Work and Leisure

My co-author Mike Naughton likes to remind people in his talks
around the world about faith and work that “If we don’t get leisure
right, we can’t get work right.”

The immediate conclusion that many people jump to at this point is
that they need leisure time to recharge for work, or to rest so they
can gain that competitive edge. Our leisure time from taking this view
is simply instrumental to helping us build a business or advance in our
careers. But, this is absolutely not what he means by his
statement. Mike has argued that when we look to non-work and leisure
time in terms of “balance” or in terms of “recharging”, we are missing
the point.

What Mike is saying is that we need to pursue an integrated life.
One in which our work and leisure are both guided by the same faith and
passion — toward the same ends. How we pursue our leisure time and how
we pursue our work both help create who we become — in terms of our
character and in terms of our virtuousness. Both leisure and work have
a purpose and give meaning to our lives — one does not simply support
the other.

The Wall Street Journal today reports on a new study that seems to offer empirical support for Mike’s point:

For the study, the five professors surveyed some 4,000
Americans, asking what they did the previous day and then quizzing them
in detail about three randomly selected events from the day. Those
surveyed were asked to rate the three episodes based on feelings such
as pain, happiness, stress and sadness. All this was used to calculate
what percentage of time people spent in an unpleasant state….

The standout cluster was what the authors label “engaging leisure
and spiritual activities,” things like visiting friends, exercising,
attending church, listening to music, fishing, reading a book, sitting
in a cafe or going to a party. When we spend time on our favorite of
these activities, we’re typically happy, engrossed and not especially
stressed.

So don’t view your weekend as a time to vegetate and to simply
recharge for the week. Pursue meaning and purpose in all that you do in
your life.

The Real Economic Hero

One of the myths about entrepreneurship is that high growth, high
potential ventures (some call them gazelles) are the main driver of
economic growth. For example, consider this quote from National Dialogue on Entrepreneurship:
“High-growth businesses — sometimes known as gazelles — -are the real
drivers of innovation and economic growth in our economy.”

High potential businesses are those that tend to attract venture
capital. VCs need businesses that yield very high returns in a very
short time — some will tell you that they seek 100% annual returns
with an exit within 3-5 years and others simply say they seek 5 times
their initial investment within about the same time period. However,
gazelle companies represent a tiny fraction of 1% of entrepreneurial
ventures.

Do they have an impact? Of course. Are they the “main driver of our economy”? No.

Those boring little entrepreneurs who toil away with only their own
investment — maybe with a little help from their family and friends —
is what really drives today’s entrepreneurial economy. It is these
small businesses that now generate about 50% of the US economy and have
created 77% of new jobs for the past twenty years. They do so with
ingenuity, bootstrapping, passion, persistence, and as Monroe Carell
told our students yesterday, patience.

Gazelles quickly get absorbed into corporate America within 3-5
years if they have any success. The average entrepreneur is not even
considered successful unless the business lasts at least five years.
They are in it for the long run.

Rather than measuring success in terms of mind-boggling returns to
investors, the average entrepreneur measures success in terms of making
a living for his/her family, by creating good jobs, by becoming able to
contribute to building a better community.

Don’t misunderstand my point. I like high growth. high potential
businesses. We get a few coming through our program and they are
challenging, interesting, and fun to watch. I hope we get more.

But, they are not the heroes of our entrepreneurial economy. That
title belongs to the average entrepreneur who will never get a dollar
from a venture capitalist — who builds a successful business seemingly
out of almost nothing.

Average entrepreneurs may not be “gazelles”, but they are the work horses we need to move this economy steadily into future.

Patience

Monroe Carell, former CEO of Central Parking,
talked to our students this morning about his journey of taking the
eight parking lots his father owned and turning it into the largest
parking company in the world.

