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.

Going Green

I read an article this morning on how some larger companies are going green (attempting to be more environmentally friendly in highly visible ways) in order to attract not only customers...but employees! With the rise of the creative class, some highly desirable employees are being a bit choosier about the kinds of companies they work for. They want to work in an environment where they know they are making a difference.

If you are a start-up company and want to be competitive, there is further motivation for going green. Not sure how? For starters, you should at a minimum...

• Recycling in the office
• Using eco-friendly suppliers
• Go digital (reduce paper consumption)
• Offer carpooling and/or working from home
• Use energy-efficient light bulbs

Visit www.evo.com for some additional ideas.

 

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.

Information Overload

The good thing about the Internet is that it makes an enormous amount of information available at your fingertips.

The bad thing about the Internet is that it makes an enormous amount of information available at your fingertips. It is like going to Wal-mart to buy toothpaste and feeling a bit overwhelmed at ALL the many different kinds and choices you have -- when all you wanted to buy was just some ordinary toothpaste!

The real question then becomes -- how can you maneuver online to find good and useful information for the purposes of starting your own business? Here are just a few suggestions...

- Trade Association websites: One of the first places to look should nearly always be a trade association website. Most industries have trade associations (i.e. National Restaurant Association) and they can be a wealth of statistics, knowledge and trends -- that can very well impact the development of your business idea. To find your trade association, simply do a google search of the words 'trade association' and whatever industry it is you are entering.

- Find websites 'close to home'. For instance, if you are looking to start a business in the state of Illinois, you might look to the Illinois guide (sponsored by the state government) that includes details specific to that state. Also, check out your local Small Business Development Center or economic development corporation. It is a good place to look for local grant and loan programs that may be of help.

- Entrepreneurship-related magazines: There are many magazines geared to entrepreneurship that have a lot of up-to-date statistics, articles and help by topic that can also be a good starting point. One of my favorites is Entrepreneur Magazine.

- Try the SBA: The U.S. Small Business Administration actually has quite a bit of good, basis information to start with. Check out their small business planner.

- Get some referrals: Pick up the phone or go talk with people to find out what websites they recommend. Word of mouth is usually a great source!

How do you sift through all the information on the web?

Customer service: Is it overrated?

Have you visited Taco Bell lately? At least in the area where I live, if you pull up to the drive-thru, you will be asked "how are you today?" As I was expecting the typical "how can I help you today" or "go ahead with your order whenever you are ready", this surprised me a bit. So I answered, "fine, thank you."

However, the experience again began to impress me in that the reason why franchises in general are successful are because they can create processes for everything! Yes, they can create processes for their food preparation, and although I personally believe that franchise food is marginal at best, people go there because they always know exactly what to expect. However, the more fascinating aspect is that processes can be created for other aspects of the business such as accounting procedures, order intake, cleanliness procedures, etc, and in the case of Taco Bell, customer service. I have not researched it at all, but I am fairly certain that the Taco Bell drive thru workers are specifically training in how to address the customers. This makes it easy for the franchise owners to ensure a certain level of customer service every time!

What can YOU learn from this? Well, even if you are not interested in owning or operating a franchise, you can learn from them by creating processes for every aspect of YOUR business. In turn, this will not only allow your customers to know exactly what to expect and improve your reliability, but it will also help your business to run more smoothly.  

A great book to check out that talks more about the critical importance of processes and imitating what franchises do well is The Emyth Revisited by Michael Gerber.

Assumptions versus Knowledge

One of my favorite quotes is that new ventures have a 'high ratio of assumption to knowledge' (McGrath & MacMillan, 1995, p. 4). Essentially, when you start a business, you are relying on a huge pile of assumptions. Take the business plan, for instance. It is an important tool that I highly recommend, but it is based almost completely upon assumptions such as what price you think you can charge, how you think the customers/competitors will react, the sales you think you can get, etc. You will likely get financing if your assumptions appear believable, but it is still not a guarantee of success.

