Thursday, November 20, 2008
VCs in This Awful Economy
I can't figure out how to make a link to this blog article about Venture Capitalists. So I'm just pasting it below. Very interesting article on the VC model.
Is the VC Model Broken? Far From it
Mathew Ingram Friday, November 14, 2008 6:00 AM PT 20 comments
Updated: Adeo Ressi, the serial entrepreneur behind the venture-capital rating site TheFunded, has been getting a lot of attention for a presentation he gave at Harvard Business School in which he argued that the VC industry is “broken.” His central point is that there are simply too many venture capital funds chasing too few opportunities, with unrealistic expectations. The result, as he notes in one eye-grabbing slide, is that VC returns over the past five years have fallen below the total amount of money invested over that same time period.
It’s certainly the kind of slide that makes you sit up and take notice. But is it evidence that the VC game is kaput? Hardly. Instead, it’s reminiscent of Warren Buffett’s quip about how if he had been at Kitty Hawk he would have shot Orville Wright’s plane out of the air, because the airline industry over the last 100 years has been a net destroyer of capital. While that may be true (I haven’t double-checked Buffett’s numbers), that’s not to say investors haven’t been able to make money throughout that troubled history. To quote another great economic mind, John Maynard Keynes, in the long run we are all dead. In the short run, however, some successes are possible.
Have there been too many funds created, too much money poured into finding the next Facebook, Twitter or YouTube? Undoubtedly. But the VC industry is subject to the same economic forces and laws of supply and demand as any other industry — in other words, if some funds are making money, others will emerge and try to duplicate that success, even if they know the odds are against them. The same dynamic can be seen in plenty of other businesses, including the mining industry: When gold is hot, everyone wants to be (or invest in) a gold miner, even though they all secretly know that too many miners means less gold for everyone.
An industry like that is inevitably going to grow and contract, and now sure feels like a time of contraction. But that doesn’t mean smart VCs can’t prosper by concentrating on what they know, or by staying small enough to get more “home runs,” as angel investor Austin Hill notes in a comment at TechCrunch (disclosure: I know Austin, and consider him a friend). The VC industry isn’t broken any more than any other boom-and-bust industry is broken. It’s likely to go through a restructuring as a result of the current downturn, and some VCs will undoubtedly go out of business, as they should. But there will always be VCs, just as there will always be gold companies — and airlines.
Update from Om: Looks like Darwin is doing his thing. Bloomberg reports that universities and pension fund investors are dumping their stakes in VC funds. “Investors have venture-capital stakes valued at more than $2 billion up for sale, double the $800 million this time last year,” the newswire writes. Everyone including large university endowments are having sleepless nights.
TheFunded - Canarie
View SlideShare presentation or Upload your own. (tags: lp investing)
Image courtesy of Adeo Ressi via his blog.
Is the VC Model Broken? Far From it
Mathew Ingram Friday, November 14, 2008 6:00 AM PT 20 comments
Updated: Adeo Ressi, the serial entrepreneur behind the venture-capital rating site TheFunded, has been getting a lot of attention for a presentation he gave at Harvard Business School in which he argued that the VC industry is “broken.” His central point is that there are simply too many venture capital funds chasing too few opportunities, with unrealistic expectations. The result, as he notes in one eye-grabbing slide, is that VC returns over the past five years have fallen below the total amount of money invested over that same time period.
It’s certainly the kind of slide that makes you sit up and take notice. But is it evidence that the VC game is kaput? Hardly. Instead, it’s reminiscent of Warren Buffett’s quip about how if he had been at Kitty Hawk he would have shot Orville Wright’s plane out of the air, because the airline industry over the last 100 years has been a net destroyer of capital. While that may be true (I haven’t double-checked Buffett’s numbers), that’s not to say investors haven’t been able to make money throughout that troubled history. To quote another great economic mind, John Maynard Keynes, in the long run we are all dead. In the short run, however, some successes are possible.
Have there been too many funds created, too much money poured into finding the next Facebook, Twitter or YouTube? Undoubtedly. But the VC industry is subject to the same economic forces and laws of supply and demand as any other industry — in other words, if some funds are making money, others will emerge and try to duplicate that success, even if they know the odds are against them. The same dynamic can be seen in plenty of other businesses, including the mining industry: When gold is hot, everyone wants to be (or invest in) a gold miner, even though they all secretly know that too many miners means less gold for everyone.
An industry like that is inevitably going to grow and contract, and now sure feels like a time of contraction. But that doesn’t mean smart VCs can’t prosper by concentrating on what they know, or by staying small enough to get more “home runs,” as angel investor Austin Hill notes in a comment at TechCrunch (disclosure: I know Austin, and consider him a friend). The VC industry isn’t broken any more than any other boom-and-bust industry is broken. It’s likely to go through a restructuring as a result of the current downturn, and some VCs will undoubtedly go out of business, as they should. But there will always be VCs, just as there will always be gold companies — and airlines.
Update from Om: Looks like Darwin is doing his thing. Bloomberg reports that universities and pension fund investors are dumping their stakes in VC funds. “Investors have venture-capital stakes valued at more than $2 billion up for sale, double the $800 million this time last year,” the newswire writes. Everyone including large university endowments are having sleepless nights.
TheFunded - Canarie
View SlideShare presentation or Upload your own. (tags: lp investing)
Image courtesy of Adeo Ressi via his blog.
Monday, November 17, 2008
Saturday, November 15, 2008
Starting a Business In Bad Times
An inventor sent me this article. It shows how to take advantage of the downturn and start a successful business. Read on...
By Joan Lefkowitz, Accessory Brainstorms
"Few can believe that suffering, especially by others, is in vain.Anything that is disagreeable must surely have beneficial economiceffects." - John Kenneth Galbraith
You might think that during times of economic recession consumers arein no mood to experiment with, or purchase inventive products.Counter-intuitively, starting a business or launching an inventionduring a recession can be one of the smartest moves to make- dependingof course, on if you take certain factors into account. Looking atpast recessions and consumer psychology can give us ideas on the typesof inventions that can succeed during an economic downturn. Let's walkthrough some of these themes that appear on the psychologicallandscape during a recession.
Nesting
Let's start with how people are feeling during these uncertain times.Recessions can generate fear and uncertainty in the minds of people.All around, people are watching others suffer economic hardship,losing their jobs and homes. A result of this is a mindful gratitudethat they are not that person they see struggling on the nightly newsor in their neighborhood. An appreciation of what one already has, asopposed to what one can attain becomes paramount.
That's why many inventions that do well during hard times have to dowith comfort, organization and do-it-yourself products. Nesting relates to all things related to the home; personal possessions,making oneself more comfortable and secure, improving homeenvironment, and making one's life more functional. It's also a knownfact that during recessions, many people have less disposable incometo spend on going out, so home entertainment and gaming items arealways popular. An example of an inventive gaming product introducedduring this recession is The Sega "Project Beauty" virtual realityvideo game (designed for Nintendo DS), which helps women try outdifferent make-up looks via their TV screen.
The Magic Fur Ball helpstake care of your clothing and laundry by removing people and pet hairfrom fabrics in the dryer. Lumbarwear is a soft undergarment thatsupports core and back strength, while providing comfort to thewearer. Tag Tamers is another product that enables comfort byrelieving the itchiness of garment labels and eliminating the need tocut them out of clothing. By the way, replenishment products such asthis are great for repeat sales. The stylish Shoe Seen is atransparent shoe pouch that helps people organize and store theirfootwear. All of these are products that satisfy that urge for nesting.
Competition- "Looking Good is Feeling Good"
People are looking to improve themselves to compete in a tougher jobmarket. They become acutely more aware of their own presentation andappearance, viewing the world as a more competitive, rather thanfriendly place. A recent `Do-it-Yourself' beauty invention that's ahit in the market is the ZENO PRO Acne Clearing Device (uses heat toclear blemishes), which despite retailing at over $100 saves moneythat would otherwise be spent at the dermatologist. Another example ofa grooming tool that's time and money saving (no trips to the salon!)and makes the consumer look good is R.E.M. Spring, a battery-freefacial hair remover. Slimpressions is a shapewear product designed toslim a woman's arms, back and midriff. These products help people lookgreat, and also are created to deal with ongoing beauty issues.
Survivor
Where once people saw life as a progression of economic milestones,lowering expectations during a recession to "just getting by" becomesroutine. Products that emphasize survival in the economic storm shouldbe central in the minds of inventors. For example, Steam Buddy ironthat replaces dry-cleaner wrinkle-removal (plus, you don't have todrag out the ironing board) costs about $20, but saves the averagecustomer $100's in dry cleaning bills over the course of a year.Re-usable items that replace disposables, such as Zorbeez absorbentcloths that are used in place of paper towels, will also appeal tomoney-strapped consumers.Back in the 1960's, there used to be special areas in departmentstores that sold "Notions" or problem-solving personal products. Todaythese types of products that emphasize personal preparation arethriving on the internet, and in mail order catalogues.
Examples include Hollywood Fashion Tapes, double sided clear tape for "fashionemergencies", and Bosom Button, a discreet jewel-like pin which allowspeople to wear clothes with embarrassingly low necklines, or turnscarves into skirts.Escapism…and HopeRecessions can cause collective anxiety and panic within the public.
Thoughts of losing ones job, the home that the job pays for, and allits contents, are scary enough. It's common knowledge that during thegreat depression, the movie cinemas served as a great escape for themasses. Often those movies featured the lives of the rich and famous,in the most expensive and lavish of clothes and settings, a starkcontrast to the movie-goers reality. Bars and liquor stores alsoexperience an uptick in clientele. What is entertainment but an escapefrom the mundane.
Escapism is a search for hope and magic. Hope iswhat people need and crave most during tough times. People are lookingfor things to magically improve their lives.
Examples of "magical" and entertaining products include the "Roomba" robotic vacuum cleaner and"Change Rocks", the inter-changeable, multi-stone ring. Another suchitem is the Shower Bow Shower Curtain Expander, which creates a moreluxurious bathroom experience, by creating more space in the shower.People need little extravagances as opposed to big ones.Tips
For Inventions
Let's look through some of the hallmarks that make for good retail inventions:
It is functional and simple to use. It makes life easier, while makingthe user feel better, smarter, more efficient or more attractive. It'sfun to use. It retails for $40 or less, yet has an element of magic.It saves both time and money, and is reliable, durable, safe andperforms well. It is convenient to store.
During a recession, otherattributes of successful inventions would include items that helpconsumers repair/improve or re-use what they already own.The item should be visually and tactilely appealing, have a nice shapeand be made available in an attractive color, with smooth edges and aneven finish. Packaging should be compact and the product name catchyand memorable; logo and graphics are clear and easy to read. Photos ofproduct results should appear on the front of the package. Simple'how-tos' should appear on the back of the package.
What Wholesale Buyers are Looking ForMost inventions are currently sold to wholesale buyers and/or solddirectly to the public (through internet and TV commercials). Inselling to wholesale buyers, it is critical to keep in mind theirperspective. Wholesale buyers are on the lookout for something that will cut through the jungle of "stuff" already out there, that will sell itself, and is so novel it needs little to no advertising. In cash poor times, buyers are looking to tighten inventories bybuying and stocking less, and paying less for products in order toincrease profit margins, while offering value to customers. Some ofthe ways to appeal to a buyer and help them market your product are: Source for the best pricing on materials and labor. Keep size of theproduct to a minimum (which takes up less space on the store shelf).Provide alluring signage, displays and photos if the retailer permits.Offer live demonstrations and inventor "guest" appearances. Offer"how-to" videos to stores that will run them on the selling floor.Offer bonus booklets showing extra style or use options as a method ofsampling or giveaways. Create special price breaks to buyers if theywill "outpost" your product in multiple locations in a store. Provide periodic surprising new add-on products to keep the buyer interested, grow your solitary item into a full product line; and help theretailer satisfy consumers who are always looking for "what's next"(regardless of the economy.)
Why This is a Good Time for You, The Inventor
You may be unemployed, or in need of extra money. You may be scared totake that next step. You may have been waiting for the "perfect time"to launch your invention. But now is the time to put your idea intoaction. Now is the time to push yourself to compete, and complete yourvision. Take advantage of recessionary times. If your invention issuccessful during a recession, it can really thrive during good times. As Frank Sinatra's most famous song said, "If you can make it here,you can make it anywhere", we say "If you can make it now- go for it!"
Joan Lefkowitz (who knows how to spot a retail trend when she seesone, having represented inventors through her third recession), is anoriginal marketer of TopsyTail tm, and is president of ACCESSORYBRAINSTORMS, NYC, a licensing agency, sales representation andconsultancy for Fashion and Beauty Accessory and Lifestyle Inventions.www.accessorybrainstorms.com
By Joan Lefkowitz, Accessory Brainstorms
"Few can believe that suffering, especially by others, is in vain.Anything that is disagreeable must surely have beneficial economiceffects." - John Kenneth Galbraith
You might think that during times of economic recession consumers arein no mood to experiment with, or purchase inventive products.Counter-intuitively, starting a business or launching an inventionduring a recession can be one of the smartest moves to make- dependingof course, on if you take certain factors into account. Looking atpast recessions and consumer psychology can give us ideas on the typesof inventions that can succeed during an economic downturn. Let's walkthrough some of these themes that appear on the psychologicallandscape during a recession.
Nesting
Let's start with how people are feeling during these uncertain times.Recessions can generate fear and uncertainty in the minds of people.All around, people are watching others suffer economic hardship,losing their jobs and homes. A result of this is a mindful gratitudethat they are not that person they see struggling on the nightly newsor in their neighborhood. An appreciation of what one already has, asopposed to what one can attain becomes paramount.
That's why many inventions that do well during hard times have to dowith comfort, organization and do-it-yourself products. Nesting relates to all things related to the home; personal possessions,making oneself more comfortable and secure, improving homeenvironment, and making one's life more functional. It's also a knownfact that during recessions, many people have less disposable incometo spend on going out, so home entertainment and gaming items arealways popular. An example of an inventive gaming product introducedduring this recession is The Sega "Project Beauty" virtual realityvideo game (designed for Nintendo DS), which helps women try outdifferent make-up looks via their TV screen.
The Magic Fur Ball helpstake care of your clothing and laundry by removing people and pet hairfrom fabrics in the dryer. Lumbarwear is a soft undergarment thatsupports core and back strength, while providing comfort to thewearer. Tag Tamers is another product that enables comfort byrelieving the itchiness of garment labels and eliminating the need tocut them out of clothing. By the way, replenishment products such asthis are great for repeat sales. The stylish Shoe Seen is atransparent shoe pouch that helps people organize and store theirfootwear. All of these are products that satisfy that urge for nesting.
