The Global Small Business Blog: January 2008

Thursday, January 31, 2008

Weak Dollar Has Small Businesses Thinking Globally

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The New York Times now reports on how the weak dollar has small businesses thinking globally. If you make your products in the U.S.A., think exports.

A hat tip to friend and colleague John Yunker at the Global By Design blog for the nudge.

Up next: Another guest expert weighs in with her comments about the 'R' word tomorrow. Stay tuned.

Wednesday, January 30, 2008

Just Go For It: Take Your Business Global!

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I participated in this fabulous program UPS (along with Inc. and IBM) put on in November. I can't encourage you enough to take the time to listen to these podcasts where global small business owners share their successes that will inspire and empower you to take your business to the next level: global. If you can't tune-in to all of them, pick one or two that appeal to your interests.

And don't forget to download and read the invaluable Business Monitor Reports (refer to the upper right hand side of the site) to find out what's really holding small businesses back on going global.

Tuesday, January 29, 2008

GEM 2007 Executive Report: Six Questions With GEM Research Director

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I had the great pleasure to thoroughly read the GEM 2007 Executive Report again over the weekend. If you haven't already, I suggest you do so here. It is a gem -- filled with all sorts of amazing insights on the state of early-stage entrepreneurship. After digesting it all, we reached out to I. Elaine Allen, PhD, Research Director, Arthur M. Blank Center for Entrepreneurship, Associate Professor of Statistics & Entrepreneurship, Babson College to ask her a series of questions about it since she is largely responsible for directing its research and contents.

We narrowed our questions down to six so it becomes a little like Cliff Notes -- providing you with a fresh take on the report. We thank Babson College (especially Elaine for her valuable time), the London School of Business and all the university teams from each participating country for their hard work on this immensely complex topic concerning the role of entrepreneurship in national economic growth. Here are the questions along with Elaine's responses.

1. Question: How is it possible for low-income countries to exhibit such high rates of early-stage entrepreneurial activity?

Answer: In our survey we divide early stage entrepreneurship into Necessity-driven entrepreneurs who are pushed into starting companies because all other options for work are either absent or unsatisfactory and Opportunity-driven entrepreneurs who start companies to exploit a business opportunity. In low-income countries, Necessity entrepreneurship is driving individuals to start companies. These high rates do not incorporate the value or potential revenues of the new company so these may be quite small endeavors started with micro-financing. Our definition of early stage entrepreneurship is nascent entrepreneurs who plan to start a company in the next three months or have a new company less than three months old that is not paying wages and new entrepreneurs who have companies less than 42 months old.

While the dichotomy between low/middle and high-income countries is striking, there are also dichotomies that remain in all countries between male and female entrepreneurship. While rates are lower for female early stage entrepreneurs in all countries, in low/middle-income countries the motivation is almost entirely necessity while in high-income countries women are opportunity motivated entrepreneurs who cite independence, rather than increased income, as their reason for starting a company.

2. Question: Why does the United States exhibit such high rates of early-stage entrepreneurial activity? What's leading that surge?

Answer: When you look at our figure of the rate of entrepreneurship plotted versus the GDP per capita, in general you see a U-shaped curve with high rates of early entrepreneurship in low/middle income countries, very low levels of entrepreneurship in most high-income countries but an increase in entrepreneurship rates as you move to countries with some of the highest rates of entrepreneurship, such as the US, Iceland, and Hong Kong. This pattern has persisted throughout the 10 years of the survey. Reasons for the US continuing high rate of entrepreneurship can be partly explained by cultural values but economically it probably has to do with some of the lowest levels of perceived ‘red tape’ involved in starting a business and also the lower cost involved in starting a business in the US compared to other high-income countries.

Although the US rate is high for high-income countries (it ranks 3rd behind Iceland and Hong Kong with a rate of early stage entrepreneurship of about 10%), it is in the middle of the pack among all countries where there the highest rates are in Peru and Venezuela (greater than 20%) and the lowest rates in Austria and Sweden (less than 3%).

3. Question: How does an individual's perception affect his/her ability to start a business in the area where they live? What factors are involved?

Answer: We see in our survey that both individual perceptions and contact and familiarity with business and other entrepreneurs have a great deal to do with whether you start a company. A low perception of any fear of failure is key to becoming an entrepreneur and knowing an investor in early-stage companies or other entrepreneurs is cited as a reason for starting a new business.

When we examine entrepreneurship regionally and in cities across the world, a slightly different picture of entrepreneurship appears as rates of entrepreneurship are very high in some of the high-income countries. The Top 10 cities for entrepreneurship are: Bangkok, Buenos Aires, Chicago, Auckland, Los Angeles, Toronto, Melbourne, Sydney, New York, and Hamburg. A new initiative starting in 2008 by GEM will be a closer examination of cities and entrepreneurship to identify what the business sectors are for early stage entrepreneurs and what their characteristics (immigrants, education, age, income) might indicate.

