No Experience?

When we started our health care business I had no experience in that industry. Now normally that is not advisable. However, there are ways to overcome a lack of experience.
I had two partners who were very experienced in health care, so that helped quite a bit. But, I also tried to learn as much as I could from those who worked in our business. In fact, when one of our facility managers had to be let go, I was the only person who could possibly step in and run the business until we could find a replacement. Luckily, I had spent time with the staff and had built a certain level of trust. They took me under their wings and helped me make it through a very difficult time in our business. I learned so many important lessons during those few weeks about the health care business from working side-by-side with our staff as they cared for our patients. It made me a much more effective leader as our company began to grow.
On a similar vein, Bizjournal has a story about an entrepreneur who bought a plumbing business without ever having worked in that industry.
“As the new owner of Superior Mechanical Inc., a local commercial plumbing company, Richard Drennen had ambition and energy aplenty. What he lacked at the time of the 1999 purchase was knowledge of plumbing – commercial or residential.
“In the ensuing months, he labored on the work site alongside his employees, resolving any credibility concerns they might have had.”
Knowledge and experience of the type of business you are starting or buying are certainly important to have. But, a lack of either, or of both, can be overcome.

Don’t be a Hermit

An article at NFIB offers some good advice for solo entrepreneurs on how to connect with other people to improve their businesses. Isolation can lead to decreased creativity, obsessing over little problems, and ignoring big issues through simple denial. One approach to overcoming isolation is to connect to others in your industry.
“(O)ne of the best ways to develop a network of colleagues who understand your business is to join a professional association. Look for organizations that hold regular meetings in locations that are easy for you to get to. You can forge deeper contacts if you go beyond attending meetings by volunteering to serve on one of the association’s committees.”
I found that a group of entrepreneurs from other industries proved to be a valuable source of ideas and support when I was in business. We met through the Chamber of Commerce, but set up our own monthly advisory group. We dealt with issues ranging from finding time for our families to the right way, implementing layoffs, firing a customer, and even the right time to sell a business.
“Don’t forget professionals outside of your field. They can be good brainstorming partners for universal business problems, such as dealing with late-paying customers or deciding whether to switch from cable modem to DSL. People in other industries can also be good sources of new-business referrals.”
The article correctly points out that the benefits of building support systems go beyond improving the performance of your business.
“Hashing out business problems with others can improve your family life, too. You will be less likely to bring your work frustrations to the dinner table.”
It is not just the solo entrepreneur who should worry about the effects of isolation. We had hundreds of employees and I had two partners, yet there were times I felt completely alone. Build a network of people who provide support and advice no matter how big or small your business.

Not This Again

When I was in Business School back in the 1970s there was still some residual discussion of what was known as the Trait Theory of Leadership. The notion was that certain traits, many of them physical, are related to effective leadership. Leaders were thought to be white, male, at least six feet tall, and had good heads of hair (I kid you not). I was feeling pretty good until the hair thing came up….Of course, the only reason that most leaders looked that way was because those were the only traits we would look at to find potential leaders. We learned that real leadership was a set of behaviors. And these behaviors could be learned by almost anyone.
Entrepreneurship went down the same for quite a bit longer than leadership studies. For years we tried to identify the traits of the most successful entrepreneurs. Although no data ever supported any specific traits, it just made sense to people, so this theory stuck around.
Finally, we learned that successful entrepreneurs followed, you guessed it, certain behavior patterns that also predicted their success. They planned, assessed opportunities before jumping into a venture, they secured the right resources at the right time, and they were effective at managing growth. And, yes, they were effective leaders. All of this can be learned.
Now I am the first to admit that certain types of people might be drawn to be leaders or entrepreneurs. However, this is true for a lot of other vocations, such as airline pilots or surgeons. But would you want someone flying you to Los Angeles or cutting open your brain just because they are drawn to these professions?? Of course not! We want them trained and educated. So, too, with leaders and entrepreneurs.
I don’t care why entrepreneurs end up in my classes or in my office. I only know that once they are there it is my job to help give them the knowledge, skills and tools to be successful. What gets them to me is irrelevant. Drive alone will not create the highest potential for success.
But, my fellow academics, at least those who are career academics, seem to be drawn to entrepreneurship by some vicarious need for excitement. I see it every time I go to a national meeting of entrepreneurship educators. Those who have never made a payroll seem drawn to the most hair-raising stories of near entrepreneurial failure like rubber-neckers on the freeway. They are thrilled by entrepreneurs who pursue their vision with reckless abandon.
The latest example seems to be a book titled The Hypomanic Edge: The Link Between (A Little) Craziness and (A Lot of) Success by a Psychiatrist named John Gartner (featured this week at the National Dialogue on Entrepreneurship). He contends that it is genetics that drives people to become successful entrepreneurs.
You are wrong; dead wrong, Dr. Gartner. Personality may draw folks to become entrepreneurs to some degree, but it is hard work and education that gives them the greatest chance for success.