Competition- "Looking Good is Feeling Good"
People are looking to improve themselves to compete in a tougher jobmarket. They become acutely more aware of their own presentation andappearance, viewing the world as a more competitive, rather thanfriendly place. A recent `Do-it-Yourself' beauty invention that's ahit in the market is the ZENO PRO Acne Clearing Device (uses heat toclear blemishes), which despite retailing at over $100 saves moneythat would otherwise be spent at the dermatologist. Another example ofa grooming tool that's time and money saving (no trips to the salon!)and makes the consumer look good is R.E.M. Spring, a battery-freefacial hair remover. Slimpressions is a shapewear product designed toslim a woman's arms, back and midriff. These products help people lookgreat, and also are created to deal with ongoing beauty issues.
Survivor
Where once people saw life as a progression of economic milestones,lowering expectations during a recession to "just getting by" becomesroutine. Products that emphasize survival in the economic storm shouldbe central in the minds of inventors. For example, Steam Buddy ironthat replaces dry-cleaner wrinkle-removal (plus, you don't have todrag out the ironing board) costs about $20, but saves the averagecustomer $100's in dry cleaning bills over the course of a year.Re-usable items that replace disposables, such as Zorbeez absorbentcloths that are used in place of paper towels, will also appeal tomoney-strapped consumers.Back in the 1960's, there used to be special areas in departmentstores that sold "Notions" or problem-solving personal products. Todaythese types of products that emphasize personal preparation arethriving on the internet, and in mail order catalogues.
Examples include Hollywood Fashion Tapes, double sided clear tape for "fashionemergencies", and Bosom Button, a discreet jewel-like pin which allowspeople to wear clothes with embarrassingly low necklines, or turnscarves into skirts.Escapism…and HopeRecessions can cause collective anxiety and panic within the public.
Thoughts of losing ones job, the home that the job pays for, and allits contents, are scary enough. It's common knowledge that during thegreat depression, the movie cinemas served as a great escape for themasses. Often those movies featured the lives of the rich and famous,in the most expensive and lavish of clothes and settings, a starkcontrast to the movie-goers reality. Bars and liquor stores alsoexperience an uptick in clientele. What is entertainment but an escapefrom the mundane.
Escapism is a search for hope and magic. Hope iswhat people need and crave most during tough times. People are lookingfor things to magically improve their lives.
Examples of "magical" and entertaining products include the "Roomba" robotic vacuum cleaner and"Change Rocks", the inter-changeable, multi-stone ring. Another suchitem is the Shower Bow Shower Curtain Expander, which creates a moreluxurious bathroom experience, by creating more space in the shower.People need little extravagances as opposed to big ones.Tips
For Inventions
Let's look through some of the hallmarks that make for good retail inventions:
It is functional and simple to use. It makes life easier, while makingthe user feel better, smarter, more efficient or more attractive. It'sfun to use. It retails for $40 or less, yet has an element of magic.It saves both time and money, and is reliable, durable, safe andperforms well. It is convenient to store.
During a recession, otherattributes of successful inventions would include items that helpconsumers repair/improve or re-use what they already own.The item should be visually and tactilely appealing, have a nice shapeand be made available in an attractive color, with smooth edges and aneven finish. Packaging should be compact and the product name catchyand memorable; logo and graphics are clear and easy to read. Photos ofproduct results should appear on the front of the package. Simple'how-tos' should appear on the back of the package.
What Wholesale Buyers are Looking ForMost inventions are currently sold to wholesale buyers and/or solddirectly to the public (through internet and TV commercials). Inselling to wholesale buyers, it is critical to keep in mind theirperspective. Wholesale buyers are on the lookout for something that will cut through the jungle of "stuff" already out there, that will sell itself, and is so novel it needs little to no advertising. In cash poor times, buyers are looking to tighten inventories bybuying and stocking less, and paying less for products in order toincrease profit margins, while offering value to customers. Some ofthe ways to appeal to a buyer and help them market your product are: Source for the best pricing on materials and labor. Keep size of theproduct to a minimum (which takes up less space on the store shelf).Provide alluring signage, displays and photos if the retailer permits.Offer live demonstrations and inventor "guest" appearances. Offer"how-to" videos to stores that will run them on the selling floor.Offer bonus booklets showing extra style or use options as a method ofsampling or giveaways. Create special price breaks to buyers if theywill "outpost" your product in multiple locations in a store. Provide periodic surprising new add-on products to keep the buyer interested, grow your solitary item into a full product line; and help theretailer satisfy consumers who are always looking for "what's next"(regardless of the economy.)
Why This is a Good Time for You, The Inventor
You may be unemployed, or in need of extra money. You may be scared totake that next step. You may have been waiting for the "perfect time"to launch your invention. But now is the time to put your idea intoaction. Now is the time to push yourself to compete, and complete yourvision. Take advantage of recessionary times. If your invention issuccessful during a recession, it can really thrive during good times. As Frank Sinatra's most famous song said, "If you can make it here,you can make it anywhere", we say "If you can make it now- go for it!"
Joan Lefkowitz (who knows how to spot a retail trend when she seesone, having represented inventors through her third recession), is anoriginal marketer of TopsyTail tm, and is president of ACCESSORYBRAINSTORMS, NYC, a licensing agency, sales representation andconsultancy for Fashion and Beauty Accessory and Lifestyle Inventions.www.accessorybrainstorms.com
Thursday, November 6, 2008
Social Entrepreneurship
I attended a presentation on ITN America. It's an example of social entrepreneurship at its best. Social entrepreneurship uses business practices to solve social problems. The founder recognized a need -- transportation for seniors -- and devised a sustainable method of meeting that need. Read on...
ITN America – Independent Transportation Network
ITN CEO Katherine Freund has worked on ITN for the past 18 years. Other cities and areas are adopting her model.
Westport and its surrounding towns are considering starting an ITN in coastal Fairfield County. Connecticut already has two ITNs – Middletown and Enfield.
Key Points
· American households spend 25% of their income on transportation. 91% of people’s trips outside their homes are made in cars, 8% by walking.
· ITN is a local solution to the senior transportation challenge. It’s an example of “social entrepreneurship” – using an entrepreneurial business model to meet a social need.
o ITN started by discovering what the needs were and then designing a solution.
· ITN replicates private vehicle ownership using public and private resources in partnership.
· ITN uses technology (computers and telecommunications) to create an efficient system to use excess capacity in private vehicles;
o sharing rides, dispatched by a central office,
o driven by volunteers using their own cars or fleet cars that were donated,
o passengers pay
o volunteers are reimbursed for gas and maintenance on a per mile basis.
o Rides are available 365 days a year, 24 hours a day for any purpose.
o Riders get a 20% discount for sharing a ride and a 50% discount for reserving the ride 24 hours in advance.
o Scholarships are available on a needs-basis.
· Half the expenses of the organization are funded by fares. The rest comes from membership fees, donations from local businesses and corporations, grants from governments or foundations and an annual fundraiser.
o People can donate cars and get credits that they use to get rides or enable a relative to get a ride. Volunteering works the same way.
· Good for the local economy because it enables seniors to get out and shop, go to medical appointments and socialize (go to restaurants, movies, concerts, worship).
· Costs $125,000 to get launched and pay for the software. (It’s a bit like a franchise.)
· CT may have a $50,000 transportation grant available to help start such an enterprise.
· Connecticut insurance and livery laws have been changed to allow this.
o Drivers must have special license.
ITN America – Independent Transportation Network
ITN CEO Katherine Freund has worked on ITN for the past 18 years. Other cities and areas are adopting her model.
Westport and its surrounding towns are considering starting an ITN in coastal Fairfield County. Connecticut already has two ITNs – Middletown and Enfield.
Key Points
· American households spend 25% of their income on transportation. 91% of people’s trips outside their homes are made in cars, 8% by walking.
· ITN is a local solution to the senior transportation challenge. It’s an example of “social entrepreneurship” – using an entrepreneurial business model to meet a social need.
o ITN started by discovering what the needs were and then designing a solution.
· ITN replicates private vehicle ownership using public and private resources in partnership.
· ITN uses technology (computers and telecommunications) to create an efficient system to use excess capacity in private vehicles;
o sharing rides, dispatched by a central office,
o driven by volunteers using their own cars or fleet cars that were donated,
o passengers pay
o volunteers are reimbursed for gas and maintenance on a per mile basis.
o Rides are available 365 days a year, 24 hours a day for any purpose.
o Riders get a 20% discount for sharing a ride and a 50% discount for reserving the ride 24 hours in advance.
o Scholarships are available on a needs-basis.
· Half the expenses of the organization are funded by fares. The rest comes from membership fees, donations from local businesses and corporations, grants from governments or foundations and an annual fundraiser.
o People can donate cars and get credits that they use to get rides or enable a relative to get a ride. Volunteering works the same way.
· Good for the local economy because it enables seniors to get out and shop, go to medical appointments and socialize (go to restaurants, movies, concerts, worship).
· Costs $125,000 to get launched and pay for the software. (It’s a bit like a franchise.)
· CT may have a $50,000 transportation grant available to help start such an enterprise.
· Connecticut insurance and livery laws have been changed to allow this.
o Drivers must have special license.
Tuesday, October 28, 2008
Laffer on Prosperity
Laffer had an excellent opinion piece in the Wall Street Journal yesterday. Laffer points out that our economy and stock market have done better with less government intervention and lower taxes. Reagan's and Clinton's administrations were the best for our economy in recent years. I'm hoping that because Obama has economic advisors from Reagan's and Clinton's administrations that he will follow their advice.
I've pasted the piece below. Hopefully, I'm not violating copyright laws. Here is also a link to the WSJ.: http://sec.online.wsj.com/article/SB122506830024970697.html
By Arthur Laffer
About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
David Gothard
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
The net national debt in 2001 was at a 20-year low of about 35% of GDP, and today it stands at 50% of GDP. But this 50% number makes no allowance for anything resulting from the over $5.2 trillion guarantee of Fannie Mae and Freddie Mac assets, or the $700 billion Troubled Assets Relief Program (TARP). Nor does the 50% number include any of the asset swaps done by the Federal Reserve when they bailed out Bear Stearns, AIG and others.
But the government isn't finished. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid -- and yes, even Fed Chairman Ben Bernanke -- are preparing for a new $300 billion stimulus package in the next Congress. Each of these actions separately increases the tax burden on the economy and does nothing to encourage economic growth. Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
I was on the White House staff as George Shultz's economist in the Office of Management and Budget when Richard Nixon imposed wage and price controls, the dollar was taken off gold, import surcharges were implemented, and other similar measures were enacted from a panicked decision made in August of 1971 at Camp David.
I witnessed, like everyone else, the consequences of another panicked decision to cover up the Watergate break-in. I saw up close and personal Presidents Gerald Ford and George H.W. Bush succumb to panicked decisions to raise taxes, as well as Jimmy Carter's emergency energy plan, which included wellhead price controls, excess profits taxes on oil companies, and gasoline price controls at the pump.
The consequences of these actions were disastrous. Just look at the stock market from the post-Kennedy high in early 1966 to the pre-Reagan low in August of 1982. The average annual real return for U.S. assets compounded annually was -6% per year for 16 years. That, ladies and gentlemen, is a bear market. And it is something that you may well experience again. Yikes!
Then we have this administration's panicked Sarbanes-Oxley legislation, and of course the deer-in-the-headlights Mr. Bernanke in his bungling of monetary policy.
There are many more examples, but none hold a candle to what's happening right now. Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.
Mr. Laffer is chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let it Happen," just out by Threshold.
Please add your comments to the Opinion Journal forum.
I've pasted the piece below. Hopefully, I'm not violating copyright laws. Here is also a link to the WSJ.: http://sec.online.wsj.com/article/SB122506830024970697.html
By Arthur Laffer
About a year ago Stephen Moore, Peter Tanous and I set about writing a book about our vision for the future entitled "The End of Prosperity." Little did we know then how appropriate its release would be earlier this month.
Financial panics, if left alone, rarely cause much damage to the real economy, output, employment or production. Asset values fall sharply and wipe out those who borrowed and lent too much, thereby redistributing wealth from the foolish to the prudent. This process is the topic of Nassim Nicholas Taleb's book "Fooled by Randomness."
David Gothard
When markets are free, asset values are supposed to go up and down, and competition opens up opportunities for profits and losses. Profits and stock appreciation are not rights, but rewards for insight mixed with a willingness to take risk. People who buy homes and the banks who give them mortgages are no different, in principle, than investors in the stock market, commodity speculators or shop owners. Good decisions should be rewarded and bad decisions should be punished. The market does just that with its profits and losses.
No one likes to see people lose their homes when housing prices fall and they can't afford to pay their mortgages; nor does any one of us enjoy watching banks go belly-up for making subprime loans without enough equity. But the taxpayers had nothing to do with either side of the mortgage transaction. If the house's value had appreciated, believe you me the overleveraged homeowner and the overly aggressive bank would never have shared their gain with taxpayers. Housing price declines and their consequences are signals to the market to stop building so many houses, pure and simple.
But here's the rub. Now enter the government and the prospects of a kinder and gentler economy. To alleviate the obvious hardships to both homeowners and banks, the government commits to buy mortgages and inject capital into banks, which on the face of it seems like a very nice thing to do. But unfortunately in this world there is no tooth fairy. And the government doesn't create anything; it just redistributes. Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.
If you don't believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they'll do with Wall Street.
Some 14 months ago, the projected deficit for the 2008 fiscal year was about 0.6% of GDP. With the $170 billion stimulus package last March, the add-ons to housing and agriculture bills, and the slowdown in tax receipts, the deficit for 2008 actually came in at 3.2% of GDP, with the 2009 deficit projected at 3.8% of GDP. And this is just the beginning.
The net national debt in 2001 was at a 20-year low of about 35% of GDP, and today it stands at 50% of GDP. But this 50% number makes no allowance for anything resulting from the over $5.2 trillion guarantee of Fannie Mae and Freddie Mac assets, or the $700 billion Troubled Assets Relief Program (TARP). Nor does the 50% number include any of the asset swaps done by the Federal Reserve when they bailed out Bear Stearns, AIG and others.
But the government isn't finished. House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid -- and yes, even Fed Chairman Ben Bernanke -- are preparing for a new $300 billion stimulus package in the next Congress. Each of these actions separately increases the tax burden on the economy and does nothing to encourage economic growth. Giving more money to people when they fail and taking more money away from people when they work doesn't increase work. And the stock market knows it.
The stock market is forward looking, reflecting the current value of future expected after-tax profits. An improving economy carries with it the prospects of enhanced profitability as well as higher employment, higher wages, more productivity and more output. Just look at the era beginning with President Reagan's tax cuts, Paul Volcker's sound money, and all the other pro-growth, supply-side policies.
Bill Clinton and Alan Greenspan added their efforts to strengthen what had begun under President Reagan. President Clinton signed into law welfare reform, so people actually have to look for a job before being eligible for welfare. He ended the "retirement test" for Social Security benefits (a huge tax cut for elderly workers), pushed the North American Free Trade Agreement through Congress against his union supporters and many of his own party members, signed the largest capital gains tax cut ever (which exempted owner-occupied homes from capital gains taxes), and finally reduced government spending as a share of GDP by an amazing three percentage points (more than the next four best presidents combined). The stock market loved Mr. Clinton as it had loved Reagan, and for good reasons.
