Utah Business Blog

By Ethan Willis

In 2007, Disney distributed yet another box-office hit in Pixar’s Ratatouille. In this film, we often hear the mantra of the legendary Chef Gusteau: Anyone can cook. Carrying this to the extreme, his conviction is proven by the most unlikely “person” of all: Remy, who is, in fact, a rat.

While anything is possible in fiction (and computer animation), my experience has shown me over and over that anyone can indeed be an entrepreneur. Regardless of education, ethnic background, current socio-economic situation, and age, anyone can successfully start one’s own business.

With today’s technology, starting a new business is incredibly easy. Anyone with trinkets or even services to sell can readily find a market on eBay, Craigslist, and other on-line forums. Whether the business in question is just something “on the side” or a tech start-up that could one day rival Google and Microsoft, the door is open to everyone.

True, there are some factors that can help ensure success. Thankfully, they aren’t restricted to those who have rich parents, a Harvard MBA, or access to the “good ol’ boy network.” For anyone who wants to start a business and give life to their entrepreneurial dreams, there are three key, interrelated characteristics that can make the difference between success and failure: resourcefulness, a sense of purpose, and focus.

Before discussing each of these, let me explain why I’m qualified to address this topic. I started my own business with a good friend while we were still in college. Our business is called Prosper and we deliver one-to-one personalized education. In short, we give people the knowledge they need to take action—how to eliminate debt, invest in real estate, start a business, and more.

While the curriculum is important, the central aspect of our offering is that each student has his or her own coach—a mentor who helps them make the leap from learning to doing. We have coached more than 40,000 students in our nine-year history. This experience has provided a unique “laboratory” of sorts which has helped us understand what makes a successful entrepreneur.

The first common characteristic is that entrepreneurs are resourceful. A few years ago, Melissa Sweitzer of Honeoye Falls, N.Y., started an internet business selling custom dance shoes. She made her first sale within a day of launching her site, and in 2007, she realized sales of $125,000. The success in itself is laudable, but how she got there is exciting, too. To generate traffic for her site, Melissa secured advertising with prestigious on-line bridal magazines, which linked customers to a specific part of her website.

More importantly, she tenaciously negotiated a contract with the only shoe dealer in the U.S. capable of keeping specific lines of high-end ballroom dance shoes in stock. Through her resourcefulness, she has secured a steady supply of shoes, and now offers seven different brands on her website.

“Knowing first-hand the frustrations professional and semi-professional ballroom dancers have in getting these shoes, I invested a lot of time in negotiating an agreement with this distributor to drop ship shoes for me,” Melissa said. “This distributor has never drop-shipped for anyone before, but by careful negotiations, we worked it out.”

Because of her efforts, she now enjoys a strong, extra income stream. “I have finally found a way in which the investment of my time and energy will pay me back in proportion to that investment,” she said. “My full time job as an engineer working on thermal control of space borne satellites for NASA provides me with technical challenges, but does not come close to providing me with the sense that what I put into my work will pay me back proportionally. This sort of satisfaction and gratification are exactly what I was looking for.”

Second, entrepreneurs have a sense of purpose. Two of our students, Nancy Wasson, Ph.D, and Lee Hefner of Birmingham, Ala., have dedicated themselves to saving marriages. Through their website, this married couple offers consultations, e-zines and a book they co-authored, Keep Your Marriage: What to Do When Your Spouse Says “I don’t love you anymore!”

This is obviously not your average internet business, and the couple could likely make a living doing other things. But, they chose to build a business around something that means a lot to them, and where they knew they could make a difference. When your business is closely tied to a personal conviction, it will be easier to overcome all the roadblocks you are sure to encounter. And of course, if you can do what you love for a living, you’ll never work a day in your life.

“Over the past several years, our newsletter has grown from nothing to more than 20,000 world-wide subscribers today. The great thing about our success is that we know we’re helping couples have better marriages,” Hefner says. “The success we see day after day is allowing us to do what is truly important to us—helping to change the world, one relationship at a time.”

Third, entrepreneurs exhibit a powerful focus on goals. Lisa Herbik of Monroe, N.Y., wanted a change. As she says herself, “Staying the same would only bring me the same results.” She was focused on financial independence and prosperity. Even though she started with very few computer skills, Lisa now has her own internet business, selling wall murals. She has demonstrated that any deficiencies, such as a lack of key skills (what could be more important to an Internet business than computer skills?), can be overcome with a strong focus.

