Are you feeling stuck? Exit strategies

Whenever I teach an entrepreneurship class, I typically end up spending at least one day talking about exit strategies.

There is a good outline and video offered by PBS Small Business School that outlines the following options for exiting your business:

1. Walk away

2. Give it away

3. Sell to someone close to you

4. Sell to someone like you

5. Sell to the highest bidder

6. Sell to your employees

7. Sell through a direct public offering

8. Sell into the private equity capital market

I have always found the first option of “walk away” the hardest to believe, but yet it is also the most frequent option taken by entrepreneurs. My guess is that for many of these entrepreneurs, their business is their job and highly dependent upon them. So, if they leave, so does their business.

The rest of the options involve passing along the business to someone else, typically and hopefully for a fee/profit. However, the whole crux of these options is that your business needs to be able to be passed along. This is harder said than done.

I recently was assessing the real estate and property management business that my husband and I started. Even if we wanted to exit, we are not quite at a point where we are able to sell it. Why? For starters, we have been rapidly growing over the past few years. Thus, processes are continuously being revamped, including our accounting procedures. This makes it more difficult to look back at the historical financials and have it understandable. We also have a complex assortment of legal entities. We need to figure out the best and appropriate way to manage the transactions between the entities and also have some historical financials that make sense. If someone were to purchase the company, some of the job/roles are dependent upon us and not easily transferable. For example, my husband has a buying network that he has built over the years. Not anyone can simply buy the business and take his place.

We have been making progress though, with the end goal in mind of being able to sell the business someday or at least delegating the tasks with less involvement on our part. We have begun to outline and document procedures, even those my husband partakes in. This is perhaps the most important task because even if we do not sell the business, it allows us to delegate the tasks and not be at a total loss should an employee leave. We are transitioning to an industry standard software for managing our real estate, with the intent of being able to better analyze the business. We are hiring good quality people and writing up their job descriptions.

And while I feel sort of stuck right now in that we do not even have the option of exiting our business…in due time we will be there.

Reading Recommendations

I am very much an advocate of learning, no matter what the age and no matter where you are in your career. Of course, we all have limited time and the question then becomes -- what should we be reading?

Jack Covert and Todd Sattersten have recently put "The 100 Best" book where they highlight what they feel are the best 100 books to read whether you are a CEO or just entering the business arena. What I like about their book is the classification of books by subject area. For example, here are the books that they feel are notable under the topical area of entrepreneurship:

The Art of the Start by Guy Kawasaki
The E-Myth Revisited by Michael E. Gerber
The Republic of Tea ** by Mel Ziegler, Patricia Ziegler, and Bill Rosenzweig
The Partnership Charter by David Gage
Growing a Business by Paul Hawken
Guerrilla Marketing by Jay Conrad Levinson
The Monk and the Riddle Randy Komisar with Kent Lineback

Happy reading!

Youth Entrepreneurship - the key to economic recovery?

At the World Economic Forum in Switzerland, a panel argued that are key to economic recovery relies on incorporating the teaching of entrepreneurship into the K-12 education system. Pretty interesting huh? I guess starting out young has its benefits.

http://blogs.wsj.com/independentstreet/2009/02/17/teaching-entrepreneurship-in-grade-schools/

Layoffs, Layoffs, Layoffs: The Implications?

In January 2009, there were over 1,300 layoff stories reported by the Layoff Daily. Pretty scary, huh? It makes me wonder what the implications are for entrepreneurs.

There are likely going to be some entrepreneurs that find their way into this category -- meaning that they simply are not strong enough to survive in this economy and/or the ability of their customer base to purchase their product/service is dissipating.

Other entrepreneurs will survive and perhaps even thrive in this economy. There are certain sectors or niches that do well in a down economy (think about Walmart) and others that are effective at changing to meet the demand/needs.

Yet, interestingly enough, there are still others that will become entrepreneurs BECAUSE of the economy. Yes, these are those individuals that are in the stories of the Layoff Daily and will turn to entrepreneurship because they don't have any other option or because it is something they have considered for a while, but now have the push to take.

Podcasts: Learning on the Go

A colleague recently shared with me that she frequently downloads podcasts (for free) from iTunes in order to keep up to date on the latest business news while she is on the go. They can be played on either your iPod or your computer. After taking a look at iTunes, I was quite impressed as they literally have 1000's of free podcasts available for download.

