Last evening we went to hear a group of songwriters at the Bluebird Cafe here in Nashville as part of the Folk Alliance (their website is folk.org, which seems to be down this morning as I write this post). One of them performing last night, James Lee Stanley, is one we first heard over thirty years ago — I blogged about him a couple of months ago.
What a wonderful evening of music and an affirmation that the music industry is alive and well. The three featured songwriters had all been writing and performing since the 1970s. Are they rich and famous? No. Have they been making a living pursuing what gives them passion? Absolutely.
There is a good lesson here for entrepreneurs in any industry.
Too much attention is given to celebrity and fame. We see it in entertainment and more and more we see it in the world of entrepreneurship. The vast majority of our economic growth is coming from order topamax online entrepreneurs working in small businesses across the country. It is hard work. It is not very glamorous. But, it has created economic independence for these entrepreneurs and the people working with them.
The same is true in music. There are thousands of songwriters and performers toiling away out there. Many are fortunate and have become successful enough to make a living at it.
The vast majority of entrepreneurs will not reach the heights of Gates, Dell, Jobs, and others whose little ventures grew into empires. In fact, most won’t even make their local list of “leading entrepreneurs” in their community.
But, most entrepreneurs don’t really care about fame and recognition. That is not what drives them. That is not how they measure their success.
What a blessing it is to be able to share in real success — the songwriters who continue to hone their craft — the entrepreneurs who pursue their passion and find fulfillment in the businesses they create.
We’ve Come a Long Way
The New York Times has a story that shows just how far entrepreneurship has come in the past twenty-five years.
Undergraduate courses in how to start and run a small business are becoming as ubiquitous as Economics 101. Gone is the conventional wisdom that running a small business cannot be learned by sitting in a classroom.
According to the Kauffman Foundation in Kansas City, Mo., more than 2,000 colleges and universities now offer at least a class and often an entire course of study in entrepreneurship. That is up from 253 institutions offering such courses in 1985. More than 200,000 students are enrolled in such courses, compared with 16,000 in 1985.
I first started teaching as a graduate student in 1981 and had my first full-time teaching position in 1982. Although I helped to launch an entrepreneurship program where I taught, it met with significant resistance from faculty, parents and even many students. I left in teaching in 1988 in part because I was frustrated by how resistant business schools were to teaching entrepreneurship and small business.
Entrepreneurship education come a long way in a short time when you consider the glacial pace of change in academia.
(Thanks to soon to be alumnae of Belmont and aspiring social entrepreneur, Janice Dotti, for passing this along).
No Thanks, Brookings
The Brookings Institution has been busy pushing forward on an agenda for socialized entrepreneurship.
Two items from the National Dialogue on Entrepreneurship this week caught my eye (and raised the hair on the back of my neck).
First:
A new report from the Information Technology and Innovation Foundation and the Brookings Institution suggests that a new National Innovation Foundation could do a better job of structuring key Federal agencies to support innovation. The study recommends that a newly created National Innovation Foundation serve as the Federal government’s primary support mechanism and point of contact for issues related to innovation. The report proposes three possible structures for a new NIF: housed within the Commerce Department; a publicly-sponsored corporation similar to the Corporation for Public Broadcasting; and, as an independent federal agency like the National Science Foundation.
I must admit I would never have dreamed of modeling anything after the Corporation for Public Broadcasting.
Next. another report. I should note that both of these are from the same series, which they call Blueprint for American Prosperity: Unleashing the Potential of a Metropolitan Nation:
A new Brookings Institution study contends that current Federal policies do too little to promote cluster creation, i.e. agglomerations of businesses, service providers, and other partners who operate in a particular field or sector. As part of a wider set of programs to spur innovation, the report recommends that policymakers initiate a new set of programs to catalyze cluster activity across the US. This effort would contain two components. First, a Cluster Information Center would help map cluster initiatives across the US and provide research and evaluation about these programs. This effort is modeled on a successful European effort, the European Cluster Observatory. Second, a new Federal grant program (of about $360 million) to help fund state and regional cluster initiatives. This effort would help seed state and local innovations and also build closer connections between Federal, state and local partners.
And while we’re at it, let’s create another federal agency promoting rent seeking and model it after a European agency that tries to steer business activity to advance social agendas.
No thanks, Brookings! Keep your hands off American free enterprise! Markets work. Federal bureaucracies do not.
Niche Markets Need Planning
My column in this week’s Tennessean looks at the ins and outs of niche markets.
