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Jul. 26 2010 — 7:10 pm | 183 views | 0 recommendations | 0 comments

Seventh Generation and Wal-Mart: Strange bedfellows

Seventh Generation Inc.

Image via Wikipedia

Never say never.

Seventh Generation, one of the best-known socially responsible companies and a seller of environmentally friendly cleaning products, just announced it’s officially selling its wares through 1,500 Wal-Mart stores and, also, online.

There was a time, some years ago, when founder Jeffrey Hollender said he’d never team up with Wal-Mart. But that was before Wal-Mart started its big big push to make itself into an environmental leader.

The first phase of this odd pairing happened about two years ago, when Seventh Generation started selling its products at Wal-Mart’s more low-key Marketside stores. At the time, Hollender compared the effort to “a software product that’s entering beta.”

Then, last year, a former Quaker Oats, Tropicana and Gatorade  executive Chuck Maniscalco took over as CEO, something I wrote about at the time. The idea was to bring in someone with the kind of background and savvy that would lend itself to a successful expansion. But the question at that point was, could a person with such a buttoned-down resume fit with the triple-bottom-line principles of Seventh Generation?

Now, this second phase–selling in Wal-Mart supercenters–clearly is key to Maniscalco’s plan to expand. And Hollender clearly is down with the Wal-Mart move, since he just blogged about it.  As for Wal-Mart,  Al Dominguez, vice president of chemical and paper goods, said in a statement: “. . .  we are always looking to expand our number of sustainable offerings.”

For Wal-Mart, teaming up with Seventh Generation is a nice pr move, because, for those who follow such things, Seventh Generation is the gold standard for socially responsible consumer products. From Seventh Generation’s perspective,  since Wal-Mart has redeemed itself over the past few years through a variety of ambitious programs to reach out to green suppliers and create a greener supply chain, why not do business with the retailing giant?

Of course, there still are a lot of pesky questions about Wal-Mart’s labor policies.  Perhaps in its eagerness to expand, Seventh Generation decided it would be better to overlook them.

Jul. 16 2010 — 12:22 pm | 59 views | 0 recommendations | 8 comments

Seed funds: Biased against anyone over 30?

Sure, it’s hard to keep up with the venture accelerator/seed funds out there, all variations on the original Y Combinator theme:  Support a group of young tech-savvy entrepreneurial wannabes for three months, give them a few thousands dollars, and watch them soar.

The idea behind these efforts is that this type of company doesn’t need a lot in seed funding, since the founders are 20-somethings and the business requires only a small amount of capital to get going.

But this doesn’t mean these companies don’t need big capital infusions at some point. Plus there’s a dark side to these efforts, an implicit prejudice, a sort of don’t trust anyone over 30 thing.

First, I’m just catching up with a series of posts by assorted bloggers about the funding issue. While these companies don’t require a lot to get started, what about the next stage? In other words, these folks might be able to launch their business on the cheap, but after a year or two, it’s a different matter altogether. Here’s one comment:

What has changed in technology venture capital is not so much the total capital requirements, but when they are required.

via A VC

In fact, it takes an average $20 million for one of these startups to reach a sustainable cash flow level, according to this post. For entrepreneurs, it’s largely a good thing, because it means they need to raise big bucks when their business is worth more and they don’t have to watch their stake become really diluted, which is what happens when you accept large chunks of funding from VCs and angels early on.

So this is all well and good for web entrepreneurs. Or at least for some of them. But what about the people who can’t afford to pick up and move somewhere for three months? What if, God forbid, you have a family? Seems to me, a large number of potential founders are left out of this equation. And in fact, there’s a real age bias here.  Really, people in their 40’s, 50’s and above have innovative ideas, understand technology, and deserve consideration.

Of course, why should this bias be a surprise? Our culture is profoundly biased against the non-young.

But I’d like to see some alternatives.

Jul. 6 2010 — 2:38 pm | 114 views | 0 recommendations | 4 comments

Does it matter that many small firms don’t make much money?

Should policy makers be advising we poor slobs to rush out and start a business? Will it pay off? According to small-business expert Scott Shane, the answer is: “No.”

But his argument might be only partially relevant.

Shane analyzed Census data for average and median six-year revenues of startups by industry sector. He used that time frame because most new businesses fail in their first five years.  What he found is that average and median numbers tell different stories. Only a small number of companies survive past the six-year mark and, also, make over $100 million in sales. So, the average number skews high. But, the median is much lower. In fact, it’s zero in some cases. ($2.1 million is the average for manufacturing, for example, while the median is zero).

His conclusion is that most entrepreneurs are spinning their wheels–”spending a lot to get relatively little”. And he says:

Before policy makers tell everyone that it’s a good idea to be an entrepreneur, they should keep these numbers in mind. The people they encourage are more likely to have the typical outcome than the average one.

via The Typical Entrepreneur’s Sales Are Below Average | Small Business Trends.

So, it’s hard to dispute that many small businesses aren’t rolling in money after six years. But, for one thing, some of them seem be doing just fine. The median for agricultural services, forestry, and fishing, as well as finance, insurance, and real estate, and services,  is $50,000. Not huge, but something. Plus, during those years the companies were in business, presumably they made some money, employed some people, helped the owners and their workers pay their rent and feed their families.  If they didn’t become tycoons, that doesn’t necessarily matter.

