Why Did You Become an Entrepreneur?

What Made You Decide to start your own Small Business?

Why did you become an entrepreneur?

I often get asked why I became an entrepreneur? Why did I start my own company? I could answer that I grew up in an entrepreneurial home, with a father who ran his own business for years.  I could answer, that the change agent  in me did not like working for large corporations and instead wanted to build my own business and make things happen. However, neither of these reflect reality. My answer, much to the surprise of most, is  that I became an entrepreneur out of necessity.

Throughout my professional career, I found entrepreneurship to be the one constant that I could keep coming back to.

I first started working for myself during graduate school as a way to make ends meet. I had worked for nearly 3 years in industry doing market research, proposal writing, financial analysis and marketing and sales. I brought these varied skills to entrepreneurs and started working with green energy companies at the time helping them re-write and re-design marketing materials.  After that, I kept doing the occasional business or marketing plan

“Throughout my life, I always found entrepreneurship to be the one constant I could keep coming back to”

I was home on maternity leave with my daughter and throughout this, worked on several projects to keep me busy. When my daughter was 6 months old I found out I was pregnant again. This barred any return to work.  Within another month, my husband found out that he was losing his job.  After the initial shock wore off, we began to think how we were going to manage.

Being the industrious type, I immediately began to seek out projects to work on to keep myself busy.  I tried different types of outsourcing and contracting, but time was limited with two kids under 18 months. I found quite a bit of success in writing business plans. Part, education, part experience, and part intuition I could relate to the entrepreneurs I met. I could understand their pain, as I had seen it before in my father and his colleagues understood, what I like to call “the entrepreneur crazy”, fever and passion all in one that these entrepreneurs had for their businesses. I was inspired by their energy and dedication and genuinely loved working with them.

At the time, I decided to return to school to improve my financial analysis skills. I pursued a designation in  accounting, a designation that focuses on strategy. I returned to work for 18 months as a requirement of the designation, but hated every position I was in.  After having worked for myself, I had a difficult time working for anyone else. Perhaps it was a distaste of authority, or as I like to call it of the “inefficiency” of large organizations, but I was not a happy camper during these times.

At home, my children were suffering too. They had wonderful caregivers, but they were not mom. I was seeing changes in their behaviour that I did not like. These combined with my own unhappiness, made for a very miserable home life for my poor husband. Night after night of miserable conversations, my husband just said, why don’t you quit.  While I was working for others I had continued working on several large consulting projects. It was in these projects that I found my passion again.  I took his advice to heart and took the leap.

That was four years ago.  Since then I have worked with hundreds of entrepreneurs, helping them to define their businesses and their dreams.  There is no going back for me now.  This is what I love to do, and want to do for the rest of my life.

What is your reason? What is your drive and motivation for working on your own? Why do you want to leave it all to begin a consulting career?  What will your motivation or dream be?  Perhaps like most of us, the decision is not a grand vision or altruistic social purpose but out of necessity, out of life change and a need to learn to fend for oursel

Business Plans for Newcomers – Part 1

I cannot tell you how many times, I have heard of newcomers turned down for loans simply because they could not produce a business plan.
In our lending systems, as covered in a past blog, it is customary to ask for a business plan. In many cases, lenders will not even look at your business idea without it.
So what is an immigrant, with poor English skills to do? Many will pay consultants to prepare plans for them. Sometimes the immigrant will just stop the application process right there. Others will attend month long classes where they will be guided through the business plan process.

While both of these are good in principal, consultants can be expensive. Classes that drag on for months and months, are not only time wasters, but not effective at teaching what a business plan should be.

A business plan should be a guide-NOT a ROADMAP, but a guide, that gives general direction, provides some estimate of costs, and demonstrates an understanding of the market and the steps you need to get where you want to go with your business.

Many, expect business plans to be “gospel truth”, but they are not. There are those in the business world who will tell you never to plan or that they are a waste of time,http://www.inc.com/articles/201104/when-writing-a-business-plan-is-a-waste-of-time.html . I prefer a more democratic approach and believe that a general document should be prepared, but that document should never be taken as the Road Map for a new business.