“It took more than a year to make my first sale. Learning to be patient was hard, but I kept busy instead of fretting about my lack of sales,” Lisa said. “I am on page one of Google consistently for my main keyword phrase and I did it all with the SEO tactics I learned.”

Lisa is so intently focused on her own success that she stopped watching TV in 2006. “My time is too valuable for that!” Lisa reports. “I have put more energy and work into my business than I did with my master’s thesis. I am a powerful, competent, happy woman and I have found my spring board for success.”

Just as the fictional Remy was able to cook up something great, countless, real-life people like Melissa, Lee, Nancy, and Lisa have created thriving businesses and established themselves as entrepreneurs. They prove that anyone can start a successful business, large or small, and develop extra sources of income. With resourcefulness, a sense of purpose, and focus, anyone can do it.

Ethan Willis is CEO of Prosper, a Utah-based distance learning company, and coauthor, with Ken Blanchard and Don Hutson, of The One Minute Entrepreneur, which topped the New York Times business bestseller list in 2008.

Despite what you may think, starting your own business in a recession offers opportunities

By Joseph R. Cardamone, President, United States Federation of Small Businesses (USFSB)

Often times, the monotony of punching the clock as someone else’s employee leads to day dreams of starting a business and being your own boss. In rough economic times, those day dreams may never pass beyond imagination. “Times are tough, how could I start my own small business now?” one thinks. That’s rational thinking, but, counterintuiviely, a down economy can actually create great opportunity for budding entrepreneurs.

There are a variety of benefits to starting a small business during poor economic conditions. For starters, office rents could be lower and suppliers may cut better deals. Downturns are a great time to sign new accounts. Customers are examining every expense for ways to save, including asking eager entrepreneurs for price bids in order to replace current and expensive vendors.

An unfortunate reality of hard times is increased unemployment. But, for small business owners, this means more experienced talent is available in the marketplace, with more affordable salary requirements.

However, as you can imagine, the grass isn’t all green for entrepreneurs making a start in a down economy.  It’s tough, very tough.  A down economy means tighter lending standards, higher prices on energy and food and weak consumer spending. Like those millions of entrepreneurs who started a business during the recession of the early 1990s, today’s dreamers need to ask themselves if they have the appetite for risk and fire in the belly to succeed as a small business owner. For those inspired to give entrepreneurship a go, here are some quick tips for starting a small business in poor economic conditions:

• Avoid the middle market products and services – Even in a down economy, consumers and businesses need necessity-based products and services – office supplies, tech services, food, medical assistance, waste management, etc. Conversely, an innovative luxury item can also be successful. Avoid the middle ground; if customers can delay purchase while times are hard or choose a less expensive alternative, that’s not the industry to be in.
• Don’t fret the big bucks – If start-up capital is an issue, consider starting a part-time business. Keeping a day job for a while can help maintain a steady income while waiting for sales from the new business venture to kick in. It’s also a smart way to work out kinks, gain industry knowledge and build a solid customer base without superfluous financial stress and pressure.
• Make equipment multitask – Technology products are getting smarter and helping people streamline. Many printers can also scan and fax. Another printer, the DYMO LabelWriter printer, both prints a variety of labels, and enables users to purchase postage online through DYMO Stamps. This enables professional looking mailings, without the commitment or expense of leasing a postage meter, all while saving trips to the post office.
• Strategize staff selection - Minimize full-time staff. Hire part-time employees. Contact the local college or university to see if they offer a formal internship program. In some states, interns can work for free or class credit only. Outsource or hire freelancers who can take overflow work or specialty jobs. Don’t invest precious resources employing people who may be underutilized. As business grows, you can consider adding more full-time employees.
• Embrace the guerrilla – Don’t spend a fortune on advertising. Use guerrilla marketing techniques to get the word out. There are hundreds of free or inexpensive ways to do business promotion: Distribute free product to attract people and secure repeat customers. Write a column for the local newspaper. Get involved with your local chamber of commerce. Network with other area business professionals. Display the company logo on a vehicle.
• Buy the business – Many businesses for sale are completely viable; the current owner has simply run out of time, energy or entrepreneurial passion. Although it may cost more up front, the purchase of a business can provide an existing foundation and income stream - ready to be nurtured and advanced to a higher business level.

