Hiring People Like You

September 15, 2018 ENT600 - Entrepreneurial Planning, Entrepreneurship, Graduate Program Coursework, Insights and growth Comments (0) 17

You will have the desire to hire people like you when you're an entrepreneur.

Leveraging social capital to build your founding team makes it easy to hire people like you. People with your values, your background, and a substantially similar knowledge base can be advantageous for you, the founder. You’ll have a common language, communication may be more comfortable, it will take less time to get those new hires up to speed, and you will have greater confidence in their ability to achieve your goals and objectives (Wasserman, 2012). Hiring people like you might seem to be a smart business choice.

When you hire, people like you are probably hiring them because you have had a good working relationship in the past. You hire people you like and people with whom you enjoy working. You hire them because your experience tells you they are good at what they do. You hire them because although they have different areas of expertise—sales, marketing, or finance—they are likely to have similar backgrounds, networks, and possibly industry knowledge. Arguably, this may give you an advantage at first. Surrounding yourself with people like you when you’re risking everything else to get your business off the ground will provide some comfort. On the surface this seems rational; homogeneous teams may make things a little easier in the beginning but are likely to be the cause of stress as your business grows.

Hiring people like you means you may be hiring people who have not just similar strengths, but also similar weaknesses. Hiring people like you may also mean few will challenge your view of market opportunities, customer targets, or product features and benefits. People like you will tend to see the world in much the same way as you. And this might mean you miss business opportunities because hiring people like you limit your ability to see much of anything different than you may see it. Hiring people too much like you may well restrict your long-term success in business.

Hire people who have different backgrounds, education,...

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Are you building the right kind of capital for your startup?

September 8, 2018 ENT600 - Entrepreneurial Planning, Graduate Program Coursework Comments (2) 39

In its original use the word, “capital,” referred to the number of cattle a person might own. The headcount of cattle and total assets of the owner were often synonymous in ancient Greece and Rome, so capital took on the broader meaning of “wealth” until sometime in the thirteenth century when it evolved to mean money advanced to an entrepreneur to start a business (Hodgson, 2014). Wealth created through goods and stock—assets that could be turned into cash for investment—became the primary definition of the word capital for more than 500 years.

In the eighteenth century, industrialization changed the economic structure. Labor, as well as money, became a critical factor in the ability to create wealth. Economist Adam Smith recognized the importance of labor in the creation of new products and introduced the idea that “capital” applies to people as well as things (Smith, 1776). Karl Marx expanded on the Smith’s idea, arguing that “capital is not just things or people, but a social relationship between people, established by the instrumentality of things” (Hodgson).  And the concept of capital grew again—financial, human, and social.

In modern economics, capital is typically defined as an asset that you can use to produce something that is economically useful to a business or an individual.  The word, then, has different meaning depending upon its context (Goodwin, 2003). The most common types of capital are:

  • Financial – referring to an investment that produces something of value;
  • Natural – involving the supply of natural resources in any form that plays a productive process in economic gain;
  • Human – referring to individual education, skills, abilities, and labor used in some combination to produce assets for economic benefit;
  • Produced (Physical) – relating to those physical assets (products or objects) created for sale by applying Human Capital to Natural Capital for economic gain;
  • Social – referring to the goodwill, trust, shared values and social knowledge that, in combination, facilitates a financial benefit.

Even with these different meanings, you still might think capital is synonymous with money. And it would make sense since if you’re a founder, you are spending a lot...

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Choosing between wealth and control

August 30, 2018 ENT600 - Entrepreneurial Planning Comments (8) 85

You’re an entrepreneur. You identify a problem, come up with a solution, and then launch a business to deliver that solution to the marketplace. And as the company grows, you continue to exercise control over every aspect of it, because after all, it is your idea and your solution, so there is no one better to ensure the vision of the company than you, it’s creator.

Until you’re not.

Many startup founders desire to maintain control as the primary means to achieving their goals with their business. One of those goals, of course, is solving that problem on which the company is built. However, many of the other goals are much more personal. Things like personal pride and wealth, for example, come to mind. Thanks to men like Jobs, Gates, and Zuckerberg, almost every first-time entrepreneur has aspirations of building something big by controlling everything and then gaining fame and a fortune when the company goes public.

