrepreneurs must be acting from a strong moral core. Strong values and good character don’t just happen. They are developed, nurtured, and reinforced in families and communities by a strong culture that is based on common values.
However, over the past fifty years we have been abdicating what was once the domain of our shared values–our culture–to government policy, laws and regulations. What is left is a culture that is a shell of what it once was. We are moving toward a society in which government tells us what we can and should do. We are no longer responsible for our own acts. It is becoming a society that does not trust that man, acting freely, will act in a just and magnanimous manner within a strong culture that nourishes his inherent goodness.

Kind of Getting it Right?

This post comes to you from Palo Alto, California, where I am attending a forum on the future of small business.
I got to my room and started to look at today’s USA Today, which had a special section on small business. I was pleased to see that the main stream media is starting to get entrepreneurship right. The special section seemed to have a good overview of what it takes to be an entrepreneur. This was nice to read, as the media still doesn’t seem to always “get” entrepreneurship.
They highlight that entrepreneurs are after more than just money. This is a big leap, as the media seems to still be fixated on those who make the biggest fortune. They also seem to get risk-taking: “would-be entrepreneurs are calculated risk takers.” Also good to read, as they too often glamorize the extreme, and often careless risk-takers.
But, then I see that while they admit that “a college degree doesn’t hurt,” they go on to say that Bill Gate didn’t finish college. Blah, Blah, Blah. The data shows that he is the exception. Success rates go up dramatically for those who get educated in the entrepreneurial process. At this point I am beginning to worry that they are going back to their old ways.
Then they make a slip as bad as Mel Gibson’s. They run one of those hokey quizzes that has “ten questions” to see if you are “an entrepreneur.” YIKES! Just when I thought they were beginning to get it right…..
I guess that is why I keep blogging…..

We Can’t Ignore the Self-Employed

For a long time everyone seemed to ignore the self-employed: those who work for themselves and have no employees. We all seemed to view self-employment as a temporary state. They were the consultants who were between “real” jobs.
A recent census report shows that these folks now number 19.5 million people!

Among the fastest-growing: building finishing contractors (22.5 percent), Internet service providers (18.7 percent), nail salons (14.7 percent), electronic shopping and mail-order houses — including Internet-based consumer trade (12.7 percent), lessors of real estate (9.7 percent), formal wear and costume rental stores (8 percent) and motorcycle dealers (7.4 percent).

It is time to recognize this group for who they are: a major part of this entrepreneurial economy. More of the self-employed with no employees are deliberately choosing this as their permanent work.

Best Place to Work in the US?

I was going through the press clippings that my Dad sends me via snail-mail every few days (now you know where I get my Luddite tendencies from) and came an article that highlights a business not far from where I grew up in Wisconsin.
Badger Mining, a family owned business, was named the best place to work in the US by the Society for Human Resource Management. Badger Mining, headquartered in Berlin (pronounced BER-lin since WWII), manufactures aggregates out of silica, limestone, etc.
Here is their mission statement:

Our mission is to become the quality leader in the industrial minerals industry with a team of people committed to excellence and a passion for satisfying our customers. We will allocate all our resources by having self-directed work teams identify, evaluate, and develop our most profitable opportunities, with controlled growth and the highest quality standards. We are committed to environmental responsibility, safety, health, and integrity while providing a rewarding and enjoyable place to work.

They have been able to develop a very profitable business that has been around for twenty-seven years, while treating their employees and other stakeholders with respect:
– They were lauded in the award for their open communications, which includes communication from dissenting points of view. Employees said they felt free to discuss any decision with the person who made that decision no matter what position they hold in the business.
– Flexible work hours allow employees, or associates as they are known at Badger Mining, to attend family events.
– They have an “impeccable safety record” that got them an additional award from the U.S. Department of Labor’s Mine Safety and Health Administration (MSHA) and the Industrial Minerals Association – North America
– They share 20% of profits with those who generate their profits, their employees, every quarter.
– They offer full insurance for the entire family, and if your family waives their coverage, you get the cash — $8,000.
– They offer four $5,000 college scholarships, one to a student located in each of their four operating locations.
– Badger has been recognized for their land stewardship and conservation efforts.
This is a small business that has put their values into practice in how they run their business. They clearly manage their operations with integrity.

