Posts Tagged small business financing

International Entrepreneurs: Success Means Knowing Where to Go


In 1990, Robert Walsh, a Montreal engineer, launched Forensic Technologies inventing the Integrated Ballistic Identification System (IBIS), a crime-fighting tool so popular CSI and Jeopardy have featured it on television. Although Walsh had no knowledge of guns, his invention has become a sophisticated crime-fighting tool that fingerprints bullets and casings from guns by digitizing microscopic information about them. The company landed its first federal contract in 1994 in Washington and has gone global with sales in over 60 countries. Forensic Technologies has its technology installed in over 200 locations in the United States (Chapin, Righton, & Gallant, 2011).

Although Walsh founded the company in his native Canada, he noted the United States emerged as a natural place for this technology because of exploding gun crime. Forensic Technology’s vice president and general manager, René Bélanger, said expansion of the company did not come without challenges because doing business from one country to the next is quite different. Bélanger added a company has to pursue its target and know where it wants to go. Bélanger said a company has to tie to the segment of the market it wants to target to achieve success. Forensic Technology learned this lesson after trying to diversify its product offering, which did not go so well. Forensic Technology today boasts an IBIS hub at Interpol in Lyon, France as it targets the world (Chapin et al., 2011).

International entrepreneurs have to define their target market and go after it with a vengeance. Doing business across the globe is a complex task and a company has to know its customers. Do you have a business that you want to go global? Have you defined your market? If you do and have not defined your market you need to learn more.

References

Chapin, A., Righton, B., & Gallant, P. (2011). International success stories Canadian Business, 84(10), 52-54. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&db=ent&AN=61074191&site=ehost-live

, , , , , , , , , , , , , , , , , , , , , ,

1 Comment

Entrepreneurial Lessons Learned: Twinkie, Twinkie, Little Cake How I Wonder What’s Your Fate


As the song goes the bankruptcy of the Hostess Brands, Inc. brings to mind how many companies today rest on their laurels. Many companies have forgotten how to compete because rapid growth has gotten in the way. Kalson (2012) noted how the Hostess company blamed the company’s problems on its unions and dispelled the idea bad corporate decisions, financial shenanigans, outdated strategy, and inept management could have caused the problems.

The Hostess brand emerged from a troubled history at Continental Bakeries. Interstate Bakeries later bought Continental pursuing its strategy of growth by acquisition and mergers. Interstate had a history of run ins with its workers and focused on rapid growth instead of its products and people. For example, in 1982 Interstate Bakeries raided an over funded pension fund to pay off debt on its inefficient plants (“Hostess Brands, Inc.,” 2012).

The Continental merger brought new enzyme technology to the company allowing its products to have a longer shelf life, lowering delivery costs, and improving profitability. Continental like Interstate engaged in an acquisition strategy. Similarly, the company had disputes with its workers and in 2000  lost a suit in San Francisco brought by 19 black workers claiming racial discrimination (“Hostess Brands, Inc.,” 2012).

Again in 2004 the government probed the company’s worker’s compensation reserves and problems with a new financial system the company installed. In 2004 the company filed for bankruptcy still under investigation for how it set its worker’s compensation reserves. In 2009 the company emerged from bankruptcy and relocated to Kansas City only to file for bankruptcy again in 2012 (“Hostess Brands, Inc.,” 2012).

The lesson learned is growth through acquisitions often is a poor strategy leading to financial difficulty if not managed carefully. An entrepreneur would do better by focusing on products and people to grow organically. Entrepreneurs should learn from the Hostess story, acquisitions and mergers often leads to discord between workers and management, and financial problems. Duplication of duties is costly without a plan to remove these costs. A company’s business strategy can become blurred, and the company can lose its focus on its vision and how it best serves its customers.

Kalson (2012) noted how Hostess sold its soul to private equity firms, hedge funds,  and investors while amassing over $1 billion dollars of debt. Acquisitions seemingly erase the competition, but can also serve as the deathbed of a company. Entrepreneurs should think about losing their Twinkies before entering such a strategy.