For newcomers, understanding what to put in a plan, how to obtain market research, estimates of business costs and mission and vision statements, can be beyond not only their language, but also their cultural skills. Remember, Business Plans are largely a North American invention. To do them properly requires insight into Business Culture.

So what is an immigrant to do? My advice is to find a plan/template/program you are comfortable with and use that to develop a basic business plan. More important are items like personal credit and financial holdings. Also, getting a mentor in the industry would be a great asset, for immigrants or those new to an industry. In the next blog we will discuss finding a Mentor.

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Demographics for Small Business: market segmentation and counting customers

DEMOGRAPHICS FOR SMALL BUSINESS: MARKET SEGMENTATION AND COUNTING CUSTOMERS

The last couple of entries have focused on stories of entrepreneurs who have either not cared about customers or who believed that the entire world was a prospective client base.

While these strategies may work for some entrepreneurs, generally speaking, we need to have some understanding of the size of the market and what we can expect to sell. This understanding increases dramatically if you are a “product” based business, where you make or manufacture a product. Making too much can result in excess inventory and wasted operating funds, making too little and you forego potential profit.

I’ve created a 5 step process to help you segment your market and more accurately predict potential sales:
Go through this exercise – even in your head, and I guarantee you will have a better understanding of your potential customers and will be better able to quantify your market research to an investor, funder or partner.

1. WHO WILL BUY YOUR PRODUCT AND WHY?

Most entrepreneurs create a product to fill a need or to improve. Who will buy your product and why they will buy is the first step in calculating your customer base.

2. HOW MANY OF THESE INDIVIDUALS/GROUPS/NEEDS EXIST?

For most people this is the hardest part of market research. Calculating the number of people in the “market” can be a daunting task. However it need not be that bad. If you determine that your product is aimed at young professionals who live with their parents, you would first need to consult the Census in your country to determine the number of professionals, then most censuses narrow these by age, so you can further segment professionals say in the 24-34 range.

3. NARROW, NARROW, NARROW THAT CUSTOMER BASE

One of the core mistakes in research is that many people want as large a customer base as possible. This is a mistake. While some lenders will let this pass, to the trained business person, the more narrow a target market, the more I know that the individual has thought about his product and who will buy it. The trick here, is to tie the narrowed slice of the target group back to question 1 – who will use your product and why?

So in our example above, we decided that young professionals who live at home with their parents are your target market. You know that not all young professionals still live at home. However you saw a recent stat in a newspaper that said about 20% of these individuals lived at home until the age of 34. So if we determined that in our City, there are 200,000 young professionals, and we estimate that 20% of them live at home, then our market segment would be 40,000. (200K*20%)

4. MARKET PENETRATION RATES: NOT ALL THE WORLD IS YOUR OYSTER

The next biggest mistake people make is that they assume either naively or optimistically that they will sell to the entire market. Either this, or they assume a far too low market penetration rate. A general rule, the smaller and better defined your market, the larger your market penetration rate can be. The larger your prospective market size, the smaller your number.
Let’s clarify with an example.

So if I was going to sell business plans, and I know there are over 3,000,000 global searches a month in Google for business plans, I could say that I could sell to half of the market (50%) and I would have generous predictions indeed. Trust me, if I was selling 1,000,000 business plans a month I would not be here blogging!

Rather, I know that the 3,000,000 can represent less than the total market. Why? Because many individuals do a search more than once. Particularly for something like a business plan. Also, they may search on more than one device. Finally, this represents global searches and my market is the English speaking world of do-it yourselfers or those for whom English is not a first language.
So if I were to limit my search to Canada, there are over 12,000 searches in Canada. Assuming that half of these are repeat queries, and then taking the percentage of the general population that are do-it yourselfers, (perhaps in the 5-10% range) might provide me with a realistic size of the market that I am targeting.

(12,000*50% for repeat queries) = 6000*10% DIY market= 600 = the number of business plan writers that are DIYers


My target capture rate of 35% = 210 Plans per month – my sales at maturity

Now compare this number with saying that I plan to capture 0.1% of the global business plan market – that would be 30,000 plans per month – still much to high, particularly since many of those searches are in a language other than English. Numbers below 1% make no sense to anyone, so segment, segment, segment I say.

