So, You Want to be an Entrepreneur?
With the popularity of television shows such as Dragon’s Den and Shark Tank, there has been a reawakening of entrepreneurship interest across Canada. A survey conducted by Ernst and Young and RBC concluded that 8 out of 10 North Americans expect entrepreneurialism to define the 21st century. COVID-19 may well have accelerated this process, as we have witnessed from the Great Resignation of 2021 and the emergence of the gig economy. These events have ushered in a new paradigm, where people are opting for jobs that align more with their interests and ideals rather than higher paychecks.
There are different forms of self-employment, including labels like contractor, sub-contractor, and small business owner; with a variety of business structures, such as sole proprietorship, partnership, corporation, among other sub-categories. There are product businesses, service businesses – or both – business to business, and business to consumer – or both. Regardless of its forms, people have unique and personal reasons for being drawn to entrepreneurship. Many of today’s job seekers are seemingly searching for freedom and job satisfaction, others have difficulty working with authority figures and so want to be their own boss, some people have unique health concerns that require a flexible work schedule, while many yearn for flexibility while raising a young family. In many cases, self-employment could be the right choice for achieving these goals.
The COVID-19 pandemic has disrupted governments and organizations globally and entrepreneurs are no different. According to The Global Entrepreneurship Monitor (GEM), 2021/22 report, starting and running new businesses is a vital process in any dynamic economy. New companies bring jobs, increase wealth, and add value, often by introducing innovations, technologies, and products to society. Across Canada, many colleges and universities offer short courses, micro-credentials, and degree programs in entrepreneurship.
This leads us to the ageless question: Are entrepreneurs born or taught? This question has been up for debate and has been the subject of many research studies with compelling arguments on either side. According to Professor Juris Ulmanis, if one were to ask students, academic colleagues, and fellow entrepreneurs, “What characteristics make a successful entrepreneur?”, the answers are consistent: clear vision, drive, energy, risk-taking, persistence, intellect, curiosity, listening skills, energy, passion, excitement, and creativity. Most of these qualities are wired into our DNA and cannot be taught. Professor Ulmanis argues that many other elements can be taught, including leadership and industry knowledge.
If you are seriously contemplating starting a business, it’s recommended to learn about what is involved to decide whether it is a realistic option for you at this time. Many people assume that all you need are some unique talents and a business idea, whereas it can take years of planning, learning through trial and error, and adapting before you can earn a sustainable income from your business. In addition, the lifestyle can be demanding and intense, so it’s not for everyone. To get you started in your learning, outlined below are the basic pillars that are common to every business: Operations, Marketing, and Finance.
The operations aspect of any business refers to the systems, processes, relationships, facilities and equipment required, and so on. It is essential to set up a business that legally complies with government regulations, otherwise audits and fines can be imposed at any time. New businesses must source out and establish relationships with suppliers; in some cases, staff need to be hired and HR policies/systems developed; plus, processes to create and distribute products and/or services must be developed and streamlined to maximize efficiency. The entrepreneur needs to decide how to accept payment, and how to keep accurate financial and customer records. Privacy policies must be researched and defined, so that customer data is protected, plus the storing of information must be investigated and decided.
In the early stage of a start-up, the learning curve for the entrepreneur is steep. When budgets are tight, the entrepreneur is likely to deal with challenges relating to human resources, accounting, sales and marketing, and customer care – all of which are important to the success of the business and should not be compromised. As the business grows and cash flow is available, it is often advantageous to hire staff or else outsource these areas to qualified external consultants. For a small business, software for accounting such as QuickBooks, HR solutions like Humi, and project management tools such as Monday.com can streamline processes, making it manageable for the entrepreneur. A study from PricewaterhouseCoopers found that 77% of Canadians hope to utilize technology to drive efficiencies and collaboration in their business.
Before considering how to market your product/service, the first step is to identify your target market – in other words, who are your most reliable, repeat customers, and what are their characteristics? Once you have studied the market and are able to develop a theory of who your target market is, it’s very important to research your audience to verify your hunches – via surveys or interviews – to learn about what they value, their opinions, their habits, where they look for information about products/services like yours, what they are willing to pay – and design your marketing plan around this. Then, be ready to adapt to what you learn about your customers once you start actually serving them.
