Title: Personal Business for Life, PB4L
1Personal Business for Life, PB4L
- The Road to Financial Security and Independence
- Prepared for CEED, Centre for Entrepreneurship
Education and Development, Nova Scotia - Date October 19, 2009
- Professor Bruce M. Firestone, B. Eng. (Civil),
M. Eng-Sci., PhD. Entrepreneur-in-Residence,
Telfer School of Management, University of
Ottawa Founder, Ottawa Senators Executive
Director, Exploriem.org Real Estate and Mortgage
Broker, Partners Advantage GMAC Real Estate - http//twitter.com/ProfBruce
- http//www.eqjournalblog.com/
2Personal Business for Life, PB4L
- Kevin Rose, Founder, Digg.com.
- Spent his last 5,000 on Digg instead of a house.
- His girlfriend left him.
- He made 60 million in the next 18 months.
- How did he do that?
3Personal Business for Life, PB4L
- Web 2.0.
- A new model for a newspaper uniquely adapted to
the Internet. - Readers are contributors.
- Readers dig up interesting stories from all over
the web and post brief synopses to the site and
links to them whereupon other readers vote on
themthe most popular ascend the page.
4Personal Business for Life, PB4L
- The site harnesses the competitive instincts of
the readers/contributors to compete to see whose
story will lead. - The site works because of its homogeneous
demographiccontributors only post stories that
will be of interest to the group. - The site is dynamicleading stories change by the
minute or hour.
5Personal Business for Life, PB4L
- Digg.coms cost for headline writers ZERO.
- Digg.coms cost for journalists ZERO.
- Digg.coms cost for editors ZERO.
- Digg.coms cost for distribution ZERO (at
least, the marginal cost is practically zero).
6Personal Business for Life, PB4L
- Diggs sustainable competitive advantage (pixie
dust) is its business model and its readership. - You might be able to knock off its business model
but it is extremely difficult to knock off its
millions of dedicated (mostly males 15 to 55)
readers/contributors. - The key is that the readership is relatively
homogeneous and has similar interests.
7Personal Business for Life, PB4L
- How to first populate Digg.com?
- Each co-Founder personally called 1,500 people in
a month. - Thats 50 calls a day for 30 consecutive days.
- Then they let scalability and network effects
take over. (No pushing on a string.) - The more readers, the more contributors, the more
contributors, the more readers. - Clients (readers) are also suppliers!
8Personal Business for Life, PB4L
- Harnessing the Internet effectively means
- you can make money while lying on a beachi.e.,
your enterprise can run without you being there - the enterprise is scalableoutputs grow
non-linearly with inputsi.e., more hours worked
will produce way more money for you - you have reversed out the worklet your suppliers
and customers do the work for you like, say,
Digg.com does - you can mass customize products and services for
clients in a cost effective manner - you can connect with new clients and customers in
a cost effective manner using things like social
marketing!
9Personal Business for Life, PB4L
- Why not sell it for 60 million?
- Go lie on a beach somewhere?
- Ideas are in infinite supply. Execution counts.
- Just try counting from zero to infinity!
- Kevin trapped lightning in a bottle. (According
to http//siteanalytics.compete.com/ Digg.com
had 39.7 million visitors in July 2009.) - Hard to do, twice.
- Build and hold!
10Personal Business for Life, PB4L
- Scottys story
- Butcher in local supermarket.
- Arthritis before age 30.
- Buys a PC and cutter/self-teaches sign making.
- Mr. Charming sell, sell, sell.
- Donates one 25 banner to the Ottawa Senators.
11Personal Business for Life, PB4L
- Can he produce?
- Works out of his basement/moves to warehouse.
- Delivers on time and on budget.
- Outcompetes march larger, more established rival.
- Turns one banner into 3 million in sign sales.
12Personal Business for Life, PB4L
- Competitor offers to buy him out for 2
million/should he sell? - Imagine me, a former butcher, with 2 mil!
- Whoa, wait a minute, Scotty.
- 150,000 salary/Francis another 60k. One truck
and one car fully paid for by the co. - Plus 250,000 increase each year in retained
earnings. - Total value nearly 500k per year versus 1.5
million gt taxes invested at 3 p.a. 45k per
year!
13Personal Business for Life, PB4L
- Would you trade 500k per year for 45k per year?
- Sustainable.
- Recurring revenue.
- No matter how much money you start with, if you
spend more, you will eventually run out. - Scotty would need to re-start within 3 years.
14Personal Business for Life, PB4L
- What is a PB4L?
- Stable business.
- Fallback position.
- Bootstrapped so you end up owning it.
15Personal Business for Life, PB4L
- How would you like
- To work half days.
