Bootstrapping Thoughts from Around the Blogsphere

Sramana Mitra is running a series at her blog that features a selection of posts from the blogsphere on bootstrapping.

The first three posts she features includes:

  • Luke Timmerman at Xconomy writing about a biotech start-up that bootstrapped its first 20 months with no support from VCs.
  • Brad Feld’s post on bootstrapping — noteworthy as he is a VC who advocates bootstrapping.
  • Taylor Davidson’s suggestion of a new funding model that shifts VC funding to meet the new reality of an economy dominated by bootstrapped start-ups with less focus on high, short-term growth.

She will be featuring more posts throughout the week, so I will provide some more links in the next few days.

A Culture for Success

One of the greatest challenges faced by growing businesses is to avoid the pitfalls of culture drift. 

Most entrepreneurs launch their businesses with the intention of building a certain type of culture.  But, the demands of growth can take the entrepreneur’s eye off creating an intentional culture.  And each new hire can bring in elements from the different cultures where they have worked.  The result is that over time the culture can look very different from what the entrepreneur had originally intended.

My friend John Wark has passed along an interesting article from Inc.com about an entrepreneur named Nick Sarillo who founded Nick’s Pizza and Pub.  Sarillo’s story offers lessons on how to create an intentional culture during times of growth:

Sarillo has built his company’s culture by using a form of management best characterized as “trust and track.” It involves educating employees about what it takes for the company to be successful, then trusting them to act accordingly. The alternative is command and control, wherein success is the boss’s responsibility and employees do what the boss says. Think of the Navy SEALs versus the National Guard. Both approaches can work, but they produce very different cultures. If done right, moreover, trust and track can allow a company to be nimble, flexible, and productive enough to perform at the highest level through good economies and bad.

China Matters

We all know China matters in a big way to the US and the world economy.

They fund much of our debt and probably hold the future of any recovery in their hands.  They produce goods for American companies at prices that make them competitive in the world market.  And they have a lot of potential consumers with growing income and wealth!

Today when I showed up at my office I was reminded in a very personal way that China matters because they are also becoming an entrepreneurial hotbed as well as an economic powerhouse.

There on my desk was a box from Prentice-Hall, which is one of my publishers.  I opened it and out tumbled five copies of a book that was in Chinese. 

“What the heck is this?,” I wondered.

Upon a closer look I realized that it was my Bootstrapping textbook translated into Chinese.

bootstrapping chinese larger image.png

China does matter!

(By the way, if you prefer a Chinese edition of the book you can get it here).

EU Small Business Economy

While we have been sounding the alarm about the state of the entrepreneurial economy in the US, its seems that the constriction of the small business sector has created even more dire circumstances across the pond in the EU.

From the Wall Street Journal:

As important as small businesses are to the U.S. economy, the problem
may be even more acute in Europe. Companies with fewer than 250 workers
account for 70% of the private-sector work force in the European Union,
compared with 49% in the U.S., according to EU figures.

Like the US, about 99% of employers are small businesses, but the total employment in small firms represents 67% of the EU workforce, which compares to 50% in the US (data from the US SBA and the European Commission).

The article in WSJ goes on to point out that funding for EU small businesses is even tighter than the US:

Business also
relies more on banks in Europe than in the U.S. where, at least for
bigger firms, capital markets are an important source of finance.

A 2009 report from the European Commission highlights the concerns EU entrepreneurs have about access to debt financing.  This survey found that access to financing — typical bank financing — continues to be one of their top worries.

However, there are some glimmers of hope when you dig a little deeper into the EU survey.

Although 46% of EU small businesses report a deterioration of bank lending, 70% said that they were able to get all or at least part of the bank financing they were seeking.  Only 15% said that they were fully rejected.

Times are certainly tough for small firms in the EU, with about half reporting lower profits.

But, as in the US, there is evidence that EU entrepreneurs are hunkering down and doing what they need to do to survive the recession.

(Thanks to Joe Ormont for suggesting this topic).

2009 Not a Good Year for Small Businesses

The National Federation of Independent Business Index of Small Business Optimism lost 0.3 points in December, falling to 88.0 (1986=100) [1]. The Index has been below 90 for 15 months. Optimism has clearly stalled.
 
Since I made a resolution this year to look at the world from a “Glass Half Full” perspective, let’s see what good news we can see in the details from this survey.

Employment

Ten percent of the owners increased employment, which was the highest reading of 2009.  That is encouraging, but the survey also found that 22 percent reduced employment.

The job outlook is also has some hopeful signs.  Ten percent reported unfilled job openings, up two points from November.  This is a good sign.

Those planning to reduce hiring still is about double the percentage of those planning to increase hiring.  However, over the next three months, the number of small business owners planning to reduce employment has declined slightly.  And those planning to increase their hiring is up one percentage point from November.   

Capital Spending

The frequency of reported capital outlays over the past six months was unchanged at 44 percent of all firms, holding at a record low level (data first collected in 1979). But, plans to make capital expenditures over the next few months rose two points to 18 percent.  Still near the record low, but at least it has started to move in the right direction.

Sales

When it comes to revenues, it becomes a little harder to see positive signs.  The net percent of all owners reporting higher sales in the past three months remained negative at negative 25 percent.  However, this is a six-point improvement over the dismal November reading. 

Earnings

Try as I might, I could not find a silver lining in the responses on profits.  Reports of positive profit trends were unchanged at a net negative 43 percentage points. For the 54 percent reporting lower earnings compared to the previous three months, 65 percent cited weaker sales, 4 percent each blamed rising labor costs, higher materials costs and higher insurance costs, while 6 percent blamed lower selling prices. Poor real sales and price cuts are responsible for much of the weakness in profits.