Entrepreneurs should understand both sides of this strategy before committing to it. If you want to know more about the pros and cons of different strategies contact us to learn more.

References

Hostess Brands, Inc. (2012). Hoovers Academic. Retrieved from http://subscriber.hoovers.com.ezproxy.apollolibrary.com/H/company360/history.html?companyId=15324000000000

Kalson, S. (2012). When all else fails, blame the union hostess gives the twinkie defense a whole new meaning Pittsburgh Post – Gazette. Retrieved from http://search.proquest.com/docview/1220357399?accountid=35812

, , , , , , , , , , , , , , , , , , , , ,

Leave a comment

David and Goliath: The Dyson story


The Dyson vacuum cleaner story is an interesting case study about a man taking on the established vacuum cleaner industry by believing in a superior product. Dyson believed in making the world better through ingenuity and took on the giants. Dyson took on the role of the consummate protagonist (Carruthers, 2007).

Dyson grew up in a family in which he had little direction and he developed a distaste for conventional institutions. Dyson’s parents knew of his rebellious side and wanted him to take up teaching, become a doctor, or become a professional. Dyson gained an understanding of industrial product design through the art school he attended in London (Carruthers, 2007). Entrepreneurs typically have a disdain for the way conventional businesses do things and have it in their DNA to reject conventional wisdom. Rebellion is an integral part of the entrepreneur’s mold.

Entranced with the idea of improving the vacuum cleaner, Dyson began his adventure by stripping down the Hoover Junior to understand its poor performance. Dyson introduced the cyclone and clamber in developing his prototype. At first, Dyson had no fear, but balked when low-income, a big overdraft occurred, and he faced the uncertainty. Dyson experienced several brushes with bankruptcy (Carruthers, 2007). Entrepreneurs have to learn how to deal with their fear and overcome it by moving on. Keeping an eye on the opportunity trumps the original fear, but the entrepreneur faces failure each time he encounters a hurdle and has to deal with it in a positive way. Risk-taking is scary even to the most accomplished entrepreneur.

Jeremy Frey had mentored Dyson and provided the original funding for his venture. Dyson met Frey at college, and the millionaire and founder of Rotork served as an innovative person with whom he could identify. Dyson spent three years working on thousands of  prototypes and testing them. Dyson found industry unwilling to accept or license his ideas, but Japan did eventually license the Apex and G-Force products. Dyson relied on inventing and marketing himself instead of the conventions of big business and its marketing tricks (Carruthers, 2007). Entrepreneurs are bold people who reject established mediums and want to improve on them, but fighting with the enemy has its risks.

Dyson decided rather than to license his work to produce the product himself. Self-manufacturing the products, obligated Dyson to raise capital by borrowing against his property putting his family at risk. Dyson decided to take this path and export directly to the to the United States (Carruthers, 2007). This experience shows entrepreneurs have to look danger square in the eye and have the confidence to deal with it.

The last challenge for Dyson is to bring the product to the United States, the world’s largest market, where he must beat Hoover, Amway, and Black and Decker. Although Dyson set up manufacturing in Asia, he must confront the Big Three on their own turf in the United States. To bring the product to the United States, Dyson has to distastefully import the product from Asia and play by the rules. Dyson successfully captured enough of the United States market, but faced intense competitive pressure from his rivals. Hoover infringed on Dyson’s patent rights and Dyson filed suit to protect his business. Despite the challenge, Dyson wins the battle and confirms his success (Carruthers, 2007). Entrepreneurs often want to create the rules they play by, but sometimes have to conform to win the larger battle. The Dyson story shows how entrepreneurs can persist and improve existing products. David beat Goliath!

What have you learned from the Dyson story? Please let us know your thoughts. If you need help getting started I urge you to seek our help now. Learn more.

References

Carruthers, I. (2007). Chapter 5: The Entrepreneur’s Story Great brand stories Dyson: The domestic engineer: How Dyson changed the meaning of cleaning (pp. 85-99). London: Marshall Cavendish Limited.

