Financing: WIP

Yesterday we mentioned community coalitions, and left the concept hanging. Here is what our community is doing to help entrepreneurs.

We are building an entrepreneurship education system for youth, to help them build local businesses, which is not a new idea. But our system will assist students with the whole process, from idea formation to funding.

Our town here is to small to handle this project, so we have joined with some really smart people in Carthage, and together we will roll this out to the whole county. We're creating a coalition of private and public organizations, focusing on the people within those organizations.

Included in the coalition are banks, grant experts, those familiar with USDA loan options, educators, education administrators, and successful entrepreneurs.

Note: this is still a work in progress. 

Financing

The wannabe entrepreneur usually complains about one thing: money. "I've got a great idea/business plan/potential innovation/ but I need funding. And banks are not lending these days."

I've heard this many, many times.

In the current environment, we offer two possible suggestions:

 - Move forward without funding. We call this bootstrapping.
 - Rely on community coalitions that help you find funding.

We'll talk about both of these options.

The new, new economy

The model of business that we have operated under for a century or more is that the firm’s purpose is to lower costs by increasing efficiency. As much as possible, firms safeguard information on how they do this.

Perhaps the new era heralds a different purpose for the firm. Now our responsibility is to increase knowledge, and by synergizing it with the knowledge produced by others we multiply our knowledge. The whole world benefits. 

The U-Turn

In Japan, the term "U-turn" is applied to people returning from the "big city" to their hometowns, and is involved with the career concerns involved with such a move.

When you decide to leave the cube farm (slang for a floor full of cubicles) and move to a place with real farms, you need to find a livelihood.

Here at the Nauvoo Commuter, we encourage self-employment in that situation, as we do for most rural dwellers. But your plan of attack will need to be different from someone who has already lives in your new neighborhood.

 - you won't have as many connections, your local personal network will be 
   smaller
 - you will lack a knowledge of the "lay of the land" that an already local will have
 - your cost of set up will be more, as moving and changing lifestyles have costs

...but:
 - you will bring creativity to the situation; you've seen other options for how to 
   solve problems


If you persevere, you'll do fine. 

Urban Poor vs. Rural Poor

When Americans think of economic development, they are generally envisioning the need to eliminate inner-city poverty. But isn't the problem of rural poverty just as important? 

The Rural poor deserve revolving loan funds, efforts to encourage banks to lend to urban residents, microcredit structures, and charitable help-them-to-help-themselves organizations just as much as the urban poor do. 

That is today's social comment. Dissenting arguments are welcome. 

Accentuate the positive, OR eliminate the negative

Annoyance bears consideration. If you could eliminate one annoyance in your life (with the wave a magic wand), what would it be?

The question is not rhetorical. Please answer. Write it down.

Now, does a business exist that could take it away for you? Could such an industry be created? Could YOU create it?

Accentuating positive aspects of people's lives is admirable. But eliminating their difficulties might be a faster route to success.

And your personal annoyances might be common to others living in the farm belt.

Downgrading and Upgrading

Air travel used to be glorious. People dressed up and dressed their children in "Sunday best" for a flight. It felt special.

Bus travel, on the other hand, was for normal people.

Then deregulation changed the travel industry. The riff-raff like me de-boarded buses and started flying. Airports now feel like Greyhound terminals used to feel. Air travel is for normal people, and a bus terminal is entered only if absolutely unavoidable. You avoid making sudden moves and you never make eye contact with people.

Moving downmarket is easy and profitable. A brand can take years to develop exclusivity, then suddenly Kmart carries it and everyone buys it (for a short time.)

Moving upmarket is more difficult, but does happen. Toyota was for people who needed a car but never needed to drive up hill. But the marketing people delivered a consistent message for give decades: "you made the right decision when you bought a Toyota." People like to be told they didn't do something dumb, so gradually everyone started believing them.

The takeaway: Toyota established their brand just in time. Kia, Hyundai, and a host of other companies would have killed them by now if Toyota had not worked so hard in their marketing. You need to build a brand, go upmarket, differentiate yourself rather than digging in to survive. 

Branding

Today, I will be discussing branding in my class. Here are some points I may or may not bring up.

Branding requires nurturing. It takes a long time to build a brand, constantly nurturing it.

A brand represents a value or values. Want a universal, huge brand? Tie it to important values, and make the connection between the two believable and tight. You can represent a lesser important value, or make the connection weak, and not build something lasting.