Banks Competing for the Business of Small Businesses

The NFIB just released findings from its second poll related to small business and banking. I wrote a post on the first poll last week. This new poll finds that American bankers are stepping up their competition for small-business accounts.
First, a note of caution to all you hungry young commercial loan officers out there. Entrepreneurs don’t like to change banks. It is disruptive and a hassle, and can be expensive if there are loans involved. Only one in 10 small-business owners have switched principal banks in the last three years, according to this survey.
But, bankers don’t give up easily. To progress through the ranks of Vice Presidents of “this” and “that,” they have to expand their portfolios. Slightly more than 40 percent of the owners surveyed said they have seen an increase in banks courting their business. Nearly three-fourths of those owners cited a noticeable increase in mail solicitations and advertising and an almost similar share were aware of the appearance of more places to bank. Nearly two-thirds of those with fewer than 10 employees got phone calls from bank telemarketers, 65 percent were made aware of financial products and services targeted to their sector and 57 percent reported in-person contacts.
Sometimes it is the entrepreneur who goes shopping for a new bank. My experience is that it is usually when we are unhappy with an answer we just got on a loan request. The NFIB survey found that twenty-one percent of small business owners shopped for a new principal financial institution in the past three years. But, entrepreneurs need to remember that all bankers basically think the same way. Of those entrepreneurs who went shopping, only one-third actually switched.
Incredibly, 5 percent of small business owners said there were too few alternatives to attract their business. Those folks really need to get out more. The old saying “There is a bank on every corner” needs to be modified a bit. It seems that now there is a bank on every corner and a half a dozen in between each of them.
Among those who did find a new principal bank, service and credit issues were the key motivators driving them. Sixty-four percent changed to obtain better service quality; 47 percent pointed to the number and type of services available elsewhere. Half noted the expectation that they could more easily satisfy their credit needs at a new bank and slightly more, 53 percent, said they believed the new institution being considered would give them better loan terms and rates.
In the past, owners have expressed consternation about the considerable merger and acquisition activity in the banking industry, but less than one-fourth of those who switched banks cited that as a reason for the change. While a merger may not directly motivate someone to change banks, the outcomes of mergers can be the issues they do cite as reasons for changing. Service can get worse, loan officer turnover increases, and terms can get tighter as banks get bigger and more bureaucratic in their practices.
Slightly more than 41 percent said they use a small bank, one with assets of $1 billion or less, while the share reporting banking at very large institutions — those with more than $10 billion in assets — was just a few points less, 38 percent. Only 15 percent had their accounts handled by very small banks holding less than $100 million in assets. Nearly half, 47 percent, said they still use only one financial institution exclusively. These results are a bit surprising, as the common wisdom is that smaller community banks work better with small businesses.

VC Investing is Getting Stronger

U.S. venture capital investing reached its highest point in 4 1/2 years with $6.73 billion directed to 619 deals, according to the Quarterly Venture Capital Report released by Ernst & Young LLP and VentureOne. Overall deal count increased 3% from the second quarter of 2005, and the capital was 5% higher than a year ago, representing the most venture capital invested in a single quarter since the fourth quarter of 2001. Health care led the way in these investments.
Two things to keep in mind. First, this is very good news as venture capital investment tends to be a leading economic indicator. VCs see better days ahead, even if we are in a soft economic period in the short-run.
Second, these new ventures represent only a small sliver of business start-up activities in the US. Using recent data, we can estimate that there are over 1,600 new business with employees created every day. The tendency is to only focus on the deals with the big money behind them. While they matter, they are about 0.4% of business start-ups with employees; a point reinforced by Glenn Reynolds (of Instapundit) the other day at TCS Daily:

It seems to me that while big enterprises will always be with us, we’re going to see a much more vibrant small-business (and even micro-business) sector over the next decade or so. I also suspect that neither the culture, nor the people who purport to measure and manage the economy, are really up to understanding the impact of this trend.