Advice for Collegiate Entrepreneurs

Travis McMenimon is a fellow blogger who happens to be a college senior at Villanova (what a wonderful and open media this is). He has been blogging about his personal “Odyssey of the Mind” at his blog site of the same name. He polled a few of his fellow bloggers who were much topamax mail order longer in the tooth and grayer in the beard than he is to see what we thought about the issue of when is the right time to start your first venture. As you can imagine, we all have different thoughts on this question….You can read about what each of us said Travis’ blog.

IPO Activity Strong in Q3 of 2004

An article in Inc.com reports the strongest IPO activity since 2000 for VC backed firms. This is an important leading indicator for the strength of the entrepreneurially driven recovery.
“The third-quarter number brings to 48 the total of IPOs so far this year, a figure that already exceeds the sum of IPO activity for 2002 and 2003 combined, according to the report.”
M&A activity is also strong, which is another sign of renewed growth in the emerging venture sector.
“Ninety venture-backed U.S. companies were merged or acquired in the third quarter, for a total of $5.89 billion, with information-technology companies representing the majority of those deals.”
These activities will further enhance the base of funds that venture capitalists will have to invest, so this should support strong growth in new VC investment into 2005.

“Archaic Laws” May Not Be All Bad

This was one of those weeks. Everyone looked tired here at Belmont University. The students looked tired, the staff looked tired and the faculty looked tired.
When I asked my students about their weekend plans, I hoped (as a parent of two college age children) that I would hear them tell me that they were going to rest this weekend. They all were dragging so much this week. Who could blame them with the first round of tests and papers for the semester just getting over and their jobs, and their businesses, and their sports practices, etc., etc. But what I heard from each was a weekend that sounded even more hectic than the past week.
This got me thinking about an article in Inc.com I read during this past summer. It was about an effort in Virginia to once and forever “rid the state’s code of ‘blue laws,’ or laws intended to restrict activities and commerce on Sundays.” But, in a legislative snafu “Virginia legislators accidentally repealed exceptions to the archaic laws.” There would actually be two weeks of even stricter “Blue Laws” due to this oversight.
Now as I read this article, I was struck by the author’s choice of language. Rid is a word that often is used to describe the process of casting out something undesirable, bad or even evil. Archaic, well let’s be honest, it’s a word that refers to anything that predates the Internet, CDs, and unleaded gasoline.
But, what’s wrong with a culture that decides to rest for one day? God even rested on the seventh day, after all. Maybe this isn’t something we need the legislature to force upon us, but is it a bad thing?
When I grew up, Sunday was just accepted as a different day than the rest. Most of us would get up more leisurely, have a nice family breakfast and go to church. Then we’d go home, spend time with our families and neighbors and have a nice family supper. We didn’t do yard work, as that was what Saturday was for. We didn’t clean the house and do laundry, as those tasks were taken care of during the week. We didn’t shop, as very few, if any, stores were even open. We just enjoyed each other (OK, so my brothers and I still fussed at each other a bit even on Sundays), praised God, and just slowed down.
Now Sunday is a day to catch up on work. It is for many, their day to gain a competitive advantage in their businesses.
When my wife and I first moved to Kentucky, Blue Laws were still in effect. Our Sundays had already gotten more like any other day by this time in our lives. The shock of the “Blue Laws” was immediate. What, no Mall shopping on Sundays?!? I remember that I had the same reaction that the author of the article in Inc had to this aspect of Kentucky culture. This was archaic!!
Looking back, however, I now see the wisdom in the old ways of treating Sunday as something different in our week. A day of rest. A day of praise. Do I follow the old ways? Sadly not really. Should the old Blue Laws be brought back? Probably not, since we don’t need government fooling around with anything more in our lives.
But, as I read about the pace of our lives today, the stress we create for ourselves, and the alienation we have from our families and neighbors, I can’t help but wonder. Maybe there was some wisdom in our old ways. I am tired. My weekend will be at least as busy as this past week was for me. And then I go back to work….

One Small Step for Entrepreneurs….

The Office of Advocacy of the SBA reports on another positive development in the fight to get government out of the way of entrepreneurs.
“Small businesses will find it easier to comply with complex and confusing federal regulations, if a bill recently introduced by Senator Olympia Snowe (R-ME) becomes law.
“The Small Business Compliance Assistance Enhancement Act of 2004 (S. 2834) amends the 1996 Small Business Regulatory Enforcement Fairness Act, a law that bolsters the Office of Advocacy’s ability to reduce regulatory barriers that can stifle entrepreneurial growth. S. 2834 places new emphasis on compliance guides that agencies are required to write so that small businesses can better understand complex rules and regulations.”

Q2 Shows Stronger Growth Than Originally Reported

The Bureau of Economic Analysis (BEA) announced today that GDP grew at a seasonally-adjusted annual rate of 3.3 percent during the 2nd quarter, up from a previous estimate of 2.8 percent growth. Major contributors to the growth in GDP were business investment, consumer spending, and private inventory investment. Business investment, the lack of which drove the economy into recession in 2001, increased by 12.5 percent in the 2nd quarter and has now increased for five consecutive quarters. GDP has increased for eleven consecutive quarters.
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Highlights:
* During the 2nd quarter of 2004, GDP grew at a seasonally-adjusted annual rate of 3.3 percent. Over the past year, GDP has increased by 4.8 percent.
* Business investment was stronger than expected, growing at a robust 12.5 percent annualized pace in the 2nd quarter.
* Export growth was strong and the revised 2nd quarter trade deficit was slightly smaller than previously estimated.
* Residential investment, primarily home building, was also revised up and is now estimated to have grown at a very strong 16.5 percent annualized rate. This is the second strongest quarterly growth in home building in eight years.
Source: Congressional Joint Economic Committee

