Entrepreneurial Inspiration

I am here in Louisville with twenty-eight of our Belmont students at the annual International Career Development Conference of the collegiate division of DECA, Delta Epsilon Chi.

Interest in entrepreneurship continues to be strong at this conference.  I was amazed to see the high level of interest this year in the conference-long event called the Entrepreneurship Challenge.

Each year the students participating in this event are given a specific prompt and told to develop a new business that takes advantage of the issue in the prompt.  Here is this year’s challenge:

“The Challenge is simple–create a business concept that capitalizes on the new Louisville Downtown Arena currently being built right next to the Galt House Hotel. NOTE: Your business concept, whether it’s a product or service, may not be “located” inside the arena itself.”

The student teams will be making their initial pitches this afternoon in a speed dating style format developed by my friend George Solomon from George Washington University. 

The top teams from the preliminary rounds will then refine their pitches for the finals tomorrow.

The entrepreneurial energy and the optimism of these students is motivational to all of us involved with the event.

Let me share a little entrepreneurial inspiration with all of you this morning.  Ben Cunningham sent along a video that was posted at Club for Growth that brought a smile to my face this early morning:

Let’s Choose None of the Above

I was sent an e-mail this week that for some reason caught my attention.

It read as follows:

Hello,

I thought you might like to know that America.gov has published a feature on public efforts to promote high-tech entrepreneurship. The feature includes a blog discussion of relevant issues.

Regards,

Andrzej S Zwaniecki
Editor, International Information Programs
U.S. Department of State

How interesting.  The U.S. Department of State has its tentacles in entrepreneurship.

So I went to the link at America.gov.  I must admit, it was my first time at this site. 

The page linked to at America.gov had a quiz.

“Can Your Government Promote Entrepreneurship?” was the headline in bright red at the top of the page. 

Of course, I immediately looked for the “NO” button to click.  After all, if venture capitalists who study high growth ventures for a living have such a lousy record of picking winners — the good ones get about one out of ten right — how in the world can government officials expect to be able know where the market will lead us next?

But there was no button that would let me answer “NO”.  The site just wouldn’t let me answer that first question.  Instead had a second question that I could answer that was part of a quiz:  “You can invest $1 million of public funds to spur high-tech business. What steps will you take? (Click START.)”

So I went ahead and threw caution to the wind and clicked “START”.

Up popped the following:

Imagine you are a provincial government official ready to invest $1 million of public funds to kick-start high-tech business. After considering the following hypothetical scenario, test your decisions.

BACKGROUND:
Your province was strong in traditional manufacturing, but recently lost ground to cheap overseas competition, and your government is promising an economic recovery.

Three local universities are doing fruitful research on clean-energy technologies.

As often happens, you hire a consulting firm. Assume that the firm studies the business climate in your province and reports that the $1 million you have to invest to kick-start entrepreneurship should be split among efforts to encourage three types of ventures: 1) clean-energy technology, 2) biotechnology and 3) high technology.

You must encourage local economic growth. You could place strings on the money, matching it only to loans by local investors supporting companies that hire locally, or you could work with more-experienced firms based overseas that want to operate in your province.

The consulting firm recommends converting a former manufacturing facility into a research park/business incubator. Some of the potential tenants, however, prefer to maintain headquarters in their own garages or basements. They want networking opportunities but can’t afford office space, even if rent is subsidized.

The consultancy would be happy to manage the entire program, as it provides business-development services. But you can also rely on the local research universities and venture capital firms for advice, and they have a strong interest in the success of local businesses.

As you go on to set up an appropriate entrepreneurship program, you need to answer four questions:

1. Do you split the money into three funds?
2. Do you aim at the developing local businesses or global players?
3. Do you establish a physical or virtual research park?
4. Do you hire the consulting firm to manage the program?

(Click on Questions 1, 2, 3 and 4 and on the options to answer them.)

