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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Tuesday, November 30, 2004
Emotion Key to Acquisitions of Small Businesses
The Wall Street Journal recently issued a special section on small business. An article by Li Yuan (requires subscription) caught my eye, on the critical difference between buying a small business and buying a larger business.

The article profiles Pete Pike, who started a nursery business in his 20's and has worked at it for almost 50 years. The article points out that trust and personal chemistry play key roles in any sale or acquisition of a small business:

In some ways, the acquisition was like any company buying another. But when it comes to the purchase of a small business, the stuff that's important is often on a whole different plane.

Roark, for its part, needed to know the Pikes' business inside and out to be sure it had the brand reputation and customers to meet Roark's goals for growth, as well as the leadership to get it there. The Pikes wanted to be sure that Roark shared their business philosophy, that its other investments were sound, and that the family would still run the business.

"When you think of businesses being bought and sold, you think of lawyers and investment bankers, the highest price wins, and it's all very cold and canonical," says Neal Aronson, founder and managing partner of Roark. "In small family companies, all those conventional approaches many times go out the window. It's much more about really spending time, getting to know people, really building trust and rapport and a real relationship."
I used to work in a large corporation seeking out businesses to acquire. Many of those businesses were entrepreneurial companies that had been started and nurtured by the business owner. A high percentage of deals we evaluated never went through.

Convincing an entrepreneur to sell his or her "baby" was a huge emotional hurdle. They had been sustained for so long by the drive of achieving their dream, that in order to convince them to sell you had to paint a picture for them of a new dream. And they had to be comfortable with that new dream. It's not an easy thing for an entrepreneur who has devoted his every working hour to a business to up and turn around and walk away without looking back.
Sunday, November 28, 2004
PowerBlog Review: Patent Pending

Editor's note: Can it possibly be the forty-first in our regular weekly series of PowerBlog Reviews of business weblogs? Yes, it is!

This week's PowerBlog Review is about the blog Patent Pending.

Or, as the full title describes the site, "Patent Pending - Inventions and Technology Updates For Fans of Inventions and Technology, Startup Companies and Entrepreneurs."

The Patent Pending blog is the brainchild of Robert Shaver, an attorney from Boise, Idaho, USA who enjoys technology.

Patent law blogs are nothing new -- there are dozens already. But Patent Pending is different. It is so interesting.

Robert says he didn't set out to write a typical "blawg" or law blog. Mostly those are read by lawyers and as he says, patent law is "a boring subject even for me."

Instead, he wanted to write about things that were of interest to non-attorneys -- things that inventors or other people interested in inventions and technology would want to read.

Robert has always liked to read facts about inventions, such as the items that trivia columnist L.M. Boyd used to write. He thought that if he liked it, so might others. So he decided to write about what interested him, using L.M. Boyd for inspiration. He says he looks for "...information that is readable, interesting, and something that the average person would have a hard time finding. Patents are good for that, because there are 6 million of them to choose from."

What you will find at Patent Pending is not typical blog fare. For one thing, it is mostly original content. For another, it is often about events that were news a long time ago, instead of something that happened yesterday or last week. Yet somehow it all seems fresh and relevant. History, technology, inventions, historical patents and trademarks are all covered -- often with a sense of intelligent humor and wit.

Thomas Edison Ticker Some of the historical patent posts are absorbing -- even when they're about subjects you'd think would be a snooze. Take for instance, the plow. There is a great post on the history of the plow, replete with diagrams of a John Deere patent for a plow. Boring it sounds, but boring it is not. A lot of interest is added by the different patent diagrams and images Robert inserts in the post.

The way Robert approaches his subject matter heightens the interest. One of the techniques he uses adeptly is to tell a story using background information about inventors. One of my favorite posts is about Thomas Edison's invention of the ticker tape. The post illustrates Edison's capabilities as a negotiator, and how he received over ten times the amount for the invention than he expected -- all by knowing when to ask a question rather than answering one. While the post is ostensibly about the ticker tape, it is really a vignette about Thomas Edison the entrepreneur.

In addition to all the invention and technology topics, Patent Pending also gives practical tips about patents for inventors. For instance, did you think getting a patent was expensive? Well, perhaps it's not as expensive as you think, as this post, Patenting Basics, Q & A, points out.

The Power: The Power of Patent Pending is in the content that is full of trivia, but hardly trivial. And it is also in the way the blog tells stories, covers unusual topics, and uses images and diagrams to make for fascinating -- even addicting -- reading out of what would otherwise be dry subject matter.

Why the U.S. Presidential Election Doesn't Matter
Andy BirolRecently we had the opportunity to interview small business expert, Andy Birol, www.andybirol.com.

Andy is the author of "Focus. Accomplish. Grow... the Business Owner's Guide to Growth." He is also a noted small business coach, consultant and speaker who has been interviewed on CNN, Wall Street Journal, The New York Times, Entrepreneur, and Fortune Small Business.

Andy is a colorful guy who doesn't hold back. His incisive, get-to-the-point remarks make for interesting reading. He talked about the U.S. Presidential election and why the election really doesn't matter much for small business.


Small Business Trends: What did you think of this last U.S. Presidential election for small business?

Andy Birol:
It was bitter sweet.

Whoever was going to win, I knew there would be a lack of impact for the small business market. Although President Bush is said to be a bit more small business friendly, the reality is: small business has no friends and few advocates.

There is only one unifying issue in this country for small business owners: health care. Beyond health care there is no unity of interest among small businesses.

Small business is really "Everyman."

Take the steel tariff a couple of years ago. That helped one set of businesses and at the same time it hurt others. Their interests were not all the same, and so it didn't affect all businesses the same. The issues were more complex.

Have you ever heard the Paul Simon song "One man's ceiling is another man's floor"? For every action in favor of one small business, it means something against another small business.

Small Business Trends: Would it have made much difference if small business owners had gotten involved in politics and lobbied?

Andy Birol:
I'm not sure that spending time and effort on the elections would have done small business owners much good -- unless they happened to be printing companies with a contract to print bumper stickers or ballots.

This election dumbed us down. All the issues are so much richer and more complicated than the way they were presented.