- Be profitable less than ten days after launch.
- Make 120,000 per year.
- Start your business for less than 100.
16Personal Business for Life, PB4L
- Ryan North, (now famous) online comic
- Cant draw (he is a brilliant IT specialist).
- In 2003, he creates Qwantz.com, an online
dinosaur comic. - Six panels using clip art/characters that never
move. - Only dialogue changes, day-to-day.
17Personal Business for Life, PB4L
18Personal Business for Life, PB4L
- Key facts
- Turns disadvantage (cant draw) into advantage.
- Guinness Book of Records application longest
running comic strip where characters never
change/move. - Quirky personality.
- Revenue streams merchandise sales/book
sales/appearance fees/advertising by Project
Wonderful, PW. - PW created by Ryan profitable lt 10 days gt launch.
19Personal Business for Life, PB4L
- Startup Budget
- 15.00 for domain name www.poo.ca.
- 15.00 for domain name www.qwantz.com.
- Web hosting 35 per month.
- Fulfillment costs outsourced.
- Won 500 in 2003 Business Model Competition.
- Startup Budget -400.
20Personal Business for Life, PB4L
- Marketing
- T-Rex cardboard cutouts.
- Placed around campus with this domain on them
www.poo.ca. - Resolves to www.qwantz.com.
- Ryan is a wealthy person today with plenty of
time to explore new ideas
21Personal Business for Life, PB4L
22Personal Business for Life, PB4L
- How would you like to own a business that made
you 100,000 per year and took about 200 hours of
your time (500 per hour)? - Richard Rutkowski, former Kanata City Councillor,
REALTOR, Owner, Best of Kanata. - 600 per page to advertise in book.
- Lots of pages.
- Books sell at retail for 20 each.
- Two main sources of revenues.
- Each book buyer becomes a member and gets 10 off
at all participating retailers using BOK CARD.
23Personal Business for Life, PB4L
- Secret sauce his advertisers are also one of
his main distribution channels. - They buy books to sell to their customers at 20
and keep 10. - If a full page advertiser sells 100 books, the
cost of their ad is -350! - What a great value proposition BUY AN AD IN THE
BEST OF KANATA FOR A VE 350.
24Personal Business for Life, PB4L
- Another channel charities and minor
hockey/soccer groups buy the Books for 5 and
sell them for 20. - Low tech.
- Richard can SELL.
- Richard is trusted.
- Advertisers pay 50 on signing contract and
balance on delivery of books.
25Personal Business for Life, PB4L
- Pre-sold enough advertising to pay for first
printing and then some. - Cash required to start BOK -ve!
- This biz is scalable.
- Maybe there is a market for
- Best of Dartmouth,
- Best of Cole Harbour,
- Best of Lower Sackville,
- Best of Manhattan!
26Personal Business for Life, PB4L
- NEVER, NEVER sell this.
- It is like
- a sinecure,
- a franchise,
- a license,
- a concession,
- a Personal Businessfor life.
27Personal Business for Life, PB4L
- Perhaps, we should each have one micro business
that we hang onto for life - It would be pretty cool if every man, woman and
child on the planet each had their own Personal
Business. - Its a fallback position or, as my Dad used to
say, your iron reserve.
28Personal Business for Life, PB4L
- A PB4L does not include things like the guy who
tells you "I can show you how to make a million!
Just send me ONE dollar, and I will tell you
how." - And, of course, the answer is "Get a million
fools to each send you a dollar to tell them
how..."
29Personal Business for Life, PB4L
- They have to be real businesses.
- One way to find inspiration might be to go get a
copy (from your library) of the Encyclopedia
Britannica and look for crafts from the 1930s. - Say, for example, making high end paper for
writers, socialites and important persons who
want acid-free paper to preserve their writings. - Or a high end chef sells his restaurant to his
employees and canning his recipes (like smoked
canard) which he then sells with his two partners
at shows and high-end shops in Québec and
elsewhere
30Personal Business for Life, PB4L
- Bootstrap Capital, BC
- Self-capitalization.
- Allows you to start with no money down (or little
money down). - Allows you to control your own destiny and not be
beholden to (or slowed down by) Banks or VCs. - You end up owning the enterprise not them.
31Personal Business for Life, PB4L
- Bootstrap Capital
- When student entrepreneurs or others tell me that
cant start because they have no money thats
just an excuse. - So how do you start?
- Another example the NHLs Ottawa Senators!
32Personal Business for Life, PB4L
- Franchise cost 50,000,000 USD in 1990.
- Pre-sold 15,000 PRNs for 25 each for a team that
does not yet exist. - Pre-sold 500 Corporate sponsors for 500 each.
