Tennessean Columns: February 2010 Archives

Entrepreneurship is more than just a driver of economic development. It can help build communities.

Two recent examples from Tennessee universities help illustrate this important lesson.

The first one comes from Jackson. In fall 2007, a group of entrepreneurially minded students at Union University came together to create a vision for the school's first campus-based business.

The students represented majors from all over campus, including business, art, communications and philosophy. They wanted to create a space on campus to foster conversations and collaboration among academic departments and social groups.

After months of planning and preparation, Barefoots Joe -- a coffeehouse and concert hall -- was proposed to the administration. But a lack of finances delayed construction.

Then on Feb. 5, 2008, an F-4 tornado devastated the campus, causing millions of dollars of damage. Only hours after the tornado, Dean of Students Kimberly Thornbury began to search for a common place for faculty and students to come together to deal with all that had happened.

The administration invited the student team to implement its idea for Barefoots Joe. With donations from the community for funding, materials, equipment and time, the team began to implement its plan.

On March 1, just three weeks after the tornado, the coffeehouse and concert hall opened. More than 500 curious and excited students gathered to celebrate the grand opening and start the process of rebuilding the Union University community.

Two years later, Barefoots Joe continues to be a meaningful space that helps foster community spirit and collaboration.

Another example comes from a group of Belmont University students who traveled to Guatemala as part of their entrepreneurship studies.
Effort improves farmers' lives

The town of Chajul, located in the mountainous region of Quiche in northern Guatemala, suffered some of the most brutal violence of the country's 30-year civil war. Its predominantly indigenous community continues to be one of the most economically distressed in Guatemala.

The Belmont students, led by College of Business Administration faculty Jose Gonzalez and Marieta Velikova, traveled to Chajul earlier this year and worked with the farmers who are seeking to diversify away from their reliance on coffee by adding fair trade honey production.

What started as a small initiative to support coffee farmers is beginning to have a major impact on the economic and social development in the region.

The students are now seeking funding from a social innovation competition sponsored by Dell to fund expansion of the project. They also want to use the funding to support the expansion of a micro-loan fund.

Funding from the competition is based on votes at this Web site: http://www.dellsocialinnovationcompetition.com/ideaList?lsi=3.

Some 85 percent of the population of Quiche lives on less than $2 a day. Creating a more efficient opportunity for revenue growth for a cooperative that is a central part of the community will greatly improve the livelihood of the honeybee farmers, their families and the community.

Given the depths of this recession, we need to help entrepreneurs around the globe once again thrive. Small business growth is the key to rebuilding communities that have been devastated by unemployment.

(This post ran as a column in today's Tennessean).

Just like in real estate, we are in a buyers market for the sale of existing businesses.

The demand for buying businesses has weakened as the recession has lingered, while the increasing number of distressed small businesses has created a surplus of owners ready to sell.

Even when the economy recovers, we can expect conditions to continue to favor business buyers as baby boomer entrepreneurs look to exit or cash out of their businesses to fund retirement.

Scott Hill, managing partner of Peer Business Group in Brentwood, offers five key steps, if you are in the market to purchase an existing business.

First, carefully evaluate the impact of owning a particular business on your family's lifestyle and finances. Evaluate the income and wealth risks by working through worst-case scenarios.

Hill suggests you ask questions such as, "What are my own and my family's lifestyle priorities, and how will the demands of the new business affect what we have been accustomed to?"

And "beyond the investment, down payment and debt obligations, how many months can I survive if the business cannot pay me for a period of time?"

Hill also recommends that you talk about the risks honestly and clearly with your family to make sure everyone is 100 percent behind buying the business.

Second, ask the owner detailed questions about his or her daily activities. Shadow him or her to get a true understanding of the actual role the owner plays in the business. Determine whether the duties of the owner are consistent with your own priorities, lifestyle and values.

Third, take a critical look at the business and try to uncover any red flags. Never evaluate a business from a perspective that simply reaffirms your desire to buy it.

Hill advises: "Some red flags are really no big deal. But some are deal killers." Make sure you uncover and discuss potential problems before you buy.

Fourth, make sure you have enough cash to support the business. "Ideally, you shouldn't buy a business unless you have at least an extra 10 percent set aside for working capital or as an emergency fund."

Statistics say the buyer can expect as much as a 15 percent reduction in sales after the purchase. The more cash you have, the better the cushion, Hill says.

Finally, make sure to work with experts when buying a business. That includes not only a buyer's broker, but also an attorney and certified public accountant who are experienced at business acquisitions.

A challenge you will face is that owners often place unrealistic values on their own businesses. Experts familiar with buying and selling can help determine a realistic valuation.

Scott Hill's firm has a buyers resources page filled with tools and information at this Web site: www.peerbusinessgroup.com/buyerresources.html.

(From my column this week in the Tennessean).