Tag: entrepreneurial

Some Lessons from 2011

Jeff Wuorio shares a collection of 2011 lessons learned from various entrepreneurs that he posted at Business on Main.

Here are two of my favorites:

“The biggest lesson I learned in 2011 was for our business to question our beliefs. We all have preconceptions about what our customers want, how best to market to them, how best to support them and so on. But if we set aside those preconceptions and brainstorm new solutions, we can come up with unexpectedly good new ideas.”
— Michael Kaiser-Nyman, Impact Dialing

“I’ve learned this year not to take on too much work. I have an
18-month-old little boy who is taking up a lot of what used to be my
‘work from home’ time. Rather than stressing about all the stuff that’s
not getting done, this year I made it a priority to try and ignore the
small stuff, understanding that, if left alone, none of these
non-actions would cause the company to go down the drain anyway.”
— Adam Koos, Libertas Wealth Management Group

Both of these lessons resonated with me personally.

The first lesson reinforces what we are working on with our program here at Belmont, which has seen tremendous growth and development over the past couple of years.  We have put a lot of features into our program for our students that are based on our own “preconceptions” about what they want and need.  As we continue to improve our entrepreneurship program we need continue to co-create with our students and alumni.

The second lesson hits home as we now have two adorable little granddaughters who both live here in the Nashville area. I need to keep time for them and the rest of my family.  If I don’t make an effort to do this, no one else will do it for me.  I guess I just figured out my New Year’s resolution for 2012!

When is a Failed Concept a Success?

A student come up to me before class the week before their business plans were due this past semester looking very dejected.  

“My concept just can’t work,” she said.  The more she tried to pivot the business model, the more she uncovered evidence that convinced her that she had reached a dead end.

This is what is known as a teachable moment.

Aspiring entrepreneurs go through an arduous process between the initial spark of an idea to the eventual launch of a business.  

They start by sifting through the various ideas they have to find the one that has the most promise.  Many ideas may appear promising at a first glance, but careful assessment helps to sort out those that have little promise. Eventually, the entrepreneur selects a product or service they hope will be accepted by the market.

The next step is for the entrepreneur to take the idea and begin to build a business model.   

The primary goal of business modeling is not to try and rationalize starting a business based on your idea.  Instead, the objective is to discover all of the challenges, flaws, and gaps that need to be addressed if you have any hope of moving from a good idea to a successful business.  Business modeling is a process of finding problems and fixing them by altering and expanding the operating framework needed to launch the business and, when necessary, pivoting the concept based on what is learned about your customers and what they really want.   

When developing a business model, you may reach a point where you realize that no matter what you do, it just won’t work.  This realization can happen very late in the process even at the point when you are developing a written business plan based on the business model.  If that happens, no matter how much time and effort you have put into the project, you need to be decisive and abandon it.  

But this is much easier said than done.  You have spent countless hours talking about the business with friends and family.  You have shared your idea with advisors and mentors.  You may have even pitched the idea in business plan competitions and to investor groups.  It feels like your reputation is riding on getting the business launched.  There is a sense of inevitability that launching the business is what you are going to do.

But do not ignore the evidence.  Have the fortitude to walk away.  The fact that you have spent countless hours getting your idea to this point is not a reason to keep moving ahead.  

So back to that teachable moment….  

As class started that morning I asked the student to share her story with her classmates. I then looked her in the eyes and emphatically said, “You did a great job!  You stayed true to the process and had the courage to acknowledge that your concept just won’t work.  Congratulations!”

The end of this story is that while her initial idea did not work out, the process helped her discover several new ideas and gave her the opportunity to make several new connections with people to add to her network.  She learned the lesson that while her idea may have failed, she was successful.

Kopecky Family Band Named Top Live Act

One of our recent alums, Gabe Simon, is a member of the Kopecky Family Band.

The key to their business model, which Gabe worked on in our program, is to build a strong, loyal following that has a sense of community with the band.  A key aspect of delivering that value is through live performance.

I ran into Gabe yesterday at Bongo Java (my favorite local coffee shop).  It seems they are executing on their business model.  Paste Magazine named them as 18th on the 25 Best Live Acts of 2011.

Check out “Howlin’ at the Moon” in the clip below (Gabe is singing the lead in this song):

Millennial Entrepreneurs Waiting in the Wings

Based on the history of previous economic downturns, America’s entrepreneurs will need to play a key role in helping to rebuild our economy.

So, just what is the current mindset and makeup of those in the entrepreneurial sector of the U.S. economy?

