The Office of Advocacy of the SBA has issued a summary of a conference they sponsored on “Entrepreneurship in the 21st Century”. There is a fairly short summary that is an interesting read. More detail about the specific presentations at this conference can be found here.
Conference participants (academics and public policy folks) examine the current conditions and obstacles faced by entrepreneurs, and present a fairly accurate picture, although by no means groundbreaking.
Sadly, they take a very academic turn at the end by simply calling for more research to determine public policy options to support entrepreneurship. Much research has already been conducted around the world. This research has consistently concluded that education and breaking down governmental obstacles are the two most important policy initiatives that can help. I fear that this is an attempt to federalize entrepreneurship rather than create the free markets and educated entrepreneurs that can make it continue to flourish. Some would like to advocate for funding more governmental programs rather than advocate for entrepreneurs.
Fed Increases Interest Rates
As expected, the Fed increased interest rates today. They are still at historically low levels and helping to make financing accessible for small business. Here is an analysis from Sean M. Davis, Policy Analyst, Congressional Joint Economic Committee:
“There were four noteworthy features of today’s monetary policy statement:
1. The Fed still believes that the stance of monetary policy is accommodative, which means that interest rates remain very low to assist economic growth.
2. The Fed noted that since its last meeting, incoming data indicate that output growth has moderated in recent months and the pace of labor market improvements has slowed. The recent economic soft patch is attributed by the Fed “importantly to the substantial rise in energy prices.”
3. The economy, according to the Fed, is “poised to resume a stronger pace of expansion going forward.”
4. The Fed also noted that inflation has risen this year and that “a portion” of the rise reflects “transitory factors.”
Analysis:
* In June, the Fed started to remove policy accommodation by increasing its target for overnight interest rates to 1.25% from the 1.0% level that had been in place for almost a year. Today’s action puts the target overnight interest rate at 1.5%.
* As in the past few policy statements, the Fed announced that policy accommodation (i.e. low interest rates to accommodate economic growth) can be removed “at a pace that is likely to be measured.”
* Financial market participants still feel that the Fed will increase short-term interest rates in the future, but perhaps not as quickly as was previously thought given recent signs of slower economic activity. The Fed may adopt a wait-and-see approach at its next meeting, waiting to raise interest rates further if incoming data have not confirmed that the recent soft patch in the economy was indeed temporary.
* The Fed’s monetary policy committee meets three more times this year: September 21, November 10, and December 14.”
Here is the full statement from the Federal Reserve.
Small Business Expects a Great 2004
Inc.com reports on a survey of small business owners:
“(S)mall businesses reported doing well and expressed confidence that the second half of 2004 will be even better, according to a new survey.
“Nearly 70 percent of small businesses surveyed by International Profit Associates, Inc., a small business consulting firm, said they met or exceeded their expectations in the first half. Looking to the second half, 88 percent forecasted that they’ll meet or beat their projections.
“Despite confidence about the future, businesses are still planning on keeping spending under control. More than half of those polled indicated that they will maintain their current level of capital spending, while 15 percent said they would reduce spending from their original budgets. A little more than 30 percent said they intend to raise capital spending.”
Since entrepreneurs are the source of most of the current economic growth, this is indeed good news.
Entrepreneurship Education is a Growth Industry
Hello from New Orleans!
I am down here at a convention of academics known as the Academy of Management. I was shocked to learn this year that of the 17,000 members, ten percent are part of the entrepreneurship division of this august organization. That is amazing to me, given that this is a fairly traditional, corporate-oriented group of faculty. And my own favorite academic group, United States Association of Small Business and Entrepreneurship (USASBE), has grown to almost 800 members.
When a group of academics interested in entrepreneurship got together in the 1980s, we were lucky to get fifty of us together.
It is indeed a new area for business in America.
Employment in July
July employment data has been released. And while the payroll survey of employment announced today did not increase by as much as Wall Street’s forecast (32,000 vs. 240,000), unemployment actually was lower than expected (down from 5.6 to 5.5 percent). Why? That often ignored household survey on employment, which measures total employment including entrepreneurial activity, increased by 629,000 in July! The entrepreneurial economy at work!