The trial lawyer issue is a great example. On the one hand everyone would agree that in the case of the woman who burned herself sipping hot McDonald's coffee, trial lawyers took advantage of that. But without trial lawyers we would not have gotten padded dashboards, seatbelts or airbags nearly as fast as we did.

A small business owner can't afford to unilaterally add safety items. Small businesses can only do so after the industry has adopted these and prices reflect them. And it took the trial lawyers to force big business to implement these safety features first.

Small Business Trends: You said "small business has no friends and few advocates." What about small business advocacy associations, such as the National Federation of Independent Businesses (NFIB)?

Andy Birol:
Many associations just create co-dependence.

The entrepreneur is a hunter gatherer. Entrepreneurs don't make money when they're together. They make money when they are out in the marketplace.

I have a little saying. "Business owners should get their lovin' at home."

Associations can't be effective lobbying for legislation because there is little legislation that impacts small businesses the same across industries.

Big companies can lobby for laws or special consideration, but small biz can't do that. A small business is selling only 1% or less of whatever market they're in.

Workers comp is not a small business issue, it is a business issue. So guess who legislation will be designed for? Big business.

Small Business Trends: Talk to us about outsourcing trends. Do small businesses outsource much?

Andy Birol:
Tons of outsourcing is going on -- tons.

And yet in this election you had all this ranting and raving about bringing jobs back to the U.S. But that's not the way business works today. It was another oversimplified issue.

I am a one person company and I outsource nearly everything. I have at least 20 service providers.

Outsourcing offshore is the only answer for any commodity business. Small manufacturing companies are outsourcing production to China. I advise all my small business clients to move the commodity portions of their business offshore.

Right now I am imploring an accounting firm to consider moving its 1040 personal tax return work -- the type of work done by H&R Block -- overseas. How can a small accounting firm compete against H&R Block's prices? Anyone who tries is suicidal.

Small Business Trends: What one thing does every small business need to do today to be successful?

Andy Birol:
At the end of the day business owners have to move from ambivalence and apprehension, to confidence and conviction. The single biggest destroyer of business is lack of confidence.

I've been working with small business owners my entire professional career. I started out working in Corporate positions and ran a $40 Million unit of New England Business Service, now a division of Deluxe Corporation.

Then I realized I am unemployable and proud of it. So I started my own consulting business.

The lesson I've learned is... you have to walk the talk. I eat my own dog food -- I'm a small business owner and I follow my own convictions. That's why whoever is in office as U.S. President doesn't really matter. Business owners have to find their own confidence and convictions.
Information Technology Spending Trends
In 2004 small and medium businesses (SMBs) spent an average of 6.6% more on information technology than in 2003. In 2005, spending will grow again, but not quite as fast -- 4.8%.

That's according to Forrester Research in a survey of over 1,000 IT decisionmakers. Here is the breakdown between small and medium businesses:

IT Spending by SMBs - Forrester Chart

Forrester Research Chart - click for larger image

So what are SMBs going to be buying? Listen up Cisco, Symantec, Dell and Quicken (and your re-sellers and competitors). Here is what Forrester says:
"Security tops buyers' wish lists, and nearly two-thirds of SMBs will buy new servers and networking equipment this year. Dell dominates mindshare among PC buyers, who on average expect to replace one in four PCs next year. The direct channel will receive the lion's share of PC and other hardware purchases by SMBs, but buyers are split on where they'll turn for hardware support. On the software front, many are in the market for finance and accounting software, and a surprisingly high number will consider hosted apps."
The Forrester report is here (requires free registration to view the summary; full report must be purchased).
Friday, November 26, 2004
Just Say No to Taxpayer Money for Venture Capital
In a previous article, I pointed out Guy Kawasaki's humorously blunt advice about venture capital. I stressed this point: very few companies are good candidates for venture capital funding.

This is precisely why I do not support the continuation of the U.S. Small Business Administration's SBIC program. The SBIC (Small Business Investment Companies) program uses federal money as venture capital.

News reports make it sound like eliminating the program would hurt needy entrepreneurs. But few entrepreneurs qualify for venture money.

Besides, it is not as if the government is giving money away directly to entrepreneurs. The money goes to special venture capital funds to help minimize their investors' risk and give them more money to play with. And their use of that money hasn't exactly had a stellar track record. The program is more than US$1.2 Billion in the hole.

That's $1.2 Billion of taxpayer money lost.

And it's likely the losses will approach US$2 Billion before all is said and done.

The Office of the Inspector General of the SBA issued a report critical of the SBIC program in May 2004. The report concludes that too much risk is being taken on by taxpayers.

There are wiser uses for taxpayer money. More small businesses can qualify for loans than for venture capital -- by far. More good can be done for more small businesses through the SBA's lending programs. Congress and President Bush should continue to fund the SBA loan programs.

However, they should let the SBIC program die a natural death. Government should not be subsidizing the venture capital industry, which is what the SBIC program amounts to. Providing high risk venture capital is for private investors, not taxpayers.

Unfortunately, it looks as if the Omnibus Appropriations bill that was passed this week in the U.S. Congress has given a reprieve to the SBIC program, at least insofar as Congress is concerned. U.S. Senator Olympia Snowe, Chair of the Senate Committee on Small Business and Entrepreneurship, generally has been an excellent advocate for U.S. small business. However, she is off base on this one.
Wednesday, November 24, 2004
Venture Capital: The Illusion of Easy Money
The Art of the StartI am reading Guy Kawasaki's The Art of the Start. For anyone who doesn't know, Guy Kawasaki is a venture capitalist and managing director of Garage Technology Ventures.

This is a snappy book filled with street smarts about startups. It's set up so that it is easy to read a section here and there when you have time.

In one part he offers FAQs about raising capital for startups, with his trademark blunt wit:
Q: If I do not have an IPO or acquisition as my exit strategy, will I ever be able to attract investors? Would investors ever be interested in making their return through profit sharing or a buy-out from the founders of the company in five to ten years?

A: Only if the investor is your mother. If the investors are professional investors, you can forget about raising money without a shot at an IPO or acquisition.
Venture capital is an unattainable illusion for the vast majority of small businesses. Most small businesses will never be initial public offering (IPO) material. And entrepreneurs who are so emotionally attached to the business that they cannot stand the thought of selling it should forget about venture capital.

