Flock Free Nation

No nonsense information on small business.

Apr 15, 2011 - 2 minute read - Comments - entrepreneurship

Location, Location, Location

When scouting locations for your new business, you can be beset with a variety of choices. Picking the location for your business is one of the most important choices you will make. Your success or failure rests on this. This blog will give some insight into what the important considerations are.

Where are your customers? This is by far the most important consideration. You need to be where your customer can reach you when he is in a buying mood. For example, putting a family restaurant in the industrial section of town is a mistake. In order to make the best choice, you need to know your customer. Where do they currently get the product or service you wish to provide? If you miss this, you could have the best product, best customer service and satisfaction and still fail. It’s like the philosophical question “If a tree falls in the forest and nobody is around to hear, does it make a sound?” In the case of a poorly located business, the sound is your cash register, and the answer is NO.

Do you want to buy or lease? Unlike the first question, there is no simple answer to this. Leasing is an attractive option for owners without a lot of cash. It also is good if the lessor can attract your target market. Buying is a better option for those with ample funds because owning tends to be less expensive than leasing. In addition, as the owner of the premises, you have much more control over what happens to your store. New lessors can’t come in and force you out if you own the property.

How much do you want to pay? Obviously, your capital or lease payments have to fit in your business plan. Unfortunately, many entrepreneurs look for the best rate or price as the first consideration in picking locations. The trouble with this is if you choose a location where there isn’t a market, the location could be free and the business would still fail. If you can’t raise the capital to get into the right location, the best choice is to raise more capital. Choosing your location based on price will be the undoing of your business.

Choosing your location is vital to your success. If you use these three considerations, you should have a good chance of making the right choice.

Apr 14, 2011 - 3 minute read - Comments - entrepreneurship

CYBF Launches Spinmaster Innovation Fund

The Canadian Youth Business Foundation (CYBF) has partnered with Spinmaster to launch the Spinmaster Innovation Fund. The fund will offer financing, mentoring and support for up to 10 young entrepreneurs.

Spinmaster was started by three Toronto entrepreneurs in the mid 1990s. The company has grown to be a successful toy maker, well known for its Air Hogs line of toys. The founders have decided to partner with the CYBF to give back to the entrepreneurial community.

Each entrepreneur will be eligible for up to $50,000 of startup financing. There is no collateral required and there are no principal payments required for the first year of the loan’s amortization. Interest rates start at Prime + 2.0% and can decline over the life of the loan should all payments be made on time. A loan with these terms and interest rate is a very good deal for the entrepreneur. Typical bank financing for this type of business would likely require collateral with a much higher interest rate.

Each of the entrepreneurs will receive mentoring through  the CYBF’s mentoring program. They will also have access to some of Spinmaster’s executives during the first two years of operating their business. The successful entrepreneurs will be given a paid trip to Toronto for a two day Innovation Launch Pad Workshop where they will be taught business skills by the Spinmaster team.

The application process is as follows:

  1. Call For Applications - CYBF will start taking applications on April 27th, with the call for applications closing on June 9th, 2011. Each application will require a business plan.
  2. Application Review - The evaluation committee will review applications throughout July and August. They will narrow the applicants down to 18 semi-finalists.
  3. Pitches - During August 17th & 18th, the finalists will pitch their presentations to the selection committee.
  4. Innovation Launch Pad Workshop - The 10 winners will be announced and they will attend the workshop on September 24th & 25th.

The contest is open to Canadian entrepreneurs 18 to 34 years of age. The business must have been in operation for less than a year and it must have a business plan with good prospects for profitability. The business must be majority owned by qualifying age individuals. The applicants need to work in the business full time and cannot be full time students.

The application process is fairly straightforward. The entrepreneur will need a business plan prepared according the CYBF’s template, resumes for each individual applying and a couple of references. There is an online loan application that will also need to be filled out.

For any of you young entrepreneurs out there, this a contest worth entering. The financing is a sweetheart deal, you’ll have access to the mentorship of the entrepreneurs behind Spinmaster and the contest exposure can only help your business.

For further information check out the CYBF’s Spinmaster Innovation Fund website.

Apr 12, 2011 - 1 minute read - Comments - business news

Bank of Canada Holds Rates Steady

The Bank of Canada decided to leave its overnight lending rate at the current level of 1%. This is the rate that the banks base their prime lending rate on. This is good news as the cost of borrowing will remain stable for small business loans based on prime at least until the Bank of Canada’s next meeting on May 31st. The Bank noted that the economy is growing slightly faster than expected. Trying to predict the future is a bit of a fool’s errand but it seems to me that rate hikes are likely as the economy strengthens.

Mar 4, 2011 - 3 minute read - Comments - entrepreneurship

Four Ways to Build Your Plan Like an Engineer

I’m an engineer by trade, and while I don’t do much “engineering” anymore, I still think like one. One apt lesson for entrepreneurs is to plan their business with the care and rigour of an engineer.

