Tag Archives: Culture

Midlife Entrepreneurs Better Prepared Than Younger

One of the most gratifying things I get to do is work with entrepreneurs and business owners to optimize their businesses. In the area where I live, most of the media attention is focused on technology startups usually run by people in their 20s. What I find interesting about the new businesses in our area is that the founders who are willing to rent an office and hire a consultant or take some classes tend to be mid-life entrepreneurs. These older entrepreneurs actually are more prevalent than the younger ones. Dane Spangler, a researcher at the Ewing Marion Kauffman Foundation wrote in a 2009 report, “in every single year from 1996 to 2007, Americans between the ages of 55 and 64 had a higher rate of entrepreneurial activity than those aged 20-34.” Also, according to the 2011 Global Entrepreneurship Monitor U.S. Report — a survey of a representative sample of the U.S. adult-age population — 15.4 percent of Americans aged 55-64 and 12.8 percent of Americans aged 45-54 run their own business, compared with 0.8 percent of Americans aged 18-24 and 4.9 percent of Americans aged 25-34.midlife entrepreneur

Bureau of Labor Statistics data on both incorporated and unincorporated self-employment show an even more extreme pattern. The rate of self-employment is higher among people in their 60s than even those in their 50s, let alone those in their 20s or 30s. In fact, the bureau’s surveys of American workers reveal that people aged 65 to 69 are self-employed heads of corporations at four times the rate of people aged 25 to 34. 

The Small Business Administration reports in its recently released publication Small Business Economy that, from 2000 to 2011, self-employment among people under 25 dropped 9 percent. Among those aged 25 to 34, it fell 8 percent, and for those between 35 and 44, it declined 24 percent. By contrast, self-employment among those aged 55 to 64 rose 54 percent, while it increased 36 percent among those over 65.

Scott Shane (A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University) shares an interesting observation that, even in high technology, entrepreneurs are much more likely to be over 50 than under 25. Research by Vivek Wadhwa, Richard Freeman and Ben Rissing shows that these older entrepreneurs, while they fly under the media radar, are very prolific and on the rise.

Shane asks (as you might), “Why are baby boomers more likely than their kids to be entrepreneurs?” He goes on to answer his own question:

Researchers have two hypotheses, the second more plausible than the first. The first explanation is a cohort effect: Today’s young people don’t want to run their own businesses as much as their parents did were when they were young. The more plausible explanation is an age effect.

The reason Shane provides for the cohort effect being a weaker argument is a body of research conducted at UCLA within the Cooperative Institutional Research Program (CIRP). CIRP points to a trend over the past quarter century whereby college freshmen are less likely to want to be a “business executive,” “accountant,” or “actuary.” Instead, a higher percentage want to own a business now than previously.

So, while more freshmen want to be business owners, fewer people in their early twenties are actually starting businesses. This is where the age affect provides an explanation. Those who prefer this argument would say that the experience gained and savings accumulated over a period of fifteen years or more give one more confidence to start a business later in life. While there are certainly more responsibilities for the stereotypical midlife entrepreneur on the home front, this age group appears to have figured out how to address those responsibilities and still be willing to start businesses at a higher rate than the younger counterparts.

What’s holding you back? Start a business as a second career!

 

Failure to Innovate Spells Decline

History has a way of repeating itself. JP Nichols, the CEO of Clientific, recites a passage from Theodore Levitt’s 1960 treatise “Marketing Myopia“ to illustrate how railroads missed a window of opportunity in their business life cycle:

“The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product oriented instead of customer oriented.”

railroadThen, Nichols makes the connection of this faulty business strategy to the modern banking system. As an industry, he feels the banks have become product rather than customer focused. Here’s how he describes the slippery slope slide into irrelevance:

Mature industries erode subtly at first. Hungry upstarts nibble at segments too small or unprofitable for entrenched incumbents to waste much energy protecting. But eventually the new entrants gain traction and move upmarket to larger and more profitable segments. And new categories are invented along the way.

Then, as it relates to banking, he writes:

Economic cycles wax and wane, but people will always look for ways to save and borrow, to move money from one place to another, and to occasionally get some advice from someone they trust. Traditional financial institutions like banks and brokerages held a near-monopoly on those activities for generations, but banks that continue to be bank-oriented will continue to lose to an increasingly broad group of competitors that are truly customer-oriented.

Think about what’s been happening around the edges of the banking industry. Peer-to-peer lending platforms and retailers’ captive financing programs have taken lending business that once was nearly the sole province of banks. New payments ventures like Square and Dwolla provide services that people want to use because of their great design and ease of use. SigFig is an online registered investment advisor with over $50 billion in assets tracked on its platform. Innovative startups like Simple and Movenbank are reinventing the whole notion of what it even means to be a bank.

The scariest part? None of those companies even existed five years ago.bank

In contrast to the banks’ inability to anticipate the needs of consumers as well as these new enterprises, Nichols salutes another highly regulated industry, healthcare, which he says, reinvests 10% to 15% of its revenues back into research and development, and “represented 21% of the $603 billion spent globally on R&D in 2011, according to a Booz & Co. study. Financials don’t even make the list, lumped in instead with the 2% of “other” industries, collectively in tenth place.”

