Courage in the Gulf

I had a conversation last night with one of our student entrepreneurs. She was learning the hard way about the roller coaster ride of entrepreneurship. After experiencing one her best weeks ever last week, she was faced with perhaps her greatest challenge yet this week. I told her that this is what entrepreneurship is like. It is not the straight line of growth we predict in our financial forecasts or the realization of each milestone with the clockwork precision that our business plans envision.
Some describe it as being like a prize fighter. To make money you have to work really hard knowing that every once in a while you will get your brains knocked out. To me it is like my golf game. It is mostly just trying to move ahead by dealing with some good shots and some bad shots, some lucky bounces and some unlucky ones, and trying to do all of this without losing my soul.
Courage is the entrepreneurial virtue that keeps us level-headed during the highs and keeps us moving forward during the lows.
Fortune Small Business offers the inspirational tales demonstrating the courage of four small business owners who are rebuilding their lives and their businesses in the wake of last fall’s hurricanes.
Jason Perry, Out of the Box Web Productions, New Orleans, LA

Within days of Katrina, Perry faced a serious cash crunch. All through that giddy August, he had been borrowing heavily to buy the equipment to service his new client. He had purchased a phone system and two servers and had leased new computers from Apple and Dell. For all he knew, Katrina had wiped out all his equipment, and he had no idea how he’d make his lease payments.

Donald Ridings, ABS Computers & Satellites, Gulfport, MS

On the morning Katrina hit, Donald Ridings and his wife, Helen, started driving. They had a plan that was both vague and crystal clear: to get far away from Gulfport. The couple own an old New Jersey Transit bus that they’ve converted into an RV, complete with a bedroom, a kitchen, and hot and cold running water. They simply got on I-10 and headed east. “We had no clue where we were going,” says Ridings.

Austin Tindol, Gulf Coast Glycol, Gulfport, MS

The mood was giddy on Aug. 26 as Austin Tindol held a ribbon-cutting ceremony in Gulfport. It had taken 18 months to launch Gulf Coast Glycol, an outfit that recycles used antifreeze into reusable antifreeze. Tindol raised a glass of champagne, toasting (their)…a new family business….Within hours, an ominous note had crept in. Weather reports indicated that a hurricane was heading toward the Gulf Coast.

George Brumat, Snug Harbor Bar, New Orleans, LA

When Katrina hit, Brumat took cover in his third-story apartment about a block from the club….Soon the couch was rumbling and bouncing, says Brumat, and the walls were swaying in the 150-mph winds. Looking out the window, he witnessed “roofing tiles flying like sparrows and tall magnolias going down.”

These are just four examples from the thousands of small business owners in the Gulf region who are not giving up on their visions and their dreams. Although they have all suffered through the ultimate low point as entrepreneurs, they are all rebuilding their businesses.
These are the real entrepreneurial heroes. Keep them in your prayers.

Disaster Planning

Hurricanes, terrorist attacks, ice storms, tornados, pandemics, fires, floods….while things like this may seem too abstract and too overwhelming to even think about, you need to do just that for your small businesses. You need to develop a plan for unimaginable. I offered my tips on disaster planning a few months back.
StartupJournal summarizes some additional useful advice from a recent meeting of small business owners. Here are some of their thoughts on disaster planning.
Before a disaster strikes:
– Sit down with your management team, or if you are small enough your employees, and test your plan.
Present a disaster and see how well everyone knows your plan (if you have one) and what the holes are (and there will be several). Throw in some twists and turns to see how everyone reacts.
– Back-up your files.
When I was a doctoral student many, many years ago we all developed a system to protect our dissertations from possible disaster. We did not have personal computers in those days, so we had not developed the false sense of security that we now get from those little machines. We had hard copies of stuff. And if they were destroyed we knew we were sunk. What we had to lose was tangible and we held it in our hands. Your data is just as important, but often forget how vulnerable it can be. With our dissertations we kept one complete copy in our office at the university, one complete copy at our home, and one complete copy in our car. We figured that even if a plane crashed into the university it could not also hit our car and our house. In our business I insisted that we keep copies of key materials off site. Be paranoid about your important data and information and assume that the worst case will happen. Keep at least one set of back-ups off site.
Once a disaster hits:
– Do what ever it takes to get operational again.
We saw after 9/11 how paralyzed many folks became. They did nothing for days. You cannot afford to lose that much time in your business, so be resourceful and be determined. When Dick Schulze’s stereo store called the Sound of Music was hit by a tornado, he salvaged the merchandise that he could, rented a tent, and set up a sale. The rest is history, as huge crowds came to take advantage of his low prices. He learned from this experience and out of it transformed his business; this was the creation of Best Buy. Not only can you survive disasters, but they can often make your business stronger over the long run if you manage the situation properly. Do not give up hope and do not wait for others to help. It will be up to you.
– If you have insurance, you can hire your own adjuster to represent you.
The adjuster who represents your insurance company will have their best interests at heart, and not yours. Everything is negotiable and having an expert on your side can help.
The most important tip was not mentioned in this article: cash is king. The more cash reserves you have, the better the chances that you can survive even the worst case scenario. In these times, your goal should be to have 30-90 days of operating cash available. If that means keeping your salary a little lower than you’d like for a while, it is well worth it if it keeps your business going through the next disaster.

