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

Those on Wall Street are not Alone Wringing their Hands

Small business owners on Main Street are joining investors on Wall Street in worrying where the economy is headed, according to the latest survey from the NFIB.

For the fifth consecutive month, NFIB’s monthly Small-Business Optimism Index fell, dropping 0.9 points in July–a larger decline than in each of the previous three months–and bringing the Index down to 89.9. This is below the average Index reading of 90.2 for the last two-year period. Put simply, they are losing what little optimism they had been building during what had been hyped as the beginning of a recovery. They now fear that there really was no recovery after all and more bad times are likely ahead.

Expectations for future real sales growth and improved business conditions were the major contributors to the decline in optimism. Remember that this survey was completed before the events of the last two weeks.

“Given the current political climate, the protracted debate over how to handle the nation’s debt and spending, and the now this latest development of the debt downgrade, expectations for growth are low and uncertainty is great,” said NFIB Chief Economist Bill Dunkelberg. “And considering the confidence-draining performance of policy makers, there is little hope that Washington will stop hemorrhaging money and put spending back on a sustainable course. Perhaps we might begin referring to the ‘Small-Business Pessimism Index’ from now on.”

Indeed.

I am hearing economists who had been hopeful for our economy to muddle along and grow ever so slightly changing their tune. More and more are talking “double dip”. Since I do not agree that a true recovery has ever really taken root, I prefer to call it a “second plunge.”

“And what should the government do now?”

That is the wrong question to frame the debate. It is what the government has done over the past two administrations that has magnified the problems in our economy.

Governments cannot create a sustained economic expansion through spending and monetary policy.

Businesses and their customers do that. Stop bleeding them of their money and get out of their way.

Creating an Entrepreneurial Culture

“Culture is one of the most precious things a company has,” said Herb Kelleher, Founder, Southwest Airlines. “So you must work harder on it than anything else.”

For the entrepreneurial business, its culture begins from day one. The culture is a reflection of the values the entrepreneur brings into the business.

Culture is important for an entrepreneurial venture because it is the mechanism that institutionalizes the values of its founders. Culture serves to socialize new employees. It helps them understand how they should treat the customers, how they should treat each other, how they should act in their jobs, and how to generally fit in and be successful within the business.

If managed properly, culture also improves the performance of the business. Culture is an important part of the overall strategy of the business and helps ensure a growing organization will continue to meet the expectations of customers that were established by the entrepreneur during the early start-up of the venture.

For many businesses their success has been built on the entrepreneurial nature of the business. Since it is important to keep the entrepreneurial nature of the business, as that is what has gotten the business this far, it is important to create a culture of entrepreneurship.

“Building a culture that encourages autonomy, risk-taking, and entrepreneurial behavior is challenging,” said Jennifer Prosek, CEO of CJP Communications and the author of Army of Entrepreneurs: Create an Engaged and Empowered Workforce for Exceptional Business Growth. “For companies that want to out-think and out-pace the competition, an entrepreneurial culture isn’t optional: it’s an absolute necessity.”

According to Prosek, the key to unleashing that creative energy is to create an entrepreneurial culture based on four pillars.

Authenticity — Demonstrate your sincerity by being enthusiastic about entrepreneurial strategies and actions pursued by the business.
Commitment to People – “An entrepreneurial culture is based on the idea that each individual can be a powerful force for change in the organization,” said Prosek. Support the professional development of your staff, celebrate exceptional work, and don’t forget to have fun.
Commitment to the Business — Align an individual’s interests with those of the business. “At my firm, we have a program called Commission for Life™,” explains Prosek, “Which encourages new-business generation: Anyone who books a meeting that results in a new client gets 5 percent of the revenue for the life of the business.”
Continuous Effort — The work of building a company’s culture never ends.

Sustaining an entrepreneurial culture starts with who you hire. It is essential to carefully screen prospective employees to ensure that they will fit within your culture. An entrepreneurial culture is also sustained by your reward system, by the autonomy and respect you give to your employees, and by consistent communication about your ongoing entrepreneurial vision for the company.

Creating an entrepreneurial culture creates a business that will continue to grow by adapting to change and by actively pursuing new opportunities in the market.