 

, , , , , , , , , , , , , , , , , , ,

Leave a comment

Stop the Predator Soothsayers


One of the traits of a good entrepreneur is to stop people trying to take advantage of them by foretelling the future. So often I see people trying to sell their products and services telling the small business founder if he or she does not buy the product the sky will fall on them. Savvy entrepreneurs filter the predator soothsayers claims to conserve capital.

My advice to a new business founder is to buy goods and services as you need them only if they are absolutely necessary to the business’s plans. Predators will try to sell the small business founder everything under the sun. If the predator is so hungry, the small business founder should ask for a free trial with no strings attached to see if the product or service performs as intended. Before signing on, business founders should ask themselves if the product or service is absolutely necessary or if they can get by without it.

Capital preservation is critical when a business is in an embryonic stage. The small business founder should take great care to preserve capital. I have seen too many small businesses spend foolishly and eat the capital the company needs to survive. A savvy entrepreneur learns to make do with less. Learning to say no is a tough assignment, but pays dividends in the long-run. When in doubt, return to the business plan and only say yes to those items included in the business plan.

Are predator soothsayers knocking on your door? How do you deal with them? If you need help learning to say no I encourage you to get help now. Contact us for help.

, , , , , , , , , , , , , ,

Leave a comment

Starting a New Business Doesn’t Have to Be Taxing


One of the most often forgotten about benefits new business founders overlook is the ability to carry forward and carry back a net operating loss. Founders of new business struggle to find sources of cash flow available to bootstrap their way to sustainable profits. A new entrepreneur founding a business should consider the benefits of cash flow from the net operating loss.

A company has a net operating loss when its business expenses exceed it business income. Business expenses excludes any capital losses, personal exemptions, and 50% of the gain from the sale or exchange of a qualified business stock. Business expenses also exclude alimony paid, contributions to an individual retirement account or self-employed retirement plan, payments to a health savings account, and most itemized deductions with some exceptions.

A founder can carry back a loss two years before the year in which the company incurred the loss creating a refund of previously paid taxes. A company can carry forward any remaining losses for up to 20 years reducing future tax liabilities. When a new business struggles to make ends meet it should not lose sight of this important tax benefit.

Most new businesses take 3 to 5 years to achieve profitability, but meanwhile the company can preserve cash. Using the net operating loss deduction can produce cash from the refund of taxes paid previously. This refund produces cash a business owner can use in the business.

Have you built the net operating loss into your cash budget? If you want to take advantage of the net operating loss, but have not already done so I encourage you to get help now. Contact us.

, , , , , , , , , , , , , ,

Leave a comment

Credit Unions: An Alternative to Community Bank Financing of Small Business Loans


I read a blog post today about how banks have started to lend to small business again. Considering the bad treatment banks have given their customers I wonder how they will treat small businesses after cutting off lines of credit and other lending to them during the financial crisis. I suggest considering the credit union as an alternative to a bank for small business lending. Personally, I like getting treated as a person instead of as a commodity and credit unions have many advantages. I just opened an account with a credit union and I found the I received much better treatment and the credit union valued not just my business, but me as a person.

I remember an SBA loan I had with a small bank that a larger bank later took over. For several years the bank and I had a good relationship. One day I received a notice the larger bank had bought the bank and the new bank no longer wanted SBA loans as part of its business. The new management made it difficult to preserve the good relationship by charging new fees for everything imaginable. A few years into the recent financial crisis I saw this bank on a list of the banks the Fed had shut down.

Because small business financing sources have evaporated during the global recession, small business should consider using credit unions. Credit union unlike small banks are cooperative nonprofit organizations. As nonprofit organizations credit unions have an exemption from tax resulting in lower costs allowing them more latitude in making loans. Credit unions also enjoy  lower costs from volunteer labor and employer sponsorship giving them the ability to offer lower rates. Besides offering small business loans, credit unions also offer other products like credit cards and car loans (Feinberg & Rahman, 2006).

The trend is for large banks to buy smaller banks especially in larger markets. This trend has resulted in less lending to small businesses causing a need for alternative funding sources like credit unions to service small businesses. Consolidating small banks has created less of an interest in small business lending. The lack of interest stems from the difficulty large banks have dealing with soft data, the more hierarchical bank’s need for more approvals, and lower credit supplies by the larger organization (Ely & Robinson, 2009).

