Tag: cornwall

Keep on Hunkering Down

As I feared, things are looking bleak on Main Street.

Chief economist for the NFIB William C. Dunkelberg, issued the following statement on May job numbers, based on NFIB’s monthly economic survey that will be released on Tuesday, June 7, 2011.

“After solid
job gains early in the year, progress has slowed to a trickle. The two NFIB
indicators–job openings and hiring plans–that predict the unemployment rate
both fell, suggesting that the rate itself will rise. 

“May’s job
numbers will disappoint; meaningful job creation on Main Street has
collapsed. 

“Twelve
percent (seasonally adjusted) of small-business owners reported unfilled job
openings (down 2 points). Further indications of minimal future growth include
the fact that in the next three months, 13 percent plan to increase employment
(down 3 points), and 8 percent plan to reduce their workforce (up 2 points).
That yields a seasonally adjusted net negative 1 percent of owners planning to
create new jobs, a 3 point loss from April.

“Overall, reports of job reductions have
returned to historically normal levels. However, the percent of owners hiring
has not recovered to levels historically observed after two years of expansion.
With one in four owners still
reporting ‘weak sales’ as their  No. 1 business problem, there is little
need to add employees, especially with the uncertainty about future labor costs
arising from new regulation and legislation. And, if Congress doesn’t deal
effectively with the trillion dollar deficit, we’ve got plenty to keep us
worried.”

Plenty to keep us worried indeed.  Remember that almost every past recovery has been led by small business owners.

And we still have to worry about inflation even with a possible double dip recession…..

Keep on hunkering down….This economic morass ain’t even close to being over.

Millennial Entrepreneurs

A recent study from The Guardian Life Small Business Research Institute looks at something near and dear to my heart — Millennial Generation small business
owners as compared to other generations. 

Here are my thoughts on a few of their key findings:

  • Millennials
    are 50% more likely to expand their business compared to prior generations    .      This one does not surprise me.  More and more of today’s young entrepreneurs have studied entrepreneurship.  There are also many more resources out there for them to draw upon.  Part of what drives the interest in expansion is confidence.  Understanding what drives successful growth makes seem more attainable.  Many of our students talk about how to scale their ventures — it seems to be part of their basic outlook on starting ventures.
  • Millennials reported they are 100% more likely to sell
    their business    .      Again, not at all surprising.  Exit planning is fundamental to what they learn about entrepreneurship and what they most often hear about it in media where to buy topamax online stories.  It also fits with their limited attention span — their words, not mine.  Almost all of my students admit that they probably will lose interest in a business within a few years.  They seem to be born to be serial entrepreneurs. 
  • Millennials are 120% more likely to be a business owner without other workplace
    experience    .      The old common wisdom was that you need to go out and work for someone for years before you strike out on your own.  Not any more.  We encourage our students to start ventures while in school to use as learning vehicles.  Every year we see more and more young graduates walk across the stage with their diploma and a business in hand.
  • Only
    8% of Millennials inherited their business from their parents    .      No kidding.  The Baby Boomers have not saved enough to retire, so they will be needing those businesses for a long, long time!!

From Distress to Success

distress to success cover 3.jpg

I have invited Bobby Guy, a local attorney here in Nashville, to speak in my classes from time to time. While it may not seem that unusual or blog-worthy to mention that I have a lawyer in my class, it is his area of law that makes his visit unusual. For you see, Mr. Guy practices bankruptcy law. How often do entrepreneurs get to hear from a person who understands business failure from the inside before they start their ventures?

Bobby has now taken what he has learned from years of practicing bankruptcy law and turned it into a book titled Distress to Success. (You can see a preview of the book at Amazon).

Bobby Guy is one of the few attorneys I have met who truly understand that financial distress in business is not an event, but a process that unfolds over time due to an array of specific decisions.  Taking this perspective offers both businesses and their investors the opportunity to develop a sound strategy early enough in this process to actually help many of these businesses avoid bankruptcy.  This is truly a groundbreaking book that can help transform how all of us work with distressed businesses.

The book has several audiences.

It is written for the business leader struggling to return a company from the “red” into the “black.”  For the struggling company, Distress to Success is a roadmap to early intervention when good options are still available. It presents business executives with a new paradigm for thinking about financial distress, takes them on a crash course through what to expect, and then arms them with strategies for achieving a confident recovery.
  
For the distressed investor, Distress to Success outlines the complex strategies that arise in the ever-evolving landscape of insolvency, and provides buyers with tactics for achieving success in the pursuit of exciting undervalued opportunities.

Even in these difficult times success can be created out of impending failure.

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Outlook Uncertain

In addition to some not so good hard economic data coming out lately, there is a growing pessimism among entrepreneurs and those who pay attention to entrepreneurs in our economy.