It rarely happens.

Pride and personal recognition have fanned the flames of more crashing businesses, than the successful companies those same goals have fueled. Control is the problem for founders who, like Yertle in Dr. Seuss’s Yertle the Turtle, desire “to be king of all they can see” (Geisel, 1958). A king might see the wealth in the distance, but eventually, somebody sneezes, the king loses control, and everything comes tumbling down.

Being a king and building wealth are not mutually inclusive. Some research suggests that if you focus on maintaining control of your business you may become king, but it is unlikely you will ever create significant wealth. And if you focus on building wealth, it is inevitable that you will give up control (Wasserman, 2012). It is rare for an entrepreneur to maintain control and achieve wealth.

Here’s why: Like it or not, your business will inevitably outpace your skills, abilities, and expertise. If you believe controlling all aspects of the company will ensure your success, it is unlikely you’ll recognize when your company has outgrown you. You might be the king, but you’re likely to have little else. Plus, investors don’t like kings all that much. Particularly...

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The Entrepreneur and the Sunk Cost Fallacy

May 25, 2018 Change, Entrepreneurship Comments (0) 300

If you’re an entrepreneur and you’re not familiar with the term “sunk costs” you may have a problem.

A “sunk cost” is any past cost for something that you’ll not be able to recover. Typically, sunk costs are not included when making forward-looking decisions because those costs will remain the same regardless of what you may choose to do. In manufacturing, for example, a sunk cost might be the cost of equipment because it is a cost that has been incurred which will remain constant regardless of whether that equipment produces any product.

Think of it this way: It’s money you needed to spend that you’ll never get back.

The problem for most of us is that our forward-looking decisions become too tied to those sunk costs. We often become emotionally invested and the more investment we make, the harder it becomes to divest ourselves from those costs. In these situations, it is difficult to consider the pros and cons objectively. Instead, we try to recoup sunk costs, which makes us do irrational things.

Researchers Hal Arkes and Catherine Blumer argue that when we continue a behavior or work because of our previous investments of time, money, or effort, we fall victim to what has become known as the sunk cost fallacy (Arkes & Blumer, 1985). We place such a high value—either monetarily or emotionally—on those investments that we irrationally behave when faced with a decision that devalues those prior investments. Moreover, we look for ways to justify our choice rather than accepting the sunk costs as what they are—money we can never recoup.

Let’s look at it a more personal way.

Say you bought a quart of your favorite yogurt at the grocery store. It’s been in the fridge for a few weeks unopened, and putting away the dinner leftovers you spot it and realize that yesterday’s date is the “use by” date on the package. Concerned that it will spoil, you open and eat as much of the yogurt as you can—maybe even all of it—even though you’ve already had dinner because you’d rather do that than “waste your money” on food that will...

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Interview: Jim Mitchem on Entrepreneurship

May 8, 2018 Interviews Comments (0) 878

Jim Mitchem, an author and partner with branding firm Out of the Ether, and I explore starting a service business, the willingness to take risks, branding, continuous self-improvement, and many other things in this interview for my Everyday Entrepreneurs podcast.

 

You can listen below on Soundcloud or subscribe to the podcast on iTunesGoogle PlayStitcher, or wherever you get your podcasts.

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Why you need an accountant year-round

March 30, 2018 Finance Comments (0) 424

I hear this often from entrepreneurs and small business owners: "I have the popular accounting software to manage my business checkbook. I can use it to create invoices and pay suppliers. I even use it to manage my payroll. It is simple, and it is just like my checkbook. I think I have it all covered. I use an accountant for my taxes, but do I really need an accountant other than tax season?"

The answer is,yes. You should have an accountant who can support your business year-round.

An accountant offers much more than bookkeeping and taxes. In fact, an accountant’s area of expertise often goes far beyond that of your neighborhood bookkeeper. While undoubtedly a bit more expensive than a bookkeeper, you should be able to rely on an accountant to add value to your business operations.

