The Growing Liability Risk: Your Information Systems

Business and government is not doing enough to protect sensitive and confidential personal information according to computer security experts at the annual Black Hat Europe conference being held in Amsterdam. From Red Herring:
“Simon Davies, a professor at the London School of Economics and director of Privacy International, told security researchers they would have to demand more transparency from organizations that deal in private information.
“‘Governments and businesses are saying ‘surrender your privacy and we’ll give you benefits and make a safer society.’ We have to push for greater accountability. We’re giving up this ancient right and the government’s not prepared to budge,’ said Mr. Davies.
“Recent scandals at Choicepoint, Reed Elsevier, Bank of America, and the University of California, Berkeley, have compromised the private information of millions of people. This data can be used to steal identities, apply for credit cards, and ruin debt records.”
But liability for lapses in computer security is not just the worry of large corporations. As small businesses gather more information about their customers they become more vulnerable to hackers and the liability that may result from their attacks.
And as the article in Red Herring points out, hackers are moving into the wireless world to find new paths into computer systems.
“Joe Grand, for example, gave a talk on vulnerabilities in common computer hardware. He said it was possible to break into a certain type of Dell wireless access point because nobody ever thought hackers would pull the appliance apart and test the software inside. ‘So many people in the computer industry trust hardware to be secure just because its hardware. It’s a total false sense of security,’ he said.”
Small businesses are setting up more and more wireless networks, and some, such as coffee shops, bagel stores and so forth, are setting up wireless networks open to the public. All are becoming vulnerable to a hackers attack, and if that leads to the wrong information getting into the wrong hands lawsuits will not be far behind.

Tripping at the Exit

StartupJournal highlights two entrepreneurs, Barbara Meade and Carla Cohen, who thought they had their exit plan in place for their bookstore.
“As they reached their mid-60s, they wanted to make sure their business would thrive into the future. Since neither had children interested in taking over the store, four years ago they hired a younger entrepreneur, Danny Gainsburg, with the understanding he would eventually buy them out.”
But, their plans soon came unraveled as their employees rebelled against the transition. There story is an informative case study on the challenges of the exit process.
I remind entrepreneurs to keep a few things in mind regarding exits:
– The first offer is rarely the one that works. Don’t get too excited and don’t spend the money until it is actually in the bank. Half of all business sales that actually make it to closing actually complete the sale, and a very large percentage fail long before that point.
– Staff will always get anxious during an exit no matter how well it is planned. The process is disruptive and can become quite chaotic. Keep it as quiet and low key as you can for as long as you can. Avoid making a highly visible long term transition.
– Twenty years can be short-term for exit planning. Don’t wait twenty years to start your planning like the entrepreneurs did in the StartupJournal profile.
– Involve your accountants and lawyers throughout the process. It will be expensive, but it is worth the costs given the risks of making any missteps.
– Integrate the needs of your important stakeholders into your planning. But, in the end remember that it is your business you are exiting.
For more tips on exit planning see my earlier post on this topic.

Independent Coffee Shops Best at Thinking like their Customers

Anita at Small Business Trends has a great post on how independent coffee shops are more effective at listening to their customers. This is not only a good practice for coffee shop entrepreneurs like Jason at A Thought Over Coffee, but all small businesses. The ability to think like their customers is a key competitive advantage entrepreneurs have over their large corporate competitors since they are so much closer to their customers day-to-day as they run their businesses.

Angels Flying High

Angel funded was way up in 2004, which is good news for the entrepreneurial economic recovery. Angels are credited with supporting more total economic development than venture capitalists. Inc.com reports on the details of this study.
“Angel funding for start-ups grew 20% in 2004 and helped create 141,200 new jobs, according to the Center for Venture Research at the University of New Hampshire, in Durham, N.H.
“The total investment by angel investors rose to $22.5 billion last year compared to $18.1 billion in 2003. The volume of angel investments was 16 times more than the number of venture capital investments, and the number of entrepreneurial ventures that received angel funding in 2004 increased 24% to 48,000.”

Battle Over Copyrights

The battle over copyrights that is now before the Supreme Court has far reaching implications beyond the litigants in the case. It could shape the competitive environment for years to come in the entertainment industry.
As seen in this article from Red Herring, many fear that this could stifle innovation and entrepreneurship in the industry.
“The case has provoked a flurry of briefs from interested parties, including such diverse groups as computer science professors and professional musicians. Intel filed a brief this month saying that Hollywood is trying to force technology companies to accurately predict how consumers will use their technology-an impossible task, opening tech companies to endless litigation. Other groups, including the National Venture Capital Association, pointed to the technological importance of file-sharing over peer-to-peer networks.
“Mark Cuban, billionaire entrepreneur and president of HDNet, recently wrote in his blog that he would finance Grokster’s defense. ‘If Grokster loses, technological innovation might not die, but it will have such a significant price tag associated with it, it will be the domain of the big corporations only,’ he wrote.”
Stay tuned….

SBA Looks at Definition of “Small” Business

StartupJournal reports that the SBA is looking into the definition what is a small business.
“By U.S. government standards, a sheep farmer is one, so long as her business pulls in no more than $750,000 a year. So is a residential remodeler, though he can make up to $28.5 million. A fish and seafood wholesaler gets small status if the company employs fewer than 100 workers while a telecommunications reseller is allowed up to 1,500 employees and can have unlimited revenue.”
Congress is not real interested in this change, as the current policy allows them to micro-manage yet another part of our economy.
Think I am exaggerating? Check out the official list the SBA puts out on what constitutes a “small” business. It currently runs about 42 pages…….

Vacation Season…Even for Entrepreneurs

From time to time I have written about the importance of vacations or just time off for entrepreneurs. Judy Artunian at the NFIB web site offers their take on this topic.
“More often than not, the entrepreneurs who could stand to gain the most from taking a two-week vacation are often the ones who can’t bear to be away from their business for more than two days. If you’re having trouble breaking away for that leisurely trip to the Bahamas or to your brother’s lakefront cabin, it might be time to re-orient your thinking about vacations.”
She says it can be good for your company, good for your employees and good for your ability to deal with the stresses your venture keeps sending your way.
And as I also recommend, she says to make sure to really take time off.
“Eighty percent of small-business owners check e-mail or voice mail while they’re on vacation, according to the results of a recent survey conducted jointly by Thomas Industrial Network and the U. S. Small Business Administration; try not to be one of them. Too much checking in will dilute the regenerative powers of a vacation. Urge your staff to call you if they need help with a matter that can’t wait until you return, but stress to them that you need this time to decompress from the pressures of work.”
Before one vacation I told my staff that they should only call me if the office burns down (completely) or if someone would die if they didn’t contact me before I got back. (I still got two calls, but neither had anything to do with a fire or a potential death…..).