Home Articles How to succeed in 2007

    How to succeed in 2007

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    NEW YEAR, FRESH START

    Ever dreamed of ditching the day job? Swapping from salary slave to enterprising entrepreneur? Of course you have. But what does it take to turn the dream into reality? As the New Year approaches, we turn the spotlight on some fresh start-ups.

    By Jodie O’Keeffe

    Sahil Merchant’s business card used to read, Management Consultant, McKinsey & Company. Now it reads Chief Magazineologist, Mag Nation. An ambitious MBA graduate with a young family and a bright future, Merchant had every reason to stick with the day job. And yet, one day in March 2005, he quit McKinsey to pursue a retail venture. The next morning he awoke to a home office, no salary and no funding.

    "It was scary. There were so many unknowns. At McKinsey my mobile phone was paid for; we had an IT department; someone arranged all my travel. I had no idea about setting up. I had to learn how to structure the company, how to register it, create an email address, everything," says Merchant.

    The aim of the exercise was to create a new concept in retail: Mag Nation, a store offering ‘more magazines than you’ve ever seen’, issuing an open invitation to customers to browse at their leisure without pressure to buy. Merchant had been working on the concept for some time, seeking investment, but while he kept up the day job, none was forthcoming.

    "Once I could say to potential investors, ‘I’m doing this full time, I believe in it enough to have left my job,’ people took notice. It was a credibility issue."

    INDEPENDENCE DAY

    Many budding entrepreneurs start their new venture while still committed to a time-intensive day job. After weeks or months (but hopefully not years) of sleep deprivation, it becomes clear that something has to give. This is crunch time.

    By this stage, the desire to be your own boss is usually too strong to repress. According to the 2005 Global Entrepreneurship Monitor Report, over 60 percent of Australian start-up business operators are motivated by a desire for independence, where a ‘start-up’ is a business up to three months old. The corresponding figure for young firms, between four and 42 months in operation, is more like 76 percent.

    Going it alone is not a decision taken lightly, according to Robert Bowen, National Manager of the Commercialising Emerging Technologies (COMET) team. The COMET program supports early-growth stage businesses in the commercialisation of innovative products, processes and services, via Australian Government grants and an advisory service. In seven years as National Manager, Bowen sees the move from day job to fully-fledged entrepreneur as an evolutionary one.

    "It’s a very gradual thing. Apart from say, the manger who has retired early to pursue an idea, most of the other entrepreneurs we come across work on their concept for quite some years before it gets business legs. People generally don’t stop what they’re doing and devote themselves 100 percent to their idea, because they typically can’t afford it," he says.

    Often, the business concept is commercially-ready by the time the pull of independence and the smell of success make your current status as employee pale in comparison. You quit that job (or at the very least, take leave without pay) and the fresh start begins.

    SKIN AND BRICKS AND MORTAR

    Of course, simply giving up the trappings of secure employment won’t secure success. While seeking funds for his new venture, Merchant was also on the lookout for the right retail location. "From a retail perspective, we had to convince the landlords to let us in. If you’re a landlord with a prime location, you have no shortage of potential tenants. So, it was a catch-22, we needed the investors on board to pitch to landlords, but at the same time the investors were saying, ‘Well, where are your properties?’" When the Melbourne Mag Nation store finally opened in April 2006, the challenge was to educate the public as to what this new store was actually all about.

    "We’re in an old-fashioned industry with a very established retail network – the newsagent. There’s a huge re-education process. We’re not a newsagent, but a lot of people see magazines and assume we are. The other challenge is that we’re in two industries, magazines and coffee. There’s a perception that a magazine store doesn’t do coffee, but we do better coffee than many of our café competitors," says Merchant.

    The process of re-educating the market is also one of Matthew Nolan’s current challenges. Having established a solid, 15-year career in the finance industry, working for Macquarie Bank, Westpac and ANZ, Nolan wanted to own the corporate ladder, not climb it. He launched Sydney-based Provident Inventory Finance in August 2005, providing cash flow financing without the need for bricks and mortar security, giving businesses like manufacturers, wholesalers and retailers an alternative source of finance to acquire stock.

    "I wanted to fill a gap in the Australian finance market," says Nolan. "We launched a new finance product, which doesn’t happen very often in Australia. Consequently we had to educate our potential customers that there was an alternative to traditional bank ‘bricks and mortar’ lending."

    Nolan had previously started new businesses from the safety of his management positions with the big banks, so going it alone was a fairly smooth transition.

    "The actual move into this venture only took three months from initial discussions with potential partners to resigning. Day one I literally started with a blank piece of paper. The first thing I did was purchase a white board and fill it with lists of things that needed to be nailed down or done to get the venture operational ASAP…it was a big list," he says.

    However, confidence in his ability to launch the new venture didn’t dampen the excitement and satisfaction of making that first sale.

    "We received an application fee on our first loan application. I held the cheque for a few moments and savoured it… not wanting to bank it, but frame it."

    WHERE THERE’S A WILL, THERE’S A WAY

    For Ben Schutz, the move from employee to entrepreneur was only a matter of time. With ten years experience in finance and equity capital, his role with ANZ Private Equity involved helping other people’s businesses get off the ground.

    While he enjoyed the private equity work, Schutz was keen to spend more time with his young family and the thought of running his own start-up had been teasing him for a couple of years. His only problem: he didn’t really have that many good ideas of his own.