Source: This scenario is based on opinions of experts who have tackled the topic of what government efforts are likely to succeed in spurring high-tech entrepreneurship. They are authors Josh Lerner (Boulevard of Broken Dreams) and Anthony Townsend (Future Knowledge Ecosystems).

“Wait just a minute,” I exclaimed out loud while sitting on my back porch.  “Who the heck are these experts and what do they know about entrepreneurship.” 

It seems that Josh Lerner is a Harvard professor of Investment Banking.  Wait just a minute!  Investment banking?  Aren’t those the guys who helped get us into the current mess with all of their knowledge of managing markets?

Anthony Townsend is Director of Technology Development at the Institute for the Future out in Palo Alto, California.  His blog is full of ideas on how government can reinvent cities, shape markets, and the like.

Hmm… Sure wish the quiz had given me more options, like maybe “None of the Above.”

All of this reminded me of the following quote from Friedrich August von Hayek about the proper role of government in the economy:

“He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.” 

I have to agree with Hayek on this one.  The last thing we need right now is the State Department, an investment banking professor and a futurist trying to craft our economy.

Let’s cultivate the economic soil and see what the market spouts!

Start-up Visa: Right Agenda, Wrong Policy

We need to rethink immigration policy.  As I have written in the past, we need to find creative new ways to open our doors to immigrant entrepreneurs.

A new bill introduced by Congressman Jared Polis (D-CO), would create a Start-Up Visa for entrepreneurs with financial backing from angel investors.  It is H.R. 4259 – The Employment Benefit Act (you can see a summary of the bill here).

Here is how the bill is described in the press release:

Every day the American economy is losing ground–not to mention high-tech jobs and technologies–to India and China because foreign-born entrepreneurs cannot secure a visa to stay in the U.S. That’s why I’ve introduced H.R. 4259, the Employment Benefit Act, to create AMERICAN jobs by bringing our immigration system into the 21st century and encouraging foreigners with good ideas and much-needed capital to invest in our economy, rather than in our competitors. By streamlining and expanding our nation’s EB-5 visa program, this much-needed change would unleash innovation into our economy, create thousands of quality jobs right here in America, and bring capital to America to grow American businesses.

But, when looking at the details of this bill it becomes clear that this is another example of Washington policy makers thinking they can predict and control the market.

Rather than open the doors and let the market pick winners, the act targets what markets are eligible and constrains its benefits to specific levels of investment.

What about those immigrant entrepreneurs who do not want or need venture capital or angel backing?  Out of luck with this bill.  While venture capital backed deals are important, they create only a small percentage of new jobs in our entrepreneurial economy.

What about entrepreneurs who want to start a business in a particular market where they see an opportunity?  Only if it is in a targeted geographic area.  Entrepreneurship is a powerful economic tool — we need to stop trying to hamper this by making it a social policy tool.

We desperately need immigrant entrepreneurs to join in the rebuilding of our economy.  But we don’t need bureaucrats serving as the bouncer at the door deciding who can come in.   

Upturn is Elusive

A growing number of economists are pulling back from their earlier statements that the economy has bottomed out and is poised to begin its upturn.  It seems that small business owners concur.

The National Federation of Independent Business Index of Small Business Optimism lost 1.2 points in March, falling to 86.8.  The persistence of index readings below 90 is unprecedented in survey history.

“The March reading is very low and headed in the wrong direction,” said Bill Dunkelberg, NFIB chief economist. “Something isn’t sitting well with small business owners. Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

The index has posted 18 consecutive monthly readings below 90.  In March, nine of the 10 Index components fell or were unchanged from February’s not-so-great readings.

Some highlights from the March NFIB survey:

  • While actual job reductions may have halted, plans to create new jobs remain weak.
  • The frequency of reported capital outlays over the past six months fell to near record low levels.  A paltry two percent characterized the current period as a good time to expand
    facilities.
  • Widespread price cutting continued to contribute to reports of lower nominal sales.
  • Small business owners continued to liquidate inventories and weak sales trends gave little reason to order new stock.
  • Earnings trends declined again in March, with 58 percent reporting that profits are falling. 
  • Regular borrowers continued to report difficulties in arranging credit. 

