Lessons in Succession

We are experiencing a new challenge for the campus-based businesses we run here on the Belmont campus. Our students run a record store, a clothing store, an art gallery, a graphic design firm, and a PR firm. All five of these businesses are faced with succession issues this year.
One of our local papers ran a story on this today:

Looking at the profit and loss sheet, [Boulevard Design] likely would not have survived its short two years in the graphic design industry.
[Laura] Duditch [student manager] wants that to change, but she will not be around to see it. She graduates in May and has planned an adventure in Taiwan with her future husband. One of her student interns will take the helm after graduation.
Bryan Vaughan has a similar quandary. The junior music business major spent nearly the last two years managing a record store called Reverb Media, a few spaces down from Boulevard Design Studio. Vaughan leaves this summer to study abroad, then to manage his start-up publishing company called Paper Garden Records.
“It’s hard to put in everything when you know you’re going to give it up,” he said.

The students experience the same kind of succession issues that any small business faces. The only difference is that instead of taking decades, succession for them is accelerated down to a few short semesters.

Issues Entrepreneurs Face as their Businesses Grow

Growth puts strains on all aspects of an entrepreneurial business. Hiring more staff, expanding the resources necessary to support new customers, managing cash flow, building new systems to support your business, and so forth all take time and attention. If you do not get these issues taken care of properly, your business can suffer or even fail.
But, growth also creates personal challenges for the entrepreneur. Here are some of the more common issues that entrepreneurs wrestle with as their business grows:
– Delegation: Your “baby” is now a “teenager” ready for more independence
Letting go is tough for most of us. We have been with our business all the way through its growth, through the good and the bad times. But at some point, if we want our business to grow successfully, we have to begin to delegate. At first it will seem that no one can do what you do as well as you can. But just like raising a teenager, at some point you have to begin to let go so they can learn and grow up. Your business will go through this same difficult transition. If you don’t begin to let go, you business may never successfully move into its next stage of development.
– “My company just isn’t the same as it used to be”
With each person we hire, our culture can change just a little bit. And over time, this can lead to a business that does not look like we had intended or envisioned. One area that you must keep control of is your culture. Your values shaped the culture of your business as it began, but to maintain that culture you must actively manage it. You do this by who you hire, what you reward, what you celebrate, the structure you create for the business, your communication, etc., etc. Be deliberate about the culture you intend and think about how each action you take over time can effect this culture.
– “So just what is a CEO supposed to do, anyway?”
For many entrepreneurs, this may be their first time as a CEO. That title means very little in the early days, but as the company grows it takes on more meaning. Defining your role and your style as the CEO of your company takes planning and specific effort on your part. It may even feel a bit awkward at some point, but you have to establish what your role will be as the CEO. Play to your strengths.
– The Fear of the Unknown: Moving from hands-on to strategic
Many entrepreneurs start their businesses because they like the hands-on part of their business. Engineers like to engineer. Furniture makers like to build stuff. As some point in the growth of the business, the entrepreneur begins to move away from the hands-on part of what they company does. This can be a painful and frustrating period. Keep this in mind when you decide how far you want to grow the business. It is OK to keep it at a size that allows you to stay in the hands-on part of what you do.
– “How come everyone keeps forgetting this is still my company (sometimes, including me)?”
I remember how at some point it seemed that I was chasing everyone else’s goals for our business. Our banker, our CPA, our attorney, fellow entrepreneurs, our managers all seemed to have their own vision for what we could become and ideas for where we could take the business. Some of these folks wanted us to take our business public. That is not where I wanted to go, but I felt the pressure to look seriously in that direction. Even though it possibly cost me some money, I am so glad that I ultimately listened to my own aspirations. I would have been very unhappy running a public company. Remember: it is your business!

Entrepreneurship Down on the Farm

Farmers were among Americas first entrepreneurs. The National Dialogue on Entrepreneurship has a link to a new study on the current state of the entrepreneur farmer in America.

Consolidation and the rise of corporate agriculture have created tough times for the family farm, but in many regions, farm-based entrepreneurship is growing. A recently posted report from Iowa State’s Department of Sociology examines the issues around farm-based entrepreneurship. Entrepreneurship has become a critical component in local efforts to preserve family farms. An earlier survey in Iowa found that 21% of farmers operate a second business outside of their farming operation. Most of these businesses are in agriculture-related fields, such as manufacture of farming equipment or other types of food production. The challenges facing these business owners are not a whole lot different from those facing urban entrepreneurs. At the top of their list of challenges was access to outside financing and access to more sophisticated business services–especially in the area of marketing.

In addition, let’s look to the other side of the globe for ideas. I wrote this post recently about the turn around of farming in New Zealand thanks to aggressive deregulation. Farming is still a highly regulated industry in the US as can be seen on this article about the trials and tribulations of a milk farmer. If we want to help American farmer entrepreneurs let’s put our efforts toward open and free markets.

