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Captain overboard! Stop the entrepreneurship!

If the old the-buck-stops-here sign is stuck on your desk, you may know how great it doesn't feel to be the big buck-stopping entrepreneur these days. Harry Truman, now there was a guy. He parlayed a small clothing establishment into a huge multinational that won World War II. That's entrepreneurship!

In my own case, success has been much more elusive and lower caliber. When I get philosophomoric, I often reflect on my own ongoing saga. Let's call it the Doaks Dilemma: how can a run-of-the-mill guy find happiness running the mill?

It's a new year and time to reflect. When I look back on all the good money of mine that I've spent trying to keep this company afloat, it almost seems like I would have been better off just burning bucks by the bale. I've seen some rough times lately. The Business Boom that some people talk about didn't even wake me; I slept right through it!

Each year, when I look at the new year ahead, I try to get into the spirit of things. This year--from the people I've talked to and the 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 we entrepreneurs are people who know no middle ground--we're either on or 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 entrepreneur of today--Mr Modestly Successful. Sentry Insurance Co recently hired Louis Harris & Associates Inc to do a study on the entrepreneur. I guess they wanted to know whether they could justify raising our premiums.

This is how they summarized their findings: "The entrepreneurs in this study are tough, scrappy, and competitive risk-takers. But they are not gamblers. They show a willingness to take substantial personal risk in areas where they have control, and where their conservative planning and projections can offer some hedge against the unpredictable future."

Harris says that these entrepreneurs currently see themselves as more successful than they had anticipated and better than their competition. Before leaping into the fray, they had developed a conservative worst-case projection of the opportunities in their industries, and they did not anticipate easy entry into the market, easy access to capital, or any lack of competition as inducements to start the business. (Level-headed and clear-eyed, just like me.)

"Instead," Harris concludes, "they saw a competitive market and anticipated a difficult, slow start. Still, they invested substantial portions of their personal savings and assumed new debt in order to start their business. Most of them are glad they did. They would recommend entrepreneurship to others." (Me too.)

But why in metalworking?

The Harris people investigated four industry groups, only one of which was ours. "The precision metalworking industry is run by specialists. Most of the owners are the founders, and most had prior experience in that field. They are the least likely of all four groups to have started more than one business. Most of them have just seen a very good year (1983) for their regional economy and their business, and they are cautiously optimistic about the future. More than any other group, they consider a college degree necessary for their successor." (But not for themselves.)

In evaluating their management strategies, Harris found that a large majority of metalworking owners in the past year have reduced their operating costs, started or upgraded quality control programs, and sent employees for further training. But they train lower-level employees, not management. Only a third have ever had structured training for management or plan to in the future. And 43 percent have done nothing to train a successor. (Big deal, why structure a program just to train Cousin Freddie?)

Generally, they are moving rapidly into computers: 53 percent have one now (30 of these 53 got it in the past year). Of those who don't, 38 percent plan to get one within a year, 48 percent have no computer plans for the coming year, and 14 percent are scratching their heads, wondering what to do. The smaller the company, the less likelihood they'll be installing a computer.

In marketing, the small guy tends to play the same cards and not shuffle the deck. Only 42 percent introduced a new product or service in the past year and 34 percent say they have never expanded their product line or services. The bigger the company, the more likely they are to shuffle the deck: 63 percent of companies with over 30 employees plan new products this year.

The metalworking entrepreneur tends to be tightfisted with his ad dollars: 55 percent do not plan to increase their advertising or promotional budget in the near future. And he's trying to eliminate the middleman: 37 percent have restructured their companies in the past year to directly supply end-users and 43 percent plan to do so in the next year.

Expansion plans

They believe in investing in capital equipment (that's for sure, without machines, you can't do much machining): 69 percent invested in new capital equipment in the past year and 76 percent plan to do so in this one, but again, big plans are more likely with the bigger 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 never tried international markets and only 10 percent plan to this year.

In the staffing area, 68 percent have hired more employees in the past year and 76 percent plan to do so this year. While 24 percent had cutbacks in the past year, 44 percent have never had one. Reports Harris, "The industry is clearly optimistic about the future, with only 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 the past year and 42 percent plan to this year. Larger firms, again, are more likely to be in either of these optimistic categories. But they stick to what they know: 57 percent have never diversified into a related 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 percent have ever opened additional places of business, and only 13 percent plan to do so this year. Only 11 percent moved to a larger location last year, while 23 percent plan to relocate this year (not necessarily to a larger site), with significantly more of the smallest companies ('83 revenues under $500,000 and five or fewer employees) in this group.

Merger mania is accelerating. Only 6 percent of the group were acquired by another business last year and another 6 percent plan to be this year. But 22 percent report they have acquired another business in the past (8 percent last year), and 23 percent of those with over 30 employees have future plans to grow by acquisition.

Worry warts

What are we worrying about these days? According to the Harris study, "The potential impact of workers' compensation insurance and unemployment insurance on the profitability of their business over the next five years heads the list of items which concern business 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 23 percent somewhat concerned about the cost of unemployment insurance.

"A clear majority (66 percent very concerned, 17 percent somewhat concerned) are also worried about finding enough qualified apprentices to ensure an adequate supply of journeymen over the next five years. There is also substantial concern (50 percent very concerned, 33 percent somewhat concerned) about the cost of new technology to improve productivity and its impact on profitability over the next five years."

So this is the Harris profile of the entrepreneur. To me, it sounds reasonably accurate. Let's hope that it also sounds inviting to all you young hot-blooded potential entrepreneurs. Uncle Sam wants you! All in all, it's a good life, sailing those high seas of Risk and Reward. Good luck to you!
COPYRIGHT 1985 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Title Annotation:metalworking entrepreneur management
Publication:Tooling & Production
Date:Jan 1, 1985
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