Tag: entrepreneurial

New Economic Reality Leads to New Business Models

After developing their business model and forecasting expenses, many aspiring entrepreneurs are suffering from sticker shock. The thought of investing a large amount of money or going into debt is scaring many away from their startup dreams.

Aubree Phillips, who is graduating from the entrepreneurship program at Belmont University this spring, has dreamed of starting a clothing boutique since the day she arrived on campus. She gained experience by working in the campus-based clothing store called Feedback and worked on the plans for her store in every entrepreneurship course she took.

But with graduation looming this spring, the thought of spending more than $100,000 to open her store in a weak economy gave her cold feet. But she did not abandon her dream. Instead, she partnered with her friend Natalie Sawyer, a Lipscomb University alumna, to brainstorm about ways to meet shared goals by bootstrapping.

The biggest single financial commitment was the physical space to house their boutique. So Phillips and Sawyer decided to change their business model from a store to a “traveling boutique” called Fringe and Lace. Rather than setting up in a traditional storefront, they take the clothing directly to their customers’ homes.

“We specialize in clothing, jewelry and accessories,” Phillips said. “All items are trendy and under $100. Our customers find that shopping at home, surrounded by friends, is a fun and relaxing buy topamax online canada alternative way to shop.”

They are able to keep staffing costs down since they do not need employees for a brick-and-mortar store. Phillips and Sawyer staff all of the parties. When the business grows beyond what they can handle, they plan to hire interns and part-time employees to help.

Fringe and Lace has relied on bootstrapping for its marketing. Word-of-mouth has been a big source for securing early customers, which they have encouraged through the use of social media. They have also been using a blog approach to their website, www.fringeandlace.com, to keep their customers current on their new inventory and to help build a community of loyal repeat customers.

Inventory is the final major cost for their business. “After each party, we make an order to update our merchandise,” Phillips said. “This way we do not have too much inventory on hand. It also helps us to continue to offer new and different pieces. We try to be smart about our buying so we don’t end up having too much or excess inventory that we can’t sell.”

They store their inventory in an office at Sawyer’s home.

Rather than letting the economy discourage their dreams, Phillips and Sawyer showed how changing the business model and bootstrapping can make the cost of a startup more affordab

Joint Venture on the Boulevard

Belmont and Lipscomb universities are just a few miles apart along Belmont Boulevard and are both part of the Atlantic-Sun athletic conference.  Over the years and intense rivalry has developed between the schools, which reaches a crescendo each year during basketball season.

While the Battle of the Boulevard — as this rivalry is known — continues between their basketball teams, one group of student athletes has called a truce for the sake of launching a new business.

Two Belmont tennis players have joined forces with a member of the Lipscomb tennis team to start Mydormfood.com, an online grocery store geared toward college students with empty cupboards in their dorm rooms or apartments.

Jonathan Murrell, a sophomore finance major at Belmont University, came up with the idea.

“I kept finding my friends paying three times as much for food on campus compared to what it would cost at bulk stores.”

Jonathan developed his business model the right way. Rather than jump directly into writing a formal plan, first he talked with potential customers, some friends and other students to gauge the validity of the concept.

He also assessed what he needed to get the startup launched. What he needed most was help.

He also realized that he needed people with other skills. Jonathan approached his older brother James, a marketing major at Lipscomb University, and Bruno Silva, a teammate on the Belmont tennis team.

After a few planning meetings, the trio decided that this new idea was worth going for. James would take on the shipping and marketing. Bruno would manage the inventory and accounting. Jonathan would oversee the site and customers.

So, the company was born with three tennis players from rival schools coming together.

They soon realized that their original business model was not quite right. Instead of students being the primary target market, they soon learned, most orders were coming from parents.

So, they adjusted their product. They created two options: gift cards so students could shop for themselves, and pre-made care packages delivered directly to customers’ doors.

Bootstrapping is a big part of their startup. Jonathan’s and James’ oldest brother recently moved out of their house to pursue graduate work in history at Oxford. So, their mother agreed to let them use his office as a makeshift warehouse.

“We removed all the old manuscripts from his bookshelves and replaced them with Pop-Tarts and potato chips,” Jonathan said.

They also developed their own website, which saved them thousands of dollars in development costs. They used an online legal site to set up their LLC.

While they have high hopes for their new venture, they took care to protect their downside risk.

“We ended up making our inventory purchasing decisions based on what we would be willing to eat if the business failed. If it doesn’t work out, let’s just say I’ll be eating mac and cheese, cup noodles and Skittles for a very long time.”

But if they succeed, their effort will be known as the Joint Venture of the Boulevard.

Five Voices at Once

Lee Rainie, Director of Pew Research Center’s Internet and
American Life Project, gave an intriguing talk on their research into the current use of the Internet in the US at our USASBE conference this past week. 

The trends they are finding on the use of wireless, social networking, the types of technology we are using to access information, and the types of information we are seeking is really eye-opening.  Anyone who is working on ventures related to the Internet or that rely on it for marketing (I guess that pretty much includes almost every business today) should read their reports. 

One of the interesting conversations that came out of their data was about the changing norms and social expectations that are developing due to technology and the Internet.