Generally, a niche strategy is a good way to enter the market for a new business. It usually takes fewer resources for the startup because of lower marketing costs and the ability to start on a smaller scale.
Success rates tend to be higher for niche businesses since they have less direct competition.
Without much competition, niche businesses often can charge higher prices, which allows for quicker positive cash flow during startup and better margins once the company is profitable.
But, entrepreneurs also should be cautious when picking a niche. Here are some things to consider.
My column offers five key tips for finding success in a niche market.
Seeding Innovation
Ideablob.com attracts a large number of ideas for social ventures. This one caught my attention as continue as guest advisor for this week. Seeding Labs reclaims and refurbishes laboratory equipment from universities, hospitals and biotechnology companies in order to equip talented scientists and clinicians living and working in the developing world.
Seeding Labs aims to transform the global map of scientific innovation hubs. By refurbishing laboratory equipment from universities and biotechnology companies in the United States, we equip talented scientists working in the developing world and reduce the environmental burden in the U.S. We believe that talent is everywhere, and that scientific research is the key to improvements in education, healthcare, environmental stewardship and a thriving modern economy. Our goal is to help our colleagues pursue the issues that matter most to them, at the same time connecting scientific communities across international borders. Visit us at www.seedinglabs.org.
My advice:
I would build partnerships with universities through their new interest in social entrepreneurship and service learning. Rather than just plug into their research labs, also tie into their academic programs dedicated to either social entrepreneurship and/or service learning.
Social entrepreneurship is popping up all over the country. Some schools have developed single courses, while others have developed full programs (for example, here at Belmont University we will be launching a Social Entrepreneurship major this coming fall).
Service learning is more established in academia. Using this pedagogy professors add service projects to classes that apply what students are learning to real situations that are tied to social issues in the community or around the world. Some schools have campus wide requirements for students to get involved in service learning (Duke just got millions of dollars for such an initiative).
Don’t assume that the research labs on campus interact with social entrepreneurship and service learning programs on their campuses. Universities are notorious for creating academic silos. You may need to create the bridge for them. Once you do, you will not only have access to the laboratory equipment, but to a ready army of skilled and talented volunteers. There is a good chance that they also have access to funding to help with each project.
Small Start-ups Don’t Always Mean Small Business
The average start-up in the US has about $10,000 in funding to get things rolling. A common myth is that if you start small you will stay small. Not true. Even the most cash tight bootstrappers can build a business that is scalable.
From Texasmonthly.com:
Founded Sweet Leaf Tea Company in 1998 with $10,000 and a recipe from his grandmother / Now markets ten flavors of bottled iced tea in all fifty states and has doubled sales each year for the past five years / Announced in April that he had raised $18 million in private equity.
This story is worth clicking through to hear about this success story from the entrepreneur’s own words.
(Thanks to Bro’ Steve for passing this along).
Perception and Reality
I was at a meeting attended by several local entrepreneurs the other morning. They all agreed that everyone is worried that the economy is in bad shape, but none of them were really feeling recessionary pressures in their businesses. The only thing that worried them directly was inflation.
In economics, perception can very quickly become reality. With enough talk about a bad economy we can all start behaving like there is poor economic conditions.
Take the latest results from the OPEN survey from American Express Small Business Monitor as a case in point.
Optimism among small business owners is at the lowest point in the six-year history of the OPEN survey. The economy is cited by four in ten small business owners (44%) as the issue that will most sway their decision on the next president of the United States, followed at a distance by homeland security (cited by 16%).
HOWEVER, despite concerns over the economy, growth is still a priority for entrepreneurs as seven in ten business owners plan to grow their business over the next six months and 31% of entrepreneurs report plans to hire, up 7% from the fall.
That is the psychology of mass panic that can make a weak economy seem worse than it really is. The media loves bad news (as they used to say — “It sells newspapers”), so they have an incentive to make even worrisome news about the economy sound much more dire than it actually is at the present time. It can also lead to behaviors that make the economy become worse than it otherwise might have.
Are we in a slow down? Yes. Is it across all sectors? No. Is it across all geographic regions? Definitely not. Are we in a recession? Not yet, and if small business has its way and pursues the growth plans they are talking about, I doubt we will actually experience a true recession.
However, I still remain very concerned about inflation. Very, very concerned.
Macro Environment as Important as Competitive Environment
The idea I picked to give advice to for ideablob.com Week at the Entrepreneurial Mind is one that offers an innovative product tied to wellness.