Within the 'business' category of available podcasts, the top 10 audio podcasts include:

1. NPR: Planet Money Broadcast

2. The Dave Ramsey Show - The Truth about Life and Money

3. Wall Street Journal This Morning

4. APM - Marketplace

5. Bloomberg on the Economy

6. World Business News

7. Harvard Business Ideacast

8. Get-it-done Guy's Quick and Dirty Tips to work Less and do More

9. Wall Street Journal's What's News

10. Bloomberg Economics

There are also many podcasts available that pertain specifically to entrepreneurship. By far, the most popular downloaded podcast was Rich Dad's Podcast by Robert Kiyosaki (who I have recommended previously on this blog). Overall, there were 86 podcasts that came up in a search on the word 'entrepreneur.'

Regardless of whether or not you are an entrepreneur, one of the keys to being successful in life in constant learning.

Steps for Starting a Business

Recently, I've been searching online for potential web resources that outline the steps for starting a business. This would be helpful for someone that wants to start their own business, but isn't sure where exactly to start or what to do. Most people, in my experience, are especially anxious about the paperwork and legality side of a business -- as they usually have the business idea down pretty well.

One of the better "steps" that I found was by startupnation.com, which included the following:

1. Create a Life Plan
2. Choosing a Business Model
3. Create a Business Plan
4. Select a Business Structure
5. Create Key Business Assets
6. Find the Funding
7. Organize Logistics
8. Find Great People
9. Establish the Brand
10. Market and Sell

I liked these steps because it starts out with creating a life plan, which I firmly believe in. You don't start a business just for the heck of it, it needs to fit into your life strategy. I think it is also pretty realistic in the sequence of starting a business. They offer much more detail after every step -- providing the wanna-be entrepreneur with the guidance he/she needs.

The Small Business Planner put out by the SBA is also pretty good as they focus on what is needed not only to start up the business, but also grow and eventually exit the business. They offer a specific set of steps within each of the four categories below.

1. Plan your business
2. Start your business
3. Manage your business
4. Getting out

Building on my previous post about looking for local websites when doing market research, a last source for identifying the steps for starting a business should be a local government website -- depending upon whatever state you live in. As a whole, these websites are not (in my opinion) that great for offering an overall sense of what it takes to get your business started, but they are especially useful in providing you with the paperwork and bureaucracy that needs to be taken care of. As an example, the State of Illinois offers a step-by-step process with links embedded to all the necessary government forms.

How entrepreneurial are you?

The term entrepreneurship is thrown around quite a bit in the media today, but have you ever wondered how entrepreneurial YOU are?

To answer that question, we must first define what it means to be entrepreneurial. According to academic research in this area (see Lumkin & Dess, 1996), being entrepreneurial consists of the following attributes:

• Autonomy
• Innovativeness
• Risk-taking
• Proactiveness
• Competitive Aggressiveness

Thus, to assess how entrepreneurial you are, you need to determine how autonomous, innovative, risk-taking, proactive and competitive you are. 

(On a side note, when you are more entrepreneurial, research also suggests that you are likely to perform better.)

Last year, I attended a speaker event by Michael Morris of Syracuse University. One of the points he was trying to get across is that there are many ways to be entrepreneurial. In addition to starting your own business, you can be entrepreneurial in the corporate environment, as a student, in the government (yes, really!), as a parent, in your church, non-profits, etc. Let's take the example of a student. In order to be entrepreneurial as a student, this could mean being more proactive in figuring out what you want to do, being more aggressive in trying to get scholarships, being innovative in designing a major or selecting double major combinations, being autonomous in your college decision, and perhaps risk-taking in trying out something new.

So, in what areas of your life are you most entrepreneurial?

You are never too young to be an entrepreneur!

I grew up in family-owned business. When I was younger, I also babysat, mowed lawns for extra money, sold cards, had a lemonade stand (well, once, it didn't go over that well) and probably did a few other "business ventures" that don't come to mind right now. Yet, I don't think that I was ever actually exposed to the concept of 'entrepreneurship' until college.

Today, there are not only a growing number of college entrepreneurship programs, but many targeted to schools and youth. Here are just a few:

 

 

 

If you are under the age of 18 and/or interact with anyone within this age group, no matter how young, there are many advantages of helping expose the entrepreneurial side in them. First, you are enabling them to build valuable skills (money handling, sales, people skills, etc.) that could be used later on in life. You are also teaching them how to be self-sufficient. Let's face it, not everyone is made for the corporate world. Last, you can help build confidence and give them something positive to focus on.