Nichols, who was the first chief private banking officer for US Bank, challenges the industry to redefine what business they are in, as the railroads should have but didn’t. He feels that a redefinition of the industry to become more responsive to consumer needs and niche services to serve them would be revolutionary.

But, set aside railroads and banks. Look at your own organization now. How can you become more innovative? How can you light the fire of intrapreneurship so that it burns brightly a generation from now? Very simply: begin with the customer in mind and build something that will blow their socks off in terms of its ability to resonate with deep seated needs. Go do it!

Soft Skills Matter in Business – Even if Not Measurable

Throughout my career, I have had the opportunity to work alongside some brilliant co-workers and clients. Whether it has been inside a public accounting firm, or as an advisor to engineering and construction companies, I am often surrounded by folks with strong technical skills. Since my role has usually involved organizational development, strategy, or marketing and business development, I have heard time and again how “soft and fuzzy” topics such as relationships, emotional intelligence, and creativity and communication are less needful than the technical skills.

Susan Mazza, who writes a blog entitled Random Acts of Leadership, recognizes the dichotomy of “soft” versus “hard” skills in her recent post, “The Power of Soft.” She states in the post that, “the very need to distinguish “soft” vs. “hard” speaks to a paradigm that has long revered hard results as the only ones that really matter. Unless something can be quantified and measured the underlying belief is that it is somehow less valuable and hence of lesser importance.”Soft vs hard skills

Whether I have been in conversations with a CFO, a business owner, or a  VP of operations, I have heard over and again how that which cannot be measured must be insignificant and pale in priority. Mazza references a recent TED Talk by Dr. Brene’ Brown, “Leaning into Vulnerability” in which Brown shares how one of her research professors once stated, “If you cannot measure it, it doesn’t exist.” Mazza observes that many with advanced degrees subscribe to a scientific framework that assumes “measurable” is the only test for “real!”

Dr. Brown’s talk about vulnerability addressed the effort to view “soft” subjects with “hard” data. New insights have prevailed that challenge the long-held distinction within the business world of the value of each category of skills. Mazza’s view of the new awareness is that, “in our relentless pursuit to collect and analyze data, we all too often ignore the most important measure of all – our senses!”

The behavior we see and emotions we feel, according to Mazza, are the source of the most powerful tool we have as leaders and mangers – our ability to observe. She observes the following:

You have probably heard the phrase, “the tension was so thick you could cut it with a knife.” Can’t you feel that tension? How much productive work gets done when that kind of tension is present? Yet we often grind through what we see and feel through simple observation, knowing both the experience and the result are going to be less than satisfying.

Would having a mood Geiger Counter to assign the tension a number really make any difference?

By simply observing the mood and the impact it is having on your ability to fulfill your commitments, you are able to take action to make a difference in any moment. How to take that action is, of course, another subject.

The point here is the real power of soft comes from our innate ability to observe. So perhaps it’s time to give up our attachment to measuring all things and the belief that, “If you can’t measure it it doesn’t exist.”  Why not start  learning to better use the tools we have been born with – our senses – as an access to improving relationships, enhancing performance and creating great places to work?

The ability to navigate through tensions, create win-win scenarios, and build esprit de corps comes not from technical, “hard” skills, but from those soft and fuzzy assets that many C-suite executives and business owners underestimate. Think about your own organization and how greater respect for soft skills could make it a better place to work, where senses are valued equally with data and relationships that build goodwill are put on a pedestal.

 

 

 

Entrepreneurial Field of Dreams

Many communities across the United States are scrambling to come up with an agenda for entrepreneurship. With significant success stories in the San Francisco Bay and Boston areas, others have jumped onto a bandwagon. Each community pursuing the elusive prize is making wagers with a combination of public and private dollars to try and effect economic growth through encouraging start-ups. While the models being used are very different, the common denominator is that each effort, like a start-up itself, must determine where to focus to obtain the best trade-off of investment versus anticipated benefits.

Go For It Start a BusinessInstead of one of the “hotbeds” of entrepreneurship, I like to look at what is working in the hinterlands. Columbia, Missouri certainly seems to fit that categorization at first blush. Mike Brooks leads REDI (Regional Economic Development, Inc.) in an effort to “promote positive economic expansion and provides increased economic opportunities in the Columbia area, assisting entrepreneurs, developing businesses, and companies relocating.”

