Welcome to our Meeting

Why are you here?

"Why do you want to be an entrepreneur in the first place?"

Paul was asking the question because he was getting tired of Larry's rambling complaints: nothing was going as planned; he was not having any fun and still not making any money.

But it was a good question. Most of us ask it of ourselves occasionally and we all have different answers. Larry had probably asked himself the question recently too, but now we were all wondering the same thing.

"If it's that bad, why would you ever quit your day job? Maybe it's time to get back to work on your corporate career."

"Hell no," said Larry. "This business may not always be fun or profitable, but it will always be better than that."

We all agreed.

"Right," said Stan, "I may be a lousy manager, but I'm still the best boss I ever had. It sure beats working for somebody else."

"And it's so satisfying to make your own decisions and live with the results, good or bad," added Vivian.

"OK, so let's talk today about how we got started in business and why we did," I said, "It will help Larry's thinking and give us all a healthy reminder of why we are entrepreneurs. A good start to the day - unless we decide someone made a mistake and shouldn't be here!"

So we adjusted the day's agenda based on the discussion already started. (Not the first time we had done that.)

Welcome to the e2eForum

We are a group of entrepreneurs that meet regularly - every third Thursday of the month over breakfast from 7:30 to 9:00AM, missing rush-hour traffic, but before missing any of the work day.

I had started this group about six months ago with Paul, the owner of a machine shop who had done well for over twenty years and was now thinking of his retirement plan. We both valued the opportunity to share ideas and experiences with other entrepreneurs, especially in a quiet, confidential environment without any conflicting or competing interests and I had organized similar peer advisory groups in the past.

In the first few weeks, we had added other members and now there were seven of us, including me and Paul. The others all come from different businesses and are at different stages in their business life cycle. You will get to know them better in the next few meetings.

The newest entrepreneur is Larry, a young software engineer planning to leave his day job soon to launch a mobile app for monitoring personal health and fitness. He has developed an initial version and is test marketing it with free downloads. He is still drafting his business plan while starting to develop connections with potential strategic partners and sources of financing. He is at the very early-stage of starting his own business.

Vivian is a veterinarian and pet store owner. She has run her own pet store and clinic for about six years and is very dedicated to healthy, natural and personalized pet care. She is now trying to develop and expand her single suburban location into a franchised business.

Brian is also a young entrepreneur, but has been running a Web development and e-commerce business since leaving university four years ago. He had discovered his aptitude for computer science in high school when he started designing his own computer games. Since then he has learned that he also has an aptitude for business and often impresses us with his ability to manage the technology and the operational requirements of his business while maintaining strategic focus on his long-term plan.

Stan is the second generation owner of a small commercial service business. Typical of service businesses, his father started the business as an independent contractor. He was installing heating and air conditioning equipment in residential construction projects and eventually grew his business to eight employees specializing in commercial heating and ventilation equipment. Stan started working with his father after high school and acquired all the necessary industry training and certifications, but struggles with managing the business since his father passed away two years ago and he had to take over.

Dave is a forty-something engineer, MBA and former corporate executive, now running an import/distribution business for high performance bicycles. He made the leap when his career plan needed a jolt and his employer offered only more of the same. He was introduced by a fellow cyclist to a new high performance bicycle from Italy that needed marketing and distribution in North America. The opportunity fit with his management experience and it got him excited enough to put in a big chunk of his own money and sign personal guarantees for a line of credit to get started. Now in his third year, he faces challenges to manage both the manufacturer and the bank to keep up with his rapid sales growth.

We were all here this morning and had now agreed on the following agenda.

Discussion points: How to succeed

• When to leap?

• What do you need before you start?

• Who will succeed and who will not?

• Why and why not?

All very philosophical questions, but necessary to think about - before, during and after any entrepreneurial adventure.

Larry started with the first question, "So how did you get started as an entrepreneur, Uncle Ralph?"

"Well," I replied, "I often say that starting your own business is a lot like sky-diving - it seems like an exciting idea, but you're not likely to do it until you're pushed out the door."

