Tag Archive for 'business start-up'

A business is not a Chia Pet

When I have talked with would-be entrepreneurs who want to start their own business, I often observe more urgency than understanding. I continue to be amazed at how many people disregard the fact that being a business owner is a profession.

If you decided to become a surgeon, would you expect to operate on someone the day after you made that decision? If your bent was toward the ministry, wouldn’t you expect to get appropriate education and training before you would be qualified to shepherd a congregation? Or let’s say you longed to be an automobile mechanic. That desire alone wouldn’t give you the ability to diagnose a mechanical problem and successfully make the repairs, would it?

So what makes anyone think they know how to run a business just because they . . .

. . . have always wanted to?
. . . can’t stand to work for someone else another day?
. . . have this great idea that no one else has ever thought of?

A business is not a Chia Pet. It takes more than adding a little water and waiting a few minutes for green stuff to pop into your life. Successful business ownership is at the least more like growing strawberry plants, which don’t produce berries until the second year. But it’s often more like growing apple trees, which only bear fruit after several years.

Too many so-called “experts” have learned the hard and expensive way that, just because they know a lot about a product, service or industry, doesn’t mean they know how to run the business that successfully makes those things available in the marketplace.

If you want to start a business you certainly need to know your product and industry. But you also need to know the profession of business ownership. And like a surgeon, minister, auto mechanic and farmer, being a successful business owner takes education, training and time.

Before you turn in your time-card, minimize your urgency and maximize your understanding about the profession of business ownership.

The kinship of private equity and small business

Mitt Romney’s record in the private equity industry has become part of the election year political debate. The Romney campaign offers it as a positive credential and the Obama campaign has disparaged the industry as a way of casting a negative on Romney’s record.

Recently, a former leader in the private equity sector and President Obama’s former “car czar” and loyal supporter, Steven Rattner, weighed in with support for private equity by allowing that these firms are completely legitimate and add value to our economic system. But, as if to throw a bone to his former boss, Rattner also pointed out that private equity firms are founded to create wealth, not jobs. Here is one of Rattner’s quotes on this issue:

“Bain Capital — like other private equity firms — was founded and managed for profit … earned legally and legitimately. Any job creation was a welcome but a secondary byproduct.”

With this pronouncement, Mr. Rattner finds himself in historic company.

In his seminal work, “The Wealth of Nations” (1776), Adam Smith, introduced his now immortal “invisible hand” theory, which proposes that an individual, “led by an invisible hand” in pursuit of “his own interest, frequently promotes that of society more than when he really intends to promote it.”

For Smith, who is considered the father of economics, there was no chicken/egg quandary. The chicken – individual self-interest – comes first, followed by the egg – benefit to society. Mr. Rattner, perhaps without intending it, is singing Smith’s song in 21st century English: profit first, jobs second.

Nor is there a chicken/egg quandary today. In our capitalist, free-market economic system, the chicken is profit and the egg is jobs. It’s superfluous to say that jobs are the secondary byproduct of private equity; jobs are the byproduct of capitalism – period. In fact, the only economic system that has job creation as a founding imperative is communism.

From the very first small business created in America to the millions that have been formed since, from the sole proprietor to the 499-employee high-growth enterprise, all were founded with the nuclear notion of generating profits that will ultimately create wealth. And as essential as employees are to accomplishing a business founder’s wealth-creation goal, no pre-start-up entrepreneurial dreamer ever thought, “I want to commit all of my time, energy and resources – and risk everything – so I can create jobs.”

Like any venture that takes risks, private equity firms have to make tough business decisions and they make mistakes, which are fair game for critics. But if you’re going to malign private equity firms because their founding principle is to create profit and wealth, then you would have to extend that indictment to all 26 million American small businesses.

Led by an invisible hand in pursuit of their own wealth-creation self-interests, America’s small businesses benefit society by producing over half of U.S. GDP, creating most of America’s new jobs and delivering tens-of-millions of paychecks to their productive and grateful employees every month.

For small business, the chicken is profit and the egg is jobs.

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I talked more about the “Profit first - jobs second” business motivation on The Small Business Advocate Show. Click here to listen or download.

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Small business and specialty foods

It’s been exciting to watch the growth of entrepreneurship and its product, small businesses, over the past couple of decades. Business models have been developed and perfected that previously were either unheard of or no more than a fringe opportunity. One case in point is specialty foods.

As one of the growing sectors of the small business landscape, specialty foods - sauces, desserts, salsas, etc. – has become more than just a viable alternative; more and more it’s being leveraged beyond the lifestyle business, or artisan/shopkeeper form. There are even trade opportunities for specialty foods. My friends at the Department of Commerce have told me about a Tennessee small business that makes salsa, whose biggest customer is a grocery store chain in – I’m not making this up – Mexico.

There’s more good news: Food business incubators are proliferating around the country, where entrepreneurs can find efficiencies by sharing commercial kitchen time. These centers also provide marketing and organizational assistance to help these specialty food entrepreneurs get their businesses out of the blocks without having to use precious capital to acquire expensive equipment and single-use real estate.

On my radio program, The Small Business Advocate Show, specialty food expert who authored “Sell Your Specialty Food” and Brain Trust member, Stephen Hall, talked with me about this growing small business sector and provided a number of tips and best practices. Check it out.




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