The stock market is obviously no fan of second-term George W. Bush, Nancy Pelosi, Harry Reid, Ben Bernanke, Barack Obama or John McCain, and again for good reasons.
These issues aren't Republican or Democrat, left or right, liberal or conservative. They are simply economics, and wish as you might, bad economics will sink any economy no matter how much they believe this time things are different. They aren't.
I was on the White House staff as George Shultz's economist in the Office of Management and Budget when Richard Nixon imposed wage and price controls, the dollar was taken off gold, import surcharges were implemented, and other similar measures were enacted from a panicked decision made in August of 1971 at Camp David.
I witnessed, like everyone else, the consequences of another panicked decision to cover up the Watergate break-in. I saw up close and personal Presidents Gerald Ford and George H.W. Bush succumb to panicked decisions to raise taxes, as well as Jimmy Carter's emergency energy plan, which included wellhead price controls, excess profits taxes on oil companies, and gasoline price controls at the pump.
The consequences of these actions were disastrous. Just look at the stock market from the post-Kennedy high in early 1966 to the pre-Reagan low in August of 1982. The average annual real return for U.S. assets compounded annually was -6% per year for 16 years. That, ladies and gentlemen, is a bear market. And it is something that you may well experience again. Yikes!
Then we have this administration's panicked Sarbanes-Oxley legislation, and of course the deer-in-the-headlights Mr. Bernanke in his bungling of monetary policy.
There are many more examples, but none hold a candle to what's happening right now. Twenty-five years down the line, what this administration and Congress have done will be viewed in much the same light as what Herbert Hoover did in the years 1929 through 1932. Whenever people make decisions when they are panicked, the consequences are rarely pretty. We are now witnessing the end of prosperity.
Mr. Laffer is chairman of Laffer Associates and co-author of "The End of Prosperity: How Higher Taxes Will Doom the Economy -- If We Let it Happen," just out by Threshold.
Please add your comments to the Opinion Journal forum.
Thursday, October 16, 2008
Tax Advice for Joe the Plumber
I work with small business owners. Small businesses like the one Joe the Plumber wants to buy can be structured as LLCs, sole proprietorships or "C" or "S" corporations. In each case, the taxes will be different. I think Joe should get a good accountant who will explain to him how he can lower his tax liability. Anyway, when Joe says that the business "makes" $250,000 to $280,000, does he mean that's the annual taxable income?
In my area, plumbers charge $100 to $120 per hour, and they charge for travel time. Most folks around here feel that is way too much. What do people making the minimum wage do when they have to call the plumber for $120 per hour? They try to fix the leak themselves. I don't have a problem with a bit more progressive tax rates when they are hitting people who earn that much. I mean when nursery school teachers make $20,000 per year and public school teachers make $40,000 to $60,000 per year in before tax dollars, why shouldn't Joe's profitable business pay three percentage points more on what he earns over $250,000 to help lower teachers' taxes and enable them to have a bit more money to pay the plumber in an emergency or to pay for heat in winter?
Actually, I'd really rather have a flat tax and no social security taxes for the lowest wage earners. No FICA on anyone earning $25,000 or less. It would be an instant raise for the lowest wage earners and an instant tax break for all companies employing them -- including the self-employed small business owners. Then, make the top earners still pay FICA. That could bail out the social security system and boost productivity.
The funny thing is that Joe the Plumber reminds me of Josephine the Plumber -- the old spokesperson for Comet cleanser.
In my area, plumbers charge $100 to $120 per hour, and they charge for travel time. Most folks around here feel that is way too much. What do people making the minimum wage do when they have to call the plumber for $120 per hour? They try to fix the leak themselves. I don't have a problem with a bit more progressive tax rates when they are hitting people who earn that much. I mean when nursery school teachers make $20,000 per year and public school teachers make $40,000 to $60,000 per year in before tax dollars, why shouldn't Joe's profitable business pay three percentage points more on what he earns over $250,000 to help lower teachers' taxes and enable them to have a bit more money to pay the plumber in an emergency or to pay for heat in winter?
Actually, I'd really rather have a flat tax and no social security taxes for the lowest wage earners. No FICA on anyone earning $25,000 or less. It would be an instant raise for the lowest wage earners and an instant tax break for all companies employing them -- including the self-employed small business owners. Then, make the top earners still pay FICA. That could bail out the social security system and boost productivity.
The funny thing is that Joe the Plumber reminds me of Josephine the Plumber -- the old spokesperson for Comet cleanser.
Wednesday, October 15, 2008
Paul Krugman Win Economics Nobel
Paul Krugman is a professor of Economics at Princeton and a columnist for the New York Times. I love reading Krugman's columns, but he got his Nobel Prize for his work on international trade. His work simplified much of the complexity inherent in explaining international trade. And it looked at international trade in a new way, explaining why Americans would buy Volkswagens, while Germans would buy Fords.
Here's a link to the lead story in the New York Times. http://www.nytimes.com/2008/10/14/business/economy/14econ.html?partner=permalink&exprod=permalink
Conservatives tend to dislike Mr. Krugman because he has many liberal ideas about how to make the economy work better for all. Even though I tend to be fiscally conservative, I think Krugman makes a lot of sense on many topics. But I did major in economics in college.
Here's a link to the lead story in the New York Times. http://www.nytimes.com/2008/10/14/business/economy/14econ.html?partner=permalink&exprod=permalink
Conservatives tend to dislike Mr. Krugman because he has many liberal ideas about how to make the economy work better for all. Even though I tend to be fiscally conservative, I think Krugman makes a lot of sense on many topics. But I did major in economics in college.
Thursday, October 9, 2008
Starting a Nonprofit
I'm involved with two groups that are thinking of starting nonprofit companies. One would help seniors with transportation. The other would help them "age in place". Aging in place is a national movement to help seniors stay in their homes as long as possible. The Beacon Hill Village model, made famous by articles in AARP Magazine and The New York Times, is the model most groups are following. The group I'm with doesn't want to follow their model. We're creating our own.
The senior transportation nonprofit could follow a model from New Canaan, CT, called Get About, or the ITN America model.
In any case, even starting a nonprofit, we will need to do the same sort of work that any start-up must do -- ask the right questions about our mission, our goals, our strategies and our tactics. We'll need a plan. I'll contribute the questions I ask all start-ups -- read them on my website: www.upstartbusinessplanning.com.
I have another blog on aging in place, which I don't update often, but you can read some of my research, if you're interested -- www.agingwithgrace.blogspot.com.
The senior transportation nonprofit could follow a model from New Canaan, CT, called Get About, or the ITN America model.
In any case, even starting a nonprofit, we will need to do the same sort of work that any start-up must do -- ask the right questions about our mission, our goals, our strategies and our tactics. We'll need a plan. I'll contribute the questions I ask all start-ups -- read them on my website: www.upstartbusinessplanning.com.
I have another blog on aging in place, which I don't update often, but you can read some of my research, if you're interested -- www.agingwithgrace.blogspot.com.
Wednesday, October 8, 2008
Can We Survive?
My daughter and I read science fiction. One of the most common themes in recent books is the world wide great collapse. I'm beginning to think that we are facing the beginnings of that economic collapse. It's spreading around the world. My bigger fear is that as the economies collapse, a few countries will ban together to a war to get us out of it. Think about it.... WWII got us out of the Great Depression.
Or will entrepreneurs get us out of the problem with great new inventions? Will the creative brains go into engineering and science instead of investment banking?
Or will entrepreneurs get us out of the problem with great new inventions? Will the creative brains go into engineering and science instead of investment banking?
Friday, October 3, 2008
Meltdown Continues
It's looking really bad for small businesses and educational institutions. Money market funds are freezing, preventing schools from making payrolls. Small businesses are having their lines of credit frozen.
The House of Representatives need to take action. They can't dither and act the way they usually do.
See The Wall Street Journal and the New York Times for articles.
www.wsj.com and www.nytimes.com.
The House of Representatives need to take action. They can't dither and act the way they usually do.
See The Wall Street Journal and the New York Times for articles.
www.wsj.com and www.nytimes.com.
Thursday, October 2, 2008
Economic Rescue Plan, aka, Bailout
I'm fascinated that after the "$700 billion bailout" for Wall Street failed to pass in the House that it's suddenly acquired a new name -- "The banking rescue plan". The media have jumped on the bandwagon.
The media realize that our nation's credit system is frozen. Small businesses, municipalities, college students, the average folks living in small towns can't get credit. What happens on Wall Street definitely affects Main Street. But folks in small towns and large cities across the nation believed the bailout was only to help people with grossly high compensation packages who live in Greenwich, CT. They called their Representatives and said, "We're mad as hell and won't take it. Vote 'NO!'" They didn't realize that voting "NO" would harm them in their everyday lives. They didn't understand the interconnectedness of the financial system.
Hence, the name change, and some other tweaking to make the bill more palatable. I heard Obama speak in favor of the bill, and he made great points about its importance to businesses and individuals across the nation. I just hope the House of Representatives votes in favor of the plan.
Our economy really depends upon the free flow of capital -- the circulation of money -- and access to credit. I mean, think about it. Painters and contractors ususally get 30 days to pay for their materials. When that credit dries up, they can go out of business immediately.
This rescue plan is for all of us -- not just "fat cats."
The media realize that our nation's credit system is frozen. Small businesses, municipalities, college students, the average folks living in small towns can't get credit. What happens on Wall Street definitely affects Main Street. But folks in small towns and large cities across the nation believed the bailout was only to help people with grossly high compensation packages who live in Greenwich, CT. They called their Representatives and said, "We're mad as hell and won't take it. Vote 'NO!'" They didn't realize that voting "NO" would harm them in their everyday lives. They didn't understand the interconnectedness of the financial system.
Hence, the name change, and some other tweaking to make the bill more palatable. I heard Obama speak in favor of the bill, and he made great points about its importance to businesses and individuals across the nation. I just hope the House of Representatives votes in favor of the plan.
Our economy really depends upon the free flow of capital -- the circulation of money -- and access to credit. I mean, think about it. Painters and contractors ususally get 30 days to pay for their materials. When that credit dries up, they can go out of business immediately.
This rescue plan is for all of us -- not just "fat cats."
Thursday, September 25, 2008
Marketing Basics
Last week I attended OMMA Global in New York City. I thought I'd learn all that I never knew about digital media and all the new platforms. Instead, I found out that I knew just as much as the people giving the talks. They all went back to basics.
You can't execute or buy the new media without understanding your target audience and the benefits you deliver to them. How basic can you get?
The creative should be appropriate to the media you're using -- another basic.
Sure, there were all sorts of cool companies with vertical marketing opportunities, widgets, and digital delivery mechanisms. But they're all worthless, if you don't have the marketing basics down.
To learn more about the questions you should ask when planning -- see my website -- www.upstartbusinessplanning.com.
You can't execute or buy the new media without understanding your target audience and the benefits you deliver to them. How basic can you get?
The creative should be appropriate to the media you're using -- another basic.
Sure, there were all sorts of cool companies with vertical marketing opportunities, widgets, and digital delivery mechanisms. But they're all worthless, if you don't have the marketing basics down.
To learn more about the questions you should ask when planning -- see my website -- www.upstartbusinessplanning.com.
Tuesday, September 23, 2008
Businesses That Made It - Platform Wars
Last week I attended "OMMA Global Expo -- Platform Wars". This was a conference in New York City for the digital media world, sponsored by MediaPost Live. I was probably the oldest person at the event. As I attended workshops and toured the expo hall, I felt as if I were at a Venture Capital Fair, only instead being populated by young companies looking for capital, these were young companies looking for customers. These businesses had made it. They had raised capital and launched.
Truly, the oldest companies I met had started in 1999. One speaker on a panel had started and sold her business, espin.com, to Hearst. Espin directs interactive media activities and advertising to teenagers. Another really cool company I talked to was Sprout -- a widget company. www.sproutbuilder.com. They enable rich collaborative content.
It was great to be around so many companies that had actually made it in the digital media space. Some were the platforms -- the high tech. companies that provide the code and the servers that makes it all work. Some helped bring media buyers and sellers together. Some offered search, others vertical marketing vehicles.
The point is that the digital media world is crowded, but people with great ideas, great management and lots of energy can and do make it.
It was exciting.
Truly, the oldest companies I met had started in 1999. One speaker on a panel had started and sold her business, espin.com, to Hearst. Espin directs interactive media activities and advertising to teenagers. Another really cool company I talked to was Sprout -- a widget company. www.sproutbuilder.com. They enable rich collaborative content.
It was great to be around so many companies that had actually made it in the digital media space. Some were the platforms -- the high tech. companies that provide the code and the servers that makes it all work. Some helped bring media buyers and sellers together. Some offered search, others vertical marketing vehicles.
The point is that the digital media world is crowded, but people with great ideas, great management and lots of energy can and do make it.
It was exciting.
Monday, September 22, 2008
Inflation Slams Small Business
This Research Brief from The Center for Media Research shows that inflation is a major problem for small businesses. Read on....
Monday, September 22, 2008Small Business Still Negative, But Expecting Some Improvement
The Quarterly NFIB Research Foundation Small Business Economic Trends Data reports that the Index of Small Business Optimism rose 2.9 points to 91.1 (1986=100), continuing one of the longest strings of recession level readings in the history of the survey (started in 1973). Two-thirds of the gain was due to a dramatic improvement in the percent of owners expecting the economy to improve over the next six months, says the report. Though the direction of change was positive, there's a long way to go to restore normal levels of the Index to the average reading of 100.
Monday, September 22, 2008Small Business Still Negative, But Expecting Some Improvement
The Quarterly NFIB Research Foundation Small Business Economic Trends Data reports that the Index of Small Business Optimism rose 2.9 points to 91.1 (1986=100), continuing one of the longest strings of recession level readings in the history of the survey (started in 1973). Two-thirds of the gain was due to a dramatic improvement in the percent of owners expecting the economy to improve over the next six months, says the report. Though the direction of change was positive, there's a long way to go to restore normal levels of the Index to the average reading of 100.
- Seasonally adjusted, there was a decline in average employment per firm of 0.04 workers reported by small business owners in August, not as bad as July, but still on the negative side.
- 11% of the owners increased employment by an average of 5.7 workers per firm 15% reduced employment at average of 3.7 workers per firm (seasonally adjusted)
- 46% of the owners hired or tried to hire (down 3 points)
- 76% of those trying to hire reported few or no qualified applicants for the job openings they were trying to fill
- 9% of the owners reported that the availability of qualified labor was their top business problem, one point lower than July
15% reported unfilled job openings, down 2 points from July (the 34 year average is 22 percent)
Over the next three months, 13 percent plan to create new jobs (up 1 point), and 10 percent plan workforce reductions (unchanged), yielding a seasonally adjusted net 9 percent of owners planning to create new jobs, 4 points better than July.
