“Hot” Opportunities

Entrepreneur magazine offers four ideas on how to find or create business opportunities:
1. “Tap the countertrend”. This is sort of the contrarian’s approach. Everybody else is running to take advantage of the trend. “Consider C&C California, the Los Angeles T-shirt company whose ‘classic’ T-shirts have struck a chord with women sick of skimpy, midriff-baring tops.”
2. “Eat off the big guy’s plate”. Just think about all of the retail “drop-off” businesses that are popping up like mushrooms after the rain to tag along buy topamax online uk with e-Bay’s success.
3. “Switch the niche”. Find a new niche that with a little different approach would respond just as well as the niche that is already working with a product or service.
4. “Borrow a business model”. Business models that work in another industry or even a different segment of the same industry can prove to be a great inspiration for new applications.
They also offer their list of “hot” business opportunities for this year, including some ideas for youth and seniors.

A Missing Dimension to the Outsourcing and Globalizaion Debate

I got into an interesting discussion yesterday with a friend of mine about whether outsourcing and globalization were good or bad. He wasn’t sure which side of the political debate about this he stood on, but seemed to be sure that at some point he would need to pick a side. The truth is that this should not be viewed as a simple debate of the morality of outsourcing and globalization, as they are both morally neutral economic tools. The morality comes from how they are used and toward what ends.
For example, assume we are looking at a small manufacturing business that has been making a profit acceptable for the owner for several years. He has been proud of the jobs he provides and has been an active member of his community. The prospects look good for the future of his business. However, a consultant comes in and as part of his recommendations points out that if the entrepreneur were to outsource the manufacturing of his business to Mexico, he could easily triple his profitability. I would argue that in this case such an outsourcing decision, while within his rights in a free market, would be ethically questionable. He had defined his own success as much more than his profits, which met his personal goals, and outsourcing would ignore the employees and community who helped him reach his success in the first place.
Harbus Online (from the Harvard Business School) offers an example of and ethically good application of outsourcing. They tell the story of Digital Divide Data, which operates a digitization business in Cambodia.
“To outsourcing experts and globalization critics, DDD is simply one more company looking to take advantage of cost arbitrage between the world’s haves and have-nots. But…DDD represents a new breed of international social enterprise that melds the merits of the private sector with the morality of non-profits.”
What makes DDD different?
“‘Profits generated from data entry services are funneled into scholarships, healthcare and continued training,’ Tim notes. ‘The problem with most non-profit organizations is that they require annual grant funding. At DDD we aim for a double bottom line – the first is to be operationally self-sustainable, which funds the second, the direct, tangible improvement of disadvantaged people’s lives and the communities they live in.'”
To those who try to define outsourcing as being inherently evil, DDD would be just another company taking away jobs. How sad that a company that is pursuing good ends using good means would be cast within such a net.
Does this mean that we should pass legislation to define “good” or “bad” outsourcing as many are demanding these days. I would argue that we should not. However, does this mean that business should then blindly engage in outsourcing and globalization without considering the moral consequences? Of course not. In fact, if business behaves this way, with total disregard of the moral and ethical consequences of such decisions, they are just asking for government to eventually step in.
The choice is not simply one of free markets or government controls. There is a third dimension made up of moral and ethical criteria that should be shaped by our culture. Sadly, we seem to keep trying to insulate our culture from the moral virtues which should be at its core. In business, just as in government, we have moved to defining ethics in a purely legalistic manner. That is a sure ticket to more government involvement in the day-to-day aspects of our economic lives. The challenge is to integrate our shared moral traditions into our business decision making rather than simply default to government bureaucrats and lawyers.
Thanks to Paul Chenoweth for passing along the Harvard article.

Antiques On-line

I wrote earlier this week about the growth in e-commerce predicted for this year’s Christmas shopping season and how this channel of sales is becoming more successful for entrepreneurs. StartupJournal has a good example of this in their story about an antique boutique using the Internet to sell.
“In August 2002, Lynn Dralle closed the doors to Cheryl Leaf Antiques & Gifts, but that wasn’t the end of her retail business. Today the store’s collection of old furniture, glassware and knickknacks reach thousands more customers from their high-tech home — on eBay.”