For example, an accountant will:

  1. Help you read and understand your financial statements.  If you are just printing them off your accounting program each month without a thorough understanding of what you are reading, your business may be in trouble, and you may not even know it.  An accountant can help you decipher the numbers on your financial statements and determine how to use those numbers to determine the actual condition of your business.
  2. Advise you on Generally Accepted Accounting Practices (GAAP).  Like most business operations, accounting has a defined set of “business rules” or the “acceptable way to do things.”  Although most accounting software packages provide some safeguards to prevent you from making significant errors in bookkeeping process and they do provide an audit trail for what you have done, they will not force you to follow these standard business rules. Regardless of your business size, you will want to be able to justify your record-keeping and financial reporting by the accepted practices.
  3. Provide a dose of business reality.  As a business owner, one of the most challenging things to do is to look at the books objectively. An accountant will provide you with an objective outlook on how...

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Beyond Short-Term Royalty Potential: Vetting Prospective Licensees for Long-Term Success

March 12, 2018 Licensing Comments (0) 594

Licensors often start their vetting process with a license application to learn about a prospective licensee’s proposed licensed product, the sales potential for the licensed product, and the underlying financial health of the licensee. This may be sufficient if the primary goal for a licensor is revenue generation; however, if the licensing strategy goes beyond royalty generation, a licensor will need to consider other factors to help ensure all parties have more significant opportunity for success in the licensing relationship.

A licensor who seeks to increase awareness of its brand, expand into new categories or markets, or develop new products to help serve its business goals, for example, may not consider short-term royalty potential as the primary factor in evaluating new licensees.

Depending on a licensor’s strategy, it might also incorporate factors into its review and vetting process to gain a broader view of a prospective licensee, its alignment with a licensor’s mission and vision, and potential for long-term growth. In such situations, a licensor’s vetting process might include the following:

  • Organizational Fit. A prospective licensee and the new licensed products it proposes must be a good fit with a licensor’s mission and vision. The proposed products, the manufacturing and sourcing procedures, and the marketing and merchandising strategies, must all be in alignment with a licensor’s brand, image, and organizational direction. The prospective licensor’s business practices, executive leadership, management, and customer service staff will likely have an impact on a licensor’s brand, and these factors should be considered in the evaluation of alignment with the licensor’s organization.
  • Operational Stability. Stability is essential, and some licensors assess stability by the number of years a prospective licensee has been in operation or the appearance of financial solvency; however, a more in-depth dive is always required. For example, a licensor will likely want to pull Dun & Bradstreet reports, ask for financial statements from non-public companies, check several references (other licensors, vendors, and manufacturers), and evaluate the leadership biographies for relevant experience. A licensor might also want to consider a prospective licensee’s operational structure and supply chain, paying particular attention to the ability to fulfill its marketing, sales,...

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Interview: ClassB CEO Eric Hilferding on Entrepreneurship

March 8, 2018 ENT670 – Adv. Entrepreneurial Strategy, Graduate Program Coursework, Interviews Comments (0) 496

The following is an interview with Eric Hilferding, CEO of ClassB, a custom t-shirt manufacturer, and printer for my graduate coursework in entrepreneurship. Eric and I first met in 2005 when I was with the Boy Scouts of America. His company was one of the BSA's first licensees in the revamped licensing program. We became fast friends and I have long admired his attention to detail, his creativity, and his commitment to service.  

 

Eric Hilferding of ClassBQ. Tell me a little about ClassB and your role with the company.

A. ClassB is a provider of custom decorated goods including t-shirts, embroidery and promotional products to primarily nonprofit organizations. The company started in 1982. We currently have 38 full-time employees. We focus on having a great customer experience. The internal motto is we sell service not t-shirts. I am the CEO of ClassB and one of the two company founders back in 1982. I have been formally running the company since the mid 1990’s.

Q. Did you have any entrepreneurial experience or education before launching the company?

A. I have zero business or entrepreneurial education - I have a BA in History. Luckily, learning about running a business was always a part of my life. I started working at around age 8 at my grandfather's lumber yard. My parents often discussed business at the dinner table.