Small Business Lending Increasing

Lending by the most important institutional supplier of credit to small firms-commercial banks-increased in 2002-2003, according to a report released today by the Office of Advocacy of the U.S. Small Business Administration (SBA).
The report allows small businesses to see which specific banks, by state, are most active in lending to small businesses.
“Information about which banks are making small loans is critical to the health of small businesses,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “This kind of information helps small businesses save time and shop efficiently for credit-and it also helps the banking sector understand the competition in their markets.”
Four sets of tables rank large Bank Holding Companies (BHC) and commercial banks nationally and by state. For example, the highest ranking bank based here in Tennessee is Union Planters Bank, which ranks 8th nationally among large banks. (Note: Union Planters is in the process of merging with Regions Bank, which ranks 3rd nationally).
Findings also include:
– Small business loans outstanding (loans under $1 million) totaled $495 billion as of June 2003, an increase of $11.1 billion or 2.3 percent between June 2002 and June 2003, compared with an overall increase of 5.1 percent over the previous period.
– In 2002, a total of $227.5 billion in small business loans under $1 million were extended by 905 CRA-reporting banks/BHCs, compared with $203 billion in 2001. Large multi-billion-dollar banks and BHCs made 5.3 million micro business loans valued at $73 billion in 2002, compared with $4.9 million loans valued at $62 billion in 2001.
– The CRA data confirm the findings in the Call Report data of the importance of multi-billion-dollar banks and BHCs in the market for the smallest loans.
Knowing which banks work best with small businesses can be a daunting task for entrepreneurs. This type of data can really help cut through the marketing hype and allow entrepreneurs to focus on talking with banks that have a history of working with smaller companies.

Don’t Get Stuck in a Dying Market

My years in the health care industry taught me many lessons. One that I often stress to new entrepreneurs is to remember that the same changes in the market that give you an opportunity can just as quickly take it away.
Our early growth in the mental health market came from the emergence of managed care in the 1980s. We offered a much lower cost and more effective outcomes than the traditional treatment that involved long-term hospitalization. But the same HMOs that once loved us, had to keep delivering lower health care costs to employers. Eventually, they were able to find cheaper, but this time less effective, alternatives.
Fortunately, we saw this trend coming and had already begun to shift our business away from private managed care companies to working with state and county agencies eager to privatize mental health treatment. While this was a fundamental change in our business model, it was necessary for us to survive.
BizJournals.com offers another entrepreneur’s story of having to make a drastic shift in target markets. Veicon, Inc. had provided Internet access to hotel guests until 9/11 all but ended that market. So they quickly shifted to public access terminals in libraries and hospitals.
Entrepreneurs, by definition, operate in what my former colleague Peter Vaill calls permanent white water. That often requires quick and decisive changes in direction to avoid complete disaster. Someone once told me these words of wisdom; “Never get ‘married’ to your customers.”

Patent Ruling Hurts Inventors

StartupJournal reports that the federal appeals court has ruled in favor of big corporations over inventors in a case that will make patent protection much more difficult for the little guy. The ruling makes ‘willful’ patent infringement much harder to prove.
“Before the ruling, it was easy to prove willful infringement by having defendants admit they hadn’t obtained a legal opinion as soon as a patent holder asserted a violation. But the appeals court said such evidence on its own isn’t sufficient anymore, forcing plaintiffs to find other evidence of willfulness.
“Big companies think the court’s ruling could reduce claims by so-called patent vultures, who buy patents from defunct companies solely for the purpose of licensing and litigating. But it also limits the clout of individual inventors and makes lawyers less willing to take them on as clients on a contingency basis.”
This ruling will splash a big bucket of cold water on the part of our entrepreneurial economic expansion created by inventors. This is the classic case of the court throwing out the baby with the bath water.

State Programs Recognized

Four state initiatives spurring entrepreneurship and economic growth, and demonstrating market-based results, have won national “Best Practices” awards from the Office of Advocacy of the U.S. Small Business Administration.
“Encouraging entrepreneurship is a key component of local, regional, and state economic development,” said Thomas M. Sullivan, Chief Counsel for Advocacy. “The Best Practice winners show a clear dedication to innovations in public policy that encourage entrepreneurs and provide an environment where they can flourish. These programs demonstrate market-based results and ought to be replicated across the country.”
The winners were:
– Idaho’s “TechConnect” program for Best Practice in educational efforts to promote entrepreneurship.
– The Maryland Technology Enterprise Institute at the University of Maryland’s “Maryland Industrial Partnership Program” for Best Practice in technology transfer programs.
– The Michigan Economic Development Corporation’s “SmartZone” initiative for Best Practice in regional economic incentives.
– The Wisconsin Department of Commerce’s efforts to reduce state small business regulatory burden for Best Practice in regulatory flexibility.

