Just When you Thought it was Safe to Startup
ABC TV’s Shark Tank returned to the airwaves. When this show debuted, I had misgivings about the concept because it seemed as if billionaires were profiting from the work of cash-strapped entrepreneurs, cornered into giving up large portions of their companies for operating capital or face losing their dreams.

The sharks don’t offer help out of the goodness of their hearts. They are predators, after all, looking to make a profit. Historically, very few business owners get venture capital, so in some respects, this show is like a lottery ticket for business owners.

Still, the reality program eventually won me over. Shark Tank is an inside look at some of the mistakes that aspiring entrepreneurs routinely make.

For instance, a business grad and aspiring inventor presented an idea for a bedside alarm clock that doubled as an oven and would awaken its owner to the aroma of cooked bacon.

The entrepreneur was firmly convinced that he had the best idea since, well, sliced bacon. However, he did not fully research the cost to manufacture the clock, nor could he answer important questions about financial issues for his company.

The sharks declined the idea.

Lesson: Some entrepreneurs believe that their product is so fantastic that its merits alone will overcome all obstacles. Practical business details, which are necessary for success, are ignored.

Lesson:  Some entrepreneurs believe that their product is so fantastic that its merits alone will overcome all obstacles. Practical business details, which are necessary for success, are ignored.

Reference
http://abc.go.com/shows/shark-tank

Avoiding Financial Pitfalls
Traveling salesman Ray Albert Kroc started the McDonald’s empire after buying the name and concept from the McDonald brothers in the 1950s, but turning a profit proved to be a challenge, despite the popularity of the hamburgers.

Although Kroc sold 200 franchises within five years and the unit’s were grossing $37 million annually, yet his share after paying business expenses and licensing fees to the McDonald’s was so small he had to earn money for personal and living expenses by selling milkshake mixers to restaurants.

Kroc had entered into an agreement with the McDonald’s that severely restricted how much he could charge for the hamburger franchises. Eventually, Kroc took on a business partner with financial savvy and he found a way around the rules spelled out in the agreement. However, Kroc spent millions of dollars to buy his way out of the restrictive agreement.

Lesson: A bad contract and a lack of financial street smarts can ruin even a great business idea.

Boas, M & Chain, S. (1976). Big Mac: the Unauthorized Story of McDonald’s.  Page 24.

Will Allen
Many ventures are largely inspired by a single idea, but the founder of the nonprofit Growing Power used several diverse sources of inspiration in order to develop his international organization.

After leaving the corporate world, Will Allen began growing, selling, and teaching others how to grow produce in an urban setting.

These activities were a return to childhood roots; Allen had grown up on a farm. Later, while living and playing basketball in Europe, he observed how the Belgians used small plots of land for farming. He began using the methods to grow crops for his family and teammates. Allen eventually earned a college degree in education which has come in handy for the teaching component of his organization.

References
http://video.pbs.org/video/2234960813
http://www.growingpower.org/
http://www.growingpower.org/assets/presskit.pdf

Marketing Research
She doesn’t have runway model looks, doesn’t dress provocatively, and has no gimmicks added to her music, says 60 Minutes reporter Anderson Cooper. However, what Adele does have, besides talent, is a grasp of business principles.

Consider: after her Grammy win several years ago, the singing sensation took a part-time job in a record shop sorting and labeling CDs. Her presence baffled fellow employees. But Adele’s seemingly odd behavior had a commonsense purpose: she wanted to learn more about music and what people were buying. Hopefully the manager/owner of the store educated his workers about market research and its value.

Today, fans are buying Adele’s records to the tune of 100,000 albums each week. And there is nothing baffling about that.

Lesson: Working in a retail location is one way to learn about latest trends and what customers are buying.

What Would You Do? 
You open a pizza parlor in a small college town, and business is great. However, the following summer, 20,000 students, your customers, leave town for several months. It’s vacation time.

 *You overlooked this detail when you bought the restaurant. What will you do for income?

The scenario points out two common mistakes that start-ups make. Can you spot them?

                                                           Answer
First: There is not enough information provided to answer the question “what will you do for income?” However, many potential entrepreneurs brainstorm business decisions without making sure they know all of the facts.

Second: The scenario outlined above is a failure to research the industry, including the patterns and lifestyle of customers.  

 *Note: Based on a real-life newspaper story that took place in the late 1990s when a husband and wife sold their home and moved to an unfamiliar state to start a new life.