Bottom line: Guy describes key reasons that most businesses are not good candidates for venture capital. That, and minor little points such as:
(a) most companies don't have a high growth business model with a potential market size of US$ 500 Million, and

(b) most can't show the VC that he or she will get a 10x return on their money in 5 years.
The vast majority of small businesses have more modest expectations. Their path to success lies in bootstrapping and small business loans at the right time. As Barry Moltz pointed out here on Small Business Trends, what's wrong with having a business that's only going to grow to $3 Million?

UPDATE November 29: Andy Birol emailed me a link to his article on venture capital. His advice? Get customers to fund your business, rather than venture capitalists.
Tuesday, November 23, 2004
The Boom in Translation Services
Globalization and foreign trade are driving tremendous growth in translation services in the United States and some of its trading partners. And that spells opportunity for small businesses here and abroad.

For instance, China's translation industry is booming. In 2003 it accounted for over US$1 Billion. It's expected to grow to nearly US$2.5 Billion by 2005, according to sources quoted in this Xinhuanet report:
"Huang Youyi, deputy director-general with the China Foreign Languages Publishing and Distribution Administration, said the 2008 Beijing Olympics and 2010 Shanghai World Expo are golden opportunities for faster growth in China's translation industry.

By 2008, one out of every ten sentences spoken in Beijing is expected to be in a foreign language, a much higher rate than the current situation, Huang said.

The translation industry has witnessed an upsurge in the number of companies, with more than 3,000 currently operating in China. The number may actually be closer to 10,000, as many small companies that are registered as consultant agencies actually conduct translation business."
Foreign trade is what's driving the growth in translation service. And much of it is trade with the United States.

Through the twice-weekly Asian blog roundup over at Simon World, I found a link to this great discussion over at Wangjianshuo's blog about whether English is the lingua franca of business. One point of view in the discussion suggests that English is the main language of commerce because it's the language that buyers use and most buyers are from the United States.

Whether you agree with that perspective or not, reading the discussion drives home the critical role that language plays in commerce today.

It is not just China experiencing a growth in translation services. As we reported here in an earlier post, globalization is driving a boom in translation services in the United States also. And just like in China, many translation services are small businesses.

It sounds like boom times for small translation businesses.
Monday, November 22, 2004
Small Fry Retailers Gain Popularity
BusinessWeek has an insightful article by Amy Tsao about the comeback of smaller specialty retailers.

As it turns out, news of their death at the hands of Wal-Mart was greatly exaggerated:
Wal-Mart's influence over shoppers "has peaked," says Zandl. Maybe consumers need to go to big-box retailers to buy toilet paper, cat food, and such everyday items. But shopping is about more than the necessities. And "more consumers today are looking for products and experiences that are more unique, more stylish, and more sensory than what Wal-Mart delivers." The retail giant did not return calls for comment.
We could have told them. It's about "the experience, stupid." We've written about that here on Small Business Trends many times.

When buying necessities, consumers go for price. After all, how much pleasure can you get out of buying paper towels and laundry detergent?

But when it comes to other items, consumers want shopping to be an experience. They want the pleasurable sensory experience, fabulous selection and great service that comes from shopping at niche retailers. You can get low low prices at Wal-Mart, but it's not exactly big on atmosphere.

Another growing trend in retail is that of shopping online. Sales via the Internet are expected to grow 19% this holiday season, to US$21.6 Billion.

That may seem to go against the grain of the "experience shoppers." But not really, when you think about it. Good Internet sites tend to offer a much larger selection. And the convenience of shopping from your PC without having to fight the crowds sounds downright inviting.
Sunday, November 21, 2004
PowerBlog Review: Ripples

Editor's note: Welcome to the fortieth in our regular weekly series of PowerBlog Reviews of business weblogs.

We're very pleased that this week's PowerBlog Review is being guest-blogged by Wayne Hurlbert. Wayne Hurlbert is an expert on business blogging who edits the popular Blog Business World blog. He is also a writer who publishes online marketing articles. Wayne happens to be a huge fan of roller derby and exhibits his passion for the sport on his popular site Wayne's Derby World....

By Wayne Hurlbert

Business blogs and personal journals are two entirely different breeds of blogs, and never the twain shall meet. Right?

Well not always, as David St. Lawrence of Ripples is not your typical business blogger or personal journalist. He is both.

Blending business knowledge, gleaned from many years in a fast-paced high tech business career, with down home wisdom collected from a lifetime of studying people and nature, David St. Lawrence has a foot planted firmly in both worlds.

David's beautifully designed Ripples blog clearly illustrates that interconnectedness of all things.

There is no compartmentalizing of business on the one hand, and personal thought and contemplation on the other, in the Ripples world. Both are part of the same yin and yang of life, and richly described and shared with readers, from all walks and stages of life.

By interspersing a photograph-enhanced post on watching the deer grazing on the lawn of his rural Virginia home, with a discussion series on bootstrapping a small micro business, David has learned what is truly important in life. The sense of balance displayed in Ripples, so richly and generously shared with readers, is part and parcel with David's philosophy of business and life.

To David St. Lawrence, a successful business person is also a well rounded person, who takes time out to replenish the soul's energy through friends, family, and the beauty of nature. By taking time to see the wonders of life and the world, a business person is able to find the strength of character and wisdom necessary, to operate a successful company or maintain a rewarding career.

After all, David has learned those valuable lessons through some bitterly painful life lessons. He shares the joy and sad times of his eventful life freely on Ripples, in a business blog that truly is a conversation with his readers.

The Power: Ripples is a business blog that creates a lasting personal connection with its readers. The visitor is drawn back to the blog through the intensely rich conversation started and continued by David St. Lawrence.

A business blog should always be a vehicle of communication between blogger and the public. By combining freely given and unvarnished business advice from the real world, with intensely personal life experience, Ripples combines the best of both blogging worlds into one fully integrated whole.

Saturday, November 20, 2004
Does the Weak Dollar Help US Small Businesses?
As these things tend to happen, you're just cruising along. And then one day it seems like everyone is talking about a new trend. That trend is the "weak dollar."