“What small businesses need most are increased sales, giving them a reason to hire and make capital expenditures and borrow to support those activities,” said Dunkelberg in summarizing this month’s survey results.

Economic recovery on Main Street is looking to be a long, long way off.

Business Plan Matters, But Other Steps Come First

When an aspiring business owner decides to move ahead and start a new
venture, conventional wisdom says the first thing he or she needs to do
is write a business plan. But research on how to plan and my own
experience suggests this isn’t usually very effective.

In fact, writing a formal business plan should be the final step in a
three-step business planning process.

Step one is to assess your idea to determine if it is
actually a viable business opportunity. Is there a large enough market?
Can I charge this market enough to make a profit?

Is the concept something I can personally pull off?
Do I have the experience, knowledge and access to the necessary
resources to make this business successful?

This first step should not involve that much detail.
It should be a quick-and-dirty first assessment of the concept.

Step two is to develop
the business model. A business model adds more detail to the evaluation
and begins to make sure all of the moving parts of the business work
together.

What is
the value that is offered to the customer and what is it worth to them?
Who is my target market? What do they expect out of me as a customer?
How do I get information to them and how do they want to get the
product? What are the key activities to make this all come together and
what will they cost? What are the resources I need to make this happen
(money included)?

There
is a great resource available to help would-be owners develop a
business model: www.businessmodelgeneration.com. This Web site
contains a large amount of free information on business modeling and
links to an excellent book to guide you through the process.

Now, it’s time for the plan

Step three is to write an actual formal business plan.
The business plan details the elements of the business model. It helps
organize what can become a complex and overwhelming array of issues.

The business plan puts
everything down on paper to make sure that we have thought of all of
the important “must-dos” that go into a successful startup.

Understand that the business plan is just a map, albeit a map into an
unknown territory. The actual path the business takes will almost always
be different from the original business plan. But the plan can help us
think through the details.

It helps us understand how all of the parts of a business fit
together to make a whole venture. It helps prepare us for our journey
and makes us better prepared to adjust to all of the surprises that we
will face almost every day we’re in business.

However, this final step of writing a formal business
plan is not always necessary. I know many very successful entrepreneurs
who never wrote a formal business plan for their ventures.

But almost all of them
understood the importance of business planning. While they may not have
written a formal business plan, they did take the time to go through the
first two steps of business planning.

While a formal business plan may not always be
necessary, sound business planning will always improve an entrepreneur’s
chances for success.

(This post ran as my column in the Tennessean this morning).

A Moral Analysis of the Economic Crisis

Rev. Robert Sirico will be giving an address on the Belmont University campus this next week.  The title of his lecture is “A Moral Analysis of the Economic Crisis”.  Father Sirico will examine some of the key cultural factors
essential to a robust economy, including rule of law, trust, and a
worldview that encourages rather than undermines these things.

Father Sirico is president of the Acton Institute, whose purpose is “integrating Judeo-Christian truths with free market principles.”

Fr. Sirico lectures at colleges,
universities,
and business organizations throughout the U.S. and abroad. His
writings on religious,
political, economic, and social matters are published in a variety of
journals,
including: the New York Time, the Wall Street Journal, the London
Financial
Times, the Washington Times, and the National Review. Fr. Sirico is often called upon by members of the
broadcast
media for statements regarding economics, civil rights, and issues of
religious
concern, and has provided commentary for CNN, ABC, BBC, NPR and CBS’ 60 minutes, among others.

This is Fr. Sirico’s second visit to Belmont University. 

Date: Tuesday, April 13, 2010
Time: 5:00 PM – 6:30 PM
Location:  Maddox Grand Atrium, Belmont University, Nashville, TN
Details:  This event is free and open to the public

Vote for Entrepreneurship and Education

Sam’s Club is a regular stop for many small business owners. 

Sam’s Club has launched a new program called Giving Made Simple that should be near and dear to many entrepreneurs.  The program supports education and entrepreneurship, as Sam’s Club believes they are essential to the growth of our economy and communities. 

