ENT: How to Evaluate Your Business Idea
ENT: How to Evaluate Your Business Idea – Awesome flowchart to check if you’re ready to start your business from Moo.com. http://ow.ly/2z9hns
How Missouri Fares as an Entrepreneurial Powerhouse
The US Chamber of Commerce posted a report last month on how the states were doing in promoting enterprise. Entitled Enterprising States: Policies That Produce (get the report here), the report rated states on 33 attributes the Chamber felt were essential to economic (and entrepreneurial) growth in areas such as Economic Performance, Exports & International Trade, Innovation & Entrepreneurship, Taxes & Regulation, Talent Pipeline and Infrastructure.
Missourians are probably curious how we did. Of 33 measures, Missouri scores in the top 10% (i.e. the top 5 states) on none. We had 2 measures (Entrepreneurial Activity and Higher Education Degree Output) that were in the top 20% (a.k.a the top 10 states) and 10 more measures in the top half of states. The chamber gave top 10 state lists in the six areas mentioned above, and Missouri did not have one mention on any of the lists. On the list of “The Next Boom States,” Missouri did not get mentioned.
As a state that prides itself on low taxes and being a haven for business, state leaders and a host of politicians would probably expect the Show-me State to fare well, but in comparison to other states on those Taxes & Regulation measures, Missouri’s performance is anemic. There are six measures (Business Closure, Tax Environment for Mature Firms, Tax Environment for New Firms, State business tax climate index, Small Business Survival Index, and State Cost of Living Index). Missouri is in the bottom half of states on the first three, and ranked between 11 and 25 for the last three. And this is one of the categories where our state’s performance is strongest, along with the Talent Pipeline.
In the report’s narrative on our state, the Chamber applauds Missouri’s efforts to improve the economic climate and mentions advances in training and promoting manufacturing and exporting. It is gratifying to see the state getting recognition for making strides, but reports like this, which are really compendia of already existing surveys, bring into sharp relief the need for the state legislature to do more to help promote efforts to grow our economy. Some of these, like an angel tax credit, higher education supports, funding for economic development, or supports for improved Internet access, are relatively inexpensive, and provide relatively fast paybacks in improved business and job results. Improving the tax climate in ways that groups like the Tax Foundation recommend would help, but also require more legislative energy and pose bigger challenges in making sure the state has enough revenue to meet its own obligations.
Missouri’s entrepreneurs did their part, starting businesses at the 6th highest rate in the nation in 2011, despite the less-than-ideal conditions in the overall economy and (as the Chamber’s report indicated) the state. It would be a great time for our legislators to step up their own game.
Finding a Programmer in St. Louis
Today, so many businesses need programming help for apps, websites or the heavy-lifting back-end of their businesses. There are a ton of reputable IT businesses, but they are busy and their prices can be too high for start-ups. So people come to me looking for places to find programmers who will work for free, cheap or equity. I asked by some St. Louisans I depend on for entrepreneurship information and here were their suggestions:
Ask your own alma mater if they can refer you to someone on campus.
More generally you could try:
1 Million Cups at 9am every Wednesday morning at nineNetwork.
St. Louis version of Startup Digest (www.startupdigest.com) for upcoming entrepreneurship events.
Also, just ask your facebook, linkedin or other social network friends.
Realize that these are not situations where you can sit back and wait for people to come to you. After all, you’re not paying big or a brand name gig for their resume. If you try the above, you need to be the one getting out and networking, passing out your business card (maybe with a sticker on the back describing your programming need), and working the room.
Billiken Angels Workshop: Pitching To and Planning for Angels
Ever wonder what DO angels want? Learn that and more at a free workshop being offered by the Billiken Angel Network, one of St. Louis’ two angel networks. The workshop is open to the public, but seating is limited and reservations are required.
The Billiken Angel Network at Saint Louis University will host a workshop for entrepreneurs seeking angel investment funding from 5:00-6:30 p.m. Monday, April 25, in room 173 at the University’s John Cook School of Business, 3674 Lindell Blvd. The event is free and open to the public, however seating is limited and reservations are required.
The workshop is designed for start-up entrepreneurs with a completed or in-process business plan and focuses on how to prepare the business plan and the “pitch” for presentation to angel investment groups and bankers. BAN staff members Jerome Katz and Andrew Fehlman will discuss:
* What angels look for in business plans.
* How to think about valuation and deals.
* The seven slides of the perfect business plan pitch.
The Billiken Angels Network is a St. Louis-based angel network and is dedicated to funding deals for people and firms with SLU DNA. You can learn more about the BAN at http://www.billikenangels.com.
To register for the workshop, contact Jeanne Rhodes at SLU’s Center for Entrepreneurship at (314) 977-3850 or by email at email@example.com.
Super 7: The 7 Best Free Sources for Business Plan Help
I was asked by a budding entrepreneur how to get started on their business plan, and I thought I’d share the answer as to my 7 favorite spots for getting started. All are free, whether for the planning materials or the help offered.
Business Plan Templates
(These show you how to craft a plan)
1. SBA has some good free guides at www.sba.gov/content/templates-writing-business-plan.
2. SCORE also has some at http://www.score.org/template_gallery.html
Online Business Plan Makers
(These ask you the questions and format your responses)
3. Purdue’s Agricultural Innovation & Commercialization Center at https://www.agecon.purdue.edu/planner/
(click on ‘start here’ on business planner).
4. My Own Business offers free and for-fee services at http://www.myownbusiness.org/course.html (scroll down and click ‘Free Access to online Course).
Note that all of these are pretty high quality sources, although they do have slightly different outlines of what goes in and where it goes. It is up to you to decide if every single entry is needed (hint: it usually isn’t), but if in doubt, it is better to leave it in (or even better, get free advice from the sources below.