I used to work with an organization called The Institute for Entrepreneurship, where I helped administer a grant fund for kids/teachers and helped with their annual youth entrepreneurship conference. It was a simply amazing and inspiring experience -- you might be amazed at the potential in our young people.

Inventors

Are inventors really entrepreneurs? I believe they are. The entrepreneurial process involves identifying, evaluating, exploiting and managing the opportunity. While some entrepreneurs participate in the entire process, others, like inventors, participate in just a part of it. Inventors typically are the ones that identify the opportunities, which is the essential base to any new business.

Can you guess what these inventors were famous for?

(1) Alexander Graham Bell

(2) Elisha Otis

(3) Bette Nesmith Graham

For the answers to these and to see many more inventors, check out Wikipedia's inventory page.

More than a great idea

Have you ever wondered why Pizza Hut doesn't expand into the 'take-n-bake' aspect of the pizza business? Papa Murphys has found a way to not only enter a very mature and relatively saturated industry, but also a way to THRIVE in it! Instead of delivering pizzas (while trying to keep them warm from the oven), Papa Murphys prepares fresh pizzas in a Subway-line fashion and has you pick them up. So, it would seem logical to me that instead of expanding into the pasta delivery market (like they recently announced), Pizza Hut might instead exploit their delivery system to this fast-growing market. Really, how nice would it be to have a fresh ready-to-bake pizza from Pizza Hut delivered to your door?

I have asked a few people and they fully agree that it would be a great idea. So, what is holding me back? To be quite frank, it is near impossible for me to sell the idea to Pizza Hut. Why? Because you cannot simply patent ideas such as this.

Thus, the remaining option to take advantage of my idea would be to start my own business. It wouldn't be quite as good as Pizza Hut leveraging their name to enter this portion of the industry, but I have yet to see a replica of Papa Murphy's pop up that offers delivery. Here again, however, is a dead end. You see, entrepreneurship requires more than a great idea. It also requires the motivation as well as the capacity to exploit the idea. In terms of motivation, I need to be willing to take on the risks of entrepreneurship and devote the time necessary. For capacity, I need to have the money, equipment, network, industry knowledge, credit, and much more.

Unfortunately, I am a bit lacking on the motivation side as the pizza industry is not an area that I am passionate enough about in order to give up how I currently spend my time. But, perhaps the next idea I come across just might...

Xtreme Examples

I previously blogged about finding something that you are passionate about and then making a business out of it. Here are a few more examples found on entrepreneur.com of some Xtreme entrepreneurs -- that have found ways to follow their passion and make a buck or two!

Carey Hart, Professional freestyle motocrossrider and reality TV star
Business ventures - Owner and founder of Hart & Huntington Tattoo Company, a tattoo shop and clothing line with locations in Honolulu; Las Vegas; Orlando, Florida; and Cabo San Lucas, Mexico; owner and founder of Wasted Space, a new rock-inspired nightclub set to open this spring at the Hard Rock Hotel & Casino, Las Vegas

Eric Robinson, Off-road dirt bike rider, motocross rider, mountain biker, snowboarder and triathlete
Business ventures - College Park Industries, manufacturer of prosthetic feet, and founder of the Extremity Games, a sports event for athletes with limb loss and limb difference

Marc Frank Montoya and Liko S. Smith, Snowboarders; Montoya boards professionally
Business ventures - Co-founders of THE BLOCK Hotels, a chain of hotels designed for snowboarders with locations in Lake Tahoe and Big Bear Lake, California; Montoya is also co-owner of Sound Outerwear, maker of snowboarding gear and founder of DumbFounded PerduKshinz, a DJ company; Smith is also founder of Rogue Hospitality

Izzy and Coco Tihanyi, Surfers; Izzy formerly surfedcompetitively
Business venture - Surf Diva, a surf school and surf apparel company for women

For the full article, follow this link.

Startup Weekend

Are you looking for an intense weekend of which you'll walk away an entrepreneur? Formed in 2007 by Andrew Hyde, Startup Weekend offers you just that! In select cities, they bring together a group of highly motivated individuals and leave with a community focused on creating a brand new business of which all the antendees have a share in. Upcoming weekends will be taking place in Bloomington (Feb 8-10), Portland (May 23-25) and Ann Arbor (June 20-22).