Giving Made Simple is a online voting campaign that allows Sam’s Club members and associates to determine how Sam’s Club will distribute $4 million in charitable contributions to eight selected nonprofit organizations dedicated to youth education and entrepreneurship.

The organizations that were selected to participate in this program are Kiva, Community Reinvestment Fund, USA (CRF USA), Corporation for Enterprise Development (CFED), Accion USA, Junior Achievement, YMCA, Girls, Inc. and Network for Teaching Entrepreneurship (NFTE).

Sam’s Club members and associates can log onto http://www.samsclub.com/giving, and vote for the non-profit organization they would like to see win the largest donation.

Immigration is Key to Entrepreneurial Economy

Tom Friedman offered his thoughts on what we need to do to get the economy going in an op-ed piece at the New York Times.  His take on how to revive the economy:

“Good-paying jobs don’t come from bailouts. They come from start-ups. And where
do start-ups come from? They come from smart, creative, inspired risk-takers.
How do we get more of those? There are only two ways: grow more by improving our
schools or import more by recruiting talented immigrants. Surely, we need to do
both, and we need to start by breaking the deadlock in Congress over
immigration, so we can develop a much more strategic approach to attracting more
of the world’s creative risk-takers.”

Immigrants have always played a vital role in fueling our
entrepreneurial economic engine.  Given our need for help in revving up
that engine right now, I wish we would take another look at our
immigration policy.

The primary reason that we see so many
immigrants pursue entrepreneurship is that they are opportunity focused –
surveys reveal that this is what drives many of them to leave for a
new country.  I have to wonder how attractive the US will look in a few
years after our mad dash to socialism is fully in force. 

When
we look within specific ethnic communities in the US, recent immigrants
out perform non-immigrants in economic achievements and have higher
rates of self-employment than native-born in these ethnic communities.

In
Internet-based ventures, immigrant entrepreneurs pursue more aggressive
strategy.  One study found that 25.4% of engineering and technology
companies include at least one founder who was born outside of the US.

Here
are a few more quick facts:

  • Immigrants represent 12.5 of
    all business owners.
  • Immigrants are 30 percent more likely to
    start a business than non-immigrants are.
  • Immigrant business
    owners are concentrated in certain states, including California, New
    York, New Jersey, Florida, and Hawaii.
  • Mexicans represent the
    largest number of immigrant business owners, while Greeks, Koreans, and
    Iranians have the highest ownership rates

In the 1900s we viewed immigrants as a
source of cheap labor.  Our immigration policy — or lack thereof — has reflected
this. 

To help create jobs and growth we should open our doors to
entrepreneurs from around the globe.  Current policy makes it difficult
for entrepreneurs to enter the US legally.  We
should be actively recruiting immigrants who want to come to our system
of free enterprise to start their businesses, just as we did to bring
in the scientists we needed in the 1950s and 1960s to help fight the
cold war. 

The last great entrepreneurial economic boom was
created in large part by first generation Americans and sustained by a
large, but controlled, wave of immigration that helped to build an
economy that last through most of the 1900s.

 

In addition to a “green card” for
immigrants coming here to work, the US also needs another card (let’s
color it a “red card” for urgent) to support the flow of legitimate
entrepreneurs looking for the freedom this country offers to business
owners.

The Importance of Balance

One of the joys of teaching at Belmont is that I get to keep in touch with so many of our alumni.  I offer my students a life time warranty on their entrepreneurship education, which translates into my willingness to continue to help them out on their entrepreneurial journey after they leave our campus.  We have made a policy in our program to never charge for consulting with alumni businesses and to never take an ownership stake in their firms.

I met for lunch yesterday with my former student Adam Wynia.  Adam was a member of the Belmont golf team.  His final business plan in our program dealt with becoming a professional golfer.  He has been working to implement this plan by playing the developmental professional golf tours since graduation.