The frequency of reported capital outlays over the past six months rose 2 points to 54 percent of all firms, still at "recession" levels historically. The weak economy has reduced the need for expansion and new equipment and put pressure on cash flows.
Inventory reduction has been heavy for the past three months, confirmed by the second quarter Gross Domestic Product estimates.
- A net negative 13% of owners reported gains in inventory stocks (more firms cut stocks than added to them, seasonally adjusted), the fifth negative double digit month in a row
- 11% reported gains and
- 23% reported inventory reductions
- For all firms, a net negative 3% reported stocks too low (seasonally adjusted), 1 point better than July
The net percent of owners expecting gains in real sales volumes improved to a net negative 6 points (up 3 points) seasonally adjusted, still 20 points below last September's reading, but 5 points better than the May-June readings.
At "street level", the inflation picture remained sour. The net percent of owners reporting higher average selling prices dropped 6 points to a net 26 percent in August (seasonally adjusted)
38 percent reported raising average selling prices, down 4 points
13 percent reported lower selling prices, up 2 points from July
The percent of owners citing inflation as their number one problem fell 2 points to 18 percent. The average percent of owners citing inflation as problem # 1 since the monthly surveys were started in 1986 is 3 percent. Plans to raise prices fell 8 points to a net seasonally adjusted 30 percent.
The net percent of owners reporting earnings gains improved modestly in August. Seasonally adjusted, those reporting declining earnings trends outnumbered those with gains by 30 percentage points, a 7 point gain.
A year has passed since the Federal Reserve declared the existence of a "credit crunch," but no evidence of serious credit problems has appeared on Main Street. Regular borrowing activity was reported by 34 percent of the owners, unchanged and typical of readings for the past 15 years.
At street level, inflation appears much worse and is a major source of angst for consumers and all in all, it is looking like a pretty slow second half of the year, concludes the report. Since 1983, the average percent of owners citing inflation as a top problem has averaged 3 percent, compared to the 20 percent readings in June and July. August's 18 percent reading was not much of an improvement and the tie with "poor sales" as the top business problem fits the "stagflation" picture.
Please visit the NFIB here for more information including a PDF file containing charts, graphs and trends.
Thursday, September 18, 2008
Escape From Wall Street
The happenings on Wall Street remind me of the science fiction books I've read about the great collapse. But just when I was thinking that things are really, really bad, I saw this article in the NY Times -- Silicon Alley and Silicon Valley are hiring. Start ups are still OK. Venture capitalists still have money. Here's a link to the article: http://bits.blogs.nytimes.com/2008/09/17/silicon-alley-to-wall-street-send-us-your-resume/
The advantage is that you're helping to start something new. So if you're down and out on Wall Street, escape to the world of start-ups and entrepreneurs.
The advantage is that you're helping to start something new. So if you're down and out on Wall Street, escape to the world of start-ups and entrepreneurs.
Monday, September 15, 2008
What VCs Look For
I was just reading an article in the Pennsylvania Gazette (the alumni magazine of the University of Pennsylvania) about funding IT grad's entrepreneurial ventures. A couple of Wharton grads decided to start a venture fund focusing on entrepreneurs with Penn connections. They've funded everything from Diapers.com to First Flavor.
The one statement that stood out to me most was this:
“When I’m looking at the financial projections for a company, the one thing I know for certain is that they’re wrong,” says Topche. “Maybe the market changes; maybe a new competitor will appear; maybe there will be a regulatory change. The ability of the management team to adapt to that change in their environment by adjusting their product or doing something different strategically is almost always the determining factor in the success of that company. These are things that you have to get comfortable with before you write a check.”
That's why Venture Capitalists like investing in smart management. While you can write a great plan and have detailed financial projections, you have to be flexible and able to adjust your plan as the market changes or opportunities present themselves.
To read more, visit this link: http://www.upenn.edu/gazette/0908/pro04.html
The one statement that stood out to me most was this:
“When I’m looking at the financial projections for a company, the one thing I know for certain is that they’re wrong,” says Topche. “Maybe the market changes; maybe a new competitor will appear; maybe there will be a regulatory change. The ability of the management team to adapt to that change in their environment by adjusting their product or doing something different strategically is almost always the determining factor in the success of that company. These are things that you have to get comfortable with before you write a check.”
That's why Venture Capitalists like investing in smart management. While you can write a great plan and have detailed financial projections, you have to be flexible and able to adjust your plan as the market changes or opportunities present themselves.
To read more, visit this link: http://www.upenn.edu/gazette/0908/pro04.html
Thursday, September 11, 2008
Mistakes Entrepreneurs Make
The Wharton Alumni newsletter had a great interview with two Wharton alums who are entrepreneurs (Isakow and Minskoff). They talked about their mistakes and gave some good advice. Here's a link to the whole article -- http://wep.wharton.upenn.edu/gis/article.aspx?gisID=70
Along with the moderator, Bob Chalfin (an instructor), they said the following:
Minkoff suggested that they be flexible. Successful entrepreneurship requires a business plan that allows for lots of wiggle room. "Your business will never play out like it does in your business plan,' he said. "You have to have flexibility in your structure-your money, your timeframe, your markets. You need to plan for bad things happening-stuff will cost more than you thought, key people will leave, and markets will evaporate.'
Isakow agreed, offering up a philosophical take on ups and downs of self-employment. "I read something early in my career that really influenced how I look at my business: 'Failure is never fatal, and success is never final.' There are always going to be bumps in the road.' He added a bit of guidance of his own, saying that, when starting a company or investing in one, you must do rigorous analysis, no matter how promising an idea sounds. "Don't just believe the story,' he added. "I'm the worldwide owner to the rights for solar-powered lawnmowers. You'll notice that you don't see too many of those around. I believed the story.'
Along with the moderator, Bob Chalfin (an instructor), they said the following:
Minkoff suggested that they be flexible. Successful entrepreneurship requires a business plan that allows for lots of wiggle room. "Your business will never play out like it does in your business plan,' he said. "You have to have flexibility in your structure-your money, your timeframe, your markets. You need to plan for bad things happening-stuff will cost more than you thought, key people will leave, and markets will evaporate.'
Isakow agreed, offering up a philosophical take on ups and downs of self-employment. "I read something early in my career that really influenced how I look at my business: 'Failure is never fatal, and success is never final.' There are always going to be bumps in the road.' He added a bit of guidance of his own, saying that, when starting a company or investing in one, you must do rigorous analysis, no matter how promising an idea sounds. "Don't just believe the story,' he added. "I'm the worldwide owner to the rights for solar-powered lawnmowers. You'll notice that you don't see too many of those around. I believed the story.'
Wednesday, September 10, 2008
Social Entrepreneurship
I keep wondering how I can use my talents and business experience to make more of a positive difference in the world. While I love helping entrepreneurs by coaching them through the business planning process or writing or editing their plans, sometimes I want to start another business myself. That's why the article I've pasted below intrigues me so much. It's about being a social entrepreneur -- starting something to fill in gaps where government or private enterprise fail.
I've been volunteering in my church and community to promote local "Aging in Place." We help local seniors to stay in their homes as they age. They face all sorts of challenges. We're here to help them with those challenges. Others all over the country are doing the same. But no one else that I've come across has used the model we have at Aging in Place in Darien. We use the social services already in place, rather than ignoring them. Then, we try to fill in gaps and connect seniors with the services already out there.
In my work, I've been reading as much as I can. This article is about solving transportation problems for seniors. Read on....
ITNAmerica featured in Report to the President December, 2007, Washington, D.C.
ITNAmerica was featured in The Small Business Economy: A Report to the President, an annual series used by policymakers, academics, librarians, and others to learn more about small firms.
ITNAmerica is one of eight examples of social entrepreneurship included in a chapter by Andrew Wolk of Root Cause titled "Social Entrepreneurship and Government: A New Breed of Entrepreneurs Developing Solutions to Social Problems."
Chad Moutray, Ph.D, Chief Economist & Director of Economic Research for the Small Business Administration, said, "Congratulations on being on the leading edge of this exciting phenomenon!"
Wolk, a senior lecturer in social entrepreneurship at MIT, describes social entrepreneurship as emerging at the nexus of the public, private, and nonprofit sectors. Innovation is a key role of the private sector; providing public goods and services is a role of government; and engaging individuals in action to achieve social goals is a role of the nonprofit sector. Social entrepreneurship has emerged where these roles intersect.
Wolk's chapter represents one of the first explorations of the relationship between social entrepreneurship and government, and each case study showed a social-entrepreneurial initiative responding to some type of market failure, ranging from older Americans who must choose between their safety and their mobility, to building high-quality playgrounds in underserved communities.
Seven other specific programs used as case studies illustrating social entrepreneurial approaches include City Year, Benetech, KaBOOM!, New Leaders for New Schools, Resolve to Stop the Violence Program, Outside the Classroom, and Triangle Resident Options for Substance Abusers, Inc.
The chapter above can be found at http://www.rootcause.org/assets/files/SE_and_Gov_Wolk.pdf.
I've been volunteering in my church and community to promote local "Aging in Place." We help local seniors to stay in their homes as they age. They face all sorts of challenges. We're here to help them with those challenges. Others all over the country are doing the same. But no one else that I've come across has used the model we have at Aging in Place in Darien. We use the social services already in place, rather than ignoring them. Then, we try to fill in gaps and connect seniors with the services already out there.
In my work, I've been reading as much as I can. This article is about solving transportation problems for seniors. Read on....
ITNAmerica featured in Report to the President December, 2007, Washington, D.C.
ITNAmerica was featured in The Small Business Economy: A Report to the President, an annual series used by policymakers, academics, librarians, and others to learn more about small firms.
ITNAmerica is one of eight examples of social entrepreneurship included in a chapter by Andrew Wolk of Root Cause titled "Social Entrepreneurship and Government: A New Breed of Entrepreneurs Developing Solutions to Social Problems."
Chad Moutray, Ph.D, Chief Economist & Director of Economic Research for the Small Business Administration, said, "Congratulations on being on the leading edge of this exciting phenomenon!"
Wolk, a senior lecturer in social entrepreneurship at MIT, describes social entrepreneurship as emerging at the nexus of the public, private, and nonprofit sectors. Innovation is a key role of the private sector; providing public goods and services is a role of government; and engaging individuals in action to achieve social goals is a role of the nonprofit sector. Social entrepreneurship has emerged where these roles intersect.
Wolk's chapter represents one of the first explorations of the relationship between social entrepreneurship and government, and each case study showed a social-entrepreneurial initiative responding to some type of market failure, ranging from older Americans who must choose between their safety and their mobility, to building high-quality playgrounds in underserved communities.
Seven other specific programs used as case studies illustrating social entrepreneurial approaches include City Year, Benetech, KaBOOM!, New Leaders for New Schools, Resolve to Stop the Violence Program, Outside the Classroom, and Triangle Resident Options for Substance Abusers, Inc.
The chapter above can be found at http://www.rootcause.org/assets/files/SE_and_Gov_Wolk.pdf.
Monday, September 8, 2008
Secrets of a Successful Business Plan
Next week, on September 15, I'm beginning to teach my course, Secrets of a Successful Business Plan. It's being presented by Darien Continuing Education. Several entrepreneurs who have taken this class in previous years have started successful businesses. Class participants can enter the annual CT Business Plan Competition to win start-up funding. We'll get into the five elements your business plan need:
A. The Big Idea
B. The Marketplace
C. The Business Model
D. The Marketing Plan
E. The Path to Profitability
Sign up now. http://www.dariencontinuinged.com/CourseCatalog/classView.asp?id=965
For more courses, go to: http://www.dariencontinuinged.com/
A. The Big Idea
B. The Marketplace
C. The Business Model
D. The Marketing Plan
E. The Path to Profitability
Sign up now. http://www.dariencontinuinged.com/CourseCatalog/classView.asp?id=965
For more courses, go to: http://www.dariencontinuinged.com/
Thursday, September 4, 2008
Women Entrepreneurs - High Tech Conference
This just in from the Inventors Association of Connecticut (IACT) --
The MIT Enterprise Forum of Connecticut is proud to present our next Global Broadcast:
“Pathways to Entrepreneurship” - Tuesday, September 23rd, 20086:00 - 8:30 pm (6:00 - 7:00 networking and hors d'oeuvres and 7:00 - 8:30 WEBCAST program)
At University of Connecticut Health Center, Farmington, CT (directions) Register online
For anyone, launching a high-tech startup is hard work, with many paths to success. But female entrepreneurs face unique challenges on each of the roads they may follow. Hear our panel discuss the unique paths they took:· Candida G. Brush (moderator), Division Chair in Entrepreneurship, Babson College· Robin Chase SM ’86, Founder of ZipCar, GoLoco.org, and Meadow Networks · Priya Iyer MBA ’05, President, Anaqua· Christina Lampe-Onnerud, Founder and CEO, Boston-Power· Susan Lindquist, Professor of Biology, MIT, Scientific Founder, FoldRx Pharma.This broadcast is presented in association with Technology Review’s EmTech08 Conference. Complete details may be found at www.mitenterpriseforum.org
The MIT Enterprise Forum of Connecticut is proud to present our next Global Broadcast:
“Pathways to Entrepreneurship” - Tuesday, September 23rd, 20086:00 - 8:30 pm (6:00 - 7:00 networking and hors d'oeuvres and 7:00 - 8:30 WEBCAST program)
At University of Connecticut Health Center, Farmington, CT (directions) Register online
For anyone, launching a high-tech startup is hard work, with many paths to success. But female entrepreneurs face unique challenges on each of the roads they may follow. Hear our panel discuss the unique paths they took:· Candida G. Brush (moderator), Division Chair in Entrepreneurship, Babson College· Robin Chase SM ’86, Founder of ZipCar, GoLoco.org, and Meadow Networks · Priya Iyer MBA ’05, President, Anaqua· Christina Lampe-Onnerud, Founder and CEO, Boston-Power· Susan Lindquist, Professor of Biology, MIT, Scientific Founder, FoldRx Pharma.This broadcast is presented in association with Technology Review’s EmTech08 Conference. Complete details may be found at www.mitenterpriseforum.org
Connecticut Innovations - Funding for Ventures
If you own a high-tech company in Connecticut and need growth capital, you should approach Connecticut Innovations -- http://www.ctinnovations.com/index.php.
CI is a public/private partnership that provides venture funding. It was started to help Connecticut's economy grow via entrepreneurship. The organization is especially helpful to high tech, bio tech, and sustainable and clean energy companies. Visit their website and subscribe to their blog. Learn more about the clean energy fund and chances for start-ups to get funding.
CI is a public/private partnership that provides venture funding. It was started to help Connecticut's economy grow via entrepreneurship. The organization is especially helpful to high tech, bio tech, and sustainable and clean energy companies. Visit their website and subscribe to their blog. Learn more about the clean energy fund and chances for start-ups to get funding.
