Business Tennessee released its annual Business Tennessee Fast50, ranking TAG (The Access Group) as one of the fastest-growing private companies in Tennessee. Charles Hagood, a co-founder of TAG, is an alumnus of our MBA program here at Belmont. (I ran a profile of TAG a few months ago).
The ACCESS Group works with a variety of Fortune 500 companies throughout North America and Asia in providing a variety of engineering, project management, plant relocation, facility startup and consulting services. TAG also provides A/E and design services to industry via TAG Design Services, LLC and recently began providing Healthcare related consulting services targeting cost reductions, quality improvement, and efficiency improvements through its new subsidiary, Healthcare Performance Partners, LLC.
TAG has been honored on multiple occasions as a Tennessean newspaper Future 50 company including 2003, Business of the Year by the Chamber of Commerce in 2001, as well as the 12th fastest growing small business in middle Tennessee by Business Nashville magazine in 2002.
“The 2005 Business Tennessee Fast50 surely reflects the diversity of industry that is so beneficial to our state,” said David A. Fox, editor of Business Tennessee magazine. “These companies are showing what entrepreneurial drive amid a good business climate can accomplish. Many of these businesses are destined to be Tennessee’s biggest employers and publicly traded corporations of tomorrow.”
Carnival of the Capitalists
COTC can be seen at View From a Height.
When are Small Business and Entrepreneurship Different?
A debate has been going on for years in the academic world over the difference, if any, between small business and entrepreneurship. While much of this debate is rather esoteric, there is one instance where I draw a clear line between the two. It centers on private versus public ownership. An IPO is more than a financing strategy. It is a transforming event that will change a business forever (or at least until the company goes private again).
When a business, no matter how small, goes public with its stock it begins to become a different entity when compared to a classic entrepreneurial venture. Entrepreneurship and private ownership to me are critically intertwined. Once a business goes public, the founders become employed managers. Just ask any of the legions of entrepreneurs who went public, only to be fired from the company they founded. Granted, this can also happen to an entrepreneur before his company goes public if he gets venture capital money. But, it is even more common once the company becomes a “public good.”
So when I see lists like Fortune’s Top 100 small businesses, I see them as entrepreneurial successes that are no longer entrepreneurial in nature. They are really nascent big public companies.
Lessons from the Fairway
We played golf today at Ko’olau, which is billed as the “World’s Most Challenging Golf Course.” While that may be a little hype, it is one of the toughest I have even played. Two lessons for entrepreneurs came to mind with our round.
Focus. Ko’olau is right next to the mountains. There is jungle along every fairway, and many sand bunkers in key places. Many holes have you hitting over jungle to get to the fairway. If I wasn’t careful I found myself thinking a shot or two ahead, or thinking about everything around me and not about what I needed to do to execute my shot.
But, I found that when I blocked out the beauty, the danger, the hazards, and just focused on each shot, I did alright. I hit some great shots that sailed over the jungle and landed where they should. Then I went to the ball and made my next shot.
Focus on one shot at a time. Don’t think ahead.
So, too, as entrepreneurs we need to learn to block out that which would distract us. We get excited by all the opportunities that we see out there and start thinking about what to do next. Many entrepreneurs jump too soon to the next deal before the current business they are just getting going is even stable.
Focus on one shot at a time. Don’t think ahead.
Set Realistic Goals and Stay Within Your Limits. My son Russ and I both went at this course with the understanding that we would likely score quite high. We set out to keep our scores in our normal range, and played our games to reach this goal. We did not try to shoot a very low score, as that was just not realistic on this course under the conditions we played in.
As entrepreneurs we need to set realistic goals. Don’t try to turn a nice business into something bigger than it is or bigger than it ever realistically can become. Understand what the business can give back to you and work hard to reach that goal.
I am not saying that we should never challenge ourselves and reach for a goal that may seem hard to achieve. However, we can try too hard.
In golf you should never try to swing too hard. If you do, you usually don’t hit it very well. If you swing smooth and easy the ball will almost always go farther and straighter. Do the same in your business. Know your limits and do the best within those limits. Over time, this will lead to more successes.
By the way, by setting a realistic goal today and playing within our limits, we both shot within our typical range of scores on this quite demanding golf course.
Aloha!
I will be blogging for most of this week from Honolulu where I am attending the Academy of Management Annual Meetings (and squeezing in a little golf with our son, as well).
