Recently in Start-up Category

We had a rather spirited discussion in a small group breakout late this morning session here at the Economics Bloggers Forum here in KC.  It centered on what really caused the recession.  The argument was made by Michael Mandel (formerly of Business Week) that we had very few real technological innovations introduced into our economy since 1998.  What is interesting to me is that this may partially explain why we are seeing no entrepreneurial job growth pulling us out of the recession.  In all past recessions it has been entrepreneurs who have kindled new growth.  The argument may be that there is no real base of new technology to build from to jump start a recovery.

The good news is that Bob Cringely asserts that there is a technology seedbed out there that may yet spur long-term growth.

With traditional employment looking so bleak a common question is this: "Are you seeing more students interested in entrepreneurship given the depths of this recession?"

This is a good question because historically we have seen a small upswing in student interest in entrepreneurship when the economy and job market soften. But this has become a much deeper recession and a more worrisome long-term economic climate. How are students reacting this time?

When the bottom fell out of the economy, the initial reaction among my students at Belmont University was one of shock. This generation is one that has been protected from failure and insulated from risk. I tend to have graduating seniors in the class that I teach, so those not already in business did not know what to do next.

But over the next few months, I saw a transformation. My students began to accept the new state of the world and adjust their expectations. I began to believe that this generation is ready to follow their entrepreneurial spirit and help rebuild our economy.

The other day I received a piece of data about our program that affirmed my theory.

Many industries see interest

Each year we usually see about 15 to 20 new businesses started by our undergraduate students. Mind you, they do this in the midst of taking classes and often while also working part time. This year we have seen a tripling of new practicing student entrepreneurs.

We went from 18 new undergraduate student businesses last year to 54 this year. These students are coming from all across our campus from many different majors.

The businesses they are starting are in a variety of industries. As would be expected in Nashville, a good number are in the entertainment industry -- including audio production, video production, artist management, live performance and music promotion.

There are several related to the food industry, too, including a couple of different types of catering businesses, a manufacturer of food flavorings, one that makes barbecue rubs and sauces and a food co-op.

Students have set up online businesses that sell everything from golf clubs to auto parts to high-end makeup. There are businesses that sell such things as jewelry, lawn services, aprons and kitchen cabinets.

And some students have created businesses that provide a variety of services, including basketball training, online marketing, medical waste disposal and even credit restoration.

Now it is time to turn the newly minted "Entrepreneurial Generation" loose. It is time to help give them the capital they need by cutting taxes. We also need to provide the freedom they need to navigate a very challenging marketplace by clearing the path to starting and growing businesses by cutting regulatory red tape. The "Entrepreneurial Generation" is willing to meet the challenges in our economy. This news has certainly raised my spirits about our economic future.

(This post ran as my column in the Tennessean today).

The number of self-employed and freelance entrepreneurs has seen steady growth over the past two decades. As recently as 2007 the Small Business Administration estimated that there were more than 21 million self-employed entrepreneurs without employees in the United States.

Many are predicting that this number will swell as a result of the recession.

The traditional work spaces for the self-employed are coffee shops, cafes and home offices.

More recently a new alternative has emerged, called co-working spaces, where self-employed people and freelancers can come together in a common space. Unlike traditional executive suites, co-working spaces offer more than just space and office support. Co-working space usually has a very open environment that fosters interaction, collaboration and even shared work projects.

Co-working spaces are a good option for many startup entrepreneurs. They also can be a good option for small businesses looking to move from a home office. In an age of technology where it is so easy to become isolated, the co-working movement has drawn those who work independently but still seek to be a part of a stimulating community.

Co-working spaces are being established all around the country. Some of the early co-working spaces, such as Citizen Space in San Francisco and Indy Hall of Philadelphia, have led the way in this emerging alternative work space environment.

A new co-working space, called CoLab, recently opened on Fourth Avenue in downtown Nashville.

CoLab started with its first location in Orlando, Fla., about 18 months ago.

CoLab started as a side business for founder John Hussey of Orlando. Within 18 months, CoLab has outgrown the original floor it had leased and has added a second floor. With the growing success in Orlando, Hussey looked to open in a different city.