The weak dollar can be good news, bad news or no news for U.S. small businesses. It all depends on whether the small business is buying or selling, what it is buying or selling, and where.

The significance of the weak dollar trend was driven home to me the other day. I logged on to eBay to do some Holiday shopping and found a fine antique from a dealer in Great Britain. I thought it might make a good gift for my husband. I looked at the price (in British pounds) and then looked at what I would have to pay in US dollars before converting to pounds. I decided to pass. With the conversion rate favoring pounds Sterling, it just didn't seem like a good value.

So that's what a weak dollar means, if you happen to be an American small business. If you are buying something from another country -- if you import -- then your dollar will not go as far. Offshore purchases will be more expensive to your business.

On the other hand, if you are a U.S. company selling to buyers outside the U.S. -- if you export -- then it is usually good for you. The traditional wisdom is that a weak dollar makes American exports more competitive on world markets. Here's a simple example: suppose my company sells widgets to buyers in Italy. If Italian buyers had to pay 100 euros last year for my widgets, but now pay only 92 euros to meet my price once converted to dollars, Italians are going to find my widgets a good deal. Especially if similar widgets produced by a local Italian company still cost them 100 euros.

Now let's consider a third scenario, the case of a U.S. company buying from U.S. suppliers. There the weak dollar probably doesn't make any immediate difference. The buyer's dollar is worth the same as the seller's dollar. At least, that is the way it looks on the surface.

What I have just described to you are the traditional views. But today in an era of globalization, the issues are more complex.

One twist is that there can be hidden currency costs. Say, for instance, the item you are buying from a U.S. distributor was manufactured outside the United States. Or let's say the raw materials had to be imported somewhere along the supply chain. The prices of goods you buy here in the U.S. from another U.S. seller may have been ratcheted up to cover these hidden currency costs. Those price increases eventually will be passed along to consumers.

Here's another twist: Even if you are exporting, local suppliers in other countries may be reducing their costs to stay competitive. So, in my example above selling widgets in Italy, if the Italian sellers reduce costs and can now sell their goods for 90 euros, they can undercut my price. My small business's products no longer have a price advantage.

And yet another twist: the dollar is weaker against certain currencies than others. I haven't done an exhaustive study on this point, but it appears that the dollar is weakest against the euro and the British pound. But the Chinese Yuan, for instance, is pegged to stay close to the dollar's value. So if you are a US small business having your plastic widgets manufactured in China for sale in the US to Wal-Mart, the "weak" dollar may not make much difference to you. Lou Dobbs will still hate you, but that's another matter....

I could name a dozen different scenarios that make the weak dollar good for one small business or bad for another. One thing, though, is clear. In this increasingly global world of commerce, no country is an island. And no business operates on a single island. The traditional wisdom about currency valuations and who it helps and who it hurts is not such a cut-and-dried proposition anymore.

That's why US policymakers will need to take stock of the whole fabric of the U.S. economy if one special interest group or another starts lobbying for action. Recall the short-lived steel tariff of a few years ago. Under pressure from the steel industry, the U.S. passed a tariff on imported steel, only to find out that the tariff hurt other segments of the U.S. economy -- particularly small manufacturers that used steel.

It's also important to remember that a weak dollar is all about whose ox is getting gored. If you are a businessman sitting in France, you are probably apoplectic about the weak dollar. And if you are looking at the issues from a macro-level, of country deficits and trade balances, then other considerations may be paramount.

But back to the subject at hand. Does the weak dollar help American small businesses? The answer is, it all depends.

UPDATE November 23: For more on the weak dollar, Laurel Delaney points us to this article.
Friday, November 19, 2004
Backyard Wineries and Garagistes
You've heard of garage bands. You've also heard of the high tech companies started by "two guys in a garage."

Well now there are garage wineries. These are small businesses making wine from their homes, without the expensive vineyards.

An article in the San Francisco Chronicle highlights this trend:
When Mark Herold and his wife Erika Gottl climb out of bed in the morning, they carry their coffee cups from the kitchen of their modest wood- frame house on a working-class residential street near downtown Napa to a bonded winery -- their garage.

To a casual observer, that tin-roof structure seems suited to shelter a couple of dusty pickup trucks, maybe a lawnmower. To Herold and Gottl, it's the home of Merus Wines, where they produce less than 500 cases a year of one of the most sumptuous, coveted Cabernet Sauvignons in the country. Wine critic Robert M. Parker Jr. tasted it a few years back and fell madly in love. ***

Garagistes share a passion in their approach to winemaking that often trumps profit. Marketing and sales usually take the form of a basic Web site, a mailing list, local restaurants and possibly a few small distributors. Gottl parcels out Merus three bottles at a time to devoted customers willing to pay $105 a bottle. But most garagiste efforts retail between $20 and $50.
I can see it now -- all the business opportunities popping up around the Garagistes. Selling Garagiste wine could become an interesting niche for wine retailers. It also could make a fun theme for wine-tasting fundraising parties. And, of course, then there'd be a need for an online directory of all the Garagistes so that winemaking supply companies can market to them. The list goes on....

[Hat tip for the link: Oklahoma Wine News]
Thursday, November 18, 2004
Advisory Boards Becoming More Popular
My article on advisory boards for small businesses is now up over at Small Business Brief. It's entitled "Advisory Boards: Seven Great Reasons to Have One."

Advisory boards are becoming more popular and I predict they will become even more so. It's because of the changing nature of how businesses are set up today.

Many small businesses in the United States are established as sole proprietorships, partnerships or limited liability companies (LLCs). None of these business forms uses a board of directors. That's only for corporations.

For small businesses that want to receive board-like input, advisory boards are the way to get it. My article answers all those questions you always wanted to know about advisory boards, but were afraid to ask. Really.

UPDATE November 20: From the comments section... Anthony Cerminaro over at Bizz Bang Buzz points out his article about advisory boards. It makes excellent follow-on reading. (Isn't it great how blogs become conversations?)
New Communications Forum 2005
The New Communications Forum 2005 is a 2-day intensive workshop to be held in California in January and Paris in February. It is designed to educate public relations and marketing communications people about new communications tools such as blogs and RSS feeds.