In fact, one conclusion is that government policy makers should, indeed, advise people to go into business for themselves. But they should find ways to offer constructive help to entrepreneurs to boost their chances of success.  That means more classes at community colleges, for example, or expansion of SCORE. ( Too often, I hear mixed reviews from patrons of SCORE. It’s like dealing with customer service. You have to keep calling until you get someone who can help. In the case of SCORE, that means someone with solid entrepreneurial experience who knows what he or she is talking about).

This wouldn’t be about becoming super-successful, necessarily, but about operating at a level that allows owners and employees to remain solvent. And that’s important.

Jun. 25 2010 — 11:21 am | 95 views | 0 recommendations | 2 comments

Cynical political maneuvering is hurting small business

Mitch McConnell

Image by Gage Skidmore via Flickr

Just read a post on the New York Times small-business web site summing up why we’re never going to get a small-business bill that really helps small companies.

The Obama administration’s efforts have included a variety of approaches: boosting SBA funds for loans, introducing tax incentives for investment and hiring, and creating a $30 billion fund to encourage community banks, which account for the lion’s share of lending to small businesses, to step up to the plate.  But there’s been such partisan fighting–including what seems to be cynical push back from Senator Mitch McConnell and his colleagues, who see tax cuts and only tax cuts as the uber-solution to everything–that nothing much has been done so far.

The ultimate cynical ploy is how Republicans are maneuvering to brand the $30 billion lending plan as that horrible thing–another TARP–just so they can turn around and use that label to convince community banks to reject the idea.

Though Democrats tried to inoculate the lending fund with a legislative provision that specifically disassociates it from TARP, Republicans derided it as “TARP 3.0″ and even tried to change the bill’s title to the “TARP Junior Act of 2010.” At the same time, Republicans professed concern that, as they wrote in a Financial Services Committee report, “banks could shun the program for fear of being stigmatized by its association with the TARP.”

via Will Obama’s Small-Business Agenda Survive Congress? – You’re the Boss Blog – NYTimes.com.

How utterly Orwellian.

To be clear, I’m not completely sold on the proposals. There’s a continuing question about how much of a problem tight access to bank credit is for small businesses, something I just wrote about. SBA loans are especially problematic, since they account for a very small percentage of total lending.

But community-bank lending is another matter.  There’s a contingent of healthy companies that might expand, if only they could get some bank credit. And these are the businesses that are more likely to hire.

So, bottom line: These proposals aren’t perfect. But the craven maneuvering by Republican partisans who mostly want to stop anything Obama does so they can win the next election–that’s distasteful.

Let’s have a constructive dialog.

Jun. 16 2010 — 11:09 am | 198 views | 0 recommendations | 21 comments

For many small businesses, the solution isn’t a bank loan

Just how much of a problem for small businesses is tighter access to bank lending?  Would loosening up credit make a big difference?

A few months ago, the NFIB produced research showing that the vast majority of small businesses don’t think the lack of bank lending is their biggest problem. Poor sales are.

To judge from the experiences of one New Jersey bank, that situation still exists. In a big way.

I recently talked to Frank Sorrentino, president of North Jersey Community Bank in Englewood Cliffs. Most of its customers are small businesses.  And according to Sorrentino, overall demand for borrowing is down, although he didn’t want to get into specifics. “There’s less home construction, less manufacturing. Law firms are laying off. People are afraid for their jobs.  They aren’t borrowing as much. Everyone is deleveraging. They’re not going to take on extra debt,” he says.

According to Sorrentino, banks want to lend. Or, at least, his bank wants to lend.  And, in fact, his bank is actively engaged in trying to get more companies to borrow.  (For example, they certainly seem to be revving up their media outreach).

Obviously, it all has major implications for appropriate government action. Should the Obama administration be spending $30 billion to boost bank lending? For  Sorrentino, the answer isn’t to throw a lot of money at banks.  His suggestion is to provide more tax incentives. That means giving breaks to banks for loans made to small business and to companies to borrow in order to expand or hire.

Of course, he’s not the most unbiased observer in that regard. So, let’s take his suggestions with a grain of salt.  Still, he’s there at ground level. And, judging from his experience, it seems pretty clear that loosening access to credit isn’t the Holy Grail of small-business recovery.

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    About Me

    It's just in the past few years that I've become interested in not-only-for-profit startups and small businesses. In fact, I can remember a time when I thought the concept of "enlightened capitalism" was simply an oxymoron. Now, I see the possibilities. Plus, it combines my own political bent with my long-time coverage of small business for such places as the New York Times, Business Week, CNNMoney.com, Portfolio.com, Harvardbusinessonline, and Fortune. Otherwise, I live with my son, a soccer fanatic, my husband, a journalist and avid rower, in Pelham, NY. My daughter, a former varsity wrestler, is away at college, studying art. You can see more of my work at www.annefieldonline.com. Or follow me on Twitter@annearfannearf.

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