June 2009 Franchising World

It seems clear that the ingredients for an entrepreneurial boom are in place. 
 
By Brian Miller, CFE 
      
America has always been a nation of entrepreneurs. My grandfather was the original type of entrepreneur––a farmer. He had customers who followed him until the day he died. Together, he and my grandmother earned a living for their family and created a legacy for generations to come. They didn’t have a lot, but they never went hungry.
  
Back then, they lived on optimism and hard work. Going through those tough times made our grandparents and parents strong and shaped a generation that knew how to work hard and complain little. They weren’t seeking a handout from anyone; in fact, they were likely giving the little they had to help a friend. When I think of today’s entrepreneurial climate, I remain bullish on America. Don’t count America out. The strength of America is in its people. I saw my grandparents and parents live through some tough times and come out strong. It is adversity that builds strength and character, and it is this very recipe which fosters ingenuity and creativity. John D. Rockefeller said … “These are the days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again.” 
  
Federal Reserve Chairman Ben Bernanke said recently that the economy should begin to stabilize later this year and the economic recovery will come early in 2010. We can only hope so. But even as today’s economy recovers, we’re emerging into a much different world than the one in which our parents and grandparents lived. Gone are the days when individuals will work for one or two employers, receive lifetime benefits and retire boasting double-digit service time from one employer.  
  
Changing jobs is the norm in today’s work force, either by choice to take advantage of a better opportunity or because of today’s New Career Economy. The average American will have had 10 jobs between the ages of 18 and 38. In this New Career Economy, longterm security will be gained through people managing their own careers through self-employment and other alternative career options. More and more people are beginning to recognize this. We’re no longer expecting a storm on the horizon. We’re in it. Threats to the American worker’s family that are completely out of their control include: colossal consumer debt, companies downsizing or going out of business, elimination of benefits, massive pension deficits and Social Security insolvency. This means that people are beginning to recognize that the stability they once thought was in the job market is no longer there. And for those who are employed, they’re having a tough time making ends meet.
  
According to a recent Career  Builder.com   article, nearly half of all workers (47 percent) say they always or usually live paycheck to paycheck just to make ends meet, up from 43 percent last year.
  
The New Career Economy is characterized by:  
   • Increased worker knowledge of overall economic factors which support individual efforts such as business ownership to ensure long-term security for themselves and their families;

   • Increased entrepreneurial success leveraging the knowledge and experience of men and women leaving the corporate workplace;

   • Business-services sector increasing due to the need for people and companies aligning with business coaches;     

   • An increased desire for “personalization” of new businesses to the lifestyle, goals and needs of the business owner; and,

   • Increased diversity in the workplace characterized by women, minorities, veterans, disabled and older workers.   

Starting a Business Now? Are You Crazy? 
  
Fact or Fiction? The small-business market shrinks during a recession?  Answer: Fiction

We’ve all read that small businesses are the backbone of the U.S. economy and will drive our economy in the years to come. The logical assumption is that the smallbusiness market will shrink during recession times. In fact, the opposite is true.
  
During downturn economies, not only does the net number of small businesses grow, but the number of start-ups actually increases versus previous years. The result of corporations downsizing is a catalyst for many to fulfill their dreams of being self sufficient. This serves as a launching pad for the nation’s aspiring entrepreneurs.
  
Where do all of the sharp, well-trained executives go when their firms make massive layoffs or cease to exist? Many of them start their own business. Historically, the number of new businesses spike as recessions get deeper. As the chart above illustrates, small businesses actually grow during downturn economies.
  
People are becoming less confident in “reactive” investments as well. Re-active investments such as stocks, mutual funds or 401(k) programs are considered reactive because they all depend upon the performance of corporate America. Ninety percent of all companies do not make their forecasted revenue figures in any given quarter. And more recently, the default rate for issuers of U.S. corporate junk bonds—those that Standard & Poor’s rates BB+ and below—is expected to catapult to an alltime high of 13.9 percent by December, S&P reported in January. The collapse of the stock market last year left corporate pension plans at the largest companies underfunded by $409 billion. So what does this mean for the aspiring entrepreneur? They are beginning to realize that to meet their goals, needs and expectations, they need to take control of their own destiny.
  
