I live in Atlanta. And I love it. I think our skyline outlined with Coke, Delta, AirTran, CNN, and ATT logos is magnificent. I also think the region still welcomes growth and innovation. Apparently, if I was a venture capitalist, I would feel quite differently.
A new article in our local paper (Atlanta Business Chronicle, February 6-12, 2009) touts that VC’s don’t feel us Georgians are worth their time OR their money. Top reasons why venture firms are turning away new businesses? Geographical distance, deal flow awareness, and finally…”a lack of entrepreneurial talent.” Questions about the “adequacy of Georgia’s management and entrepreneurial talents” were found in a recent poll of 156 firms in 24 states. It was also commented in the survey that “Georgians make enough in the small business to live modestly but not enough to attract true VCs”.
So why the long face VCs? Well, for starters, Atlanta has been lacking true entrepreneurs like Steve Jobs or Michael Dell for some time. There’s nothing our state has become known for entrepreneurial-wise. Another deterrent may be the influx of technology companies years ago during the tech boom. VCs stepped up, then lost out, and now they’re burnt out. That trend of “serial entrepreneurs” has now officially warded off VCs. Are there more reasons they are still turning away? Try “mediocre pitches” and a “focus on funding not development.”
The VCs seem to think us Georgians need to look to the Californiaian bootstrappers for some advice. Considering half of the survey respondents don’t feel Georgia even welcomes entrepreneurs…this next generation of entrepreneurs has its work cut out for them.
Thursday, February 12, 2009
Wednesday, February 11, 2009
“Oh…well…then, you’re not a REAL entrepreneur” (a.k.a. Franchising cont’d)
In this week’s edition of the Atlanta Business Chronicle, the focus is on franchises and using the right amount of due diligence before signing up with one. It makes a very good additional point on why a franchisee would go this route: they are in love with the concept. While in my previous blog I gave other reasons for going down this path – less start-up costs, pre-planned marketing materials, branding, etc. – I did not focus on the passion someone may already have for the concept. Because it is so very hard to come up with a unique idea, of course so many franchisees find businesses that already exist that they wish they themselves could be a part of.
But are they spending their own money just to grow someone else’s business? If that is truly the case, then maybe they aren’t REALLY entrepreneurs. Maybe they just want to be their own boss but can’t commit to what it takes to do it on their own. But what they may not understand is that being a part of franchise means they do not have 100% ownership. If true entrepreneurs are risk-takers, then I think this would further prove my new theory.
So…are you a real entrepreneur?
Monday, February 9, 2009
To be or not to be…a franchisee
Do you think there’s a difference between the Outback Steakhouses you dine at? Well, the truth is, you shouldn’t notice any at all.
Outback Steakhouse only has company-owned restaurants; meaning they do not have franchisees. They own and control all of their locations. In other words, they no longer allow young entrepreneurs like me to engage in a franchise agreement with them and I will not get to own and manage any of the Bloomin’ Onions of the world anytime soon. Even when Outback allowed this approach the saw a huge gap in consistency among their locations, including the quality of food. Even with a detailed contract, you cannot control the franchisee completely. Since enforcement was so problematic, Outback regained ownership and control of all their locations.
I have another example of a franchise in a food industry that still allows this practice: Subway. I hold the 6” Italian near and dear to my heart. And with the convenience of having one on nearly every corner in Atlanta, you really can’t go wrong. However, I never know what to expect. I have literally eaten at probably a hundred different Subways around the world and about all that remains the same across the board is the company name. Yes, there’s a template for how they decide how many banana peppers go on there and how many pieces of cheese to add. But there is no consistency with the quality of food, the cleanliness of the eating area, the design of the room, or the décor. I believe this makes it difficult to increase customer loyalty when your brand has no consistency across multiple locations.
I also have friends who run a very successful dog grooming business north of Atlanta called The Dirty Dog. After opening up their second location, they began to be inundated with people interested in becoming a franchisee. The two owners discussed it at length over and over but the truth is, they were not ready to give up any control whatsoever. They were determined that the level of service their customers were used to remain the same. And I tend to agree. It would be next to impossible for them to oversee each location around Georgia, or much less out of state.