Study Sheds Light on Women Entrepreneurs

A new study just released by Babson College offers some interesting insights into not only women entrepreneurs, which was the focus of the study, but entrepreneurs in general. The authors studied 215 woman-led firms in Massachusetts from 2000 – 2004. Here are some of the highlights:

– Women CEOs are ambitious and are primarily motivated by personal achievement (85%) and a desire for challenge (80%). Debunking the stereotype that women are driven to start businesses solely out of economic necessity, more than 54 percent stated that economic necessity was barely a motivator or none at all. Similarly, while nearly 32 percent cited the glass ceiling as a motivator, 48 percent said it was minimally a motivator or none at all.

One myth about entrepreneurs is that the growth in new business start-ups is from a growing number of people being displaced by their previous employers. This study reinforces what I see. The entrepreneurial economy we are in today is real and it is being driven by people who are highly motivated to be entrepreneurs, and not just being thrown into it by life’s circumstances.

– Establishing strong customer and employee relationships are considered the cornerstones to conducting business. The women CEOs cited customer satisfaction as the leading factor in doing business (97 percent), followed by key human resource issues: employee satisfaction (92 percent), company culture (81 percent) and work/life balance (67 percent). These areas were ranked higher as daily business priorities than rapid sales growth, high profitability, personal financial reward, high market share and personal autonomy and control.

These are interesting findings that support many other studies reporting that the meaning of “success” to entrepreneurs is very personal and much more complex than sales and profit growth. There are even deeper reasons people are driven to start new ventures.

– Of the 43 companies that consistently participated in the study over a five-year period from 2000-2004, the average company grew nearly 27 percent from revenues of $13.9 million in 2000 to revenues of $17.9 million in 2004. In the same timeframe, average employment increased by 9.5 percent, resulting in productivity gains of 15.9 percent.

– The woman-led firms are solidly focused on future growth. Ninety-two percent of the companies expect to grow over the next two years, and 59 percent are anticipating growth of five percent or more annually. The primary focus for growth is through new clients and customer accounts, followed by new products and new geographic markets. Most firms expect to finance growth through cash flow from operations, short-term debt and retained earnings reinvestment.

These businesses are part of the vast majority of entrepreneurs in this country. They are not financed by venture capital, but rather grow organically with minimal outside support. They are bootstrappers through and through.

-Women leaders have a long-term commitment to building their careers and their businesses. The typical CEO of woman-led companies has 27 years of work experience, and 13 years in her current position.

Real entrepreneurship is not a financial transaction, it is a commitment to build a business that “has legs” and builds real value.

– Seventy-seven percent of the woman-led businesses studied continue to be run by their founding entrepreneurs.

Entrepreneurs are not just starters, we are also builders. Another myth debunked.

Jason’s Coffee Shop Adventure Makes it into US News & World Report

Many of you have been following Jason as he works his way from Belmont student to coffee shop entrepreneur in Bozeman, Montana. It seems that US News & World Report has also been following Jason’s adventures!

It is one thing to suffer the trials and tribulations of starting a small business. But it takes a special kind of masochism to share those hassles and head-aches publicly with complete strangers. Yet that’s just what 23-year-old Jason Duncan is doing with A Thought Over Coffee, a blog devoted to documenting his attempt to start an artsy coffeehouse in Bozeman, Mont.–or, as he puts it, “my journey through the dreaming and planning of Cafe Evoke.”

