The formula for finding entrepreneurs | Ryan Ryals

At work, I get a lot of phone calls from sales representatives. They’re always trying to sell stuff of course, but lately they always ask, “So, how’s business?”

Fine, I say. Sales are steady, profits are slightly up. What do you hear from your other customers? “Oh, most of them are not doing that great. You know, Macy’s and Amazon are doing all right, but most of the little guys are struggling.”

I’m not too surprised. In my industry, there are a handful of small retailers who are either all over 60 years old, or are large retailers like Macy’s, Amazon and Bed Bath & Beyond. There aren’t any midsized businesses to speak of, and only one that is run by someone under 40. It’s as if an entire generation of entrepreneurs simply doesn’t exist here.

So we’re left with the Davids versus Goliaths, and most of the Davids are already working on their shuffleboard game and taste-testing cat food for their forthcoming dinners in retirement.

Many of them missed the transition to Internet-based businesses, and have kept doing business the old fashioned way. Most customers started shopping the new fashioned way, and big businesses paid attention. Macy’s parent corporation even spent $130 million a few years ago to update their websites to attract those shoppers and their money.

Big business wipes out the little guy. Again. But that’s an old story, starting back with the Atlantic and Pacific Tea Company, better known as A&P. They started as a single store over 150 years ago, and then expanded to become the biggest grocer in the country. Along with Sears, they turned the old general store into a quaint museum oddity. But they were overtaken by the discount grocers we use today, who will probably be taken over by Wal-Mart soon enough.

It’s an old story, but I’m not ranting against big business. To me, the bigger story is the lack of entrepreneurs to replace the ones who are leaving. We need more of them, but they aren’t appearing. The U.S. Department of Labor statistics show that the self-employment rate has been declining over the past 10 years.

Why is that? It’s likely due to a number of factors, some of which we can control.

Big Business

We can start with them, since they are often pointed to as the culprit. Stories of big, bad Wal-Mart moving in and wiping out small businesses and leaving ghost towns behind are fairly common. But the good side of that is, they make it easy for Americans to save money. Their hyper-efficiency in logistics combined with heavy pressure on manufacturers to lower their prices have almost single-handedly kept down the inflation rate.

McDonald’s succeeds against smaller burger chains not because their burgers are better (or even good), but because they have standardized the experience and lowered prices. It’s always safe to go to McDonald’s, the food is always exactly the same, and it’s always cheap.

The entrepreneur’s challenge is to be a little different. Going head-to-head with McDonald’s or Wal-Mart isn’t a great strategy. Creating a different experience that distinguishes you from them will win the day. Maybe it’s an all-natural, grass-fed beef burger with no additives or chemicals for under $6. Maybe it’s a specialty paint store that offers expert advice from the guy behind the counter, thousands of color choices, and a free roller.

Too much regulation

This is a fairly common complaint, but take it from someone who’s done it several times; it can be difficult for the little guy to start their own business. Our state is easier than most, but some of the business taxes require a bookkeeper to sort out. It’s become that way due to “tax incentives” that are rated differently for each industry.

We really do need a legislative session to weed out old, out-of-date tax incentives, more standardized taxes, and a new effort to make it easy for would-be entrepreneurs to start a company. My suggested mantra for legislators: Will this regulation or tax make it easier for companies to do business in this state?

Schools

One of my biggest complaints about schools is that they are training worker bees, and not entrepreneurs. By the time kids graduate, they are skilled in taking orders, thinking inside the box, and memorizing facts, instead of creative thinking and problem-solving. That’s great if you want to be a cog in the big company machine, but it doesn’t create entrepreneurs.

We can fix this one too, but it will take a long time. Most teachers aren’t entrepreneurs themselves, and you can’t just learn it from a book. More importantly, legislators and teachers have the power to take the fear out of starting a business, but today they simply don’t do it.

With the unemployment rate as high as it is, and tax revenues suffering, this must change.