Summer School in a Food Truck

Can’t find a summer job as a student? Then start a business.

That is what two students from Belmont University are doing this summer. Hayden Coleman and Ale Delgado took second place in Belmont’s Baker Donelson Business Plan Competition this past spring.

The $2,000 prize helped them launch Moovers and Shakers. Their business brings together one of the hot new trends in small business, food carts and mobile food trucks, with good old fashioned soda fountain.

The beauty of food carts and mobile food trucks is the low start-up cost, as seen in this profile on the food cart boom in Portland, Oregon from Business on Main. For just a few thousand dollars aspiring restaurant entrepreneurs are able to break into the food service industry.

But even with the ease of entry, there are always a few bumps in the road for any new start-up.

“It has been a pretty crazy adventure trying to get Moovers and Shakers started,” said Hayden. “There has definitely been a learning curve for us, since we are two students who have never started a business before. Also, we have had to deal with things such as health code regulations and searches for places to buy a proper food truck. Everything has taken about four times as long and cost about four times as much as we originally expected, so we have really had to be able to adapt and hustle.”

So was it all worth it?

“At the end of the day, after all the stress and setbacks, we still just love making milkshakes,” added Hayden. “The people that we have met along the way have been so supportive and helpful. If anything, our experience has made us even more determined and excited for the future of Moovers and Shakers.”

Bigger is not Always Better

One long standing aspect of American culture is that bigger is better.

We seem obsessed with having the biggest city, the tallest building, the busiest airport or the largest house. When I went to business school in the 1970s, we were trained to pursue one goal: maximize market share.

Even today when students in my classes describe the businesses they want to start, many feel the need to explain, justify, rationalize or even apologize if they do not plan to grow the venture to meet its full market potential.

However, I always make a point to caution them about what I call the Growth Myth of Entrepreneurship, the myth that the success of a venture is best measured by the size of its revenues.

The truth is that growth is not always good for an entrepreneurial venture.

A banker once told my students, “The leading cause of business failure is business success.”

What he meant by this is that to be successful with a growing business, one must also create systems, build infrastructure, grow the team and secure critical resources to support growth.

To survive and thrive as a growing venture, entrepreneurs cannot simply run things the same way they did in the start phase of the business. If they don’t change how they run things in the growth phase, the odds of the business surviving the trials and tribulations of growth aren’t very good.

So how big should an entrepreneur plan to grow the business?

Before answering this buy topiramate and phentermine question, we need to understand what needs to be grown.

Revenues should never be the primary focus for growth, profits should be. Profits are what allow an entrepreneur to earn a salary and build wealth. Revenues should only be grown if they help grow profits.

Too often, I see entrepreneurs chase customers just to build sales without making sure that those new sales will actually earn them more profits.

The goal for growth should be tied to the entrepreneur’s aspirations and financial goals. Some people describe this as simply pursuing a lifestyle business. However, I would argue that every business is a lifestyle business. It all just depends on the lifestyle that you want to pursue.

If you grow your business deliberately based on your goals and aspirations, you can create a business that is an intentional reflection of the lifestyle you would like to live. Entrepreneurs should always remember that success in life should be so much more that simply growing a company and making money.

One of my favorite quotes about success comes from someone who grew a very large business. Paul Orfalea grew Kinko’s from a single copy shop into a huge chain of stores that eventually was sold to FedEx.

When asked after all the things that he had accomplished since he opened his first store, what was his biggest success, Orfalea replied, “Success in life is having kids who want to come back to visit you when they’ve grown up.”

Tech and Travel

When I was first starting up our healthcare business back in the late 1980s the only “technology” I took with me was an AT&T phone card for making calls from the road. I would punch in a bunch of numbers and then punch in more numbers to make the call. It was actually pretty cool for the time because before that I used to have to call my wife collect from the road.

Soon I added a couple of amazing new technologies. One was a car phone. Only problem was that it was hard wired to my car (with the antenna permanently attached to the roof), so unless I was traveling in my little red Mazda 323 it was of no use. Also got a pager. That allowed me to know when people wanted me to take out my AT&T calling card, punch in a bunch of numbers, then punch in their phone number. Hopefully they were there to answer….