I have been invited to speak as a panelist...more details to come. In the meantime, please visit the site and check it out.
Holiday Plans Suggest Good Economic Times
It looks like small businesses in the U.S. think things are going well for them -- well enough to do a little more for their employees this holiday season:
"Small-business employees should find more to celebrate this holiday season, according to the 2004 Small Business Monitor by OPEN from American Express. The survey found that more business owners are planning to celebrate the holiday season with their employees this year (82% vs. 78% in 2003). Among these business owners, 53% say they plan to hold a holiday party; 51% report plans to give year-end bonuses and 47% plan to give time off to employees."
American Express's OPEN also offers suggestions for employee holiday gift-giving in this press release.
Tuesday, November 16, 2004
Getting Rich Offering What Nobody Needs
Today's entrepreneurs are creating successful new businesses offering things that no one really needs. Entertainment, lifestyle and discretionary services businesses frequently are the domain of today's entrepreneurs.

Consider this story in today's Wall Street Journal (requires subscription):
"The movie 'Coyote Ugly' might have faded from memory soon after its August 2000 debut. Most people who saw the Walt Disney Co. film about a honky-tonk bar in New York's East Village couldn't believe the raucous place was for real, and the flick got terrible reviews. But then a funny thing happened: The movie became a cult hit, and fans started turning up at the dive bar, hoping to taste the Coyote Ugly experience -- bawdy, bar-stomping waitresses and all.

'What business ever anticipates getting $40 million in free national and international advertising?' says owner Liliana Lovell, who figured she had a hit on her hands. 'We decided to take advantage of it.'

Four years and 13 bars later, the woman who quit a Wall Street job at age 24 to open a dive bar is a millionaire."
What's more, she's licensed the Coyote Ugly brand to entrepreneurs around the country. Even that stalwart of Middle America -- the Mall of America -- has asked for its own Coyote Ugly. Gross sales last year exceeded $20 Million.

How different the entrepreneurial success stories of the new millennium are from those of early last century. In the early part of the 20th century the titans of industry were making their names and fortunes in just that -- industry. Railroads, automobiles, tires, mining, shipping, steel -- that was their domain. They made their fortunes on the critical building blocks of an industrial economy.

Today in the United States and other developed nations, it's more likely that budding business owners will be involved in services businesses. Those services are often discretionary and not strictly "necessary." (Come on, does society really need a chain of dive bars? No, but we sure want them.)

Services now account for two-thirds of GDP in the United States. Yet as this Forbes article indicates, we are still better at measuring traditional industry based on goods. We do a relatively poor job capturing economic information about services.

Recently I heard a talk by David Brennan, a very successful entrepreneur who in later life has championed the charter school movement. He spoke about small businesses and entrepreneurs saying this: "It never ceases to amaze me what creative livelihoods entrepreneurs make for themselves."
Monday, November 15, 2004
Small Business Economy 2004 - Home Based Businesses
Several readers sent me links to the new report issued by the U.S. Small Business Administration's Office of Advocacy: The Small Business Economy 2004. [Thank you Doug the Infoman, Steve, and Marge.]

Some of the other blogs have addressed it, too -- including Kirsten at reinvention and Jeff Cornwall at The Entrepreneurial Mind.

As Kirsten points out, the report supports that home-based businesses are a significant trend in the U.S.

Home-based businesses make up 53% of the small business population in the United States. They serve as incubators for growing businesses.

And what lower-risk way could there be to bootstrap a new business? Starting a business from home keeps overhead and startup costs low.

Yet, many segments of our society have a poor perception of home-based businesses.

As Jeff points out, some people "try to dismiss self-employment by ignoring its impact on overall employment and trying to cast it as some form of economic desperation. Rather, it is American self-reliance at its best."

Then, as I wrote here last month in the comments section, there is the bad rap that home businesses have gotten. In some circles "home-based business" is synonymous with shady get-rich-quick schemes. I've told the story about trying to send out an email newsletter referring to home-based businesses. My email newsletter program has a spam filtering test that helps me assess in advance whether the newsletter will get through. However much I tried, I could not get that article about home-based businesses to pass the spam test. In the end I gave up and removed the article from the newsletter.

Part of the perception issues can be traced to the lack of reliable information. More data is needed about home-based businesses.

Home-based businesses are tough to measure because they are under the radar screen of so many of the usual business measurements (incorporations, rental space, employees). Information about them tends to be fragmented and scattered around. And few organizations have had the incentive to collect information about the self-employed and home-based business owner.
Sunday, November 14, 2004
PowerBlog Review: Upgrade Your Mind

Editor's note: We continue our regular weekly series of PowerBlog Reviews of other weblogs with this, the thirty-ninth Review ...

Walk into the average bookstore today and you will find shelf after shelf of motivational books. Motivational publications and aids make up a thriving market in the United States and many other countries.

And now they've arrived in the blogging world, too. One example is the Upgrade Your Mind success motivation blog.

Upgrade Your MindUpgrade Your Mind aims to start you on a journey of success. Thomas Pierce is the leader of that journey. Thomas blogs from Accokeek, Maryland USA, which is located about 30 minutes outside of Washington D.C.

As a motivational blog it contains --what else -- uplifting posts. Some posts discuss extracts of motivational books. Recently the discussion has centered around a book called "The Power of Focus" by Jack Canfield.

Thomas believes that "you are one thought away from change ... one idea away from breakthrough." He sees his role as that of encourager. He encourages people to go after their goals and dreams, one step at a time.

I asked Thomas about why he started to blog. This is what he had to say:

"Reaction to my 'type' of blog has been interesting since it seems most people like to be able to quickly classify the type of blog they are reading. Apparently mine isn't quite 'personal' and not quite 'commercial' in the eyes of most although they find my content useful.

I consider it a business blog really because my product and service is 'success motivation' and 'accelerated learning.' My blog is helping me build content, communication and contacts with others that will allow me to promote relevant products for my market and will also aid in the launch of a learning-on-demand website for an eLearning company I'm working on."
Improve Your Mind is just one of several small business blogs that I have run into recently where the blog was set up before the business was launched. The blog is used for gathering market research, cultivating prospective customers, and generating market demand. And, in this case, the blog is also being used to showcase the owner's capabilities and talents.