Individuals begin fitness programs each year, but set unrealistic goals or improperly structure their fitness programs and eventually lose interest. I’m developing a portable touch-screen device equipped with a heart rate monitor, acting as a personal trainer. The device uploads workouts from our website, where based off an individual’s fitness goals, they can build their own workout or use one of ours. The device displays progress charts, advice for future workouts, and can incorporate daily nutrition information. The website also functions as a social networking website centered around device results for exercise gurus, athletes, and anyone who enjoys living a healthy lifestyle.
While I think this is a cool idea, the entrepreneurs need to keep their eye on the big picture — that is the future of healthcare policy in the US — and not just their customers and competitors.
My advice:
Wellness might well become the “next big thing” in healthcare. The reason I say “might” is due to the uncertainty of the elective and what healthcare plan ends up being passed in the next president’s term.
This is a great example of a good idea that may blossom or fade due to macro trends outside of the entrepreneur’s control.
If healthcare stays a primarily private sector industry, products like yours has a bright future. Health plans will be trying to implement more programs and initiatives to help their population of covered lives get healthier. As a society we have become too sedentary and are eating too many calories. It is taking its toll on health care costs. Insurance plans are trying to find ways to incentivize people to get healthier and use fewer resources for healthcare. Your product would be a great tool for this.
If healthcare goes with a more public payment model in the next few years, we will likely have all attention focused on lobbying to keep coverage for certain illnesses. We will also see resources going to create healthcare entities that will be able to maximize their market share of federalized healthcare dollars (think economic rent seeking). Not as much money will be going to wellness.
When I was and entrepreneur in the healthcare industry we paid attention to the macro changes in the 1980s and 1990s. We saw a shift from insurance to managed care and positioned our business accordingly. We saw Medicaid being pushed down from the federal level to individual states — again we shaped our strategy to meet this macro trend. We still paid attention to our customers and competition, but those really involved more short-term tactical decisions. Our strategy was shaped by the direction of those broader trends.
Don’t just look at your competitive environment — keep your eye on the macro trends that may shape your future. See which way the election takes our country as it will have a huge impact on healthcare and on the wellness sector you are operating in with your new product.
Family and Friends
This morning’s installment for ideablob.com Week at the Entrepreneurial Mind looks at an idea to develop sportswear for women:
Vintage Blue is a vintage inspired sportswear line for women. We hold the exclusive license to the All American Girls Professional Baseball League featured in the film A League of their Own. We create t-shirts with graphics from the 1940’s and 50’s. Our line is environmentally friendly using non-toxic dyes and 100% organic cotton tees. We also give back to the community with our internship program encouraging young women to be positive, motivated individuals while learning the ins and outs of the fashion industry. We will also donate 5% of our profit to the Achieving Independence Center Female Mentoring which helps young women achieve self-sufficiency through mentoring relationships.
They stated that their main concern is funding, so here is my advice:
Funding for this venture is probably limited to family and friends.
Your market is probably too limited and does not offer enough growth potential for traditional equity investment (angels and VCs). Not enough growth potential, especially using a movie that is several years old as your theme. Don’t feel bad about this, as they actually only fund a fraction of a percent of deals in the US.
Banks will only loan you money on your personal credit for a start-up like this. If you have homes that you can borrow against you should be able to get some help from a bank.
So that leaves friends and family. Treat their money as a true outside investment. Set up terms and conditions. Be realistic with them about potential returns and all of the risks. Thanksgiving dinner comes every year, so let’s avoid creating family problems that center around unrealized expectations of any investment. Families can be complicated enough as it is!
Social Ventures Need to Have Market Relevance
Social entrepreneur Sam Davidson was offered the following advice from one of the founders of a fair trade coffee venture called Higher Ground located in Alabama:
It would be moronic to push an issue in the marketplace if you couldn’t be competitive with it.
Even social ventures need to understand the fundamentals of good business opportunities. There needs to be a big enough market that will pay enough money to make the business financially viable.
Sam went on to make this observation on this advice at his blog:
No matter how well-meaning Higher Ground was, if it didn’t make a great-tasting coffee that was competitively priced, no one would buy it, and moreover, no one would listen. But because they’re able to offer a tasty brew, people take notice and happily support their efforts to improve the lives of coffee growers abroad and nonprofits at home.
That is why we call them social entrepreneurs — they need to be effective entrepreneurs if they want to help their particular cause.