So, You Think You Want To Create an Entrepreneurial Ecosystem?
WHAT SUPPORT DO ENTREPRENEURS REALLY NEED
More and more rural communities are looking at ways to grow from within; and more specifically, through entrepreneurship. Rural community leaders and stakeholders across the country are looking for ways to establish entrepreneurial ecosystems in support of their local existing businesses and to accelerate new business growth in their communities.
I often receive invitations to speak about entrepreneurship. As I work with the various stakeholder groups, I often find a sense of naiveté regarding entrepreneurship, and even small business in general. Those who have not owned a business or who have not been involved in a small business often have misconceptions about small business ownership. Not to mention the new realities facing small businesses given the ongoing impacts of the pandemic. But that’s a blog for another day.
That’s precisely where I like to start the conversation. If you are going to have a serious conversation surrounding an entrepreneurial ecosystem in your community, it is imperative that the conversation start with a good understanding if what small business often is – messy.
When I am addressing a group on this subject, I often start by asking how many in the group own their own business. It helps me gauge the level of understanding among participants. I typically follow that with asking how many in the group have an entrepreneurial program in their community. I am quick to add that it doesn’t have to be a formal overarching program. I challenge the group to think about any business referral programs, small business coffee chats or young professional groups that may already exist in their community. These groups can be a great way to gather feedback from small business owners as well as provide a strong base to build a more formal program upon.
Then comes the million-dollar question – what types of assistance does the group think entrepreneurs need? This is really where the rubber meets the road. The answers are often both astounding and disappointing. What types if assistance do entrepreneurs need? Not what do we think they need, but rather what do they actually need? Not a square peg, round hole.
I then ask the group what percentage of businesses fail within the first five years. As you know, the numbers vary greatly depending on what source you quote or what type of business it is. However, most of us can agree that there is certainly a large failure rate among new businesses within the first five years. It’s a good place to start the conversation. Quoting these percentages typically raises a few eyebrows.
I need to inject a pet peeve here. I have worked with stakeholders in the past that literally believed that when a small business owner hangs and shingle and opens for business that they are immediately successful. All business owners are millionaires, right? Small business is incredibly hard. It can be dangerous financially. It is often messy, at best.
As I speak with entrepreneurs about why they want to open their own business, I often hear them say “freedom” or “independence”. I quickly dispel that belief and bring them back to reality. You are never “free” from your business. People are counting on you. Your employees, customers, lenders, investors, vendors and more.
In fact, I typically share a story I hear more than anyone would like to admit. A business owner reciting a time when they had to tell their significant other that not only did the business owner not take a paycheck this week, but they took money from their personal account to make payroll for everyone else. That one usually gets a raised eyebrow or two as well. After all, all business owners are millionaires, right?
Now that I have their attention, I like to tell a few reality stories from entrepreneurs. It is good for the group to hear some real-life case studies. Fortunately, a number of entrepreneurs I have worked with over the years are kind enough to allow me to share their stories.
I like to start with a story about a young lady and her sister who were touched by breast cancer in their lives. It was their mother’s experience with breast cancer that inspired them to stand up and find a way to support others on their journey. After a very long, frustrating and fruitless day of shopping for bras during her recovery from a lumpectomy and radiation, they quickly realized there had to be a better option and—if they could not find it—they would create it. And in that one shopping trip, an idea was born.
While I could share so many inspiring things about these two talented sisters and their business, I then ask the group how long they think it was before the CEO pulled her first paycheck from the business? Some say 90 days. Some say 9 months. Some even say a year. The answer – 8 years.
I remember that day like it was yesterday. I received a text message from the CEO with a picture of her standing in front of an ATM machine depositing her first paycheck from the business. What a celebration! While this one raises even more eyebrows in the group, I can tell some are skeptical so I continue with my stories.
I also tell the story of a small manufacturing company I worked with a number of years ago. Once again, very talented young entrepreneurs with a high-demand product. While the company started in their garage, it didn’t take long for the ramp up. In fact, the company was soon occupying around 12,000 SF and employing a number of people.
On a Thursday afternoon, one of the owners visited our office to seek assistance. She told us that the company was having some financial difficulty and would not be able to make payroll the next day. From all outside appearances the company was doing well, but internally things were not good. While we were able to find the company help, I like to ask the group what they would do on Thursday afternoon at 4:00? After all, you want to create an entrepreneurial ecosystem, right?
I then like to tell the story of another very talented duo. In fact, I have had the honor to assist the young lady with two businesses over the years. The young man was also very talented and both had launched successful marketing companies in a rural area. Both were seeking assistance from our office as well as our Small Business Development Center. Our SBDC counselor and I discussed the companies and whether or not there was enough business in the rural location to sustain both companies. Perhaps it would be better to introduce them and propose a partnership. Our SBDC counselor and I agreed and we made the introduction.
The introduction went well, and given both entrepreneurs brought different strengths to the table, they were willing to pursue the partnership. They created a new company under one of the brands. Things went well for about a year, until the relationship began to unravel. While both entrepreneurs were very talented business people, they had differing motivations for business ownership. That’s where the partnership struggled.
The young lady was content to own her business and her motivation was to make enough money to succeed while raising her family. She was interested in remaining a small business. The young man was more interested in following the Mark Zuckerberg approach and growing the business into a tech giant. Perhaps even taking the business public. Both are admirable goals and there is not a right or wrong here. Unfortunately, their varied motivations did not mesh well and the two were struggling to make collective decisions regarding their business. One of the entrepreneurs sought assistance to divide the company again. It was not a pleasant process that cost them a partnership and a friendship.
Today, both parties admit some stubbornness and share that it is important to watch your attitude in a partnership. The young man places the separation of the company on his actions. Both warn that partnerships are hard in the best of situations. Being realistic about goals and ideals from the start is really important and it is important to have an exit strategy. They both miss the partnership, and more importantly the friendship. This story usually raises a few more eyebrows with the group.
I then remind the group about our earlier discussion regarding failure rates. I share that failure rates with franchise businesses are very low. In other words, franchise businesses have a very high success rate. I challenge them to think about the difference. The difference is the support system. The franchisor typically offers operating manuals, home office personnel and training – an ecosystem so to speak.
I then remind them that some of Rural America’s largest employers started in a garage or around a kitchen table. The news is not all bad, but it is important to go into this conversation with eyes wide open. Hopefully the stories help them see some real-world examples.
Now that we have an accurate depiction of what small business can be, I typically go on to discuss what an entrepreneurial ecosystem could look like and how they might customize something to their community’s needs.