Even in pre-launch stage, Thomas reports that his blog is a good source of speaking engagements.

More important, perhaps, is the positive feedback he has received about the impact of his blog on others' lives. This testimonial is one of them: "You have no idea how much I needed this post tonight. Thanks to BlogExplosion and your blog, I finally found something useful."

One of the features about this blog that I love is the logo design. It shows a head with an "open mind." What better image could you have for a media property about motivational and success themes?

The Power: The Power of the Upgrade Your Mind blog is in the way it offers a perfect medium to carry on an uplifting, motivational conversation with customers and prospective customers. It should be a worthy complement to an e-Learning business when that business is eventually launched.
Saturday, November 13, 2004
IT Education Trends
When it comes to information technology training in the U.S., smaller and nontraditional education institutions are gaining at the expense of traditional colleges and universities. Non-U.S. institutions are also gaining.

This week I attended an event where I heard a keynote speech by Harris Miller, President of the Information Technology Association of America. He offered telling information about shifting roles:
  • Community colleges are growing their market share. They are becoming more creative in partnering with business and provide practical training at lower cost. Apparently 2-year associate degrees in IT are a growing trend.

  • Proprietary training schools such as DeVry and online universities such as the University of Phoenix now focus on IT training. They continue to grow.

  • Traditional 4-year and graduate colleges and universities in the United States have seen a drop in IT program enrollment. The root causes: a precipitous drop in foreign student enrollment and growing market share by the upstarts and smaller institutions.

  • Big winners are traditional colleges and universities in India and China. These countries are investing in their workforce education. Their schools are perceived as being as good as or better than U.S. institutions. Homeland security concerns, too, make it harder for foreign students to get U.S. visas.
Michael Standaert over at the Online Universities Weblog has some startling statistics. Check out the declines in enrollment in U.S. graduate schools.
Friday, November 12, 2004
Retail Trends: The Eyes Have It
Editor's note: we are pleased to present another article by expert guest blogger, John Wyckoff. He explains how big food retailers have figured out what small businesses need to know about retail.

By John Wyckoff

Big chain food stores have done a tremendous amount of research on how people shop.

Today in these huge food stores, marketing is primarily transactional. That means there is a minimum amount of personal communication between the customer and the store's staff.

Location, lighting, and packaging take the place of person-to-person interaction. These big box retailers need to know how customers shop because they aren't particularly interested in having salespeople on the floor. Salespeople cost more than clerks.

How do they entice customers to spend money? Easy. They put the milk in the back of the store forcing the shopper to wend his/her way through all manner of enticing goodies before getting to the milk, which is why he/she came to the store in the first place. But that's just the beginning.

Here are some other things their research has told them: The vast majority of people entering any retail store look left and turn right. The grocery store puts the bakery on the right. Why? It smells good. Smell is purely emotional, not intellectual. Once past the bakery the shopper comes upon the fresh fruit and vegetable section. This area has mirrors, water, bright colored fruits and veggies. By now the customer is salivating and ready to go up and down the isles on a shopping spree.

Another thing learned by these same retailers is that women look down not up. And men look up not down. I've been told these actions are a result of our ancestors. Back in the dawn of human time, men hunted food in the trees while women tended the children and food growing on the ground.

How do the grocery stores use this information? They and their suppliers know that food products placed on a shelf about three to four feet above the floor have the greatest sale potential. They also know that few women buy exotic high-priced foods but men do. That knowledge leads them to put these things high on the shelf. It works.

Shoppers enter the store, look left and turn right. Men look up, women down. It seems simple enough but it's also one of marketing's best-kept secrets -- until now.

Can other non-grocery stores benefit from these unique human foibles? Sure. It works in any retail environment where the customer can ply the aisles. The product lines could include books, hardware, clothes, recreational products. It works for just about anything that is displayed on shelves in a self-service environment.

Blogger's Growing Pains
Ten days ago I posted a note about difficulties with Blogger (the software used for this site). Those difficulties persist. This site has been very slow to load and yesterday I was not able to post at all.

I have written to Blogger Support many times. Here is their latest response:
"Thanks for writing in. Please be assured that we are currently working on addressing and fixing the issue that causes this problem with latency within the application. I apologize for any inconvenience it may have caused."
In nontech speak, "latency" roughly means it is taking a long time to access a software application or database. Given the size and scale of Blogger and the many sites that use it, migrating servers and recoding software applications to fix this issue is no small matter, I'm certain.

Blogger obviously is having growing pains. Most small business that grow up encounter growing pains at some point. As another business owner I can appreciate the dilemma. As a customer I can only be frustrated.

Thank you for your patience, readers.
Wednesday, November 10, 2004
Coming Growth Strategy: Exporting
CNBC economic commentator Lawrence Kudlow now has a blog. He predicts that the U.S. will be exporting more over the next decade:
"As for the trade deficit, the U.S. grows faster than its biggest customers. So we import more than we export. However, exports are rising at a 13 percent pace; a great sign of economic health. Imports are rising even more by 17 percent. We are selling goods and services to China at a 37 percent rate. But the volumes are too small to dent the trade gap. This will change over the next decade."
Laurel Delaney of GlobeTrade.com would like for a large chunk of those exports to be by U.S. small businesses.

She's just published a ChangeThis manifesto about small businesses going global. The manifesto refers to our earlier interview of Laurel on the subject of globalization.
Tuesday, November 09, 2004
Tax Shelters Cause Concern
If you were a landlord of commercial property and a buyer offered a price greater than the market value of your property, would you be elated?

Who wouldn't? But part of you also might be worried.

A tax shelter trend is gaining ground around the United States. It's called "1031 exchange buyers."

The buyers purchase commercial real estate as a group of tenant-in-common investors. As this article in Crain's Cleveland (subscription required) points out, these investment groups consist of investors who:
"[band together] with other investors to buy other properties in order to shelter their proceeds from capital gains taxes. The exchanges take their name from the section of the federal tax code that allows them."
Because they are sheltering tax gains, these investors are tempted to overpay compared to other buyers who do not have capital gains to shelter.

The danger is this can inflate the real estate market.