4. Question: If you could lump it into one thing, what is the single greatest factor that keeps an individual in any part of the world from starting a business? What's the one thing that entices them to get them started?

Answer: It is hard to pick just one thing that discourages someone from becoming an entrepreneurs but perhaps the two most important are access to capital and being employed. Access to business funding is interesting because the overwhelming majority of early stage businesses are funded by the founders own money or money from family and friends, even in countries with strong programs and policies to encourage entrepreneurs. The GEM survey (through a separate survey of experts in entrepreneurship worldwide) has found that it takes a long time for individual entrepreneurs to learn and take advantage of government programs designed to encourage entrepreneurship.

A final big factor is the perception that most early-stage businesses will fail. The GEM Survey shows, by comparing the rates of early and established entrepreneurship, that in some countries the conversion rate for businesses (how many new business last longer than 42 months) can be as high as 80%. In the US, our survey estimates this to be between 45% and 60%, a much higher than is often quoted.

Being employed is a counter-intuitive finding and is strongest in low/middle-income countries. Having a job (even part-time employment) is highly correlated with perceiving lower risk levels in starting a business. One interpretation of this is that being employed allows an individual to understand the market and business better as well as coming in contact with other entrepreneurs and acquaintances who could invest some money in a new business.

If we examine motivations in high-income countries, such as the US, it is clear that individuals start a business when an opportunity is seen in an area with few competitors and fast growth. The ability to use new technology and the view that this may include globalization also appear to drive US entrepreneurs.

5. Question: How does an open international trade system -- sales to other countries -- benefit entrepreneurs?

Answer: Our survey asks early-stage business owners as well as established business owners to estimate how much of their business will be from other countries and we classify a business as being ‘global’ if at least 25% is not in their country. There is an inverse relationship between the World Bank’s classification of a country’s barriers to international trade and its rate of entrepreneurship. Also, those companies that have identified global marketing as part of their early-stage entrepreneurship, also are more likely to have plans for higher growth and higher revenues.

6. Question: Based on the GEM 2007 Executive Report findings, what does the future hold for global entrepreneurs?

Answer: Global entrepreneurship continues to grow and countries with very low rates of entrepreneurship like Japan and the Netherlands have seen increases in early-stage entrepreneurship over the last 5 years (Japan, 2.0% to 4.3% and the Netherlands, 4.0% to 5.2%). The US rate has been stable (between 10% and 12% over the last 5 years) with some gender trade-offs in growth by more women entrepreneurs starting businesses.

The World Trade Organization and the World Bank’s figures predict a growing global economy with increased open international trade. Micro-financing in low/middle-income countries is clearly responsible for some of the high rates of early stage entrepreneurship in these countries but this may also be due to an increased number of countries embracing national policies encouraging company start-ups while a reduction of red tape in some high-income countries with very low rates of entrepreneurship (i.e.; Greece and Belgium) may increase start-ups in these countries.

Just in (1/31/08): Due to our summary report featured here, we have been added to the Babson College press release.

Updated (2/6/08): Elaine Allen's podcast with BusinessWeek online about GEM. It's headlined "What Helps and Hinders Entrepreneurs."

Monday, January 28, 2008

Gear Up For Globalization: Answers From Real People (#2)

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Question from:

Laurel Delaney, Founder and President, GlobeTrade:

"Do you think Ex-Im Bank will cut back or be more willing to extend loans to SMEs (that qualify on exports) this year in light of a possible recession?"

Answer from:

Harvey Bronstein, Senior International Economist, U.S. Small Business Administration, Washington

"As far as ExIm Bank, you'll have to talk with them.

As far as recession, the US is not in a recession, which is commonly defined as two quarters, that is a period of six months, over which the size of the US economy actually shrinks. For the third quarter of 2007, that is through Sept. 30, the economy actually grew almost 5%, far above the long-term average growth rate of the economy. Although growth will almost certainly be slower in the fourth quarter of 2007 than it was for the earlier part of the year, one quarter of slow growth does not equal "recession."

Concerning job creation, small businesses often create well over one-half of all net new jobs in the economy. Please refer to the link below on our website:

6. How many new jobs do small firms create?

Over the past decade, small businesses created 60 to 80 percent of the net new jobs. In the most recent year with data (2004), small firms accounted for all of the net new jobs. Firms with fewer than 500 employees had a net gain of 1.86 million new jobs. Large firms with 500 or more employees lost more jobs than they created, for a net loss of 181,122 jobs. For information on employment dynamics by firm size from 1989 to 2004, see www.sba.gov/advo/research/data.html#us.

