Bootstrapping into Space

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I am in Madrid, Spain this week with a group of MBA students on a one week intensive study abroad.

Yesterday we visited an impressive company, Deimos Space, headquartered here in Madrid.

The founders were able to build a high growth company that launched their own satellite into space using only self-funding of $250K from the founders.  An amazing story of what bootstrapping and building the right team can accomplish.

They started, grew to a global presence in the space market, and exited their venture all within a ten year period.

Most of the founders are still with the company helping to take the core technologies they developed in Deimos into other markets and other applications.  There is a great description of how far they have taken their business model on their website.

Simple Act of Record Keeping Can Make All the Difference in Success

In the rush to start a new business, the simple act of keeping records often gets put on the back burner. But poor record keeping has been the demise of many otherwise successful businesses.

The entrepreneur needs clear and accurate records to help manage the challenges of the startup. These records can help manage cash flow and will provide financial statements that can help monitor the progress of the new venture.

The IRS expects even the smallest of businesses to document deductible expenses and support all items reported on tax returns.

Also, bankers monitor the progress of their business customers using financial information. If you cannot supply timely and accurate financial statements and other required information to your banker, it will hurt your ability to get loans when your business is at the stage where it could otherwise qualify.

The first step in establishing a record keeping system is setting up a separate checking account for the business. The deposits into this account should include any initial investment you make to start your business, the proceeds from any startup loans or investments, and all revenue from customers.

This checking account should be used to pay all expenses for the business, but not any personal expenses. As an owner you can draw money from this account, which can be deposited into a personal checking account to pay personal bills and living expenses.

Carefully document every expense paid from the business account. If paid by check, make careful notation of the check number, date of the check and purpose of the expense for each purchase. If paying with business debit or credit cards, keep detailed notes on each expense. Writing this on the back of each receipt is a good habit.

Set up a filing system, which can be either hard paper copies or scanned records, to track all documentation on receipts and expenses. Think ahead when setting up the filing system so it can accommodate the business as it grows. Use separate files for each vendor and customer and organize these files by type of expense or receipt.

Accounting software, such as QuickBooks, can help organize financial information. But remember that no system runs itself. Any system for record keeping relies on proper and timely input of information from you.

One lesson that many entrepreneurs learn the hard way is that you should not delegate financial record keeping to employees too quickly. Sadly, fraud is common in small startup businesses, and it often leads to the failure of an otherwise healthy business. Keep a close eye on financial records and put in systems of checks and balances. For example, never let the same person who handles revenues from customers also pay the bills, as this makes stealing money easier to cover up.

Record keeping may seem mundane compared with the other aspects of starting a business, but it is a critical step to ensure a healthy business. Record keeping systems should be simple to use. The job of the entrepreneur is to use this system to keep accurate, timely, consistent and compete records of all activity in the business.

Building Community Throught Hiring

Owning a business gives entrepreneurs the freedom to pursue more
than simply income and wealth from their businesses. Many choose to use
their businesses to become building blocks to help improve their
community.

Several students at Belmont University are
participating in a program addressing one challenge faced by every
community: Inmates are released from prison every day back into the
community and face a difficult transition back into society. TRIO, which
stands for Transformation Reconciliation from the Inside Out, uses
education as a tool to help build a path for successful reintegration of
former offenders from prison back into the community.

One
important partner in this process is local employers. Finding employment
for former offenders significantly reduces the probability that they
will return to prison in the future.

In the first phase of this
program, TRIO brings together college students and inmate students in
classes that are offered at the Charles Bass Correctional Complex Annex
in Nashville. The goal of the classes is to engage the inmates jointly
with college students in education to help foster understanding and
reconciliation through community support.

Some of the students are
trying to help with the next step in this program by identifying
employers who are willing to hire the offenders. This is not always an
easy task.

“I am especially discouraged when employers see only a
crime rather than an individual working toward reconciliation,” said
Lindsey Ricker, an entrepreneurship major at Belmont who is
participating in TRIO. “Many employers take one glance at a checked
felony box and throw a job application in the trash.”

“I have
confidence in our guys,” added Eliza Hemmings, a sociology and French
double major from Belmont. “I have confidence that given support and the
right opportunity that they will be successful in their re-entry
process. It is not possible to change the past — what’s done is done.
But what we can do as a larger community is support their will to
change, their will to contribute to society in a positive way and
rebuild their lives. We as community members have a choice as well, and I
choose to support my inside friends on their journey toward success.”