But then how DO you grow a business? We have seen the successes of franchise though…can you say “golden arches?” McDonalds opened its first franchise in 1955. While incorporating a training program for its employees appropriately entitled Hamburger University, it ensured consistency among locations, and over time, success. Notice I said “over time…” that’s key to the success of a franchise.
So “where’s the beef”, you ask…the benefit of even engaging in this type of start-up? Well, for starters, entrepreneurs typically think a franchise will be less risky as the company name/brand has already been established. But a franchise isn’t a proven concept. Just because one store does well, does not mean another will. The same factors that we learned in Entrepreneurship 101 still apply – target market, demand, price, area, etc. all play a role in the success of a business.
Entrepreneurs are also under the impression that they can spend less money during the start-up phase and make a faster profit if they only have to put forth some initial costs to buy the rights to use the company name, etc. While sometimes this is true, other times the franchisor still expects a portion of the sales and they do not always pay for marketing materials.
I personally ran into this at a local dog boarding franchise. While the new owners had become franchisees and they were given all the brochures and flyers they could ever imagine, there was a lack of help from the franchisor’s side on best practices to get the business running. When discussing how to run a grand opening, there were little no ideas or assistance from the parent office.
In the end, I think true entrepreneurs have an internal locus of control and want to start their own independent store. It’s hard for them to see the incremental successes and failures if their location is always tied to a “mother ship.”
Outback Steakhouse only has company-owned restaurants; meaning they do not have franchisees. They own and control all of their locations. In other words, they no longer allow young entrepreneurs like me to engage in a franchise agreement with them and I will not get to own and manage any of the Bloomin’ Onions of the world anytime soon. Even when Outback allowed this approach the saw a huge gap in consistency among their locations, including the quality of food. Even with a detailed contract, you cannot control the franchisee completely. Since enforcement was so problematic, Outback regained ownership and control of all their locations.
I have another example of a franchise in a food industry that still allows this practice: Subway. I hold the 6” Italian near and dear to my heart. And with the convenience of having one on nearly every corner in Atlanta, you really can’t go wrong. However, I never know what to expect. I have literally eaten at probably a hundred different Subways around the world and about all that remains the same across the board is the company name. Yes, there’s a template for how they decide how many banana peppers go on there and how many pieces of cheese to add. But there is no consistency with the quality of food, the cleanliness of the eating area, the design of the room, or the décor. I believe this makes it difficult to increase customer loyalty when your brand has no consistency across multiple locations.
I also have friends who run a very successful dog grooming business north of Atlanta called The Dirty Dog. After opening up their second location, they began to be inundated with people interested in becoming a franchisee. The two owners discussed it at length over and over but the truth is, they were not ready to give up any control whatsoever. They were determined that the level of service their customers were used to remain the same. And I tend to agree. It would be next to impossible for them to oversee each location around Georgia, or much less out of state.
But then how DO you grow a business? We have seen the successes of franchise though…can you say “golden arches?” McDonalds opened its first franchise in 1955. While incorporating a training program for its employees appropriately entitled Hamburger University, it ensured consistency among locations, and over time, success. Notice I said “over time…” that’s key to the success of a franchise.
So “where’s the beef”, you ask…the benefit of even engaging in this type of start-up? Well, for starters, entrepreneurs typically think a franchise will be less risky as the company name/brand has already been established. But a franchise isn’t a proven concept. Just because one store does well, does not mean another will. The same factors that we learned in Entrepreneurship 101 still apply – target market, demand, price, area, etc. all play a role in the success of a business.
Entrepreneurs are also under the impression that they can spend less money during the start-up phase and make a faster profit if they only have to put forth some initial costs to buy the rights to use the company name, etc. While sometimes this is true, other times the franchisor still expects a portion of the sales and they do not always pay for marketing materials.