Short term I don't suppose we will hear many sellers complaining.

However, real estate investors and successful small business owners with capital gains they'd like to shelter might want to remember history.

Back in the late 1980's I worked in banking. It was quite common to see small business people with real estate investment portfolios that made no sense except for tax shelters.

Then the U.S. tax laws changed. The shelters were eliminated. Those real estate portfolios went up in smoke faster than a crack head's stash.

Suddenly an inflated real estate market became a deflated market -- in a matter of months. The only thing that grew was the bank's real estate owned (REO) portfolio following foreclosure.

As one commercial landlord in the article above says: "he considers the tenant-in-common buyers 'a disaster waiting to happen,' and likens the phenomenon to the real estate syndications of the 1980s that were driven by tax-shelter considerations. Those deals went bad after Congress in 1986 reduced tax benefits for real estate."

For buyers and sellers of commercial real estate, this is a troubling trend.
Monday, November 08, 2004
Blogging by the Capitalists
Here at Small Business Trends we participate in a weekly business event that travels from blog to blog, called Carnival of the Capitalists. Carnival of the Capitalists showcases business articles from a variety of excellent blogs. It's a great way for you, the reader, to discover new blogs and to read great articles by some of the blogosphere's finest minds.

And, what's more, it's becoming extremely popular. Be sure to visit this week's Carnival of the Capitalists over at INCITE. Beck has done a nice job presenting a rather large Carnival, with about 40 entries.

Next week, Carnival will be over at Trader Mike.

If you would like to submit an article or become a host, visit the Carnival home page.
Sunday, November 07, 2004
PowerBlog Review: ReachCustomersOnline.com

Editor's note: Welcome to the thirty-eighth in our regular weekly series of PowerBlog Reviews of business weblogs.

This week's PowerBlog Review is about the blog ReachCustomersOnline.com.

The title describes the site as "an online magazine that offers free how-to internet knowledge for budget-minded businesses and the designers, programmers, and others who support them."

The power behind the scenes at ReachCustomersOnline.com is Tim Slavin, who along with his wife is a business writer and owner of Red House Communications, LLC. Tim blogs from Wilton, Connecticut, USA.

Tim says he started the site to help business people figure out no-cost and
low-cost ways to integrate the internet into their businesses. He says:

"When I publish anything, I have in mind 4-5 people I know first hand who are bright accomplished business people and yet they find the internet too expensive, too complex, and too difficult a place to find information.

However, they understand the power, for example, of sending emails to their customers who walk into their stores, restaurants, and offices. They just don't know how to harness that power. And they do not want to be ripped off. They want to start with a Hyundai or KIA solution then graduate to a Honda and beyond if they can justify the cost based on positive impact on their business."
ReachCustomersOnline.com is an interesting example of a hybrid site. Partly it is a blog and partly it is an online magazine.

On the one hand there are some typical blog features: a home page with shorter blog posts, arranged in chronological order with the most recent posts appearing at the top of the page.

But you will also find considerably more content than fits into the narrow confines of a weblog format. As Tim points out about the hybrid format:
"Posting items on a blog is simply one more way to convey information. Besides a need for long form content like articles and reviews, my audience also needs quick digestible content that helps them find good tools, services, and best practices."
For instance, longer articles have their own section in the site.

And the articles are extraordinarily detailed how-to's about the Internet. They're also on subjects you aren't likely to find elsewhere. Topics include everything from how to code an HTML email newsletter, to web page layout 101.

ReachCustomersOnline.com also offers a free weekly newsletter, copies of which can be found online, too. The newsletter repurposes content from the blog posts. In other words, the newsletter is yet another format for conveying information.

As Tim points out, blogging tools today are free or almost free; easy to use; and powerful. They enable Tim to reach out to potential customers in many different countries. And, as Tim also points out, the site gives him a sense of community and useful purpose, along with a feeling of "happy chaos" that comes from interacting with his users.

I also want to point out one more feature of the site, and that is the awesome "Resources" section. This section of the site is actually a set of links and mini-reviews of products and services. But it contains resources that you probably haven't ever heard of. One thing I guarantee: once having found this resources section, you will be forever hooked.

Right now everything on the site is free -- Tim strongly believes that users should always have substantial free content. In the future, though, he would like to launch a paid newsletter service, to provide even more useful content to users.

The Power: The Power of ReachCustomersOnline.com is in the way it stretches the boundaries of the blog format. This is a site in which a blog, a newsletter, and a website all converge into one coordinated way of reaching people with information. The Power is also in the phenomenal niche topic articles and resources assembled on the site.
Saturday, November 06, 2004
Entrepreneurship, Rural America, and Elections
When you hear the word "entrepreneur" in the U.S., do you immediately think of someone working in a cramped office suite in Silicon Valley or Boston or Seattle?

If you do, you may be overlooking the vast majority of entrepreneurial ventures in the United States.

Entrepreneurship is more prevalent in rural America, compared with urban areas. One-fifth of the U.S. workforce in rural areas and small towns is self-employed. Entrepreneurship is a key part of the fabric of rural life in this country. In cities a much smaller percentage of the overall workforce is self-employed.

This finding comes from the Main Street Economist, a publication of the Kansas City Federal Reserve Bank. The following map from the same publication shows the distribution of entrepreneurs as a percent of the workforce across the United States:

US entrepreneurship as percentage of workforce

This map would be interesting enough by itself. However, reading it reminded me of another map that's been featured in the news this past week.

The following USA Today map shows the distribution of votes for President George Bush (red) versus votes for Senator John Kerry (blue) county by county in the 2004 U.S. Presidential election.

2004 US Presidential Vote by county
County Map of 2004 U.S. Presidential Election

The two maps are not exactly the same, of course. But there appear to be more similarities than differences.

Hint: when looking at both maps, compare the red areas. Red generally equates to rural areas, higher share of entrepreneurial ventures in the workforce, and a majority voting Republican for President Bush.

Do you see a connection? I do. Rural America has a certain blend of economic and personal self-sustainability to which the Republican message appeals particularly. That's my explanation. Leave a comment below and let us know what you think.

[Hat tip to Don Iannone at Economic Development Futures for the link to the Main Street Economist.]

