Find COTC this week at AnyLetter.
Does It Feel Crowded Out There?
A new study just released by the Kauffman Foundation finds that there are 500,000 new business start-ups in the US every month. If accurate, that means we are now seeing start-up rates of 6 million a year!
Here are additional highlights as reported by the National Dialogue on Entrepreneurship:
Somewhat surprisingly, the study shows a relatively stable rate of entrepreneurship activity despite major changes in the national economy in the last decade. Based on data from the Census and the Bureau of Labor Statistics for 1996 – 2004, an average of 0.36 percent of the adult population created new businesses each month with the low mark of 0.33 percent in 1997 and a high of 0.40 percent in 2004.
Most of the recent increase is attributable to immigrant entrepreneurs. While illegal immigration is a very serious problem that needs serious solutions, this shows that many of today’s immigrants coming into the US are helping to improve our economy through their entrepreneurial activities.
When Disaster Strikes
The lessons from 9-11 and Hurricane Katrina are still fresh in many small business owners minds. We now face another huge threat with Hurricane Rita. Inc.com reports on a check-list from Chubb Commercial Insurance that can help small business owners work toward a successful recovery from such events. It includes health and safety issues, getting basic services back to your business, protecting property, and restoring basic business functions for your business. This is an excellent resource that all small business owners should have in their disaster plan. And all small businesses should have a disaster plan in place!
Our thoughts and prayers are with all of you on the Gulf coast of Texas and Louisiana as Hurricane Rita approaches.
VC Money is Flowing
I have written in recent months about how flush with cash most venture capital funds are these days. Here is more evidence of that from an article sent to me by Dr. Jim Stefansic, COO of Patherfinder Therapeutics, Inc.
Let the good times roll. But, also keep in mind that this, too, shall pass. Availability of money comes and goes over time. For right now, there is plenty of cash for the right deals.
The Path to Start-up is Never a Straight Line
Time to check in again with Jason as he works his way through the start-up of his coffee shop in Bozeman, Montana. He is finally getting close to a lease. I am sure the journey to this point has seemed like an eternity to him, but Jason has been diligent with every step. He has not rushed through key decisions just to get the doors opened. Too many entrepreneurs get antsy and make hasty decisions during the start-up process that they can regret for years to come.
We will have to have some sort of major web-based celebration when he finally sells his first cup of coffee. Being the purist that I am, I hope it is a mug of pure, black coffee.
The Flea and the Elephant
A common part of business plans that I read involves some strategy that will lead to the shelves of Wal-Mart or one of the other big mass-merchandisers. StartupJournal tells the tale of one entrepreneur’s attempt to get his product placed in Wal-Mart stores.
Last year about 10,000 new suppliers applied to become Wal-Mart vendors. Of those, only about 200, or 2%, were ultimately accepted. “We just don’t have very many empty shelf spaces,” says Excell La Fayette Jr., Wal-Mart’s director of supplier development.
It is a journey that generally takes a minimum of six months just to get approved — and even then an order is not guaranteed. And along the way expect your margins to get thinner and thinner as costs go up and the price that Wal-Mart is willing to pay you goes down.
One change that is helping more entrepreneurs break into large retailers is that all of them, even Wal-Mart, are allowing more local autonomy for purchasing. But even with this change the odds are against you ever getting a shot at any shelf space.
Anita over at Small Business Trends has some interesting thoughts on this article.
Interest Rates Up Again
In somewhat of a surprise move, the Federal Reserve decided to raise interest rates another 0.25%.
From a summary issued by the Congressional Joint Economic Committee:
The Fed views risks of substantial increases or decreases in inflation over the next few quarters as roughly balanced. Risks of substantial increases or decreases in economic growth are also seen as balanced.
The Fed mentioned that dislocation of economic activity and higher energy prices that resulted from Hurricane Katrina will weigh on spending, production and employment in the near term. The Fed believes, however, that the economic developments stemming from Katrina will be transitory and “do not pose a more persistent threat.”
Rates have been steadily increasing from 1% in June 2004 to the current rate of 3.75%. Such rate increases will impact small businesses that have operating lines of credit, which most often have fully variable interest rates.
Fighting Poverty Through Small Business Development
The International Finance Corporation (IFC) has a new newsletter that highlights their efforts around the world to fight poverty through economic development. Much of this development is through small and micro enterprises. In their first issue, the IFC highlights work being done in Bangladesh through micro lending programs.
Carnival of the Capitalists
WILLism hosts COTC this week.
Welcome to Sheboygan, The Bratwurst Capital of the World
We’ve all heard the claims for generations. Small towns and large cities become known for a particular product. For example, Sheboygan, Wisconsin (and for that matter Bucyrus, Ohio) claims to be the Bratwurst Capital of the World. (Growing up on Wisconsin bratwursts is probably what has made my cholesterol so high….).
There are claims of the World Capital of This and the World Capital of That all over America. Fortune Small Business profiles some of the current “World Capitals” in their September issue.
Most entrepreneurs look for a unique niche to start a business, as this is often considered the safest way to start a new venture. But, every rule has an exception.
In the business phenomenon known as a cluster, businesses find advantages in operating in close proximity to their competitors. Clusters are a bit of a paradox. They can help attract customers (Auto Dealer Row), make getting materials from suppliers more efficient, take advantage of a geographic anomaly, or tap into a specialized labor pool. This is particularly true with today’s successful clusters.
Concentrations of specialized experts may result from a university producing patents on new technology and graduates who understand them, or a large corporation sloughing off workers who see entrepreneurial opportunities their less nimble employer didn’t. Silicon Valley is a prime example of a brainpower-based capital, as is our lesser-known find, Orlando, where the University of Central Florida feeds the local virtual-reality industry.
What ever the reason, sometimes it pays to be in a crowded market.