Wednesday, September 3, 2008
Women Entrepreneurs
When I attend venture capital events and look around the room, I'm almost always amazed to see so many men and so few women. Why is that?
A recent article in the Wall Street Journal (see link in my list of shared articles - Does an Aversion to Risk-Taking Hold Back Women Entrepreneurs?
from WSJ.com: Independent Street by Kelly Spors) posits the idea that maybe there are fewer women entrepreneurs because women are risk averse. The article also surmises that women seek perfection, rather than jumping into a business before everything is finalized. Men are less afraid to do this. The article references another article about women in business that was published in the New York Times.
My own theory is that there are plenty of women-owned businesses, but most of the owners either want to keep their businesses small and easily managed or they don't want to give away ownership to equity investors. I like having a small business that I can run out of my home. I like being the sole proprietor, answering to no one but my clients. I want to focus on my craft and my clients needs. I want to manage my growth my own way.
I also don't have a business that investors would like. Most VCs I've met want a high-tech business with lots of intellectual property protected by patents. They want fast growth and huge returns on their investments. They're looking for a fast path to operating profit.
While there are some great women entrepreneurs out there, I just haven't run across many that fit this sort of profile. Maybe they've been beaten up too much in the corporate world. Maybe they've been looked down on for so long, they've lost sight of what they could accomplish. Maybe what lets them excel in school -- doing the work well and pleasing the teacher -- isn't what makes for a great entrepreneur. Who knows?
What do you think?
A recent article in the Wall Street Journal (see link in my list of shared articles - Does an Aversion to Risk-Taking Hold Back Women Entrepreneurs?
from WSJ.com: Independent Street by Kelly Spors) posits the idea that maybe there are fewer women entrepreneurs because women are risk averse. The article also surmises that women seek perfection, rather than jumping into a business before everything is finalized. Men are less afraid to do this. The article references another article about women in business that was published in the New York Times.
My own theory is that there are plenty of women-owned businesses, but most of the owners either want to keep their businesses small and easily managed or they don't want to give away ownership to equity investors. I like having a small business that I can run out of my home. I like being the sole proprietor, answering to no one but my clients. I want to focus on my craft and my clients needs. I want to manage my growth my own way.
I also don't have a business that investors would like. Most VCs I've met want a high-tech business with lots of intellectual property protected by patents. They want fast growth and huge returns on their investments. They're looking for a fast path to operating profit.
While there are some great women entrepreneurs out there, I just haven't run across many that fit this sort of profile. Maybe they've been beaten up too much in the corporate world. Maybe they've been looked down on for so long, they've lost sight of what they could accomplish. Maybe what lets them excel in school -- doing the work well and pleasing the teacher -- isn't what makes for a great entrepreneur. Who knows?
What do you think?
Friday, August 29, 2008
Attracting Customers
Every business sells something. The challenge is attracting customers who will buy what you're offering.
The buzz word today is "networking". Everyone says you get clients and customers through networking. Even big consumer package goods companies and auto companies are trying to network with consumers via social networking sites. Networking is just the first step in establishing a relationship.
This past week I've undertaken a new project for myself -- reconnecting with potential customers, keeping up with current clients and reaching out to contacts who might have ideas for new customers for me. It was hard to start. But now that I'm going, I'm picking up momentum.
Of course, my first step was having a goal. The second was to make a plan. The third -- to execute.
If you want to build your business, you have to contact your customers and potential customers.
The buzz word today is "networking". Everyone says you get clients and customers through networking. Even big consumer package goods companies and auto companies are trying to network with consumers via social networking sites. Networking is just the first step in establishing a relationship.
This past week I've undertaken a new project for myself -- reconnecting with potential customers, keeping up with current clients and reaching out to contacts who might have ideas for new customers for me. It was hard to start. But now that I'm going, I'm picking up momentum.
Of course, my first step was having a goal. The second was to make a plan. The third -- to execute.
If you want to build your business, you have to contact your customers and potential customers.
Wednesday, August 27, 2008
10 Tips for Starting a Business - Tip #10 - Get Going
You've done your research. You've developed a great plan. You've assembled a super team. You have an exit strategy.
Now, you have to launch. Execute your plan. Take action.
The first action you need to take, if you haven't already, is to be aware of any legal or tax restrictions or implications. It's best if you contact your attorney and accountant for advice. You can also read up on local, state and federal requirements.
Sometimes you don't need money to start. Other times, you do, but you can be creative in finding money. If you have savings or friends and family who are willing to bet on you and your team, you can get going. Banks, angels and VCs usually want to see that you have started and have a revenue stream or amazing intellectual property protected by patents before they'll jump in.
As you take action, you'll probably deviate from your plan. Things will happen. You have to be resilient and open to the possibilities while having enough focus to not get sidetracked. For example, Teroforma was originally going to sell its tableware via its unique website directly to consumers. But so many retailers were interested in their wares, they are now more of a B2B model.
Now, you have to launch. Execute your plan. Take action.
The first action you need to take, if you haven't already, is to be aware of any legal or tax restrictions or implications. It's best if you contact your attorney and accountant for advice. You can also read up on local, state and federal requirements.
Sometimes you don't need money to start. Other times, you do, but you can be creative in finding money. If you have savings or friends and family who are willing to bet on you and your team, you can get going. Banks, angels and VCs usually want to see that you have started and have a revenue stream or amazing intellectual property protected by patents before they'll jump in.
As you take action, you'll probably deviate from your plan. Things will happen. You have to be resilient and open to the possibilities while having enough focus to not get sidetracked. For example, Teroforma was originally going to sell its tableware via its unique website directly to consumers. But so many retailers were interested in their wares, they are now more of a B2B model.
Tuesday, August 26, 2008
10 Tips for Starting a Business - Tip #9 - The Exit
What is your Exit Strategy?
This is an essential question to answer, particularly if you are going to be seeking capital from outside investors. Venture Capitalists want their money out in three to five years. Most expect you to sell your business or go public.
Developing your exit strategy means you have to think about what you want to do with your business and what you want out of your business. Do you enjoy starting things but not running them? Think about getting the business going, then hiring a chief executive officer and other C-level executives to run the business for you. Think about selling the business to a larger firm in about five years. You could sell to competitors, suppliers, customers or strategic allies.
Companies with dramatic growth and profits that become household names can go public. (Think Google or Apple.)
Or maybe you just want to run and grow your business, letting it throw off cash in the form of dividends. Maybe you just want a business that is a joy to run and will steadily grow and provide you with a living.
In some cases, you can have a business that your kids take over.
Whatever you do, plan it out. Make your business do what you want it to -- be in control -- make your business suit the life you want -- not the other way around.
This is an essential question to answer, particularly if you are going to be seeking capital from outside investors. Venture Capitalists want their money out in three to five years. Most expect you to sell your business or go public.
Developing your exit strategy means you have to think about what you want to do with your business and what you want out of your business. Do you enjoy starting things but not running them? Think about getting the business going, then hiring a chief executive officer and other C-level executives to run the business for you. Think about selling the business to a larger firm in about five years. You could sell to competitors, suppliers, customers or strategic allies.
Companies with dramatic growth and profits that become household names can go public. (Think Google or Apple.)
Or maybe you just want to run and grow your business, letting it throw off cash in the form of dividends. Maybe you just want a business that is a joy to run and will steadily grow and provide you with a living.
In some cases, you can have a business that your kids take over.
Whatever you do, plan it out. Make your business do what you want it to -- be in control -- make your business suit the life you want -- not the other way around.
Monday, August 25, 2008
10 Tips for Starting a Business - Tip # 8 - Make Money
It may seem like an obvious notion, but businesses should make money. If you are going to invest your own money, borrow money or ask other people to invest in your business, then you really need to know how you will pay back yourself, your creditors and your investors.
In fact, before you can raise money, you need to be able to explain exactly how you'll make money.
Back in the days of the dot-com boom, it seemed that entrepreneurs only had to explain how they would generate revenue -- or sales. The idea of actually making money -- i.e., a profit was largely ignored. That's why we had the dot-com meltdown and so many businesses went out of business.
But nowadays, you need to know how you'll generate positive cash flow and profit. That takes a financial plan, or more simply, a budget. You need to answer these questions:
How much do you think you'll sell each month?
What will it cost to create what you sell (cost of goods sold)?
What will it cost to sell what you sell (selling and marketing)?
What will your overhead cost (all your fixed costs)?
What's left after you subtract your costs from your sales (Your operating income)?
All that goes into your income statement. When you actually make money, you can substract depreciation, income taxes, amortization and interest expenses to get net income.
To understand your cash flow, you'll have to look at capital expenditures and the cost of producing your inventory, in addition to other cash outflows and inflows. These numbers are key in understanding what it will take to open and operate your business. Cash is king. If you have the cash to pay the bills, you'll be O.K..
Your assets (your cash and what you own) and your liabilities (what you owe) and your owner's equity (the difference between your liabilities and assets) are all on your balance sheet. Bankers care about balance sheets.
To learn more, visit www.sba.gov. That's the website for the Small Business Administration. They have lots of great information about financial planning and budgeting. Or contact me at upstartwyn@gmail.com.
In fact, before you can raise money, you need to be able to explain exactly how you'll make money.
Back in the days of the dot-com boom, it seemed that entrepreneurs only had to explain how they would generate revenue -- or sales. The idea of actually making money -- i.e., a profit was largely ignored. That's why we had the dot-com meltdown and so many businesses went out of business.
But nowadays, you need to know how you'll generate positive cash flow and profit. That takes a financial plan, or more simply, a budget. You need to answer these questions:
How much do you think you'll sell each month?
What will it cost to create what you sell (cost of goods sold)?
What will it cost to sell what you sell (selling and marketing)?
What will your overhead cost (all your fixed costs)?
What's left after you subtract your costs from your sales (Your operating income)?
All that goes into your income statement. When you actually make money, you can substract depreciation, income taxes, amortization and interest expenses to get net income.
To understand your cash flow, you'll have to look at capital expenditures and the cost of producing your inventory, in addition to other cash outflows and inflows. These numbers are key in understanding what it will take to open and operate your business. Cash is king. If you have the cash to pay the bills, you'll be O.K..
Your assets (your cash and what you own) and your liabilities (what you owe) and your owner's equity (the difference between your liabilities and assets) are all on your balance sheet. Bankers care about balance sheets.
To learn more, visit www.sba.gov. That's the website for the Small Business Administration. They have lots of great information about financial planning and budgeting. Or contact me at upstartwyn@gmail.com.
Friday, August 22, 2008
10 Tips for Starting a Business - Tip # 7 - Your Team
Investors don't invest in products or services. They invest in people. They look at the management team as the most important part of the business.
Even if you aren't going to raise outside capital, you still need a strong team to make your business successful. Of course, the first member of your team is YOU. Why are you the person who will create a business that is successful? Do you have experience as an entrepreneur? Do you have experience in the industry? How about your partners or your advisers?
If you just have an idea or a prototype of an invention, can you tap outside experts to help you produce and market your product? Do you have trusted advisers, such as a lawyer or accountant, who can help you? How about a professional strategic planner or operations expert?
Figure out what people you need, whom you want to work with, then get the team together.
But whatever you do, make sure you work out who will contribute what and what each person will receive in rewards. Pay? Stock? Options? Work it out in advance. Then, put it in writing. Get a lawyer to help you craft a document detailing what will happen if the company grows or if the company goes bust or is sold.
In any event, if you're raising capital, highlight the skills, talents and experience of the management team in all your pitches. That is your key to success.
Even if you aren't going to raise outside capital, you still need a strong team to make your business successful. Of course, the first member of your team is YOU. Why are you the person who will create a business that is successful? Do you have experience as an entrepreneur? Do you have experience in the industry? How about your partners or your advisers?
If you just have an idea or a prototype of an invention, can you tap outside experts to help you produce and market your product? Do you have trusted advisers, such as a lawyer or accountant, who can help you? How about a professional strategic planner or operations expert?
Figure out what people you need, whom you want to work with, then get the team together.
But whatever you do, make sure you work out who will contribute what and what each person will receive in rewards. Pay? Stock? Options? Work it out in advance. Then, put it in writing. Get a lawyer to help you craft a document detailing what will happen if the company grows or if the company goes bust or is sold.
In any event, if you're raising capital, highlight the skills, talents and experience of the management team in all your pitches. That is your key to success.
Thursday, August 21, 2008
10 Tips for Starting a Business - Tip # 6 - Get the Word Out
Despite the cliches, if you build it, people will not necessarily come. If you build a better mousetrap, the world will not beat a path to your door.
How will people -- customers -- know that you built the baseball field in the middle of a corn farm or a better mousetrap?
You have to get the word out. You can try word-of-mouth, which marketers sometimes call "viral marketing". That works sometimes. You probably don't have money for a big ad campaign. Lots of dot-coms that advertised on the Super Bowl during the technology boom failed because they spent too much money on advertising and marketing.
What you need to do is make a plan. Figure out who will buy your product and what you need to tell the potential customers about the product or service. Then, figure out the most efficient and effective way to get that message across to the target.
This can be PR -- putting articles into papers, contacting local news TV and radio stations. Or it can be going to trade shows and running small ads in the trade press or getting articles into the trade press.
The most effective and most essential thing you can do, however, is to create a website. It can be simple. But if you optimize it for the search engines, you'll get traffic. You can always refer your potential customers to your website so that they can read your story and see your products or understand your services.
See the article on search engines and local search that is in my list of articles on the right. Free local listings can be highly valuable for a start-up.
Contact me with marketing questions or comments - upstartwyn@gmail.com.
How will people -- customers -- know that you built the baseball field in the middle of a corn farm or a better mousetrap?
You have to get the word out. You can try word-of-mouth, which marketers sometimes call "viral marketing". That works sometimes. You probably don't have money for a big ad campaign. Lots of dot-coms that advertised on the Super Bowl during the technology boom failed because they spent too much money on advertising and marketing.
What you need to do is make a plan. Figure out who will buy your product and what you need to tell the potential customers about the product or service. Then, figure out the most efficient and effective way to get that message across to the target.
This can be PR -- putting articles into papers, contacting local news TV and radio stations. Or it can be going to trade shows and running small ads in the trade press or getting articles into the trade press.
The most effective and most essential thing you can do, however, is to create a website. It can be simple. But if you optimize it for the search engines, you'll get traffic. You can always refer your potential customers to your website so that they can read your story and see your products or understand your services.
See the article on search engines and local search that is in my list of articles on the right. Free local listings can be highly valuable for a start-up.
Contact me with marketing questions or comments - upstartwyn@gmail.com.
Wednesday, August 20, 2008
10 Tips for Starting a Business - Tip #5 - Basic Operations
You're really starting a business. Where is that business going to be? Now is the time to start planning your operations.
