Tim Jackson, Canadian entrepreneur and venture capitalist, offer his thoughts on our economic future in an interview by Gordon Pitts at ReportonBusiness.com. Here is a sample of what he had to say:
So if you are laid off from your job and have a business idea, what do you do?
You beg, borrow, steal and you get it going – and you find a customer.
I know that sounds overly simplistic and there are certain companies where you need a venture-backed business because it will take three or four years to develop the technology. But traditionally, businesses have been started by designing something or creating a service or a product.
Then you went and sold it, and you used the revenue from the first customer to get your second customer and improve the product slightly. The revenue from the second customer was used to improve it again and you get the third customer.
We saw 300 companies last year [and funded two] and the vast majority should never have been looking for venture capital. Our advice is just go and start the company. Go and sell this. If you have something people will buy, they will partner with you and you can build a business.
Great advice not only for the accidental entrepreneur, but anyone starting a business. Your goal is never to raise money — it is to build a business. If you are successful at that and eventually need funding, it will follow.
The ADP Small Business Report released today shows that 284,000 small business jobs were lost in March. Declines in March and previous months indicate that the resiliency displayed by small businesses earlier in the recession is no longer apparent compared to medium- and large-sized enterprises.
The ADP Small Business Report is a subset of the ADP National Employment Report:
Total small business employment: – 284,000
Goods-producing sector: – 111,000 small business jobs
Service-providing sector: – 173,000 small business jobs
The FastPitch Event tonight is being streamed, so you can join in even if you don’t live anywhere near Nashville, TN. The pitches will start up in about 30 minutes. You can watch and vote from home, your office, your car (if you are not driving), the beach, your corner tap, or the library.
Here is what one local entrepreneur had to say about Franklin:
“It’s a very vibrant, growing community with a good education system and with people who are very attuned to the importance of quality of life, family time, and balancing that with careers and business. Once you identified a top candidate and bring them here, any negative perception that they may have had about coming to a small town in Tennessee is really overcome once they’re here and they see the community and they get the feel for the quality of life.” -Sam Lynch, founder and CEO, biotech development company BioMimetic Therapeutics
I would agree. In choosing to move here almost six years ago it was the entrepreneurial culture of the area that, in large part, drew us to Nashville. (Not to mention golfing almost year around).
My column in today’s Tennessean looks at the challenges of taking financing from family:
In good economic times, 85 percent to 90 percent of capital for small businesses comes from friends, family and the entrepreneur’s own funds.
But during times of tight credit or recession, family members may be one of the few sources of funding for most startup entrepreneurs.
When taking funding for a business from family members, it’s critical that everyone involved fully understands what they are getting into.
Family members provide funding for many reasons. Some are motivated by altruism — they just want to help the entrepreneur get started and be successful. Others can be driven by greed — they see the investment as a way to ride on the entrepreneur’s coattails to fortune and fame.
But no matter what the reason for a willingness to provide financial assistance, defined boundaries and clear expectations must be clearly established.
Here are some rules of the startup road:
• Never take money for a business from a family member as a “gift.” It should be treated either as a formal loan or investment.
Present the interested family member with a formal business plan, which should be discussed in full detail.
• Any loan from a family member should have a formal loan agreement that defines interest rate and payment terms. To help the entrepreneur, payments can be delayed, but interest should accrue during this time and eventually must be repaid.
The Internal Revenue Service publishes the current minimum interest rates at its Web site, www.irs.gov/ (just enter “interest rate” into their search feature).
• Do not structure any loan without interest. There can be tax consequences for all involved if such a loan is not set up with acceptable interest charges.
• If the money comes in as an investment, the family member is now the entrepreneur’s partner. This means they have certain rights that any shareholder has in a privately held business, which can include approving certain major decisions, such as the sale of the business.
Send reports
All investors should be provided with complete financial data at least once a year.
If the business makes a profit, they probably will owe taxes on this profit. All of this must be made clear before any investment funds are accepted.
Whether the money is treated as a loan or an investment, the entrepreneur should regularly communicate good and bad news. Provide regular quarterly or even monthly summaries that include any significant accomplishments, challenges and major events.
All of these steps will help keep issues that are business related as strictly business, and issues that are family as family matters. After all, Thanksgiving comes every year. Don’t let a business deal spoil the family dinner.
I don’t get my hope from anyone in Washington, DC.
I have the joy of working each day with young entrepreneurs who are brimming with true hope and optimism about the future.
Today I spent the day leading 72 students at Centennial High School in Franklin, Tennessee on a full day of what we call the Entrepreneurial Challenge. It is an exercise originally developed by my friend Dr. George Solomon at George Washington University.
Twenty four teams each comprised of three students developed ideas based on the theme: “Find a business opportunity that can be started in Williamson County that take advantage of or is able to thrive in the current economic downturn”
All of the teams did a wonderful job.