The Pitfalls of Statistics
Editor Sarah Weinman of Publishers Marketplace discusses the industry’s hits and misses for the year. It’s an important overview for aspiring entrepreneurs who are considering entering the industry in one form or another. Weinman also explains why sales figures for traditional versus electronic books may be biased and inaccurate.

Lesson: Regardless of the industry, always double- check the source of the statistical information before making a decision using good or bad sales figures.

Reference
http://www.booktv.org/Program/13104/2011+Year+in+Books.aspx

John Brown struggled throughout his life as a businessman, living near the poverty level. Few influential historical figures have failed so miserably at so many different pursuits, says American studies professor and historian David S. Reynolds.

Brown was a tanner, lumber dealer, wool distributor, horse breeder, cattle trader, and real estate speculator. Actually, astute in real estate speculation, Brown would have become very wealthy had he retained ownership of the lands that he bought, however, the economy tanked in 1837 plunging the country into a five-year depression.

He eventually declared bankruptcy and was forced to relinquish his property.

Although a good farmer, he was a terrible business manager. For instance, when he operated his wool company, he ignored market conditions and priced his product erratically, and his account books were in terrible shape, says Professor Reynolds, author of John Brown, Abolitionist: The Man Who Killed Slavery, Sparked the Civil War and Seeded Civil Rights.

Some of the problems that contributed to Brown’s failure as an entrepreneur were outside his control, but the issues that likely helped sabotage his success were the conflict caused by his need to support a large family versus his philosophical and religious morals.

Brown, a strict Calvinist, had principles which were not compatible with the mindset necessary for entrepreneurial success. In fact, making a lot of money clashed with his spiritual ideals. Brown firmly believed in the way of life of a bygone era, where people lived simply, subsisting from the land.

But Brown would later use his charisma and entrepreneurial talent to raise funds from a group of wealthy backers to fund his abolition work; work which would become his sole focus. Ironically, after his capture, and execution, his large family was left impoverished.

John Brown, an idealistic dreamer with unwavering lofty goals, never learned how to merge his talent and values to achieve a healthy and successful balance in the business world.

References
http://www.booktv.org/Program/5816/John+Brown+Abolitionist.asp
Phone interview with Professor Reynolds October 18, 2010.

Class Notes

In 2012, the ability to self-motivate, problem solve, and think critically are the three skills that business owners seek out in the people they hire, according to an assistant university dean. 

The academic community is beginning to realize that the course material being taught in critical thinking classes doesn’t relate well in the real world, in many instances.  For example, my university class taught critical thinking  using symbols resembling algebraic equations. Although, it was one of the most valuable classes I have ever taken, it took a lot of extra work on my part to relate what I’d learned into business concepts.

In the academic field, critical thinking is often an elective class, and it’s unfortunate because it is a necessary skill for daily living on a personal and business level.

For potential entrepreneurs, it is an essential tool. Figure out how skilled you are and where your weaknesses may lie. If your skill needs improving, how will you do so? Studying independently? Taking an Online Course? Attending a workshop or seminar?

Different learning strategies and excerpts from two of my class assignments will be available next week.

References
http://online.wsj.com/article/SB10001424052748703882304575466100773788806.html

http://www.youtube.com/watch?v=w1DU3Tl3bd0&feature=relmfu
Business management students build problem-solving skills

http://www.youtube.com/watch?v=R-NGhKc-pjE
Learning to Think Critically

Don Cheadle
The Oscar-nominated actor explains how he’s broadened his skill set and philanthropic efforts. Cheadle dishes background info on his new comedy for Showtime TV’s House of Lies. It’s about the underbelly of the consulting industry.

Just a guess, but given some of his remarks about consultants, I’ll bet Cheadle won’t be a keynote speaker at the American Management Association convention anytime soon.

Reference
http://video.pbs.org/video/2050561649/

Cookie Dough Niche
In the late 1970s cookie chain store founder Ken Rawlins, wanting to remain competitive, switched from retail sales to manufacturing and supplying his pastry dough to restaurants and other food service operations who wanted to offer their customers fresh-baked cookies.

Lesson: Rawlins kept track of business trends and interpreted them, a practice that some entrepreneurs overlook, and then developed a way to stay in the same industry by serving a different market.

Reference:
http://www.spunkmeyer.com/About-Us/Our-Story/Our-Story/