Dr Jeff Cornwall - Co-founder of The Entrepreneurial Mind, serial entrepreneur and professor of entrepreneurship.

Pitching Investors in the Post-COVID World

Pitching to investors has always been like playing whack-a-mole. Connecting with the right investor at the right time can be quite tricky.

Now add all the impacts from COVID-19. Angel investors all but disappeared in the second quarter amid he pandemic chaos. Venture capital firms became much more cautious and conservative in their funding, trying to mitigate their risk amid almost infinite uncertainty. More than we have seen in many years, traditional savings skyrocketed as both people and companies fled to cash for financial security.

Many angels who were still investing focused on shoring up companies already in their portfolios with additional capital.

Bright Spots Emerged

Toward the latter half of 2020 and moving into 2021, certain segments emerged as investor favorites. HealthTech, FinTech, CleanTech, EdTech, and eCommerce are seeing a continued increase in deal flow. The success of Zoom is making deals that offer better efficiency in business-to-business transactions a new focus of investors, as well. Deals with strong elements of “sustainability” in the business model are seeing increased attention.

However, overall it seems that investors are moving from hot industries and industry sectors, to a much more targeted form of investing. As the world is disrupted from COVID and the economic crisis, investors are now focusing on a broader range of deals that focus on specific problems arising from the sudden changes in our world. Investors are seeking opportunities that fit what they see as the “new normal.”

Even if it takes a bit of pitching gymnastics, try to highlight any COVID overlay in your business.

Zoom Becomes the New Investment Marketplace

And then there is Zoom….

The events of 2020 brought an abrupt end to localized start-up pitch events. Gone are the days of live Demo Days. The ritual of making the rounds from VC board room to VC board room to VC board room are no longer happening. Gone are the massive investment conferences. Everything is now on Zoom.

The entrepreneurship world quickly adapted to the new normal of raising funding. It had to happen, even with COVID, as entrepreneurs still need funding and angels are still looking for fund deals.

Inboxes now fill up with Eventbrite invitations to Zoom pitch events. Meetup groups now facilitate bringing together investors and entrepreneurs via Zoom. No more standing in front of a room full of investors and entrepreneurs. Now entrepreneurs pitch into the little green dot on their computer.

Just as there was an unwritten set of rules, expectations, and norms for live pitching, we now are seeing a consensus on Zoom pitching protocol take form.

Pitching on Zoom

Some things about pitching have not changed. You need to be compelling and concise, as you only have the first few minutes to connect on a pitch. You need to look and act the part. Dress well; business casual is generally the norm. Since you no longer have body language to communicate your confidence and enthusiasm, you need to show this through your voice.

Here are a few tips specific to Zoom pitches I have been hearing from both experienced entrepreneurs and angel investors:

Make sure you have good lighting. Natural light is best. Avoid any back lighting that may come from windows and bright lights.
Make sure you have a strong Internet signal and have a backup plan.
Technology matters. Invest in a high quality webcam if yours on your computer is not very good. The same goes for your mic. When recording classes for my university students this past summer I was blown away by how much better the video and audio were when I upgraded from my 2015 MacBook Pro to a 2019 model. I went back and re-recorded all the lectures I had done on my “old” MacBook Pro. It made that much of a difference!
Calm yourself before you get on Zoom. Most of us do this before a live pitch, but forget how important it is to be “centered” when hopping on Zoom for a pitch.
Don’t pitch continuously for more than about 5 minutes at a time. Break your pitch up and go off of screen share to answer questions and to help keep them engaged.

Pitch Deck 2.0

Even the pitch deck has evolved post COVID. You should have two versions of the same pitch deck prepared.

First, entrepreneurs still need to prepare a traditional pitch deck for live pitches on Zoom.

The second is what is being called an investor pitch deck, an annotated pitch deck, or a stand-alone pitch deck (there is still no consensus on the preferred term). It should be organized exactly like the deck used for your live pitches, except that most of the slides will be split in two. The one side includes the same graphics used in the oral pitch. The other side includes a short narrative including what you would be saying about that slide during a live pitch.

Use the widescreen format for your deck to make plenty of room for the two sides. There should be no more than 150 words per narrative section on each slide on the narrative side, with the ideal word count being about 50-100 words. There is no need to include the narrative side text on slides which are self-explanatory, such as financial summaries, timelines, and so forth. The split between the two sides should be about 40% for narrative, and 60% for the graphic side.