On small business and exporting, 2007 will be a record year with small businesses racking up over $400 billion in exports. While in the third quarter of 2007 the economy grew 5%, exports grew by 19%. So long as the dollar remains weak and other countries' economies strong, the outlook for exports is bright."

Note from LD: Interesting "definition" of Export-Import (Exim) Bank at Answers.com.

Sunday, January 27, 2008

Globalization, Small-Biz Style

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Young entrepreneurs in emerging markets find the Internet allows them to scale up operations without huge financial outlays. Read all about it here.

Saturday, January 26, 2008

Can You Be Semi-Global?

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Everyone knows you can't be semi-pregnant but can you be semi-global?

Read the interesting post by Benjamin Sargent at Global Watchtower covering book theories about semi-globalization versus the world is flat.

Friday, January 25, 2008

Gear Up For Globalization: Answers From Real People

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Question from:

Laurel Delaney, Founder and President, GlobeTrade:

"Do you think Ex-Im Bank will cut back or be more willing to extend loans to SMEs (that qualify on exports) this year in light of a possible recession?"

Answer from:

Chad Moutray, Chief Economist & Director of Economic Research, U.S. Small Business Administration, Office of Advocacy:

"Small businesses are increasingly sophisticated global players who are able to spot opportunities, whether these are found in their local communities or across the globe. The depreciated dollar has given entrepreneurs -- many of whom had not looked at the export market before -- a golden opportunity to pursue sales abroad."

Regarding the possibility of a downturn, Moutray referred us to this study (be prepared for an immediate PDF file download) by Craig and Kohlhase that had been released in December 2006. Note the research summary's overall finding: "Small firms play a vital role in maintaining economic growth in urban areas."

Moutray does not follow the movings of the Ex-Im Bank so there was no comment on the loan policy.

Sign up for Advocacy's ListServ here.

Add on from LD (1/26/08): Interesting "definition" of Export-Import (Exim) Bank at Answers.com.

Thursday, January 24, 2008

Gear Up For Globalization

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We are gearing up to rally the global small business troups to export like mad in 2008 -- a year when the U.S. dollar is so low that it makes exports of all American goods a flashing blue light special.

In getting started, we have been working behind the scenes to create a new global platform for small businesses that will help them connect, collaborate and do more business internationally but you must first sign up for Borderbuster to learn about the launch on February 5th. Yes, word will get out fast, but why wait? Go here.

Next, we decided to reach out by email to the best of the best of global business experts and ask their opinion relative to the following question:

Do you think Ex-Im Bank will cut back or be more willing to extend loans to SMEs (that qualify on exports) this year in light of a possible recession?

My belief is that entrepreneurs and small businesses are typically the ones who create jobs in a downturn (refer to WSJ commentaries here and here) and that they most certainly lead the way on exports.

Let's see what some of our experts weigh in with starting tomorrow. You won't want to miss this.

And saving the best for last, on Tuesday, January 29th, we will be interviewing GEM Research Director I. Elaine Allen, PhD, on the latest key findings from the GEM 2007 Executive Report.

Be sure to stay tuned on all these great channels of global small business information.

Wednesday, January 23, 2008

World Trade Organization 2007 Data and Foreign Trade Statistics

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Due to reader inquiries (and the media), we went on a virtual mission to find direct links to trade data. The WTO has released two updated statistical publications. This year’s edition of the annual “International Trade Statistics," released electronically on 12 November 2007, has a more user-friendly presentation and expanded content on trade in services

Also available electronically is a fabulous updated “Trade Profiles," which offers a quick but comprehensive look (197 pages!) at WTO members’ trade statistics and policy measures and those of countries negotiating WTO membership.

Go here to access WTO information.

If you want or need more data, the best of the best is published by U.S. Census Bureau, Foreign Trade Statistics.

Tuesday, January 22, 2008

International Trade (2006)

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We received the following trade statistics for 2006 from our friend Myles Matthews, President and CEO of Global Trade & Technology Center. He indicated it will take a few months to analyze trade information for 2007.

The United States trade set a record for total trade which includes total exports, imports, and total trade deficit in 2006. In 2006 exports surpassed a milestone exceeding $1 trillion for the first time. Fewer than 5% of all countries (11) held almost 80% of the US trade deficit. The 5 leading countries in order of these 11 where China, Canada, Mexico, Japan, and Germany.

The US probably surpassed $3 trillion in total trade in 2007. US trade with 39 nations exceeded $10 billion in 2006, an increase of 5% over 2005.

