Small Business Data

Good data to help guide public policy has been lacking says a report issued by the Office of Advocacy of the SBA. This is alarming given the major part that entrepreneurship plays in today’s economy.
“Traditionally, business data has focused on large manufacturers and agriculture,” said Dr. Chad Moutray, Chief Economist for the Office of Advocacy. “However, our changing economy is finally being mirrored in data collection and that means more emphasis on small business. This is a good first step, but as the study shows, more needs to be done to more fully understand small business and the economy.”
True, as long as this does not mean more government bureaucracy meddling in private enterprise.

World Bank Hosting Online Discussion

The World Bank is hosting a new online discussion on “How to Improve Access to Finance for Small Firms?”
This online discussion is moderated by Thorsten Beck, senior economist in the Finance Team of the Development Research Group of the World Bank, and Asli Demirguc-Kunt, finance research manager in the World Bank’s Development Economics Research Group, and adviser, Operations and Policy Department, in the Bank’s Financial Sector Vice Presidency.
The World Bank discussion site has links to several policy papers that serve as background reading for this discussion.

Dr. C the Luddite Strikes Again

I always have been a bit of a skeptic when it comes to web sites for small businesses. For a long time I advocated that they were not important enough for most small businesses to spend precious marketing dollars on since they had not proved to be a source of business. My how times have changed.
I recently heard the story of a small business owner who generated hundreds of thousands of dollars in new sales with a $3,000 web site. It changed their market from regionally based to being national and even international in scope.
Then today one of my students, Tyler Oban, sent this article from Business Week that reinforces this point.
Tony March first took his 32-employee business, National Private Annuity Trust, online just 18 months ago….Result? The response has been so overwhelming that he’s now exploring franchising. “We’ve had thousands of potential customers calling us out of the blue because they saw us on Internet searches,” he says. “It was like we got billboarded overnight. We had no idea the product was this marketable. It’s a beautiful thing.”
Even my own blog site has increased contacts from national media and those trying to seek out expert advice. I guess it is time to soften my Luddite tendencies on yet another technological breakthrough. The marriage of small business and web-based marketing is here to stay. As with any marketing tool, entrepreneurs need to “think like their customers.” And it is clear that more and more of these customers are using the web.

The Fed Raises Rates

The Fed announced a quarter point increase in rates. As reported by Forbes, the Fed is giving strong indications that they have a bullish outlook for the economy. Interest rates are still relatively low and sustainable growth is forecast for at least the next year. Good news for businesses from Main Street to Wall Street.
Highlights from the Fed’s statement (from the Joint Congressional Economic Committee):
* The Fed continues to see the stance of monetary policy as accommodative which means that the Fed still perceives that interest rates remain relatively low to accommodate economic growth.
* The Fed noted that output is growing at a moderate pace despite earlier energy price increases, labor market conditions continue to improve, and inflation along with long-term inflation expectations remain contained.
* The policy statement reiterated the Fed belief that “policy accommodation can be removed at a pace that is likely to be measured.” This language has been used in statements accompanying the past five meetings (May, June, August, September, and November) and is a strong signal that the Fed is not yet finished with interest rate hikes. The Fed began removing policy accommodation at its June meeting when it increased its target overnight interest rate from 1.00% to 1.25%.
* Recognizing strong and steady growth in GDP, continued job growth and marginal upward pressures on inflation, the Federal Reserve is continuing its policy of increasing short-term interest rates at a measured pace.
* The Fed has increased its target overnight interest rate by a quarter of a percent at each of its past five meetings, bringing the target from a low of 1.00% to the current 2.25%.
* Markets expect another quarter point increase when the Fed next meets (February 1-2, 2005).

Lawyers, Lawyers Everywhere! Even Where We Drink!

Here is a great story about a lawyer who put his practice, literally, into a coffee shop.
“Thirsty for justice? Jeffrey Hughes’ two Legal Grind cafes in the Los Angeles area offer ‘Coffee and Counsel’ to those who may not otherwise seek legal advice. Through his innovative venture, Hughes has worked hard to both provide a valuable service to his community and change the public perception of attorneys.”
Who can come up with the best lawyer joke that ties in a coffee shop?
(Thanks to Jason Duncan for passing this story along!)

Hot Ventures for 2005

The editors of Fortune Small Business have made their predictions of “products, people, and ideas likely to make news in 2005.”
Here are some of their picks:
Designer Fruit: “Sometime in 2005 you may walk into a farmers’ market and find a fruit that you have never seen before and may not be able to pronounce: the peacotum.”
DNA Markers to Prevent Counterfeiting of Products: “Applied DNA takes strands of DNA from plants and alters them to create unique chemical tags that can be used to mark products (just as chemical taggants are added to explosives sold in the US).”
A Room With a View of the Ocean: “Poseidon Undersea Resort, expected to open in early 2006 off Eleuthera Island in the Bahamas, will give non-scuba divers the chance to experience life underwater without air tanks or wet suits.”
Medical Devices Galore: brain implants for quadriplegics that let them move a computer cursor by thoughts, nerve replacements, better joint replacements, harnesses for enlarged hearts, and spinal replacement parts are just some of the new medical devices coming to market.
Fast Food an Oxymoron No More: “HyperActive Bob…is a camera on the roof of fast-food restaurants that tracks cars in the drive-thru lane, along with software that analyzes the images. Based on the size and type of car, the software predicts how much food the people in it will order.”

Friends and Family: And How to Keep Them That Way

So you are ready to launch your new business, but need about $20,000 to get if off the ground. So you turn to family and friends to help you out. Smart choice? Maybe….
StartupJournal looks at the ups and downs of borrowing money from family members to start a new business.
“Few start-ups qualify for bank loans or possess the prospects to attract venture capital. Many entrepreneurs must endure the discomfort (of)…meekly asking a family member for a loan to get off the ground. Sometimes a family loan works beautifully, with full understanding of the risks on one side and gratitude for the help on the other. Other times a family business loan is a prelude to a disaster.”
How should loans from family and friends be handled? Like any other business transaction. To begin with, it should be formal and in writing. They should also be based on a formal business plan.
Venture Capitalists make loans based on team members of the deal, but that is because those entrepreneurs are proven business builders. People who go to family members for loans and investments are usually unproven as entrepreneurs. And yet, many family members talk about “trusting” John or Jane and “believing in them”. Invest in the business only if it is a deal that can stand on its own merits. If you want to keep Thanksgiving pleasant, keep business as business and family as family.

Microfinance Program Seeks to Expand its Impact

The Grameen Bank has helped expand the model of using small seed funding as a mechanism for pulling people in developing countries out of poverty through self-employment and entrepreneurship. The National Dialogue on Entrepreneurship reports on a new effort by the non-profit Grameen Foundation, to attract much broader financial support to help grow microfinance institutions (MFIs) around the world.
“The foundation has produced a new report Tapping the Financial Markets for Microfinance that offers a primer on how banks and other large financial institutions can effectively back micro-entrepreneurs. A huge potential market exists. Grameen suggests that global demand for microfinance exceeds $300 billion, yet only $4 billion is now expended in these markets. This huge gap can only be filled by major financial markets, and the report details a host of ways that investors effectively and profitably work in the field of microenterprise.”
The microfinance movement has taken root in places around the world including India, Bangladesh, parts of Africa, the Caribbean, Mexico and Central America. It is offering a market approach to poverty, which empowers recipients to take some self-control of the economic futures. This new initiative by Grameen seeks to integrate the microfinance movement into the mainstream financial markets.