Brands can be lost quickly by neglect or stupidity. The stronger the brand, the better it can withstand your stupidity. But better to not be stupid or neglectful in the first place. Remember the Cadillac Cimarron in the early 1980s? GM slapped chrome onto a cheap Chevy and called it a Cadillac. Dumb. One of the best brands in the world, arguably the Cadillac of brands, was lost, including the work of generations. Now Cadillac makes one of the best luxury cars available to normal humans (a Bentley is nicer, but normal people can't dream of buying a Bentley), but Cadillac is still struggling to regain their place in our hearts.

Don't sell your brand equity for a mess of potage. 

The importance of referral marketing

Let's say you are a house painter. You can market your services the typical way:
- buy an ad in the yellow pages
- rent billboards
- shove flyers into screen doors

Or you can be recommended by:
- interior designers
- real estate agents
- carpenters
- paint retailers
- contractors
- mortgage brokers
- flooding cleanup professionals

A fan club is much better than a brochure. Way better.

Now, getting those endorsements is not easy. Let's talk about it soon.

Public Partnerships and Entrepreneurship Coalitions

Here at the Nauvoo Commuter, we are working to build a coalition to develop local entrepreneurs through education. The original plan was to create a model community, but our community is in fact too small. We're rolling it out to include all of Hancock County, and honestly Carthage is doing the heavy lifting so far.

We'll be discussing this issue more later, but here are three hints when building a coalition to promote entrepreneurship education:

- involve as many pertinent people as possible, but leave the "stoppers" out of the planning process
- build the partnership on a bigger scale than you are comfortable with
- include school superintendents (go straight to the top), banking and other funding professionals, and helpful public employees

Why do you need all these people?  Because you will be doing more than teaching a class. You will be providing mentorship and support to help launch businesses, so you will need broad commitment.

The Entreprenuerial Ecosystem

The Nauvoo Commuter is this week being trained on building entrepreneurship education coalitions. The training comes from the Southern Entrepreneurship Program, which is housed at Southern Mississippi University.

We're currently building a system for encouraging entrepreneurship in West Central Illinois. We're working on Hancock, Henderson, and Warren Counties. I was at first dubious about the need for community support. But if you want the whole package of support, you need the whole village on board.

More Upside for Rural Entrepreneurship

Today's quote comes from Alvin Toffler, who is the forerunner of trend trackers. 

WHEN IT COMES TO WORK, “WHERE” WILL MATTER LESS AND LESS 

    "The proliferation of high speed internet connections, the 
     growth of low-cost videoconference technology, and the 
     ability to rapidly and easily move around the globe via 
     interrelated networks of airlines will allow white-collar 
     workers to complete their work anywhere in the world, 
     freeing them from their cubicles." 

You, out there on the edge of the prairie, or on the edge of the savannah, or on the edge of the jungle, your opportunities are increased by Mr. Toffler's idea.

Stop Sweating Innovation

Innovation is much more than inventing new technology. It can be a new process, a new way of approaching customers, or offering a current product for different customers.

You don't even need to create a new idea. You can take one from someone else and apply it to your market. It only has to be new in your town or for your customers.

So if you've been spending years trying to come up with the a Great Idea, stop now. See what someone else is doing in another part of your country or in another country, and so the same thing in your region. You can do the same thing for finding ways to improve your existing business.

Again, if you spend too much time looking for the idea, it means you are stalling, procrastinating the start.

Your situation is not original

Lem was a sleepy farming town on the west coast of Denmark in 1898 when a 22-year-old lad named Hansen arrived and bought a blacksmith shop. The market was small, and the demand for horseshoes was soon to plummet. 

But he and his sons continued to innovate. Now they are the world's largest manufacturer of wind power equipment, Vestas. 

 They didn't have access to resources we have now. Reaching that stage required constantly looking forward to where markets were moving, and being aggressive, and overcoming a lot of hardship. But they did. 

They weren't successful because it was a long time ago before "all the good ideas were taken." Their industry still sees new entrants.

The example is not isolated. Population in Bentonville, Arkansas was only about 3,500 when Walmart started. In fact, the company succeeded by focusing on rural markets. 

Lots of world-class companies don't start in "creative centers," where the "new creative class" resides. Backwater country folk creating powerful corporate empires is not a new idea. Nor is it an outdated idea.