Many franchisors are beginning to see people grab this “need for self-sufficiency” bull by the horns. Peter Taunton, president and CEO of Snap Fitness agrees. “Over the past few months, we have seen a definite increase in the amount of franchise prospects who are ready to control their own destiny. Many who have lost their jobs due to downsizing have stated that they do not want to go through this again and they feel that the real way to financial security is to own their own business.”
  
Polling firm Zogby International conducted a joint interactive poll with WeMedia, asking the question: “Who will lead us to a better future?”
  
Americans put entrepreneurs and small businesses at the top of the list, with 63 percent saying entrepreneurs and small businesses would lead the way. Next were science and technology leaders, with 52 percent having confidence they would lead us forward.  
  
So it seems clear that the ingredients for an entrepreneurial boom are in place. Unemployment will continue to rise and create this form of “forced entrepreneurship.” The sooner the credit markets thaw, the faster this economic boom will occur. And as this fertile ground for entrepreneurs emerge, we’ll have opportunities we haven’t even thought of yet. We’re seeing more of an emphasis on “lifestyle” franchises these days as well.
  
Colleague Leann Reynolds, president of Homewatch International, Inc. says, “As boomers age and the needs of society continue to change, I believe we are moving much closer to a service-based economy. Franchise companies that are postured to meet the growing demands of all people will see significant growth and new opportunity. In the not too distant future, people will purchase services that make their lives easier and more productive; life-services will no longer be an indulgence but a necessary aspect of living life.”
  
Certainly technology is one way in which our lives have changed. Technological advancements have touched every part of our society. I recently read that if MySpace were a country it would be the fifth largest in the world. Think about this, in 1984 the number of Internet devices was one thousand; in 1992-one million and in 2008 it exceeded one billion.
  
It is said the amount of technical information is doubling every two years. This will change the future of entrepreneurship and of franchising.
  
Deb Evans, president and CEO of Computer Explorers agrees that today is a time full of opportunity. “Purchasing a franchise today is a time to embark on an   exhilarating and gratifying journey. Franchise owners have many opportunities available to them such as education, healthcare, automotive to name just a few. Technology has given many franchisees like Computer Explorers the opportunity to market and stay connected to their customers through social media which is very inexpensive or free. YouTube channel, Facebook, Twitter will be an important part of how franchisees and franchisors operate in 2009 and beyond.”
  
It’s clear that the next 18 months or so will be bumpy. No one can predict exactly when the United States or the world will emerge from this global downturn. Some good advice comes from war hero Admiral Jim Stockdale who was a prisoner of war in the now famous “Hanoi Hilton.” Held in captivity for more than eight years, he saw fellow prisoners who didn’t make it out, yet somehow despite terrible odds and deplorable conditions, he survived.  
  
Jim Collins, author of “Good to Great,” asked Stockdale what his secret was—why did he survive when others didn’t. His response was simple, “This is a very important lesson. You must never confuse faith that you will prevail in the end—which you can never afford to lose—with the discipline to confront the most brutal facts of your current reality, whatever they might be.” Admiral Stockdale didn’t know when he was going home, and didn’t think it was a good idea to predict. He simply knew it would happen, yet woke up every day to face whatever life dealt him.
  
We too may not know exactly when we’ll wake up to a better day, however, we know we will, and if we play our cards just right we might learn a few things on the way. Terry Powell, CEO and founder of FranchiseSource Brands International, has some strong advice for new and existing business owners. “In today’s bleak economy, business owners need to go on the offensive and look at these tumultuous times as a chance to implement bold, creative ideas, outflank the competition and overall improve the performance of their business.”
  
Seems like good advice to me.  

Brian Miller, CFE, is president of The Entrepreneur’s Source. He can be reached at 203-405-2120 or  brian@FranchiseSource.com  . 

Not a Member? Join IFA
Forgot Login?