Thursday, December 22, 2011

Where Do Entrepreneurs Find Their Money?

In my experience talking to aspiring entrepreneurs on a daily basis, access to start-up capital is one of (if not the) overarching factor preventing them from pursuing their entrepreneurial aspirations.

I recently came across a video thanks to Brad Feld that was created by the Kauffman Foundation and is titled “Where Do Entrepreneurs Get their Money.”  I’ve embedded it below and it provides a great overview of your financing options as an entrepreneur.  The key points are:

1.    More than half of young companies get all their funding from founder savings and cash flow derived from the business.

2.    Credit cards are the second largest source of capital for startups after founder savings. 

3.    Friends and family are the third largest source of capital.

4.    Banks are the fourth largest source of capital.  The difficulty with banks is that they want to lend against secured assets, which most young companies don’t have.

5.    Venture capital is available to high growth companies, but interestingly, less than 20% of the fastest growing companies in the U.S. received venture funding thanks to #’s 1-4.

6.    In the last few years, new sources of capital have arisen such as Angel investors (Tech Coast Angels, AngelList) and peer-to-peer crowdsourced fundraising (Kickstarter, Lending Club, etc).

Here's the video.  Until next time, have a happy holiday season and cheers to a great 2012!

Thursday, December 15, 2011

The Future of U.S. Golf Course Design

The Wall Street Journal recently published an article titled: “When Building a Course Makes Sense.”  Right now the answer is, well, pretty much never.  There has been a net loss of 300+ golf courses since 2006 and the author could find only a half dozen courses scheduled to open in the next two years (compared to the ~300/year that opened during the 90’s).

While the drop off is more significant than I would’ve imagined, the trend makes sense.  Courses are often built as attachments to real estate communities or resorts, or by municipalities to serve the community.  We’re all familiar with the recent struggles of these industries / budgets.  Additionally, the number of golfers in the U.S. fell 13% from 30 to 26 million in the five short years between 2005-2010.

According to the article, most of the courses currently under construction are “destination courses” that are looking to cut costs by being built in remote areas on sand-based land while utilizing more of their natural environment in the design.

The article cites Bandon Dunes and Sand Hills as great examples of this philosophy being a good one.  I’d include Whistling Straits as well.  All three were created in this style and are widely considered the best courses built in the U.S. since 1960.

Whistling Straits, where Dustin Johnson famously
couldn't tell what was and was not a bunker
A friend in the golf industry recently gave me a book called "Planet Golf USA” and in it, the author laments the lack of quality golf courses that have been built in the U.S. since the Great Depression.  And he’s right.  If you look at Golf Digest’s ranking of “America’s 100 Greatest Golf Courses” you’ll find that 9 of the top 10 were built before1933 … along with 18 of the top 25.  I find these statistics fascinating considering the remarkable advancements in technology and equipment since then.

It’s reported that Sand Hills (#9 in the aforementioned rankings) was built for $1.5 million in 1994 compared to some resort courses with fake waterfalls, etc. that exceeded $20 million.  I know which one I’d rather play.

Sand Hills - only Top 10 U.S. course built after 1933 and
considered one of the most naturally-built courses ever
Interestingly, my favorite public course in Los Angeles – Rustic Canyon – was one of the few non-ranked courses featured in Planet Golf USA.  It is rugged, pure and a great test of golf.  The designer moved only a scant 17,000 cubic yards of soil during the construction process, bringing the project in on time and under budget.  As a result, they charge $60 greens fees in a region where the only other public option (besides municipalities that take 6 hours to play) are mediocre, fancied-up daily fee courses needing to charge $100+ to stay afloat.  And that is the problem the market is currently correcting.

Rustic Canyon's Front 9 hugs the natural landscape
The recalibration occurring in the golf industry unfortunately affects many good people.  But if there is one bright spot, I hope it’s that the necessity to build more cost-effective courses brings the game back to its roots of being played on minimalist courses designed from the natural environment.  This applies to both destination courses we can dream about like Bandon Dunes and local courses we can play regularly as weekend warriors like Rustic Canyon.

If this trend continues, who knows… perhaps one day we’ll look back on this time as a second golden age of golf course design.  And undoubtedly there are opportunities out there for entrepreneurs to capitilize on this shift. 

Thursday, December 1, 2011

Create, Know & Obsess About Your KPI's

Please note that a variation of this blog catered towards franchise candidates first appeared in the Franchise Business Review.  You can read it here.


1.    Efforts made in marketing (i.e. Are you doing the work?)
2.    Conversion Rate (i.e. How effective is your message?)
3.    Profitability

A good set of KPI’s addresses these three topics. 

If you’re running a business, your KPI’s should be central to your thoughts and actions at all times.

If you’re thinking about starting a business, figure out what your KPI’s will be in advance so you can make an honest assessment of the opportunity.

If you’re analyzing a business as a potential investor or franchise candidate, ask about KPI’s to quickly ascertain the health and key drivers of the business model.

Hopefully this outline provides some guidance on recalibrating or creating these incredibly important measurements which will serve as the lifeblood of your business.  Good luck and happy entrepreneuring.

In working every day with current and aspiring entrepreneurs I often find that metrics and data don’t receive the attention they should.  I often hear comments like – “How much money can we make?” or “How long will it take to do so and so?” but these are cursory questions that often don’t scratch the surface of a business model.

Every business, whether real or in creation, has key revenue and expense drivers.  All entrepreneurs should translate these drivers into “Key Performance Indicators” (“KPI’s”) or something similar to measure the company’s performance.

KPI’s are the heart, brain and central nervous system of a business.  Want to know if you’re investing your time and money in the right places?  Know how these investments relate to your KPI’s.  Want to know when to crack open the champagne or hit the panic button?  Know the ceiling and floor of each KPI and create reasonable goals/milestones.  Want to know if a key employee is the right person for the job?  Look at their impact on the KPI’s relative to what they’re costing the business.  And so forth.

I was speaking recently with Brian Destarac, a business coach and founder of Cobalt Business Solutions, and he had a great outline for looking at KPI's that I wanted to pass along.  He identified three categories: