Startup Entrepreneurs Have Confidence. Duh.

Pssst. Want to know a secret? Entrepreneurs are insanely confident.
Of all the data points released about the economy week after week, perhaps the least helpful nowadays is the Kauffman/LegalZoom Startup Confidence Index. With apologies in advance to the Ewing Marion Kauffman Foundation and online legal-advice company LegalZoom – both of which I have no doubt carry the best intentions and otherwise do good work – and, with an additional shout out to John Calvin, tracking startup confidence seems an exercise in predestination.
You will never, ever find a time when startup confidence, as measured by this survey, is not high. Ever. Startup owners are confident, so confident that, well, they started a company. One needn't waste human hours tallying numbers to express that.
Let's take a deeper dive into the numbers themselves, released this morning. Despite what the companies call “ceaseless uncertainties in Washington” and “mixed signals” on the economy, it turns out the confidence of owners of startups is at a new high of 86 percent.
Put aside that the “new high” isn't all that significant since the survey has only been tracking sentiment since the first quarter of last year. There are other, more significant problems with the survey and the results:
The life of the businesses surveyed is too short. In ordered to be surveyed, you had to have started a business within the past six months. This is the biggest problem with the data compiled: You are talking to people who felt optimistic enough about their own abilities to quit their jobs and start a business. It puts to mind what Reed Hastings said, that to be an entrepreneur “you have to feel like you can jump out of an airplane because you're confident that you'll catch a bird flying by.” Entrepreneurs may succeed or fail, but confidence never flags.
It asks the wrong question. The lead question is a simple one: “How confident are you that your business will be more profitable in the next 12 months than it is today?” Well, most businesses are not profitable in year one, let alone in the first six months. So, since you are asking people who are trying to turn losses into a viable business whether or not they think they will be more profitable, isn't the answer always “yes?” And, if not, does that matter? Many tech startups have multi-year business plans that call for many quarters in the red. That doesn't make them any less successful, particularly since they probably have raised a war chest of cash to burn.
The survey tracks respondents by age. According to the latest figures, 95 percent of 18-to-30-year-olds and 94 percent of 31-to-40-year-olds feel certain about near-term profitability. That the youngest group should feel more confident again shouldn't be a surprise, because they lack long-term experience in being able to judge consumer demand. There is some evidence that younger entrepreneurs are less successful than older ones.
It is not a predictor of future startup activity. One would think that entrepreneurial confidence would lead to a higher rate of startup creation among the younger demographic groups. In fact, it hasn't. Just look at Kauffman's own Index of Entrepreneurial Activity, which showed the share of startup activity by people between the ages of 20 and 34 fell from 34.8 percent in 1996 to 26.2 percent in 2012. At the same time, the share of companies started by people aged 55 to 64 rose from 14.3 percent to 23.4 percent. So, if confidence is higher among the younger entrepreneurs, why is the growth rate for new business creation so much higher among older entrepreneurs? Well, it is because the population is aging. It has little to do with changes in confidence.
It is reliant on LegalZoom's customers. This is an email survey sent only to those people who used LegalZoom products. LegalZoom has some fantastic tools for small businesses, allowing owners to save money on the reams of documents they need to file in starting or managing a business. But, as businesses grow, and the stakes get higher, businesses typically drop software for actual counsel (and curse incessantly over the concomitant billable hours). As a result, you are asking a very small subset of the overall entrepreneurial population – both in absolute terms and size of business – for opinions. Statistically and economically, that isn't a good enough sample off which to make any bolder a declaration than “LegalZoom customers agree...”
There is too much turnover in respondents. This is a quarterly survey of people within six months of starting their business. For those not good at math, that means that you are asking a lot of different people the same questions. Particularly when it comes to something as tough to measure as confidence, it is more helpful to hear how respondents' thinking evolves over time. Being a startup owner is great, but growing that business into a multinational, big-money enterprise is even better. That kind of experience is lost when you look at people's sentiment at just the starting line.
So, is looking at confidence a waste of time? Not at all. Consumer confidence is a nice way of judging potential sales. Looking at the customer – rather than your peers – has a bigger impact on business planning. And, even gauging sentiment among business owners is helpful when you are asking a wider range of questions to a bigger group of companies, as the National Federation of Independent Business does with its Small Business Optimism Index.
For its part, Kauffman, in a statement, says the report “helps illustrate the resilience of the American economy and the way in which new business creation constantly creates a new economic future, even as the surrounding economy appears stuck.”

Accounting 101 for a Growing Business

 Emerging growth companies have different needs than startups, especially when it comes to accounting. If you’re not using professional software, tax expert Mark Kohler warns, you could be missing out on key information that can help you manage your business. Kohler, author of What Your CPA Isn't Telling You, advises growing businesses to upgrade their accounting practices, including investing in a bookkeeping system and hiring part-time help.