Oriz-Molina and Penas (2008) found one way to mitigate opaque risk from small business is to shorten loan terms to watch the progress of small businesses. The more conventional approach is to want greater collateral over a longer term. Credit unions also have the ability to gain a better understanding of owners’ personal wealth. Although credit unions can focus on better addressing opaque risks using these approaches, larger banks often rely on credit scoring to approve small business loans to achieve a competitive advantage (Immergluck & Smith, 2003).

Despite the ability of larger banks to gain a competitive advantage in lending to small business, credit unions are closer to small business customers and able to forge better relations. Large banks have shown poor behavior in recent years making them less attractive than more personal, smaller thrift institutions. For example, banks have added new fees and restricted lending to only the strongest small businesses. Improved relations with small businesses promotes long-term relations despite shorter lending terms.

Consolidating small community banks into larger banks has caused banks to become less personal and more selective. Credit unions fill a social gap in the market because of consolidation of these community banks and the cost advantage they have from the nonprofit status. Credit unions can expand from solely personal to more commercial lending to fill this gap.

What sources have you considered for your business in achieving financing? Are credit unions part of the mix? Do you want to know more about the value of commercial lending by credit unions? Find out more about how you can benefit.

References

Ely, D. P., & Robinson, K. J. (2009). Credit unions and small business lending. Journal of Financial Services Research, 35(1), 53-80. doi: 10.1007/s10693-008-0038-3

 Feinberg, R. M., & Rahman, A. F. M. A. (2006). Are credit unions just small banks? Determinants of loan rates in local consumer lending markets Eastern Economic Journal, 32(4), 647-659. doi: 1241333261; 35361511; 11879; EEJ; INNNEEJ0000065491

 Immergluck, D., & Smith, G. (2003). How changes in small business lending affect firms in low- and moderate-income neighborhoods. Journal of Developmental Entrepreneurship, 8(2), 153-175. doi: 502848551; 8351081; 38473; DVEN; INODDVEN0000469300

Ortiz-Molina, H., & Penas, M. F. (2008). Lending to small businesses: the role of loan maturity in addressing information problems. Small Business Economics, 30(4), 361-383. doi: 10.1007/s11187-007-9053-2

, , , , , , , , , , , , , , , , , , , , , , ,

Leave a comment

Small Business Financing: Let’s Play Where’s Waldo


Finding financing for a small business is like playing Where’s Waldo. Where’s Waldo is a game in which a player looks for a funny guy in a red-striped shirt and stocking cap in a maze. Waldo blends into the crowd and is difficult to find.

Small businesses look to find a source of financing among a maze of potential financiers and hazards. Financing can include angel investors, venture capitalists, banks, and other sources of equity and debt. Ma and Gui (2010) classified direct small business financing in the United States into venture capital and securities financing. Ma and Gui explained indirect financing comes from commercial bank loans. Some commercial bank loans have a government guarantee from the Small Business Administration. Mezzanine financing is another hybrid source of financing valuable because a company can treat much of it as equity even though it combines features of debt and equity (Silbernagel, Vaitkunas, & Giddy, n. d.). The maze is difficult to navigate because the terms differ from one source to another. The small business should target equity financing whenever possible because debt financing is more risky. Micro financing and crowd funding are some new entries to the maze, but an old favorite is bootstrapping.

A person playing Where’s Waldo has to examine the maze with great scrutiny to find Waldo blending in to the crowd. Waldo is a friendly guy, but is crafty in making himself inconspicuous among the crowd. Waldo may have hidden motives in avoiding making himself obvious.

A small business needs to have an awareness of the hidden motives different financiers may have. Some financiers use convertible features to gain control of a company. The small business should have an awareness of these features to prevent a takeover. Small business founders work hard to find a working model for their business and should protect themselves from possible takeovers by reviewing the terms of the financing. Protecting a controlling interest in the firm is a critical role for a small business founder to keep control and avoid the board from firing him.