5. WHAT WILL YOUR SALES BE IN YEAR 1?

The third and final biggest mistake that people make, is that they assume they will sell their predicted sales at maturity in year 1. Remember, that your size of the market is once your sales reach maturity. For the majority of businesses, this can be a minimum of 3-5 years. How quickly you reach your sales will include how quickly the industry is growing, the number of competitors and the quality of your product. Anyone of these can change your sales forecast.

For myself, I know that I will most likely achieve 15-25% of sales at maturity in year 1 and then predict that sales will increase by 20-35% every year thereafter.

So, to all the prospective entrepreneurs out there, good luck and start selling!

 


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The Customer is always right….Except when he isn’t…

As part of my continuing series on markets and customers, I would like to tell you about another entrepreneur who was determined to change his customer. Unlike Bob from the last blog who was content to live with his books, this entrepreneur, Luis, has been fighting to convince customers that he was right and they needed to change since the day he opened his doors.

Luis was a Portuguese immigrant to Canada in 1980. Luis was a bright, energetic and enthusiastic young man eager to make a life for himself and his family. He came over to Canada as a pastry chef. His family had been bakers for generations in Portugal and despite his rather Neadrathal like appearance, Luis was rather artistic when it came to decorating cakes.

Luis at a Market in the winter
Luis prefers to sell outside…and grab (sometimes literally) unsuspecting customers as they walk by.

He started off living in Leamington, Canada, working for a baker there who sponsored him. Within a few months, knowing some contacts in London, Canada, Luis moved there. Always dissatisfied working for others, Luis changed jobs every few months, much to the chagrin of his wife and young family. Finally, in 1986/7, Luis took over a Latvian bakery and began working for himself on weekends (still doing construction during the week to supplement the family income).In 1989 the bakery was forced to re-locate due to a zoning change and Luis bought a new home and bakery in Aylmer, Ontario Canada where he has been ever since.

Luis makes what we would call today artisan bread. The bread is made with flour, salt and water-nothing more. Fashionable today, these loaves in the 1980’s resembled a cross between a flatbread and a rock. Despite this, Luis peddled his wares at area markets. He haggled with customers, yelled at them, insulted them and kept coming back for more every week. For a few years he tried retail-delivering to area health food stores and supplement stores. When one of them went broke–owing him a large amount of money, he swore off retail in favor of farmers markets and flea markets where he could sell directly to customers.

What makes Luis unique? Well for one, he has never changed his product in nearly 30 years. He has added lines, detracted products, changed recipes slightly, but the core product has never changed. His selling style resembles old world Arab market (think yelling and haggling) crossed with a pushy car sales man. People either love him or hate him. He has adapted his “pitch” to go with the times. In the 1980’s-1990’s the pitch was “diet bread” no fat, sugar, milk or oil…..the magic fix pill that would make you lose weight. In the late 1990’s to 2000’s healthy bread-with no fats or oils, that would let you take charge of your health. From the late 2000’s onward he has been peddling artisan breads with no additives or preservatives that supports the small business owner.

Selling outside in the Summer time
Luis used to use cardboard boxes to sell his bread–old banana boxes. These days he uses wicker baskets because banana boxes are treated with chemicals and health regulations actually prevent their re-use in our local area.

Over time has his product changed? Not really. Instead he uses language of the times to “re-invent” himself and keep his product relevant. He is still in business, fighting with customers who disagree with him, pushing his product onto unsuspecting passer-bys. Is he happy? Yes, 99% of the time he loves what he does. He is eccentric and his work environment permits him to be eccentric.

Luis, fights with his customers to make them understand why his product is relevant. Everyweek he fights. For some this would be exhausting, but for Luis, this weekly fight is what motivates him, what drives him. At heart, he loves people (“I am a lover, not a fighter” as he would say). He is known to be yelled at to keep him quiet. However, despite all of this, he loves what he does. He is passionate about bread and never hesitates to educate customers about his product, about bread, about why you should be passionate about it. He does not let the customer dictate what product he should sell, rather he fights with the customer, changes his sales pitch and educates, until the customer exhaustedly agrees to buy a loaf just to shut him up. The funny thing is, most customers come back a second time, a third…etc. He knows he just has to get them to take one loaf. A few have put up with him for nearly 30 years, others tire of his ways, and only come back occasionally. Does Luis care? No. He knows the world is full of customers, they just have to be convinced and he will go on “convincing” till the day he stops baking.