Is your headquarters in the basement of your house? Your garage? An empty bedroom? Or are you going to go out and rent a building or a space in a business incubator? This is one of the basic questions you need to answer. How much will it cost to rent space? Do you really need to do this?
One of my clients, a fashion designer, designed all of her creations in her basement. She had her patterns, her computers and her samples all in the basement. To manufacture her clothes, she ordered fabric from France and had it shipped to the manufacturers in New York. There, the pattern makers, cutters and sewers mass produced the clothes. Then, they shipped the clothes (the inventory) to a warehouse. The warehouse shipped everything to the boutiques. It was quite a process. Brigitte, the designer, found that she would need far more volume if she wanted to contract with overseas producers in places like China or Turkey. That's why she manufactured in New York.
Another client, Teroforma has their headquarters in the same building as their warehouse. They do their own shipping to consumers and to retailers. Their inventory is manufactured by artisans overseas. But while the management was finding designers and artisans, they worked out of their house.
Another client, MyBroadway.com, has its production studios for producing proprietary videos in the same building as its offices in New York City. This gives the company a distinct advantage.
What do you need to provide your service or manufacture and sell your product? If you're an inventor, will you license your design or actually manufacture and sell your product?
You need to think all this through and price the alternatives. What will computers cost? Furniture? Overhead? Personnel? Security? Should you lease or buy?
Start doing your homework.
Is your headquarters in the basement of your house? Your garage? An empty bedroom? Or are you going to go out and rent a building or a space in a business incubator? This is one of the basic questions you need to answer. How much will it cost to rent space? Do you really need to do this?
One of my clients, a fashion designer, designed all of her creations in her basement. She had her patterns, her computers and her samples all in the basement. To manufacture her clothes, she ordered fabric from France and had it shipped to the manufacturers in New York. There, the pattern makers, cutters and sewers mass produced the clothes. Then, they shipped the clothes (the inventory) to a warehouse. The warehouse shipped everything to the boutiques. It was quite a process. Brigitte, the designer, found that she would need far more volume if she wanted to contract with overseas producers in places like China or Turkey. That's why she manufactured in New York.
Another client, Teroforma has their headquarters in the same building as their warehouse. They do their own shipping to consumers and to retailers. Their inventory is manufactured by artisans overseas. But while the management was finding designers and artisans, they worked out of their house.
Another client, MyBroadway.com, has its production studios for producing proprietary videos in the same building as its offices in New York City. This gives the company a distinct advantage.
What do you need to provide your service or manufacture and sell your product? If you're an inventor, will you license your design or actually manufacture and sell your product?
You need to think all this through and price the alternatives. What will computers cost? Furniture? Overhead? Personnel? Security? Should you lease or buy?
Start doing your homework.
Tuesday, August 19, 2008
10 Tips for Starting a Business -- Tip # 4 -- What Will It Take?
What is it going to take to start your business?
How will you make and sell your product or service?
How will you get the word out?
Now is the time to start really researching and planning. Do you need an office? A factory? What can you do yourself? What do you need to outsource?
To find out, go out and study similar businesses. Talk to business owners, read articles in the trade press, join trade associations, go to events.
Make a list of questions, then go out and get them answered.
What will it take in time, space and money? Write down the answers. Create a plan for achieving your goals.
How will you make and sell your product or service?
How will you get the word out?
Now is the time to start really researching and planning. Do you need an office? A factory? What can you do yourself? What do you need to outsource?
To find out, go out and study similar businesses. Talk to business owners, read articles in the trade press, join trade associations, go to events.
Make a list of questions, then go out and get them answered.
What will it take in time, space and money? Write down the answers. Create a plan for achieving your goals.
Monday, August 18, 2008
10 Tips for Starting a Business - Tip #3 - The Big Idea
They say that necessity is the mother of invention. That's why big needs help inventive people come up with BIG IDEAS. You know there's a need. You know there's a big, growing market with that need.
How are you going to fill that need? What is your BIG IDEA?
Your idea for filling a need can be born from a passion you have or simply a frustration. That's how Airborne was invented. A second grade school teacher was tired of getting sick. She created an herbal concoction to help her immune system fight off germs. The product is wildly successful.
From the Airborne website: "Airborne is the best-selling herbal health formula that boosts your body's immune system. It was created by a former second-grade school teacher, Victoria Knight-McDowell." http://www.airbornehealth.com/about_index.php
One of my own clients saw a need in the marketplace for videos that enable people to talk about their passions and the products they are loyal to. It's called Loyaltv.com -- www.loyaltv.com. My favorite video on the site is the one about the Camry. That video lets people see so much more about that car than you would ever get from a car commercial or even the Toyota website. This site fills people's needs to learn more about products from real people telling real stories. I'm thinking of going out and making some videos like this myself. I want other people to know about the products I think are great.
Now, some people approach this whole business development dynamic differently. They have what they think is the Big Idea and then look to see if there is a need and a market. That's OK, as long as you have all three elements.
How are you going to fill that need? What is your BIG IDEA?
Your idea for filling a need can be born from a passion you have or simply a frustration. That's how Airborne was invented. A second grade school teacher was tired of getting sick. She created an herbal concoction to help her immune system fight off germs. The product is wildly successful.
From the Airborne website: "Airborne is the best-selling herbal health formula that boosts your body's immune system. It was created by a former second-grade school teacher, Victoria Knight-McDowell." http://www.airbornehealth.com/about_index.php
One of my own clients saw a need in the marketplace for videos that enable people to talk about their passions and the products they are loyal to. It's called Loyaltv.com -- www.loyaltv.com. My favorite video on the site is the one about the Camry. That video lets people see so much more about that car than you would ever get from a car commercial or even the Toyota website. This site fills people's needs to learn more about products from real people telling real stories. I'm thinking of going out and making some videos like this myself. I want other people to know about the products I think are great.
Now, some people approach this whole business development dynamic differently. They have what they think is the Big Idea and then look to see if there is a need and a market. That's OK, as long as you have all three elements.
What is your big idea? Is it big enough to catch on in the marketplace? 8 out of 10 new products die. What will make yours survive?
Wednesday, August 13, 2008
Ten Tips for Starting a Business -- Tip #3 -- Is There a Market?
There may be a need for your product or service, but is it a BIG need? In other words, how big is the market, and is it growing? You need to go out and do some research. The easy way is to do online research. But your public library can help, too, so can trade organizations in your industry.
Once you find out how big the market is, and if it's a growing market, then you need to find out how many competitors there are. Can you compete effectively? Again, you have to do research.
Maybe there is a small niche for your product, where you can fill a need that others can't.
One of my clients was a high-end fashion designer. Her creations were beautiful but very unusual. The market for unusual fashion design is small, and it is very crowded. Yet, she found a niche for her designs and was able to expand her sales by finding the boutiques that catered to the type of woman looking to make her own fashion statements.
Teroforma, which was just profiled in the New York Times Home Section, is in the crowded, large and growing market of tableware. But the company is positioned in the affordable luxury niche, which has virtually no competitors that can match Teroforma's quality or unique designs or sustainable and artisan-crafted manufacturing stories. Such stories resonate with consumers.
Remember:
How big is the market, and is it growing?
What is the competition like?
How are you different? Can you compete?
Once you find out how big the market is, and if it's a growing market, then you need to find out how many competitors there are. Can you compete effectively? Again, you have to do research.
Maybe there is a small niche for your product, where you can fill a need that others can't.
One of my clients was a high-end fashion designer. Her creations were beautiful but very unusual. The market for unusual fashion design is small, and it is very crowded. Yet, she found a niche for her designs and was able to expand her sales by finding the boutiques that catered to the type of woman looking to make her own fashion statements.
Teroforma, which was just profiled in the New York Times Home Section, is in the crowded, large and growing market of tableware. But the company is positioned in the affordable luxury niche, which has virtually no competitors that can match Teroforma's quality or unique designs or sustainable and artisan-crafted manufacturing stories. Such stories resonate with consumers.
Remember:
How big is the market, and is it growing?
What is the competition like?
How are you different? Can you compete?
Tuesday, August 12, 2008
Tip # 2 Continued - The Need - Win Detergent
As I wrote this morning, Tip # 2 - is to make sure your business fills a real need. I just read in the Wall Street Journal an article about the official detergent of the Olympics -- WIN Detergent.
It was developed by a marathon runner who noticed that regular detergents could not get out the odor embedded in his running clothes. High tech fabric captures the sweat molecules, and those molecules attract bacteria.
WIN detergent is specially formulated to get to and dissolve those sweat molecules. Read about it on the WIN website -- http://www.windetergent.com/our_tech.html.
This stuff, according to the Wall Street Journal and to the manufacturer, really works. I think I'll try it. Anyway, it is the official detergent of the Olympic Games. This shows that even small companies can win big. Link to WSJ article: http://online.wsj.com/article/SB121842749618229161.html?mod=hpp_us_entrepreneur#
It was developed by a marathon runner who noticed that regular detergents could not get out the odor embedded in his running clothes. High tech fabric captures the sweat molecules, and those molecules attract bacteria.
WIN detergent is specially formulated to get to and dissolve those sweat molecules. Read about it on the WIN website -- http://www.windetergent.com/our_tech.html.
This stuff, according to the Wall Street Journal and to the manufacturer, really works. I think I'll try it. Anyway, it is the official detergent of the Olympic Games. This shows that even small companies can win big. Link to WSJ article: http://online.wsj.com/article/SB121842749618229161.html?mod=hpp_us_entrepreneur#
10 Tips for Starting a Business - Tip #2
Lots of people want to start a business because they love doing something, such as writing computer code. Others have an invention. Still others just want the freedom to be their own boss.
But the single most important thing you must figure out is if there is a need in the marketplace. Do lots of people have a need for your product or service? Is the need big enough that they will spend money to satisfy that need?
Tip # Find and Fill a Need.
But the single most important thing you must figure out is if there is a need in the marketplace. Do lots of people have a need for your product or service? Is the need big enough that they will spend money to satisfy that need?
Tip # Find and Fill a Need.
Monday, August 11, 2008
Ten Tips for Starting Your Business
Lots of people think about starting businesses. But if you really want to do it, you have to clear away the cobwebs of your mind. You have to start thinking strategically and logically. I don' t mean that you can't have passion. You won't succeed without passion. But you do need to become focused.
Tip 1: Decide what you really want out of your business. Where do you want to be in five years?
Stay tuned. More tips to come.
Tip 1: Decide what you really want out of your business. Where do you want to be in five years?
Stay tuned. More tips to come.
Thursday, August 7, 2008
Teroforma in NY Times
Teroforma, one of my clients, was featured in the Home section of the New York Times today. Teroforma creates unique housewares by pairing cutting-edge international designers with old world craftsmen and artisans. Teroforma's designs are arresting.
The article is at: http://www.nytimes.com/2008/08/07/garden/07goods.html?ex=1375848000&en=17723e5568e4a23c&ei=5124&partner=permalink&exprod=permalink
Teroforma can be found at: www.teroforma.com.
When I called to congratulate Andrew Hellman, the founder, he said that I had been right when I said that as you execute your plan, things will change. Nothing will turn out was you expect. New opportunities and challenges will come up. You just have to grab them and deal with them.
The article is at: http://www.nytimes.com/2008/08/07/garden/07goods.html?ex=1375848000&en=17723e5568e4a23c&ei=5124&partner=permalink&exprod=permalink
Teroforma can be found at: www.teroforma.com.
When I called to congratulate Andrew Hellman, the founder, he said that I had been right when I said that as you execute your plan, things will change. Nothing will turn out was you expect. New opportunities and challenges will come up. You just have to grab them and deal with them.
Tuesday, July 22, 2008
Starting a Business
I received a comment about starting businesses with a question about how to decide if you should buy or start your own business and how to do it. Here is my reply:
I think that the best way to start a business is to look for a need in the marketplace that no one else is filling. Can you fill it?
To buy a business is a bit different. You could invest in a start-up that you believe in and become a hands-on manager, using your special skills. You can find businesses at local venture fairs.
There are also franchise fairs and business brokers. If you get involved with either of those, get yourself a good business lawyer and do lots of research and ask lots of questions.
Consultants like me can coach you through the process.
Thanks for your comments.
UpstartWyn
I think that the best way to start a business is to look for a need in the marketplace that no one else is filling. Can you fill it?
To buy a business is a bit different. You could invest in a start-up that you believe in and become a hands-on manager, using your special skills. You can find businesses at local venture fairs.
There are also franchise fairs and business brokers. If you get involved with either of those, get yourself a good business lawyer and do lots of research and ask lots of questions.
Consultants like me can coach you through the process.
Thanks for your comments.
UpstartWyn
Monday, June 23, 2008
Women Entrepreneurs
Yesterday, the Connecticut section of the New York Times ran an article about Women Entrepreneurs in the our area. It focused on "Carla Schneider, 40, of Orange, whose product, the WubbaNub, a silicon pacifier with a small stuffed animal attached, has been used in neonatal intensive care units and by mothers of fussy babies around the country." And the article went on to say that "for many female entrepreneurs, necessity is the mother of their venture." I used to belong to the Women's Entrepreneurial Network, which had no end of striving women with their own businesses. It was true that many of the members who had seen real necessity in the marketplace had plenty of success, but a lot were just wannabes. The wannabes were thinking of starting businesses or were in overly crowded markets, where it was hard to make money.
The article points out that more women start businesses than men. But most woman-owned businesses make very little money. Nearly half of businesses owned by women make less than $10,000 in annual revenue.
In my business planning work, I've only had one woman client -- only one woman who realized the great value of a professional plan and was willing to pay for it. In my marketing communications work, again, I've only had one woman client. I've always wondered about that. Are women more conservative with their money? Or do they have lower ambitions and so don't want to spend money on their businesses? I'm a woman, and I've got to admit, I hesitate before spending money on professional advice or help. But I've also mixed my home life with my home-based business. I work out of a home office, which gives me a tremendous amount of freedom and keeps overhead low. I also realize that what I do for my family and home has economic value. Otherwise, I'd have to hire other people to do my "home work". Still, I love having my own business and generating and contributing my own revenue stream to the family. When paying college tuition, every penny helps.
In any event, the article about women entrepreneurs in our area is well worth reading. It really shows how exciting it is to build a business from an idea and how it is possible to be a business owner and a person with a home life. Here is a permanent link to the article.
http://www.nytimes.com/2008/06/22/nyregion/nyregionspecial2/22Rwomenct.html?ex=1371700800&en=ad2d6107b4914913&ei=5124&partner=permalink&exprod=permalink
The article points out that more women start businesses than men. But most woman-owned businesses make very little money. Nearly half of businesses owned by women make less than $10,000 in annual revenue.