Growth Planning
Jay Ebben offers some excellent thoughts over at Inc.com on how to properly plan for growth.
“My advice before you consider growth is to consider your business model and how it lends itself to growth. Three areas you especially want to concentrate on are your revenue model, your operational model, and your cash flow model.”
If you are planning to ramp up for the expanding economy I strongly suggest you read Jay’s advice in full.
Security Programs
Drakeview linked to my recent post “What If?” in which I talked about the need to plan ahead for the possible aftermath from another terrorist attack in their piece about the importance of security programs. They cite a Conference Board survey on security programs in companies of various sizes. Security programs are designed to help businesses plan for the inevitable “bumps in the road” or even “major road blocks and detours” that inevitably get in the way of day-to-day operations of any going concern.
“Security is strongest among “critical-industries” those that typically have to dedicate resources to make sure that their essential products and services are reliable and available – transportation, energy and utilities, financial services, media and telecommunications, information technology, and healthcare. They have a lot of experience with minor recurring service disruptions brought about by weather or natural disaster. They can prepare for a somewhat reliable set of circumstances – hurricanes are going to blow, blizzards are going to fall, forest fires are going to burn. Only the date and duration of these events are unknown.”
Small businesses are the least prepared, and the most vulnerable. In addition to the suggestions I raised, they point out that it is possible to purchase insurance to cover such losses. It is not a standard part of business insurance in many cases, but it is probably worth considering adding such coverage, for as we all know, “stuff happens.”
On-campus Entrepreneurs
Paula Lovell sent me this article about the explosion of students starting businesses while in college. It is happening on almost any campus in the country these days. More evidence that the entrepreneurial economy is alive and well.
One of the first new programs that we opened when I arrived at Belmont is our Student Business Hatchery, which is designed to serve just this kind of entrepreneurial student. It is a two room office that provides the basic business infrastructure to support students running businesses on campus. They have access to computers, a fax machine, a copier, file space, and conference table, and so forth. All resources are shared on a cooperative basis (first come, first served). Any student who has a business up and running (or at least close to up and running) is eligible, no matter what major they are studying. If they believe it could help them in running their business, they fill out a brief application and are admitted to the program. In the first year at our small university we had twenty students representing eleven different businesses (most formally incorporated) in our Hatchery Program.
Due to its success, we will be expanding the Hatchery Program this year to include a second location on campus to serve more developed businesses. This expansion is funded in part by a grant we received from the Coleman Foundation.
Several of the students who operated businesses in the Hatchery last year have graduated and are now working on these ventures full time in the outside world. We continue to offer advising and networking assistance, but they are launched from the Hatchery into their own space. They are beginning to hire employees, buy equipment, etc., helping in their own way to expand the entrepreneurial base to our local economy.
Economic Summary for the Week
This week of economic headlines is courtesy of Sean M. Davis, Policy Analyst, Congressional Joint Economic Committee:
Factory Orders Rise, Services Buoyed
U.S. Auto Sales Heat Up Again in July
U.S. Factories Enter Longest Stretch of Rapid Growth in 30 Years
U.S Factory Growth, Hiring Stay Strong
Consumer Confidence Edges Higher
Wages, Benefits Rise Moderately in 2Q
Home Sales Still Sizzle
All this good news–I wonder if there is any bad economic news…..
European Economies: German Unemployment Rises to 11-Month High
Interesting….its from the land that stifles entrepreneurship.
Entrepreneurial Economic Development in Rural North Carolina
The National Dialogue on Entrepreneurship highlighted North Carolina’s Institute for Rural Entrepreneurship this week. Entrepreneurial development has helped to transform many of North Carolina’s rural counties. Economic growth is no longer just found in the state’s metropolitan centers. Counties in North Carolina have been pushing for local business development for many years. We benefited from their support in the 1980s as we were first building our company. This program should be a model for other states looking to develop such programs. It is based on education, building support networks, and access to financing. We found they also were helpful in breaking through governmental bureaucracies that were not structured to support new business formation.