His group sees the following as Benefits for Local Communities committed to the process:

  • Employment and Opportunity: Cities are places where people live, work, and play. Cities need opportunities for employment so citizens can afford to enjoy the metropolitan lifestyle. Harvard Business School professor Howard Stevenson defined entrepreneurship as “the pursuit of opportunity without regard to resources currently controlled.” Prosperous cities work to understand this dynamic, since entrepreneurs will establish their businesses in locales that support business growth. The jobs created by entrepreneurs not only support current citizens’ lifestyles, but they also make specific cities more attractive for future businesses to establish themselves in that location.
  • Tax Income: Communities require governance to provide a structured environment. The infrastructure of successful cities would not exist without money coming into local economies from the sale of products or services. The necessary public works and amenities that sustain a city depend on businesses, as well as resident taxes and purchases.
  • Identity and Character: Entrepreneurs help create the unique character of a community. This character enhances the sense of place and belonging that adds to the overall quality of life. Most entrepreneurs start businesses where they live, which allows companies to develop deeper connections to the community. Apple, Google, Dell, and HP started as entrepreneurial companies that were identified with, and formed a strong relationship with, their surrounding communities.

In order for these benefits to accrue to the community, an entrepreneurial ecosystem has to be built. In Raleigh, the Innovate Raleigh initiative is the rallying cry for such dedicated efforts, though many others are tackling the challenge in differing ways. The important thing is to, as Brooks recommends,

Support Entrepreneurs

  • Recognition and Shared Goals: Already-established entrepreneurs in the community can greatly help city organizations focus on effective economic development, prioritizing incentives, and planning strategies to encourage business growth. The presence of colleges or universities can also be a great channel for enticing businesses to launch or expand in a community. A diverse population of students, professors, visitors, and residents allows for more variety in business ventures.
  • Community Programs: Several communities around the nation continually find successful ways to encourage local entrepreneurs. In the 1980s, the city of Littleton, Colo., decided to focus on homegrown businesses as a community growth strategy. They established “economic gardening,” which focused on bringing sophisticated, corporate-level tools like database research, geographic information systems, search engine optimization, and social network mapping to small businesses within Littleton. This nurturing environment proved successful and serves as a model for similar communities throughout the nation.

Other best practices for supporting entrepreneurs have less to do with cool co-working spaces and meetups and more to do with helping someone who’s never run a business sort through what they will face. A proven entrepreneurship curriculum, complemented by personal mentoring of the founders by experienced start-up veterans, is so needful and should be a part of every community’s offering to all entrepreneurs they hope to serve.

Main Street Start-ups Better

 

Sean Ogle, the founder of Location Rebel, once faced the daunting challenge of whether to go the start-up route or begin a lifestyle business. He took the time to examine the two alternatives and feels that lifestyle businesses are a better option for many people. He offers 7 reasons why he thinks this way below:

1. You are not Instagram.

For every startup that sells and makes millions, there are hundreds — if not thousands — that fail or, even worse, continue to just barely make it, sucking the life out of you in the process.

2. Building a startup is building a 9-to-5.

While it’s fun to start up running on nothing but adrenaline and Red Bull, the excitement wanes and the monotony sets in after a few months. Many startup companies turn into really bad 9-to-5 jobs for the founders. For example, Jun Loayza who, after getting over a million in funding and successfully selling two companies, left his current startup to pursue a lifestyle business.

3. You won’t wait years to turn a profit.

When you work for yourself, your overhead is limited. Salaries, office space, benefits? That’s all on you. I started my most recent business with less than $500 and it took me three sales to become profitable. Most startups are lucky to be profitable after three years!

Lifestyle business4. You can work from a beach with a Mai Tai.

You know that dream everyone had after reading “The 4-Hour Workweek” where they’re chillin’ on a beach with a cocktail, working from a laptop? That really is possible. This year I’ve already worked from places like Vail, Playa del Carmen, Cuba, New York, China and Jordan among others — all without skipping a beat in my business.

5. You’ll have more flexibility than Gabby Douglas.

You wanted increased flexibility and control in your life? Fat chance in a startup, especially when you’re playing with someone else’s money. As a lifestyle entrepreneur, you truly have the flexibility to set your own schedule. For many, that’s more time with friends and family; for others, it’s travel and adventure. You get to decide.

6. Stress is minimized.

Thoughts like “How am I going to make payroll this month?” and “Revenues were 30 percent less than projections, what will the investors think?” or “My partners and I have drastically different opinions of where the business should go, what do I do?” are all common issues in a startup. A lifestyle entrepreneur has no one to answer to but themselves, thus reducing the stress that comes with common business problems. 

7. You can become a modern-day Renaissance person.

I can’t focus on just one thing; I’m always all over the place. Being a solopreneur has forced me to learn how to handle all aspects of business — marketing, accounting, sales…you name it, I do it. In this position, you grow your expertise and become a more well-rounded business person, and that will undoubtedly help you in any future endeavors. 

 

Much of what Ogle says has basis. Yet, when I think of a lifestyle business, the image that comes to mind is of a semi-retired person who has enough savings that income needs are very minimal. Solopreneur, a term used under the category of Renaissance leadership, seems more apt. The beauty of not being a sole proprietorship, however, is the opportunity to create jobs, build community, and share life with others. At EntreDot, we often refer to such an enterprise as a “Main Street business.” These types of businesses represent about 35%  of start-ups, where fast growth (often venture or angel-backed) is about 5%, and sole proprietorships about 60%. 

Let’s go create more Main Street businesses that have many of the benefits espoused above, but also help grow the economy for someone other than just ourselves!