Charlie Goetz, senior lecturer in organization and management and distinguished lecturer in entrepreneurship, is a serial entrepreneur, an active investor in more than a dozen businesses, and partner in an African nonprofit focused on developing healthcare solutions for Africans. Goetz is responsible for starting and building new ventures in a number of industries, including banking, healthcare, radio broadcasting, sports, real estate, and advertising. Since 2001, Goetz has taught classes on entrepreneurship and business development at Emory’s Goizueta Business School.
In this interview, Goetz addresses why now is a good time to start a business, why there’s so much capital available and where to get it, and a few tips on how to position your startup for success.
EB: From an entrepreneurship standpoint, what are you seeing right now?
Goetz: One of the things we see is that during bad times there’s a lot more entrepreneurship happening. New ventures are starting, and there are a number of reasons for that.
EB: So the silver lining of hard economic times is new business growth?
Goetz: Correct. A lot of companies get started because people are either losing their jobs or think opportunities at their current company are limited. Also, research shows that this could be a good time to take a step away and start a new business. Starting a business in difficult economic times makes finding good people easier, cost of product development is often less expensive and because people are no longer sure of their future at their large employers, they are frequently willing to take more chances and work for lower wages and stock options at startups.
In addition, bad economic times can often take out weak competitors, leaving customer opportunities that would not have been there in good times. For those who move forward and start their businesses, often by the time the economy comes back, these new ventures are up and running and they hit the market fast, which is usually one of the keys to being successful. It is not uncommon for companies that start during a big recession or economic downturn to have successful exits in five to seven years. Frequently, after a bad downturn, an economy is running at full tilt five to seven years later.
EB: How are these upstart companies getting funded right now?
Goetz: While the most common funding process for incorporated businesses are still savings and friends and family investment, there is a definite increase in demand for SBAs—Small Business Administration loans. SBA loans can fund up to $5 million, although the vast majority are for significantly less money. To get an SBA loan, find out if your local bank offers them. If not, other banks will. Try to bank with community banks (small local banks) as they are much more interested in your startup business than the large ones.
EB: What’s your take on the U.S. government’s response to aiding small businesses during this COVID-induced downturn?
Goetz: To date the government has done some good things for small businesses. The most effective program for small businesses has been the Paycheck Protection Program (PPP) under the CARES Act. It provided small businesses with $525 billion through approximately five million loans. That’s more loans by value and volume than all the loans the SBA has ever approved in its 67-year history. In addition to PPP, the SBA’s traditional loans exceeded $28 billion at the same time, and some of that was through its microloan program, which gives aspiring entrepreneurs access to capital in loans of up to $50,000.
EB: So, it sounds like a good time to launch a business, but what are the options for those seeking to exit existing businesses?
Goetz: Right now, there is a huge amount of cash available on the sidelines. Specifically, during recessions investors try to play it safe and will hold onto cash. Now that the market has come back significantly and interest rates are still so low, investors are looking for good places to invest their money. Consequently, this may be a good time to start a business or to sell a business that is already up and running. Prices for businesses have skyrocketed this past year.
EB: In 2019, 90 percent of all startups failed. Any advice for entrepreneurs on how to be a part of the 10 percent that are successful?
Goetz: Be very careful of this statistic. It is heavily skewed to mom-and-pop businesses. Businesses that are incorporated do not fail at this high of a percentage. In reality, 90 percent of startup businesses do not fail. Some of that percentage includes businesses that get out of their business, frequently due to retirement and other reasons. That said, there are a significant portion of companies that do fail. While there are no perfect solutions to being successful, there are definite things you can do to increase your probability of success. Here is just a very small sample:
- Take time to really understand your market. The key here is to spend a lot of time and effort determining exactly what your customers really want and then do everything you can to give it to them.
- Understand what your potential competition looks like. Are there direct competitors? If not, are there indirect competitors? By the way, if you tell a seasoned investor that you have no competition, they will laugh at you, and when they are laughing, they don’t invest. Instead, focus on what are the strengths and weaknesses of your competitors? Try to identify why competitors are not able to satisfy your market’s demands.
- Design your product. Once you have done your market research well and know what your market really wants, you then need to develop a design for your product/service and run the design past your prospects to determine if you make it, will they buy it? If not, why not?
- Start charging. If your prospects tell you they’ll buy your product/service, try to get some payment from them upfront, even if it means giving them a good discount when you have built it. After you have a sufficient number of prospects agreeing that they will buy your product/service if you make it, you will need to either develop the product or service yourself or find someone who can. Do your due diligence on who you are having develop the product/service. It is not unusual for a small company to hire the wrong people/companies, and by the time they realize they’ve made a mistake, they are out of money and time. Be very careful here.
- Develop an effective marketing and sales plan. Once your product/service is being developed, it’s critical you spend significant time developing an effective marketing and sales plan. And a big warning:The number one reason why small businesses fail is due to lack of sales.No matter how good your product is, marketing and sales are difficult processes. The overwhelming percent of prospects don’t like to try something new; your company has little to no credibility, and there is a concern you may not be in business if there is a problem with the product down the road. In addition, sales don’t come from heaven. There is a direct cause-and-effect relationship. You do a marketing tactic, it drives leads, which in turn you give to your salespeople, who in turn close a percentage of those sales.
- Identify a niche. To overcome this, I recommend that you identify a niche that is underserved rather than targeting the entire market. Then design your product specifically for that target market. Since your product/service is exactly what this subset of the market wants, they buy it. Once they buy it, you can get good recommendations, which you will use for building your company’s credibility.
EB: Besides building businesses, are you investing in businesses too?
Goetz: At the moment, I’m invested in 12 different companies. Over the last three years I have changed my focus from investing in companies solely for their investment potential to companies where I can do both good and do well. Meaning, not only does a good return matter, but the companies must have products that can help people live a better life. Consequently, a lot of those investments are in healthcare companies.
EB: Do you also consult for these companies or is this strictly monetary for you?
Goetz: Sometimes I’ll have positions on the board. Not always. It depends on the time commitment and whether or not they need me. If they have somebody who has the same skill set I do, then no. But it’s mostly about the time commitment. I can’t be on everybody’s board.
EB: And speaking of time commitments, what about the classes you’re teaching?
Goetz: I have a full load this semester. I’m teaching Intro to Entrepreneurship, Applied Entrepreneurship, and Entrepreneurial Practicum and always doing a lot of directed studies with students.
EB: What is Entrepreneurial Practicum?
Goetz: There are a lot of pieces to it, but essentially it’s a class where our students work with entrepreneurial companies and are assigned a project with those companies. Each student gets a project. Not only do they learn about entrepreneurship, but the students also help us identify startup companies for the RAISE Forum.
EB: Remind readers about the RAISE Forum.
Goetz: By teaching students how to identify the best companies for the purposes of the RAISE Forum (Retention and Advance Investment for the Southeast at Emory Forum), they learn what companies need to do to make themselves successful. To date, we have done 11 RAISE Forums and over 32 percent of the budding companies who pitch their businesses have received funding from the investors we invite to our forum. Each semester, almost 100 entrepreneurial companies in the Southeast who are in-revenue, apply with hopes to get one of the seven spots to present to our investor groups. Our investor groups include “super angels,” venture capitalists, and private equity companies.
EB: During this time, do you feel optimistic about business?
Goetz: I feel bad for those businesses in hospitality—like restaurants or hotels. There are a lot of those businesses that either won’t be coming back at all or won’t be returning to the level where they were before the pandemic. But the higher level businesses, the more professional businesses, they’ll probably be fine. On the whole, they’ve gotten through this pretty well and many of them have done better than they thought, even before COVID-19 hit.