As I wrote last week, the latest NFIB survey of small business owners does not paint a rosy picture of their mood. The results of the survey are out this morning and once again we see a decline in their optimism this month.

“A second consecutive month of decline in small-business optimism does very little to encourage further confidence in a strong economic recovery,” said NFIB Chief Economist Bill Dunkelberg. “Owners simply find no reason to be optimistic about the future and therefore they find no reason to pick up the pace of spending and hiring. It’s difficult to know exactly why the outlook for small firms is in decline; but it’s a safe bet that political and economic uncertainty–about the deficit, the threat of inflation, rising energy and health care costs–are at top of the mind for most small-business owners. Who is going to stay positive in this turbulent political environment?”

The Kauffman economics bloggers (of which I am one) also share the lack of optimism found among business owners.

“Uncertain” continues to be the word they would use most to describe economy.  In fact, 85% view current economic conditions as “mixed” or “facing recession,” up 8% from first quarter of 2011.  And if that isn’t enough, 32% believe the country is doing “worse” than official statistics show.

Small business owners are putting their pessimism into action, or should I say a lack of action according to the NFIB survey.

Only 50 percent of all firms reported making capital outlays last month,
down 1 point from the month prior. The percent of owners planning
capital outlays in the next three to six months fell 3 points to 21
percent, a recession level reading. 

Money is cheap, but most owners are
not interested in a loan to finance equipment they don’t need. 
Prospects are still uncertain enough to discourage any but the most
profitable and promising investments.  A wise position to take from my perspective.

We are seeing many small business owners begin to take action to deal with inflation.  (I know, I know…what inflation, if we believe the government’s cooked and filtered inflation statistics).  In April, a net 12 percent reported raising average selling prices, a 3 point gain from March and 23 points higher than last September. A net 24 percent planned hikes in average selling prices in April.

So what do business owners and economists agree on?  More recessionary times yet to come, coupled with the new reality of inflation.

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A Good Business Attorney is a Key Resource for Start-ups

One of the first bits of wisdom my father shared with me many years ago was that a small business needed “a strong three-legged stool” to support it. The three legs should consist of a strong attorney, a CPA and a business banker.

To save money, many startup entrepreneurs cut corners on legal work. With all the use of do-it-yourself legal websites, many entrepreneurs seem to be questioning whether they need a personal relationship with an attorney.

“Every business is different, and that is equally true for their legal needs,” said Chris Sloan, an attorney with the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz. “For the truly simple, small, mom-and- pop types of businesses, you may be OK with a do-it-yourself approach. But if you are expecting a lot of growth, or have partners, an off-the-shelf approach is often a poor fit.”

I tell entrepreneurs that when it comes to partnership/shareholder agreements, you can pay your attorney now or pay him a lot more later.

“There’s a reason why we call partnership disputes ‘business divorces,’ ” Sloan said. “They can be just about as nasty and emotional at times.

“The best way to avoid that is with an agreement that addresses issues like decision-making, dispute resolution, what happens if someone dies or wants to leave, and how and when to shut or sell the business.

“With a good agreement, you accomplish two things. First, you avoid a dispute down the road, and second, you have a chance to preserve the personal relationships.”
Shape the issues

“First, find a business lawyer,” Sloan said. “Many lawyers cannot think outside of the law school approach of spotting every issue and addressing it. Those are not business lawyers.

“A good lawyer also has the heart of a teacher; they should be able to explain things in a way that the client can understand them and feels comfortable. How they do this also gives you a good indication of how they will write, how they will negotiate and how they will interact with another party.

“Lastly, remember that lawyers are like doctors; there are many different areas of expertise. Just like you wouldn’t go to an internist for open heart surgery, you shouldn’t go to a public securities lawyer or a litigator for startup work.”

One attorney with whom I worked in my business past used to say that he wanted me to first shape the issues we were working on for him from a business perspective, and then he’d do the lawyering.

Sloan agreed with this advice.

“My job isn’t to say, ‘Do this. Don’t do that.’ It’s for you to tell me your business objective, and for me to advise you on the different ways to accomplish it and the risks associated with each one.”

A strong legal foundation is one of the three legs of the stool supporting a small business. My subsequent columns will examine the other two legs of the stool.

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Go Belmont!

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For the past eight years I have had the pleasure of taking our students from Belmont University to the International Collegiate DECA competition. 

This was the largest Collegiate DECA Event ever, with about
1,500 international competitors. 

Of our 28 Belmont participants, we had 20 end up in the
finals today.