Community Development and Fundraising

The Nauvoo Commuter philosophy states that local governments are not obligated to support small business. But they are obligated to not get in the way, either.

Every small town has projects needing funding. So we argue about which projects most deserve the limited monies, we apply for federal grants, we in the end make the wrong choices, and we flounder. We don't do the most important things.

The best way to is to create what I call a Community Betterment Fund, based on the following principles:

 - Every dollar should be earmarked for a certain project, which
   should be determined by the person who donated that dollar.
   It is the ultimate form of taxation with representation.
 - Keep it independent. Don't make it a sovereign fund, or a city
   slush fund. It should be an independent non-profit, with its own
   governing board, who are accountable to tax authorities and to
   the stakeholders.
 - It should not be democratic. Not everyone in the community
    should be able to vote on how the funds are spent. The funds
    don't come from taxes, so citizens should not be able to coerce
    the board to spend in a certain way.
 - The fund should be independently audited.
 - The board should not try to please everyone, and should not try
   to report to the citizenry. If any citizen or city official disagrees
   with how money is earmarked, let those people create their own
   fund, dedicated to some other pet project. A community can
   have more than one fund. Let those who donate determine
   the priorities.
 - Keep it simple, with no more than five potential projects.
 - Accumulated funds should be invested until spent. This should
   be outsourced. Several communities should combine their funds,
   so they can negotiate higher returns. This is not uncommon.

These ideas help avoid some potential pitfalls, and give a voice to the payer (unlike income tax.)

The Goalpost

You are seeking success, so you need a goal to define success. Bad news: the goal post keeps moving.

You can use soccer, American football, hockey, or several other sports as analogies. Your choice. In any case,

   - The world is shrinking, so as soon as you prove excellence, someone
      else will come along and do it cheaper.

   - Expectations always grow, so as soon as you prove excellence, then
     excellence becomes the new normal.

Big Small Towns and Small Small Towns

The size of your town makes a difference. The smaller your town, the less likely you have critical mass, economically speaking. So formulating economic development policies to support entrepreneurs is more challenging.

A small-small town will also have fewer support services. Tiny towns lack:
 - accountants
 - office supply stores
 - management consultants
 - marketing support professionals
 - advertising agencies
 - computer repair and support techs

But if you are thinking too much about these issues, you are looking for an excuse to not start.  In a flat world, in a connected world, you can usually procure those services from outside the region.

Career Advice, Part II

To follow up on last week's posting, some more fundamental career advice for young people is needed. Here are key two points:

1) When choosing curricula on which to focus your studies, go broad as is usually recommended, but also go narrow.
Someone who is "well rounded" is a better problem solver, but you still need to be able to do something. At the basic level, firms don't hire people to think. They hire people to do something. So you need an in-demand skill to get in the door.

2) Choose a focus which increases your choices, not limits them.
If you earn a PhD in the psychology of Chaucer's writings, then you might be able to teach literature. If you earn a PhD in physics, you can work in research, you can model derivatives on Wall Street, you can do several types of engineering, you can invent new ideas that change the world. Or you can teach. An engineer can either sell or do engineering. A humanities major can sell (if the engineer helps out on technical issues.)

Please tell your children these things.

The SEP

In the world of entrepreneurship education, Brent Hales is a rock star.

He has established a train-the-trainer for potential teachers of entrepreneurship education. The program is similar to programs costing thousands of dollars. But his charge is minimal.

Brent is the best example I know of a tribe leader by Seth Godin's definition.


Check out The SEP, the program Brent established. 

Fundamental career advice

I have advised thousands of careers, and this is the career advice I give to everyone.

You have three choices for the type of career.

First, follow your passion. Let’s say your passion is snow skiing. You embrace that as your career, and become a ski instructor, or a trail groomer. The downside to that is that your hobby becomes your job. It can cease being a passion. 

The second option is to earn a lot of money, retire early, and do your hobby full time. You work in commission sales, try for a job on Wall Street, or do something that will earn you more money in a shorter amount of time. The downside: earning a lot of money is always much, much harder than you thought it would be. It changes you. In the remote chance that it works as planned, the experience changes you. You end up less passionate about your passion.

The third option is to keep your hobby as a hobby. You have to work a job you dislike instead of the one you would love. But your hobby stays fun, you enjoy your non-work time, and maybe, in the long run, your hobby might evolve into an ideal job. And if your interests change, and they often do in the long run, you’re not stuck.