It was interesting to hear him talk to our students about the
importance of patience, especially given the impatience of GenY where can i buy topiramate that I
talked about in my recent interview with Inc magazine. He
believes that patience is probably the most important trait of
successful entrepreneurs. I agree. This will probably be the biggest
lesson that the entrepreneurial Generation Y will need to learn if they
hope to be success over the long-run.

Pricing Strategies for Start-ups

My column in this week’s Tennessean looks at pricing strategies for start-ups.

Pricing is one way a business communicates about its products and services to its customers.  The power of pricing to shape what customers think about the quality and value of a product is often underestimated by new businesses.

Science Daily reported on a new study about placebos that demonstrates the psychological power of pricing.  In the study, researchers administered a light electric shock and asked the participants in the study to rate the pain of the shock.  Then all of the subjects were given a placebo (a sugar pill) that they were told was a new pain-killer.  Half of the subjects were told that the cost of the new pain mediation would be $2.50 per dose, while the other half were told that it would cost $0.10 per dose.  “In the full-price group, 85 percent of subjects experienced a reduction in pain after taking the placebo. In the low-price group, 61 percent said the pain was less.”

Why the significant difference in the power of the placebo with the higher price? People often use pricing as a means to judge quality of a product or service. 

There is a great example that comes from the story of a psychiatrist who tried to use pricing to phase out his practice.  He was getting ready to move toward retirement.  So he decided to double his rate for any new clients, assuming that nobody would pay that much for his services.  But, the opposite occurred. Referrals and new patients came in at the highest rate he had ever experienced in his long career in practice.  So he raised his rates again hoping this would do the trick and keep away any more new patients.  However, you guessed it — referrals increased even more.

When a business enters the market with prices well below the rest of the competitive landscape, which is common with many new entrepreneurs, they make a statement to potential customers.  Setting a below market price creates a phenomenon that I call “apologizing to the market.”

It is as if the entrepreneur is saying: “We are not as good as the rest, but hope our low price gets you to buy our product anyway.”

Entrepreneurs need to set a price that puts their product squarely where they want to be in the minds of their potential customers.  “We are as good as the rest.”  Or, “We are better than the rest.”  There is always a risk that you can over price your product and price yourself out of the market.  But, the most common pricing error we see in new businesses is to under price.

Often a new businesses needs to initially offer lower prices to attract customers.  It is best to do this through a temporary discount — through a grand opening sale or coupons.  Make it clear that the discount is to introduce the product so they give you a try. 

When it is hard to objectively evaluate the quality of a product or service, consumers look to other ways to judge quality.  And pricing can be one of the most powerful tools to communicate quality.

The Virtue of Impatience

Thanks to Donna Fenn for the nice comments about our program here at Belmont in her article published in Inc about the entrepreneurial –and impatient — nature of GenY:

Now, says Jeff Cornwall, who runs the program at Belmont,
“it’s a whole new world.” Fully 40% of undergrads come to Belmont with
businesses already started — an astounding number. “So we try to make
learning so relevant to their businesses that they don’t want to
leave,” he says. “A lot of what drives them is impatience. They want
fulfillment and success and they’re not willing to wait 10-15 years.
They want it today.” It’s a trait that may make GenY difficult to
employ, but that could bode well for their future entrepreneurial
success. What do you think? Is impatience an entrepreneurial virtue?

The Musician as Artisan

The music industry is facing an interesting puzzle these days How do
you run a business where customers do not want to pay and they do not
want advertising? From today’s Tennessean:

Efforts to sell music by subscription have mainly failed.

Yahoo recently gave up on its Music Unlimited subscription service
and sent its customers to Rhapsody, another struggling music provider.

But traditional radio’s offer of free music surrounded by audio
advertising also is being rejected by a generation that resents
undesirable interruptions.

“They want to be the program director, and they insist that the
program be free,” says Jerry Del Colliano, a professor of music
industry at the University of Southern California and a former
executive at Top 40 WIBG in Philadelphia.