When my mother and I started ClassB, all immediate family members eventually were employed. I read profusely to fill gaps in my knowledge. I was very lucky to have my father with his extensive business knowledge available at all times. Without his experience, I would have failed many times over. Now I realize how right he was on everything.

Another key area is my Boy Scout experience. I learned so much by making lots of leadership mistakes in my Troop and working at Summer Camp. Having that sandbox to learn is one of the most valuable things I can imagine. If not for my parents and the Boy Scouts, my only business reference point would be work based sitcoms.

Q. What are...

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Stop focusing on your product and start focusing on your customer

February 19, 2018 ENT670 – Adv. Entrepreneurial Strategy, Entrepreneurship Comments (0) 503

The most common definition of business suggests it is the “organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs” (Pride, Hughes, & Kapoor, 2013). In a manufacturing-driven society, this definition might be valid, yet it arguably emphasizes an outward-in approach to product and service development and in doing so has potentially set a generation or more entrepreneurs off on the wrong foot. So many entrepreneurs believe that the “thing”—the product or service—they have created will “satisfy society’s needs” without giving enough thought to understanding what society needs, values, and expects. The focus on the thing poses one of the most significant long-term barriers to success for entrepreneurs.

Entrepreneurs devote too much time and energy to the perfect execution of the product or service at the outset. In fact, many entrepreneurs invest—maybe even over-invest—in the thing before they understand if there’s an actual market for the thing. Not long ago, I spoke with an entrepreneur who had an idea for a new technology product and a pool of funds to develop the product. He was searching for a developer to help get this product off the ground but had not thoroughly researched the market opportunity for what he was about to create. Moreover, he had done little more than cursory research on his target customer. His focus was on product execution, rather than customer understanding. Unfortunately, this approach is all too common with startup entrepreneurs. A good product or service—one that meets a customer's desires—will be far better than a great product or service that misses that mark.

Steve Jobs once said, “Customer’s don’t know what they want until we have shown them” (Isaacson, 2011). To Jobs’ point, when new ideas for products and services are solicited from customers, those ideas tend to mirror competitive products in the marketplace or be derivations of products or services already available (Furnham, 2000). However, this should not suggest that knowledge of the target customer and customer input is without value. In fact, one might argue that Jobs and...

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How to find and qualify new licensing opportunities

January 18, 2018 Licensing Comments (2) 577

One of the most significant challenges for licen­sors is to keep the opportunity pipeline full. Regardless of the size of the licensing pro­gram, finding and qualifying prospective li­censees can be a challenge. Some licensors need more opportunities to explore, while other licensors have the opportunities but do not have a defined qualification pro­cess. Unfortunately, some licensors have both challenges. To overcome those challenges a licensor might consider the following sales and business development techniques.

Key assumptions

Let’s start with three fundamental assumptions:

  • You have a strategy for each of your licensed properties;
  • You’ve identified the product cat­egories that align with your core brand message and best support your li­censing growth goals; and
  • You have a realistic understanding of the value of your brand and licensed properties.

While having a defined strategy for each licensed property and knowing the catego­ries which each property fits best is a great starting point, you also need to have a real­istic expectation of your licensed property’s value to a prospective licensee. For example, you may have a top brand in one category, but your brand might not bring significant or even incremental value to the market leader in another category that you’re targeting; therefore, your brand probably has less value for that category leader than it would for the number two or number three player. This will be a crucial factor in targeting and qualifying licensing prospects.

With these assumptions in mind, you can begin developing or refining the process to grow your licensing program.

Finding prospective licensees

Prospective licensees fall into two camps: Those who know and see value in your brand, and those who do not. The former is likely to be already knocking at the door to pitch new ideas, but the latter creates the biggest challenge for most licen­sors.

The best way to identify possible new op­portunities is through Environmental Scan­ning—careful monitoring of the marketplace—for new licensing deals in your target product categories. You can also identify potential opportunities by not­ing specific changes at companies within those target categories, which might in­clude:

  • Changes in licensing, marketing, or other senior leaders;
  • A shift in organizational strategy, new product line development or line extensions; or
  • Expanding...

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