This is the version of the deck you want to send out to investors who want to preview your deal before meeting with you over Zoom. Think of it as an executive summary of your business plan with pictures.

The Good News into 2021

Deal flow is increasing as we enter into 2021. The strong market on Wall Street and cheap capital has buoyed investor confidence and their portfolios. We are seeing more angels get back into seed investing, which is outstanding news for startups!

Unless COVID takes a nasty turn for the worse (what John Mauldin calls the “gripping hand” of the economy), things are looking up for a better year for startup entrepreneurs.

Do You Really Need a CFO?

“Maybe it’s time for you to get a Controller.”

I have said that to entrepreneurs more than once over the past few months. In every case, all of these companies had already brought in a person designated as CFO (Chief Financial Officer) to lead the financial aspects of their company. And in every case, that was the wrong type of person to hire for the specific needs of these companies.

What Should be Your First Hire?

Entrepreneurs who experience significant growth in their business may eventually hear this advice, be it from their CPA, their banker, or other entrepreneurs. Financial management in a growing business can become strained. Eventually, the time will come when the entrepreneur needs to upgradecertain members of the team.

The first instinct of most entrepreneurs seems to be to hire a CFO. In some cases this may be the right choice, but in many situations a controller or even a senior level bookkeeper might be what is really needed.

Let’s assume what you need to get done is the following:

– Keeps accurate records of financial transactions and also creates basic financial statements (Income Statement and Balance Sheet) using accounting software.

– Performs basic accounts payable management — makes sure bills get paid and records these entries into the accounting system.

– Performs basic accounts receivable management — if the business has to send invoices to customers to receive payment, sends out invoices monthly.

If this is the list of functions that need to be taken care of, you really need a senior level bookkeeper. These are the functions that would be in the job description of an experienced bookkeeper.

What Comes Next?

As a company grows and becomes more financially complicated, a controller adds more horsepower to the financial management team. Depending on the nature of the company, this often happens when the business grows to about $1 million to $3 million in revenues. (Although, I have seen companies much larger than that get by with a solid bookkeeper and a hands-on outside CPA).

A controller does the following tasks:

– Performs all of the functions of a bookkeeper or supervises the staff that does.

– Creates customized daily, weekly and monthly financial reports to meet the specific needs of a specific business.

– Chooses and maintains financial software.

– Provides basic cash flow management of the business. Major cash flow decisions should still be made by the entrepreneur, however.

Good controllers can pay for their salaries in a growing company. They do this by helping to create needed financial systems, by keeping costs under control, and by helping to manage cash flow more effectively.

When Do You Need a CFO?

One situation that may require a CFO is if a business must raise a significant amount of outside funding to get off the ground. This is particularly true if the CEO/founder does not have a strong financial background.

Some businesses may grow to the point that they need a CFO, but this is not true for every business. Many very large organizations don’t have CFOs. If the capital needed for growth must come from complex debt instruments, private equity, or venture capital, a CFO is likely to be an important addition to the leadership team.

A CFO does the following tasks:

– Performs all functions of a Controller or supervises a staff that does these tasks.

– Structures and negotiates complex financing — including both debt and equity.

– Creates complex financial projections to aid in strategic decision making and is an active player in the strategic management of the business.

– Manages banker and other financial relationships for the business.

The Risks of Adding the Wrong Position

One risk of hiring the wrong person is that you end up overpaying for what you really need done. The typical salary of a controller can often be at least twice as much as the salary of a senior bookkeeper and an experienced CFO earns easily twice as much as a controller.

If a CFO does not have enough work to do in the financial management of the firm, idle hands can become the devil’s workshop. I have seen CFOs who become overly involved in the strategic decision making that should be the domain of the founders, sometimes creating unnecessary descent and conflict.

The titles “bookkeeper”, “controller” and “CFO” often get tossed around rather loosely. Many entrepreneurs give the title of CFO to people who are not qualified to be one. They may do this to help bolster the external perception of the company, or simply to offer a nominal reward to someone in place of higher salary. However, to bankers and investors, titles within the financial management of a business have specific meaning. If you give the title of CFO to someone with the knowledge and qualifications to be a senior bookkeeper, you may destroy the credibility of your business with bankers and investors.