"When opening CoLab Orlando, I immediately thought it was a good fit for Nashville because it's an entrepreneurial town -- the creativity of an up-and-coming town on the cutting edge," Hussey said.

Kailey Hussey, a recent graduate of Belmont University and John Hussey's daughter, is heading up CoLab in Nashville.

CoLab Nashville seeks to become a place for meetups, technology groups and entrepreneurs to come together for networking and collaboration.

Bootstrapping entrepreneurs seek ways to keep their overhead low, especially in these uncertain economic times. Co-working space may offer an alternative for entrepreneurs that helps keep the cost of space affordable for those trying to grow their businesses within a limited budget.

(This post also ran as my column this week in the Tennessean).

Barry Moltz has a great article on the mistakes that entrepreneurs can make while trying to sell their products and services:

"In order to find new customers or keep the ones you have, every entrepreneur needs to be able to sell. The biggest fear is that when someone says no to your product, you think they are really saying no to you.

"Most of us take it personally. Fortunately, the customer does not care that much about you! In fact, we actually can't sell anything to anyone; we just need to be there when they are ready to buy.

"This is why marketing and sales are so important to any growing business"

Learning to see has always been an important skill for start-up entrepreneurs, but in today's tough economy it can be the difference between the life and death of your business. 

There are enough challenges with start-ups -- finding capital, finding space, attracting customers, reaching breakeven, hiring employees, etc., etc..  Why do so many entrepreneurs add interpersonal problems to this the already long list of challenges that must be dealt with during startup?

I have written often about the pitfalls of working with partners in entrepreneurial ventures (see here and here for a couple of recent musings). When a partnership works well, it can help you achieve things you never could have achieved alone.  That was certainly the case with some of my partners in our health care venture. 

But, partnership problems can be a significant cause of business failure for deals that would have succeeded were it not for the infighting of the owners.

Such dysfunction also extends to the key members of the team who are not formally partners in the venture.  Team dynamics can soak up precious time that is needed to align the business to the market and getting customers in the door.

MyVenturePad has a link to a good post by Martin Zwilling at his blog Startup Professional Musings in which he looks at how to build a successful start-up team.

Culture really begins to take form with the first few hires, so make sure you look at not just people's talents, but their fit with your evolving team. 

Manage the team carefully to build cohesion.  And if someone is not fitting in, do not wait to long to remove that person from your business.  The longer you wait to act, the worse the problem gets, and the more damage will be done to your team.

My colleague Ed Rogoff, who teaches at Baruch College of the City University of New York, has a new book out targeting all of us Entre-Boomers.  It is titled The Second Chance Revolution:  Becoming Your Own Boss After 50.  It is an excellent book for any late career entrepreneur with lots of useful tips and "how-to's" on choosing a business, financing the business, and running the business that are all specifically written for those entering the entrepreneurial world who are over 50.

My column this week in the Tennessean offers start-up advice for accidental entrepreneurs:

Has the recession made you an accidental entrepreneur? Not sure how to pick the right business to start?

Business opportunities are most often the result of major changes in the economy, society, our culture or technology. These changes create customers who have new unmet needs. For example, when women entered the work force in large numbers in the 1970s, they needed child care.

This soon led to creation of a whole new industry called day care.

The first step in determining if a business idea is right for you is to make sure it builds on your existing knowledge, skills and experiences. The best business opportunities come from solving everyday problems that you have observed from your previous work experiences, your hobbies or things you regularly experience.

Make sure that there really is a strong market that is truly interested in your product or service. Examine the size of the market to confirm that you need to attract only a small percentage of the total potential customers to make your business work. And make sure that the potential customers are willing to pay you enough to make the business turn a profit.

The business will need to generate enough income for your lifestyle. Also, it will need to become profitable before you run out of whatever funds you have saved to live on during the startup of the business.

It is very difficult, if not impossible, to find bankers or investors willing to back a first time entrepreneur's startup in today's economy. So if your savings are meager, you may need to find a venture that generates cash flow quickly or postpone the startup until enough savings are in place.