Adam also is doing some golf teaching.  He is part of a program that teaches golf in a rather unconventional manner.  It is an approach that takes a rather holistic approach, focusing less on the technical details of the golf swing and more on how the body works together to get a natural, consistent, predictable swing.

The philosophy they take is that the golf swing starts with the ankles, which must work with the legs to help open the hips and get the proper shoulder turn.  The arms and hands are just an extension of the proper movement from the rest of the body.  Too many golfers focus only on their arms and hands.  It takes the whole body working together to get a consistent swing.

Adam said that by focusing on the golf swing this way, the golfer is able to focus on balance.  With the body being balanced, the body can swing naturally and consistently.

I know….this is supposed to be a blog about entrepreneurship, not golf.  But, this has been such a long winter that spring fever has hit me hard and it seems that I can’t get my mind off of golf!

As I listened to Adam describe how they teach the golf swing it dawned on me that this is how I am trying to teach entrepreneurship.

The proper golf swing begins with the ankles, which provide the proper foundation needed for balance.  A new venture needs to start with a solid foundation, which comes from proper fundamental assessment of the opportunity — Is this idea a real business opportunity? 

With a proper foundation, the legs, hips and shoulders can all work together to get the proper swing while staying in balance.  In a new venture, it is the business model that defines how all of the parts need to work together — in balance, if you will — to meet the needs of the market.

If you do everything in balance with your ankles, legs, hips and shoulders, your arms and hands will follow.  The result is a consistent, predictable swing.  Think of your business plan as your arms and hands — it is the natural extension of getting the opportunity assessment and business model right, thus ensuring that all parts of the venture are working together.

Adam said that only focusing on your arms and hands will not lead to a consistent swing. 

Likewise, focusing only on the technical details of the business plan will not lead to a predictable entry into the market. 

Economic Pessimism Shapes Entrepreneurs’ Actions

I recently attended the second annual Kauffman Foundation Economics
Bloggers Forum at the foundation’s headquarters in Kansas City, Mo.

The invited attendees were economists who write popular blogs or
those, like me, who write about the economy in their blogs.

The economists there
were in general agreement that the economic forecast for the next year
or so remains pretty bleak. This is particularly true on Main Street
America, as they see little job growth in the foreseeable future.

About half believe the
economy will remain as it is now, with unemployment hovering around 9
percent or 10 percent and economic growth staying anemic. The other half
think the economy will turn significantly worse in the next year or
two, in large part because of the federal debt.

Recent surveys of small-business owners seem to
indicate that many entrepreneurs share the worries expressed by the
economists at the bloggers forum and are taking specific actions to deal
with what they see as a continuing recession.

According to the latest poll of small-business owners
taken by the National Federation of Independent Business, one defensive
measure entrepreneurs are taking is putting off hiring.

“Net job creation will
appear in the coming months, but the gains will be painfully slow with
timid consumer spending, especially in the service sector,” said William
Dunkelberg, the NFIB’s chief economist.

In the NFIB survey, owners complained that poor sales
are their biggest problem, and that there is no need to hire with no
new customers. In this harsh sales environment, it’s hard for workers to
earn their pay. Owners cannot pay workers more than the value they add
to the firm.

More than half stockpile
cash

A survey conducted by Brother
International Corp. found that small-business owners are strengthening
their cash reserves to buffer the impact of a prolonged recession.

The survey revealed
that 53 percent of small-business owners believe stockpiling cash is the
best strategy for surviving the current economic climate, as opposed to
investing in their businesses.

This is a prudent strategy during a weak economy and
can help protect a business from future economic shocks. Cash is the
best cushion against uncertainty.

The same survey showed that the majority of
small-business owners (79 percent) plan to strive to make their company
more efficient this year. Bootstrapping is back in style, and it’s a
great path to higher cash reserves.

Economists and entrepreneurs seem to agree that, in
terms of Main Street America, the economy will not improve anytime soon.
While the economists disagree on the public policy needed to improve
the situation, entrepreneurs are taking steps to weather the ongoing
financial storm.