Finding the Right Person

Use your advisors, CPA firm, your banker, and your network of experienced entrepreneurs to determine what type of financial professional your business actually needs. Once your needs are clearly established, these same people can also help you find a pool of candidates to interview.

Good Debt. Bad Debt.

Young entrepreneurs generally seem to be reluctant to consider using debt to help finance their businesses.

The reasons they cite are many. Often, they are concerned that they already have a heavy debt burden due to student loans from college. Others tell me they watched their parents get deep into debt and don’t want to do the same. The requirement to sign personal guarantees for business debt terrifies many young entrepreneurs. More than a few tell me that Dave Ramsey’s anti-debt message shaped their negative perceptions about debt.

When I tell my students that, generally, I prefer debt over equity financing, I see shock on many of their faces.

Bad Debt

There are certainly many instances when taking on debt financing for a business is not a prudent decision.

When I hear of entrepreneurs maxing out credit cards to finance a startup, it sends shivers down my spine. I know that there are countless stories in entrepreneurship magazines about “heroic” entrepreneurs who went tens of thousands of dollars in debt with credit cards to create incredibly successful businesses. But for every successful use of credit cards to launch a business, I have seen dozens who end up with failed businesses and mountains of credit card bills that haunt them for years.

Bankers can tell countless stories of business owners with business models that are no longer competitive seeking loans to keep their failing businesses afloat. Rather than keeping these businesses on life support by continuously pouring money into them, these entrepreneurs need to come to the hard realization that they have come to, what I call, an “Old Yeller” moment. Sad, but true.

Some debt funds short-term needs for cash, while others fund longer term investments in your business. However, sometimes we use debt for the wrong purpose. For example, when I was a young entrepreneur, I used a line of credit to invest in things that were actually tied to growth capital. A line of credit is meant to fund short-term timing issues with cash flow, such as funding inventory purchases or paying for payroll on a project that will be billed upon completion. I used it for hiring staff and adding new space that would take much longer to generate cash flow.

Fortunately, I had a good banker who helped coach me on the proper uses of lines of credit. He also provided us with a long-term term loan to use to fund the investments we needed to make in staff and space to grow our company. I never made that mistake again!

Good Debt

Good debt begins with debt that your business and you can support. This is how bankers make decisions on making loans.

Bankers always look to multiple means of repayment when making business loans. The first source of repaying is a healthy business with more than enough cash flow to fund the debt. The second line of defense to ensure loan repayment is the personal guarantees of business loans by the business owners. If your financial house is not in order, your chances of getting a loan for your business are diminished. Finally, bankers will use assets pledged as collateral to pay off business loans, but only as a last resort.

“Bankers only give loans to people who don’t need it,” is a common refrain I hear from small business owners. The reality is, bankers only give loans to people who they are highly confident can repay those loans. After all, it is our deposits in the bank that they are using to fund loans.

Bankers understand what makes good debt, and you should understand and follow their criteria for using debt.

Use With Caution

The requirement of personal guarantees are a sobering aspect of taking on a loan for your business. Keep in mind, personal guarantees are not only a financial tool used by banks. It is also a psychological tool. If you are not confident enough in your business to personally back the loan, then why should the bank?

Another risk with taking business loans is that although your business might be solidly bankable when a loan is made, times can change. We need to look no further than the thousands of loans that went from safe and solid earlier this year, to being rated as highly at risk for default after pandemic took hold.

When you need to use debt, make it a priority to pay down your business loans as quickly as possibly. Certainly, don’t pay off your loans so aggressively that it hurts your cash flow. However, once you have a good cash position, the next most important goal is to pay off your loans.

The reason I prefer debt to equity is that debt is like a house guest. When you pay it off, it goes away. Equity is like adding a new member to your family. Once you take their money, they are there to stay!

Hopscotching Your Business Models

The coronavirus and economic crisis have certainly challenged many entrepreneurs to do some serious re-evaluation of their business models. One of my friends compares it to being a toddler playing at the beach, getting knocked down by wave after wave after wave. More often than not, this has resulted in more hopscotching than simple pivoting when it comes to business models. Rather than incremental changes, known as pivots, entrepreneurs are being forced to reinvent their businesses on the fly as the pandemic creates seismic disruptions in society and in the economy.

Typical Pivots

Significant pivots in business models are common during the early days of a new venture. We pivoted the business model of every startup I have ever launched once we opened for business and received feedback from the market. In the days when we relied on formal business plans to guide our startups, some of these pivots could be rather jolting. Today’s business modeling tools facilitate a more incremental process of pivoting during early days of a new business. Steven Blank refers to this as the searching stage of customer development.