As a business grows, however, this ratio of assumption to knowledge should change. You will get customer feedback regarding your prices and products/services. You will see how your competitors react. You will find out how much sales you can actually build. Then, if you are going to be successful, you integrate this knowledge into your working business plan to reduce your reliance on all those unknown assumptions. 

As I am writing this blog, I am sitting here at my favorite coffee shop and just finished a conversation with the owner. (By the way, if you ever get to Linton, IN, you have to look up Francisco de Borja!!!) They are in their second year of business and he described their experience thus far as a roller coaster as they try to figure out what works and doesn't work for their business. One example he gave me was their pastry cases, they realized that customers are more apt to purchase pastries if they are on the counter where they can see it and help themselves rather than in the case. I've also noticed that they have modified what they sell for lunch and also what they sell retail.

What I admire about their business is that they are willing and open to taking in new knowledge and integrating it to produce a more successful business. Other businesses can get stuck on that initial business plan (based entirely on assumptions) and don't take the opportunity to adapt and grow into a mature business with the new knowledge being given.

 

Small Business Development Centers (SBDC)

If you want to start your own business and need some help, and are located in the U.S., I encourage you to start with your local small business development center (SBDC). What is an SBDC? As described on the U.S. Small Business Administration's (SBA) website:

SBDCs offer one-stop assistance to individuals and small businesses by providing a wide variety of information and guidance in central and easily accessible branch locations. The program is a cooperative effort of the private sector, the educational community and federal, state and local governments and is an integral component of Entrepreneurial Development's network of training and counseling services.

The services do tend to vary from SBDC to SBDC, but I have found that the quality is good and it can be an affordable start to receiving some training and one-on-one counseling for your business idea. Another advantage of starting the entrepreneurial process with your local SBDC is that they have a great knowledge base of the local entrepreneurial resources that you can tap into - both within and outside their organization.

Use the SBDC Locater on the SBA's website in order to fine an SBDC close to you.

Commercializing your new product

Coming up with a new idea is an essential part of the entrepreneurial process, but that idea alone will not turn you into a successful entrepreneur. Sometimes I even think that coming up with the idea is the easy part, and that turning an idea into a business is really the hard part. VentureNet Iowa is a new organization that is dedicated to helping Iowans in the commercialization process. Their model below is a great representation of the many key questions that need to be asked throughout this process.

 

 

 

 

 

 

 

 

 

 

In my experience, I have found that individuals tend to have specialized knowledge in different aspects of this model. For instance, you might have an inventor or an engineer that is great at coming up with ideas, but they might not have that much knowledge of the marketability or how to write a business plan, or vice versa. The answer it to know where your strengths lie and then surround yourself by people that can help you. This is valid for both independent entrepreneurs as well as corporate entrepreneurs. Before pursuing my Ph.D., I worked for Brady Corporation and at the time they were spending a significant amount of time and effort to create teams across the product/market/business arenas as they knew it would enhance their ability to better commercialize products successfully.

Many thanks to my former student and respected colleague, Cris Grunewald, for passing this model along.

The Cooperative Artist - The ARTrepreneur

If you are an artist and want to sell your products, what options do you have? While a storefront might be ideal, many artists cannot afford the expenses associated with it and/or lack some of the business skills necessary. An alternative that I encourage you to consider is an cooperative gallery. As explained by ARTrepreneur.com:

The idea of an artists' cooperative is really very simple - a group of artists get together to divide expenses and chores so that they can exhibit and sell their work. They rent communal space; they volunteer their time and contribute to shared expenses. Their hope is that they will find a reliable place to exhibit work and that they will mutually benefit from being in the business of selling work in addition to creating it.

How do you get started? The first step is organizing a group of artists in your community, and then, like any other business venture, get started on figuring our the details of your business plan.

What is in a name?

When you start your own business, one of the first things that you do is choose a name for your business. Here are a few considerations:

• Be unique! This will help you be remembered.
• Even if you are starting out with a single product/service, think about what products/services you want to be selling 10-20 years from now. Make sure your name is inclusive of them.
• If selling overseas is a possibility down the road, consider the translations.
• Look into the legal restrictions depending upon what type of legal entity you will be.
• Is a corresponding domain name available? This is a key component is today's world.
• Conduct some trademark research to make sure that the name is not already taken.