Anytime can be the right time to launch a venture if the opportunity is right. During periods of a challenging market, big companies suddenly don’t take any risks; they retrench and bunker down. In contrast, entrepreneurial start-ups, small and agile, are out reinventing models. Great ideas, some savvy business sense and a passion for self-employment can overcome any type of economy. Good luck!

Joseph R. Cardamone is president of the United States Federation of Small Businesses (USFSB). Founded in 1983 by small business owners, USFSB advocates for the rights and interests of small businesses and the self-employed. Their mission is to help their members grow and prosper by joining together and effectively promote small business interests before local, state and federal lawmakers.

This recording is of an awards presentation to Jake Garn for his board service to FranklinCovey at the Outstanding Directors Event hosted by Utah Business on October 30, 2008. Jake Garn joined the FranklinCovey board in 1993, shortly after the company went public. As a former United States senator, Garn brought unique perspective as he has served on the audit and corporate governance committees.

This recording is of the welcome speech by Martin Lewis, editor-in-chief/publisher for Utah Business magazine at the Outstanding Directors Awards on October 30, 2008. Lewis talks about the outstanding directors awards and why directors are so important to businesses in the state of Utah.

This podcast is a conference call between editorial intern at Utah Buisness, Jared Preusz, and T. Craig Bott, president and CEO of Grow Utah Ventures, a not-for-profit company that organizes contests where entrepreneurs can submit their ideas and compete for a cash prize and receive professional assistance in starting a new business. Bott talks about the upcoming contest in Southern Utah in this podcast.

This podcast is of speaker Dr. Kelly Matthews, executive vice president and economist for Wells Fargo and Company at a Utah CCIM chapter event. He talks about how the real estate market can cope with the recent financial crisis in America and gives some suggestions on how to make the best of real estate in these hard times.

By George Spilka

As this article is being written during the fourth week of September, the U.S. is in the midst of its greatest financial crisis since the Great Depression. Congress is in the process of debating a proposed bailout package of the financial industry by the Federal government. This infusion of capital would be the most massive governmental intervention in the financial markets in this country’s history. Although the bailout has not been approved yet, I believe that it will by next Monday. If, Congress doesn’t approve it or an alternative package of comparable substance, there will be a complete freezing of the credit markets. The financial consequences will be the most devastating in the past 80 years.

What brought the country to the brink? – Very simply, the reckless, verging on idiotic, residential mortgage lending that took place starting in 2004 combined with the use of modern technology to design exotic financial derivatives that almost nobody fully-understood the consequences of. The massive use and distribution of these derivative products was almost completely funded by debt.

Why did it happen? – The crisis was fostered by a culture of greed that has permeated this country since the “dot com” explosion of the 90’s. This culture reached its apex on Wall Street, where the “Wall Street Whizzes” felt that no amount of money was enough. It was nurtured and brought to maturity by the easy money policy of the Federal Reserve under former chairman, Alan Greenspan. This resulted in the most excessive and imprudent lending and use of leverage seen in U.S. history. The consequences should have been realized by all at least 3 or 4 years ago. I assure you the eventual consequences of their actions were evident to the Wall Street Whizzes. However, why should they have worried? They already would have made a vast fortune from it. Their personal wealth would be secured before the problem became evident. Others could deal with the carnage. The others turned out to be the United States and the taxpayers.

What hasn’t happened in the financial crisis – The impact has been limited to the financial industry, which has been devastated by the losses sustained in the residential mortgage lending market and the losses related to credit default swaps and other derivative products. At the peak of the financial crisis on Wednesday, September 17 as financial institutions became concerned about extending credit to anybody; thereby almost causing a meltdown of the U.S. financial structure, the Federal Reserve and Treasury stepped-in and proposed the bailout package. This brought renewed life to the credit markets. However, while this scenario evolved, U.S. industrial companies (both manufacturers and distributors) had their strongest balance sheets since the 1970’s. There has been no massive borrowing by America’s industrial companies during this period, nor has there been any meaningful disruption in the manufacturing and distribution segments of our economy. The immediate impact has been limited to the financial markets, and this is where the impact will be contained.

As I survey the landscape, although the economic figures indicate the country is in a recession or an economic downturn (define it as you like), the profits of U.S. industrial companies remain strong. The results for public companies indicate that although profitability is moderating, it remains at historically high levels. My clients are realizing moderate to strong profit growth this year.

