Let’s see how well you know about entrepreneurs in

1. The primary reason that people start new businesses is:

• a. to make more money
• b. for flexibility in their schedules
• c. to achieve independence
• d. to make a contribution to society

2. It is very easy to define what small business means.

• T or F

3. ____% of small businesses survive at least the first 6 years.

• a.40
• b.10
• c.68
• d.25

4. All business owners and managers make a lot of money.

• T or F

5. All but which of the following are declining job types?

• a. bank tellers
• b. insurance claims clerks
• c. entrepreneurship professors
• d. farmers/ranchers

 
6. Which of the following is NOT among the growing industries expected to produce the most new jobs by 2012?

• a. service
• b. manufacturing
• c. education
• d. health care 

7. It is estimated that up to 50% of today’s college graduates will work in some kind of global activities in the future.

• T or F

8. Age and professional maturity are important in the decision to start a new business.

• T or F

9. Which of the following are most perceived to “have a good influence on the ways things are going”?

• a. police
• b. business owners
• c. churches
• d. local and state governments

10. ____% of small businesses in the

• a.90
• b.49
• c.65
• d.30

 

 

 

 

1.C 2.False 3.D Heavily argued 4.B 5.C 6.B 7.T 8.False 9.B 10.A

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Do you have what it takes to break the corporate mold and succeed as an entrepreneur? Many have the thoughts of becoming their own boss, but few have the drive and real potential to really make it big. Entrepreneurs are risk takers – both personally and financially – but in a planned fashion in ways that will limit the odds of failure. They must perfectly balance risk and potential award so they can either pursue or discontinue ventures. Some of the greatest entrepreneurs develop strategies to use the least amount of resources possible to leverage their future returns.

If you want to have success with your ventures, you need to assemble a team of passionate individuals that strive for a common goal. Because you will be the leader of the organization, you must be able to infuse imagination, motivation, passion, diligence, and vision in your partners and venture.

Most entrepreneurs do not look at their ventures as a get-rich-quick scheme; therefore you must plan for the future. Developing a short, mid, and long term goals for the business is key to evaluate your achievements. When the business grows to its maturity stage, a developed exit strategy must already be implemented to leave the business on its high note. Good ventures are long term businesses with a mentality to sell at the correct time. You can’t hang out to your baby forever. You must let it go sooner or later.

Some people are not meant to succeed in the corporate world. These individuals have a different calling and must use their talents to excel in areas where most have failed. But remember, planning, innovation, and perseverance are the keys to success. Just because you fail in the corporate world once or twice does not mean to jump head first into your own business.

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This is more of a motivational post than a financial article. But trust me; you can apply these concepts to many parts of your life.

What distinguishes you from a rich entrepreneur? Do you just want to be working in the corporate world or do you want to start something fresh? Everyone can be successful, but the fuel that drives certain individuals is what makes them rich and successful. Have you ever had a really good idea, but you were too afraid to actually talk about it? Well that right there means you do not have the drive for success. Fear needs to be taken out of your vocabulary if you want to succeed. As FDR stated during his first inaugural address, “The Only Thing We Have to Fear Is Fear Itself”. That was man who was about to step into the biggest war this world has ever seen. You need to have that sense of mentality to achieve greatness.

Rich people think to the future, poor people think of the present. The best athlete this world has ever seen said it best “Skate to where the puck is going, not to where it is.” If you want to be successful at whatever you want to do, don’t think of things that have already happened. The world needs more forward thinkers and fewer historians. Don’t get me wrong I live and die for history, but what excites me is the future. One of the most powerful tools you can possess is the ability to learn from the past and apply it to the future.

Studies have shown that chief executives of winning companies were found to have three common traits: perseverance, a builder’s mentality, and a strong propensity for taking calculated risks.  In addition, dedication to a specific goal and having the vision to make it a reality is the cornerstone to entrepreneurship and creativity.

“Perseverance is the hard work you do after you get tired of doing the hard work you already did.” ~Newt Gingrich.

Love what you love and hate what you hate. If you love building decks, think of how you can capitalize on your interest. If you hate your job, seriously think about a new career. I know many people who have gotten rich from jobs they have hated, but they were not happy with their lives. People that are extremely rich love their careers and love to work hard at it.

“Nothing that sends you to the grave with a smile on your face comes easy. Work hard doing what you love. Find out what gives you energy and improve on it.” ~ Betty Coster, Entrepreneur.