"In my case, I had literally been pushed out the door of a technology company (AES Data) that was winding down and my number came up. Not a surprise, since I had spent the previous nine months closing facilities and letting people go, but it was a painful experience, nonetheless. I quickly had two other corporate job offers from Nortel and Rolls Royce, both with similar job descriptions and compensation packages, but I decided it was time to take care of my own career plan and not let someone else decide whether I had a job and what I was doing next. Besides, with an MBA and lots of experience, I was ready to prove that I was at least as good a manager and businessman as the people I had been working for. So I went back to consulting on my own and started to explore opportunities to start in business for myself."

"That's when I met the owners of TTX who were looking for a distributor of their computer peripheral products in Eastern Canada. That appealed to me because it matched my interests in technology and I had good credentials in managing the distribution side of a business. So I quit consulting, put in some cash and agreed to start with no salary as we opened a joint venture in Montreal. It was a great experience from the first day."

As we looked around the table, we realized that we had all arrived at entrepreneurship from different backgrounds and got started at different times in our lives, but we were all attracted for the same reasons.

The attractions that we usually agreed on were:

• Unlimited opportunity to go where you want to go

• Freedom and independence to do things your way

• Continuous challenge and variety of experience

• Responsibility for all facets of the business

• Control over your career and your work/life balance.

However, being an entrepreneur quickly leads you to recognize the less attractive elements of that career choice too:

• There are still limits to what you can do or control

• Many more people are now dependent on you

• The business requires skills and knowledge that you probably do not have

• Your work does not get left at the office

• You now have more at risk and less security in your financial future.

Other entrepreneurs have made some memorable observations that highlight the contradictions:

"I used to work for someone that I called boss. Now I work for thirty people who call me boss."

"I wanted to be my own boss. But now I have many bosses - my customers, my employees, my suppliers, the bank, the landlord, the government, and the city! It's hard to satisfy them all."

"It's still better than working for somebody else."

"I'm the best boss I ever had!"

Which can you say about your business?

Can you succeed as an Entrepreneur?

Although you may still be attracted to entrepreneurship, will you succeed? What does it take to be a successful entrepreneur?

It was Vivian who asked, "Is there really an entrepreneurial type? What are the personal characteristics, preferences, attitudes and abilities that are essential to success? You've worked with a lot of entrepreneurs, Uncle Ralph, surely you have learned to recognize who will succeed and who will not."

"Sorry, but it's still not obvious to me, or anybody else that I know of. Unfortunately, there is no easy stereotype that applies."

I added, "And if we define success as running a business with continuing profitability and growth, then we also have to admit that success is not always entirely due to the entrepreneur. While I would argue that failure is always the fault of bad management; success is not always the result of good management."

"Success also requires good luck and good market conditions. Even with good management your business may fail. Not a pleasant prospect, but an important truth. We'll talk about it another day, but my theory is that it's more important to avoid catastrophic failure than it is to chase big success stories. Manage for the small victories that will eventually add up to a big success story. We will discuss it when I present the Seven Biggest Mistakes that Entrepreneurs Make and how they can be avoided."

"However, back to Vivian's question, there are some common characteristics of successful entrepreneurs that you can check off for yourself. Here is my short check list of the Characteristics of a Successful Entrepreneur:

• Energetic, competitive, independent, confident, persistent, action-oriented, decisive.

• Passionate, persuasive communicator.

If you don't have them all, then you better include a partner in your plans."

"Then before you leap into the unknowns of entrepreneurship, you need to go through another checklist, starting with your Basic Defensive Interval."

Don't quit your day job yet

This time Larry spoke up, "Now I'm getting worried, I haven't got a checklist and I've never even heard of the Basic Defensive Interval."

"Not to worry, I had to have it explained to me too the first time I was asked about it. It simply means: How long can you last without income?"

"If you quit your day job today, but you still need $3000 a month to live on and you only have $15,000 in the bank, then your Basic Defensive Interval is five months. After that, if your new business cannot afford to pay you at least $3000 a month, then you better have a new day job!"

"OK, so if I need six months to get my business up to speed and I need $5000 a month to live on, then I have to have at least $30,000 in the bank before I quit my day job?"

