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Archive for February, 2012

One would not think home mortgages have a hell of a lot do with entrepreneurship.  But they do.

We are clearly in the middle of a huge housing bust.  Almost all homes have lost value and many are in foreclosure.  What has not been well-publicized is the effect this catastrophe is having on small business, particularly those entrepreneurs trying to start a new firm.

A page one piece by Robbie Whelan in the WSJ (Feb. 1, 2012) cites Mark Zandi, chief economist at Moody’s Analytics.  Zandi notes that small business owners  extracted $75 billion from their homes to fund their businesses in 2006.  This year Zandi projects this number to be under $20 billion.  According to Zandi, the implication of this for the parvenu entrepreneur is dire indeed.

He tells of his own experience of starting Moody’s Analytics in 1991 with a $40,000 loan using his Philadelphia home as collateral.  He doubts this could happen again without great difficulty.  Zandi says, “That is one more reason the be nervous that small businesses won’t be the source of job growth they have in past economic recoveries.”

New companies often have insufficient cash flow to qualify for normal business loans.  If they can’t borrow against their home they’re dead.  A recent study from Pepperdine University says 64% of current start-ups are rejected for bank loans.

In the same article the WSJ records the case of Adrian Pelkus, a San Marcos, CA business owner who started six different businesses since 1985.  Mr. Pelkus thought he had his best idea ever–to generate power from ocean waves.  He patented his idea and produced a prototype and wanted to borrow against his home to do lab tests and marketing to investors.  However, the three homes he owned were $100,000 underwater.  Banks would not lend to him.  He had to give up on wave power and let his patents expire.

Mr. Pelkus is not alone.  Robbie Whelan states, “Many small business owners see their home-equity lines of credit pulled or reduced when home prices fall.  In its quarterly survey of about 400 small to mid-size businesses, conducted this past fall, Barlow Research Associates, Inc., a Minneapolis-based data provider, found that 41% of small businesses reported seeing their home-equity credit level decrease in the previous year.”

All this is not good news the the long-term health of the economy, despite recent green shoots.  The closing window of home-equity borrowing has serious implications for entrepreneurship and the creative small business engine that must provide the major mojo for prosperity and healthy employment.

In Poor Richard’s Almanac, Ben Franklin said, “Neither a borrower or a lender be.”  Unfortunately, when starting up, the existential entrepreneur may have little choice in the matter.

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Very little attention is being paid as yet to a bi-partisan bill that could usher in just the help our small business community needs to bounce out of it’s current malaise.  It’s called the Startup Act.

The Startup Act does the following:

  1. It exempts many small business stocks from capital gains, if held five years.
  2. It reduces our bureaucratic burden.  Sarbanes-Oxley‘s needless, time-wasting compliance is to eased for entrepreneurial companies.  The Startup Act also requires all government agencies to present a cost benefit analysis of any new regulations with estimated impact over $100 million or more on small business.  This would reduce future regulatory overreach.
  3. The Startup Act facilitates immigration of entrepreneurial talent and skilled workers.  A new category of Visa, would be created just for the purpose of providing a pathway for foreign students at American universities with advanced degrees in science, technology, engineering, or mathematics to be issued green cards along with their diplomas.  In an op-ed in the Wall Street Journal, p. A13, February 7, 2012, Senator Mark Warner (D-Virginia) and Senator Jerry Moran (R-Kansas), co-sponsors of the Startup Act, cite researchers at Duke and the University of California at Berkeley who have found that “more than a quarter of technology and engineering companies created in the US between 1995 and 2005 had at least one key partner who was foreign-born.  In 2005 alone, researchers found these companies produced $52 billion in sales and employed 450,000.”
  4. The Act further instructs the Department of Commerce to assess state and local policies that aid or hinder in the development of new businesses.  (Look out California, New Jersey, New York, Illinois.)

The Startup Act is a practical common sense bill that has minimal cost in a time of austerity.  It is a simple, elegant emollient for the damaged job-producing entrepreneurial sector of our economy.  It’s a bill that simplifies rather than complicates.  It avoids  and begins to cure all the distopian statism that has been such a drag on small business in the last three years.

Even in an election year the simple common sense of the legislation is compelling.  Surely such good legislation that militates a bi-partisan economic palliative can summon support, even in a contentious election year.

On the other hand, as Voltaire said, “Common sense is not so common.”

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I’ve had two weeks how to digest the victory of my New York Giants over the New England Patriots in Superbowl XLVI. It was a wonderful game with exhaustive post-game analysis of the minutia of every aspect of the game, all of which I have relished.  But as a entrepreneur and as a salesman, my thoughts keep coming back to New York’s decidedly uncharismatic coach, Tom Coughlin.

