How should artists structure their ventures for long term success?
Starting any sort of business venture is hard enough. Business ventures that depend on the founders specific talent are in a class of their own in terms of difficulty to scale, difficulty to turn into a business that others can take care of, independent of the founder, and difficulty to structure as a business enterprise that can offer investors stocks.
In a 1996 article titled ‘The Questions Every Entrepreneur Must Answer,” Amar Bhidé, looked at the vast array of challenges that startups face and asked if there was a structured approach that could help new entreprenuers.
He wrote, “…the range of options—and problems—that founders of young businesses confront is vast. The manager of a mature company might ask, What business are we in? or How can we exploit our core competencies? Entrepreneurs must continually ask themselves what business they want to be in and what capabilities they would like to develop. Similarly, the organizational weaknesses and imperfections that entrepreneurs confront every day would cause the managers of a mature company to panic. Many young enterprises simultaneously lack coherent strategies, competitive strengths, talented employees, adequate controls, and clear reporting relationships.”
- How does this apply to arts and culture ventures?
- If an artist is a musician, don’t they already know what business they are in?
- Actually, maybe not. I think as artists we often think we know what business we’re in, but we don’t. For instance, many singers think they are in the business of selling albums, but later on realize that they are in the business of building a following for their music, which following they can then turn into clients for live shows, merchandise, and perhaps songs and albums.
Bhidé went on to present a framework which he based on his observation of several hundred start-up ventures over eight years. The framework “doesn’t prescribe answers. Instead, it helps entrepreneurs pose useful questions, identify important issues, and evaluate solutions.”
He suggested that entrepreneurs “should use the framework to evaluate their companies’ position and trajectory often—not just when problems appear.”
- Does it apply to artists and to creative ventures?
“The framework applies whether the enterprise is a small printing shop trying to stay in business or a catalog retailer seeking hundreds of millions of dollars in sales. And it works at almost any point in a venture’s evolution.”
- This still doesn’t really answer the question. Artistic ventures are different. Very different.
“The framework consists of a three-step sequence of questions. The first step clarifies entrepreneurs’ current goals, the second evaluates their strategies for attaining those goals, and the third helps them assess their capacity to execute their strategies. The hierarchical organization of the questions requires entrepreneurs to confront the basic, big-picture issues before they think about refinements and details. This approach does not assume that all companies—or all entrepreneurs—develop in the same way, so it does not prescribe a one-size-fits-all methodology for success.
Bhidé came closest to addressing the specific issues that artists and creatives face when he wrote this, “Entrepreneurs who operate small-scale, or lifestyle, ventures face different risks and stresses. Talented people usually avoid companies that offer no stock options and only limited opportunities for personal growth, so the entrepreneur’s long hours may never end. Because personal franchises are difficult to sell and often require the owner’s daily presence, founders may become locked into their businesses. They may face financial distress if they become sick or just burn out. ‘I’m always running, running, running,’ complains one entrepreneur, whose business earns him half a million dollars per year. ‘I work 14-hour days, and I can’t remember the last time I took a vacation. I would like to sell the business, but who wants to buy a company with no infrastructure or employees?’
- “Who wants to buy a company with no infrastructure or employees.” Magic question, right there.
- As artists, are we locking ourselves up for a lifetime of endless work when we launch our ventures?
- How can we structure things differently?
- How can we make sure we are building enterprises that create financial freedom, time freedom and space for continued beautiful creative expression?
Amar Bhidé is the Thomas Schmidheiny Professor of International Business at the Fletcher School at Tufts University. He is a member of the Council on Foreign Relations, editor of Capitalism and Society, and a founding member of the Center on Capitalism and Society. He is the author of “A Call for Judgment: Sensible Finance for a Dynamic Economy” (Oxford, 2010), “The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World” (Princeton, 2008), “The Origin and Evolution of New Businesses” (Oxford, 2000) and “Of Politics and Economics Reality” (Basic Books, 1984). In addition, he has written numerous articles in the Harvard Business Review, the Wall Street Journal, The New York Times, BusinessWeek, and Forbes.
Bhidé just had an article titled Capitalism Won’t Thrive on Value Investing Alone published in the Harvard Business Review.
“Summary. Investors fall into two camps: value investors, who base decisions on a careful analysis of revenues and costs, looking for steady performance, and growth investors, who place bets on risky projects with very high potential payoffs. A capitalist economy needs both kinds — those willing to back transformational ventures as well as those who reward prudence and thrift.”