Christmas Reading List

The National Dialogue on Entrepreneurship offers their annual Christmas Reading list (they don’t actually use the word Christmas, but I will). You can see all of their picks here.
These are a few that caught my eye:
Business Plan in a Day: Get It Done Right, Get It Done Fast!, Rhonda Abrams and Julie Vallone (Planning Shop, 2005).
I wish the world would stop being so obsessed with business plans. It is not the plan that is important, but the process of business planning. I hope that their recipe for a quick plan does not lead to superficial planning!! This one won’t be on my list to Santa.
How to Run Your Business Like a Girl: Successful Strategies from Entrepreneurial Women Who Made It Happen, Elizabeth Cogswell Baskin (Adams Media, 2005).
I have heard some good things about this book and its author.
The World According to Peter Drucker, Jack Beatty (Free Press, 1998).
A sentimental pick this year with the passing of Professor Drucker. I would package this book with Drucker’s Innovation and Entrepreneurship, which I still find myself referring to at least once a month. In fact, if any of you are looking for something for me this Christmas, I’d love an autographed first edition of this Drucker classic.
The Moral Consequences of Economic Growth, Benjamin Friedman (Knopf, 2005).
I read the review on this one and ordered it before I even finished this post! I’ll let you know what I think about it early in 2006.

Hurricanes’ Impact Ebbs

Families and small business owners in the Gulf states and Florida will continue to rebuild their lives in the wake of the fall hurricanes for months and years to come. And we should all continue to keep them in our thoughts and prayers.
But, our overall economy is showing just how resilient it is. And this will help all of us prosper in the year ahead.
Gas prices are now lower than they were last September according to AAA.
gas prices 12-05.jpg
And employment remains strong as seen in today’s report from the Bureau of Labor Statistics. Some highlights:
– Job growth returned to pre-hurricane levels as 215,000 new payroll jobs were created in November.
– It also appears that the impact of the hurricanes on the U.S. economy as a whole was more contained than previously thought as September’s hurricane-related losses of 8,000 jobs were revised to a gain of 17,000 new jobs. October job gains were revised slightly downward however, from 56,000 to 44,000.
– Regardless of the temporary effects of the hurricanes, over 4.5 million new payroll jobs have been created since the recession ended 30 months ago.
– The November unemployment rate (calculated from the household survey of employment) remained unchanged from October at 5.0%.
– In November, the BLS returned to standard data collecting procedures from the revised methods used following the hurricanes. From those revised methods is insight into the local employment impact of the hurricanes. According to the BLS, “The unemployment rate for persons identified as evacuees was 20.5 percent; it was much higher for those who had not returned home (27.8 percent) than for those who had returned (12.5 percent).”

Good Source of Industry Trends

Bill Hobbs passed along this great site that provides links to 117 blogs by industry analysts. It tends to be more tech-oriented, but offers a very rich source of information from a variety of sources. The search engine at this site is also useful.
Not only is industry data like this is critical for effective start-up planning, but also for managing the growth of a business. Business planning should be a process, not an event.
Too often entrepreneurs believe that the business plan that they developed prior to opening should be treated like a detailed blue print. It should be followed step-by-step. Once completed, the business will be like a well built house that will last for decades.
The problem is that the market you are entering is probably under going dynamic change. This change is what in most cases creates the opportunity you are pursuing. You are entering what Peter Vaill calls permanent white water.
Your plan is full of assumptions, not just facts. Assumptions need to be tested and refined. Sometimes they need to be abandoned if proven wrong. The plan is more like a general map of a river. It shows where you will be headed, but the key to your success in navigating this river is in your ability to adjust to all of the things that you could never have planned for. The large rocks in your way that do not show up on any map. The sudden rising of the water due to an unexpected deluge of rain. A tree that has fallen across the river.
All of these require dynamic, real-time adjustments in your planning. Managing with assumptions means knowing those things that you are unsure of, and knowing those things you don’t really know, none of which you can absolutely plan for. It is also knowing those things that will likely be changing, and keeping a watchful eye each step of the way.
Your industry is likely to be a volatile and sometimes unfriendly place to operate within. You best tool for this is to keep informed about what is happening so you can integrate these changes into your ongoing business planning.