Take it personally

An entrepreneurial business is not just a simple financial investment. It becomes much more personal and emotional than that. Surveys of entrepreneurs tell us that building income and wealth is only one of the many reasons for launching a business.

Entrepreneurs want to create a business that is a reflection of who they are. They want to build a business that has a culture based on their values -- that is, on how they want their employees and customers to be treated.

Finally, don't overlook the importance of building a business that allows room for the other things that are important in your life. The time and energy you want for your family, your friends, church and hobbies should be factored into the planning.

The right business needs to fit with your experiences, income needs and values, and it must allow for a balanced life.

I will be leading a seminar for Belmont University titled "Business worthy? How to uncover and evaluate entrepreneurial ideas."

It's designed to help guide aspiring entrepreneurs through the process of finding ideas and assessing their feasibility. It will be held in Williamson County on Nov. 3, Nov. 10 and Nov. 17.

More information can be found at http://www.belmont.edu/business/executive_education/workshops/index.html.

Gregory Go and Glen Stansberry have pulled together a collection of recommended resources from various entrepreneurship writers and bloggers, which is posted at OPEN.  My recommendation was:

How often are you working on building connections? Jeff Cornwall believes that connections are some of the most important resources you can have to help your small business.

"An often overlooked resource for small business owners - and particularly aspiring small business owners- is entrepreneurs in the same industry whose businesses are further along in their development. Entrepreneurs are surprisingly willing to 'pay it forward' and help other entrepreneurs. These entrepreneurs are usually very willing to offer information, advice and even mentoring because someone probably did the same for them when they were first starting up. And more often than not, all you have to do is ask."

This is probably one of the most common pieces of advice I find myself giving to our students and alumni as they are developing their business plans or trying to get their ventures off the ground -- and it really works.  All it usually takes is a phone call or an e-mail.

My column in this week's Tennessean looks at franchising as a path to business ownership for accidental entrepreneurs:

Franchising is a path to business ownership that many of today's accidental entrepreneurs find appealing.

"For those in career transition who are considering business ownership, franchising may be a viable option, primarily because most have spent their entire career in corporate America and are used to structure and following processes," says Dan Aronoff, Nashville franchise consultant with FranNet.

"Franchising provides that structure through well-established and proven systems. For the right person and right fit, following the franchise's 'recipe' can lead to success. Why reinvent the wheel if you don't have to."

One of the downsides of buying a franchise, though, is that many require that the entrepreneur put up a significant amount of funding to start the business. However, many franchises may be eligible for Small Business Administration loan programs, too. Here is a Web site that offers more details.

Just like any new venture, developing a business plan is a must. It's essential to determine the feasibility within the local market where you plan to open the franchise. Make sure that you temper any financial projections with current economic conditions. Be realistic.

Also, look for franchise opportunities that create value for the customer, as this will be the best business model for some time to come.

There are some sticky contracting issues with buying any franchise. Make sure to work with an attorney who has experience in that arena.

Monthly fees add up

One of the biggest sources of frustration among franchisees is that, over time, they begin to perceive that the value added provided from the franchisor or the parent company becomes less valuable.

A franchise will charge a significant monthly percentage fee (this typically ranges from 4 percent to
7 percent of sales).

This fee covers business systems, marketing support, purchasing power for inventory, and so forth. As they gain experience in the business, many franchisees believe that they can be at least as effective on their own without the support of the franchisor.

Another concern expressed by franchisees is that with all sorts of rules and standardized procedures, they tend to feel more like an employee than a business owner. Those who try to break away from the predetermined model can face the wrath of the franchisor. Larger franchisors have entire staffs dedicated to franchisee compliance.

The SBA offers comprehensive information on buying a franchise at its Web site, 

The Wall Street Journal recognized the Top Small Workplaces in its third annual report featuring some of the best small employers  in the U.S.  The Journal Report on Small Business features the 15 winners in yesterday's print and online editions.

Part of this feature was a column by Laura Lorber on web resources for small business owners, which included some recommended websites on organizing and funding your small business (all are great sites).  She also recommended two sites that offer insights on entrepreneurship.  Thanks for including The Entrepreneurial Mind as one of those two resources!