The number one priority for an engineer is to protect public safety. It is the reason why engineers are licensed. The iron ring that engineers in Canada wear is a symbol of the oath to protect public safety above all other considerations. It’s easy to see why. Mistakes in engineering cause catastrophes like collapsed bridges, crashed airplanes and factory explosions.

I-35W bridge collapse in Minneapolis, August 1, 2007

To avoid these disasters, engineers use safety factors. When specifying a material for a structure, an engineer will use a factor that will provide three to four times as much strength as is required by design calculations. Bridges, levees and other water structures are designed to withstand beyond one-in-100 year flood levels. This is due to the high danger of failure compared to relatively low cost of increased safety. In addition, engineers know that real life will never be the same as the drafting table (for those younger readers, that’s what engineers used before computers). Flaws in materials, workmanship, and design as well as changes in usage and wear and tear all eat away at these safety factors. Finally, regardless of the skill of the engineer and tradesperson, things will happen that nobody anticipates.

This isn’t to say that planes don’t crash and factories don’t blow up. It’s impossible to eliminate risk totally. Even if you could, your project would become so expensive it wouldn’t be feasible. The best engineers balance risk and cost. They provide the safety required while not destroying the budget.

So what does this mean to an entrepreneur? A failed business doesn’t kill people or do widespread environmental damage. It can, however, destroy personal wealth for the entrepreneur, investors and employees. Much of the risk in business failure can be dealt with in the planning stage. For instance:

  • In the design phase, the engineer will rely on measurements in the field. This is like basing the sales and marketing assumptions on research. Yes, it’s possible to start a business on a hunch, but the success is due more to fortune than skill.
  • An engineer will sometimes specify a material with properties that exceed requirements. This is because of things like fatigue and corrosion. An entrepreneur does this by building a management team with skills beyond what appears to be immediately necessary.
  • The engineering safety factor is like the amount of cash the entrepreneur has to invest in the business. Our plans come with a standard level of three months cash on hand at all times. This means that there is enough cash retained to cover payroll and all fixed costs for three months.
  • When an engineer discovers a flaw in the design, it’s back to the drawing board. Nobody dies or gets hurt. When an entrepreneur finds a flaw in her plan, she can rework it to get it right. Nobody goes broke.

In summary, using the engineering method will not guarantee success in business. No plan can totally eliminate risk. However, using these methods will help you build your business to be strong and durable enough to protect your time and investment.

Feb 19, 2011 - 3 minute read - Comments - entrepreneurship

Are You An Entrepreneur?

There are many reasons people look at going into business for themselves. It could be that they hate their current job and yearn to be their own boss. Maybe a tradesperson feels that he or she could run a better business than the company they work for. It’s important that people go into business for the right reasons. Failure lurks around every corner and if someone is in business for the wrong reasons, he or she is much more susceptible to it.

There has been some research on what makes an entrepreneur successful. One study found that the entrepreneurs they interviewed had the following characteristics in common.

  • A propensity to take risks
  • A need for achievement
  • A belief in one’s ability to control the outcome of a situation
  • A tolerance of uncertainty
  • Self-confidence
  • Innovativeness
  • A need for autonomy

In my experience, these characteristics are useful in running a business. Different people have them to different degrees. Some of these characteristics are developed in the business owner as he or she becomes more experienced. The Business Development Bank of Canada, a federal crown corporation, has an online quiz that will test you in the attributes above.

It is important to have a passion for the industry the business is in. If someone starts a business based solely on where the best possible financial returns are and without passion for the space, it will be very difficult to succeed. Things will get tough, so tough that only a passion for the business can carry the business person through. A person without passion in this situation will quit before they become successful. Very few businesses become successful without experiencing a period of adversity.

It is important to have the right foundation in place before getting started. Most new businesses won’t be able to pay a predictable salary to the owner right away. If a business owner has an expensive personal lifestyle, he or she needs to be prepared to reduce that lifestyle to one the business can support.

A person starting a business also needs to be able to contribute cash towards the start of the business. Every business needs some cash to get started. The amount can vary widely depending on the nature of the business, from a few thousand for a home based business to millions for a manufacturing business. Some of this needs to come from personal savings, while the remainder can come from borrowing against personal assets or through business loans.

Family support is essential. Starting a business takes a lot of time and financial sacrifice. Starting a business without complete, informed buy-in from your spouse and family will lead to a lot of stress when things become difficult. This will compound the problems the business is having. While it is necessary to put some money at risk when starting a business, a business owner should never take a risk so large that failure would wipe his or her family out financially. Sure there are those stories of the plucky entrepreneur who maxes out his credit cards to start what becomes a billion dollar business. Unfortunately, the guy who did the same thing but had his business fail and push him into bankruptcy, costing him his marriage, never gets any press. He represents the vast majority of people that try this move.

Starting a business is difficult and requires a lot of hard work, but it can be very rewarding for those who prepare themselves well to accept the challenge.