UPDATE NOVEMBER 12: I've substituted an updated version of USAToday's red/blue county map to reflecting more complete vote tallies.
Friday, November 05, 2004
Is the U.S. Losing its Innovation Leadership?
Fast Company magazine's November 2004 feature article is about the "top 101 ideas, people and trends for 2005."

In typical Fast Company fashion, at least half of the items are what I would consider short-lived fads that will come and go -- very fast.

But mixed in here and there are some solid global trends and important products and concepts shaping the future. These we can expect to have lasting impact.

Here's one that I find important to pay attention to:
Number 3: Over There -- and Staying

Once upon a time, the United States nurtured innovation and then exported it to the rest of the world. But American venture capitalists say that more and more technology is being developed abroad and marketed to burgeoning regions, bypassing our own shores completely. Partly it's because the United States lags in crucial areas such as mobile communications. And Asia isn't just a source of cheaper labor for U.S. companies -- it's a huge end market of its own, accounting for 22% of worldwide info-tech consumption. India, especially, is beginning to develop its own entrepreneurial culture. Leading Silicon Valley VCs from firms such as Sequoia and Kleiner Perkins are rushing over to hunt for deals. The risk is that the influx of talent that used to come to America, bringing with it great energy and innovation, will start to stay home.
Go over to Fast Company and read the entire list. You can even enter your vote for number 101. The best idea will be published in the January edition.
Thursday, November 04, 2004
African Entrepreneurs Ascending
Steve Rucinski of Small Business CEO emailed me a link to an article suggesting that African eCommerce may be on the verge of bigger and better things.

A joint marketing agreement between Quadrem and TradeWorld holds promise of growing the revenues of South Africa's 75,000 small and midsize enterprises (SMEs). The venture creates the largest eMarketplace in Africa. It will bring together buyers and sellers, especially buyers that are requesting more quotes from black-empowered SMEs.

And as this article points out, all it takes is some energetic entrepreneurs to build up Africa in much the same way America was built by entrepreneurs.
Wednesday, November 03, 2004
Small Business Owners Would Do it All Over Again

Gallup Wells Fargo chartSmall business owners in the U.S. are pretty happy with their lot. The overwhelming majority of small business owners (86%) say they would do it all over again if given the choice to own a business. That is according to a recent Gallup/Wells Fargo survey of U.S. small business owners, as noted by the Startup Journal.

Interestingly, 76% say they are better off financially than they would have been if they had worked for another company.

That's a profound comment on the power of entrepreneurship. And it's a powerful statistic -- especially in light of my post from yesterday.

In yesterday's post I commented on an earlier column written in a Wisconsin paper. The columnist there had implied that 17 million small business owners' livelihoods weren't "jobs" and didn't amount to much.

Apparently somebody forgot to mention that to the 76% of small business owners who told Gallup they were better off financially than if they'd had "real" jobs workin' for the Man.

Tuesday, November 02, 2004
Making a Big Fuss About Small Business
Via the Law and Entrepreneurship News, I found a link to this column entitled "What's the Big Fuss About Small Business?".

I note the column here not because I agree with it -- I do not. Emphatically not.

But because it reveals such a non-entrepreneurial thinking process. And it ignores the concept of the business ecosystem that our economy is based upon.

Among the comments I take issue with: calling entrepreneurship part of the "neo-conservative agenda of personal responsibility." As Brian of the Law and Entrepreneurship blog points out with dry wit, apparently the columnist is against personal responsibility.

At another point the columnist talks about how 17 million of the small businesses in the United States are self-employed. He then goes on to conclude that those small businesses provide zero jobs.

Zero jobs? Those 17 million entrepreneurs have employment in their own businesses. Yet the columnist blithely dismisses their self-employed income as if it doesn't matter. Try telling that to the IRS.

But the biggest flaw in the logic is the dismissive suggestion that, aside from selling them some loans and office supplies, small businesses don't much count in the economic picture.

Nothing could be further from reality.

A huge number of corporations consider small businesses to be a coveted market. This includes some of the world's largest multinational corporations. These corporations have divisions that are dedicated to creating products and services specifically for the small business market. Corporations from Cisco and Microsoft, to Verizon and ATT, to ZurichNA and State Farm, to Fortune magazine and GE, to Visa and MasterCard, to Dell and HP, to Fedex and UPS, to Google, Yahoo and eBay. It is small businesses buying products and services that helps create jobs at those corporations.

That doesn't even take into account the multitude of smaller businesses that count other small businesses among their prime customers. Businesses such as landlords, insurance agents, software vendors, attorneys, accountants, ad agencies, newspapers, web designers -- you name it.

The world needs small and large businesses both. The business landscape is an ecosystem, and every size company has its role to play. Small businesses are a crucial part of that business ecosystem, just as they are a crucial part of the economy.
Monday, November 01, 2004
Blogger a Victim of Its Own Success?
An open letter to all Small Business Trends users:

In case you haven't noticed, Blogger (the software used for this site) is incredibly sloooow today, as it was last week. If you are on the site right now, I want to thank you for hanging in there. I know it took you a while to get here.

Biz Stone of Blogger, posted this notice over at the Blogger Status site:
"I don't usually post here at status but I just wanted to drop by and say: Damn, Blogger is slow. We've been growing for years, but our relaunch last May blew the doors off all the numbers we had come to expect. Blogger activity is through the roof every day and increasing. As a team, we're elated, but as an individual user, I feel your pain.

We're fixing it right now. In addition to buying and installing a supernatural amount of brand new machines, and upgrading existing hardware, we're moving away from the last of some third-party solutions that have given us trouble. Blogger will be on an impressively scalable custom Google architecture which translates into much more than just speed. It means improvements, enhancements, and integration.

Thank you for being patient, we know slow sucks. Wires, boxes, machines, and all manner of gadgetry are being installed at this very moment."
So, please bear with me as we get through the planned Blogger upgrades. With a little luck the current situation will be short-lived.

And, by the way, this sounds like good news for Blogger and its parent company, Google, proving that blogs are lasting trends and not flash-in-the-pan fads. It also validates Google's acquisition of Blogger. Or else the folks there are just great spinmeisters.
More news... more trends... more insight...

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