Good Free Advice on Business Plans
(They will offer you advice about your plan.)
5. SBDCs (Small Business Development Centers) have the most offices nationally, so they are your best chance for local advice. You can find them through you can find at http://www.sba.gov/content/small-business-development-centers-sbdcs.
6. SCORE.org offers free advice from over 300 local offices nationwide, or even via email.
7. And don’t forget the original first source of help, the US Small Business Administration at SBA.gov and at district offices in every state.
With these resources at your side, you are sure to get a great business plan going.
Missouri – An MO State Alum’s view
If you’ve gone international – brag to Uncle Sam!
This came across my desk today. If you’ve been successful in international trade, consider sharing your story.
Rare Opportunity for Missouri Businesses to Make a Difference!
The US International Trade Commission is holding a public hearing in St. Louis on Wednesday, March 10, 2010 at the Hilton St. Louis at the Ballpark, One South Broadway; St. Louis, MO 63102. The purpose of the hearing is to allow small to medium-sized businesses to give first hand testimony on their experiences in international trade. The hearing will focus on:
* identifying barriers to exporting noted by firms, and the strategies they use of overcome those barriers
* identifying the benefits to of increased export opportunities, including free trade agreements and other trading agreements;
* providing insight into the multinational operations of small and medium-sized businesses, including foreign affiliates of US firms, and indirect exports through sales to larger exporting firms
Information on the St. Louis hearing, including the procedure for requesting to testify, is available at the following link:
We urge all of you consider participating, and please encourage all of your clients, suppliers, and contacts to participate. The final USITC report goes to the US Trade Representative and the report becomes part of the Federal Register. This is a chance to make progress exporting for America!!!
A Thousand Points of Small Business Light? Well, Lets Start With Three
It may be too early to hope for a “thousand points of light” for America’s small businesses, but I was asked recently if there was any good news out there, and here were three I could think of:
There is a bright spot for industries taking advantage of the downturn, for example real estate trusts buying up distressed commercial properties in hopes of the upturn. (The residential market has a similar operation going, but with less upside potential and more human capital involved.)
More students are deciding to start their own businesses rather than fight the rising tide of a horrible job market. Unemployment in the 18-24 age group is over 16% (http://michael-e.com/2009/08/unemployment-hardest-on-18-to-24-year-olds/).
We also seem to be seeing a surge in part-time self-employment, with a lot of small-scale home-based businesses, a lot of selling on eBay, and other low-cost, low overhead efforts to help make ends meet. As the economy picks up, a lot of people will abandon these efforts for better-paying employment, but the skills of working for yourself, and the emotional payoffs of it, mean that we are likely to see a long-term growth in self-employment after the post-recession dip.
Three’s not a thousand, but it is a start. I’d love to hear about more.
The Silent Crisis – Unrealistically High Business Valuations
GM is about to pull the plug on Saab, since it cannot successfully conclude negotiations with any buyer. Tens of thousands of businesses will silently close down over each of the next 10 years as their owners are also unable to find anyone willing to buy their businesses. And at the other end of the small business life-cycle, there are thousands of start-ups seeking outside investment who won’t get it.
The common factor in all of these is a valuation of the business set too high. It is widespread enough and significant enough to warrant being called a crisis, but it is one rarely discussed.
Over the past year for example, the angel group I manage saw over 100 business plans, over 80% for start-ups. Most of these had no customers, no sales, no revenue stream. Most of them had no protected (or in many cases protectable) intellectual property, but the vast majority had valuations of $1 million. You can see what that amount of money looks like in the photo to the right. The causes of this kind of thinking? In part it is following a norm – blindly – since the typical amount given is $1 million. But when asked to defend the number, most entrepreneurs vigorously promote their sweat equity and underlying concept as worth the valuation.
Inc. Magazine has an annual valuation section which gives the worth for operating companies in more than 100 industries, but few start-up entrepreneurs refer to this in assessing their own plans. So lacking hard data, why do entrepreneurs persist? Hubris comes to mind, and in that version of passion, the start-up entrepreneur, the established entrepreneur, and the CEO of a billion-dollar corporation find a common ground.
Family business experts suggest that about one-third of family businesses (maybe more) will face the retirement of the founder over the upcoming decade. The same will be true for small businesses in general. Even with family successors, less than 30% of family firms make it into the next generation, and the statistics for transfer of non-family small businesses are even more bleak. These closure hurt customers and employees, and basically mean that the owner gets no value out of the business at the point it closes.
On the other hand, when asked to sell the business, suddenly a business with no value if closed down takes on all sorts of value, producing multi-million dollar valuations, again with little or no basis in fact, like even the rough rubrics given in the Inc. Magazine valuation guide. Typically owners who have taken decades to build a businesses value, and who know what their cash flow looks like, want nearly all the value of the business in cash, and the sooner the better – tomorrow for instance!
Amazingly, it is little different for Fortune 500 corporations. Monsanto saddled their Solutia spin-out with mountains of Monsanto’s own debt, as a way to improve Monsanto’s bottom line – and make it less likely for a competitor to buy Solutia. In the case of GM’s Saab, the valuation placed on Saab as well as the liabilities GM has likely been pushing on any eventual Saab buyers, have become deal-breakers. For cash-flush Chinese businesses eager to break into the American market, such inflated deals are acceptable, but for less-motivated buyers, the hubris-inspired valuations are deal-breakers.
The solutions are the same regardless of the size of the business – pick honest valuations, structure deals so that the buyers can pay off the purchase over an extended period, and don’t saddle the business on the block with outrageous debt or valuations. Half a loaf is better than none goes the old saw, and for the shareholders of GM and the owners of millions of American businesses destined to close up over the next ten years, that old saw should have new relevance.