When one finds Waldo, the game is over and the player can start a new puzzle. A small business founder looking for the right financing locates it the search is over, but he must remember to make sure the terms allow for keeping control of the company.

What sources of financing have you considered? Want to learn more about small business financing and how to preserve a controlling interest? Learn more.

References

Ma, J., & Gui, J. (2010). Study on the small and middle enterprises financing mode in financial crisis. International Business Research, 3(1), 76-79. doi: 2225515451; 56706961; 137934; NBRS; INNNNBRS0000568443

Silbernagel, C., Vaitkunas, D., & Giddy, I. (n. d.). Mezzanine Finance, from http://pages.stern.nyu.edu/~igiddy/articles/Mezzanine_Finance_Explained.pdf

, , , , , , , , , , , , , , ,

Leave a comment

How a Turnaround is Like Founding a New Company


Once I took a position as the chief financial officer of an organization with a history of over 100 years. The institution in its early years thrived because of its location bordering a city nearly the size of Chicago with a booming coal mining industry. The location bordered on the one of the Great Lakes cutting off half the circumference of the target market.

Eventually, the coal mining industry declined and the city bordering the organization dwindled in population because of lack of other industry in the area. Recreation supplied the next biggest industry in the area because of ideal conditions for snowmobiling, cross-country skiing, and other winter sports. In the summer, the area provided ideal conditions for hunting and fishing. These industries failed to provide enough jobs and opportunities to keep the city alive.

The organization I worked for had its numbers drop by nearly 70% because the organization depended on people within a hundred mile radius of it. When I arrived I found the finances in a shambles and an accumulated deficit resulting in a negative net worth. At first, this condition alarmed me, but I knew I had a calling to turn this ship around.

A turnaround of this magnitude is like starting a new business because it needs a radical transformation. Fortunately, the executive team committed to a radical transformation of finding a new model for the organization that would turn around the organization and create positive cash flows. Weekly we explored new ideas and acted on cutting drains on the organization’s cash flows. In this way, the turnaround is more difficult than starting a new business because a new business does not have to deal with getting rid of existing programs causing a drain on cash flows.

The result of these efforts balanced the organization’s budget and identified new programs capable of producing positive cash flows. When I did my doctoral research I discovered that many companies that go public have accumulated deficits of the same magnitude and about 70% of them eventually fail. This revelation surprised me and I thought about how many companies can use the same help a turnaround expert provides. Big and small companies have similar failure rates. ‘

Although the cause is different, the need to identify a working model is the same. Without transforming an organization by finding a working model that produces positive results any organization will subject itself to failure. This revelation also caused me to think about the benefits of going public versus remaining private. Often, companies go public far before they rightfully should and prematurely remove the founder whose role it is to find a working model.

Public companies start to create more bureaucratic settings, while the organization needs to stay nimble enough to allow the working model to develop and meet consumer needs. Bureaucratization adds costs and reduces flexibility to adapt to make the model work. I believe many companies act too fast to go public because they believe it provides a safety net for raising capital. I believe a slower more deliberate growth may benefit many companies and allow the founders to keep their company and learn how to manage it instead of getting shown the door.  Founders work hard and if they are serious should hold on to their creation and learn how to improve it.

I believe other consultants place too much emphasis on getting big too fast. Companies might do well to slow down and grow organically than fall prey to seeking the safety net of a public company. Slowing down allows the founder to start to see the forest from the trees and build a sustainable model without risking the founder’s position.  

My company works to build organic growth by building on gaining the experience and education needed to grow organically. I believe a serious entrepreneur has an attachment to his or her creation and needs a different focus to preserve an identity with the company the founder creates.

What is your goal in founding a company? Would you prefer to stay involved in the company you create or do you want to exit and put the company in someone else’s hands? Please leave a comment to let me know your view.

If you are serious about preserving your identity with the company you want to create I urge you to try the services of my company by signing on now.

, , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Leave a comment

A Treatise on The Need for Social Entrepreneurship


Today I watched a video presentation by Steve Blank and the UCLA Anderson School of Management on different entrepreneurship types. Blank had many good ideas I agreed with about entrepreneurship. For example, Blank said when a founder finds a model that works, investors act quickly to take over and replace the founders because founding entrepreneurs’ role is to create value by finding new models. Investors look to manage successful models by recruiting corporate planners to maximize profits for owners and managers in these newfound wealth creating enterprises. Blank also claimed social entrepreneurship has no value because it creates no new wealth (LeanStartupCircleLA, 2011, October 16).

I take exception to this shortsighted view because I believe all enterprises should take some social responsibility. Further, sometimes, I believe social issues belong in social enterprises rather in commercial ones because social enterprises better serve consumers’ social needs and commercial businesses place more value on serving themselves. What is wrong with just earning a decent living instead of channeling all wealth to the elite? Can social entrepreneurs gain more value from satisfying more than their personal wealth and by serving society’s needs? If government fails to address social issues who should?

Different worldviews on social entrepreneurship.

Various worldviews exist about social entrepreneurship. One view comes from the protectors of social entrepreneurship, who believe in the effectiveness of social organizations. Another view comes from the doubters, who demand empirical proof of social entrepreneurs effectiveness  (Pärenson, 2011).

Trexler (2008) reasoned both people and business enterprises have hybrid needs consisting of both social and commercial parts. Trexler rationalized business managers encode the thinking burdensome laws in, “the DNA of our for-profit corporate entities, yet business leaders persist in reducing corporate identity to the material enrichment of its executives and shareholders” (p. 80).

Bull, Ridley-Duff, Foster, and Seanor (2010) argued the current social setting directs itself toward self-interest and eroding moral values. Bull et al. claimed social entrepreneurship has great value to look beyond existing missions and values and maximize ethical virtues.

Defining social entrepreneurship.

Pärenson (2011) found some scholars define social entrepreneurship as any action helping solve social issues, while others see social entrepreneurship only when it serves both a social cause and fulfills a commercial need. Pärenson found other definitions about social entrepreneurship strictly about nonprofit corporations, but most definitions view social entrepreneurship mainly focusing on social needs and less on commercial concerns.

Alvord, Brown, and Letts (2004) defined social entrepreneurship as providing sustainable solutions to great social problems using economic, political, and social means by applying market-based skills to the nonprofit area. Noruzi, Westover, and Rahimi (2010) defined the social entrepreneur as a person, group, or alliance seeking sustainable solutions through break-through changes and ideas in how business, governments, and nonprofit organizations should do business.

Who decides where an enterprise fits?

Should government, commercial enterprise, or society decide the best place to deal with social issues? Should corporate profit making behaviors eclipse social values? Traditionally, governments decided because people of the world organized governments to represent their interests, but with global markets companies aim to tear down the walls of governments. Who then deals with social issues?

Soros (1998) argued autocratic governments find it easier to amass capital, but their power causes corruption and ignores the glue holding the shared values of society together. Soros explained the weaknesses of global capitalism emanating from uneven benefit distribution, unstable financial systems, threats to competition by monopolies and oligopolies, the unclear and confusing role of governments, and the lack of social unity. Without government is the social landscape falling to autocratic interests of big companies? What say should people have about their values?

When does “creative destruction” begin and creativity die?

Without the voice of consumers represented by government the place to deal with social issues best comes from entrepreneurs close to the customer. If monopolies and oligopolies make it difficult for entrepreneurs so they cannot compete who is responsible for creating new and improved products and services to fill the gaps needed by consumers?

Pichler (2010) explained entrepreneurs act as the villain to market economies by averting market tendencies in accord with what Elliot (1983) viewed as Schumpeter’s theory of creating new combinations. Without such new combinations economic conditions become static and fail to foster conditions ripe for creativity. Entrepreneurship drives creativity and when crowded out by monopolies and oligopolies exposes the economic conditions leading to “creative destruction.”

Society needs entrepreneurs to drive creativity and fill gaps exposed by monopolies and oligopolies that fail to consider social needs. Monopolies and oligopolies foster preserving the wealth of the elite with little consideration for social needs. Without entrepreneurship creativity dies and leaves a hole in market for needs direly needed by consumers.