Owners continued to reduce compensation at a record pace, with 10 percent reporting reduced worker compensation and 9 percent reporting gains, unchanged from November. 

Credit

Regular borrowers (accessing capital markets at least once a quarter) continued to report difficulties in arranging credit at the highest frequency since 1983. A net 15 percent reported loans harder to get than in their last attempt, unchanged from November.

“Still that is not nearly as severe as the financial distress reported in the pre-1983 period,” said NFIB Chief
Economist William Dunkelberg. “Twenty-four months of recession have sapped the financial strength of many small firms.” 

Look for the Small Victories

“2009 was a very difficult year for small business,” said Dunkelberg.  “Continued weak sales and threatening
domestic policies from Washington, have left small business owners with
little to be optimistic about in the coming year.”

Alright, so the big picture shows only slight signs of improvement in the economic conditions for small business.

Let’s keep focusing on the small victories.  Let’s keep our eyes on those entrepreneurs who are keeping their heads held high and finding ways to succeed in spite of the adversities they are facing in the economy and from the misguided policies coming out of Washington.

Pitch Camp

Once again we are partnering with Angel Capital Network to run a Pitch Camp and pitch competition called Fast Pitch. 

Here are the details on the pitch camp:

Pitch Camp!
February 5, 2010
1:00-4:00pm
Belmont University – Frist Lecture Hall, Inman Health Sciences Building

Have you always wanted to start your own business, but didn’t know how to communicate your idea to investors?

Have you already started your business but need funding to get it off the ground?

Or, simply, do you foresee an interview with a company, large or small, in your future?

If you recognize yourself in any of the above, you must plan on attending Pitch Camp!

Pitch Camp covers topics such as: creative thinking, effective communication of ideas and how to pitch successfully in 60 seconds. Groups will work together and then pitch to the room. It is not necessary that you come to this event with a business idea in hand; learning to pitch transcends entrepreneurial endeavors – everyone should be able to pitch themselves for networking.

Attending this camp will set you up for Open Pitch and the opportunity to compete in Fast Pitch (held March 30, 2010) for the opportunity to win a top prize of $3,000.

Pitch Camp is free to students with a valid ID and $55 for non-students.

For more information on this event or to register, please contact Rachael Qualls at rachaelqualls@angelcapitalgr.com or Sarah Reeves at sarah.reeves@belmont.edu.

For All of Us Entre-Boomers

My colleague Ed Rogoff, who teaches at Baruch College of the City University of New York, has a new book out targeting all of us Entre-Boomers.  It is titled The Second Chance Revolution:  Becoming Your Own Boss After 50.  It is an excellent book for any late career entrepreneur with lots of useful tips and “how-to’s” on choosing a business, financing the business, and running the business that are all specifically written for those entering the entrepreneurial world who are over 50.

A Conference for Free Enterprise

The Acton Institute has been working tirelessly at the intersection of entrepreneurship, faith, free enterprise and public policy for many years.  They empower people to become more effective church and community leaders, supporting free enterprise.  We have had one of their founders, Father Robert Sirico, to the Belmont campus in the past and have him scheduled again on April 13, 2010.

For four days each June, the Acton Institute convenes an ecumenical conference of 400 pastors, seminarians, educators, non-profit managers, business people and philanthropists from more than 50 countries in Grand Rapids, MI. With this week of fellowship and discourse, participants build a theological and economic infrastructure for the work of restoring and defending hope and dignity to people around the world. This is Acton University.

Registration is now open for the 2010 Acton University (AU), which will take place on June 15-18 in Grand Rapids, Michigan. This year’s distinguished international faculty will once again guide participants through an expanded curriculum, offering even greater depth of exploration into the intellectual foundations of a free society.

Space and scholarship funds are limited.  Visit www.acton.org/actonu for online registration form along with complete conference information.

A great forum to join like-minded people looking to take positive actions to support economic liberty.

Small Business Job Report for December

William C. Dunkelberg, chief economist for the National Federation of Independent Business, issued the following statement on December job numbers based on NFIB’s monthly economic survey.

“Despite the holiday season, December didn’t put small business owners in a hiring mood. Last month, small business owners reported a decline in average employment per firm of 0.5 workers reported during the prior three months, not much of an improvement from November’s loss of .58 workers per firm.

“Ten percent of the owners increased employment by an average of 4.2 workers per firm, but 22 percent reduced employment an average of 3.5 workers per firm (seasonally adjusted).  Growth from new firms will provide a positive nudge to the macro BLS numbers. But overall, the job-generating machine remains in reverse.  

“A slowdown in firing will also help job creation, but there is no real strength in job growth because there is no real strength in spending.  It is picking up, but not returning to the levels that supported the employment levels of 2007.  Employment reductions have proceeded faster than the decline in GDP (thus strong productivity numbers), creating the possibility that employment could respond faster in the early part of the recovery than many expect.  However, there is no indication that job growth will be strong enough to dramatically reduce the unemployment rate.

“Ten percent (seasonally adjusted) reported unfilled job openings, up two points from November, a good sign.  Over the next three months, 15 percent plan to reduce employment (down two points), and 8 percent plan to create new jobs (up one point), yielding a seasonally adjusted net-negative 2 percent of owners planning to create new jobs, a one-point improvement, but still more firms planning to cut jobs than planning to add.  Not seasonally adjusted, net job creation plans were positive in the professional services and the wholesale trades, negative in all other industries.”