On your way to opening day

Do reporters tell the truth or are they susceptible to bias and perspective? Over the last several months the press has created a phenomenon that continues to pick up momentum. Everyone seems to be jumping on the bandwagon; politicians, civic leaders, and educators alike have taken up the torch and continue to proclaim its benefits.

I am talking about entrepreneurism. It is being characterized as the secret ingredient for economic salvation. In times of fiscal malaise, the argument says that entrepreneurs can fix the economy by reducing unemployment, creating a demand for capital and restoring trust in corporate America. Although I find the notion laudable, I find the process laughable.

You see, for many years there was no spotlight on the entrepreneur. The best kept secret was that entrepreneurs were the backbone of capitalism and the American economy; yet everyone, including the press, had no clue of this simple fact. Entrepreneurs create jobs, promote capital transfer and generate wealth. These folks understand risk as they put their careers, personal reputation, bank accounts, and heart and soul into their idea. Entrepreneurs are not common people. Compared to the populace, they are very few and far between, and their societal impact is a result of their true perseverance.

Because entrepreneurship has never really been understood, the prevailing belief is that new government programs are the best way to promote entrepreneurship. Among the most popular proposals are government-managed loan funds, government subsidies, government-funded business development centers, and entrepreneurial curriculum in public schools. These programs, however, have generally failed. Government-funded and managed programs have suffered from the same poor incentives and political pressures that plague so many other government programs. Entrepreneurs simply need roadblocks removed and their instinctive abilities will do the rest.

So what type of character traits and skills are necessary to be an entrepreneur? The person with the most gumption, a plan, availability to necessary capital, and the good sense to keep his/her eye on the ball through all adversity is an entrepreneur. But the term has evolved in the press recently, in part because of the current state of the economy and the press’ infatuation with creating something out of nothing.

Entrepreneurs assemble resources, cash and business acumen in an effort to transform innovations into economic goods. As someone who organizes, manages and assumes the risks of a business or enterprise, an entrepreneur is an agent of change. They find new ways of successfully combining resources. Synergies are often exponential. For them, one plus one equals 10.

Successful entrepreneurs expand the size of the economic pie for everyone. Through their entrepreneurial efforts, guys like Steve Jobs and Mark Zuckerberg have created opportunity and wealth, not just in the computer information technology market, but they have also had an indirect helping hand in a wide swath of ancillary markets. Entrepreneurs make a difference.

What I find interesting is that in the last few years, state and local governments across the country have abandoned their previous strategy of stealing someone else’s business as the centerpiece of their economic development policy, and instead shifted their focus to promoting entrepreneurship. This move was long overdue, but its effects are cosmetic at best.

Although I would agree that in some special cases entrepreneurs are created, my contention is that entrepreneurs have innate abilities that set them apart from the general public and fictional wannabe-business-owners. In short, they are not created they are born.

Entrepreneurs must be able to create a product or service; they must be able to sell it in a competitive environment; and, they must have the ability to manage the business. They do not necessarily need to be good at each of these broad tasks, but they need to be able to mobilize the resources and talent to accomplish each of them.

There are many challenges to being an entrepreneur and opening a successful business enterprise. Regardless of the business and its market, the following rules may be handy if you are considering giving it a try:

1. Develop a plan. Establish goals and objectives for your new company, and measure your performance. Do not over-estimate your sales and always plan for higher costs.

2. Hoard your start-up capital. Whether you use your savings or borrow the money, do not spend your money like a drunken sailor. Websites are nice but not always needed; boxes of pre-printed envelopes are a waste of money. Buy only what you need, not what you want. Always, always, always preserve your capital.

3. Pick the right business structure. Talk to a reputable accountant when selecting your business structure (e.g. C-corp, S-corp, LLC, sole proprietor). Tax implications are an enormous impediment to staying in business.

4. Protect your corporate name. Your name is your identity, so protect it as though it was your first love.

5. Establish necessary business documents. Corporations are governed by their internal bylaws, whereas LLCs are governed by operating agreements. In addition, consider stock Buy/Sell Agreements, Non-Disclosure Agreements and Non-Compete Agreements. If you don’t know what these are, find out. In business, ignorance is no excuse.

6. Buy the right insurance. Insurance is a huge corporate cost and, all too often, companies buy the wrong insurance thinking they are protected when they are not. Read the fine print and ask a ton of questions.

7. Separate the money. Do not inter-mingle funds. Keep your personal money and your corporate money separate. The tax man does not like it when you mix it together.

8. Establish a brand. Give significant thought to what your business does and how you characterize its purpose to everyone you meet. Pass out your business cards like you are being paid to do it. In the end, always follow Rule #10 because you are your brand.

9. Form a network of confidants. If you have not been in business before, don’t think that successful business owners don’t need help. No one knows it all. Network with the people who can help you.

10. Be honorable. People won’t do business with people they don’t trust. Pay your bills; keep your word; and, make everyone around you proud. Not everyone survives the fight; but just like in a hockey fight, it’s not whether you win or lose, it’s whether you show up.

It has been widely reported that successful entrepreneurship comes from activities that produce wealth, rather than from activities that forcibly take other people’s wealth. Recent academic research on entrepreneurship shows that to promote entrepreneurship, government policy should focus on reforming basic institutions to create an environment in which creative individuals can flourish. That environment is one of well-defined and enforced property rights, low taxes and regulations, sound legal and monetary systems, proper contract enforcement, and limited government intervention.

When it is all said and done, understand that every business in America was conceptualized, planned, capitalized, started, managed, and grown by an entrepreneur. It’s not easy, but old-fashioned American entrepreneurship works.

David Saint-Onge is president and principal strategist for Black Ink Assets, a business consulting company providing organizational assessment and performance enhancement services, business growth and sustainability implementation strategies, computer information technology consulting, and formation of exit strategies and corporate transition plans. David is also the author of Built To Fail – How Uncertainty is Killing Intuition, Invention and Investment in American Small Business, and The Exit Equation – How to Leave Your Business with Your Money and On Your Terms, which is set to be published in early 2012.