Small business seen emerging from “foxhole”
An improved economic outlook has many small business owners looking to grow now to gain a leg up on their competition.
Nearly half (47 percent) of the owners polled in a recent survey by office equipment maker Brother International Corp said they were willing to spend rather than stockpile cash reserves – an increase of 11 percent over 2010, when they were still facing recessionary pressures.
“They know they can’t stand pat, they can’t stay in the foxhole,” said John Wandishin, vice president of marketing for Brother. “When the clouds start moving and the sun starts coming out, how are they going to be positioned?”
At the same time, small business owners are experiencing stress levels relatively unchanged from a year ago, with more than half indicating their worry is higher than usual, according to the survey, which included 501 interviews.
“There is still uncertainty out there,” said Wandishin, noting troubling headlines about unrest in the Middle East and higher gas prices.
Keeping up with policy changes in Washington appears to be contributing to business owners’ anxiety. Forty percent of respondents said following trends in state and federal policy is more difficult than bringing in new customers, according to the survey, which was conducted in late January by Wakefield Research.
“When they get mixed signals or no signals, that has a negative impact,” Wandishin said.
Is it time for do-gooder to cash out?
TOMS Shoes founder Blake Mycoskie created his Santa Monica, California-based company as a vehicle for giving away shoes to needy children, but should the Texas entrepreneur be looking ahead to selling the company and using the money to pursue other philanthropic goals?
TOMS, an abbreviation of “Tomorrow’s Shoes,” is based on a simple concept: for each pair of shoes sold, a pair is donated. Mycoskie, 33, conceived his “One-for-One” business model on a trip to Argentina, when as a volunteer on a shoe drive, he witnessed how a simple pair of shoes could change a child’s life (read original story here).
“Many of the kids’ feet I saw were really badly cut up and infected and just really gross, for lack of a better word,” said Mycoskie, who also noticed how much trouble the non-profit organization he was helping had in getting the right size shoes for the kids, as they were completely reliant on donations. “It dawned on me that instead of looking at this as a charity thing, which is what they were doing, why not look at it from a business perspective and create a business where you sell a pair of shoes and give a pair.”
In the first year Mycoskie sold 10,000 pairs of his South American-inspired canvas espadrilles, which retail for $45. Conversely that meant he was able to give away the same amount to kids in Argentina. Mycoskie refused to give specific revenue figures, but said it’s easy to extrapolate his overall minimum revenues since his 2006 launch – based on 400,000 giveaways at an average cost of $45 – as roughly $18 million.
THE PITCH
To date, TOMS has been entirely bootstrapped by Mycoskie, who would prefer to keep it that way. He said the orders are still essentially processed as they come in, allowing him to carry little in the way of inventory.
“We get the orders from Nordstrom’s and then we make it and then we ship it to them and then we get paid 30-60 days later,” said Mycoskie, who has benefitted from a long-term relationship with his small Texas bank, which has never balked at extending him the necessary credit. This has allowed him to resist bringing in outside investors that might try to impose a more financially-based corporate focus. “A few times I almost took the investment, but ultimately decided not to because I figured it would potentially hurt the culture.”
Taking outside capital to expand may be a necessity to grow; however, it does not have to mean hurting the inside culture if the source comes from private individuals sharing TOMS core values. Even if the business would just break even, the pool of such potential investors can very likely be large and readily available. Other sources of capital such banks, traditional joint ventures, public offering, and the like, would quickly destroy the vibe of this commendable company.
The only real way out: Entrepreneurship
– Robert C. Wolcott is the founder and executive director of the Kellogg Innovation Network at Northwestern University. Michael J. Lippitz is the senior research fellow at the Center for Research in Technology & Innovation at Kellogg and a consultant to the federal government. Their book, “Grow From Within: Mastering Corporate Entrepreneurship and Innovation” launched in October. The views expressed are their own. –
The news the U.S. economy grew at a 5.6 percent pace in the fourth quarter – the best showing in years – is tempered by the fact it was fueled by government-supported spending and revving of depleted inventories.
How can America again create quality growth? Though growth appears around the corner, many fear it’s based on governments worldwide flooding markets with liquidity and public spending. To address a crisis born partly of excessive private debt, we’re writing public IOUs to the future. But public largess only buys us time. Eventually, the future will come calling.
There is only one attractive way out: creating new value through innovation and entrepreneurship.
The alternatives—higher taxes or monetizing debt through inflation—won’t provide the jobs and productivity that sustain a rising standard of living. In 1798, Thomas Malthus predicted mass starvation and conflagration: “The power of population is indefinitely greater than the power in the earth to produce subsistence for man.” The world proved Malthusians wrong by vastly increasing agricultural and manufacturing productivity through innovation and entrepreneurship.
Many governments seek to enhance innovation through funding research and development or special initiatives. The recently announced U.S. Department of Commerce Office of Innovation and Entrepreneurship aims to help the U.S. connect “the great ideas to the great company builders,” mostly by supporting small business access to capital and technology.
These types of efforts are helpful, but they’re too narrow. Entrepreneurship is about more than the stereotype of mavericks risking it all to become the next Steve Jobs. We need people across all sectors to become entrepreneurial; empowered to define visions for meaningful change and then make them real. We need to nurture entrepreneurial capabilities and actions within large companies, non-profits and even governments, not just startups.
In the 50 years since the creation of the mis-named Small Business Administration, it is arguable that there is less entrepreneurial activity than before the government got involved. Now we get the Office of Innovation and Entrepreneurship? Which is different from the SBA how?
The government is as far from entrepreneurship as any entity possible. The very nature of government is antithetical to it. I don’t want my government in the business of risks, passion, dreams, and impossible odds. Stick to protecting me from all threats foreign and domestic.
Does size really matter to women entrepreneurs?
The results of a new survey show that nearly 90 percent of women business owners want to grow their companies, but few of them see hiring as a way to do it.
Nell Merlino, the founder and president of Count Me In, a not-for-profit organization that includes 70,000 online members, commissioned the report that polled 250 women small business owners and another 700 non-business owners nationwide. Merlino said the survey shines a light on why women-owned businesses don’t grow at a similar rate to those run by men and why broader societal misconceptions are preventing many women from expanding their businesses.
“There is a perception on the part of the public in general that women are in business to bring in a little money, as opposed to women are in business because they are supporting their families and they want to grow a business,” said Merlino, quoting the study’s findings that just 38 percent of Americans believe women entrepreneurs care about making a lot of money, compared to 63 percent who said male entrepreneurs care about the same.
Merlino, whose organization provides support to women business owners, said this is a troubling statistic, since women currently account for about a third of all U.S. small businesses. “You have 8 million women who have businesses and most of them are really small. Are they small because we want them small, or are they small because we’re missing a few steps? I continue to believe it’s because we’re missing a few steps, not because we all woke up and said I want to have a really tiny business and work 24 hours a day and not make any money.”
Merlino, who also started the Make Mine A Million $ Business campaign that helps women convert micro businesses into million-dollar ones, said the biggest impediment to growth is the belief among the majority of women small business owners that being more efficient is the best way to grow revenues. Merlino said this works for big corporations that have huge budgets and thousands of employees, but it doesn’t work for a startup with little or no staff.
Once they’ve successfully launched their business, women should instead be looking to get their hands on some capital so they can hire workers, said Merlino, whose survey showed that a mere 23 percent of women entrepreneurs look to do so.
“Women historically have done a lot of things by themselves – particularly in the household – and I think a lot of women take that learned behavior to their business and it doesn’t work,” said Merlino. “I would argue if women would start to understand the value of hiring we could do it faster and given the need for jobs it would be a great thing if they did.”
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