Most of us have experienced a situation where we are talking to a young adult who in the middle of the conversation begins to answer a text message.  Those of us who are Baby Boomers find this behavior to be socially rude.  But to younger people, this is absolutely socially acceptable.

An extension of this is the need to compete with our marketing to an increasing amount of “noise” out there.  People receive multiple messages, often simultaneously. 

Such multiple, simultaneous flows of information are becoming the norm in our culture.

If you try to fight it, you will likely lose.  When culture shifts this way it is impossible to reverse or even slow down the changes.

The conversation reminded me of an interview I heard with Brad Faxon, who is a professional golfer.  Faxon had tried his hand at television broadcasting with NBC sports this past year.  He is getting to the age where he is not very competitive on the PGA tour, but not quite old enough for the senior tour.

He said that his contract was not renewed with NBC.  He shared that one of the most difficult things about the job was being able to listen to five different voices at once coming through his head phones offering information about what was happening in the golf tournament.  He had to discern which of the voices were relevant for his commentary, while at the same time carrying on a conversation with other announcers or making comments about what was going on in the tournament.

I think all of us may soon experience something similar in our daily lives.  More and more information is coming to us through more and more media and sources.  And it is coming to us faster and faster.  It is not slowing down and it is not going to let up. 

We will all need to learn to adapt to this new social/cultural reality of “five voices at once” both as consumers of information and producers of information to the marketplace.

More Women Pursuing Entrepreneurial Career

During the on-going recession, entrepreneurship is becoming an even more popular path for women in America.  Elizabeth Fuller has an article in CSM that explores some of the common practices of women entrepreneurs:

“If opening a business demands courage, opening one in the aftermath of the
worst economic downturn since the Depression demands a special steeliness,
especially for female entrepreneurs. Because women-owned businesses are
concentrated in retail and service industries – think Estée Lauder, Coco Chanel,
Mrs. Fields Cookies, even Zipcar – they were among the first to feel the
downturn. Now, in a fragile recovery, the business climate requires other
qualities, like resourcefulness and patience.”

Their strategies?  Keep debt low and bootstrap at every opportunity. 

MBA Partners with Seven Year Old

Shawn Sweeney will soon be graduating from the MBA program at Belmont University. Like a growing number of graduate students and alumni, he made the decision to leave his corporate job to become a full-time entrepreneur.

But what makes Sweeney unique is his choice of a business partner for his venture. It is his 7-year-old son, Gunner.

As with many opportunities, this business was born out of an interest that Shawn and Gunner had in common.

When Gunner was 5, he became interested in recycling. It was around the same time that Gunner was also learning about money and how to count. Since Nashville’s recycling program does not pick up glass, Shawn Sweeney mentioned the idea of taking neighbors’ glass to the recycling center for a fee. That piqued Gunner’s interest right away.

In August 2009, Gunner and his dad walked through their immediate neighborhood to find customers. Six neighbors signed up.

The neighbors loved the service and began telling their friends and neighbors. Gunner Recycling soon reached the maximum capacity for the family truck, so father and son decided that it was time to invest in a trailer.

As Gunner Recycling continued to grow, it quickly became a family business. Tiffany Sweeney, Gunner’s mother, became part of the team. Shawn Sweeney recently left the corporate world to focus more time on entrepreneurship, including Gunner Recycling.

“It’s inspiring to see the amount of glass recycled through our small business,” Shawn Sweeney said. “Gunner’s vision is to get every person in the world to recycle as his customer. I’m still trying to talk him into focusing on getting every person in Nashville to recycle as his customer.

“We have a great opportunity to reach more residential neighborhoods, apartments, office buildings and small businesses.”

Gunner is already learning important entrepreneurial lessons.

“When you are forced to explain every detail in a situation, it helps to slow down the process and make a more informed decision,” Shawn said of teaching business to a 7-year-old. “We’ve learned not to over-complicate things. There is no need to make our simple business difficult. Keeping it simple for us means keeping it simple for customers, and they seem to appreciate it.”

Gunner loves to deliver bins to new customers because “his customers” are his favorite aspect of being in business. Customer service is an important lesson for entrepreneurs of any age.

I am a strong advocate for teaching children about managing money and business at a young age. Many undergraduate students who come to study entrepreneurship at college arrive with operating businesses in hand. I hope I have the privilege of having Gunner become one of those students in my class in a few years.

If you are interested in learning more about Gunner’s business, visit www.gunnersrecycling.com.

Giving Thanks for Small Business

As my quote of the week, I offer the words of our daughter, Maggie Kuyper, who teaches English and coaches volleyball at St. Cecilia Academy in Nashville.  She reflected at her blog on all of the many wonderful small businesses that make up our downtown in Franklin, Tennessee.

So thanks to all the people and families who spend their time building and running these awesome small businesses!

You can read the entire post at her blog Life, Literature, and the Pursuit of Happiness.

Happy Thanksgiving!

An Antidote for Entrepreneurial ADD

Even in the midst of the recession, I have had plenty of meetings with entrepreneurs suffering from Entrepreneurial Attention Deficit Disorder (EADD).  Had one just yesterday, in fact.

