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It matters who starts a startup

Saturday, April 23, 2016

A recent congressional report by John Sopko, Special Inspector General for Afghanistan Reconstruction (SIGAR) caught my attention. The report on costs of business startups in Afghanistan is “comically disastrous”. About $800 million was spent and almost nothing has been produced for it.

As it turns out the Task Force for Business and Stability Operations (TFBSO) is a Pentagon division that focuses on rebuilding the decimated economies of Iraq and Afghanistan. Sopko began auditing it in 2012.

The abuses are incredibly ridiculous, absurd and notorious. For example, “…some $150 million was spent on secure villas for “between five and 10” American staff, who were guarded at all times, and served luxury meals.” 1

In another case, “Around $43 million was spent on building a compressed natural gas station, and retrofitting Afghan taxis to run on the fuel. The cost of each retrofit exceeded the yearly income of the person driving the car.” 1

“Most notoriously, $6.1 million was spent on importing a herd of Italian goats, to start up a cashmere industry. Not only did TSFBO believe that the goats would begin to produce enough wool in two years instead of a realistic 20, but the herd became infected with a common stomach ailment, and perished. No sweaters were manufactured at any point.” 1

So the question is – how is the Pentagon qualified to do business startups in another culture? Are they experienced business people? Have they had cross cultural experience and training? Have they ever been accountable for shareholder money?  Have they a degree in business? Have they ever started anything?

“It doesn’t seem like anyone did a real cost benefit analysis on this program,” said Sopko when testifying before the House Armed Services Subcommittee on Oversight and Investigations in mid-April. Can you imagine if business operated that way?

“You have to have an infrastructure in place, but there is no infrastructure in Afghanistan. You have to have a market, there is no market, and that is a repetition we have seen through all of the TFBSO programs,” said Sopko.

What's the lesson in this for BAM startups?

If the Pentagon has no business doing economic development and business startups, can we ask the question should churches be doing this? Should mission agencies be doing this? Are they any more qualified than the Pentagon?

I recently learned of a missionary agency which spent a quarter million dollars over ten years trying to help their missionaries start businesses in faraway places, many of them much less risky than Iraq and Afghanistan. They all failed. Is there a lesson here?

I recently received a letter from a really good guy working in South Asia. He was a seminary graduate and a coffee lover and actually quite knowledgeable about the entire process from farmer to coffee cup. He set about starting a business in his Asian country, raised tens of thousands of dollars and had a good partner. So why the letter?

When the going got tough with many hard hours required and challenges to face, he prayed and decided that God wanted him in “ministry” after all. He decided to default to traditional ministry for which he was trained. He confessed that he was not ‘wired’ for business. Again – the lesson is that he was not wired for business and the lesson is for consultants and investors to understand that up front, before mistakes are made.

Perhaps the lesson is: it matters who starts and operates a business. It is not just anybody that can do this; it takes a certain kind of person. And it is not someone with deep pockets; or a strong ideology; or a commitment to social or spiritual goals. It is a person wired by God for “seeing around corners” as one of my students expressed it.

That someone has the qualities of being a risk taker, accepting failure, being accountable, picking strong partners, tenacity, adaptability, comfort with chaos, propensity for hard work and resiliency.

Startup business people want to serve the customer, realize a dream, and accomplish a goal. They are in the arena of hard work and know defeat as well as victory. They sacrifice for the business which is their highest calling.

“Biblical entrepreneurship and business leadership is a biblically based process of identifying opportunities, taking calculated risks, solving problems, and exercising business stewardship for profit” 2 (Tsague). Doing business is a calling and doing it cross culturally is a calling for those gifted by God and ready for the challenge.

2. Tsague, Patrice. Biblical Principles for Starting and Operating a Business. Bloomington, IN: Author House, 2006, p. 19.

Larry Sharp, Director of Training, IBEC Ventures

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6 principles I learned from BAM entrepreneurs - Part 2

Saturday, April 16, 2016

This week I'm pleased to introduce you to three more examples of cross cultural entrepreneurs who impacted others through the qualities they brought to their businesses. These three together with the three from last week's blog embody much of what it means to be a successful entrepreneur, BAM or otherwise.

