The Entrepreneurial Mind
Chris Bull builds a bicycle at his small, custom-bicycle business, Circle A Cycles in Providence, R.I. After the startup period, sometimes a small business must narrow the scope of its work to ensure successful long-term growth, Cornwall writes. (Alfredo Sosa/Staff)
Finding the right customers for your small business
During start-up, entrepreneurs are desperate to make a sale. Revenues are needed to generate cash flow and affirm that the new company’s business model actually meets a need in the market.
Entrepreneurs will take just about any customer willing to do business with their new company, including those who really don’t fit with their business model. After all, a sale is a sale, and cash is cash!
When the opportunity to land the first big customer comes along, the entrepreneur sees the chance to finally get more predictability and stability in cash flow. Again, even if this customer does not exactly fit what the entrepreneur is trying to do with the business, landing a big account will help reduce the entrepreneur’s worries about the future of the business and help him or her sleep a little better at night.
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A result, entrepreneurs can amass quite a hodgepodge of customers with a wide variety of needs and expectations. Some were promised a cheap price. Some were offered a good value. And some were promised a high level of service. ( Continue… )
Travelers are seen at Boston Logan International Airport. Regulatory and trade barriers play a significant part in the reluctance of American entrepreneurs to engage in international business, Cornwall writes. (Ann Hermes/The Christian Science Monitor/File)
Why US entrepreneurs tend not to think globally
Unlike small business owners in other parts of the world, U.S. entrepreneurs do not tend to think globally about potential markets for their businesses.
The United States International Trade Commission (USITC) reports that while 31 percent of exports from the European Union are generated by small and medium enterprises, only 13 percent of U.S. exports come from small and medium businesses. And another government report reveals that only 1% of U.S. small businesses engage in exporting.
International trade is a key driver of small business success according to a recently released study by IHS and DHL Express. Of the small and medium enterprises surveyed, 26% of the companies that were trading internationally significantly outperformed their market, in contrast to only 13% of those with operations only in their home country.
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While many U.S. entrepreneurs seem content to pursue business only within our borders, we cannot ignore that over 95 percent of the world population lives outside of our country. And small business owners who are part of the 95 percent of the world outside the U.S. are aggressively using the digital economy to help them expand their small businesses into the U.S. market. ( Continue… )
The logo for General Motors decorates the entrance to a former UPS facility in this January 2013 file photo. You may have never heard of William Durant, Cornwall writes, but he founded General Motors and, later, Chevrolet. (David Goldman/AP/File)
When starting a business, what really matters?
Have you ever heard of an entrepreneur named George Mecherle? How about George Jenkins, William Durant, James Casey, or Paul Orfalea?
While you may not know their names, we are all familiar with the businesses they founded.
George Mercherle founded State Farm Insurance in 1922 in Bloomington, Illinois. Mercherle, who was a retired farmer, thought it was unfair that farmers had to pay the same auto insurance rates as drivers in the big city of Chicago.
George Jenkins founded Publix grocery stores during the Great Depression.
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William Durant first founded General Motors, and then, after being forced out of his leadership position in that company, founded Chevrolet. ( Continue… )
Ping's Tibet shop owner Ping Wu Longval, left, in Cotton Exchange shopping center, helps costumer Sherry Rhodes with her shopping in Wilmington, N.C., in this November 2012 file photo. When you start a business based on a completely new idea, attracting customers is a costly and time consuming process, Cornwall writes. (Jeff Janowski/Wilmington Star-News/AP/File)
Just because nobody is doing it is not a reason to start a business
“I’ve got a great idea for a business. I know it will work because nobody is doing it! I need to move quickly before someone else does it first.”
As someone who works with entrepreneurs for a living and hears a lot of business ideas, this type of business pitch puts up a big red flag for me.
Just because nobody has started a particular type of business is by no means an indication that the market needs that type of business.
When starting a new business it is always best to start with a clear and compelling need in the market, not with a great idea for some new product or service for which there may or may not be customers ready to purchase.
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In many ways, starting a business that already has competitors in the market can actually be an advantage. That is why businesses tend to cluster together. ( Continue… )
In this December file photo, 12-year-old entrepreneur William Zsigo enjoys one of his own chocolate confections as he poses for photos at his home in Haslett, Mich. Before entrepreneurs write up a business plan, they should model their business visually. (Greg DeRuiter/The State Journal/AP/File )
A business plan? Start-ups need something else.
When advising people about what they need to do as they get ready to launch a business, there are two distinct approaches recommended by experts.
The first, which has been the traditional approach, tells aspiring entrepreneurs that writing a business plan is the first critical step.
In business schools the business plan was the core of our entrepreneurship curriculum for decades. Writing a business plan that’s thickness is measured in inches is still a rite of passage in many top entrepreneurship programs.
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However, there is a growing chorus of experts questioning why business plans get so much attention. After all, most entrepreneurs will tell you that once the business gets going it can quickly look fundamentally different than described in their original business plan. ( Continue… )
In this February 2011 file photo, President Obama and Small Business Administration Administrator Karen Mills participate in a breakout session during the Winning the Future Forum on Small Business in Cleveland. It is a myth that all business people think alike, act alike, and stick together, Cornwall writes. (Carolyn Kaster/AP/File)
Small business vs. big business: The divide widens
There has always been a bit of a tension between small businesses and their big corporate cousins.