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Globalization is still a pretty frightening concept for an “old-school” business type like me. Even though I cannot ignore the fact that it is happening around me, I still like having the ability of real life meetings instead of virtual meetings. Personally, I feel that because of the internet and other types of technology we are taking away one of the best parts of international business—face to face contact. “Nandan Nilekani, the Infosys C.E.O., was showing me his global video-conference room, pointing with pride to a wall-size flat-screen TV, which he said was the biggest in Asia. Infosys, he explained, could hold a virtual meeting of the key players from its entire global supply chain for any project at any time on that supersize screen. So its American designers could be on the screen speaking with their Indian software writers and their Asian manufacturers all at once.” I always remembered reading books about the Japanese never going through with a business deal without knowing their American partners for at least two years. I like the past business model and I feel like brand loyalty will suffer because of the ease of finding new business partners.

Globalization will have a huge impact on the way America operates. I will be part of the generation that might see America slip to number two or three in terms of world economics; which is the reason why I think it’s kind of scary. Previous generations always saw a bright and brilliant future for America. Now we are being painted a vivid picture on what America will look like if we do not change some of our past ways of doing business. It wasn’t always on how cheaply you could make a product, it was how well-built you could make a product. I think instead of trying to compete with cheaper labor and cheaper products we need to improve our quality.

The Japanese businesses as a whole are still looking extremely profitable in the future because of their total quality management. We need to readopt that concept in order for our country to flourish. One American company that always comes to mind because of their never ending quality improvements is Apple Computers. Apple’s business model is to provide a top quality product with revolutionary innovation that no other products possesses at the lowest possible price.

The one way that globalization will end up helping me in the future is the ability to have information at my fingertips. Investing in countries that are developing at an incredibly fast rate is one way that I will be able to profit from their success while still spending my money in America. I like business and the idea of free enterprise, but we shall see if America can still hold on to their title as the economic giant.

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A few weeks ago I was introduced to a young woman, Marie, who had invested $5000 into her friend’s music production startup. The terms of her investment were as follows:

1) she would receive 1% of the company’s gross revenue ad infinitum, paid quarterly

2) she would be guaranteed to recoup her $5000 in a lump sum payment after 6 years if it had not been paid back through quarterly earnings

Her question: “My friend’s father has been urging me not to call the $5000 note next year. He says that the company is posed to take off. It just needs a little more time.
What should I do?”

Before responding lets go over the details again and see if it makes sense. We are about to enter the world of company valuation. She paid $5000 for a 1% stake in the company on day 0. So what is the company’s market value? If 1% of the company was valued at $5000, then 100% of the company would be worth $500,000. A company’s initial valuation is not set in stone, rather, it is negotiated between the owners and the investors. By agreeing to the terms, Marie confirmed that, to her, the startup was worth $500,000.

Next we need to define what stake she has in the company: is it debt or equity? Debt implies a liability and enforcement of repayment. Equity implies ownership and offers no promise or reimbursement. Which does Marie have? The promise of 1% of gross revenue in perpetuity tells us that it is equity. The promise to repay in year 6 is a clear liability. So in reality she has both equity in the company and a $5000 receivable.

So should she call the receivable? For the following five years, the record studio posted the following earnings:

Can you dissect these results like a financial archaeologist? What happened? The owner’s father appealed to her, “we are looking at getting some venture capital money. We just need to keep things going until then.” What should she do?

The “solution”

The story told is a typical one in the music production industry. The entrepreneur had a friend with some money who needed an album, but after that the connections dried up. For the next four and a half years the business limped by doing off-the-street recordings for walk-ins. Growth is flat. Total earnings have been about $25,000. This company has no future.

As for getting VC money, that too is impossible. The company’s financial structure is toxic to VCs. With Marie receiving 1% of the company’s revenue in perpetuity, no matter how much they invest she will benefit. For example, even if they pump $50M into the venture and make it a powerhouse doing $40M / year in recording, Marie would still be entitled to $400,000 of that income. This company is “unfinancable.”

The correct way to structure a startup involves shares. An investor buys X shares for Y dollars. Dividends are then paid on shares. This allows future investors to come in and be properly compensated. I will talk about raising capital for startups in a future article.

So what does the future hold for Marie’s investment? The prospects look bleak. The company has barely made enough in 5 years to service her debt and, if she only owns 1% of the company, how will it service all of its notes? It is no coincidence that the owner’s father is courting people not to call their notes. Doing so would bankrupt the company. I advised her to contact the CFO immediately and attempt to settle the note for $2000 - only 40% of its face value. If she waits until next year, she will receive nothing along with her fellow investors.

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