1. He was a student of the culture.

Jeremy and Lynn were recent college grads when we first starting consulting with them. After a couple of years developing the business model, trying to understand potential customers and developing them as individuals, they headed for India and started a tour business.

About three years into the business I visited the business on site along with several others who were bringing financial, legal, marketing and content expertise. We followed Jeremy around India in a “beta tour” and then provided feedback and recommendations to Jeremy and Lynn.

I was greatly impacted by the fact that they loved the country, they loved the people and they loved the culture. I observed how they were continually learning new things, asking questions and applying what they learned to their personal development and the development of the business.

One time we were in a restaurant and Jeremy said, “You are going to love this new food…it just explodes in your mouth.” I am not accustomed to having food “explode in my mouth”, but the point was that Jeremy loved everything about the culture and that contributed greatly to the success of the company.

2. She was a team player.

A young recent college graduate name Brit set out to start a business in a former Soviet republic in central Asia. There were many challenges with the history of corruption, Soviet style business and cultural nuances. Because she had worked her way through business school at Starbucks, she was uniquely qualified when they decided to start a coffee outlet.

She teamed up with some people she met there in Asia and soon had a management team, the startup capital and a values proposition. I will never forget her value proposition. The people were intrigued with America and wanted to go there; it was a tea-drinking culture; and few of the middle-upper class could speak English. The value proposition then provided opportunity to learn to value America’s drink – coffee, learn English in the shop and formal classes, and learn values which provided the foundation to America’s democracy, capitalism and Christian faith.

It required a team to do this and she promoted the concept beautifully – demonstrating the potential for people of diverse backgrounds, with complementary skills, working together with nationals within a foreign culture. Today two profitable coffee shops in the business district of the capital demonstrate the success of her teamwork.

3. He masterfully built a social enterprise combining social needs and business.

Kirk went to China with a heart to help the disadvantaged, disabled and handicapped. But he was wired by God for business and was loaded with entrepreneurial qualities. This all came together when the Barrington Group decided to start a factory in China.

Kirk came to help start the factory which focused on the production of leather goods while providing a profit for the parent company in the USA. They became profitable in a few years, but while doing this Kirk focused on the social needs of the community where there were many handicapped without hope of a better life. One class of handicapped was the deaf-mute.

When I visited the factory a few years ago, I observed an entire production line of deaf-mute workers. Their foreman was a woman named Ceci who was the first handicapped person hired by Barrington. She was able to learn quickly and soon was a very productive worker. This led to others who were disabled in some way to contribute to the company, and gain confidence to live life to the fullest.

A social enterprise is one that is profitable and sustainable, but also focuses on the needs of the community where it exists. It maintains its viability while at the same time addressing social problems. Kirk and Barrington Gifts in southeast China do that well.

Larry Sharp, Director of Training, IBEC Ventures

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6 principles I learned from BAM entrepreneurs - Part 1

Sunday, April 10, 2016

I am a firm believer in models, examples and in observing closely the experiences of others. I have been consulting with entrepreneurs for ten years now and have learned much from them. These six things are among the many principles which have been observed in their lives while in the overseas marketplace.

1. He was risk tolerant and never gave up.

Joe was a small business owner in Florida before he headed to Azerbaijan to start a consulting group there. Things went well for the first couple of years due to his hard work, some good contacts and an environment which seemed conducive to foreign owned startups in the post-Soviet era. His partner, a national, seemed to provide complementary business skills and contributed in the legal domain as a lawyer.

The day came when I got that dreaded email which seemed to spell disaster. Joe’s partner had run off with all the assets and cash, and being a foreigner in a country with lots of unknowns, Joe knew he had lost it all. I was devastated for him.

I waited a few weeks and called Joe and asked him what he was going to do now, thinking he might be packing his bags for the ‘good ole’ USA. I will never forget his answer to my question, “Oh, I have already gone down the street and opened a new office. We have a new name and I have registered the new company.” Joe was not a quitter. Joe was a self-starter. Joe was not about to give up. When he left the country a couple of years later, he sold the company and realized a nice profit.