The 25 leading ports of entry and exit in the US for 2006 where:

1 Los Angeles -- $329.4 billion total trade +12.3%
2 New York/New Jersey -- $295.0 billion total trade +10.2%
3 Detroit -- $238.5 billion total trade +3.7%
4 Houston/Galveston -- $162.2 billion total trade +18.9%
5 Laredo -- $157.4 billion total trade +13.0%
6 New Orleans -- $152.8 billion total trade +17.4%
7 Chicago -- $120.6 billion total trade +11.1%
8 Seattle -- $119.9 billion total trade +19.2%
9 San Francisco -- $111.1 billion total trade +12.3%
10 Atlanta/Savannah -- $82.5 billion total trade +13.7%
11 Buffalo -- $82.2 billion total trade +6.0%
12 Cleveland -- $77.6 billion total trade +11.1%
13 Miami -- $72.1 billion total trade +9.4%
14 Philadelphia -- $69.2 billion total trade +19.3%
15 Dallas/Fort Worth -- $58.2 billion total trade +17.5%
16 El Paso -- $52.3 billion total trade +9.0%
17 San Diego -- $50.8 billion total trade +17.0%
18 Charleston -- $49.2 billion total trade +2.6%
19 Norfolk -- $44.5 billion total trade +10.4%
20 Ogdensburg, New York -- $44.4 billion total trade +7.2%
21 Great Falls, Montana -- $40.3 billion total trade +9.3%
22 Baltimore -- $39.6 billion total trade +2.6%
23 Tampa -- $37.6 billion total trade +27.8%
24 Boston -- $33.3 billion total trade +3.7%
25 San Juan -- $32.6 billion total trade +11.4%

These numbers will continue to improve for exports based on the value of the dollar.

Monday, January 21, 2008

"I Have a Dream"

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If Martin Luther King, Jr. were still alive today, his dream of racial equality would be more relevant than ever and global in reach.

Today, in honor of Dr. King, I will be out of my office learning all I can about what inspired him, and for those worldwide who wish to know more about his dream, visit here.

Friday, January 18, 2008

Global Entrepreneurship Monitor Report (GEM) 2007 Released

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Dawn has broken in Chicago and as promised (and corrected), below is the latest GEM Report.

Download it here.

Thursday, January 17, 2008

The World's Most Comprehensive Entrepreneurship Report

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We will be releasing the best of the best in global entrepreneurial research reports here tomorrow at the crack of dawn Chicago (CDT) time.

Stay tuned.

Wednesday, January 16, 2008

Found in Translation

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The more global you are, the more you need a good translation service and I am not talking about free online translation tools where you get a sentence translated. I am referring to translating important things such as your entire website, company's collateral material, legal documents and even email communications to ensure communications are understood.

Take a look at this article. Think the author is on target?

Tuesday, January 15, 2008

Operation China

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How do you go from idea stage to strategy to doing business in China? Well a good portion of those answers can be found here.

Although Operation China focuses on multinational corporations, you can still, even as a global small business, pick up good insights (for example, as the authors note: even the best strategies are only as good as their execution) and winning tips on how to do business in China.

Co-authors Hexter and Woetzel have been consultants in McKinsey's offices in Greater China for more than fifteen years and are considered experts on the subject matter. Check it out. Take full advantage of what this book has to offer.

Friday, January 11, 2008

What Sets The Best Apart?

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When Subroto Bagchi and nine other colleagues launched Mindtree Consulting in 1999, he believed he had two responsibilities. The first was to build the company as a global information technology and research and development services firm. The second was to document his entrepreneurial experience, not with 20-20 hindsight -- as many businesspeople do -- but as it unfolded.

Want to know what he did and how he did it? Go here.

Tuesday, January 08, 2008

Global Tip of the Week

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"Never assume that what plays in the States will resonate in the world."

Read where it came from here. Great story. Many lessons to be learned (when to open an overseas office?) and many great ideas to act on (who should open it for you?).

And don't think milk is the only thing you should shake for a winning global recipe! Dig deep into this article ... some truly great nuggets of advice but you have to look for them.

Monday, January 07, 2008

Disruptive Innovator: Is That You?

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Calling all global small business owners!

If you are an owner (and disruptive innovator on technology), president, or chief executive of a company with 100 employees or less that has driven a significant change and/or developed a competitive advantage in delivering superior customer value and experience, Dell wants to hear your story. In addition, they want you to share customer testimonials to show how technology has helped you improve customer relationships.

The International Council for Small Business (ICSB) (www.icsb.org) announced that it is partnering with Dell and Endeavor (www.endeavor.org) to expand the Dell Small Business Excellence Award internationally (www.dell.com/ceaward). Small businesses in countries around the world will be eligible to compete by demonstrating how they use information technology in innovative ways to better serve customers. Additional countries participating in the award program will be announced in the coming weeks.
Winners will receive ... up to $50,000 in Dell solutions, a lifetime ICSB membership and the opportunity to engage with Endeavor's network of business leaders and high-impact entrepreneurs in emerging-market countries world-wide.

Get ready, get set, go here.

Deadline: February 29, 2008!