Even in a weak economy, or quite possibly because of it, there continues to be a strong interest among the millennial generation in pursuing an entrepreneurial career.

A recent survey of young Americans between the ages of 18 and 34 conducted by the Kauffman Foundation found that 54 percent of those surveyed have entrepreneurial aspirations, and about half of these have already launched a business.

An even higher percentage of young people of color — 64 percent of Latinos and 63 percent of African-Americans — expressed a desire to start their own companies. Although some previous studies have found an increased interest in business ownership among women, the Kauffman study found that women still lag in entrepreneurial intent (44 percent compared to 57 percent among men).

Given that there are an estimated 50 million millennials in the U.S., their interest in launching new businesses bodes well for the long-term health of the economy.

What we are finding is that not all of them are in it simply for the money.

The Global Entrepreneurship Monitor (GEM) 2010 National Entrepreneurial Assessment for the USA, conducted by Babson College and Baruch College, found that startup entrepreneurs are increasingly focused on both social and economic goals for their businesses.

Entrepreneurs no longer just want to do well financially with their ventures, but also want to use business as a means to support their commitment to their favorite social causes.

This shift in how small business owners measure their success is also evident in the results of The Hartford’s recent Small Business Success Study. This survey found that only 18 percent say that profitability is the most important factor in defining success. In fact, 82 percent say they place great importance on doing something they feel passionate about and enjoy.

A growing number of entrepreneurs are interested in keeping balance in their lives. The Hartford survey reported that for 79 percent of the entrepreneurs they surveyed, achieving a comfortable lifestyle from their business is most important to them.

There is a growing chorus of experts who are worried that entrepreneurs do not seem ready or willing to step forward and provide the economic push we need to begin a real economic recovery.

However, the good news is that the generation now coming into the workforce has a strong entrepreneurial spirit. That should help to eventually create long-term, sustainable growth for America.

Options for Small Business Financing

The state of small business financing is a bit uncertain these days in terms of both supply and demand.

To get the full picture, we need to frame this discussion by understanding how unimportant securing new financing is to small businesses in the current economic conditions.  The most recent survey from the NFIB survey released this week suggests just how much small business owners are retrenching right now.

The NFIB survey reports that only four percent of owners they surveyed reported financing as their most important business problem.  Ninety-one percent reported that all their credit needs were met or that they were not interested in borrowing.  Only nine percent reported that not all of their credit needs were satisfied.

But even if demand for credit is not strong right now, finding financing can be a challenge for those businesses seeking new funding.

The Hartford Small Business Success Survey, which surveyed 2,000 small business owners, found that 34 percent of respondents say that obtaining a loan or other capital is difficult.

Traditional equity and debt financing options have become much more difficult to secure.  Banks are very slow and cautious to lend and equity financing has become almost timid. 

For those few small business owners seeking new funding, Joanna Krotz offers some non-traditional alternatives in her article at Business on Main:

  1. Tap community banks. If you are going to have any luck with bank loans, your best shot is with a community bank with a strong SBA lending track record.
  2. Leverage your social media network. Krotz suggests that you should look to Facebook to broaden your “friend network” for funding.  I would caution to approach any funding from family and friends with formal agreements supported with a complete and honest set of information about your business conditions. 
  3. Apply for a microloan.There are more micro-lenders popping up across the U.S.
  4. Join a credit union, which can offer up to a $50,000 business loan to its members.
  5. Hire a loan hunter. New ventures, such as MultiFunding which was founded by my friend Ami Kassar, are having good success sourcing loans for small businesses.  They charge a small fee only when a loan is secured. 
  6. Look for local lenders.  Local angel groups are becoming more active with smaller levels of funding for emerging businesses.

As I have said before, piling more debt onto small businesses is not the solution to our economic woes.  That being said, some small business owners do need funding and are good risks.  While finding new funds is definitely a much greater challenge, there are some new options on the financing landscape. 

The Other Side of Dropping Out to Pursue Entrepreneurial Career

In May of this year, Peter Thiel, a co-founder of PayPal and an early investor in Facebook, awarded 24 young, aspiring entrepreneurs $100,000 to “drop out of school and become world-changing visionaries.”

Now that the publicity has settled down, I thought it would be a good time to offer the perspective of three entrepreneurs who dropped out of Belmont’s entrepreneurship program.

None of them was part of Thiel’s program, but each dropped out to chase his entrepreneurial dreams. However, all three eventually decided to return to school to finish their degrees.

John Price and Sam Dryden dropped out of the entrepreneurship program to pursue their photography and video-related businesses.

“I have never been a typical student, and I often found myself frustrated with classwork,” Dryden said. “When it looked like my business was going to be a success, I jumped at the opportunity to pursue something that at the time I decided was more important than a degree.

“We are told to study hard so you can get a degree and then a job. Hey, I already had income, so why waste time in school, right?”

Both of them saw a choice: stay in school and be a student, or pursue their careers as entrepreneurs.

“I knew that I wouldn’t be able to reach my business goals while attending a university and splitting the time,” Price said.

Timothy Weber left the Belmont entrepreneurship program to pursue his Web-based business, GoodMusicAllDay, full time. However, it wasn’t long before he decided leaving school might not have been a wise choice.

“After just one year out of college, I realized how little of a business background I had and how many ‘lessons’ I could have learned in a classroom instead of after they had already negatively impacted my business,” Weber said.

All three entrepreneurs believe the business experience they gained while out of school enhanced their learning curve when they returned.

“Leaving school gave me crucial experience that in my opinion made the return to Belmont more valuable than if I had never left,” Dryden said. “My experiences out in the ‘real world’ gave my professors leverage to turn class time into very meaningful time for me. It was no longer homework, and it was instead a focused business workshop that had actual repercussions in life.”

At Belmont, as in many other entrepreneurship programs across the country, professors encourage students to start ventures while in school to enhance what the course work offers them.

“The entrepreneurship program allowed me to understand my business before spending all my money and time pursuing it,” Price said. “The time in college provided me with the opportunity to focus on the bones of my business before I applied it to the real world.

“The time I would spend talking through my business ideas with other students was some of best feedback I could have gathered.”

These three entrepreneurs learned an important lesson when they dropped out of college. It does not have to become a choice between pursuing your dreams and advancing your education, as both work better when pursued hand in hand.

Bootstrapping into Space

logo_deimos.gif

I am in Madrid, Spain this week with a group of MBA students on a one week intensive study abroad.

Yesterday we visited an impressive company, Deimos Space, headquartered here in Madrid.

The founders were able to build a high growth company that launched their own satellite into space using only self-funding of $250K from the founders.  An amazing story of what bootstrapping and building the right team can accomplish.

They started, grew to a global presence in the space market, and exited their venture all within a ten year period.

Most of the founders are still with the company helping to take the core technologies they developed in Deimos into other markets and other applications.  There is a great description of how far they have taken their business model on their website.

Simple Act of Record Keeping Can Make All the Difference in Success

In the rush to start a new business, the simple act of keeping records often gets put on the back burner. But poor record keeping has been the demise of many otherwise successful businesses.

The entrepreneur needs clear and accurate records to help manage the challenges of the startup. These records can help manage cash flow and will provide financial statements that can help monitor the progress of the new venture.

The IRS expects even the smallest of businesses to document deductible expenses and support all items reported on tax returns.

Also, bankers monitor the progress of their business customers using financial information. If you cannot supply timely and accurate financial statements and other required information to your banker, it will hurt your ability to get loans when your business is at the stage where it could otherwise qualify.

The first step in establishing a record keeping system is setting up a separate checking account for the business. The deposits into this account should include any initial investment you make to start your business, the proceeds from any startup loans or investments, and all revenue from customers.

This checking account should be used to pay all expenses for the business, but not any personal expenses. As an owner you can draw money from this account, which can be deposited into a personal checking account to pay personal bills and living expenses.

Carefully document every expense paid from the business account. If paid by check, make careful notation of the check number, date of the check and purpose of the expense for each purchase. If paying with business debit or credit cards, keep detailed notes on each expense. Writing this on the back of each receipt is a good habit.

Set up a filing system, which can be either hard paper copies or scanned records, to track all documentation on receipts and expenses. Think ahead when setting up the filing system so it can accommodate the business as it grows. Use separate files for each vendor and customer and organize these files by type of expense or receipt.

Accounting software, such as QuickBooks, can help organize financial information. But remember that no system runs itself. Any system for record keeping relies on proper and timely input of information from you.

One lesson that many entrepreneurs learn the hard way is that you should not delegate financial record keeping to employees too quickly. Sadly, fraud is common in small startup businesses, and it often leads to the failure of an otherwise healthy business. Keep a close eye on financial records and put in systems of checks and balances. For example, never let the same person who handles revenues from customers also pay the bills, as this makes stealing money easier to cover up.

Record keeping may seem mundane compared with the other aspects of starting a business, but it is a critical step to ensure a healthy business. Record keeping systems should be simple to use. The job of the entrepreneur is to use this system to keep accurate, timely, consistent and compete records of all activity in the business.