Sunday, May 01, 2011
Have an idea for a new business? It pays to do your homework first
The latest from The Ticker blog
According to the Kauffman Foundation, which studies entrepreneurship, business startups reached their highest level in 14 years in 2009 -- during the height of the recession.
But wanting to start a small business isn't just about having a great idea. Would-be entrepreneurs need to consider a host of questions: Which industry segments are likely to see growth? How can I take advantage of that forecast?
And more than ever today: Where will I find the money to launch?
On Wednesday, The Roanoke Times is partnering with Cox Business to present an executive panel discussion about entrepreneurship in the wake of the recession.
Led by moderator Julie Newman of Blue Ridge PBS, we'll talk about what entrepreneurs need to know and about why fostering entrepreneurship matters to the business community as a whole.
We asked our panelists to weigh in on a couple of those issues in advance of Wednesday's forum.
-- Megan Schnabel
DAVID CATALANO, president and founding partner, Modea
What is the role of entrepreneurship now that we're in a period of economic recovery?
I believe many employees feel powerless to enact true change in the organization they work for. They may have seen warning signs as the company around them crumbles under the economic recession. Whether or not they were downsized, many startups are the byproduct of someone envisioning a better way of working.
Regardless of whether or not we're in an economic recovery, it is always the right time to start the right kind of business. Five years ago, it was no secret that the advertising industry was shifting from traditional media to digital. So in 2006 we started a digital agency. That was a pretty easy decision on our part.
What advice do you have for an entrepreneur who wants to launch a business during the current economic climate?
Be passionate about the business you want to start but don't let your passion blind you from embracing failure. Failure is a very natural part of entrepreneurship. The faster you fail the sooner you will find what works. All too often we don't want to admit that the path we're on won't meet our goals.
WAYNE FLIPPEN, director, Roanoke Regional Small Business Development Center
What is the role of entrepreneurship now that we are in a period of economic recovery?
First of all, the "recovery" has not been robust across the board.
Many are still unemployed, underemployed or are suffering from reduced net worth. This means there is still room for, and we see evidence of, new entrepreneurship activity.
As we do continue to move forward, we still look to the entrepreneur for economic energy. This comes from innovation helping the community stay alive and vibrant and through economic impact -- growth in niche markets that have not been addressed previously or had been addressed only by suppliers outside the community. Eventually, this will translate into jobs.
Most new jobs are created by "young" companies (less than five years old). On average, 1-year-old businesses create nearly one million jobs a year, while 10-year-old companies generate about 300,000.
What's the one thing you wish every would-be entrepreneur knew before he or she decided to launch a small business in today's climate?
Financial literacy -- how to read and interpret a profit and loss statement, balance sheet and cash flow analysis, so they could anticipate issues and make intelligent decisions prior to crisis.
Ideally, we would like to see the would-be entrepreneur analyze and document their financial plans and marketing plans in a written business plan document that can be reviewed on a regular basis to make sure they stay on track. It does not need to be fancy, just committed to writing.
JIM FLOWERS, director, VT KnowledgeWorks
What is the role of entrepreneurship now that we're in a period of economic recovery?
Many of the new businesses started during the recession were formed by displaced workers in response to unemployment, rather than in response to some clear economic opportunity. I view that phenomenon as statistical entrepreneurship, not real entrepreneurship.
Unfortunately, the agencies that count these things do not have a good way to tell the difference between a real venture, a hobby business and a defensive attempt to make a buck while temporarily unemployed. In a period of renewed economic growth, on the other hand, there are presumably more chances to form a business that addresses a genuine opportunity. If I am correct, we ought to see, in the long run, a higher survival rate among companies being formed now, as opposed to those started during the previous two years.
What's the one thing you wish every would-be technology entrepreneur knew before he or she decided to launch a small business in today's climate?
I am convinced that most business ventures that fail should never have been attempted in the first place, regardless of the economic climate.
Far too many people launch businesses based on wishful thinking about market behavior. They project onto a market some desired response to their cherished invention, rather than identifying a clear and compelling market opportunity and then responding with a product or service that addresses that opportunity with uncommon power.
I wish every aspiring entrepreneur would take advantage of all the information now available to confirm that he or she truly has identified a market opportunity -- a growing population with a compelling situation. Only then should they invent a product or service, one that addresses the buyers' needs and sets them apart from competitors and substitutes.
LAURA GODFREY, founder, Claire V. and Polished by Claire V.
What is the role of entrepreneurship now that we're in a period of economic recovery?
I think that the number of people employed by small businesses will continue to grow over the next five to 10 years. Partially out of necessity, as people lose their jobs and aren't able to find other jobs, and partially because I think the recession has forced people to re-evaluate their lifestyles, and they are finding that the benefits of being a small business owner outweigh the negatives.
I believe that small businesses will be the driving force in our economic recovery -- not only because they will provide more jobs, but also because small businesses can be quicker on their feet and more innovative than large corporations.
What advice do you have for an entrepreneur who wants to launch a business during the current economic climate?
Make sure you're on solid financial footing! Business loans are very difficult to get these days, and making business decisions out of a place of need is never a good idea.
You also have to be prepared to do everything in the beginning -- I've been everything from CPO (Chief of Plumbing Operations) to Chief Bottlewasher.