Global markets and unfilled social gaps in the market.

Where do issues like education, healthcare, housing, and alternative energy fall in global markets? Are these not social issues? Should the private companies strictly deal with such issues or should society deal with these issues as social issues. Are such issues best dealt with by government or nonprofit organizations? Does one size fit all?

I do not believe all these issues rightfully belong with private companies because they are beyond the control of the consumer who needs some help. For example, should everyone who wants an education have the opportunity to get one or should education depend solely on those who can afford to pay for a good education?

I would also argue putting such issues in the private companies makes the cost rise and reduces the efficiency of the market in delivering such services to members of the public. Although private enterprises like to espouse their efficiency, sometimes markets become less efficient with the profit incentive. Costs rise because merchants involved add their markups on top of all the ingredients in the product or service causing costs to spiral. In government and nonprofit enterprises companies put less focus raising prices and more focus on buying efficiently. Molina-Martinez and Martinez-Fernandex (2010) and Zhang and Fung (2006) argued social entrepreneurs contribute to improved economic performance, and Granovetter (1992) made the case that social entrepreneurs outperform nonsocial entrepreneurs.

Should society distribute social services to the highest bidder or do all people have a right to certain basic services? Who decides where best to deal with basic social needs? Do the people have a say in a global market that has torn down the walls of government or have we digressed to “the survival of the fittest?”

Deregulation and its effect on social needs.

Loss of government funding from deregulation places more demands for meeting social needs on entrepreneurs (Gliedt & Parker, 2007). Entrepreneurs need better conditions to deal with emerging social needs, but monopolies and oligopolies with notable political influence detract from making conditions more favorable for social entrepreneurs. Social enterprises now face dwindling support from donations and public funds (Craig, Taylor, & Parkes, 2004).

Without government playing a role, social entrepreneurs have a responsibility to deal with social needs, but need improved conditions to do so. Foster (2010) argued for a mixed economy because markets are not perfect and the inability of big companies to deal with certain issues. Foster called for needed government policies to deal with promoting entrepreneurship. These policies include a commitment to education and training, public guarantees of financing for entrepreneurs, public support for research and development in emerging industries, and regulatory changes promoting entrepreneurship through networking. How can conditions improve to provide better conditions for social entrepreneurs without government intervention?

Examples of some of the unmet needs.

Alternative energy, housing, healthcare, and education offer examples of issues social entrepreneurs can play a part in. Green energy focuses on environment problems besides solely profit-making ambitions, but threaten conventional energy source providers with competition (Gliedt & Parker, 2007). Does threatening conventional energy source providers offer enough reason not to develop energy alternatives? What happens when shortages exist in conventional sources? Should society just accept paying more? How does society deal with environmental issues like global warming?

Society can apply the same thinking to housing, healthcare, and education. Are these not at least in some part social issues needing solutions encompassing more than profit-making? Do social entrepreneurs have value in solving these problems?

We would like to hear more from you about what you think? Please leave a comment or let us know if you would like to learn more.

References

Alvord, S. H., Brown, L. D., & Letts, C. W. (2004). Social entrepreneurship and societal transformation: An exploratory study. Journal of Applied Behavioral Science, 40(3), 260-282. doi: 10.1177/0021886304266847

Bull, M., Ridley-Duff, R., Foster, D., & Seanor, P. (2010). Conceptualising ethical capital in social enterprise. Social Enterprise Journal, 6(3), 250-264. doi: 10.1108/17508611011088832

Craig, G., Taylor, M., & Parkes, T. (2004). Protest or partnership? The voluntary and community sectors in the policy process. Social Policy & Administration, 38(3), 221-239. doi: 10.1111/j.1467-9515.2004.00387.x

Elliott, J. E. (1983). Schumpeter and the theory of capitalist economic development. Journal of Economic Behaviour and Organisation, 4(4), 277-308. doi: 10.1016/0167-2681(83)90012-4

Foster, J. (2010). Productivity, creative destruction and innovation policy: Some implications from the Australian experience. [Article]. Innovation: Management, Policy & Practice, 12(3), 355-368. doi: 10.5172/impp.12.3.355

Gliedt, T., & Parker, P. (2007). Green community entrepreneurship: creative destruction in the social economy. International Journal of Social Economics, 34(8), 538-553. doi: 10.1108/03068290710763053

Granovetter, M. S. (1992). Problems of explanation in economic sociology. In N. Nohria & R. G. Eccles (Eds.), Networks and organizations: Structure, form, and action (pp. 29-56). Boston, MA: Harvard Business School Press.