More than 30 Million Women Worldwide Are Entrepreneurs

Forty-one percent of entrepreneurs are women, according to a new Global Entrepreneurship Monitor (GEM) report on women’s entrepreneurial activity. The report was released today by The Center For Women’s Leadership at Babson College.
“The GEM study on women’s entrepreneurship emphasizes the critical role women have in new venture creation and provides insights to inform policies focused on increasing and extending the scope and reach of their entrepreneurial activities,” said Dr. Nan Langowitz, Director of the Center for Women’s Leadership at Babson College. “These findings support our goal of understanding, featuring and supporting the entrepreneurial efforts of women worldwide.”
Key findings:
– 73 million people are involved in starting a new business in the 34 countries that participated in the study. Of those, about 30 million are women. The average level of female total entrepreneurial activity varied from 39.1% in Peru to 1.2% in Japan.
– In every country in the study, men are more active in entrepreneurship than women. The largest gap occurs in middle income nations where men are 75% more likely than women to be active entrepreneurs, compared to 33% in high-income countries and 41% in low-income countries.
The GEM report shows that across all countries, a strong positive and significant correlation exists between opportunity recognition and a woman’s likelihood of starting a new business. Women who perceived the existence of business opportunities were more likely to make the decision to start a new business.
Additionally, across all countries, a strong positive and significant correlation exists between a woman’s belief of having the knowledge, skills and experience required to start a new business and her likelihood of starting one. Conversely, a strong negative and significant correlation exists between fear of failure and a woman’s likelihood of starting a new business.
“In order to be effective, policies with respect to entrepreneurship need to be tailored to a country’s specific context,” said Prof. Minniti. “This is particularly important for women since they tend to be much more sensitive than men to conditions in their local environment. Nonetheless, across all countries, it is clear that support policies by themselves are not sufficient to increase women’s involvement in entrepreneurship. Women are particularly sensitive to their social environment. Mentoring and network support, especially at the local level, are at least as crucial in boosting women’s attitudes with respect to business leadership and new venture creation as financial support.”
While the findings of this report are fascinating at face value, the “So what?” questions are the where it gets really interesting.
Policy Implications for High-Income Countries
From the Babson Authors: High-income countries need to sustain innovation rates and encourage the involvement of women in entrepreneurship, especially when faced with an aging labor force. Areas of importance for policy makers should include promoting entrepreneurial education at the college and post-graduate level and encouraging more women to pursue technical degrees and to commercialize their ideas. Coordinating policy to encourage equal benefits for women in the workforce, whether in traditional or entrepreneurial business roles, is vital.
While I agree on the critical role that education plays in improving the success rates of business start-ups, I am concerned where the authors are headed with their other recommendation for high-income countries. What do they have in mind in terms of “equal benefits” in “entrepreneurial business roles”? Are we talking mandates or quotas? That would be a sure fire way to stifle entrepreneurial activity overall in these countries. Such governmental social engineering related to economic activity just never has proven to work. In fact, it has the opposite impact over time.
Policy Implications for Middle-Income Countries
From the Babson Authors: More than in other groups, women in middle income countries shy away from starting their own businesses. Areas of importance for policy makers should include to instill fundamental aspects of the entrepreneurial mindset and to increase the attractiveness of entrepreneurship as an income producing activity for women even when they have access to jobs in manufacturing or in the public sector.
I recommend that we avoid the temptation to micro manage public policy based on any particular findings of this report. Why? The devil is always in the details on such research. In this case, the middle-income countries in this study tend toward more socialistic policies, which have been shown to be anti-entrepreneurial.
Policy Implications for Low-Income Countries
From the Babson Authors: Much female entrepreneurship in low-income countries is motivated by necessity, thus starting a new business represents an effective and flexible way for women to emancipate themselves and provide for their families. Areas of importance for policy makers should include literacy and financial assistance.
Amen to the role that entrepreneurship can play in pulling all citizens in these countries out of poverty. My only comment is that we let the private financial markets, both for-profit and non-profit, provide the kinds of micro-credit programs that have proven to be so successful. We don’t need governmental agencies getting into the credit business. Leave it to the experts.
(Source: The Center for Women’s Leadership at Babson College).

ChoicePoint Fiasco

Anita at Small Business Trends offers her take on the ChoicePoint fiasco.
“ChoicePoint could have done a better job limiting the use of sensitive personal data to legitimate ‘consumer-driven’ transactions in the first place. If it had done that, and vetted its business customers with the same level of detail as the individuals it reports on, there would be no need to take the action it is now announcing.”