Fast forward a few years and the pager and car phone morphed into a flip phone. Also got a laptop, although still not in the wireless era so it was kind of a dumb device. But I felt liberated. Although carrying the rather bulky laptop everywhere threw my back out a few times….

Today’s tools and toys makes traveling even easier. My Android phone, iPad and MiFi unit are about all I really need. Light, easy to use. Plus, they actually make traveling easier. I still need my laptop on some trips, but it is no longer essential. And thank goodness those have gotten a lot lighter — gotta save my old back for golf.

Business on Main offers a short video by Paul Hochman that has a few specific tips on products and devices that make business travel easier and less stressful. You can check it out here.

(My blog is a part of an online influencer network for Business on Main. I receive incentives to share my views on a monthly basis).

“Entrepreneur” App Helpful Resource

I have been exploring the app for Entrepreneur magazine. It is a free iPad app that brings the magazine and other content through a single source.

I really like the search function in the “Library”. That is what I always tended to use at their website, so this is an app that truly eliminates the need for me to go to that website. At this point it seems that it can only go back to content from 2010 and 2011. There is some really good content from Entrepreneur that dates back a few years. Hopefully they will build up the archives available through the app so I won’t have to also search at the website.

Navigation in the app is a bit clunky and slow. For example, with articles presented in the “Feeds” section it provides links to the web article. “OK”, I thought. “I will get some more meaty content there.” But often it is the same article I just read in the app version. Time wasted. It is also hard to get out of a specific article once you use the search feature.

Within an issue it would be great to be able to click on an article and go to it from the contents. Instead you have to “page through” to get to it. Quicker to read the hard copy magazine in this case.

I also think it would help to streamline their Feeds. There are three buttons to choose from that seem to be more convenience for them than easy for the user. I really don’t care about difference between what is a “Daily Dose” versus a “New Article”. So why make me click between them.

Navigation is a bit awkward, especially since I go to this app right after I have been using some really slick content apps like USA Today and Fox News apps that are easy and intuitive.

All in all a good start. A useful tool that should get easier to use over time. In spite of it being less the user friendly, it gives some great content.

Cyber Crooks Target Small Business

Criminals take the path of least resistance.

If your car door is locked, they tend to go to the car that was left open.

If your house looks dark and empty, it is the one they will probably break into.

Same is true for your business. For years cyber crooks went after large business. After all, that is where all the cyber money is. But over time corporate America has tightened its Internet security to the point that it is no longer easy pickings.

So now they are bypassing the corporate firewalls and coming after small businesses.

An article from USA Today on cyber criminals coming after small business has gotten a lot of attention. (Hopefully not from dumb crooks who have not figured this out yet).

There is lots of information out there that can help make your business less appealing to cyber crooks out trolling for an easy mark. For example, NFIB has a long list of articles at their site on how to improve your IT security, Visa offers tips for small merchants on data security, and the SBA offers some tips of their own.

Job Creation from June is not Encouraging

Two reports on small business job creation were released today. The bottom line is that there is little evidence that small businesses are ready to lead us out of this long and hard recession.

The Intuit Small Business Employment Index rose ever so slightly in June, showing employers adding a small number of jobs and slight increases in hours worked and compensation.

But the NFIB survey were less encouraging.

“Seasonally adjusted,
9 percent of owners hired new employees last month, a 1 point decline from May,
while 16 percent reduced employment, a 3 point increase”, said William Dunkelberg, Chief Economist of the NFIB. “The remaining 75
percent of owners made no change in employment. Manufacturing was the only
winning sector to post average positive net growth; but job losses were posted
by firms in financial, non-professional services, construction, negating any
gains made.”

Both surveys found some hope for July, but we have seen the optimism among entrepreneurs rise and fall throughout this long economic morass.

Legal Definitions of Partnership not Enough

It is very common for entrepreneurs to take on partners.

They may be co-founders of the company, key personnel who are given an ownership stake as part of compensation, family and friends who offer some startup support or outside investors.