The other essential aspect to research is your competition. What other businesses offer something similar to yours, what do they do well vs. what are the gaps in their offerings, and how can you differentiate yourself from them in ways that your customers would value? To find answers to questions like these, it is important to do some competitor analysis. This can be accomplished by a combination of online research plus interviews. And yes, most competitors will agree to speak with you!
After completing your research phase, you are ready to develop your marketing plan. The marketing mix or “4 Ps” of product, price, place, and promotion can help identify gaps and opportunities in the market – in other words, gaps that you can fill. Depending on the type of marketing, advances in technology make targeting clients – even in niche areas – more affordable and realistic for the self-employed. Start-ups need not have expansive marketing budgets, and many find the use of platforms such as LinkedIn and Instagram and the use of tools such as HubSpot (a customer relationship management system or CRM), are more than enough to get the type of marketing exposure they are looking for in the early stages of development.
You may have heard the expression, “Cash is King”. What this means is that every business must get a handle on the inflow (revenue) and outflow (expenses) of money, to ensure that financial obligations can be met. It’s recommended to make financial projections and monitor your progress against these estimates on a regular basis. A solid profit and loss plan showing projected revenues for the first three years is vital for you and also for potential investors. Here are some common trends that serve as a reality check: 1) lack of access to capital is one of the primary reasons businesses fail; 2) most people who run service businesses are under the incorrect assumption that they will have no costs; and 3) it can take up to 3 years to break even and five years to make a profit. Perhaps you are looking for investors or hoping to bootstrap your business? According to Marco Carbajo, bootstrapping should be considered, as it comes with a wide range of benefits to entrepreneurs. To begin with, the company won’t be indebted to any investor. Secondly, you won’t be under any pressure to repay business loans to a financial institution.
The Business Plan
The importance of the business plan cannot be overemphasized, and planning correctly with appropriate contingencies shows lenders, investors, and potential hires that the business has a clear path, measured by quantifiable milestones. Harvard Professor Michael Porter developed his “Forces” model to analyze the strengths and weaknesses of a potential company. This model and a simple SWOT analysis can help the entrepreneur decide whether to invest the time and effort in preparing a complete business plan. Many businesses are now using the Lean Canvas model instead of the traditional business plan. Ash Maurya developed the methodology of the Lean Canvas, which allows for speed and versatility in business planning, crucial in many start-ups today. Regardless of whether you are drawn to using the Lean Canvas model or writing a complete business plan, remember that it’s the thoroughness of your analysis that will help you to make decisions, not the amount of time it takes to do the research and write the plan.
Resources Available to Start-Ups
There are some excellent self-employment programs, and, in some cases, grants (for particular types of businesses) administered by provinces, municipalities, educational institutions, and charities across Canada. The Business Development Bank of Canada offers business loans to those who might find it challenging to access funding from traditional lenders. Organizations such as Futurpreneur offer mentorship and access to loans for eligible Youth applicants. Those who are interested in a government-funded self-employment program or Futurpreneur must meet eligibility requirements and apply. With increasing numbers of people exploring entrepreneurship, understanding the resources available to aspiring entrepreneurs and preparing realistic, measurable goals cannot guarantee success alone, but should equip the self-employed with the tools to enable them to succeed.
Is entrepreneurship right for you? The Business Development Bank of Canada (BDC) has developed an assessment to evaluate an individual’s suitability for entrepreneurship: Entrepreneurial Potential Self-Assessment. Aside from whether you have the right temperament and goals, it’s equally important to consider whether you have the financial flexibility to live lean while growing your business, plus whether the lifestyle is a fit for you.
If you feel strongly that you are a great fit for entrepreneurship, our Career Services team has experts who can guide you in your decision making. Reach out to [email protected] to request an appointment.
By Andrew Woods, Business Development Specialist, Graduate Employment and Linda Folster, Director of Career Services