What the Fed Decision does for Entrepreneurs?

If any entrepreneurs have been watching Federal Reserve Chairman Ben Bernanke explain this year’s FOMC decision, I hope you’re ready for meager profits and slow growth. The FOMC has decided to finish its current round of economic easing and keep the interest rate at 0.25%. Banks and large corporations will be happy because they are, in essence, receiving “free” money leading to the continuation of rising inflation in commodities and the devaluation of the US Dollar.

Cash flow and profits, for startup companies and small businesses, are a delicate balance. Gas prices shooting up a dollar over a two month period can put many small businesses out of business. More small businesses will fail to make it through the rest of the current recession and many startup companies will fail to launch. A squeeze on profits for a company that is barely profitable isn’t sustainable.

Why will large companies succeed? Large companies can survive extended periods of time at low profit margins because of their high volume. If something goes wrong, it is easier for them to gain financing because they can use the millions of dollars of assets on their books as collateral. This allows large companies to expand or maintain while their smaller competition is forced to cut operations or go bankrupt leading to larger more powerful corporations created by the Federal Reserve.

Poor People take Advice from Poor People

It seems like everyday people give advice about things they shouldn’t be giving advice about. People in bankruptcy court are pretending they know a thing or two about money. People who lost their homes to foreclosure are advising that the best thing to do is buy a house, “It can only go up in value,” they say.

Do you think that makes sense?

I don’t

If you have a problem and are looking for a solution, who do you go to for advice? Has that person solved your specific problem before? If not, then why ask for advice from them?

Many people are facing this problem every day. I’m struggling with this problem right now. It’s always been common for people including me to seek advice from friends and family but they don’t always provide the best advice. Before seeking advice, ask yourself these questions:

1.       Who do I know that has been in the same position I am in?

2.       Are they where I want to be in life?

3.       Are they doing the things I want to do?

These can be hard questions to answer. Sometimes the people you rely on most don’t fit the description of the answers you are looking for. I know the people I usually rely, my parents and friends, have never been in the position I am in now. To get the outcome I want I have to ask someone who has earned the outcome that I want. Always remember to think about who you ask advice from before you ask it.

False Prophets Promote “Intrapreneurship”

I had the pleasure of attending CMU’s New Venture Competition on Friday. It was exciting to hear some bold new ideas especially from young people. What was not exciting to hear was the use of the word “intrapreneur.” For anyone who doesn’t know, an “intrapreneur” is a person who innovates and improves things within an existing company. If I’m not mistaken, I believe that sounds familiar to the definition of a good employee. Entrepreneurs create jobs they don’t have them. Entrepreneurs create wealth for themselves through the products and services they create. Entrepreneurs do not create wealth for CEOs and Board Members, where their only benefit is a $5,000 increase in their salary.

This post may make me sound bitter, which it should. The reason this word shouldn’t be used is because it doesn’t promote innovation. It promotes becoming a good employee for big business. I spent some time talking with these young entrepreneurs throughout and after the event and I was disheartened. They experienced a whole day of excitement where they competed for a $30,000 prize and a chance to follow their dreams, but in the end they were all talking about getting jobs in the next month. Even the winner of the competition was worried about getting a job after college. Innovation only comes from thinking outside the box and I hardly believe people start thinking outside the box when they are already in it. These young entrepreneurs need to be encouraged to follow their dreams, not the dreams of non-entrepreneurs.

"To get what you want, you must do things you've never done."

Surviving the Home Office Meltdown

Anyone running a home business or working from home has had some trouble staying focused. Although there are great benefits to working from home, such as no wasted time getting ready in the morning, save on gas and less calls to Jimmy John’s, it can be hard to stay motivated with so many distractions around. I’ve created some guidelines that have helped make my day more efficient and rid myself of some distractions.

1.       Dedicate a space of your house just for work. Often working in the same room where you spend your leisure time will result in less work and more leisure time. Get rid of the TV and don’t work from the couch.

2.       Keep your work space organized. Keeping your work space organized, no matter your specific organization habits, will prevent you from walking around the house looking for things and noticing unfinished chores that should be left for after your work is done.

3.       Don’t be afraid to use inspiration. Even the best need to be inspired in order to keep motivated. Put up inspirational pictures, quotes, etc… Whatever keeps you focused on your goal, keep it close.

Trying to Hook That Big Fish? Make Sure You’re Using the Right Bait

It seems harder than ever these days to locate funding for your next big project. There is virtually no Angel Investing going on right now in the State of Michigan and the banks are coming up with excuse after excuse on why YOU are not qualified to receive a loan. What can you do? Traditionally, investors and banks want to see a business plan. Investors will take business plans seriously if they are well written and thought out. They aren’t too picky, just looking for a few things:

·         What problem is your product or service the solution for?

·         How is it going to make money (your business model)?

·         How much will it take to get started?

·         How much money will it make them?

·         Most importantly, who is going to get the job done (your management team)?

Before you can “reel them in,” you need a killer executive summary. If it’s good enough, they will jump in the boat for you.

Banks on the other hand are a nightmare. A business plan used to work but now banks are requiring:

·         Business Plan

·         Promises from vendors

·         Collateral

·         Legal Documents

o   Franchise agreement

o   Commercial leases

o   Contracts with third parties

·         Schematics for your building

·         What color carpeting is in the building?

Ok, so I made the last one up but once you have everything a bank is looking for which is usually more than I listed, they will ask for something else. These days the best way to go is with an Investor but you have to be prepared if you want to get funding.