Congratulations to all of our International Winners:

Business Plan Event:

1st Place:  Tim Smith

3rd Place: Jake Jorgovan

Entrepreneurial Challenge:

2nd Place:  Jerell Harris, Areej Rabie, Josh
Gilreth

3rd Place:  Kathleen Bond, Matt Madden,
Lindsay Ricker

Top Ten:  Mandy Thompson, Hillary Unis, Jenna Owen

Sales Management:

2nd Place: Jerell Harris

Restaurant Management:

2nd Place:  Clark Buckner (second year in a
row)

Top 10:  Max Magura

Finalist:  Julia Cecere

Business Ethics:

Top 10: Lindsay Ricker and Kathleen Bond

Finalist:  Aubree Phillips and Charles Williams

Retail Management:

Finalist:  Hillary Unis

Bringing Values into Vision

Many entrepreneurs talk about integrating their values into the vision for a new business. But some take it one step further and actually build a business model based on their values.

Green Truck Moving Co. is a Nashville-based startup that is integrating the founders’ commitment to the environment and the community into the mission of their company.

The founders have implemented environmental practices that include using more eco-friendly fuel in their trucks, recycling and reusing moving materials, operating a virtually paperless business and using recycled materials. “While not all consumers are typically inclined to buy solely off a company’s values — say eco-friendliness — it is important to make consumers understand the potential impact it could have in their own community,” said co-founder and Belmont University MBA student Emmanuel Reed.

“We feel our values will help us grow our business, because it is not just a selling point. We have to walk the talk and have our values drive and inspire the people within our organization.”

They also commit to plant two trees after each move they perform for their customers.

As the business expands, they have plans to go even further in pursuit of environmental values. Green Truck Moving is developing rentable, reusable containers made of recycled material to replace traditional moving boxes.

Another example of integrating values and vision is a new business called Mattress Works.

This startup, founded by a group of Belmont students, exists to provide employment opportunities for the homeless and to divert waste from landfills through deconstructing and recycling used mattresses.

“We developed Mattress Works out of our passion to encourage environmental sustainability and create social change in the community,” said co-founder Emily Hollingsworth.

Mattress Works has secured used mattress suppliers and scrap buyers for two trial runs. It has processed about 160 mattresses between the two pilot operations. This served as proof of concept, which allowed it to test the viability of the business model and identify any weak spots.

After working out some kinks, the founders are moving forward with Mattresses Unlimited as their first supplier, and they are negotiating a contract with a second supplier.

“Our end goal is to transfer the ownership of the venture to a homeless man who has been trained as part of the Mattress Works team, embodying our belief in the power of entrepreneurship to facilitate change in the lives of others,” Hollingsworth said.

Hollingsworth is leading a team of students presenting Mattress Works at the Texas Christian University Values and Vision competition this week.

For a growing number of entrepreneurs, starting a business is more than just a vehicle to making money. Entrepreneurship is a path to pursue their values through the vision they create for a business.

Learning Business Hands-on

Two of my friends are helping to organize a summer camp for high school students to learn more about business through a week of experiential learning.  I will be participating as one of their guest instructors.  It will be held here in Nashville from July 17-23.

The Managing Ourselves Camp is an immersion in a working organization of the students’ own making under the leadership of experiential learning expert Dr.
John Miller,

The Managing Ourselves Camp is an excellent chance for high school students to challenge
their teamwork and leadership skills, strengthen their understanding of how
successful organizations work and learn about academic and career paths that
match their talents.

And They Said it Would Never Work

A few years ago we received a seed gift from a donor who has now become our major benefactor for the Center for Entrepreneurship here at Belmont.

He and I had a conversation about what the gift would allow us to do.  He deferred all decisions to me, but did make a challenge.  He said that he hoped that we could find ways to leverage his gift.

What a lot of entrepreneurship programs do to leverage gifts is to set up venture funds.  They make investments in student and alumni businesses with the hope that these investments will pay off big returns.

But that model does not work in our Center.  We have our unofficial “Life Time Warranty” which states that we never take ownership or consulting dollars from any students or alumni no matter how successful their businesses become.  We will always be there as their teachers and mentors.

So we came up with a different model.  We called it our Runway Loan Program, in which we would make $25,000 loans to student or alumni businesses that needed help and showed good potential.

Here are the terms:

  1. Zero percent interest
  2. Repayment of principle tied to cash flow (very small percentage so as not to bleed cash)
  3. Non-recourse loan
  4. Once principle is paid back a gift agreement kicks in which says they will give our Center a gift of 1% of the revenue of the business we supported that continues until the business is sold.  At that point we get 1% of the proceeds of the sale.

When I presented this model to a couple of national meetings I did not get a very warm and fuzzy response.

I was told, “They will never pay it back without teeth in the agreement.” 

And I heard, “No entrepreneur is going to give up 1% of revenues in perpetuity for a measly $25,000!!”

Well, they were wrong on both counts. 

We had strong interest for our initial round of two loans. 

Yesterday the first of the two loans, this one made to Just Kidding Productions (video company, whose founders also started the apps company Aloompa), was paid back to us in full.

Loan Payback edit 1 small.jpg

And thanks to the on-going generosity of  our donor, we will be making many more Runway Loans for years to come!