If the old the-buck-stops-here sign is stuck on your desk, you mayknow how great it doesn’t feel to be the big buck-stoppingentrepreneur these days.
Harry Truman, now there was a guy. Heparlayed a small clothing establishment into a huge multinational thatwon World War II. That’s entrepreneurship! In my own case, success has been much more elusive and lowercaliber. When I get philosophomoric, I often reflect on my own ongoingsaga. Let’s call it the Doaks Dilemma: how can a run-of-the-millguy find happiness running the mill? It’s a new year and time to reflect. When I look back on allthe good money of mine that I’ve spent trying to keep this companyafloat, it almost seems like I would have been better off just burningbucks by the bale.
I’ve seen some rough times lately. TheBusiness Boom that some people talk about didn’t even wake me; Islept right through it! Each year, when I look at the new year ahead, I try to get into thespirit of things. This year–from the people I’ve talked to andthe things I’ve read–is going to be a great year to be depressed.There are a lot of things just waiting to go wrong. And weentrepreneurs are people who know no middle ground–we’re either onor off, charging full steam ahead or paralyzed by paranoia. This year,I expect to be a little off, but I hope I’m wrong.
Again. Bad risks? But enough of me, let’s look at the more typical entrepreneurof today–Mr Modestly Successful. Sentry Insurance Co recently hiredLouis Harris ; Associates Inc to do a study on the entrepreneur. Iguess they wanted to know whether they could justify raising ourpremiums. This is how they summarized their findings: “The entrepreneursin this study are tough, scrappy, and competitive risk-takers. But theyare not gamblers. They show a willingness to take substantial personalrisk in areas where they have control, and where their conservativeplanning and projections can offer some hedge against the unpredictablefuture.” Harris says that these entrepreneurs currently see themselves asmore successful than they had anticipated and better than theircompetition.
Before leaping into the fray, they had developed aconservative worst-case projection of the opportunities in theirindustries, and they did not anticipate easy entry into the market, easyaccess to capital, or any lack of competition as inducements to startthe business. (Level-headed and clear-eyed, just like me.) “Instead,” Harris concludes, “they saw a competitivemarket and anticipated a difficult, slow start.
Still, they investedsubstantial portions of their personal savings and assumed new debt inorder to start their business. Most of them are glad they did. Theywould recommend entrepreneurship to others.” (Me too.
) But why in metalworking? The Harris people investigated four industry groups, only one ofwhich was ours. “The precision metalworking industry is run byspecialists. Most of the owners are the founders, and most had priorexperience in that field. They are the least likely of all four groupsto have started more than one business. Most of them have just seen avery good year (1983) for their regional economy and their business, andthey are cautiously optimistic about the future.
More than any othergroup, they consider a college degree necessary for theirsuccessor.” (But not for themselves.) In evaluating their management strategies, Harris found that alarge majority of metalworking owners in the past year have reducedtheir operating costs, started or upgraded quality control programs, andsent employees for further training. But they train lower-levelemployees, not management. Only a third have ever had structuredtraining for management or plan to in the future.
And 43 percent havedone nothing to train a successor. (Big deal, why structure a programjust to train Cousin Freddie?) Generally, they are moving rapidly into computers: 53 percent haveone now (30 of these 53 got it in the past year). Of those whodon’t, 38 percent plan to get one within a year, 48 percent have nocomputer plans for the coming year, and 14 percent are scratching theirheads, wondering what to do. The smaller the company, the lesslikelihood they’ll be installing a computer. In marketing, the small guy tends to play the same cards and notshuffle the deck. Only 42 percent introduced a new product or servicein the past year and 34 percent say they have never expanded theirproduct line or services.
The bigger the company, the more likely theyare to shuffle the deck: 63 percent of companies with over 30 employeesplan new products this year. The metalworking entrepreneur tends to be tightfisted with his addollars: 55 percent do not plan to increase their advertising orpromotional budget in the near future. And he’s trying toeliminate the middleman: 37 percent have restructured their companies inthe past year to directly supply end-users and 43 percent plan to do soin the next year. Expansion plans They believe in investing in capital equipment (that’s forsure, without machines, you can’t do much machining): 69 percentinvested in new capital equipment in the past year and 76 percent planto do so in this one, but again, big plans are more likely with thebigger firms. Two out of three have expanded to serve larger markets in the past,and most of the remainder plan to do so soon. But 77 percent have nevertried international markets and only 10 percent plan to this year.
In the staffing area, 68 percent have hired more employees in thepast year and 76 percent plan to do so this year. While 24 percent hadcutbacks in the past year, 44 percent have never had one. ReportsHarris, “The industry is clearly optimistic about the future, withonly 6 percent reporting plans for employee cutbacks this year.”(I think the fat is already gone by now, don’t you?) In seeking money for expansion, 31 percent borrowed fresh money thepast year and 42 percent plan to this year. Larger firms, again, aremore likely to be in either of these optimistic categories.
But theystick to what they know: 57 percent have never diversified into arelated metalworking field such as stamping or plastic-part production,and 80 percent were smart enough not to try a totally unrelated field. They’re very cautious about adding plants. Only 21 percenthave ever opened additional places of business, and only 13 percent planto do so this year. Only 11 percent moved to a larger location lastyear, while 23 percent plan to relocate this year (not necessarily to alarger site), with significantly more of the smallest companies(’83 revenues under $500,000 and five or fewer employees) in thisgroup.
Merger mania is accelerating. Only 6 percent of the group wereacquired by another business last year and another 6 percent plan to bethis year. But 22 percent report they have acquired another business inthe past (8 percent last year), and 23 percent of those with over 30employees have future plans to grow by acquisition. Worry warts What are we worrying about these days? According to the Harrisstudy, “The potential impact of workers’ compensation insurance and unemployment insurance on the profitability of theirbusiness over the next five years heads the list of items which concernbusiness owners in metalworking.
While 69 percent are very concerned,24 percent are somewhat concerned about the cost of workers’compensation insurance. Similarly, 68 percent are very concerned and 23percent somewhat concerned about the cost of unemployment insurance. “A clear majority (66 percent very concerned, 17 percentsomewhat concerned) are also worried about finding enough qualifiedapprentices to ensure an adequate supply of journeymen over the nextfive years. There is also substantial concern (50 percent veryconcerned, 33 percent somewhat concerned) about the cost of newtechnology to improve productivity and its impact on profitability overthe next five years.” So this is the Harris profile of the entrepreneur.
To me, itsounds reasonably accurate. Let’s hope that it also soundsinviting to all you young hot-blooded potential entrepreneurs. UncleSam wants you! All in all, it’s a good life, sailing those highseas of Risk and Reward. Good luck to you!