Tips on Selling Your Business

Entrepreneur.com has a great article on selling a business. They offer several suggestions and a few issues to be aware of as you enter into this potentially exciting, always stressful and often frustrating time for you and your business. As I tell me students, I had a full head of hair before we began the process that finally resulted in the sale of our business (see picture on this blog site to see the humor in this joke!). We went way down the road toward a sale twice before it finally occurred on the third attempt.
Here are the main suggestions that David Worrell offers in this article:
1- “It’s never too early to start thinking about selling. ‘The day you start building a business is the day you should start designing your exit,’ says Minor, who has counseled thousands of business owners through the process.”
I tell folks that if you are planning to sell your business in five to ten years, you should consider this short-term planning when it comes to an exit. Decisions you make today can have a huge impact on the options for selling your business and the price you get for its sale years from now.
2- “A business will fetch the best price only when buyers believe they can take advantage of significant future growth potential.”
Most businesses are valued based on some multiple of current cash flow. The size of the multiple is, in part, on growth potential for the business. The more future growth that is anticipated from the business, the higher the multiple and therefore your price.
3- “(H)aving a Plan B is a vital step in the sale process….Having a strong and visible alternative makes any acquirer sit up and take notice.”
As my father, the wise entrepreneur, always reminded me, “Never sit down to negotiate unless you are willing to walk away from the table”.
4- “A strong team, clear policies and procedures, and a broad customer base are the underpinnings of value. The business should not just run without you, but be positioned to grow without you.”
Most entrepreneurs want to leave their business sometime soon after a sale. And most of those who do not think they will want to leave, end up leaving fairly soon after the sale any way.
5- “While you’ve been focused on selling the company, who’s been making sure the company stays focused on selling your product?… Many deals have been quashed when financial results from the last month or the last quarter are off target. Even if the buyer doesn’t walk away, the price is likely to take a last-minute tumble.”
Also, the majority of deals never make it to closing and as many as half that do get to closing, actually never close. Since you may end up keeping your business much longer than you anticipated, make sure it is running well.
6- “The amount of disclosure that buyers require can be mind-boggling. Putting it all together in a reasonable fashion is just one reason to consider hiring outside help. An intermediary, such as a business broker or an investment banker, can relieve you of some of the work while also keeping the buyer engaged.”
Selling your business is not a time to cut corners in costs. It is a complex process that can come back to haunt you long after any sale due to the warranties that you will have to provide. Hire good help!

You Might Be A Luddite If….

Okay, I will admit it. I am a bit of a Luddite at heart. I think I was one of the last business owners to install a fax machine back in the 1980s. That same decade saw me holding out for vinyl when everyone else was building up their CD collection. In the 1990s I held out putting in an e-mail system in our business and launching a website as long as I could. And I still use video tapes rather than TiVo.
Well, the next wave of technology is about to crash over me. It seems that IM, that annoying messaging system that my kids used as teenagers, is now fast becoming a major mode of communication in businesses across the country. Red Herring reports on the IM boom as a business communication application.
“Instant messaging may be regarded as a waste of time in many corporate offices, but new studies suggesting that it can increase productivity may open the door for widespread adoption at work. But whether it’s a drain on human resources or a boon to the bottom line, for some, instant messaging means a clear path to big profits.”
Why? Because it is fast and cheap. And now there are new applications of IM being developed just for business use by some entrepreneurial communications companies.
“While that may seem like pocket change to the likes of MSN, AOL, and Yahoo — all dominant IM portals — it’s quite a profit for smaller, IM-focused companies like Jabber, Akonix, and FaceTime. These new companies are developing customized IM programs for companies who see the benefits of real-time communication.”
This is a classic example of a niche strategy that could allow some small companies to sneak up and grab some significant market share from the communications giants if they are not paying attention or able to adapt.

A New Industry?

It is interesting to watch how eBay has been leading to new business development. There are any number of start-ups that have been using eBay’s infrastructure to create local retail operations, such as SnappyAuctions.com based here out of Nashville. These retail sites offer a place to drop off goods that customers want to sell on eBay. Snappy Auctions takes care of the rest. They deal with all of the hassle and confusion of setting things up with eBay.
Well, today I learned of another new business called NashvilleBids.com, which is trying to create a localized version of eBay here in middle Tennessee.
Their pitch:
“NashvilleBids.com is a down home idea whose time has come; a big boy auction alternative for Middle Tennessee buyers and sellers.
“For buyers, this means the seller is your neighbor, not a post office box across country or halfway around the world. For sellers, there is the added bonus of being able to accept or decline purchases from buyers residing outside Middle Tennessee.
“Unlike the big boy auction sites, the staff of NashvilleBids are local people who are just as frustrated as most of us when it comes to browsing hundreds of listings before finding one or two that are close enough that we can afford the shipping charges. ‘Try paying the shipping charges for an antique piano you won on eBay from someone in California’, says NashvilleBids founder, Tracy Layne, ‘and if you do decide to pay it, you just cross your fingers and hope the person you bought it from will actually send it. NashvilleBids.com serves the entire Middle Tennessee area, so you can avoid the hassles and costs associated with nationwide or statewide auction sites and arrange to pick up your item.'”
The next few years could be very interesting times for this new eBay inspired industry. I plan to pay attention to see what works and what is next!