Tag: entrepreneurship

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.

Job Engine Continues Weak

Entrepreneurs are the job engine in our economy during good times and bad.  They are the primary creators of new jobs leading our growth during booms, and they lead job creation coming out of recessions.

The latest job creation figures from the Intuit Small Business Index suggest that while job growth is somewhat better than last year this time, job creation among small businesses is not at the levels we need to spur a recovery.

This index showed modest job creation in August, with at estimated 39,000 new jobs created.  However, September data showed only 27,000 new jobs created.  Additionally, there was no increase in hours worked or compensation.  If these figures had improved we could hold out hope that small  businesses were growing through increased productivity.  But, this is not the case. 

These figures mirror the drop in intention to hire new employees found in other surveys of small business owners over the past few weeks.

There is no sign that small businesses are ready to lead a recovery any time in the foreseeable future.

All of this is evidence that supports the growing consensus that we are in for a prolonged period of high unemployment.

Adapting the Business Model Takes Entrepreneur Full Cirle

When entrepreneurs enter the market, it is often with a very clear vision for their business. They know what they want to sell and to whom they want to sell it.

Alecia Venkataraman, who is completing her master of business administration degree at Belmont University, where I teach, launched her nonprofit, Make It Beautiful, to serve a very specific group of people.

Based on her own experience as a young adult who overcame great personal adversity, Alecia wanted to create an organization that would help others facing similar life circumstances. Make It Beautiful would offer services to help inspire these people to pursue their own dreams.

MIB developed programs for children facing terminal illnesses, as well as their families; for single parents and their children; for families trying to start over after tragedies; and for others facing significant adversities.

MIB had a team that offered services in life coaching, wellness counseling, legal issues, career planning and connecting with community resources. From its very beginning, MIB was overwhelmed with potential clients seeking help. Alecia had appeared to identify a need and a solution among her target population.

However, as successful as its programs were, the business model of MIB had a flaw. It relied on donations and sponsorships to fund the revenues it needed for its operations, and Alecia was not able to secure enough funding to sustain the idea.

Alecia had been supplementing operations from her own savings, but that money was running out. It became painfully clear that she’d have to cease operations at MIB.

Along the way, Alecia had sought advice from many different people about the problems she was having with the company. They all believed that the concept she was offering had value — and that people would be willing to pay for it.

Then it dawned on Alecia.

It was time to try to take the services offered at MIB and offer them to a different market that had the ability to pay. Like most entrepreneurs, she had to adapt her business model.

“When failure or loss happens in business, it isn’t necessarily the business model that needs to be revisited, but the market in which the business model is being used,” she says.

So, she launched a new company, Dream It Make It, which offers similar services to aspiring musicians, models, actresses, athletes, authors and entrepreneurs. The new company — such as Alecia’s former one — found immediate success in the market.

But this concept is based on a business model that is able to generate fees from the clients it serves.

“In trying to meet the challenges of an ever-changing economy and business environment, I’ve learned to not only accept but welcome what these changes might require of my business model,” Alecia said.

The epilogue to this story is that Dream It Make It’s success now offers Alecia the chance to reopen the nonprofit Make It Beautiful. Alecia will be using a percentage of the profits of her new company to fund operations of MIB when it reopens next month.

Both of her ventures can now become successful. This became possible only after Alecia adapted and changed her basic business model.

Lighting the Fire Early

Some of us were just raised to be entrepreneurs.  I think that is definitely true for me.  And yet, not all of my brothers who were raised in the same environment chose the entrepreneurial career path in life.

There is a good story about how the entrepreneurial spirit gets instilled in our children at the NY Times (via NFIB Smartbrief).  It is a reflection by a small business owner, Barbara Taylor, about raising kids in an entrepreneurial environment:

People love to argue about whether entrepreneurs are born or made, with many
feeling that success in small business is somehow genetic. My husband has five
siblings. An entrepreneur raised all six kids, yet only one became a
small-business owner. I had no exposure to business growing up, yet here I am on
my second venture. Rather than calling it genetics, I think it has more to do
with children of entrepreneurs being the beneficiaries of an early education in
business.

One of my MBA students here at Belmont, Shawn Sweeney, is certainly exposing his young son Gunner to small business at an early age:

(Video is from theeastsidestory.com)

History Lessons Needed

“In the end, we are always doomed to repeat history because there aren’t enough people who know it well enough to see when repetition is imminent, mostly because it will always be cloaked in the terminology and propaganda of the modern age instead of the plain and clear language describing what factually occurred in the past.”

From a post at The Natural Aristocrat blog sent along by blogger and Belmont alum Dan Oliver.

One More Quote for the Long Weekend

Given the tenor of the comments here at the blog this week, I could not resist a second quote of the week before the long weekend:

“So let us begin anew – remembering on both sides that civility is not a sign of weakness, and sincerity is always subject to proof”  (John F. Kennedy).