I personally ran into this at a local dog boarding franchise. While the new owners had become franchisees and they were given all the brochures and flyers they could ever imagine, there was a lack of help from the franchisor’s side on best practices to get the business running. When discussing how to run a grand opening, there were little no ideas or assistance from the parent office.
In the end, I think true entrepreneurs have an internal locus of control and want to start their own independent store. It’s hard for them to see the incremental successes and failures if their location is always tied to a “mother ship.”
Tuesday, February 3, 2009
What a Character!
Entrepreneurs come in all shapes and sizes. Both men and women start business. Even high school students start businesses now. Even retirees from corporate America will start their own company. But besides owning a business, do these people have anything in common? Yes, I believe they do. They are all characters in the game of life experience.
Life experience plays a role in the type of person we become. Our parents and the way we were raised play a role in who we are. Our education plays a role in what we learn as we grow. Our careers play a role in what we spend our time doing…and what we wish we could spend our time doing. Some studies have been done that show a strong correlation between children of parents who have started their own business and those children growing up to start their own as well. Perhaps it is the constant reviewing bills, operating procedures, meeting with employees, and daily visits to the store that mom and dad own that help gravitate a child to starting their own business. They are familiar with it and children who are not inherent risk-takers will want to stick to what they know and feel comfortable with. Also, if the business of their parents was a positive experience and a success, the children might see that as a safe and sure way to have the kind of lifestyle they want and have grown accustomed to. The opposite could also be true – if the experience was poor or the business failed, a child may steer clear of any entrepreneurial ventures in hopes to not follow in his or her parent’s footsteps. Regardless, parental encouragement is a true indicator of whether a child has interest in starting his or her own business. My parents were very sportive of what I wanted to “be” when I grew up – but they did have strong measures for success. One is a teacher and one is a nurse so while they pushed for me to enter the College of Business, I believe their own life experiences caused this push. They were living modestly but certainly on a tight budget and neither was fully satisfied with their job. But they had friends in business that seemed to have it all. And I think they just assumed being in business was the answer. A few years ago when I started my own pet-sitting business they were very supportive of the idea; however, I was doing it part-time. I think if I was to have made the leap to full-time, they would have seen it as a risk. They didn’t really know anyone who had successfully started their own business so until college, I didn’t really even have any exposure to the idea.
Our education level can also be a factor in determining whether we start our own business or not. While I agree that entrepreneurship is a part of creativity and cannot be learned, I do feel that some of the personality traits like need for achievement and independence can be instilled in a child via parenting. While our parents could have been supportive, even having their own business doesn’t mean that we will gain the skills we need just by watching them. Often times I think children of parents who own their own business will choose not to go to college because they don’t feel it’s necessary as the family business already exists. In other cases, I have seen children who have gone through secondary education just to learn more about how to run a business effectively. No matter how much schooling a person has, if the previous people who owned the business were not educated, the business has a higher failure rate. While it would behoove a person to continue their education in order to further raise the success rate of their venture, some people will not have the personality traits or understanding to do this. I took that approach as well – I decided while I was interested in starting my own animal care company, it was best to get my education under my belt and learn how to make a business succeed and then go out and do it. I think I also felt like my customers would respect me more and have more faith in me if they saw my higher education level.
Career displacement may also affect whether a person starts his or her own business. If a chosen career path is not fulfilling or a person is not succeeding at their job, he or she may look for other avenues of earning income like starting their own company. If a person gets laid off or the structure of a business changes, there may be an opportunity for a job search that leads to starting their own company. Other times workers in corporate America may see people who run their own business as carefree and happy and wealthy and they yearn for that.
The changing of careers...I have seen two close friends go thru this exact situation this year. One resigned from his tech company as he was bored and unhappy at work. One was laid off due to elimination of his position at a law firm. Both started their own business – one a doggy daycare and one a salad shop. One started because he was excited about having his own company and finally doing what he loved to do. The other started because after months of searching for a job and coming up empty handed, he felt he had no choice. Both are succeeding but I can see the clear differences in how they run their businesses – one is carefree and laid back and it appears like he’s running a business that’s more his hobby then job. The other treats it like a true business and is very structured and professional in every aspect. It’s interesting to know both of them and see how they do things differently and to see them both actually succeeding. But like research has shown us, it takes a good five years in order for us to examine a businesses true success. I can’t wait to see what each does next!