The students came up with their ideas, researched them to turn them into viable opportunities, and then perfected their pitch all in about four hours. They then pitched to various entrepreneurs from the community for several rounds.
The winners where three young women who came up with a business with the following mission: “To provide informational and enjoyable cooking programs to kids and teens which promote a healthy lifestyle with affordable life changes.” Their proposed venture would both teach low cost options for kids to make health meals at home, thus saving money in these difficult times and addressing their concern with obesity among young people.
I left the school feeling a lot more hopeful about our future.
Right after John Price and Sam Dryden won our business plan competition, they found out that the Nashville Business Journal had run a story on their business in today’s edition. From that interview:
What’s the most interesting project your company is working on right now? We’ve been so blessed to work with the clients we have filmed so far. A lot of Nashville’s roots have been captured on film, and I am honored to have been the person to document them. To be honest, every “Lifetime Reel” produced is interesting to us. We hear the most interesting things from our clients.
What circumstances led you to your current position? I launched this business when I was a sophomore at Belmont University. I felt led to give the opportunity of having a loved one’s life on film after seeing how it affected my own family. I was already studying in the entrepreneur department at Belmont and realized that this was going to be my business model.
We held our annual Belmont University Center for Entrepreneurship Business Plan Competition today.Our top student entrepreneurs made their pitches for a total of $8,000 in prize money to help support their entrepreneurial aspirations.
John Price and Sam Dryden shared their business, Lifetime Reel, which produces family documentaries.The idea came from a project John produced about his grandfather.John completed the documentary shortly before his grandfather passed away.John and Sam are both Entrepreneurship majors.
Chris Dorsey, a Music Business major, presented a social venture that he is a part of called the Umkulo Project, which came out of a service learning project he and others were involved in during a study abroad in South Africa.The Umkulo Project seeks alleviate the affects of poverty by providing the opportunity for African children to experience the hope that music education can bring.
Dale Clay, also a Music Business major, is founder of Red Winter Productions.His business composes custom wedding music, film scores, and music for advertising.
Cassie Schreiner is a double major in Graphic Design and Entrepreneurship. Her business, CNS Photographic Design, took second place in last year’s competition.
Hannah Miller is a classic academic overachiever, double majoring in Business and Spanish, with a minor in Theater.Her presentation was on The Everlasting Tea Party.Hannah’s business offers a Tea Party in a box for little girls to enjoy the creative play that she enjoyed as a little girl hosting her own tea parties.
Noah Curran is majoring in International Business with a concentration in Entrepreneurship.Noah is building a social venture called Real-8 that will bring Christian entertainment, including music, theatrical productions, and motivational speaking to churches across the country.
And the winners are….
3rd place and $1,000:Cassie Schreiner
2nd place and $2,000:Hannah Miller
1st place and $5,000:John Price and Sam Dryden
Here is what one of our judges had to say about the competitors this year:
“It is such an amazing luxury for entrepreneurial creativity to be fostered in an academic environment like that of Belmont. I am consistently impressed with the depth of knowledge their students have when they graduate regarding the direct applicability of classroom studying to ‘real world’ doing. Belmont professors are also entrepreneurs so they respond quickly to an ever-changing business environment, which gives their students a clear competitive advantage with regard to everything from concise and effective communication (or pitching) to price points and economics. I wish I had the opportunity when I was in college to learn about being an entrepreneur.”
The latest Intuit Future of Small Business Report, written by Emergent Research, focuses on the key factors that drive, enable, amplify and shape the outcome of innovation, and the six characteristics of innovative companies. The report is part of the ongoing Intuit Future of Small Business series, conducted by Emergent Research and the Institute for the Future.
Small business owners are natural innovators, the study found, with their inspiration driven by three needs: necessity, opportunity and ingenuity. Whether prompted by changes in the marketplace, competitive pressures or simply the desire to create something bigger and better, small businesses are constantly refining and redefining how they work and what they produce.
Innovation Enablers
Compared to large corporations, small businesses have a number of innovation advantages that enable them to more readily identify opportunities, quickly react to changing conditions and remain competitive. Their smaller size makes it easier and cheaper to try new approaches faster than larger businesses. These six enablers include:
Personal passion: Personally invested, most small business owners are willing to try new approaches to make their business more successful.
Customer connection: A deep and direct relationship with the market and customers helps small businesses understand customer needs, identify new opportunities, and fix problems quickly and efficiently.
Agility and adaptation: Unlike large corporations, small businesses can quickly adapt to changing market conditions and implement new business practices.
Experimentation and improvisation: When pursuing new opportunities, many small business owners and managers aren’t afraid to experiment and improvise, accepting failure as part of the path to success.
Resource limitations: Small businesses are adept at doing more with less. And these resource constraints lend to their innovative mindset.
Information sharing and collaboration: Small businesses traditionally rely on strong social networks to share information and inspire innovative thinking.