As an aside, there is much more I could tell you about Luis–enough to fill an entire book–and that book would be called ” A Baker’s Daughter” –yes he is my dad and probably the reason I am a passionate entrepreneur today.

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Demographics and Your Business Plan

The term for some of you may conjure up images of university classrooms and painful modelling excercises. For others, the term might imply some kind if research to do with population, but most certainly nothing to do with your business plan.

What if I told you that demographics should form the basis of your ENTIRE business plan. That if you have not addressed the demographics of your plan that you are doomed to fail?

Before you think I’ve lost my marbles, or worse, before you start to freak out and start “Googling) the term Demographics, sit back and read the following. Demographics are no more than your customers. Most would call this market research, but I prefer the term Demographics because in my experience most people DO NOT do their market research properly (if they did-half of the businesses we see fail would never have been launched in the first place).

Demographics, to cite Wikipedia, “Demographics are current statistical characteristics of a population” and Demographic Trends ” Demographic trends describe the historical changes in demographics in a population over time (for example, the average age of a population may increase or decrease over time). Both distributions and trends of values within a demographic variable are of interest. Demographics are about the population of a region and the culture of the people there.”

So if we are to understand the WIKIPEDIA definition, Demographics provides us with information about a population and the culture of the people who live there.

This is a very powerful statement. Demographic trends not only give us insight into whether populations are increasing or decreasing, but they also tell you about the area.

Let’s go through an example. Years ago, I moved into a new subdivision. New subdivisions tend to draw young, newly married or co-habituating couples if housing prices are close to their actual market value. A couple of years later in the middle of the night, I could not find my infant son’s soother and so had to run to walmart to find a 0-6 month soother. When I got there, not only were there no soothers in that age range, but also no size 1 diapers. Talking to the sales associate, and she said, “we just can’t keep this stuff in stock” I have no idea what it is”. Fast forward a few years, and he was preparing to enter school, the local school was talking about the “boom” in enrollment and chalked it up to the excellent reputation of the school.

You probably get where I am going wiht this. The new couples who moved in had babies, those kids grew up and went to school. So why might this info be useful if you are opening a business? Well let’s say you want to open a neighbourhood daycare. It would be wise to know the age of your subdivision. Why? Because in starter neighbourhoods, couples tend to stay an average of 3-7 years in their first home. After that they may disperse. Newly married people will have their first child within 1-5 years (generally) so if you open in a neighbourhood where there are a lot of children or young married couples, you are assured constant business (as was the case with a neighbor). However, if you open your daycare in a more established neighbourhood, you will have to search further for clients and have a marketing strategy that makes up for the lack of proximate customers.

So how does one begin to navigate this minefield of information? Before we begin, I think it is important that we begin to understand the very nature of entrepreneurship and I will tell you about some entrepreneurs that I know and what entrepreneurship means to them.

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Part III: So Who Needs a Business Plan?

So Who needs a business plan? These days, if you are seeking financing of any form, you require one.
Do you need a business plant to ensure the success of your business?-I would say “No”. I would say for some personality types, a business plan is a requirement to ensure that they have thought through their business idea. I would suggest that those entrepreneurs who are rash, those who have entered into risky arrangements in the past and those who are investing personal funds into industries which have high capital costs, would do well to stop and prepare a business planning document.

For others, I would say that a business plan is no more than a checklist item to get you investing. This is not to say that all business planning is bad. Rather, like reading literary classics in school, this is a checklist item that you need to get through the system. Some will take pleasure in preparing these, for others the term “business plan” evokes visions of weeks and months of pain.

It is for the latter group that we created BizMula. For those entrepreneurs who cannot sit still long enough to put together a 25+ page plan-there is now an alternative. This solution is not for everyone. There are scores of others solutions on the market that serve a different purpose. Business Plan Pro by PaloAlto software is one of the greatest pieces of software ever to come out. For those who do not remember or recall life before this program-it really did revolutionize business planning. Tim Berry is a guru in the industry and paying homage to him is an honor. By the same token, Microsoft and Palo Alto also have subscription services that are great for those who suit that personality. Enloop, a recent entry into the market, is also very easy to use and clear.