Once the searching stage leads to a clearer picture of what the market truly needs our business model to be, the execution stage begins. This is where the focus shift from customer discovery and pivoting, to scaling and building business infrastructure.

Hopscotching the Business Model

The disruptions being caused by the coronavirus and the governmental policies that are following the outbreak, force established businesses to jump, or hopscotch, to a new version of their business model or even a new business model entirely.

Some of these are more survival strategies. For example, distilleries across the country have shifted some or even all of their production capacity to making hand sanitizer. Such efforts have helped ease the temporary strain on the supply chain for hand sanitizer until the market can stabilize. Restaurants, with their dining rooms temporarily closed, are turning to curbside service, grocery sales, home delivery, family take-out meals, and so forth to bridge the gap until they can return to business as usual. Boutiques have found that people are buying fewer new outfits, as we are mostly working from home. So many have decided to make face masks a fashion accessory.

Some changes in business models look to be more permanent. I have already highlighted changes in travel and music that are likely to be more permanent post coronavirus. I plan to look at other industries over the coming weeks.

How to Navigate the Need to Hopscotch?

So what is an entrepreneur to do during such a crazy time?

Steve Blank suggests using a tool called the Market Opportunity Navigator to help uncover new opportunities for a business to pursue amid the coronavirus. In his blog post, Blank offers a great case study to illustrate how a healthcare company discovered how to hopscotch its business model.

Ted Ladd offers a process in a column at Forbes that is helpful.

The first step is to deconstruct your business model to its core parts using the Business Model Canvas. As I tell my students, the business modeling tools we have at our disposal today are not just to help you launch your business. They are powerful tools to help you navigate your business through the many changes that are likely to come in the future, even in “normal” times. This article in the Cape Cod Times offers some specific things to consider when deconstructing and re-evaluating your business model.

Next, Ladd suggests that entrepreneurs reimagine each part of the business model, using creative thinking processes, to reinvent each part of the model in the new world created by the pandemic.

Finally, Ladd suggests that, just like you did at the startup stage, you need to work with your customers (which may be entirely new customers) to test and refine the new elements of your business model.

SCORE offers three tips for those hopscotching their business models:

Don’t forget the need for quality in what you offer, even if it is a temporary change in your model.
Stick to what you know — don’t forget your core competencies.
Don’t leave your old customers behind.

The Need for Resolve

One of the first blog posts I made as the coronavirus crisis began to unfold was about resolve. As I stated at the end of this post:

The resolve we are seeing among entrepreneurs will pay off for our economic future. It will take time and hard work, but these entrepreneurs are the ones who will lead us into our next economic expansion….and we will have one!

To ensure this bright future, don’t just get ready to pivot — get ready to hopscotch!

2020 Disruptors

Disruptive companies fundamentally change their industries. While many entrepreneurs tout that they will be disruptive — in fact, almost every one that I have ever heard pitch for money has made such a claim — very few actually deliver on their intended disruption.

Every year CNBC identifies fifty companies that they believe are truly disruptive. I have had the pleasure to serve on the Board of Advisors for the CNBC Disruptor 50 List for the past several years.

Nothing has created more opportunity for disruption in my life time than has the coronavirus pandemic and accompanying economic collapse. The creation of this year’s list included explicit consideration of the impact that the coronavirus is having on the potential growth and disruption of this year’s finalists.

The coronavirus is transforming how we shop, how we work, how we seek healthcare, how we play, how we learn, and how we get our food. This year’s Disruptor 50 covers a broad spectrum of industries, which illustrates the fundamental economic transformation now at work around the globe.

Top 5 Disruptors of 2020

The top five are as follows:

Stripe — digital payment platform company that has now created a financing program, Stripe Capital, that is a quick and easy source of funding for small business
Coupang — the “Amazon” of South Korea that delivers packages ordered by midnight before 7:00 the next morning
Indigo Agriculture — seeks to use natural microbiology and technology to improve sustainability, profits for growers and consumer health
Coursera — hitting close to home, this company offers individuals anywhere in the world access to online courses and degrees from top universities at a fraction of the cost
Klarna — this already profitable Swedish fintech company has an app that lets customers buy at their favorite stores now, entering only their email and Zip code, but pay later

You can see the entire fifty companies on this year’s list here.