In my opinion, the intermediate and long-term impact of the financial crisis on the economy is going to be negligible, if any. I believe that by the 2^nd half of 2009 the country will be coming out of the economic downturn. My major concern regarding future economic performance is the amount of guarantees that have been made by the Federal Reserve and Treasury. These could possibly lead to a significant worsening of the Federal deficit. If it does, it will exacerbate our dependence on foreign countries and provide further opportunities for foreign sovereign wealth groups. In this scenario, without foreign governments increasing their already large purchases of U.S. debt instruments, we will likely have a significant increase in the inflation rate and a further weakening of an already weak dollar.

Obviously, this foreign ownership of America is not only a political concern, but it also has potential long-term business consequences. However, despite the aforementioned concerns, I believe the financial crisis will have limited impact on the intermediate and long-term economy.

Owners and executives of middle market companies, such  market defined as companies with a transaction price between $5-$250 million, will now continue to get their ceaseless level of calls from brokers, intermediaries and low-grade investment bankers. However their storyline will now be, either upfront or as a deal progresses, something similar to, “you better sell at a discount price before the carnage gets worse”, or “you should be thankful to receive this price due to current financial conditions”. There is no justification for those type of statements.

Most acquirers will tell you the devastation in the financial markets means you will have to accept a substantially discounted price. You will be told that pricing will be “dirt cheap” into the foreseeable future and might even deteriorate further. Don’t pay any attention; this is hogwash.

The Impact of the Financial Crisis on the Sale of Middle Market Companies

1.   Short-term impact – (up to 1 year) - There might (or might not) be a period of 3-6 months where there is some turmoil in the acquisition market. Conceivably, there could be a degree of transaction pricing weakness through the end of the 2nd quarter of 2009, but I doubt it.

2.   Intermediate-term impact (1-3 years) – There should not be any impact on transaction pricing, unless the effect on the Federal deficit of the guarantees made by the Federal Reserve and the Treasury have a greater impact than I believe they will. At this point, I don’t anticipate that happening. Therefore, I expect deal pricing to be similar to the 1^st half of 2008, which was reasonably solid.

3.   Long-term impact (3 plus years) – None. Many things will affect pricing, none of which will be the current financial crisis.

Based on my economic outlook, I don’t feel the financial crisis should have any significant impact on potential sellers of middle market companies.

The Recommended Course of Action

Don’t change the overall strategy regarding the sale of your company. If selling satisfies your personal and business objectives, you should proceed with the process. You might delay contacting potential acquirers until after the first quarter of 2009, but that will not be necessary in most cases. Furthermore, don’t modify your expected transaction price at this time. I am not reducing the pricing for any current clients.

For companies not yet in the market or ones at the very start of the sale process, whose fundamentals and business foundation are somewhat deficient, they might want to delay the sale, while they strengthen and reposition the company. However, where there is no need to strengthen the company’s fundamentals or foundation, I see no reason why approaching acquirers should be delayed past the start of 2009.

My overriding advice is don’t be intimidated by acquirer’s “doomsday scenarios”. The financial crisis has not changed anything in the industrial sector of the U.S. economy. Most companies remain very profitable and the intermediate and long-term business outlook remains good. Therefore, there should be no transaction price concessions. If patience is necessary, it will provide you a bountiful reward.

These are times when you truly need a strong-willed, determined, knowledgeable investment banker that understands the causation of the financial crisis and how it is likely to play out. They will provide you the proper guidance in how to proceed in these exciting, but turbulent, times. If you have this strength and expertise on your team, you will get a premium price. Don’t let acquirers intimidate you!! Don’t accept less than you deserve!!!

Many lives are saved each year because of the health care system in Utah. This podcast is of two speakers at the Health Care Heroes luncheon, an awards ceremony (sponsored by Utah Business and Mountainstar Healthcare) honoring individuals and companies that have made significant contributions to health care in the Beehive State.

Many students are making a living while still in school with a business of their very own. Others have also graduated from Utah universities and are the leaders of some of the most successful businesses in Utah.

This podcast is an interview with Jared Preusz, intern and online producer for Utah Business and Gary Rhoads, the academic director for the Brigham Young University Center for Entrepreneurship. Rhoads, a successful entrepreneur himself, talks about how the center assists students in their efforts to create the businesses of their dreams.

This podcast is only one part of a multi-part series of content focusing on student businesses in Utah. A video of a student business, a few blog posts, and more will be published online in the next few weeks.

In this final part of the podcast of the Utah Venture Entrepreneurial Forum event, the financial funding panel answers more questions from the audience, mainly dealing with what financial investors are looking for in a small business that needs capital.