This is the finishing hole of the Hawaiian Prince, which we played yesterday.
(Picture taken by Russ Cornwall).
Cafe Evoke Enters Critical Times
Those of you who are regulars here have been keeping up with Jason Duncan, one of our recent graduates, who is blogging about the opening of his business. It is called Cafe Evoke and will be located out in Bozeman, Montana. If you haven’t been to his blog site in a while, you should check in over the next few days. He is at a critical point in his start-up.
A Niche Market is Never as Safe and Secure as We Think
A niche strategy is the most common type of entry strategy for start-ups that I see. Entrepreneur magazine reports on a study that found that niche businesses are growing at 20 – 25% a year.
In a niche strategy, the entrepreneur finds a small part of a market that is not being served or is significantly underserved. A niche strategy gives the entrepreneur a safer market with less competition and a more dependent market.
Generally, a nice strategy is a good way to enter the market for a new business. It usually takes fewer resources for the start-up, due to lower marketing costs and the ability to start on a smaller scale. Success rates tend to be higher for niche businesses since they have less direct competition. Without much competition, niche businesses can charge higher prices, which allows for quicker positive cash flow during start-up and better margins once profitable.
But, there are some cautions that an entrepreneur should be aware with a niche strategy:
– Entering a niche requires adaptability in your plan. Many entrepreneurs assume that since the niche is a relatively safe place, they can establish their business plan, execute it, and all will be good with the world. But, if you miss the mark on exactly what the niche wants, it doesn’t matter how safe the niche is, the customers will not automatically buy from you. You still have to offer what they want. No matter how much research you do ahead of time for your plan, you can still misjudge the market.
A case in point is one of the retail businesses our students started here at Belmont. Lauren started a small clothing store called Feedback. Her plan was to sell “retro” used clothing. Such stores had done quite well in other college locations. However once she opened, she quickly discovered that what was selling were the inexpensive “designer” clothing. This was not going to be the main focus of her store in her plan. Although she had a limited budget, she realized that she had to quickly transition her inventory and get the word out about her expanded offerings from up-and-coming and local designers. She had misjudged the needs and wants of her niche market, but was able to quickly adapt. Her business is now growing.
– Niches Change. Even if you get the market right in the beginning, niche markets (like any market) will change over time. Success in a niche requires that you adapt as your market changes. Too many entrepreneurs get stuck doing the same thing or offering the same product while their customers’ needs and wants evolve. Even though it is a niche, the market is not isolated and is subject to the same forces and trends that can impact any market.
– Niches Can Go Away. No market is forever. Niches are the type of market that can dry up, sometimes quite suddenly. Again, adaptation can offer some hope, but if the decline is too rapid many niche businesses will fail.
– Niches Can Grow. While significant growth in your market may not sound bad, it can attract more competitors. And if it grows large enough, it can attract some of the “big boys.” At some point your cozy little niche can feel quite crowded and really is no longer a niche. That requires that you adapt your business strategies to this more competitive market. Your pricing will be forced downward, while the cost of business may go up due to increased marketing costs, greater expectations from your customers, and higher labor costs due to more competition for your best staff. Your goal becomes keeping market share in the increasingly competitive market, as you will now need volume to assure profitability.
So is a niche a good place to enter the market? Absolutely. However, change is inevitable and even in a niche market an entrepreneur needs to be able to adapt to survive over the longer-term.
Culture as a Criteria for Hiring (and Firing)
We had an interesting debate in my MBA class about the role of culture in hiring and firing employees in a small business. While the case for using culture in hiring is fairly straight forward, it is the issue of termination that seems to make some uncomfortable.
The culture in a small business starts with the values of the owners. Each decision she makes, each action she takes shapes the culture of her business. Over time her values will become part of the shared understanding of “how business is done around here.”
But as a business grows, the people who join the business bring their own values and behaviors that they have learned in other companies. We found in our health care business that many very technically competent employees just did not fit in our company because their way of working had been shaped and formed by one of the large national health care companies. Many of them never could adapt to our distinctly different culture.
Human resource experts tell us that culture should be a major factor in hiring employees. Even state employment agencies often strongly recommend culture as a criterion. They assure us that it is not a matter of discrimination, but trying to find people who will fit the culture and stay with the business. For state employment folks this is important as they are trying to keep unemployment down. If too many people end up in businesses where they do not fit, it leads to increased turnover and unemployment.