Tom Coughlin can be fairly described as dull, plodding, and untellegenic–an unassuming, private man in an immodest, exhibitionist era.  He was hired as a strict martinet to bring back fundamental discipline to the Giants in 2004.  He has been successful, but he is never mentioned in the same breath with such “brilliant” coaches as Bill BelichekBill Parcells, or Don Shula.  Yet it strikes me that he has a lesson to impart not only to other coaches, but also to executive salesmen like me.  It strikes me that, in his unspectacular way, Tom Coughlin may be a rather brilliant long-term thinker and expectations manager.

Coach Coughlin never over-hyped his hopes for his team this year.  But he expressed faith in his team’s ability and potential, even when depleted by injury and bad luck.  He did this consistently and without overstatement or bellicosity–never getting too high or too low, but always keeping in mind where he wanted his team to end the season.  He never pandered to short-term crisis or panicked at setbacks, but always kept his thinking and communication in terms of the long-term and the main chance.

I am the primary rainmaker for my executive outsourced sales company, Corporate Rain International, as I know many readers of the blog are for their own firms.  Coughlin’s example is a reminder to always under-promise and over-deliver in the context of a long-term and consistent coaching (sales) plan.

One thing I think I did right, among many I did wrong, when I started my company in 1996, was to think of how each of my actions and statements would effect reputationally where I wanted my company to be in five years.  That was about as far ahead as I could imagine as a parvenu entrepreneur.

Good salesmanship avoids breathless hyperbole and presents a simple, but articulate valuation of what is deliverable.  My experience is that understated salesmanship pays off in long-term trust and reputation.

So thanks, Tom Coughlin, for a reminder of the value of expectations management, the entrepreneurial salesman’s friend.

As William Shakespeare puts it in All’s Well That Ends Well (Act 2, Scene 1),

“Oft expectation fails and most oft there
where most it promises, and oft it hits
where hope is coldest and despair most fits”

Thanks, Will.

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Stress. Anxiety. Sleepless nights.  Walls of worry.  Unhappiness.  Not positive things.  Or so you would think.

I’ve been going through a period of stress in the new year.  I sure don’t like it, but, strangely, I find myself benefiting from it.  Yup.  I suddenly find myself very clear headed, energized, and efficient.  It is as if my current conundrums have gifted me with a jolt of crystal clarity and accessibility to my best qualities of instinct, logic, and centeredness.  It may feel like a misery, but It seems to be just what I currently need as a businessman and a man.  It’s getting me off the snide and spurring new thought and action.

Earlier in my life I chanted with the Buddhists for a while.  One of my favorite Buddhist prayers thanks God for challenges and failures, not successes.  The lotus flower is born out of the muck.  And pain is often the cost of growth.

As a younger man I dealt with stress through several forms of addiction.  These days I often think that my discovery of the joy of entrepreneurship is merely a continuation of my tendency to addiction, but now in a healthy way.  Certainly there is a constant frisson of enlivening stress (similar to the heightened states offered by addiction) that goes with the entrepreneurial territory.  It’s an awaking level of agitation innate in our crisis-prone entrepreneurial life choice–the excitement implicit in the necessary slaying of daily dragons.

In an article titled When Stress Is Good For You (WSJ, 1/24/12, Section D)  Sue Shellenbarger says, “Stress can propel you into ‘the zone,’ spurring peak performance and well-being.  Too much of it though, strains your heart, robs you of memory and mental clarity and raises your risk of chronic disease.”  She cites Dr. Kenneth Pelletier, a clinical professor of medicine at the University of Arizona School of Medicine and a stress expert.  He coaches executives and employees to use stress to hit “the optimal performance zone” with enough stress “to be stimulating, to focus you, to challenge you “without taking a physical toll.”  He recommends a balance of biofeedback, yoga, meditation, and internal mindfulness to create a sort of Goldilocks stress balance.

In past postings I’ve often talked of how my own failures in life have been seminal to whatever success I have had as an entrepreneur.  I think stress must be failure’s younger brother.  And I believe natural entrepreneurs intuitively have an internal mechanism that absorbs and transforms failure and stress, turning them into steps to the next level.

So, before I go off to jog, breathe, do yoga, pray and meditate, let me share this brief insight from Viktor Frankl.  In Man’s Search For Meaning (p. 87) he says, “What is to give life must endure burning.”

Thank you, Viktor.

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