Still Growing, but Very Worried

Two surveys released this week paint a very interesting economic picture.

Entrepreneurs are still creating new jobs.  ADP’s Small Business Report for September shows that small businesses (fewer than 50 workers) created 28,000 new jobs last month while corporate America is hemorrhaging jobs, losing more than 170,000 over the past six months.

However, a new survey of 500 US small business owners conducted by Harris Interactive for ING DIRECT found that entrepreneurs are very worried about their current situation and about the future.  Specifically the survey found that:

• 63 percent say are either very- or extremely-concerned about the future of the economy

• 57 percent see developing new business as their number-one challenge through the remainder of the year and “access to cash” ranked number-two at 18 percent

• 56 percent are now saving less money for personal and 53 percent are saving less for retirement savings compared to a year ago

• 40 percent see the current financial state of their business as worse than a year ago

Getting Pricing Right the First Time

Setting the price for a new product or service can be an agonizing process for new entrepreneurs.  If they set them too high they risk turning off new customers.  If they set it too low, they risk leaving money on the table and locking their businesses into low prices.

Diana Ransom writes about the challenges of pricing at SmartMoney. 

Newbie entrepreneurs often miss the mark on pricing, says Laura E. Willett, a small business advisor and finance professor at Bentley College in Waltham, Mass. Entrepreneurs either blindly place a price tag on their product or service without taking a proper reading of the market or, perhaps more commonly, they underprice their offerings on purpose – effectively apologizing to the market for being new and inexperienced.

Ransom interviewed Belmont alum Cameron Powell for her story:

When Cameron Powell launched River Rock Media Group, a Nashville, Tenn., photography and media production company in 2005, he charged just $75 an hour for his photography service. Considering that similarly equipped photographers can earn between $1,500 and $2,500 for a full day’s work, he’s certain he underpriced himself.

“It got me gigs and it gave me experience working with people. But it didn’t help me gain a whole lot of footing with the market I wanted,” says Powell who now earns the going rate. Instead, he adds, “I was attracting people who didn’t have any money.”

If you have to offer low prices to enter a market, make it clear that they are introductory discounted prices.  Don’t start with a low price and hope that you can increase it down the line. 

Stay on Track

The march toward socialism was slowed down yesterday with the courageous vote in the House.

Things will get worse before it finally gets better.  But, if we let the market work, our economy will come back stronger than ever.  And entrepreneurs will be at the heart of this economic resurgence.

We have now peeked behind the curtain and seen the truth about the Wizard of Oz that is our federal government.

Still confused about what has actually happened?  Wonder how we got into this mess to begin with?  Here is one of the best explanations of how we have got into this mess that I have seen direct from Bird and Fortune.

Always remember — the same politicians now working hardest to pass a bailout are the very ones who created the mess by meddling with the housing market as part of their grand plan of social engineering.

For now remember that cash is king, debt is your enemy, and patience is a virtue.  Stay on track.

“The Call of the Entrepreneur” on Fox Business

If you haven’t seen the video “The Call of the Entrepreneur,” I strongly suggest you tune to Fox Business Channel this weekend.

It will air from 5:00 to 6:00 p.m. EDT on Saturday 9/27/08 and from 12:00 to 1:00 a.m. EDT on Sunday 9/28/08.  I have my TIVO set up to record this one!  We hosted one of the premier showings last year here at Belmont — it was truly inspiring.

You can find your local channel for Fox Business at their channel finder.  If you do not have access to this channel you can click here to learn how to set up your own viewing.

As you watch, think about how Wall Street and Washington are trying to strike a deal that will erode the free enterprise system in America.

The New Nature of the Social Entrepreneurship Movement

The perspective we are hearing from our social entrepreneurship students is that they want to tackle one social problem at a time.  They are not interested in massive solutions to problems, as they believe that all this does is create big, inefficient bureaucracies. 

MakeZen’s Weblog offers an interesting take on this perspective.  The post challenges how we have conceptualized our past approaches to solving social problems in this world.  It clearly echoes what we are hearing from our social entrepreneurship students:

It struck me soon after how peculiar it was the way the question was formulated: would I like to join them to FIGHT against women violence? Why do we use the word “fight” that implies violence to get rid of violence? FIGHT against poverty, injustice, war etc. is something that we normally hear in the news, in the mission statements of some NGOs, and indeed in the life mission of some social entrepreneurs as well. It surely carries a negative energy and it will strengthen the other opposing energy. I believe it more and more that true and LASTING changes can never take place from a negative state of consciousness because ignorance will grow stronger when it is being attacked!

So don’t fight against war, poverty and injustice- rather- work for peace, for fairness and let peace flow through all your actions in order to create true changes! It’s possible, even in the most despair situation!

