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With a growing number of people seeking entrepreneurship as an alternative path in this rough economy, there is increasing competition for the key resources that can make or break the startup venture.

New entrepreneurs are competing for essential resources, such as the funding, the customers and the staff they need to build a successful business. Attracting these resources often relies on how well the entrepreneur can deliver "the pitch" for his new business.

An effective pitch starts with a hook -- something that grabs the attention of the person one is talking to about a business. The most effective hook lays the groundwork to show the underlying need in the market for what the new business aims to offer.

A common mistake we see in pitches is that the entrepreneur waits much too long to tell what the business does. I had my students watch some examples of pitches the other night in class. You can find lots of good ones and bad ones on YouTube.

We were amazed that some of the people making a pitch waited more than halfway through their pitch to tell what their product or service is and what it does.
Answer key questions

Remember this: Early in a pitch the entrepreneur should present a clear mission statement. Who are you? What do you offer? Who is it for? What makes you unique?

The pitch must also show that there is "pain in the market" -- that there are people who are in need of what you are offering and are willing to give you their hard-earned money to pay for it.

Who needs your product? Why do they need it? How many of them need it? What are you doing differently from your competitors?

The pitch needs to be presented clearly. It should be an unambiguous answer to some key questions that a skeptical listener is likely to have about the business. How will you make money?

The presentation of the pitch needs to be compelling. The entrepreneur should show his enthusiasm. Make it a personal message to those listening, and make eye contact. Never use note cards -- this tells the world that you are not confident and that you don't know what you are talking about.

While it is important to be enthusiastic, you still must be authentic. Putting on an act rarely gets an entrepreneur very far. Be yourself in how you talk, in how you dress and in how you interact with others.

Finally, a strong pitch always ends with a clear message. What is the one thing that you want them to remember? What do you need from them? What do you want your target audience to do for you?

In this economy, entrepreneurs face competition on every front as they launch a new business. An effective pitch can help distinguish you from all the others trying to grab the attention of investors and customers.

Even the optimists are saying that we have at least two more years of economic stagnation. Other experts are warning of a possible double-dip recession.

There is even growing talk in some circles of America experiencing a "lost decade" in its economy. That refers to the 10-plus dismal years of economic doldrums suffered by Japan in the 1990s.

Recent employment and bank lending rate data seem to support a prolonged recession for small businesses.

So what does this "new normal" in our economy mean for entrepreneurs?

For startup entrepreneurs it means you need to be lean. There will still be new businesses forming, even if the economy takes a turn for the worse. Some of these new businesses will be opportunistic entrepreneurs who see ways to meet the needs created out of the dramatic changes taking place in our economy and society.

Others will be among the growing army of accidental entrepreneurs who are finding that starting something on their own has become the only viable way to make a living during these challenging times.

Whichever path leads you to start a new business, a successful launch will require bootstrapping.

There is very little money being invested in or lent to new small businesses right now, so be prepared to find creative ways to get your business off the ground without a lot of funding.

If you are already a business owner and have survived the past two years of economic turmoil, let me be the first to offer congratulations. Clearly you have found a way to continue to offer value to the market. You must have also been an effective manager.

Some businesses that have survived are hanging on by a thread. If that is the case for your business, continue to pay attention to the basics. Keep cutting overhead, pay down debts and take good care of the customers you have so you don't lose any more of them to stronger competitors.

Every small-business owner should continue to run his or her business cautiously and prudently. There will be more tough times ahead.
Look for growth opportunity

Over the coming months, more of your competitors will probably fail, and that presents an opportunity to attract new customers to your shop.

This can be an excellent time to expand and take advantage of a larger market share. If you do expand, continue to bootstrap and try to keep your use of debt to a minimum.

This is no time for excessive leverage because of the uncertainty of the economic outlook.

Whether you are a new entrepreneur or a seasoned business owner, more than ever before remember, cash is king. Given the uncertainty of the economy, entrepreneurs should try to keep enough cash on hand to cover at least 30 days of monthly expenses -- and up to 90 days of cash on hand is not a bad idea, either.