I planned to get this posted as soon as the list came our earlier this morning. However, I got lost reading about all of this year’s startups. What an amazing group of companies! Just as in past economic crises, there is fertile ground for disruption, and this year’s Disruptor 50 offer us a peak into our future.

Methodology

Here is how CNBC describes their methodology:

All private, independently owned start-up companies founded after Jan. 1, 2005, were eligible to be nominated for the Disruptor 50 list. Companies nominated were required to submit a detailed analysis, including key quantitative and qualitative information.

Quantitative metrics included company-submitted data on workforce size and diversity, scalability, and sales and user growth. Some of this information has been kept off the record and was used for scoring purposes only. CNBC also brought in data from a pair of outside partners — PitchBook, which provided data on fundraising, implied valuations and investor quality; and IBISWorld, whose database of industry reports were used to compare the companies based on the industries they are attempting to disrupt.

Getting to the Other Side: Travel

Mrs. C. recently mentioned that she would consider taking a trip in an RV.

Many of you might not consider that blog-worthy, but traveling the country in a motor home is something we never would have considered in the past.

We love to travel. We enjoy road trips, beach trips, cruises, European travel, hiking trips, amusement parks, you name it. In fact, I had been considering taking a phased retirement to allow us to have more time to take some extended trips. However, RV-ing was never, ever on our list of future travel plans.

Then came the pandemic.

Travel Disrupted

Bookings on US domestic airlines are down 90% from last year. Airlines are slashing the number of flights to try and compensate. Airlines are trying to calm worried travelers by significantly improving cabin cleaning procedures. Rather than breezing through the cabin to pick up newspapers and drink cups passengers left behind, airlines have implemented protocol to deep clean and disinfect all passenger areas between every flight. To help with social distancing, Delta is no longer allowing people to book middle seats.

Hotel occupancy rates hover at less than half of what they were last year at this time. Europe has been particularly hard hit, with occupancy rates dropping from 70-80% last year to less than 30% today. Like the airlines, hotels are stepping up cleaning standards. Standard services are no longer standard. Daily housekeeping is a thing of the past, as are breakfast buffets, minibars, and valet parking.

The cruise industry, charter bus companies, airline companies, and aircraft manufacturers are lining up to get government bailouts.

Such efforts by industry stalwarts are to be expected during times of intense disruption. Companies will do whatever they can to preserve the status quo.

The Market is Changing

Normally, I try not to insert myself when thinking about changing markets and the entrepreneurial opportunities they create. However, Mrs. C. and I are the travel industry’s target market. We love to travel. We planned and saved through the years to allow us to travel. And now, we are blessed with the time, resources, and lifestyle that allows us to indulge in our wanderlust.

But the disruption of the coronavirus has done what disruptions like this normally do. It has changed our thinking and our behaviors as customers. And when these changes resulting from disruptions happen, they alter the future.

The Future of Travel

When thinking about the future of travel, we must take any predictions from industry insiders with a grain of salt. The lens they use to look into the future is biased toward what things have been like in the past. But, the reality is, no one is good at predicting the future when it comes to disrupted markets.

However, if I had to bet based on our attitudes and the attitudes of fellow Baby Boomer travelers like us, I do think the future of travel will be quite different.

One of the scenarios that Mario Gavira explores in his series on possible futures of travel is what he calls “The End of Mass Tourism as We Know It.” In this possible future scenario, the changes in our behaviors and attitudes from the pandemic alter our purchasing patterns in travel.

Urban-based crowded tourism will decrease in favor of outdoor and natural environments and long-haul destinations will be perceived as high risk compared to closer-to-home locations.

Conversations Mrs. C. and I are having about our future travel plans echo this shift.

What are the Opportunities?

One clear winner will be businesses that can efficiently and effectively offer cleaning and sanitizing services. Commercial painting companies are starting to explore using their spraying equipment not just for paint, but for sanitizing agents. Sanitization will be a hot industry for some time, offering some comfort that even heavy traffic tourist sites can be made safer.

We are already seeing robotics and other technologies reduce the need for humans in the service sector.

After the 2008 real estate collapse, entrepreneurs gobbled up failed condominium projects and turned them into apartments. This time around we are already seeing such projects turned into luxury “aparthotels“.

Travel agencies that offer planning for more off-the-beaten-path destinations, with more of a focus on outdoor activities may flourish.