    Schutz strategically enrolled in the Masters of Entrepreneurship and Innovation at Swinburne University, to "be around people who wanted to start their own business." There he met maths professor Myles Harding, who had some patented software designed to help people learn Chinese. They hit it off, the business plan revealed great potential and they ran with it. As well as offering the software through their new website, www.purplepanda.com.au, the pair recently won an $80,000 COMET grant to tap into the ‘Chinese learning English’ market with value-added mobile phone services.

    In March 2006, after juggling the new business with his full-time job for eight months, Schutz took a 12-month career break from ANZ.

    "I wanted to give the business a decent chance, but you can’t really do that while you’re working full time. I also wanted to spend more time with the kids. I probably don’t do fewer hours, but I can do them when I want," he says.

    BYO PASSION

    Although Purple Panda has only been ‘live’ since April 2006, Schutz hasn’t looked back. Asked how he knew this was the right move for him, he replies, "I probably don’t know that, but it feels right because I have no trouble getting motivated and I really enjoy it. If I wasn’t, Iíd move on."

    Sahil Merchant of Mag Nation has a similar yardstick. "When you get up to go to work, after three hours sleep and you don’t curse and you can’t wait, that’s when it’s right. Every day I get up rearing to go. That never happened before," he says.

    While wealth creation is not usually the main motivator for those starting up their own business, what drives people to give up their secure career for a life of professional uncertainty?

    "Well, it’s not the money, that’s for sure. You don’t do this to get rich in the short term," says Merchant. "But, it allows me to bring passion to work. I feel like I was born to do this."


    FLEXING YOUR IP MUSCLE

    Are you trading on the strength of your intellectual property (IP)? You better make sure it’s up to the task. We asked Peter Hallett, Director of Watermark Intellectual Property Lawyers, how to keep your IP portfolio fit and healthy in 2007.

    "I would encourage SMEs to learn more about IP. Business people need a working knowledge of IP to help them identify the issues of most relevance to their industry, and to ensure that they manage those issues appropriately," says Hallett.

    THE KEY QUESTIONS TO ASK YOURSELF?

    • Do you use the IP system as a source of competitive intelligence – to find out what brands your competitors are filing, or the technologies they are patenting?
    • If you are proposing to undertake or commission research, do you conduct ‘state of the art’ searches, and review the patent literature for blocking patents, to see who else is working in the same field, or to see if you are going to re-invent the wheel?
    • Are your brands protected for all products and services of interest to your company, not just your current product range but also new areas you might want to move into, and not just in Australia but in your export markets?
    • Do you know what IP your company owns and uses? Do you have systems in place to identify, capture and track your IP, including trade secrets?
    • Do your standard contracts deal appropriately with IP – including employment contracts, terms of engagement, etc?
    • If you are proposing to expand your product range, or move into new service areas, are you sure you have freedom to operate without infringing the IP rights of others? What type of searches do you, or should you, undertake?

    For those planning their ultimate fresh start in 2007, Hallett has some pertinent advice:
    "Get specialist IP advice at an early stage. The typical SME is cost-sensitive and cash flow can be a significant issue. However IP strategy is a critical aspect of business planning. The right advice at the outset can avoid costly mistakes later on."


    NEW YEAR, NEW TECHNOLOGY

    At Anthill, we love new technology. So, when our new CardScan Executive arrived, we gave our Special Projects Manager, Alex, a special project. He scanned the ‘friends of Anthill’ business cards, transforming the unruly mountain into a tidy digital pile. Here is his review:

    "The CardScan is a sleek, easy-to-use machine that scans then stores digital images of business cards. The machine ‘reads’ the text, and decodes the information into different fields, such as fax number, mobile number, address or company name. These details are stored as searchable fields in the CardScan CRM software, ready to export to your CRM program of choice, including ACT!, Outlook and Lotus Notes.

    After CardScan scans the cards, you scan for errors. For a standard business card, the results are quite reliable. However, business cards with lots of colour, graphic design and iridescent print (really, who has an iridescent business card?) often require some data to be entered manually.

    The CardScan Executive also accepts data using drag-and-drop from electronic files like email or websites. Overall, it’s a nifty little machine, but be warned – prolonged use may cause an irrational hatred of iridescent business cards."


    THE SECRET TO YOUR SUCCESS

    The January lull in business activity provides the perfect opportunity to regroup and set your plan of attack for 2007. Peter Orpen, Managing Director of Standard Capital, reveals how to weather the slow sales month and how to unlock the secret to your business’ success.

    "From a financial perspective, you have to accept the January lull is just that. Take advantage of November and December as the busy time of year. You’ve got customers buying and, often, buying more than they normally would. Give them incentive to buy more.

    Secondly, identify your January turn-over in contrast to your annual average. Then, go to your bank and establish lines of credit to fill that gap. Do this in advance because your banker is somebody who will lend you an umbrella until it’s raining. Don’t talk to them in January, when you need five grand to get through the week, talk to them in November or December when business is booming and ask for the money that you’ll use in January.

    When you refresh your business plan, do it alongside your financials from the previous year. Look at each item on your profit and loss statement and see which ones related to revenue and which didn’t. It shows every single action and outcome that happened over the last 12 months. You’ve really got some good clean, raw facts that actually tell you what worked in the market or didn’t.

    To use January well, work out how to use your existing resources to better service your customers. That’s the best financial planning you could do."

     
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