Employers who are participating find benefits from hiring men from this program.

“Which
Wich (a sandwich shop franchise) has found the employees re-entering
society to be hard-working, determined and bringing a positive attitude
to the other employees and customers,” said Tracie Maybaum, a Which Wich
general manager. “One of the most beneficial assets they bring to work
is their attitude. Theirs positivity influences other employees, and
their gratitude is motivating.”

The government can assist
employers who are willing to hire former offenders. The U.S. Department
of Labor insures qualified former offenders bonding for a range of
$5,000-$25,000 for six months. And those who hire a qualified former
offender within a year of release may be eligible for up to $9,000 in
tax credits.

Hiring former offenders certainly brings with it some
risks. But accepting these risks can help contribute toward building a
stronger community. And after all, isn’t entrepreneurship all about
taking risks?

Business Owners Share Customers’ Cautious Moods

Consumer confidence continues to languish, which is leading economists to: 1) worry about a double dip recession, 2) worry about a new recession, 3) or finally agree with most of us that we are still in a recession.

Cautious customers are not spending their money.  This is leading many small business owners to continue to see their businesses go nowhere, fast.

Based on how their businesses are performing, more than one-third of small business owners (38%) believe we are still in recession, according to the just-released American Express OPEN® Small Business Monitor.

Economic sluggishness is impacting the psyche of entrepreneurs: 27 percent say they do not plan to grow in the next six months (up from 21% in the spring) and just 77 percent describe themselves as glass-half-full optimists (down from 85% a year ago).  I have heard a few even begin to exclaim, “What glass!!!???”

The survey did find a few signs that those who have survived are getting ready for continued difficult times.  Cash flow is more under control: 55% have concerns, down from 66% in the spring.

Oh, to be a Young Entrepreneur Again…

Starting a business right out of college has challenges — being light on experience and low on cash come immediately to mind.

But it offers a very important advantage.  These young entrepreneurs have very low personal overhead. 

Typically my MBA students and other older entrepreneurs we work with have a mortgage, car payments, tuition, and so forth to pay every month.  When they start a business this personal overhead, in effect, becomes part of the overall overhead of their business.  To break even they have to cover not only the costs of the business, but their own monthly expenses, as well.

On the other hand, my undergraduate students don’t bring much personal overhead to their new start-ups.  They are used to living on ramen noodles and sleeping on couches.  Because their monthly personal expenses are so low, the breakeven point of the business (when it can cover business expenses and cover the salary the entrepreneur’s needs to get by) is much, much lower than their older competitors.  This makes getting cashflow positive a much easier task, thus increasing the odds that they will survive the trials of starting the venture.

Erin Blaskie offers her views of the pros and cons of starting a business right out of college in an article at Business on Main.

Job Description for Accidental Entrepreneurs

With the continued weak economy and little hope of recovery anytime soon, we can expect to see even more “accidental entrepreneurs” emerge. These are unemployed people whose best hope of generating income is to become self-employed or to start a business.

Ami Kassar is a typical accidental entrepreneur. Kassar had spent a decade in senior management with a large, national credit card company based in Philadelphia. When the recession hit in 2008, he suddenly found himself unemployed. His employer did not survive the recession-induced shakeout in the financial industry.

Finding a new job that was similar to his old one did not look very promising, so Kassar decided to launch a business. He started Multifunding, which helps small businesses find debt financing.

Like most entrepreneurs, Kassar faced challenges in the startup of his venture. However, many of his missteps can be traced back to habits and expectations that came directly from his years of working in a corporate setting.

So let me offer a brief job description of an entrepreneur to help those of you who, like Kassar, are facing a career transition:

1. Do everything. The temptation when you start a business is to continue to concentrate on what you did well in the corporate world and bring others in to take care of the rest. However, to build a successful business you need to learn every aspect of your business and perform every job. You need to know the business inside and out, from top to bottom.

2. Become a financial wizard. Set up a sound record-keeping system. Be your own bookkeeper for as long as you can. Just as you need to know every aspect of the operation of the business, you also need to know the numbers. The best way to do this is to make the financial aspects of the business a major part of your job.