I have always seen it in business schools. Thirty years ago those of us who were trying to add entrepreneurship into business school curriculum met strong resistance and even hostility from traditional business faculty. Even today there remains a bit of a tension between entrepreneurship and traditional faculty in many business schools.
We see the rift between small and large businesses play out in local business organizations. Chambers of Commerce, technology associations, and other organizations that support the interests of business often feel pulled between the competing interests of small business members and corporate members. Small business members want basic educational programming and networking opportunities to help bolster their businesses, while corporate members look for help in gaining favor with local governments regarding incentives and tax breaks. Small business owners pay greatly reduced memberships. Corporations pay large fees based on their employment. Lose one small business member that is not happy — not a big deal. Lose one big corporate member and it can make a huge hit on the budget. Guess whose voice is the loudest.
And at the national level the natural tensions that exist between small businesses and larger corporations has been heightened significantly since the election. ( Continue… )
A trader works on the floor of the New York Stock Exchange in this November 2012 file photo. Even in challenging economic times such as these, there are pockets of opportunity to grow and expand your business, Cornwall writes. (Brendan McDermid/Reuters/File)
4 tips for small business owners in a weak economy
Caution and uncertainty continue to be the watch words for most entrepreneurs in the current economy.
Recent surveys of small business owners by the National Federation for Independent Business (NFIB) suggest that entrepreneurs are uncertain about the future of the economy and the impact of issues such as tax policy and regulation on their businesses.
The response of these business owners has been to be cautious about investing in capital equipment, growing their inventories, and expanding their workforce.
In the most recent NFIB survey from November of 2012, uncertainty among entrepreneurs about future business conditions reached a record high, eclipsing the previous record for uncertainty set during the Carter Administration.
However, even in challenging economic times such as these, there are pockets of opportunity to grow and expand your business. ( Continue… )
In this October 2012 file photo, an employee works on his computer at the office of CloudFactory, a Canadian startup that based itself in Kathmandu, Nepal. The last thing new business partners think about as they launch their new venture is what will happen when the day comes when the partnership ends, Dr. Cornwall writes. (Navesh Chitrakar/Reuters/File)
Making strong business partnerships
When starting a new business together, business partners are brimming with excitement about the possibilities that the new venture may bring. There is a collective air of anticipation like a team in the locker room getting ready to head out for the “big game.” The last thing new business partners think about as they launch their new venture is what will happen when the day comes when the partnership ends.
But the truth is that eventually every business partnership will come to an end. It may come earlier than the partners expect, due to fundamental and irreconcilable business disagreements. Or maybe because one of the partners simply has lost a passion for the business and decides it is time to pursue a new career direction.
Dysfunctional partnerships are a major source of business failure, whether it is the result of open conflict or because a partner has lost heart. They suck energy and time away from building the business and often can lead to the failure of what was otherwise a perfectly good business model.
Even if the partners have both a great business and personal relationship, the partnership eventually will come to a natural end. Perhaps one of the partners is ready to retire before the other partner. Or perhaps the partnership finds its ultimate end due to the death or disability of one of the partners. ( Continue… )
In this April 2008 file photo, Dana Pinero, of New York, foreground, waits in line to mail tax returns for both herself and her boyfriend at the James A. Farley Main Post Office in New York. Tax increases on the super-rich won't make up for the nation's deficit, Dr. Cornwall writes. (Tina Fineberg/AP/File )
Beware of misdirection in debate on taxes
So why are we hearing all the attention being paid to taxing those making over $250,000 in the current debate over how to increase revenues to the government?
We are told that it is part of Pres. Obama’s “Buffett Rule” that increases taxes on a mythical group of super-rich people, many of whom we are being told are more than happy to pay more taxes since they are so wealthy.
We are also told that this is “only” 2% of the tax paying population. While that is true — well actually they are 1.8% of tax payers to be exact — we are still looking at increasing taxes on over 2.5 million people according to IRS data. ( Continue… )
Vice President Joe Biden speaks to a group of small business owners at Wrap-Tite, Inc, a stretch-wrap manufacturing company in Solon, Ohio, in this September 2011 file photo. The entrepreneur must intentionally shape the business culture to ensure the team will begin to embrace the budgeting process, Dr. Cornwall writes. (Amy Sancetta/AP/File)
Budgeting for entrepreneurs
In the early stages of a new business, entrepreneurs do not pay much attention to budgets.
Financial forecasts that estimate revenues and expenses are part of the business planning process. But these are really just estimates, since so much is unknown about what will actually happen as the business begins to grow. Because of this, it is impossible to develop accurate budgets. Managing cash flow is a week-to-week or even day-to-day challenge that is a reaction to what bills need to get paid first based on what revenues have come in the door.
Budgets are based on history and experience in the business. Budgets also require that a business has stable and predictable revenues. So for most new businesses, the lack of any financial history and too much uncertainty about the future means that creating a budget is really not plausible
But over time, if all goes well, the revenues of the business will become more stable and predictable. When this happens, it is a good time to start implementing the budgeting process.
While setting budgets may seem like a relatively simple process, it can profoundly impact on the culture of an entrepreneurial firm. ( Continue… )
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