2. He cared for his employees.

Will had considerable success in a large East Asia country as the owner of a manufacturing firm. He had hundreds of employees and was well integrated into the culture. His company could be considered a values-driven company, or a Kingdom company. He had become a model for others.

I am always looking for models for others to consider and it was of interest to me what his employees thought of Will. One day I found out.

One morning, Will was walking around his factory floor when he overhead a senior worker giving orientation to a new employee. The worker said, “you will just love working for Will…he is the best boss in the entire country.” It sort of embarrassed Will to hear that, so he wandered on without indicating that he had heard the comment.

Sometime later when the senior worker was alone, Will asked why she had made that comment. The worker said “Do you remember a couple of years ago when my son was ill and in the hospital?” Will indeed did remember the occasion so responded that he did remember. She responded, “Well, you asked me how he was doing. No other boss in this country cares about people like that.”

Will had established relationships with all employees and an atmosphere of caring for every aspect of the employees’ lives and they had come to love and respect him – and work diligently for the success of the company. Perhaps even more powerful, the employee came to follow Jesus.

3. He valued the wisdom and expertise of others.

One of our consultants has been working with a large poultry business in one of the “Stan” countries in south Asia. It was a great fit and I was confident that Eric would be a great consultant and mentor to Dan, the owner – and he was.

One year Dan came back to North America and was speaking at a business conference. I went to hear what he had to say. I was somewhat shocked that he said he had seven people giving him counsel on a regular basis. There were consultants, a mentor, coaches and subject matter experts.

Dan realized that he needed all the help he could get. It still seems a little much to have so many people giving advice, but the point of learning for me is that he knew there was much he did not know and he was open to others’ wisdom and any expertise they could provide him. I have to believe that his business will continue to grow and be successful.

Applying this in your life

Are there people you know who exemplify these success principles? What have you learned from observing them? How have they helped you navigate opportunities and challenges you face? This week I encourage you to reach out to someone you look up to...and likewise, to reach out to someone who looks up to you.

Come back next week when I'll share lessons from three more BAM entrepreneurs.

The mind of the discerning acquires knowledge, and the ear of the wise seeks it. Proverbs 18:15

Larry Sharp, Director of Training, IBEC Ventures

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Leading with a founder's focus

Monday, April 04, 2016

This week we're pleased to bring you insights from a IBEC board member, Dave Kier who owns and operates DFS Feeds in northwest Iowa. He is a man of business excellence and experience, and also passion for bringing his faith to the workplace. As the second generation owner of this thriving business, Dave shares from firsthand experience of the importance of maintaining a founder's mentality versus a manager's mentality.

I am convinced that one main reason businesses eventually fail is that either the founder or the next generation of leaders moves from building a company to managing it. Not that a business doesn’t need to be managed but managing has more of an emphasis on carrying on or continuing - rather than building or leading. Building doesn’t have to mean becoming larger, but if one leads well, the operation usually grows. The owner most often starts a business to meet the customers’ needs and enjoys building relationships but often subsequent managers can come in with an emphasis on meeting the company’s needs.

As companies grow, the focus can become the balance sheet rather than the service provided. A business author once said that the worst action a founder can make is to start hiring professional managers who enter a successful company, note the net worth and think of how to leverage it so the company can grow the net worth. A company may grow, for a while, but then work becomes a burden instead of satisfying. The founder likely didn’t look too often, if ever, at the net worth but more at customer growth and delight.

Dave goes on to compare this business phenomenon with churches. This ‘managing’ versus ‘leading’ happens even in churches as the founder’s main emphasis may have been on teaching the Word and evangelism but the church eventually becomes internalized by getting busy with programs all the while shrinking from its main objective of serving the customer, that is, cultivation of new followers and maturation of those already established in their faith.

While ‘leading’ and ‘managing’ are not necessarily mutually exclusive, Dave has some real food for thought here – for IBEC readers, whether business owners, consultants, investors, clients, or casual visitors. Thanks Dave for stimulating us to think about important things.

Larry Sharp, Director of Training, IBEC Ventures

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IBEC Ventures -- Consultants for BAM/Business as Mission