If you’re a true entrepreneur, then, as Donny Deutsch, creator of CNBC’s The Big Idea states, “No is not an option!”

You may be incubating your dreams of a better product than those currently offered….so don’t talk yourself out of it!  Don’t listen to the non-believers or the nay-sayers who tell you what a lousy time this is to start a business.  It’s nothing personal…..they’re just projecting their own fear onto you.

 Not only can small businesses survive and thrive during the economic downturn; these small businesses can be the driving force for economic recovery, according to Stephen Betts, at the Proceedings of the Academy of Entrepreneurship. 

As of March 2009, the United States has fulfilled the definition of a recession - two successive periods of negative growth in the GDP and an increase greater than 1.5% in unemployment (Black, 2008). 

Due to many factors, the small business owner is dealing with the effects of the economic downturn.  Under financial distress, small firms behave erratically  (Pinadad, Rodrigues & de la Torres, 2006) and sometimes frantically (Lober, 2009).  A decrease in capital expenditures and profits is typical (Monte & Castillo, 2009). 

As may be expected, as layoffs increase, so do start-ups of small businesses.  Although there is a stimulus package this time, only $730 million in funding is for the Small Business Association.  Congress left out tax change provisions that could have saved many US small businesses (Robinson, 2009). 

The current paradigm has shifted from helping small businesses to preventing small business shutdowns (Heerwagen, 2009). 

Message:  Be Your Own Stimulus Package

Bottom line:  Small businesses are not beholden to Wall Street (Bandyk, 2008).  In past recessions, it has always been small businesses that drive the economic recovery. 
How can your small business be one that thrives and drives?

Two approaches: 
Defensive strategy - go into survival mode 
Proactive strategy - re-engineer your processes
Though both approaches cut costs, re-engineering prepares you for recovery and innovation.

KEY TIPS  FOR SMALL BUSINESSES TO THRIVE, SURVIVE AND DRIVE THE ECONOMY

First, be defensive and make sure your business plan is operationally and financially sound.

1.  Review your contracts, suppliers (and their businesses and   customers), customers, laws and industry regulations, capital structure.
2.  Examine and change business processes as needed
3.  Re-train and upgrade your workforce - especially management and think of your company as being a ‘pool of talent.’
4.  Review how any changes you make, effect your business valuation,   exit strategies, partnerships,  terms of all contracts and agreements.
5.  Then…Think about approaching investors - they still need to invest in great, well-managed companies.

 The next blog will focus on adopting a PROACTIVE market orientation that will not only help your small business thrive…..but DRIVE the economy out of recession!

Stay tuned…..and please offer your suggestions for what is working for your business.

Rosalie

Key Approaches to Avoid Financial Disaster 
For Intrapreneurs and Entrepreneurs

 This morning, I was saddened to read about the bankruptcy of Seattle based retailer Eddie Bauer - the seller of high quality casual sportswear and accessories for the “modern outdoor lifestyle”, with 370 stores throughout the US and Canada.  The chain also has catalog and on-line divisions, participates in joint ventures in Japan and Germany and has numerous licensing agreements across many product categories.

With $268 million in outstanding debt, CEO, Neil Fiske, recruited to the company in 2007, told industry analysts that “the capital structure has simply too much debt for the economic reality we now face.”  Industry analysts simplify the problem further by stating that “sales are down and so is revenue.” It seemed like Eddie Bauer was doing all the right things.  They focused on the customer and built strong relationships with business partners for social responsible practices around issues such as the environment and global labor practices.

 Eddie Bauer, with its changing ownership landscape was formerly owned by Spiegel, until 2003 and previously by General Mills - with two very different corporate cultures and demands.

 Yet the higher they climbed, the more they seemed to lose their outdoorsy edge.

Once known for their exhibition creed - providing the US Army Air Corps in World War II with more than 50,000 parkas  and outfitting the 1963 summit at Mt. Everest, the company began to shift its focus to indoor casual.

 With a focus on turnaround strategy to return Eddie Bauer to its heritage as an active outdoor brand, the CEO states this may be thwarted due to previous crushing debt from the Spiegel reorganization in 2005 and the current recession environment. 

 Now - in its second Chapter 11 filing, the board received a limited guarantee from two affiliates of CCMP Capital on payment obligations.  There may be regrets about turning down a deal in 2007 to go private for $280 million with Sun Capital Partners, Inc. and Golden Gate Capital. 

 We will see what happens next….

 THE KEY FOR AVOIDING FINANCIAL DISASTER USING PROFITS Principles 
Go back to the “well” (your company’s raison d’etre) and replenish.

As you wonder how Eddie Bauer could have avoided this sad state of affairs - ask yourself what you are doing to avoid financial disaster for your company….before it happens.  As with Eddie Bauer, disaster doesn’t happen in a moment of time.  It is convenient to blame our problems on the economy.  What are the PROFITS Principles, that you, as either an intrapreneur or entrepreneur of your own company, utilize to avoid financial disaster?