What's the Next Kale? How Business Owners Can Capitalize on Food Trends

In foodspeak, using the word “kalelicious” to celebrate 2013’s ostensible year of kale seems right on the money. That’s exactly what Dee Ann Bauer thought when she coined that descriptive as the flavor of her veggie-centric popsicle.
Bauer’s green-hued icy treat – a frozen, blended fruit-and-vegetable smoothie pop produced by her 20-month-old company Green Wave Smoothies – boasts kale as a major ingredient, along with banana, mangos and oranges.
Bauer seems to have acted at the right time. “Just about everyone who stopped by our booth at this summer’s Fancy Food Show in New York, where we debuted our popsicle, told me, ‘What a great idea,’” she says. She's currently in negotiations with top-tier natural food and grocery chains and standalone stores in the U.S. and Canada who want to carry her products.

Kale, like the acai berry and avocado before it, is the latest food to capture the nation's collective appetite. Touted for its nutritious value, the leafy green seems to be finding its way into all kinds of concoctions – and will likely do so until the next big food trend sweeps through.
For business owners, the kale craze is an important lesson on how to sense trends and capitalize on them.
Sniffing Out a Trend
Bauer started out by test-marketing her popsicle formula, via freshly blended green smoothies, at farmers’ markets. She then sampled the frozen pops at a fitness club whose premises housed a certified kitchen where she made them. She never hired a consultant. She simply engaged in a bit of DIY market research by picking the brains of everyone who tasted her offerings and then tweaking her recipe.
“I knew kale was starting to become a big buzz word because of its nutrient density, and many people were already associating ‘green smoothies,’ with health,” she says. “And [I knew] that this could be a product consumers might want to enjoy, but not have access to unless they made it themselves.”

Audrey L. Darrow, co-founder and president of , a manufacturer of certified organic raw chocolate products, based in San Diego, California, also relied on practical strategies to help focus her entrepreneurial goals.
A former high-end deli owner, Darrow was diagnosed with a life-threatening illness in 2003. During her recovery, she overhauled her diet and later took a job at a local health food store to take advantage of the employee discount. “I was on the floor, and so I watched where customers congregated and how they studied food labels,” she says. “The raw-foods area was where everyone seemed to be, and I picked the brains of those customers during every break I had.”
Darrow also did a lot of research on what mattered to consumers. The raw-food movement, sustainability, and company transparency were all topics high on the list. “Ultimately, I believe that researching what consumer health issues are can help entrepreneurs determine future food trends, such as the increased interest in organic, refined-sugar-free, and gluten-free products,” she says.
Her initial product, launched in 2007, was a raw food bar. The following year, she released her Righteously Raw chocolate bar, which is now carried in Whole Foods and other natural foods and grocery stores in the U.S., Canada, Hong Kong, Japan, and later this year, in South America. “Raw chocolate may be a niche market, but it’s an extremely fast-growing niche,” says Darrow, who now produces 10 raw-chocolate products and projects $1.5 million in sales for 2013.
Discovering the 'Next Kale'
For those looking to pounce on the next trendy food item, the best advice may be to keep your eyes open and ear to the ground. “What many entrepreneurs don’t realize is we experts often conduct the same research they do to identify the next big food trend,” says Lynn Dornblaser, new products expert at Mintel, a market research company.
Dornblaser says watching for new ingredients that keep popping up on restaurant menus, new category items on grocery shelves and even talking to friends can provide a goldmine of information. “It’s all about paying attention but, at some point, you have to take a leap of faith,” she says.

On her watch list for the “next kale” are watercress – “it’s a nutrient powerhouse,” she says – and watermelon flavoring. She’s also paying close attention to the speculoos, a crisp cookie popular in northern Europe with a cinnamon-and-brown-sugar flavor profile. “Trader Joe’s already sells a popular Speculoos Cookie Butter,” she says.
Specialty-foods marketing consultant Stephen Farrelly Hall believes the next big food tsunami could be kimchi (kimchee), the traditional, spicy and often cabbage-based side dish from Korea which is also used as an ingredient in other dishes.“There has been an increased interest in Korean and Korean-styled food, and a noticeable proliferation of Korean restaurants, through which more consumers will be introduced to kimchi,” he says, adding that Korean perilla, a plant whose mint-scented leaves and seeds are used in cooking, may also figure into upcoming food trends.
However, Hall, author of Sell Your Specialty Food, says it’s not enough for entrepreneurs to simply land on the “next kale.” The entrepreneurial effort is all about innovation, he says. “The year after you bring a product to market, retailers and consumers will be asking you, ‘So, what’s new?’” he says. “So it’s necessary to always put a new twist on the original