In my business planning work, I've only had one woman client -- only one woman who realized the great value of a professional plan and was willing to pay for it. In my marketing communications work, again, I've only had one woman client. I've always wondered about that. Are women more conservative with their money? Or do they have lower ambitions and so don't want to spend money on their businesses? I'm a woman, and I've got to admit, I hesitate before spending money on professional advice or help. But I've also mixed my home life with my home-based business. I work out of a home office, which gives me a tremendous amount of freedom and keeps overhead low. I also realize that what I do for my family and home has economic value. Otherwise, I'd have to hire other people to do my "home work". Still, I love having my own business and generating and contributing my own revenue stream to the family. When paying college tuition, every penny helps.
In any event, the article about women entrepreneurs in our area is well worth reading. It really shows how exciting it is to build a business from an idea and how it is possible to be a business owner and a person with a home life. Here is a permanent link to the article.
http://www.nytimes.com/2008/06/22/nyregion/nyregionspecial2/22Rwomenct.html?ex=1371700800&en=ad2d6107b4914913&ei=5124&partner=permalink&exprod=permalink
Thursday, June 19, 2008
Organic Growth -- Planning
Organic growth can't happen without a plan. Even though most entrepreneurs find that they can't follow their plan exactly, a good plan will help them achieve their main goal.
In the dead of winter, when the ground is frozen and the sky is bleak, is when I make my plans for my summer garden. I sit down with an empty sheet of paper, pencil and my seed catalogs to plan the future. I can imagine warm sun, colorful flowers and the joy of picking my own organically grown vegetables. But first, I remember where I have planted last year's crops. This is important because rotating the crops cuts down on pests and diseases and keeps the soil from depleting essential nutrients. I also think about what worked last year and what I would like to do differently. What would I like to try that's new? What successes do I want to repeat?
It's important in business planning to take the same approach. To map out what you want to achieve and where you want to go, you need to understand where you've come from. You need to think through past mistakes and successes, in order to make a better future.
Please post how you approach planning your business (or your garden).
Wyn
In the dead of winter, when the ground is frozen and the sky is bleak, is when I make my plans for my summer garden. I sit down with an empty sheet of paper, pencil and my seed catalogs to plan the future. I can imagine warm sun, colorful flowers and the joy of picking my own organically grown vegetables. But first, I remember where I have planted last year's crops. This is important because rotating the crops cuts down on pests and diseases and keeps the soil from depleting essential nutrients. I also think about what worked last year and what I would like to do differently. What would I like to try that's new? What successes do I want to repeat?
It's important in business planning to take the same approach. To map out what you want to achieve and where you want to go, you need to understand where you've come from. You need to think through past mistakes and successes, in order to make a better future.
Please post how you approach planning your business (or your garden).
Wyn
Saturday, June 14, 2008
Choosing Your Company Name
I'm taking a moment away from my gardening metaphors because I just read a great article about choosing a company name. The very first step you need to take in choosing your company name is to do a search on Google, Yahoo!, Alta Vista and MSN for the name you're thinking of using. If you choose something that's similar to a company that is already in business, you may be in for trouble.
One of my clients, IntellEnergy, got a cease and desist order from Intel. It didn't matter that my client used two "Ls" or that they were in a totally different market -- highly efficient commercial garage lighting and ice hockey rink lighting. After spending thousands of dollars on lawyer fees, IntellEnergy had to become IntelliEnergy. But you can still find them at www.intellenergy.com.
You can read more about this problem at TwistImage -- Choose Your Words Wisely. http://www.twistimage.com/blog/archives/choose-your-words-wisely/ -
One of my clients, IntellEnergy, got a cease and desist order from Intel. It didn't matter that my client used two "Ls" or that they were in a totally different market -- highly efficient commercial garage lighting and ice hockey rink lighting. After spending thousands of dollars on lawyer fees, IntellEnergy had to become IntelliEnergy. But you can still find them at www.intellenergy.com.
You can read more about this problem at TwistImage -- Choose Your Words Wisely. http://www.twistimage.com/blog/archives/choose-your-words-wisely/ -
Friday, June 13, 2008
Organic Growth for Your Business
More wisdom from the garden --
How do you deal with competitors? Competitors are like weeds in a garden. They can overwhelm your flowers and vegetables -- sucking the nutrients and water away and stunting the growth of the good stuff.
How do I deal with weeds? I don't like weeding, so I've set up a system to deter more weeds. In my garden, after digging up and disposing of the early weeds, I put down newspapers in my paths and cover them with cedar mulch or straw. In the beds where the flowers and vegetables grow, I put down grass clippings. When I see a new weed, I pull it up.
What does this have to do with a business? Simple. When you're confronting competitors or other potentially distracting and destructive forces, you need a systematic method for dealing with them. You need to read about potential competitors and have a plan for how to deal with them. You must stay aware of the ones that exist or are sprouting up and infringing on your space.
You can make a map of the competitive landscape. It can contain attributes or benefits or price. Put your competitors on the map. Put your company on the map and see where you fit. Figure out how you are different and how to appeal to consumers and customers in a unique way.
If your business can grow in an area that is reletively free from competitors -- because it's in a clear spot (or niche) by itself, you have a better chance for success. Apple has done this repeatedly. Its products are clearly in a market niche all by themselves, even though they compete in a very full and competitive marketplace.
How have you positioned your business in the marketplace? Is it a good spot?
How do you deal with competitors? Competitors are like weeds in a garden. They can overwhelm your flowers and vegetables -- sucking the nutrients and water away and stunting the growth of the good stuff.
How do I deal with weeds? I don't like weeding, so I've set up a system to deter more weeds. In my garden, after digging up and disposing of the early weeds, I put down newspapers in my paths and cover them with cedar mulch or straw. In the beds where the flowers and vegetables grow, I put down grass clippings. When I see a new weed, I pull it up.
What does this have to do with a business? Simple. When you're confronting competitors or other potentially distracting and destructive forces, you need a systematic method for dealing with them. You need to read about potential competitors and have a plan for how to deal with them. You must stay aware of the ones that exist or are sprouting up and infringing on your space.
You can make a map of the competitive landscape. It can contain attributes or benefits or price. Put your competitors on the map. Put your company on the map and see where you fit. Figure out how you are different and how to appeal to consumers and customers in a unique way.
If your business can grow in an area that is reletively free from competitors -- because it's in a clear spot (or niche) by itself, you have a better chance for success. Apple has done this repeatedly. Its products are clearly in a market niche all by themselves, even though they compete in a very full and competitive marketplace.
How have you positioned your business in the marketplace? Is it a good spot?
Thursday, June 12, 2008
Organic Growth, Gardening and Entrepreneurs
The first time I talked about organic growth with a client, he thought I was making up the term. I assured him that investors talk about organic growth. It's a good thing. You take your earnings and plow them back into the business to generate more growth in revenues.
Yesterday when I was working in my garden, I realized that gardening is a lot like growing a business. This summer I'm going to write about the parallels between gardening and entrepreneurship.
I once had an investments professor in college who used to say, "The stock market is like a garden. You have to cultivate the flowers and pluck the weeds." A business is like a garden, too. You have to cultivate growth and make sure the weeds don't take over.
What are weeds for an entrepreneur? Competitors, creditors and other complications.
What are the weeds in your business? I'd love to know.
Yesterday when I was working in my garden, I realized that gardening is a lot like growing a business. This summer I'm going to write about the parallels between gardening and entrepreneurship.
I once had an investments professor in college who used to say, "The stock market is like a garden. You have to cultivate the flowers and pluck the weeds." A business is like a garden, too. You have to cultivate growth and make sure the weeds don't take over.
What are weeds for an entrepreneur? Competitors, creditors and other complications.
What are the weeds in your business? I'd love to know.
Thursday, May 29, 2008
Internet Advertising 2007
The results are in, and 2007 was another record year for Internet advertising. IAB just released the data, which you can read on Mediapost -- http://blogs.mediapost.com/research_brief/?p=1717. This is the fourth year in a row of record ad spending on the net.
Internet advertising revenues were up 26% in 2007 to $21.2 billion in the U.S. To me, this just shows the power of the Internet and how marketers of all sizes need to pay attention to the opportunities the Internet presents for getting the word out about their brands. The Internet gives people access to instantaneous information, and the younger generations are embracing it. If my son, a recent college grad, needs to look up a movie, a phone number, directions or any piece of information, he goes to the Internet. I'm inclined to pick up a newspaper, phone book or a paper map.
I think the biggest challenge in all this Internet advertising growth, however, is understanding how to make the best use of this new medium. I think that most businesses do not understand how to engage customers. They are clueless about social networking and viral marketing. I've talked to my young adult kids about this, and they agree. They see social networking and word-of-mouth excitement as just happening. They believe it cannot be influenced by marketers. I believe my kids are wrong. Savvy marketers can use this medium, which has now become quite well established, to influence consumers simply by giving them the information they need before making a purchase decision. Later, they can maintain a relationship with updates and information on product usage that is easy to get and understand. Marketers should start with the basics.
There's a lot of opportunity out there. What's your opinion? Post a response. Email me: upstartwyn@gmail.com.
Internet advertising revenues were up 26% in 2007 to $21.2 billion in the U.S. To me, this just shows the power of the Internet and how marketers of all sizes need to pay attention to the opportunities the Internet presents for getting the word out about their brands. The Internet gives people access to instantaneous information, and the younger generations are embracing it. If my son, a recent college grad, needs to look up a movie, a phone number, directions or any piece of information, he goes to the Internet. I'm inclined to pick up a newspaper, phone book or a paper map.
I think the biggest challenge in all this Internet advertising growth, however, is understanding how to make the best use of this new medium. I think that most businesses do not understand how to engage customers. They are clueless about social networking and viral marketing. I've talked to my young adult kids about this, and they agree. They see social networking and word-of-mouth excitement as just happening. They believe it cannot be influenced by marketers. I believe my kids are wrong. Savvy marketers can use this medium, which has now become quite well established, to influence consumers simply by giving them the information they need before making a purchase decision. Later, they can maintain a relationship with updates and information on product usage that is easy to get and understand. Marketers should start with the basics.
There's a lot of opportunity out there. What's your opinion? Post a response. Email me: upstartwyn@gmail.com.
Sunday, May 25, 2008
Entrepreneurs and the Economy
Is this any time to start a business? From what I'm seeing, lots of people are turning into entrepreneurs as they see opportunities in the market and corporate jobs lose their allure. Credit is tight, but that is not stopping people. These entrepreneurs believe in the American economy and the growing world economy.
I'm working with several great start-ups. Their founders are amazingly creative and far-thinking. They see new ways to apply technology to meet the needs of producers and consumers. That is what I find so exciting.
Check them out:
www.mybroadway.com
www.teroforma.com
www.loyaltv.com.
I'm working with several great start-ups. Their founders are amazingly creative and far-thinking. They see new ways to apply technology to meet the needs of producers and consumers. That is what I find so exciting.
Check them out:
www.mybroadway.com
www.teroforma.com
www.loyaltv.com.
Tuesday, April 29, 2008
Perseverance
One of my college professors described one of my fellow students as a person who made his own luck. I always wondered what he meant by that. But I think that it was a case of the kid knowing what he wanted and going after it. He had perseverance.
That's a trait that entrepreneurs have to have. They must believe in themselves and their goal. They don't give up. The Wall Street Journal just ran an article on perseverance and personal health. There's a link in my sidebar. Take a look.
That's a trait that entrepreneurs have to have. They must believe in themselves and their goal. They don't give up. The Wall Street Journal just ran an article on perseverance and personal health. There's a link in my sidebar. Take a look.
Saturday, April 19, 2008
Like American Idol for Entrepreneurs
This week I felt as if I were on American Idol. No, not as a contestant, as a judge. I was on a panel of three critics listening to three-minute pitches from entrepreneurs. The panel's job was to help the entrepreneurs get ready to pitch their requests for funding to over 100 investors at the upcoming Crossroads Venture Fair.
I had a yellow grading sheet for each presenter. I had to grade the contestants on specific criteria. Amazingly, most of the presenters never got to some of the points. They mostly got hung up on giving their credentials, describing how great their product or service was or going into the need in the marketplace. Two presenters completely lost me as they dove into the technical aspects of their inventions, complete with diagrams that made no sense.
The judges had to tell these entrepreneurs how to improve their presentations. What amazed me was how they looked so eager to hang on every word we said. Sometimes I thought I sounded like Simon, telling people that I couldn't understand what their business was.
But some of the ideas for new businesses were really good. I hope that the entrepreneurs learned from the experience and will do well at Crossroads.
Here is a rundown of the point we had to grade on:
Product/service - what do you do?
Market - what's the size of the market?
Competitive Analysis - Is the product unique?
Finance -- how will you make money?
Management - Do you have the talent to meet your goals?
Funding -- what do you need? how will you use it?
Crossroads is run by the Connecticut Venture Group. http://www.crossroads-cvg.org/
I had a yellow grading sheet for each presenter. I had to grade the contestants on specific criteria. Amazingly, most of the presenters never got to some of the points. They mostly got hung up on giving their credentials, describing how great their product or service was or going into the need in the marketplace. Two presenters completely lost me as they dove into the technical aspects of their inventions, complete with diagrams that made no sense.
The judges had to tell these entrepreneurs how to improve their presentations. What amazed me was how they looked so eager to hang on every word we said. Sometimes I thought I sounded like Simon, telling people that I couldn't understand what their business was.
But some of the ideas for new businesses were really good. I hope that the entrepreneurs learned from the experience and will do well at Crossroads.
Here is a rundown of the point we had to grade on:
Product/service - what do you do?
Market - what's the size of the market?
Competitive Analysis - Is the product unique?
Finance -- how will you make money?
Management - Do you have the talent to meet your goals?
Funding -- what do you need? how will you use it?
Crossroads is run by the Connecticut Venture Group. http://www.crossroads-cvg.org/
Monday, April 14, 2008
Crossroads Venture Fair - April 29-30, 2008
The Crossroads Venture Fair is coming up -- April 29-30 in Stamford, Connecticut. Now is the time to sign up for a chance to present at the fair, the largest venture event in the Northeast. I was a judge for last year's fair. We had to turn down half the companies that applied to exhibit and present. Let me give you some tips for when you fill out the forms:,
To sign up for a chance to present, go to:
http://www.cvg.org/entrepreneurzone.asp.
You'll see that there are many categories. Fill out the form for your business's stage:
2008 Connecticut Venture Group Funding Applications:
PRE-SEED and SEED STAGE Funding Application (R&D or Proof-of-Concept Phase)
Apply here if your product, technology or service requires funding for further development or testing, patent protection, or you require assistance to complete a comprehensive business plan, or other resources before you are ready to start up.START-UP Funding Application (Ready to Launch)
Apply here if you have a business plan, a proven concept or product, a management team identified, and are ready to start up.EARLY STAGE and EXPANSION STAGE Application (Sales < $5,000,000)
Apply here if you have started up and have annual sales under $500,000 [EARLY STAGE], or sales are over $500,000 but lest than $5,000,000 [EXPANSION STAGE].LATE STAGE Companies (Sales > $5,000,000)
Apply here if you have annual sales of at least $5,000,000.