The big boys in the industry do what big boys do in any industry
undergoing fundamental change — they try to get the government to
protect their interests. From TechCrunch (via Andy Tabar):

Warner Music, fully aware that the days of charging for recorded music are coming to an end, is now pushing for a music tax.

This isn’t the first time someone has called for a music tax. Peter
Jenner argued for it in Europe in 2006. Trent Reznor said the same
thing last year (as did the Songwriters Association of Canada)….

But Warner Music is doing more than just talking about a music tax.
They’ve hired industry veteran Jim Griffin to create a new entity that
would create a pool of money from user fees to be distributed to
artists and copyright holders.

We may be witnessing the end of the structure of the music industry
as we know it. The mass produced, mass marketed music is becoming a
relic of the past. And what does the future hold?

The predictions from the Institutue for the Future about the future of small business might offer a glimpse into the future of music:

Today, there are 26 million small businesses in the U.S.
that generate roughly $5 trillion in annual sales. If they were a
country that would make them the 2nd largest economy in the world!
Those numbers will continue to grow over the next decade as small
businesses re-emerge as artisans with even more economic force.

Artisans, historically defined as skilled craftsmen who
fashioned goods by hand, will re-emerge as an influential force in the
coming decade. These next-gen artisans will craft their goods and shape
the economy — through upswings and downturns — with an effect
reaching far beyond their neighborhoods, or even their nations. They’ll
work differently than their medieval counterparts, combining brain with
brawn as advances in technology and the reaches of globalization give
them greater opportunities to succeed.

What would a musical artisan look like? Probably a lot like James Lee Stanley.

My wife and I first heard James Lee Stanley at a “coffee house” in
the 1970s when we were attending the University of Wisconsin — Stevens
Point (WAY up north!!). James Lee was one of many songwriters who made
the circuit performing on college campuses at coffee house events. (As
a note of Entrepreneurial Mind trivia, I played in a couple of coffee
house sessions myself). The songwriters/musicians got a small payment
from the school and were allowed to sell their record albums (for the
younger generation — that is what we used to call “vinyl”).

Fast forward to 2008. One of my winter projects was to convert many
of our old vinyl albums into digital. When I got to our collection of
records from our coffee house days, I decided to “Google” the
songwriters to see what happened to them. Many had faded into obscurity
before the Internet was able to immortalize them in digital splendor.

James Lee Stanley on the other hand was alive and well and still
making the circuit. He had survived as an artisan in the music
industry. He’s got a website. And he has a blog offering
“tips, hints, clues and info for the artist in us all.” His blog
chronicles the life of a musical artisan offering his thoughts on
touring, performing, writing, studio work, contracts, stringing
guitars, and so forth. He still writes music, still records and still
tours.

Why does he continue to perform for well over thirty years? Not for possible fame and not for financial wealth.

What I know is that following your bliss is more rewarding
than making a bunch of money at something you absolutely hate doing. I
don’t feel that I’ve wasted my life or that I could have been more
successful at something else. I love what I do and I love trying to get
better at it and I love it that at my stage of life I still have so
much passion for what I do and I love how vibrant and alive it keeps me.

So what is the future of the music industry? I hope it is not an
industry propped up by government intervention as Warner Music would
have it.

Instead, I hope that it is an industry sustained by talented artists
— and successful artisans — who help us understand love, heart ache,
happiness, sadness, joy, despair. I hope it is full of people like
James Lee Stanley, whose view of success in his career is one we all
can learn something from, be we musicians or be we entrepreneurs.

Reducing Your Need for Debt

I’ve been preaching the need for entrepreneurs to practice fiscal
prudence during these uncertain economic times. Keeping debt load to a
minimum is one of the more important steps a business can take, due to
the inevitability of rising interest rates if inflation continues to
heat up. Also, banks will be coming under more pressure to clean up
their loan portfolios — this means that even if you have made all of
your payments on time the bank may call your loan simply because your
credit risk is too high to fit with tighter regulatory standards.