"Right, but you also have to have enough additional financing beyond the $30,000 for your living expenses to invest in the start-up of your business."

"Got it. If I need another $50,000 in working capital for operating costs, sales and marketing expenses before we generate sufficient revenue to cover them, I now need a cash reserve of $80,000 before launching. That makes it clearer what I need to arrange for financing."

"Now back to the checklist. What else is on the Before you Launch Checklist?"

I went to the flipchart and wrote:

[] Skills, knowledge, experience, and contacts relevant to your business plan.

[] Expectations and preferences for the entrepreneurial lifestyle - work routine and environment, prestige and compensation, work/life balance.

[] Personal strengths and weaknesses that will help, not hurt, the business.

[] A healthy foundation - family, physical and financial. Solid not shaky.

[] Strategic resources in place - partners, suppliers, facilities, key customers and employees.

[] Financing for start-up - including your Basic Defensive Interval and the first few months of negative cash flow.

"If you can't put a checkmark with confidence in every box, then you better try harder - recognize the deficiencies and fill in the gaps. Maybe you require more time to develop your skills and get more relevant experience or to beef up your foundation and strategic resources before launching."

"Ouch," said Stan, "Now I know why it has been so hard taking over from my father. I just wasn't ready."

It was time to wind up this e2eForum meeting, but I wasn't sure we had adequately covered the key discussion points yet.

"I think we're good," said Vivian, "I've got to get to work and review the checklist. There are some important elements missing for me too. I will get started now on making the adjustments."

"See you soon everybody. Have a good day!"

Starting-Up is Hard to Do

Initial decisions define the direction

We were gathered again for our Thursday morning e2eForum meeting and everyone was getting settled.

As usual, Larry was carefully maneuvering his over-laden breakfast plate to the table with a coffee in one hand, plate and utensils in the other and a notebook clamped under his arm. A single guy, it was apparently his best breakfast of the month and he was making the most of it. Others were usually more discrete with a small healthy plate and a large cup of coffee.

Brian was the current chairperson and he was writing on the flipchart:

Discussion points: Start-up Decisions

• Strategic Positioning

• Strategic Partnerships

• Business model choices

• Document requirements

As he sat at the head of the table, giving me a wink to confirm that he had used the list I had suggested, he said, "Last month we all found it useful to think back to when we were getting started in business, so I thought we would continue on that theme and discuss some of the other strategic decisions that need to be made in the start-up stage."

Dave interjected wryly, "Maybe we'll discover that we've missed a few. Still it's never too late to get them right."

"Absolutely," I said, "and even if you did make good decisions when you started, your environment will have changed since then and you may need to make new decisions now. At least once a year get out the road map that got you started, assuming you have one, called a Business Plan. Check whether you still have the same destination and that you're still happy with the route you chose, the bus you built and the passengers you're traveling with."

"OK," said Larry between mouthfuls, "the rest of you are far enough along to look back and do that review, but I'm just getting started. What are the first key business decisions to make?"

Since he was at the very early stage of business start-up, I gave him the same suggestion I give to new entrepreneurs in my Business Planning class. "Start by coming up with a name and a marketing slogan. That will define how you want to be seen by your customers compared to all the competing alternatives they have."

"Defining yourself relative to the market is called Strategic Positioning and it's a very important early decision. Do you want to be seen as the IBM of your industry - competent business professionals, or more like Disney - fun and friendly? Will your corporate image be that of prestige and performance like Porsche or rugged utility like Jeep? This is an early requirement soon after you have defined the business opportunity and chosen your business model - the decision on your strategic positioning and how you wish to be perceived by customers."

"Your choice of strategic positioning will only be realized if it is consistently communicated and demonstrated. It should influence everything in your business - from office décor and business cards to your website design, sales rep's dress code and automobile choices, customer service policies, product pricing and packaging. It is the starting point in defining your corporate culture."

Paul was the first to respond, "I have to admit that we arrived at our positioning and corporate culture by default, not by design. My history in machine shops gave me the experience and confidence to trust my instincts. I just did what seemed right to me whenever I had to make a decision. And now it's too late to change the stripes on this old tiger."