How to succeed
in business
Entrepreneurship
programs provide a roadmap for students
By Janice
Rosenberg
Special to the
Tribune
October 6, 2002
Since July 2001
entrepreneur and graduate student Donovan Robinson has been selling caskets,
a business opportunity that sprang from a magazine ad.
"I called my
father and said I had an idea and that we couldn't let it go to the grave,"
Robinson said with a laugh. "That was in May, and in July we were up and
running."
Today Robinson,
31, is president and CEO of The Casket Store Inc., which he operates with
Sebastian Barrett, the company's chief operating officer and vice president.
Located on Chicago's Far South Side, the business supplies a product many
people eventually need. He also is working on an MBA with a concentration in
entrepreneurship at DePaul University's Kellstadt Graduate School of
Business.
Entrepreneurship
education, now incorporated into graduate business education at most Chicago
area universities, is giving Robinson and fellow students the skills they
need to run businesses. Besides gaining expertise in finance and marketing,
they learn how to create business plans, identify funding sources and tap
into their own creativity.
A sweet start
for program
The development
of entrepreneurship education in Chicago was aided by a homegrown business,
the Fannie May Candy Co. In 1981 board members of the company's Coleman
Foundation Inc. observed that universities were not teaching students how to
start small businesses. The foundation responded by endowing five Coleman
chairs in entrepreneurship, the first at the University of Illinois at
Chicago. Today, besides UIC, colleges with Coleman chairs include the Stuart
Graduate School of Business at the Illinois Institute of Technology, DePaul
University, Beloit College in Wisconsin, North Central College in
Naperville, Marquette University in Milwaukee, St. Louis University,
California State University-Fresno and Purdue University-Calumet.
UIC's College of
Business Administration was one of the first universities in the country to
offer a concentration (at UIC, a minimum of three courses) in
entrepreneurship. At the time, large corporations hired most MBA graduates.
"But why should
business colleges be totally devoted to training and educating people for
large corporations?" said Gerald E. Hills, UIC's Coleman Foundation chair of
entrepreneurship. "Many students graduated and went to work for family-owned
companies or small and medium enterprises. Business colleges were ignoring a
huge part of the market. It never made sense."
Anyone who
starts a business is an entrepreneur, Hill said, whether the venture
involves a neighborhood sandwich shop, a unique software program or a
chiropractic office. Entrepreneurs may create something new or simply
repackage components to make the end product more attractive. They may store
goods in giant warehouses or list their services on Web sites.
Many roads to
degrees
Students who
sign on for graduate entrepreneurship education come from a variety of
backgrounds, said Curt Wang, vice president of marketing and communications
at Lake Forest Graduate School of Management. These include, he said,
entrepreneur "wannabes," employees in corporations with the urge to strike
out on their own; success seekers, people who tried to start businesses and
quickly learned that many investors preferred to back entrepreneurs who had
MBAs; and current business owners.
"They may be
great salespeople or great ideas people, but have learned they need a more
well-rounded business education," Wang said of the last group. "They are
looking for practical education that they can use right away."
As with most MBA
programs, Lake Forest prefers students who have had experience in the
business world. Although it does not offer a specialization in
entrepreneurship, its practical approach to business education draws older
students; the average age is 37.
Partners in wine
Before deciding
to pursue an MBA, Leslie Olesen, a 1995 Lake Forest graduate, worked as a
nurse, then spent 18 years running a medical education business with her
husband, Craig. They are now partners in Viva le Vine, a wine shop in
Libertyville.
"The MBA program
helped me focus more on market niches," Olesen said. "It gave a lot more
structure to what I was already doing."
Graduate school
specialization in entrepreneurship offers students hands-on training. At the
University of Chicago Graduate School of Business, the combination of
experiential and academic learning is very powerful, said Ellen Rudnick,
executive director and clinical professor in the school's entrepreneurship
program.
The
courses--including such offerings as "Internet and Technology Ventures,"
"New Venture Strategy," and "Entrepreneurial Finance and Private
Equity"--are popular. Registrations rose from 1,375 in the 1999-2000
academic year to 1,554 in 2001-02. Students participate in internships, work
on business plans and meet consultants and venture capitalists who give them
feedback about their ideas.
MBA a starting
point
Sol Kanthack
returned to school at the U of C with hopes of strengthening his background
in finance. His MBA gave him the basic tools he needed to start a business,
and more important, helped him develop a network of financial resources.
Today he is president of brightroom inc., a Web-enabled professional
photography business based in Emeryville, Calif.
Similarly, each
year Northwestern University's Kellogg School of Management places 15 to 20
students as summer interns in firms where they learn business realities at
the elbows of entrepreneurs. In class, Kellogg students are taught using a
case-method process that places them in decision-making positions.
"Entrepreneurs
need to come to business school because it provides them with the
opportunity to learn how to do things the right way," said Steven Rogers,
Kellogg's Gordon and Llura Gund Professor of Entrepreneurship. "Our program
teaches those who are interested the skills they need to increase their
chances of being successful."