My last piece of advice is simple: Don't make the business name all about you! Why? First, it makes it difficult if you ever want to sell the business. Second, it ties you to the business. It will create a loyalty to YOU rather than the business, and your customers will always want to personally interact with YOU. Thus, instead of a name like 'Joe's Pizza,' go for 'Pizazz Pizzeria!'

Best Practices

Subway is one of the top growing franchises in the world. If you were to invest in a Subway franchise, I imagine that your first question would be: What can I expect in terms of sales? Interestingly, if you take a closer look at their franchising brochures, Subway has a policy that 'no employee or agent of ours can provide you with projections as to your potential sales, earnings and profitability.' Instead, they encourage you to talk to other Subway owners. While this is largely due to legal reasons to be sure that they do not misguide you as an investor, their recommendation to talk to other Subway owners makes a lot of sense. In fact, it is the same thing I recommend all of the students and/or entrepreneurs that I work with - find some best practices and talk to them! You can learn a lot not only about what kind of sales projections you can expect, but also learn some great tips about what to do and what not to do. When you are looking for a best practice, look for another business that has a lot of similarities with you, but that are not necessarily a competitor. For instance, if you are going to open a mini golf course in a mid-sized college town, find a different mid-sized college town and talk to them! You may be surprised, as many business owners are more than happy to share their knowledge. And, who knows, you might just find someone to serve on your board of advisers and help you out indefinitely.

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.

What is a business plan, anyhow?

If you do a search at Amazon.com for books under the topic of 'business plan,' you will find a staggering 69,736 titles. Likewise, if you google 'business plan,' it comes up with 91,500,000 results!!! But, my question for you is - what really is a business plan?

According to the American Heritage Dictionary, a plan is defined as 'a scheme, program, or method worked out beforehand for the accomplishment of an objective.' So, if we apply this to a business plan, it essentially is figuring out beforehand how you are going to successfully start up your business. There are many different business plan outlines, because figuring out the how question can vary depending upon the type of business and how complex it is. That said, most business plans address the following questions:

Company: How will you be organized and bring in the personnel to exploit this opportunity?

Product/Service: What are the features and how will they benefit the customer?

Target Market: What is happening in the industry and how will your business fit into the mix?

Competition: Who are your existing and future competitors and how will you compete?

Sales and Marketing: How will you create an effective strategy to attract and sell to your customer?

Operations: How will you actually get the business up and running?

Financials: How will you make money and maintain financial feasibility?

It is important to note that technically, a business plan does not need to be written. Why? Because nothing about the definition says anything about being written. It is about planning! Of course, I suggest writing down your business plan because it is a lot of planning to keep in your head, and research does show that if you write down your goals/objectives, you are much more likely to achieve them. You will also need a written business plan to pitch your idea to important stakeholders such as investors, lenders, and key partners. Interestingly, there is a study out by Honig and Karlsson published in the Journal of Management in 2004 that found that the mere writing of a business plan is not linked to survival or higher levels of profitability in the first two years of a business. Why? My answer is that what is more important than going through the act of writing the business plan is how well you answer the how questions.

Clicks to Bricks: Is the web a good test market?

A student recently passed along to me an article published in Business Week (nov 26, 2007) entitled "Threadless: From Clicks to Bricks." It is an interesting article that talks about how companies that have started online, such as Threadless.com or Lucy.com, are now moving to bricks and mortar stores.

For those of you considering opening your own business, it begs the question of whether or not the web is a good 'starter' market to assess your opportunity. You can see what works and what doesn't. You can also collect some data to more accurately determine whom your target customer is and what their precise needs and preferences are. Then, if success seems to be coming your way, you can continue to capitalize on the online market while also entering the bricks and mortar retail market. Your chances of success in the more costly bricks and mortar market will hopefully be improved based on the previous business experience, growing reputation and more overall knowledge about the opportunity. It will also likely help you obtain the financing necessary as you can show more support for your business plan.