Helen Anderson at her blog called Bankaholic also worries about entrepreneurs who take on too much debt:

As an emerging entrepreneur, it is very easy to quickly
accumulate debts that are substantial enough to kill your burgeoning
business before it even gets off the ground. But it does not have to be
that way. Take the time to examine your business workflow and you will
likely discover a number of extraneous costs that can be eliminated to
improve the health of your bottom line. Here are eight common practices
that lead to common results; learn to avoid them and you will be
uncommonly successful.

You can read her eight avoidable causes of unnecessary business debt here.

New Orleans Looks to Entrepreneurs to Help Rebuild the City

One thing I think we can all agree on — government efforts to help New Orleans in the post-Katrina recovery have resulted in minimal success.
Startup New Orleans is, instead, looking to free enterprise to rebuild the city one entrepreneur at a time.
To attract more of these types of individuals, Start Up New Orleans has been established by four of the city’s young business leaders. A resource for entrepreneurs seeking information and connections to other entrepreneurs, Start Up New Orleans is designed to leverage the city’s unique qualities (rich culture, low costs, economic incentives), which distinguish it from anywhere else in the United States.
According to Sean Cummings, a local developer and co-founder of Start Up New Orleans, “New Orleans has always been a beacon for people with imagination, daring, and alternative approaches to solving problems. Our mission is to attract these types of people to New Orleans, and provide them with the information and resources they need to start their businesses here.”
“Silicon Valley became the nerve center for technology in the U.S. because of the investment businesses in the region made in attracting and retaining technology people,” said Nic Perkin, also a co-founder of Start-Up New Orleans and partner in the New Orleans Exchange, a new technology start-up. “The same can be said for New York City with financial people. What we’re doing here in New Orleans is making this the city of choice for entrepreneurs. If you’re smart, motivated and have a track record of success, we want you here.”
Offering a mosaic of case studies of success and profiles of innovators whose ideas are changing the Greater New Orleans region for the better, the Start Up New Orleans website is a portal through which entrepreneurs can access information about establishing operations in New Orleans.
This project is yet another example of how social enterprise can create real social change through the free market.

Forbes Blog Network Announced

The Entrepreneurial Mind will be joining several others in the newly announced Forbes.com Business and Finance Blog Network, comprised of a community of pre-screened, influential business and financial blogs.
This is part of a growing trend among media companies to build networks of existing blogs.
The Forbes.com Blog Network’s content will focus on senior business decision makers and high-net-worth investors. Topics will be relevant to the banking, trading, hedge fund management, affluent investing, and senior business decision-making communities. Participation in the network is by invitation only, and all blogs are vetted by Forbes.com editors for appropriate content, and to ensure that they are in keeping with the Forbes editorial brand.
The network will allow advertisers to target a highly engaged, exclusive niche audience of senior business decision makers and affluent investors easily and effectively. Four hundred-plus blogs have already joined the network, with many more expected to sign on before the official launch in the next few weeks.
“There is no denying the growing importance and influence of blogs within the media landscape,” said Forbes.com President and Chief Executive Officer Jim Spanfeller. “Forbes.com can ensure advertisers are reaching a hard-to-find and very desirable audience within safe, well-lit environments by exclusively inviting ‘best of breed’ business and investing bloggers to our new Business and Finance Blog Network.”
There will be a few cosmetic changes that you may notice over the next few weeks here at the Entrepreneurial Mind. Also, we will be changing the URL address of the blog to allow for the advertising that goes along with joining this network (we are currently on an “edu” address, which does not allow us to accept advertising).
But, the content will not change. I will continue to provide information and advice for entrepreneurs. I will also continue to offer my commentary on issues of public policy that impact small businesses and entrepreneurs.

Happy Easter

We’re off to spend Easter Break in Miami with my parents. I’ll be back some time next week.
If you get a chance, make sure to watch Belmont take on Duke in the first round of the NCAA tournament this Thursday at 7:10 p.m. EDT.
Go Bruins!!
Have a Happy Easter!
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