It's also important to keep one eye on the future. Eventually things will improve. And those who survive the Great Recession have a good chance of emerging in a stronger position. The survivors of today will become the market leaders during the recovery.

(This post was my column in today's Tennessean).

Is the fact that there is competition a reason not to start a new business?  Not if you build a realistic competitive strategy into your business model from the beginning.

One of the fatal flaws we see in business plans is when the entrepreneur is in denial about the fact that they will face competition.  Every new business faces some form of competition. 

I always chuckle whenever I read a business plan that, while admitting there are competitors out there, will dismiss them as incompetent or irrelevant.  Remember - they are already up and running and have customers, so they have must have something going for them!

Keep in mind that competition can be beneficial to your start-up business.  The competition has already built awareness about your product or service with customers.  That means you won't have to spend marketing money educating your customers about the benefits of what you are offering them.

The competition has already spent money learning what customers really want.  You can learn from their successes and their shortcomings as you craft your business model.  

A competitive strategy should always start with the customers.  Learn how your customers make the decision on where to buy the product.  Determine the key decision making criteria they will use to choose your product over your competitors'.  It does not matter what you think they should consider in the decision - all that matters is what the customer thinks and how they actually make their choice. 

How do you gather information about what your potential customers prefer? You need to get out and talk to them, observe them, or do whatever it takes to learn how to think like they do. 

Also gather information about how well your competitors are satisfying these customers.  You can gather this information by talking to customers, visiting your competitors' businesses, interviewing suppliers, and by meeting with others in the industry.  All of this information should shape your business model and define how you will attract customers.

Understanding the relationship that already exists between your potential customers and the existing competition helps to determine how you should enter the market. 

If your competition is strongly entrenched it may not be wise to try to compete with them directly, no matter how good you think your product is.  Think of your own buying habits.  We all get in patterns of where we like to buy things.  Changing those patterns can become quite difficult, especially if the competition has a good relationship with the customer.

Instead, it is usually better to find a niche of customers in the market.  Find a group of customers whose needs are not being met by the competition and tailor your business model to satisfy them.  They will be the easiest and least expensive to attract.

This strategy gives you the best chance of building your initial sales, while avoiding a head-on confrontation with well-established competitors that may have a much healthier bank account than your start-up business.

There is an employment statistic that all entrepreneurs should be paying attention to.  It is the underemployment rate.  Gallop tracks this statistic, which combines unemployment with those working part-time, but want full-time work. 

While the official unemployment rate is now around 10%, underemployment is over 19% according the the most recent survey by Gallop.

In a robust economy, entrepreneurs have a difficult time competing with larger firms when recruiting.  In today's job market, the large number of underemployed give small businesses a fighting chance in landing the perfect employee.

Small businesses have always had other means of non-salary rewards and compensation that are not always used in larger businesses.  The difference now is that potential employees are more willing to look at positions that offer more non-traditional compensation.

One of the main forms of compensation for many employees right now is keeping an active line on their resumes, even if it is a good title that is only a part-time job.

For full time employees non-traditional compensation might include creative bonus plans, profit sharing plans, stock, stock options, phantom stock, and/or stock appreciation rights plans.

Small businesses have more flexibility in how they structure compensation.  To leverage this entrepreneurs should listen to what the employee really wants.  There may be opportunity to meet their needs in ways that do not cost money.

Flexible hours and time off still offer value to employees, and small businesses can craft specific plans to meet the unique needs of each prospect.

Finding employees has often been a challenge for smaller firms, as traditional recruiting methods can be quite expensive.  But bootstrapping has found its way to the recruiting process. 

There are new tools popping up on the web to facilitate connecting employers with potential employees.  Social networking sites are certainly proving effective.  Ben Cunningham passed along a website that is specifically designed to connect employees with jobs in start-up businesses called jobnob.

Leveraging the current job market may be key to helping entrepreneurs to jump-start our economic recovery.

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.