However, having ADD myself, going through this software was never easy for me–even a consultant. I enjoyed learning about industries, putting together financials and foreceasts, solidifying a marketing plan and watching entrepreneurs dreams take flight–but writing that business plan was painful-even for me.

I stand back and think-“if it was bad for me, there must be others…” and in my work, I have run across immigrants with a great work ethic and a great business idea, but who get stalled in their access to capital because of poor language skills. I have come across others who have trouble with numbers, or others who have such passion and vision that a business plan is more more than an obstacle and hindrance. For these groups, and so many others, we thought, there has to be a different, not better, but different way. For this reason, we offer BizMula.

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Part 2: Why Businesses Fail

Since 1980 onward, business plans have become standard staple in lending and investing. They provide, or so their supporters will argue, a standardized way to look at a business. Business plans require entrepreneurs to actually “plan” and they are the road map an entrepreneur uses from start-up through to a full -scale operation.

So why is it then, that businesses with business plans still fail?

There are several reasons. Oftentimes, the challenge is not in the business plan itself but in the strategy of the entrepreneur and in the broader business model.

The first main reason that businesses fail, is that they are just generally bad business ideas. One of my favorite shows is the Canadian version of Dragon’s Den. Just watch one episode (the are available at www.cbc.ca) and see the sheer number of bad business ideas that exist. Bad ideas are bad for several reasons. The market for the product may be small or ill defined. The marketing or distribution strategy may be abysmal or non-existant and the entrepreneur themselves may be the biggest obstacle the business has.

The second reason that the businesses fail, is cashflow. Entrepreneurs are great at predicting prospective revenue, but poor at understanding cash flow. They are so eager to get orders, that they will take any payment terms from their customers, even if it is at their own expense. I have seen entrepreneurs come to me and they offer 90 day payment terms for their customers, but have all payments due in 30 days or less from their suppliers. It does not take a rocket scientist to figure out that there is going to be a cashflow problem here. Unless the entrepreneur has a good line of credit, or a large degree of personal savings, this issue can mean the death of the business.

There are many other reasons. Poor management. Inexperienced. Lack of contacts in the industry–take your pick. My favorite reason cited for the death of a business is poor planning.Poor planning by entrepreneur.

Planning in itself is not the answer. What these crtics mean, but rarely get around to saying is risk mitigation strategies. Identifying what the Risks are to a business and confonting ways to change/challenge those risks is really where the crux of all business success starts.

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BizMula.com – #waystokillanidea – It Can’t Be Done.

We recently hosted a conference on immigrant entrepreneurship, which was meant to drive home three key ideas:
1. Fail fast, fail forward.
2. Do not be afraid to think big.
3. Do not say no.

Obviously, there are some things we should all say no to, but generally speaking, we are often to quick with the dreaded “no”. Specifically, we are far too quick at killing ideas. Our keynote left us with some ways as to how ideas are killed. While everyone began laughing at each item, it became clear that we’ve all heard them before for either one of two reasons:

a) We heard someone say them, and couldn’t believe that they did, or;
b) We said them ourselves, and looking back we weren’t entirely sure why.

I realized that since I’ve been neglecting twitter lately, I would share some of these with you. While BCG originally entitled this “120 Ways to Kill an Idea”, I’ve trimmed this down to my favourite 80 or so. Be sure to follow @plangurus for #waystokillanidea.
Here goes #1: It Can’t Be Done.

I can’t remember how many times I’ve heard this. A part of my gets quite upset when I hear this; another part wants to prove people wrong. Sure, some things can’t be done – i.e. I can’t flap my wings and fly to Mars, but most often we use this excuse in a poor context:

This technology can’t be developed; This product can’t be marketed; This book/movie/game can’t be made appealing. Either way, this excuse is good for one thing: killing ideas. It wasn’t long ago that I was told that a business plan can’t be automated and that “not just anyone” can become an entrepreneur. Remember, if you have a great idea, don’t let it be killed!

Sincerely,

The BizMula.com Team

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