For more information, just go to www.startupweekend.com!

SBA: Are you ready to start a business?

The U.S. Small Business Administration is a wonderful resource. Yes, it can be fairly bureaucratic at times, depending on what you want to do. And yes, some parts (especially some of their loan programs) are better for smaller, growing businesses rather that brand new start-ups. However, if you take a look at their website, there are many resources there for the taking.

One of the tools offered is a self assessment of 'are you ready to start a business?' This is ideal for those 'wanna-be entrepreneurs.' What I like about the assessment is that based on the answers you provide, they offer suggestions for your next step in the entrepreneurial process and link you to helpful resources.

This is just a sampling of what is available on the SBA's website. In the coming months, I will periodically profile some of the other facets that I think you will find useful.

Passion

I remember sitting in my entrepreneurship class while doing my undergrad back at Ripon College, and my professor (who is now a good friend) Mary Avery started talking about passion. Once you find something you are passionate about and enjoy doing, the next step was to find a way to make money doing it. A prime example was the horse ranch that Mary and her husband Tom started up - due to her love of horses and riding since she was small!

Why is being passionate about the business so important? Well, for one, if it is something you are passionate about, you likely have a depth of information about it - which can be leveraged in creating a greater competitive advantage. For instance, my friend Michelle (who actually took the entrepreneurship class with me at Ripon College) just emailed me about the business she was starting - Snappy Scrapping. Michelle is very passionate and knowledgeable about scrap booking, and this results in her ability to identify an opportunity in the industry as well as to be able to create high quality products. The second reason passion is so important is because starting a business requires a LOT of hard work and perseverance. Thus, if it is something you are passionate about, you are likely to have more motivation and work through it.

So, if you are still trying to think of a great business idea, ask yourself: What motivates you? What are your hobbies and interests? What are you passionate about? Then - find a way to make your passion your business.

Updated GEM Data

In my post earlier this week, I discussed how entrepreneurial the U.S. was in comparison to other countries in the world. Yesterday, the latest figures updated for 2007 were released by GEM (thanks to Michael Chmura from Babson for the email letting me know). The U.S. decreased slightly from 10% of adult population undertaking entrepreneurial activity to 9.6%. The most entrepreneurial country in 2007 was Thailand, followed closely by Peru. The least entrepreneurial country was Austria.

Another interesting fact from the 2007 GEM report: 40% of the early stage entrepreneurs surveyed expected 25% or more of their sales to come from outside their country.

How entreprenuerial is the U.S. (in comparison to other countries)?

If you are like most people, your answer would be 'very entrepreneurial.' But the answer is pretty surprising and interesting.

There is an organization called the Global Entrepreneurship Monitor (GEM) that annually conducts a cross-national assessment of entrepreneurial activity and their latest published assessment from 2006 included 42 countries. They define entrepreneurial activity as people that are in the process of starting their own business or new business owners (of approximately 3 1/2 years or less).

According to their assessment, 10% of the adult population (ages 18-64) in the U.S. in 2006 were considered to be undergoing entrepreneurial activity. The U.S. ranked 15th out of 42, which is pretty good, but definitely not at the top end. The entrepreneurial activity was the highest in Peru (40%), Columbia (22.5) and the Philippines (20.4). The lowest levels of entrepreneurial activity was found in Belgium (2.7%), Japan (2.9) and Sweden (3.5). Here are a few other key findings:

- entrepreneurial activity is generally higher in those countries with lower levels of GDP
- entrepreneurial activity is relatively low in high-income countries (especially the core countries of the EU and Japan)

Is this making any sense yet? Are you surprised that Peru is nearly four times as entrepreneurial as the U.S.? The eye opening part of this study, at least for me, is that people undertake entrepreneurship for different reasons. In the U.S., most of the people start a business because they see an opportunity and want to exploit it. They have other options, but make the choice to become an entrepreneur. However, in many other countries including Peru, entrepreneurship is not always seen as such a luxurious option. For some, other job opportunities do not exist and/or are not satisfactory so entrepreneurship becomes a necessity in order to survive.

So, is the U.S. entrepreneurial? The answer is yes, but don't forget to understand the global context.

How much do YOU know...

...about entrepreneurship in the U.S.? Take this quiz. You might be surprised. I must admit that I scored an unimpressive 45%! Hope you have better luck and learn a thing or two.