• REALITY Review your financial structure and ask:  What decisions am I making when structuring for debt/equity? These require both long and short term considerations.
• OBTAIN VITAL INFORMATION Focus on the competition - to obtain vital information and do not adopt a new anxiety-driven shotgun strategy.  Instead, first focus on how you can differentiate yourself from the competition.
• INTEGRATION Integrate all aspects of your business.  Eddie Bauer kept adding more and more to their strategy.  Has anyone studied whether these strategic moves (adding indoor casual, adding strategic partners, selling licenses, on-line shopping, catalog division) worked together as an integrated whole?  I haven’t seen anything!
• FLEXIBILITY Are you nimble enough  - financially, strategically, operationally to be proactive in a volatile and disruptive competitive environment?  How can you become moreso?

 Our PROFITS Principles Community is growing rapidly.  As always, we welcome your comments in expanding the PROFITS Principles.

 In December 2000, Jon Swire grappled with his plan for an on-line spinoff of a technology platform that was developed at MIT and licensed to his current employer, a financial management company.  Jon’s informal investigation led him to believe that his employer was not willing to fund the spinoff at this time.

 Though he already researched the size of the market, (which appeared to be approximately $200 million) and the competitive landscape, Jon still needed to obtain vital insider information about specific competitors – their strengths, weaknesses, customers and end-users.  He had to learn about other disruptive technologies on the horizon and then determine if he knew enough about his potential customers and their customers.

 After meeting with the technology transfer division at MIT and a venture capitalist investor, Jon realized it could take at least a year or more to negotiate terms with MIT and to position his company for funding.  Jon would to have to bring on some heavy hitters for his management team.  More than likely, MIT, the venture capitalists and his new team, could quickly chip away at the wealth he envisioned as his own. 

 Based on initial calculations, Jon projected the need for $2.5 million to fund the project for two years. This included capitalization to further develop the platform, to obtain the required content licenses, for technology hardware and software, hiring consultants and meeting fixed expenses such as office space, utilities and administrative help. 

 Yet… what experience did Jon have with these negotiators?  None!  Jon knew he was smart and good at what he did.  And yet, he was a specialist with good ideas.  He could spot opportunities and then dig in and do the work.  He was a good manager and knew how to influence others.  Would he be a good entrepreneur?

 If you are contemplating whether you should remain with your current company – or start up one of your own, consider the strengths of the intrapreneur.

1. You have a good sense of timing.  You have patience and know when it is opportune to make the move.
2. You stay focused. You can keep your ‘eye on the prize’ when you are not the decision maker.  You are able to continue making inroads without giving up or alienating those who are decision makers. 
3. You know when to hold back. When your suggestions are thwarted, you view it as temporary and continue working behind the scenes.
4. You are a skilled manager. Using gentle influence, especially when there are cross-functional considerations, you maintain respect and integrity – and keep communication open.
5. You are humble and do not take all the credit. Validating the importance of others’ contributions, people clamor to be part of your team.

We welcome the comments of our PROFITS Principles community!

Your vision is clear. You know the opportunity exists. You even tested the market and validated customer needs.

And now…..2009, the year you expected to launch your new business is fraught with a sagging economy and possibly a recession. You have a job that’s ok. You don’t love it. You enjoy most of your colleagues. You have some flexibility. The reality is…it works, it pays the bills and gives you the mental, if not physical time to design your dream.

“Now what?”, you ask yourself. Do you keep your day job longer with your 401K and benefits? Ah…you can feel the freedom. It’s so close….yet so far.

And on it goes. The back and forth – the pros and cons, along with the nagging voice that says “Now is the time. If I don’t do this, I’ll never know if I could make this business a success. Yet, if I am worried about money because my customers can’t pay, will I fail anyway?”

This thinking is not as rare or strange as it might sound. Millions of people are having these conflicting thoughts and emotions. Conventional wisdom – and even the wisdom of well-respected business gurus like Donny Deutsch (CNBC show: The Big Idea, which CNBC removed from its programming this year, because the powers that be anticipate that future small business entrepreneurs are awaiting a better economic climate); and Suze Orman (also with a CNBC show: The Suze Orman Show) who advises mainstream Americans on how deal with their finances, suggests that we hold onto our day jobs before we take the leap into the great unknown.

PRACTICE THESE SKILLS AND ADVANCE IN YOUR DAY JOB
BECOME AN INTRAPRENEUR….

Key Skills to Advancing Anywhere…

• Presentation Skills
Learn to be clear, articulate and focused
Breathe…..and speak from your diaphragm
Use visuals
Skip the jokes if you’re not a comedian

• Consulting Skills
Understand your client’s business – inside and out
Learn to partner and collaborate – not tell
Listen, listen, listen and listen some more
Manage expectations

• Communication Skills
Find the human connection
Focus to get the outcome you want
Provide your full attention

We look forward to your comments, sharing your experiences and wisdom.