- Use full sentences that make sense.
- Ask someone else to read over your responses before you send them in.
- Make sure you answer the questions asked.
To sign up for a chance to present, go to:
http://www.cvg.org/entrepreneurzone.asp.
You'll see that there are many categories. Fill out the form for your business's stage:
2008 Connecticut Venture Group Funding Applications:
PRE-SEED and SEED STAGE Funding Application (R&D or Proof-of-Concept Phase)
Apply here if your product, technology or service requires funding for further development or testing, patent protection, or you require assistance to complete a comprehensive business plan, or other resources before you are ready to start up.START-UP Funding Application (Ready to Launch)
Apply here if you have a business plan, a proven concept or product, a management team identified, and are ready to start up.EARLY STAGE and EXPANSION STAGE Application (Sales < $5,000,000)
Apply here if you have started up and have annual sales under $500,000 [EARLY STAGE], or sales are over $500,000 but lest than $5,000,000 [EXPANSION STAGE].LATE STAGE Companies (Sales > $5,000,000)
Apply here if you have annual sales of at least $5,000,000.
Thursday, April 10, 2008
Financial Projections
One reason I haven't posted for over week is because I've been building a financial model. As I've tried out different scenarios, I've been reminded that a model's robustness (or flexibility) comes from the formulas and the assumptions. Having a flexible model that can show you the outcomes of different assumptions is crucial.
Here are some tips for building a model in Excel:
1. Write down your assumptions on a separate worksheet or in Word.
2. Develop formulas and links that carry through all the sections of your workbook.
3. Do your homework -- research the marketplace to understand volumes, prices, costs, etc.
4. Divide your workbook by worksheets (using the tabs at the bottom of the page):
Here are some tips for building a model in Excel:
1. Write down your assumptions on a separate worksheet or in Word.
2. Develop formulas and links that carry through all the sections of your workbook.
3. Do your homework -- research the marketplace to understand volumes, prices, costs, etc.
4. Divide your workbook by worksheets (using the tabs at the bottom of the page):
- One summary sheet that is the profit and loss statement
- A Revenue sheet that has all the revenue, cost of goods sold and gross profit assumptions -- metrics, sources, prices, quantities, growth rates, etc.
- An Expenses sheet that has all of your overhead expenses.
- A Capital Expenditures Sheet
- A Depreciation Schedule.
5. Make sure you construct your formulas to carry from page to page. That way, if you change a revenue assumption, it shows up on the profit and loss sheet. This makes it easier to try out different scenarios.
I'll write more about financial statements later.
Please post questions or send me comments -- upstartwyn@gmail.com
Friday, April 4, 2008
Focus Your Pitch -- Lessons From Pitchers
The single most common mistake entrepreneurs make is not focusing. To pique the interest of an investor or to be successful, you must focus. My recent work with one entrepreneur reminded me of this point. He sees his company as doing too many things. That was clear in his recent pitch to an angel investor.
That's why David Brooks's column, "Pitching with Purpose," in The New York Times earlier this week was so interesting to me. It was about great baseball pitchers and great pitching. http://www.nytimes.com/2008/04/01/opinion/01brooks.html?ex=1364788800&en=782ad8a401682876&ei=5124&partner=permalink&exprod=permalink
To be a great pitcher, you have to ignore everything around you and clear your mind. You just have to focus on executing the pitch you want to throw. The article is worth reading simply because it has lessons for life -- and lessons for entrepreneurs. Remember that Amazon started out as an online store for books. The company only branched out later.
Entrepreneurs -- focus your pitch!
That's why David Brooks's column, "Pitching with Purpose," in The New York Times earlier this week was so interesting to me. It was about great baseball pitchers and great pitching. http://www.nytimes.com/2008/04/01/opinion/01brooks.html?ex=1364788800&en=782ad8a401682876&ei=5124&partner=permalink&exprod=permalink
To be a great pitcher, you have to ignore everything around you and clear your mind. You just have to focus on executing the pitch you want to throw. The article is worth reading simply because it has lessons for life -- and lessons for entrepreneurs. Remember that Amazon started out as an online store for books. The company only branched out later.
Entrepreneurs -- focus your pitch!
Tuesday, April 1, 2008
Homeboy Industries
Last week The New York Times ran an article about Homeboy Industries in Los Angeles. Homeboy was started by a Jesuit priest who wanted to help kids get out of gangs. He wanted to help them learn how to work and earn money, rather than killing and getting killed through gang activity. These kids are now making Tee-shirts and baking bread. They sell their wares and learn about being successful. I love this idea of seeding capitalism. I love that these kids are learning how to be self sufficient and participate in the American Dream.
My son, who goes to USC, says that Homeboy sells its food on the campus as part of the campus farmers market. That's great because USC is very close to gangland neighborhoods.
When I had a government grant to counsel low income people on how to start businesses, one of the organizations I had an alliance with believed that the same entrepreneurial spirit and skills that inner city drug dealers have could be re-channelled into selling legal products and services. Homeboy seems to be doing just that. I hope more organizations like this pop up and are successful.
http://www.homeboy-industries.org/father_gregg.php
My son, who goes to USC, says that Homeboy sells its food on the campus as part of the campus farmers market. That's great because USC is very close to gangland neighborhoods.
When I had a government grant to counsel low income people on how to start businesses, one of the organizations I had an alliance with believed that the same entrepreneurial spirit and skills that inner city drug dealers have could be re-channelled into selling legal products and services. Homeboy seems to be doing just that. I hope more organizations like this pop up and are successful.
http://www.homeboy-industries.org/father_gregg.php
Thursday, March 27, 2008
Business Plan Contests
March Madness isn't just for basketball. Colleges have business plan competitions going on, too. The Wall Street Journal recently ran an article on how exciting these competitions can be. Students learn from the process and the feedback. And they have the chance to win seed capital for their ideas in the form of cash prizes.
http://online.wsj.com/article/SB120647561328363171.html?mod=rss_2007_Top_Small_Workplaces
(I've also shared the article in my sidebar.)
A few years ago, I mentored a business plan team from Wharton one year and was really impressed by the quality of the writing, research, thinking and creativity. Another year, I met the winners of the business plan competition at Princeton. Wow! Were those kids impressive. I often wonder if they actually got their business off the ground.
If you're a student, see if your college has a contest. If not, start one.
http://online.wsj.com/article/SB120647561328363171.html?mod=rss_2007_Top_Small_Workplaces
(I've also shared the article in my sidebar.)
A few years ago, I mentored a business plan team from Wharton one year and was really impressed by the quality of the writing, research, thinking and creativity. Another year, I met the winners of the business plan competition at Princeton. Wow! Were those kids impressive. I often wonder if they actually got their business off the ground.
If you're a student, see if your college has a contest. If not, start one.
Tuesday, March 18, 2008
From Chicken Farmer to Great Entrepreneur
Jon Huntsman's life sounds like the true American dream. He grew up the son of a rural school teacher, which gave him a work ethic. After getting a degree from Wharton, he turned down a job at IBM to sell eggs. He used his experience as a poultry farmer to start and grow more busineesses. He always took unconventional routes. Wharton has posted a video of Huntsman talking about his life and business -- how he went from poultry farmer to starting a container company to founding a chemical company.
I'm a Wharton Graduate School alumna. When I returned for my class reunion, I was amazed at the brand new Jon Huntsman Hall which now housed the latest high tech classrooms and meeting rooms. Regular, good people can make money and share it.
Huntsman says part of his success is due to humility and to being open to new ideas and to learning. We all have a lot to learn from him. video: http://wep.wharton.upenn.edu/gis/media.aspx?gisID=60,
article: http://wep.wharton.upenn.edu/gis/article.aspx?gisID=62
I'm a Wharton Graduate School alumna. When I returned for my class reunion, I was amazed at the brand new Jon Huntsman Hall which now housed the latest high tech classrooms and meeting rooms. Regular, good people can make money and share it.
Huntsman says part of his success is due to humility and to being open to new ideas and to learning. We all have a lot to learn from him. video: http://wep.wharton.upenn.edu/gis/media.aspx?gisID=60,
article: http://wep.wharton.upenn.edu/gis/article.aspx?gisID=62
Friday, March 14, 2008
Online Borrowing and Lending
What do you do when you can't get a bank loan or raise equity capital from angels or VCs? You could turn to an online network of lenders. An article in The Wall Street Journal on March 12, 2008, told the stories of several small business owners who did exactly that. One, Jeff Walsh, borrowed $22,000 from Prosper.com. His interest rate was 10.25%. The article went on to list other online lending services, or person-to-person lenders: LendingClub.com and Zopa.com.
These lenders make small, unsecured loans. The field is growing, particularly during the credit crunch, which has dried up many traditional sources. Such companies made about $100 million in new P-to-P loans in the US last year. Even Richard Branson, owner of Virgin Group, has jumped into this market with Virgin Money USA.
To read more, go to the small business section of the online Wall Street Journal. www.wsj.com. The specific article is at: http://online.wsj.com/article/SB120526439925827991.html?mod=SmallBusinessMain_feature_articles#
These lenders make small, unsecured loans. The field is growing, particularly during the credit crunch, which has dried up many traditional sources. Such companies made about $100 million in new P-to-P loans in the US last year. Even Richard Branson, owner of Virgin Group, has jumped into this market with Virgin Money USA.
To read more, go to the small business section of the online Wall Street Journal. www.wsj.com. The specific article is at: http://online.wsj.com/article/SB120526439925827991.html?mod=SmallBusinessMain_feature_articles#
Thursday, March 13, 2008
Business Plan Contests
Ideablob is a site where you can enter your business plan to raise seed capital of $10,000. http://www.ideablob.com/ There's a new contest each month. Last month Penn State student Aaron Fleishman won for designing a way to use wireless networks to help sick children in the developing world.
The Ideablob site is run by a bank and is in beta, but it looks worthwhile. Before you enter, though, make sure you read all the instructions and also be sure that you really answer the questions that investors ask. I list the top ten questions on my Upstart Business Planning website: http://www.upstartbusinessplanning.com/15601.html
No matter what stage you're in, keep planning for the future, but take action to realize your goals.
The Ideablob site is run by a bank and is in beta, but it looks worthwhile. Before you enter, though, make sure you read all the instructions and also be sure that you really answer the questions that investors ask. I list the top ten questions on my Upstart Business Planning website: http://www.upstartbusinessplanning.com/15601.html
No matter what stage you're in, keep planning for the future, but take action to realize your goals.
Tuesday, March 11, 2008
Ben Stein on Taxes
Our family have been fans of Ben Stein for a long time. We loved him as the monotone economics teacher in Ferris Bueller's Day Off and as the host of Win Ben Stein's Money on Comedy Central years ago. Ben is not just an actor. He's an economist, lawyer, writer and Republican. I'm a fan of his New York Times column in the Sunday Business section.
His March 9, 2008 column took the form of a letter to John McCain telling McCain what to do with taxes, if he became president.
http://www.nytimes.com/2008/03/09/business/09every.html?ex=1362805200&en=422ee5508ead7bc0&ei=5124&partner=permalink&exprod=permalink
Basically, Ben took the time to explain why we have a huge deficit and how to fix it. We're spending enormous amounts of money on entitlements, defense and other government-run programs. He went on to say that our nation can't afford to continue to run up deficits by keeping taxes so low. He says we need to tax the people most likely to be able to give up some of their income -- the top earners. He makes a pretty good rebuttal to the editorials in the Wall Street Journal which take the opposite point of view.
But the whole thing got me thinking about taxes. The most punitive, regressive taxes we have are payroll taxes. I mean, even teenagers in part-time or summer jobs or the poorest landscape workers or check-out clerks at Wal-Mart have to pay payroll taxes. They may not make enough to pay income taxes, but payroll taxes are withheld from everyone from the first dollar. Even worse, the employer has to match the tax. This means that employers pay far more than salary for each worker. Small business owners, sole proprietors and entrepreneurs have to pay both sides. Yet, once an salary has exceeded $97,500, the tax (both sides) disappears, giving workers and businesses a sudden boost. These Federal taxes include the Social Security Tax (6.2% from each person, and 6.2% from each business) and Medicare tax (1.45% each).
The way the system is set up creates distortions. It makes people hire workers off the books. It encourages the hiring of illegal immigrants. It hurts growing businesses and low-income workers and nonprofits, who have to pay far more than the minimum wage, once the tax is added in. If we could eliminate these taxes on the lowest-income workers (up to $25,000 in income) and take the income cap off, I believe we could free up a lot of capital that could go to paying off personal debt and funding health insurance. It would spur growth and hiring and reduce the incentive to hire undocumented workers. It would be a very creative way to increase taxes on the highest earners, while ensuring that Social Security and Medicare would remain solvent as the Baby Boomers enter retirement.
I hope that someone who reads this will help spread the word about this idea. Is anyone reading this and agreeing with my idea? Anyone?
His March 9, 2008 column took the form of a letter to John McCain telling McCain what to do with taxes, if he became president.
http://www.nytimes.com/2008/03/09/business/09every.html?ex=1362805200&en=422ee5508ead7bc0&ei=5124&partner=permalink&exprod=permalink
Basically, Ben took the time to explain why we have a huge deficit and how to fix it. We're spending enormous amounts of money on entitlements, defense and other government-run programs. He went on to say that our nation can't afford to continue to run up deficits by keeping taxes so low. He says we need to tax the people most likely to be able to give up some of their income -- the top earners. He makes a pretty good rebuttal to the editorials in the Wall Street Journal which take the opposite point of view.
But the whole thing got me thinking about taxes. The most punitive, regressive taxes we have are payroll taxes. I mean, even teenagers in part-time or summer jobs or the poorest landscape workers or check-out clerks at Wal-Mart have to pay payroll taxes. They may not make enough to pay income taxes, but payroll taxes are withheld from everyone from the first dollar. Even worse, the employer has to match the tax. This means that employers pay far more than salary for each worker. Small business owners, sole proprietors and entrepreneurs have to pay both sides. Yet, once an salary has exceeded $97,500, the tax (both sides) disappears, giving workers and businesses a sudden boost. These Federal taxes include the Social Security Tax (6.2% from each person, and 6.2% from each business) and Medicare tax (1.45% each).
The way the system is set up creates distortions. It makes people hire workers off the books. It encourages the hiring of illegal immigrants. It hurts growing businesses and low-income workers and nonprofits, who have to pay far more than the minimum wage, once the tax is added in. If we could eliminate these taxes on the lowest-income workers (up to $25,000 in income) and take the income cap off, I believe we could free up a lot of capital that could go to paying off personal debt and funding health insurance. It would spur growth and hiring and reduce the incentive to hire undocumented workers. It would be a very creative way to increase taxes on the highest earners, while ensuring that Social Security and Medicare would remain solvent as the Baby Boomers enter retirement.
I hope that someone who reads this will help spread the word about this idea. Is anyone reading this and agreeing with my idea? Anyone?
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