We tried several creative ways to find out if someone would fit in our culture. We had a very decentralized structure that was not dominated by our physicians. We had to make sure that we hired physicians and staff that fit into this culture. We would have them sit in treatment meetings and meet formally and informally with many of our staff. We would talk to our front line staff about each possible hire, and it was that group who often had veto power. Several prospective employees were not hired because they did not treat our receptionist with respect.
Firing employees because they do not fit in a culture is where many, especially those in a corporate environment, get uncomfortable. They seem to hope that eventually these employees will just realize that they do not fit in and leave on their own accord. But, in a small business we do not have the luxury of keeping any excess employees.
Performance in a small business is more than just doing one’s job. The culture of the business is still a work in progress, and the business owner must be diligent to make sure that it is evolving the way they want it to. Just because a salesman meets his quota is not enough to keep his job. If he does so in ways that undermine the way the owner wants to build relationships with customers that can be just as important a criterion for continued employment as selling product.
It may be a soft criteria and it may seem subjective to an outsider. But, an entrepreneur knows how she wants her business to run and she has an obligation to make the tough decisions to make sure that the culture develops in a way that is consistent with her values, her ethics and her vision.
“Go Lauch Yourself a Rocket!”
I happened to spend some time with two entrepreneurs this weekend. Both of them gave me some insights into why they do what they do. I know why I became an entrepreneur and what I wanted to get out of it, but I continue to be amazed at how each entrepreneur I get to know has a slightly different take on the why question.
The first person was a gentleman who we hired to do some electrical work on our home. As I watched him work throughout the day I was struck by his professionalism and with the care he took in his work. As we were settling up with him at the end of the day we started to talk with him about his business.
How long has he been in business? He told us that he had only started a year and a half ago. He had been an executive in the publishing industry for several years. But, the hours and the pressure was taking a toll on his young family, so he and wife decided that it was time to make a change. He decided to go back to the trade he had learned as a young man working his way through college.
“I realized that if I took off time to spend with my family on a Saturday when I was working for the company, it cost them money. If I make that choice with my own business, it only costs me money.”
He said that the first year was a challenge financially, but he saw immediate rewards in what mattered most for him: his family. The business was now beginning to make some money, but what mattered most for him was the independence and control to create the right balance between his work and the time he wants for his family.
The second entrepreneur lives in our neighborhood. We were at a going-away party for another neighbor on Saturday night. He and I got talking about his retail business. He and his wife had recently opened a second store. We both shared our stories of how and why we had ended up as entrepreneurs. He had gotten sick of the corporate world and decided to “bet the farm” on a business he had learned about from a friend.
I asked how many stores he planned to open, and he said that he would open enough of them to reach the financial goals he had established for his family. What was interesting about this answer to me is that even though retail can be quite a personal business, he was also working hard to look at it as an investment. He wasn’t trying to build an empire or maximize what he could accomplish. The business was a way for him to get to the retirement that he was clearly looking forward to on his own terms and in his own time.
Each of these entrepreneurs looks at business ownership in a different way. No matter how many entrepreneurs I talk with, each seems to have a unique view of their purpose for going into business and what success means for each of them.
What is very common is that however entrepreneurs define success, it is rarely defined in external terms. Most do not become entrepreneurs to impress others or become famous. They do not define their success based on what other people think about them. They seem to have a healthy ability to tune out external expectations.
All of this reminds me of a scene from a movie, October Sky, that we watched this weekend in my MBA class. It is one of my favorite entrepreneurship case study movies (even though it does not appear to be about an entrepreneur at first glance). It is a true story from the late 1950s about a young boy, Homer Hickam, from a desperately poor coal mining town in West Virginia who decides that he wants to launch a rocket after seeing Sputnik flying through the October sky. Homer’s quest to launch his rocket is a classic tale of entrepreneurship.
One line in the movie reminds me of the importance for entrepreneurs to keep their focus on their own goals, and not on anyone else’s. Homer had attracted a lot of attention from the citizens of his small town, many of whom showed up one day to see him launch a rocket. He becomes quite nervous about the success of this rocket launch and what everyone would think if it failed.
He teacher and inspiration, Miss Riley, looks him in the eye and says, “Homer, you don’t have to prove anything to anybody. You remember that. Now, go launch yourself a rocket!”
Carnival of the Capitalists
COTC can be seen at Small Business Marketing Systems this week.