Businesses that cater to road trips are predicted to see a boom in business, as more of us decide to travel in their min-vans and SUVs like families did in their station wagons during my youth.

And, oh yes, RV sales and rentals are seeing a spike in business post coronavirus.

Who knows…you may be seeing Mrs. C. and I tootling down the highway in an Airstream some time soon.

Getting to the Other Side: Music

The best governments can do to help pull us out of an economic crisis is create conditions favorable for economic recovery. It takes entrepreneurs to actually do the work that can get the economy growing and take us to “the other side.” When looking back, this has been true for every economic recovery since the Industrial Revolution.

Entrepreneurs are already beginning to do what they do best: find opportunity in the chaos. Financial author John Mauldin goes so far as to say that right now “the greatest entrepreneurial and technological boom in the history of humanity is brewing.”

To see where entrepreneurs will be leading us, it is best to examine things industry by industry. Given our home is in Nashville, there is no better place to start than the music industry.

From Performance to Product

Historically, the music industry has been resilient. Facing numerous disruptions over the past century, the music industry has adapted to every fundamental change in its business model.

The technological disruptions from Edison’s invention of the phonograph and Marconi’s (or was it Tesla’s) invention of radio brought music directly into people’s homes. Music evolved from only being experienced through live performance, to a product to be “consumed.”

As usually happens after entrepreneurs creatively destroy what was, the industry consolidated around the new business model that emerged. The large companies that emerged became very efficient at making money from the production and distribution of music as a product. Musicians made money by working for these companies.

From Product to Digits

The next disruption of the music industry came from the Internet.

The digital age took away the value of music as a physical product. We no longer had to purchase an album or a CD to consume music. Music could now be streamed directly to us via the Internet.

Over the next two decades, new business models evolved for music. Tech companies replaced music labels as the dominant players in the industry.

When music was a product, singers and songwriters made money by getting a small piece of the revenues generated by the music they wrote and performed. But as music was no longer a physical product, the share of revenues available for the artists from the digital distribution shrank to almost nothing.

Singers and songwriters had to adapt. To earn a living required that they develop a new relationship with their fans. They had to tour more and develop alternate revenue streams, such as merchandise for their fans, to make a living.

However, just as a new equilibrium in the industry was settling into place, along came the coronavirus! Live performance of music ended abruptly, and artists are now struggling to find a new way to make money.

From Artist to Entrepreneur

Yesterday, our family gave a musical gift to Mrs. C. for Mother’s Day that would not have been available a few months ago. City Winery and a group of their regular artists got together and offered a personalized video of a mini-set to give as a Mother’s Day gift. The video was waiting for Mrs. C. in her email inbox yesterday morning. Mark Broussard, one of our favorite artists, opened with a personalized message to “Yammy” (her grandma name) and he then performed the four songs that he wrote for each of his four children.

Artists and others in the music industry with an entrepreneurial spirit are starting to innovate and experiment with new business models. Private Zoom concerts. Live streaming.

What we are seeing so far is that people want to keep the personal connection with their favorite artists. This is the value proposition that artists tapped into over the past decade through live performances and social media. But with the outbreak of the coronavirus, it will be a long time before we are comfortable sitting shoulder to shoulder at a concert with our fellow fans.

So what comes next? That story is just starting to unfold. The funny thing about markets is that they often surprise us. The odds are that anyone who says they know what will be next for the music industry will probably be wrong.

But, there will be a next act for musicians. Whatever comes next will be a result of musicians and others in the industry stepping forward as entrepreneurs.

A dear old friend once described entrepreneurship as being a lot like sausage making. We love the finished product, but we really don’t want to see it getting made.

The process of innovation and entrepreneurship is messy, confusing, and frantic. But when it’s done, the outcome is quite satisfying!

Serial Entrepreneurs to the Rescue

As the economy starts to come back to life, don’t be misled by statistics on small business failure. Although the number of small businesses impacted by the current crises will be staggering, there is a slight-of-hand trick that may fool people when it comes to entrepreneurs’ contributions to rebuilding the economy. Ladies and gentlemen, may I introduce to you the serial entrepreneur!

Don’t Just Watch the Businesses: Watch the Entrepreneurs

A serial entrepreneur is someone who starts multiple businesses over their careers. To understand the serial entrepreneur’s economic contribution we need to consider not each business started by them, but by their cumulative body of entrepreneurial work.