VC Take on Economic Debacle

And what do those in the VC world have to say about the economic mess created by greedy bankers and the abuse of power from Washington?  This segment of the entrepreneurial economy seems to be operating with a “business as usual” outlook according to a post at venturebeat.com.  The post includes comments from several tech insiders.  For example, here is Guy Kawasaki’s take:

The collapse of greedy banks that loaned money to people who should not have bought homes should be unrelated to venture capital investing. In fact, it should make venture capital a more attractive investment class. But it won’t because it’s all a mental game. When Wall Street goes into a funk, it affects the mood of the venture capital industry. Truly, entrepreneurs and venture capitalists should be worried about what may happen in five years, not five days, but short-term emotions will rule. With regard to entrepreneurs specifically, if the Lehman debacle scares them from starting a company, they were going to fail anyway.

 (Thanks to Jim Stefansic for passing this along).

The Risk of Assuming the Market wants “A”, when it Really wants “B”

When you first launch a business you should be ready to “dance with the market.”  And you should be ready to let the market lead this dance.

We enter the market with a plan in hand.  It is a plan that we may have agonized over for weeks, months, or even years.  We have done our research, created a carefully thought out marketing plan and operating plan that both help justify our financial forecasts.

And then a funny thing happens.  We assumed that the market wanted “A”.  But, if we listen carefully, we often find out that it really wants “B.”

Our Entrepreneur in Residence this week, Matt Meents, is a case in point.  Their company, Reside, originally was set up to build high-end websites for the real estate industry.  Although they did land some accounts with that profile, the market soon began to tell them that there was a wider market for what they offered beyond real estate. 

If Matt and his partner had stayed rigid in their plans, their company would never have grown the way it has.  The market wanted to help them grow, but they had to be willing to listen to what it really wanted and adapt their plans.   

The dance with the market never really ends.  Markets are dynamic, so you need to be ready to follow where it leads you.

The Circle of Learning

We have had the pleasure of hosting Matt Meents as our “Entrepreneur in Residence” this week.  Matt is co-founder of Reside, based out of Minneapolis. Matt was a student of mine when I taught at the University of St. Thomas.  It is so rewarding to have students come back and tell their story to my current students and work with them one-on-one as they work toward launching their ventures.

Matt has been focusing on two messages here at Belmont this week — focus and culture.

Matt has viewed building the right culture to be one of his primary jobs as CEO of this fast growing business.  From their website:

The company also reflected on the culture that it had established internally over the years, based on the theme of “Rockin,” and what that meant to the group.  They agreed that “web for business” is what Reside does, but doing good in the world is what they are really all about.  Based on that understanding – and the desire to leave a corporate legacy – the concept of The Residers (a virtual band) was founded.  TheResiders.com would provide the interface for the company’s pro-bono initiatives and would play “alter-ego” to the group’s corporate image – providing them a framework for an ultra creative marketing and web tool application. 

2007 saw the launch of The Residers and the “Rockin’ for a Cause” initiative.  And in 2008, the mission – and company’s growth – continues.  And what does Matt Meents, founder and CEO of Reside have to say about all of this?  “We’re really just getting started,” states Matt.  “Looking back, I am humbled by what our small band has already achieved.  But I get really excited when I look to the future…because I can only see good things ahead!  We be rockin’!”

The culture that Matt has instilled is a true reflection of his personality.  It is a culture that respects the clients, the employees and the community.  He has built a team that not only shares his vision, but also embraces the culture he has instilled in Reside.  Too often we ignore the importance of hiring people that fit into the culture, only looking at their technical competence.

I am so very proud of Matt and appreciate his willingness to help our aspiring entrepreneurs here at Belmont this week. 

An Underated Skill

Knowing how to effective sell is probably the most underrated skill an entrepreneur needs.

We need to know how to sell to the customer — products or services rarely “sell themselves”.  It takes hard work and perseverance to get the connected to our customers.

We need to know how to sell to sources of money.  Bankers (if there are any left who lend money these days) and investors need to be sold on you and your business.

We need to sell to potential employees.  Going to work in an entrepreneurial venture, especially if it is still a start-up, is a risky move.  Most potential employees are more risk adverse than we are — that is often why they are not entrepreneurs.

In an article at Smart Money, Diana Ransom examines the art of selling to the customer for a new start-up business in interviews with Don Kuratko from Indiana University, Stan Mandel at Wake Forest, and me. 

The first step is to recognize that challenges you face as a new venture:

Many novice entrepreneurs stumble when trying to win over their first few clients. Besides just making simple mistakes during the presentation, start-up entrepreneurs have few, if any, success stories that they can point to, says Jeffrey Cornwall, the director of the Center for Entrepreneurship at Belmont University in Nashville, Tenn. The lack of an established track record can really hurt a business’s chances of landing a client, especially when the client is already working with a more-established competitor.

Ransom then identifies six key elements that lead to an effective pitch: 

  • Know what you are selling
  • Customize the pitch
  • Back up claims
  • Create a client base
  • Offer free or limited use trials
  • Enlist an advocate