Opprotunities in the Eye of the Beholder (or Consumer)

Anita writes a thoughtful piece at Small Business Trends on the changing nature of business opportunities in today’s service economy when looked at over time.
“How different the entrepreneurial success stories of the new millennium are from those of early last century. In the early part of the 20th century the titans of industry were making their names and fortunes in just that — industry. Railroads, automobiles, tires, mining, shipping, steel — that was their domain. They made their fortunes on the critical building blocks of an industrial economy.
“Today in the United States and other developed nations, it’s more likely that budding business owners will be involved in services businesses. Those services are often discretionary and not strictly ‘necessary.'”

Dividing Equity Between Founders

TJ’s Weblog has a link to a Q&A piece at Venturecoach.com on how to tackle the sticky issue of dividing equity between the founders of a new venture. The key issues include:
1. Time: This includes time with the company and time put into the company. The more of either you put in the more equity you should get.
2. Power: He recommends that someone hold at least 51% of the stock so that deadlocks are avoided. While this can be good advice, I have seen consensus work in other cases. Consensus requires a lot of preparation and discussion ahead of time to make sure it will work.
3. Money: Even though it seems the most obvious, any money needs to be valued relative to all of the other non-monetary contributions in this list.
4. The rest: Then there are all of the other issues to consider including expertise, connections, intellectual contribution, and so forth, which can really muddy the waters.
The other good word of advice in this piece is to keep the number of partners to the absolute minimum. Each of the issues above will need to be negotiated among each of the prospective partners.

E-commerce Taking Off for the Holidays

E-commerce, often seen as the great equalizer for the little guy in retailing, looks to have a strong Christmas season in 2004, according to an article at Red Herring.
“Online spending will surge 23 to 26 percent over last year’s holiday shopping season, consumer research company comScore Networks predicts, as web sites are expected to make more than $15 billion during November and December this year.”
An important trend is growth in non-travel related e-commerce, including niche and specialty gift items that are typically the realm of entrepreneurs selling on the Internet.
“Gift-buyers will spend 43 percent more on…flowers, greetings, and miscellaneous gifts (expected to reach about $1.1 billion). Holiday spending on home and garden will only grow 28 percent over last year, and is predicted to rake in around $1.3 billion.”

Interesting Surveys on Entrepreneurship

The National Dialogue on Entrepreneurship cites two interesting studies on entrepreneurship.
“A new survey from credit card firm Capital One and Consumer Action reveals that the American entrepreneurial spirit is alive and well. The survey found that 40% of Americans dream of owning their own business. The primary reasons for desiring this career option were ‘to do what they want to do’ and ‘to be (my) own boss.’ Within this group of aspiring entrepreneurs, nearly 55% felt that they ‘don’t know where to begin.'”
These results are both a bit concerning to me. The “Be Your Own Boss” myth is one that I try to warn aspiring entrepreneurs about. Entrepreneurs actually have many people to whom they are accountable including, partners, customers, employees, family, bankers, investors, etc., etc. The “don’t know where to begin” response speaks to the need for education for entrepreneurs so they avoid the “ready, fire, aim” approach that I see so many new business owners mistakenly take in their launches.
“Another survey from Wells Fargo and Gallup…found that 86% say they would do it again. Overall, 48% felt that they were very successful, while another 46% said that they were ‘somewhat successful.’ Only 5% felt they had not succeeded. Finally, 76% of the entrepreneurs noted that they believed they were better off financially than if they had opted to work for another company.”
Sounds like a good endorsement to me!

Inc 500

The latest Inc 500 is out, which includes their list of the 500 fastest growing private companies.
While this is kind of interesting to read, there are a few cautions that need to be noted. First, this is a self-report list so there a many businesses that choose not to participate in this type of list. They may not want this type of publicity or may not want the flood of unsolicited contacts that follow getting in this publication.
Second, growth rates are easier off of a smaller denominator (math class time, students…). Assume two companies grow by $100,000. If one only sold $100,000 the year before they would record 100% growth. If the other had $1 million in sales the year before, it would only show 10% growth for the same $100,000 increase.
Third, growing sales at the fastest rate possible is generally not a good thing for any business. Ask any banker.