3. Minimize overhead. The temptation is to surround yourself with the comforts you had in the corporate world — a nice desk, a new car, a big office, support staff, and the newest and best gadgets. However, paying for all that overhead is what stands in the way of your bringing home a paycheck. So start lean, bootstrap whenever possible and make operating frugally a part of the culture of your business as it grows.

4. Watch your cash flow. As the old saying goes, “The leading cause of business failure is running out of cash.” Learn the rhythm of your cash flow. Watch every expense like a hawk. Treat every dollar as iff it might be your last.

5. Schedule balance. Startups quickly become all-consuming. They can take up every waking moment if you let them. Build time in your life for those things that really matter — your family and your friends.

Fortunately, Ami Kassar is an accidental entrepreneur who is making a successful transition out of a corporate career. Multifunding is now growing and doing well.

To be successful, accidental entrepreneurs have to develop new work habits and an understanding of what the job of an entrepreneur is really all about.

Thanks to Our Students and Alumni

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Belmont’s Entrepreneurship program once again made the Top 25 in the country for Entrepreneurship magazine and the Princeton Review.

From over 2,000 schools surveyed by The Princeton Review for Entrepreneur
magazine, Belmont University was recognized as having
one of the top 50 entrepreneurship programs in the country.  We ranked 19 in the undergraduate category
of the survey.

This is the eighth annual ranking of the nation’s top 25
undergraduate and top 25 graduate programs for entrepreneurship.

The creativity, work ethic and entrepreneurial spirit of our
students and alumni is what makes our program work.  Our success is a
direct result of their success.

Belmont’s program was evaluated
based on key criteria in the areas of teaching entrepreneurship business
fundamentals in the classroom, staffing departments with successful entrepreneurs,
excellence in mentorship, providing experiential or entrepreneurial
opportunities outside of the classroom, as well as non-traditional,
distinguishable aspects of their programs.
 

“Behind the top ranked schools is not only a great formal
classroom experience, but a cross-disciplinary approach to teaching
entrepreneurship that embraces and encourages a student’s vision to build a
successful business,” said Robert Franek, The Princeton Review’s Senior Vice
President – Publisher and nationally recognized expert on college admissions.

“The right education enhances and reinforces curiosity and
creative thinking in entrepreneurs,” commented Amy Cosper, vice president and
editor in chief at Entrepreneur.
“This ranking provides a unique look at top schools that offer the type of
training, encouragement and direction that nurtures entrepreneurial skills.
It’s an excellent resource for those interested in academics as a pathway to
their goals, and it can help tremendously in the discovery process to finding the
right program.”

The results of the survey, along with the analysis, appear
in the October issue of Entrepreneur,
which hits newsstands today, September 20th.

Thanks to all of you who make our program shine!

Dr.C.

Surviving the Other Twenty Percent

I tell my students that through our program we can help them manage the forty percent of business failure that has its roots in their pre-venture activities.  We can teach them how to better assess opportunities and how to design, test, and pivot their business models.

We can also help them manage the forty percent of business failure that results from businesses that are not prepared for the challenges and pains that result from growth.  We tell them over and over, “The leading cause of business failure is success.  Success is only good when you are prepared for what it brings.”

But, we really can’t do much to help them with the other twenty percent of failure that comes from events beyond their control — hurricanes, floods, recessions, and so forth.  Insurance and remembering that Cash is King can serve to buffer against the unpredictable, but sometimes stuff just happens and even such preparation is just not enough to pull them through.

When I was in New York this week to celebrate small business champions, just a few days after the anniversary of 9/11, I thought a lot about all of the small businesses that did not make it through the aftermath of that horrible event.

But some did.

Sure insurance, government assistance, and cash in the bank can help to some extent, but they can only take you so far.

However, a few entrepreneurs do make it through the events that are unpredictable and completely uncontrollable that cause the other twenty percent of business failures.  For those few entrepreneurs who do survive, what helps them make it through is often the same things that got them through the tough times experienced during their original start-up — determination, passion, grit, hard work, faith, family.

Business on Main has an inspiring story of one small business that has survived 9/11, in spite of being completely dependent on their location next to the World Trade Center.  It is a story that shows what the entrepreneurial spirit is really all about.  You can view it here.