Entrepreneurship Kiwi Style

At the end of last year I had a post on how entrepreneurship and free markets have helped transform farming in New Zealand. In a study recently released by Babson College, finds that the indigenous Maori are the world’s third most entrepreneurial people.
– In terms of Total Early-Stage Entrepreneurial Activity, Aotearoa (Maori New Zealanders) at 17.7% and New Zealand at 17.6% were surpassed globally only by two other countries (Thailand and Venezuela).
– About 83% of Maori entrepreneurs are opportunity entrepreneurs, a value comparable to Canada, Austria, and the United States.
– About 25.0% of Maori versus 13.1% of the general population say they expect to launch a start-up in the next three years.
What drives this entrepreneurial spirit? For New Zealanders, both Maori and non-Maori, wealth creation is not as important as is independence. Maori have twice as many independence-driven entrepreneurs as wealth-driven entrepreneurs. The typical New Zealand entrepreneur is an opportunity-based lifestyle entrepreneur, opting for work-life balance rather than wealth creation.
The one concern from this study is that their success rates are fairly low. Only 37% of Maori entrepreneurial start-ups survive three-and-a-half years compared to 62% in the general population. There is clearly a significant opportunity to improve their success rates through education, which can as much as double success rates.
The full report can be downloaded here.

UK Youth Have Entrepreneurial Spirit

I have written often about today’s youth in America. They are full of the entrepreneurial spirit (as well as a strong libertarian streak). A new study just released by Babson College finds that young folks in the UK are also feeling entrepreneurial yearnings.

As well as expecting to be their own boss within three years (13.4% for 18-24 age group compared to 9.3% for 35-44 age group), GEM UK found 18-24 year olds were the most positive in their attitudes towards entrepreneurs, with 69.7% regarding it as a good career choice. Entrepreneurs were also given the highest status among the young.

While these numbers are not as strong as we are seeing in the US, it is a positive trend in the UK. A friend who teaches entrepreneurship in England has talked about being stifled in his work by a cultural resistance to entrepreneurship. This study shows a glimmer of hope that this may be changing.
A detailed summary of this study can be found here. More detailed reports of this study can be downloaded from the London School of Business.

Tips on Buying a PC

Buying a computer is a big deal for an entrepreneur. The average entrepreneur in the US starts his business with only about $6,800 in start up capital. A computer set-up can easily eat up a third of that. Dealhack has some money saving tips if you are planning to buy a Dell for your business.

Until Death (or Chapter 13) Do Us Part…

On St. Valentine’s it only seems fitting to look at the growing trend of couples going into business together. From IndyStar.com:

“Copreneurs,” as they’re called, are a rapidly growing segment of business partnerships. The number of husband-wife companies has more than tripled since 1990, topping 3.6 million, according to the U.S. Census. Glenn Muske, co-author of a 2002 study titled “Copreneurs as Family Businesses,” believes the number of copreneur firms is “greatly underestimated.” He said couples are leaving corporate jobs and opening businesses, but for reasons beyond the bottom line.

Family and lifestyle considerations are among the main reasons couples are tying a double knot and becoming both life and business partners. Although it can get rather complicated and for some couple overwhelming, it can work.
And that is the key word: work. A good marriage takes hard work and a good business partnership takes hard work. Putting the two together and making them both work creates the need for a tremendous amount of effort and planning. It rarely just “happens.”
Think it through very carefully. An article from Inc.com quotes an expert who estimated that only 5% of couples can make a combined business and marriage partnership work.
The challenges of being both types of partners at once are not just twice as many; the challenges can feel like they go up exponentially. That is why I like to refer to it as a partnership squared, rather than a simple double partnership.
But to all of you couples giving it a try, Godspeed and Happy St. Valentine’s Day!

This Just Doesn’t Seem Right

Anybody who buys roses for St. Valentine’s Day tomorrow knows that it is one of the busiest days of the year for florists. If you have any doubt, you can observe the power of supply and demand on the price of a dozen roses. And candy stores and card shops are equally happy to see St. Valentine’s Day arrive. But, private detectives???
According to this story at StartupJournal it appears to be the case:

Art League…had been trying for weeks to catch a client’s husband cheating, but it wasn’t until Feb. 14 that the evidence surfaced. After tailing the man to an office parking lot, Mr. League spied him placing a card on another car before driving away. Mr. League swiped the card — which was festooned with hearts and professed true love — and surreptitiously videotaped the woman who later showed up frantically looking for it. He presented the card and the video to his client, and the case was closed.
“It’s a good holiday for business,” Mr. League says. The Greensboro, N.C., gumshoe has already scheduled five infidelity investigations for Tuesday, and plans to add two part-time sleuths to his staff of four to handle the demand.