For example, over my lifetime, I have been a part of about a dozen and a half startups, including solo startups, partnerships, and family businesses. Of all of the startups I have participated in over my career, only two are officially still operating: my consulting practice and our educational content family business, Entrepreneurial Mind LLC. Were all the rest failures? Absolutely not! We sold some the ventures, and others just ran their course. Probably two or three of them could truly be called failures. They all created jobs, built wealth, and contributed to economic growth.

To understand my long-term economic contribution as a serial entrepreneur, you have to look at all that I have done over the past four-plus decades. You can’t just look at the outcome of one single deal, no matter what its outcome, good or bad.

A Current Tale

Two of my alums, Corey and George, are current examples of serial entrepreneurs at work amid the pandemic and accompanying economic collapse.

Corey’s current business lost most of its accounts during the first week of the economic shut down.

George had been doing gig work between startups. However, his employer furloughed George from his current gig.

Rather than define what they are experiencing as failure, they put their heads together and asked one simple question: What pain being created from the current crises could they provide a solution for?

Newly Created Pain

Organizers of most meetings, conferences, and other gatherings cancelled them due to the coronavirus. Corey and George’s hypothesis is that as we come out of the current crises, there may be a more lasting impact on such events. Sending people to meetings and conferences is expensive. If companies find that there are viable virtual alternatives to physical travel, there may be some level of permanent shift away business travel for meetings and conferences.

Most of the current alternatives in the market that offer virtual meetings focus on educational content delivery and training. While this is an important part of going to conferences and meetings, most people say the biggest benefit they receive is from the informal interactions in the hallway or over drinks with other attendees at the end of the day. Current offerings do not really offer this as a part of their virtual meeting platform.

Corey and George are feverishly working on solving this shortcoming.

Follow the Ball

Just as in the carnival “cups and ball trick,” we need to pay careful attention to see where the serial entrepreneur ends up next.

This is the essence of a serial entrepreneur. To a serial entrepreneur, entrepreneurship is a process, not an event. Even though the last business may no longer have enough demand to keep operating, the entrepreneur never stops. For the serial entrepreneur, their career is a journey from opportunity to opportunity.

Three Steps to Survival

Sadly, many small businesses will fail over the coming weeks. To increase their company’s chance of survival, there are three critical steps that small business owners must take.

Continue to Slow Down the Outflow

The first step is to continue to find ways to slow down the outflow of cash. You’ve probably made some initial cuts, but there is always more that can be trimmed.

Look carefully at all expenditures and cut any that do not directly impact your ability to generate revenues, and generate revenues now. Most entrepreneurs think that many of their expenditures are an investment in their future growth. We need to recalibrate our thinking. Growth is likely a long way off for most small businesses.

Most economic forecasts are seeing a very slow recovery when it does happen, and there is a lot of uncertainty about when that recovery may begin. We may see a short-term bounce when things start to open up again, but it may only be temporary. Be cautious about opening up your spending again!

The V-shaped bounce-back is most likely not going to happen. Think of cash as a finite resource that needs to be preserved. This is no time to be timid when it comes to cutting costs!

Anything for a Buck

The second step is to find ways to bring in short-term revenues. Remember during start-up when you would do anything for a buck? Get back to that mentality. Don’t worry about strategy. Don’t worry that you might send confusing messages to your customers. They are likely in survival mode, too. There will be time to get back to honing your strategy later. Now it is all about cash!

What’s Next?

The third step, once your cash flow is stabilized, is to think about what will be next for your business. Be ready to accept a very different future for your business than you had in mind just a few short weeks ago.

Consumers and businesses will behave very differently over the coming months and even years. Don’t be in denial about what you are seeing. Savings will become a national obsession in the coming years. Anytime we have a severe economic shock, people come out of it with a much more conservative approach to managing their money.

The fear of coronavirus may ease once there is a treatment or vaccine, but our collective psyche is likely to be altered for many years.

What we are going through is not just changing our economy, it is changing our culture and our society. Be ready to think differently about your value proposition and be ready to act boldly!

Cash is King

The moral of the story is simple. Cash is king! In fact, cash is king, queen, emperor, and president for life! This is not a new truism. However, it is now the most important principle in business.