Mentoring during
graduate school also helps potential entrepreneurs. In 2001 George Kalidonis,
Coleman Clinical Professor of Entrepreneurship at IIT's Stuart Graduate
School of Business, launched a hands-on program for self-driven, independent
individuals who have experience in the business world. He mentors 10
students from each class whom he hopes will benefit from his passion for
entrepreneurship. Kalidonis' career has included stints in the consumer
products and venture capital businesses.
At the elbows of
experts
One member of
Kalidonis' group, second-year MBA student Steve Mannina, is excited about
the program. He wants to work with Kalidonis to develop ideas and identify
opportunities in the current business environment.
"The materials
Dr. Kalidonis will be teaching are exactly what I had in mind when I went
back to school," said Mannina, a Chicago resident whose previous career was
in the information technology area.
To help people
who don't know exactly what kind of business they want to create, DePaul
offers students an idea-generating process that includes a course called
"Opportunity Recognition and Creativity." The course uses brainstorming and
other idea-generating techniques to train them to access the creative sides
of their brains.
Entrepreneurial
evidence
Graduates of
entrepreneurship programs seem primed to launch businesses. DePaul MBAs have
started about 100, including golf courses, CPA firms, gourmet candy stores,
lawn services, high-tech consulting firms, and most recently, Robinson's
CasketsStore. UIC student Greg Janecka won't graduate until December, but he
owns MortgageSubservicing.com, a company that provides education around the
outsourcing of mortgage bank loans.
At most schools
students aren't the only ones immersed in entrepreneurship. Many faculty
members have been or are entrepreneurs. U of C's Rudnick left an
executive-level job at Baxter Healthcare Corp. to found her own medical
diagnostics business. She also started a consulting firm that helped
companies identify and commercialize new services.
At Lake Forest
all faculty members are entrepreneurs. Adjunct professor Ron Hirasawa, who
also works as a management consultant, educator and executive coach, offers
students real-life examples of the principles he teaches.
"The odds of
failing are high on a first venture," Hirasawa said. "So I tell my students
who want to start businesses not to quit their day jobs."
Figuring profits
By Stephen D.
Froikin
Special to the
Tribune
The first step
in figuring a business' income taxes is to figure gross profits. This is
pretty straightforward if your business provides a service or you rent
property. Whatever you receive in fees or rentals ends up as your gross
profit.
We'll get to
some trouble areas in a minute, but first we want to say a few words about
special rules that apply if you sell goods.
Inventories and
the cost of goods sold
If you sell
goods, you may deduct the costs of those goods from gross receipts to figure
your gross profit. These are not business expenses, which are deducted later
on the in the tax equation. These are costs directly related to acquiring
the goods.
Why is this?
Basically, the IRS wants you to deduct the costs of goods in the year you
sell them. But most businesses that sell goods carry inventory over from one
year to the next. You might have acquired your inventory in 1999, but you
might not sell it all until 2001. The IRS doesn't want you to deduct all the
costs on your 1999 return. They want you to wait until you sell the stuff.
Accounting rules
for inventories can be quite complex, and we're not going to even try to
tackle them here. But we want you to know the concept behind them. And here
it is:
You figure the
dollar value of your inventory at the beginning of the year (usually the
same dollar amount that you ended the previous year with). You add direct
costs for adding to the inventory -- usually the cost of purchasing the
goods. From this you subtract the dollar value of your inventory at the end
of the year. The result is your cost of goods sold, often referred to as CGS.
If you
manufacture goods, your direct costs for adding to the inventory may include
materials, supplies and labor for the manufacturing process. Otherwise,
labor is not generally part of the CGS calculation.
Trouble areas in
figuring gross profit
Although fees,
rentals and sales receipts are probably the major items of income for most
businesses, you'd never know this from the amount of ink spilled in IRS
publications on items that cause a disproportionate amount of trouble for
people. Here are a few items that you should beware of on both the positive
and negative sides:
Barter. If you
receive property or services in payment for what your business does, you
must report their value as income, just as you do if you are paid in cash.
Canceled debt.
In most cases you are required to report any canceled debt as income.
Lawsuit awards
and settlements. Most awards and settlements of business lawsuits are
reportable as income. (This may not be true of nonbusiness lawsuits.)
Loans. The
proceeds of a loan are not reported as income.
Appreciation in
value. Property that increases in value has no effect on your taxes until
you sell it.
Sales returns.
Credits you give customers for returns are taken as a reduction of your
gross sales receipts.
Testing gross
profit. The IRS can look to see if your gross profit margin is typical of
retail or wholesale businesses in your industry. You can test this yourself,
comparing your business to your own markup policy and also comparing it
against industry figures. These may appear in IRS
audit technique
guides or in other industry sources. Figure your percentage by dividing
gross profits by net receipts. This percentage measures the average spread
between your merchandise cost of goods sold and the selling price. If your
percentage is off, you may be doing something wrong.
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