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."
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.
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
NEW YEAR, NEW TECHNOLOGY
THE SECRET TO YOUR SUCCESS