Virtuous Entrepreneurship

Full disclosure: I am an Adam Smith nerd. The picture above was the result of a long search that Mrs. C. and I went on when we were in Edinburgh, Scotland a few years ago to find the grave site of the Father of Free Market Economics.

First we had to find the correct cemetery. That part was not too hard, as it was well-marked and had a large memorial to Adam Smith at the entrance. But, then the search for his actual gravesite began. We searched through the various headstones, row after row after row after row. We knew it was in there, but could not find it. Finally, when I was about ready to give up, Mrs. C. said, “Here it is!” It was not the large, noble headstone I had imagined such an important icon would have. Instead, it was a grave marker no larger than the sole of a shoe.

Anyway, to understand why I am so fascinated by Adam Smith, I need to explain the two faces of Adam Smith.

The Adam Smith We All Know: The Invisible Hand

The first, and most famous face of Adam Smith is that of the economist who first helped us understand the power of free markets in his book, The Wealth of Nations. In this work, Smith explains how the power of the “invisible hand” of the free market builds economies.

Smith explains that individuals within free markets act by following what he calls commercial virtues. The first of these virtues is self-interest. By pursuing self -interest, individual entrepreneurs unknowingly benefit both the economy and society. However, this only works if the entrepreneur acts with the commercial virtues of prudence, justice, industriousness, and frugality.

The Adam Smith Most Don’t Know: The Importance of Virtue

Adam Smith was not only an economist, however. He was also a moral philosopher. His book, The Theory of Moral Sentiments, helps us understand the second face of Adam Smith. Smith recognized that the collective acts of self-interest by entrepreneurs in an economy must be moderated by nobler virtues, or the whole system will run amuck. Individuals must overcome the purely selfish impulses of the commercial realm, as there is more to life than economics.

The nobler virtues necessary for the free market to be sustainable, according to Smith, are benevolence, generosity, gratitude, compassion, kindness, pity, friendship, and love. These are not virtues commonly associated with free market capitalism, and yet without them, the individual selfishness leads to the eventual downfall of both the economy and society.

Bringing The Two Faces of Smith to Life

So why bring up the two faces of Adam Smith while we are in the middle of a pandemic and economic crisis?

Because even in the face of closed businesses and an economic free fall, we can see Adam Smith’s virtuous capitalism at work. And through the acts of entrepreneurs who bring the two faces of Adam Smith to life, we see hope for the future.

Kindness and Compassion

C19 Liberator is a charitable organization set up this past month to harness existing 3D printers to meet the demand for protective face shields to protect those on the front line of fighting the coronavirus here in Tennessee. One medical facility alone, needed 400 face shields, and needed them quickly. C19 Liberator has found small businesses and individuals who own 3D printers. They asked them to step up and meet the challenge of using 3D printers to make hundreds of face shields. They are donating them for use by medical personnel and first responders.

Generosity and Pity

One of the types of businesses that has been deemed essential and is able to remain open is liquor stores. One local liquor store, Cools Springs Wines & Spirits, has donated $25,000 to to Tennessee Action for Hospitality to help support other businesses that have been unable to operate during the current crises due to government mandates.

In an interview in Williamson Home Page, Cool Springs Wines & Spirits CEO Bret Moore says:

“We feel fortunate our store is open for business. In addition to taking extraordinary measures to create a safe environment for our employees and customers, we wanted to give back to those in our industry who are profoundly affected by this pandemic.”

Benevolence and Gratitude

Gravity Payments is a Seattle-based company that helps small businesses process payments. When the current pandemic and economic crisis hit, the impact on Gravity’s financial health was immediate. The company saw a 55 percent drop in revenues in one month. To survive, it first appeared that CEO Dan Price would either have to layoff 20 percent of his workforce, or face certain failure. Like many entrepreneurs, Price decided that neither option was viable and needed to find a creative “Plan C”. Price went to his employees and asked them to help him come up with a third alternative.

Each employee filled out a form that only the leadership team would see, in which they stated how much they could sacrifice in earnings to help avoid either a massive layoff or company failure. The plan worked, and everyone has been able to keep their jobs.

An Army of Virtuous Entrepreneurs

We are facing more than just the survival of individual businesses. Many experts are suggesting our economic system is in jeopardy. Let’s all remember the lessons of Adam Smith and create an army of entrepreneurs who not only can revitalize our economy, but ensure the preservation of free markets through benevolence, generosity, gratitude, compassion, kindness, pity, friendship, and love.