In any of these circumstances, these people become owners of the business.

And the foundation of working with a group of owners should be a sound legal agreement among all the owners.

This agreement should lay out the basic rights and responsibilities among partners as it pertains to the business they own together, such as what decisions are required to be voted on, what happens when a partner leaves or passes away, and what information those who run the business must provide to the partners.

The best time to set up a partnership agreement is when you first start the business. At this point in time, there is little to squabble over. The business exists only on paper, so finding a fair way to deal with an exiting partner seems much easier.

But such a document only lays out the minimum requirements. There should also be an ethical set of standards that goes beyond the basic legal requirements.

This is particularly true for those in the partnership who have ownership control by holding a majority of the shares.

The heart of working successfully with partners of any kind is communication.

Many partnership agreements establish the minimum requirement of providing everyone with annual financial summaries and holding an annual formal meeting. While this meets the legal requirements of most agreements, it falls short of commonly accepted ethical standards.

Communication with fellow owners should be frequent and predictable. Common practice is that the managing partner should ensure that every owner gets a monthly set of financial statements. It is also good practice to include a narrative summary of business activity over the past month.

If there are partners in the business who are not actively involved in running the company, quarterly or monthly meetings are a good way to keep everyone informed. These also allow for discussion of important issues.

Communication with partners should always be completely honest, open and proactive. The managing partner should view his or her role as a steward of the company for all of the ownership.

With that comes the responsibility of keeping everyone informed of major accomplishments and significant problems or crises. This type of communication shouldn’t wait for the monthly report.

Partners should always be among the very first to know about such things.

Communication should be comprehensive. While monthly reporting may provide a fairly succinct summary, at least once a year partners should be given a thorough overview of the business’ past, present and future.

Too often partnerships that are guided solely by the legal requirements of their formal agreements tend to end up in a legal mess trying to resolve conflicts and disagreements.

Entrepreneurs who view themselves as stewards for the other owners — and who follow a higher standard of communicating — are better able to resolve issues among themselves or avoid such problems altogether due to a strong sense of trust.

Good Start, But This App Needs a Few Pivots

The stars all seemed to be converging for me as a fan of the Business Model Canvas.

I am refining the 3.0 version of my syllabus for my planning class that has become largely centered around the Business Model Generation framework. I have never been more energized going into a new academic year. My class no longer looks like a traditional old business planning class. Instead, students learn to develop a business model and pivot until the cows come home. My old slide decks have been filed away and I have all new PowerPoints with fresh lessons, images, videos, and of course, Dilbert cartoons.

I have organized a group of faculty from across the US and Canada to present how we use the business modeling to teach our students how to successfully launch a venture that is responsive to the market. We will be offering a pre-conference session at USASBE this coming January.

I have been exploring how we might do some research into business modeling with a few colleagues.

Students and alumni who have been using the business model generation framework have been raving about its power and utility.

And then for Father’s Day, my wonderful family gave me an iPad. Now I can finally get the Business Model Toolbox App. I imagined connecting my new iPad to the LCD in the classroom so I had the ability to bring the business model canvas to life for my students.

But alas, even at the hefty price of $30, this app falls well short of what I hoped for.

Is it a great tool for developing a business model? Yes, but mostly if you work alone. It is not easily shared unless you pass around your iPad and cannot be shown live and in motion via and external monitor or better yet LCD projector. (NOTE: My friends at Aloompa tell me that it can work with an HDMI cable).

The beauty of the business model canvas is that it allows you to create a large visual representation of the business on a whiteboard or on the wall with sticky notes. Then you, your partners, your team, and your advisers can all look at the same picture and refine it, improve it, or quite often pivot it entirely.

I am glad I bought the app, as it will be a great tool to work with students and alumni one-on-one in my office. And I know my Apple-minded, shall I call them Apple-zealot, students will likely find it a great tool to learn how to use this incredibly useful tool.

But it has a ways to go to be a true app version of the original.

So for the entrepreneur on a tight budget, bootstrapping your way to launch, I still recommend the paper version and all of the free information available on the web.

The business model for this app needs a few more pivots before I recommend it as an essential tool worth $30.