LeanStartupCircleLA (Producer). (2011, October 16). Steve Blank on customer development: The second decade. Retrieved from http://www.youtube.com/watch?v=6t0t-CXPpyM

Molina-Morales, F. X., & Martínez-Fernández, M. T. (2010). Social networks: Effects of social capital on firm innovation. Journal of Small Business Management, 48(2), 258-279. doi: 10.2307/2393553

Noruzi, M. R., Westover, J. H., & Rahimi, G. R. (2010). An Exploration of Social Entrepreneurship in the Entrepreneurship Era. Asian Social Science, 6(6), 3-10.

Pärenson, T. (2011). The criteria for a solid impact evaluation in social entrepreneurship. Society and Business Review, 6(1), 39-48. doi: 10.1108/17465681111105823

Pichler, J. H. (2010). Innovation and creative destruction: At the centennial of Schumpeter’s theory and Its dialectics. Nase Gospodarstvo/Our Economy, 56(5-6), 52-58. doi: http://www.ng-epf.si

Soros, G. (1998). Toward a global open society. The Atlantic Online, 281(1), 20-32. Retrieved from http://www.theatlantic.com/past/docs/issues/98jan/opensoc.htm

Trexler, J. (2008). Social Entrepreneurship as an Algorithm: Is Social Enterprise Sustainable? Emergence : Complexity and Organization, 10(3), 65-85. doi: 10.1207/s15327000em0101_2

Zhang, Q., & Hung-Gay, F. (2006). China’s social capital and financial performance of private enterprises. Journal of Small Business and Enterprise Development, 13(2), 198-207. doi: 10.1108/14626000610665908

, , , , , , , , , , , , , , , , , , , , , , ,

1 Comment

Using Your Banker to Manage Cash Flows


I often see bankers trying to lure small business owners into letting them help manage their cash flows. Although managing cash flows is critical for the small business owner, I question the value of going to a banker for help. In my experience, many bankers only have banking experience and little other tangible business experience. Banks concern themselves with cash flows mainly to ensure customers produce enough funds to pay the bank back. Is this approach enough to create enough cash to run your business?

Banks do not provide services without some form of compensation and may charge fees for managing cash flows. Banks often have no understanding of your business and what it takes to increase cash because all they understand is that you must sell more without understanding the tactics it takes to make more sales. Many times banks simply focus on cutting costs without considering new ways to raise revenues. Is this the approach you need?

My advice to the small business owner is to look at your own cash flows daily. Looking at your own cash flows will help understand where to increase revenues and where to cut costs. The business owner is the person who needs to decide how to increase cash and how to cut it not some outside party with little experience in your business. A business owner can look at the environment in which the company works and do some scanning to see what best fits the company’s model.

A company that does need help should employ a coach or an analyst to help design a procedure for the owner to make his own daily evaluation of cash flows. A coach or an analyst can also help the small business owner asked the right questions about what to add to improve revenues and what to cut to decrease costs. Experience and education are key ingredients in deciding what revenues to improve and what costs to cut. A good consultant is worth his or her weight in gold in helping the small business understand how to produce enough cash flows to keep a profitable business.

In my view, a good coach or consultant is there to guide you and help you develop the experience you need to make intelligent cash flow decisions. Yes a good coach or consultant comes with a cost, but the cost pays for itself because the small business owner benefits from learning how to manage his or her own cash flow. Do you want to learn more? Do you think you can get the same service from your banker?

, , , , , , , , , , , , ,

1 Comment