Herd the News

Herd Strategies featured in Indianapolis Minority Business Magazine, First Quarter 2014

http://www.indianaminoritybusinessmagazine.com/departments.html

Upswing Causing Slowdown in Startups

by Dan Human

Published:  Indianapolis Business Journal, January 11, 2014

The number of newly formed Indiana companies slumped in 2013, the first such dip since the recession, but the small drop could actually be a positive sign for the economy.

  Established companies have more job openings than a few years ago, meaning workers have less incentive to start their own businesses, as thousands did when the economy tumbled.

Most newly created firms have one employee.  Thousands of laid-off Hoosiers incorporated their own businesses and began working out of their homes as free-lancers or consultants after the recession began in 2008.

“People were doing it out of necessity because they weren’t finding work elsewhere,” said Jared Konczal, a senior analyst in policy and research at the Ewing Marion Kauffman Foundation, a not-for-profit for entrepreneurship and education in Kansas City, Mo.

  The number of companies that filed with the Indiana Secretary of State’s Office increased almost 20 percent in 2010. Startups gained more traction in 2011 and 2012 before the number finally slipped in 2013, data reviewed by IBJ shows.

Would-be entrepreneurs don’t have the same incentive to start their own companies as they had when the economy hit rock bottom.

Indiana’s job market, while still not as good as it was in the mid-2000s, is better than it was in 2008 or 2009, when the number of startups spiked.

  The state’s unemployment rate was 7.3 percent in November—much higher than the 4 percent to 5 percent throughout 2007, but a lot lower than the 10.8-percent peak in 2008.

  “When our jobs increase and people are hiring, that’s immediate money into an individual’s pocket, versus starting a business,” said Julie Grice, executive director of the Business Ownership Initiative, a not-for-profit supporting small businesses. 

“I think there’s kind of a natural correlation—increased jobs correlates with decreased entrepreneurship.”

  Despite the drop, Grice has seen “tremendous startup activity.”

  Her program tripled its clients in 2013—albeit, a lot of the growth is due to increased marketing and awareness, she said.

  Indeed, more businesses incorporated in Indiana last year than before the recession, with almost 40,000 filing with the Secretary of State’s Office in 2013.  That was up from 32,700 in 2007, according to the data.

Jobless entrepreneurship

People like Denise Herd are why there are more startups today than before the recession.

 The marketer lost her job in 2008, and prospects for new work were grim.

“When I lost my job,” Herd said, “I called my parents and said, ‘Hey I lost my job.’ And my dad said, ‘I guess now you’ll actually start your own business.’”

  She listened.  She and a partner started the marketing firm H2H Group, which Herd now manages alone as Herd Strategies LLC. She remains the lone employee of the business, except for a handful of contract workers.

 The Kauffman Foundation in a 2011 report referred to Herd’s situation as “jobless entrepreneurship.”

  The concept offers a mix of pros and cons.

  One big negative is business owners often don’t know whether they will collect a personal income their first few years.

  Herd experienced the uncertainty. She carries a paycheck from 2010 as a token of her beginning.

“I told my partner, ‘You cash your check. I’ll hold mine,’” she said. “When you’re starting a business, you don’t have a lot of resources.”

  Few companies ever grow beyond a single person. Only about one in four companies established in Indiana has employees, according to the most recent U.S. Census figures.

But some of those one-person firms could grow into a major corporation with hundreds of employees.

  “Although a large number of small businesses struggled and failed in the Great Recession, many new businesses that ultimately will be very successful may have been created,” Robert Fairlie, a University of California economist, wrote in the summer 2013 issue of the Journal of Economics and Management Strategy.

  A 2009 study found 57 percent of Fortune 500 companies at the time began during recessions or sluggish markets, Fairlie noted in his report.  

Fewer of those companies have started in more recent years, though, as the unemployment rate has dropped, according to Kauffman Foundation’s research.

Funding challenges

It’s not just the job market that has deterred some startups, said David Millard, chairman of the corporate department at law firm Barnes & Thornburg in Indianapolis.

Entrepreneurs struggle with obtaining investments and loans that help them get their businesses off the ground, Millard said.

  Total private investments were down in the first three quarters of 2013 in Indiana, with $20 million in funding that companies publicly disclosed, according to PricewaterhouseCoopers.

Companies here pulled in $62 million over that same period in 2012.  That, too, was down from $179 million in 2011, when ExactTarget Inc. and Angie’s List Inc. grabbed major infusions before going public.

  Not helping the funding situation, investment firms favor later-stage companies more than they used to because the deals are less risky. Individual angel investors saw that shift and followed suit, Millard said.

  Strong stock market performance in 2013 also discouraged investments in startups deemed a higher risk, he said. The S&P 500 index had its best year since 1997, rising almost 30 percent last year.

  Friends and families haven’t been any more willing to lend or invest. Mom-and-pop establishments such as restaurants and stores, especially, struggled with funding. However, a few areas, such as information technology startups, are an exception and are still snagging investments, he added.

One of the most common sources for startup funding—home equity loans—remains a challenge years after the housing market collapse.

“It’s hard to point at it and say that’s the one, but when you look at all of those things,” you can see why Indiana had fewer startups in 2013, he said.•

Herd Strategies serves as panelist for 2013 Integrating Women Leaders Conference, “Brand You”

http://integratingwomanleaders.com/2013-conference/

Herd Strategies receives 2013 Entrepreneur of the Year Award from Indianapolis Chamber of Commerce

http://www.insideindianabusiness.com/newsitem.asp?ID=62376

Herd Strategies featured in Indianapolis Minority Business Magazine, Third Quarter 2012

http://www.indianaminoritybusinessmagazine.com/

Why Women Matter 

Published:  Indianapolis Business Journal, October 24, 2011

The Mayor’s Office in Indianapolis is not in step with women. Out of 17 top positions, the administration has only one appointment that is a woman. In addition, this is the first time since Richard Lugar was mayor there is not a woman as deputy mayor.
Women make up the majority of the American voting population, and utilizing them in the political system brings different attitudes, priorities and perspectives. It is clear that when women are at the policymaking table, the conversation changes, says Karen O’Conner, director of the Women and Politics Institute at American University in Washington, D.C. O’Conner asserts that the presence of women in legislative bodies makes a significant difference not only in what gets discussed, but also in what kinds of legislation are advanced. Three decades of research proves that:

• Women conceptualize problems differently and are more likely to offer new solutions;

• Women legislators of both parties are more likely to advance “women’s issues,” define women’s issues more broadly than men, put them at the top of their legislative agendas, and to take a leadership role in those issue areas. This results in bills dealing with children, education and health care becoming legislative priorities;

• Women are more likely to view crime as a societal, rather than individual, problem;

• Women legislators are more likely to make certain that their policy positions are translated into new programs to help women;

• Women legislators receive more constituent casework requests than their male colleagues and are three times more likely to agree that they would do more if they had more staff;

• Women not only are more responsive to constituent requests, they are more likely to be persistent in their follow through to get a favorable resolution for their constituents;

Women across America are creating small businesses that not only provide goods and services, but put people back to work. In addition, research has shown that when women are present in leadership positions, the bottom line improves—from financial profits to the quality and scope of decision making.

In order to change this equation, women must vote in the upcoming election. Criticizing one another as we’ve seen in recent advertising impedes our efforts to position women in key roles within our government.

____________

Billie Dragoo
RepuCare Inc.

Deborah Collins Stephens
author, speaker, consultant

Denise Herd
Herd Strategies LLC