Even in a down economy there are many opportunities, and those with a creative mind see them everywhere.

For years I have had posters on my wall as part of my speech to those suffering from EADD.  My first one was a island golf hole with the word “Focus” on the bottom.  It actually went back to my days before I got back into teaching when one of my partners and I both suffered from serious bouts of EADD.  When I got into teaching, I found that it was an important tool when counseling student and alumni entrepreneurs.

Over the years the picture faded, but my need for such a visual aid did not.  So I bought a replacement a couple of years ago.  It is also a golf theme, this time with a green visual through a tough shot through some trees (A position I am not unfamiliar with due to my occasionally errant drives).

EADD is a blessing and a curse.  Some of the coolest business ideas I have pursued came out of episodes of EADD.  But, an inability to focus on one business at a time also led to some of my most trying times.

Moving on to the next cool idea before you nail the current one is not a recipe for a successful and healthy entrepreneurial career.

Entrepreneur.com features a summary of a method developed by author Scott Belsky to balance the need for creative thinking with successful implementation.

Belsky’s approach offers three key steps (more than that would overwhelm anyone with EADD):

   1. Hire killjoys.  One of our partners played this role for us.  He tended to worry about the downside.  At first we thought he was, well, a real killjoy.  But over time we realized that his caution balanced our enthusiasm in a very important way.  Hiring people who can and will say “No” to some of your ideas can also work.
   2. Work with bias toward action.  Focus on getting things ready for market and then focus even harder on building customers.  No matter how tempting that next idea might be, leave it alone until your current business is nicely cash flowing.
   3. Change your vocabulary.  Celebrate implementation and business milestones, not creative free-for-alls.  Over time it will alter your culture to one of action and not just ideas.

If you suffer from EADD, read Tim Beyers’ article at entrepreneur.com, buy Belsky’s book, and find people who will hold you accountable for implementation and action.

Awakening the Beast

I have been concerned about inflation for some time.  While the day-to-day signs have not supported my view, public policy decisions that include massive deficits have kept the nagging worry about inflation with me even while others have been talking about inflation being “permanently” under control.

But the talk over the past few weeks from the Fed is that they are going to use inflationary policy as an intentional “cure” for our economic woes has affirmed my worst fears. 

Clearly, those in power in Washington do not believe that market forces will be what re-energizes our economy.  What they are telling entrepreneurs is this:  “You are irrelevant in economic recovery.”  Given that it has been entrepreneurs who have led us out of almost every past recession, this is an alarming shift in policy.

So what are the entrepreneurs to do?  What will this all mean for your businesses over the coming years?  Get ready for an even rockier road than you have suffered through up to this point in the recession.  That’s right — things are about to get worse.  Much worse.

The problem for smaller businesses during inflationary times is that they are less able to adjust prices as quickly to
adjust to inflationary pressures.  There is never a smooth and orderly increase in
prices for every business in the economy and small businesses often suffer the most.

If you have big suppliers and/or customers they can tie your hands. 
Your costs go up, but you are unable to pass along these costs with
higher prices.  You already fragile profit margins will quickly begin to vanish.

So
what can a small business do in terms of pricing strategies to try and weather this
impending inflationary storm? 

The
recession has made entrepreneurs leery of doing anything but cut prices
to keep their businesses afloat during the recession.  While that may
still seem like the best course over the short-run, pay very close attention
to pricing from your suppliers, increasing
interest rates, and pricing moves from the big boys in your industry. 
These are the metrics that should be on your inflationary dashboard.

When inflation heats up even a little, be aggressive with frequent
small price increases rather than waiting and trying to catch up at
some point with one big jump. Don’t let yourself get behind, as small businesses can almost never play catch-up with their prices.

This
can
be tough to implement for some businesses, particularly if you publicly
list your prices.  For example, it can get very costly to
print up new menus each month for a restaurant owner who wants to
follow this strategy.

But customers are less likely to pay
attention to price increases if they are small, so it is essential to
find creative ways to communicate your pricing to allow for you to
implement this strategy during inflationary times.  For a restaurant it
may require using menu inserts that can inexpensively be replaced. 
This was actually very commonly used in restaurants during the 1970s
and 1980s when we had high inflation.

Continue the prudent management of expenses that helped you survive the recession:

– Continue to keep overhead low.  It has paid off during the recession and will serve you well during inflation.

– Continue to build cash reserves to buffer short term price increases that precede your ability to get higher prices from your customers.  I
know this sounds contrary to the investment advice about holding cash during inflation.  Don’t think of this cash as
investment — it is your levy to hold back the rising tide of
inflation. 

– Watch your margins carefully. Worry about growing profits, not sales.

– Don’t lock into long-term contracts large customers that have narrow margins.  These contacts will quickly become money losers when inflation spikes.

– Pay down variable interest loans ASAP, especially now that
interest rates are temporarily relatively low. As soon as inflation
heats up, interest rates will continue to rise.  And given the
stubbornness that the Fed is now showing with interest rates, we may
soon see huge spikes in rates over just a few quarters as inflation
takes hold.