Life experience plays a role in the type of person we become. Our parents and the way we were raised play a role in who we are. Our education plays a role in what we learn as we grow. Our careers play a role in what we spend our time doing…and what we wish we could spend our time doing. Some studies have been done that show a strong correlation between children of parents who have started their own business and those children growing up to start their own as well. Perhaps it is the constant reviewing bills, operating procedures, meeting with employees, and daily visits to the store that mom and dad own that help gravitate a child to starting their own business. They are familiar with it and children who are not inherent risk-takers will want to stick to what they know and feel comfortable with. Also, if the business of their parents was a positive experience and a success, the children might see that as a safe and sure way to have the kind of lifestyle they want and have grown accustomed to. The opposite could also be true – if the experience was poor or the business failed, a child may steer clear of any entrepreneurial ventures in hopes to not follow in his or her parent’s footsteps. Regardless, parental encouragement is a true indicator of whether a child has interest in starting his or her own business. My parents were very sportive of what I wanted to “be” when I grew up – but they did have strong measures for success. One is a teacher and one is a nurse so while they pushed for me to enter the College of Business, I believe their own life experiences caused this push. They were living modestly but certainly on a tight budget and neither was fully satisfied with their job. But they had friends in business that seemed to have it all. And I think they just assumed being in business was the answer. A few years ago when I started my own pet-sitting business they were very supportive of the idea; however, I was doing it part-time. I think if I was to have made the leap to full-time, they would have seen it as a risk. They didn’t really know anyone who had successfully started their own business so until college, I didn’t really even have any exposure to the idea.
Our education level can also be a factor in determining whether we start our own business or not. While I agree that entrepreneurship is a part of creativity and cannot be learned, I do feel that some of the personality traits like need for achievement and independence can be instilled in a child via parenting. While our parents could have been supportive, even having their own business doesn’t mean that we will gain the skills we need just by watching them. Often times I think children of parents who own their own business will choose not to go to college because they don’t feel it’s necessary as the family business already exists. In other cases, I have seen children who have gone through secondary education just to learn more about how to run a business effectively. No matter how much schooling a person has, if the previous people who owned the business were not educated, the business has a higher failure rate. While it would behoove a person to continue their education in order to further raise the success rate of their venture, some people will not have the personality traits or understanding to do this. I took that approach as well – I decided while I was interested in starting my own animal care company, it was best to get my education under my belt and learn how to make a business succeed and then go out and do it. I think I also felt like my customers would respect me more and have more faith in me if they saw my higher education level.
Career displacement may also affect whether a person starts his or her own business. If a chosen career path is not fulfilling or a person is not succeeding at their job, he or she may look for other avenues of earning income like starting their own company. If a person gets laid off or the structure of a business changes, there may be an opportunity for a job search that leads to starting their own company. Other times workers in corporate America may see people who run their own business as carefree and happy and wealthy and they yearn for that.
The changing of careers...I have seen two close friends go thru this exact situation this year. One resigned from his tech company as he was bored and unhappy at work. One was laid off due to elimination of his position at a law firm. Both started their own business – one a doggy daycare and one a salad shop. One started because he was excited about having his own company and finally doing what he loved to do. The other started because after months of searching for a job and coming up empty handed, he felt he had no choice. Both are succeeding but I can see the clear differences in how they run their businesses – one is carefree and laid back and it appears like he’s running a business that’s more his hobby then job. The other treats it like a true business and is very structured and professional in every aspect. It’s interesting to know both of them and see how they do things differently and to see them both actually succeeding. But like research has shown us, it takes a good five years in order for us to examine a businesses true success. I can’t wait to see what each does next!
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