- Pre-sold 32 Original Corporate Sponsors for
15,000 each. - Pre-sold media rights for radio and TV for
250,000 and 4,000,000, respectively.
33Personal Business for Life, PB4L
- Pre-sold 30-year arena management contract for
15 million a corporate guarantee. - Pre-sold pouring rights for 3 million.
- Pre-sold product rights for 1 million.
- Pre-sold 10,000 season tickets 22 months before
the first game for 22 million in cash. - Pre-leased 100 suites at 100,000 per suite per
year or 10 million per year for 5 years
50,000,000.
34Personal Business for Life, PB4L
- Bought 600 acres for 12k per acre, won a NHL
franchise, built a MCF (Major Community Facility
aka, Scotiabank Place) in the middle and sold
extra 500 acres for 112k per acre to make
50,000,000. - You get the picture PRE-SELL, PRE-SELL,
PRE-SELL find launch clients before you launch.
35Personal Business for Life, PB4L
- Oh, this doesnt apply to me!
- Yes, it does.
- No excuses.
- Two former students start Maple Leaf Design and
Construction. - They have NO MONEY.
- They have ideas, energy, focus and dedication.
36Personal Business for Life, PB4L
- They purchased options on 20 housing lots for
500 from a friendly landowner. - They set up in a field in a trailer with nice
signs and two handsome smiling faces plus a lot
of cool floor plans and elevations. - Pre-sold 10 homes and got deposits of 20k per
home. - Now they had 200,000 in their bank account.
37Personal Business for Life, PB4L
- They negotiated 90 to 120-day terms with their
suppliers. - They pledged their Agreements of Purchase and
Sale to their Bank for a LOC. - (In effect, they borrowed the credit rating of
their customers.) - They made 40k per door and after three years and
20 homes, they had 800,000. - Now they are multi millionaires and still in
their 30s.
38Personal Business for Life, PB4L
- Does this also apply to large companies?
- You bet it does!
- People in established firms who have the skill
set of entrepreneurs are called intrapreneurs. - They like the role of an entrepreneur but not the
risk profile of actually being one. - They know how to take initiative, be innovative,
create terrific B. Models and B. Plans, find
launch clients, use bootstrap capital and smart
(guerrilla and social) marketing, check
everything, do everything in parallel and sell,
sell, sell - They also require zero babysitting and get
promoted fast!
39Personal Business for Life, PB4L
- The Disney Company (Fortune 67, 2008 with more
than 35 billion in revenues) used BC! - They bought the Mighty Ducks of Anaheim for 50
million in 1993. - Paid the NHL 25 million and Bruce McNall and the
LA Kings 25 million, 5 million/yr. x 5 yrs a
payment plan!
40Personal Business for Life, PB4L
- They got a 20 million leasing inducement from
Ogden to sign a long term lease at Honda Center
(formerly Arrowhead Pond). - They secured a 30 million LOC based on the
franchise value from a Lender. - Cost of the Ducks?
- A ve 20,000,000.
- I.e., they had more cash gt than lt.
- This is called accretive buying, a form of BC.
41Personal Business for Life, PB4L
- I could bootstrap a Lunar Colony!
- Just ask me how!
42Personal Business for Life, PB4L
- There is a lot of real estate on the moon it has
a surface area of approximately 37.8 million sq.
kilometres. - Thats about the size of the US, Canada and
Russia. - What if living in 1/6th gravity helped you live
20, 30, 40 or 50 years longer and let you boogie
like a teenager too?
43Personal Business for Life, PB4L
LIVE FOREVER!
44Personal Business for Life, PB4L
- Now maybe I could convince 100,000,000 people to
move to my Lunar Colony when they turn 70 or 80. - I might charge them 15,000 per month for their
condos. - Thats 18,000,000,000,000 in revenue per year
(18 trillion dollars, about 1.35 times the GDP of
the United States)! - I would ask for one years rent up front!
- I could build a lot of spaceships and lunar
condos with 18 trillion dollars!
45Personal Business for Life, PB4L
- So dont tell me you cant pull yourself up by
your bootstraps you can. - Primary sources of bootstrap capital
- Soft capital (Mom, Dad and rich Uncle
Buck), - Home equity loans,
- Future customers, clients or launch clients
(pre-sales), - Future suppliers,
- Strategic partners,
46Personal Business for Life, PB4L
- Primary sources of bootstrap capital (contd)
- Consulting,
- Partners,
- Receivables factoring,
- Financial leasing,
- Sponsors,
- Trading activity,
- Credit cards,
47Personal Business for Life, PB4L
- Primary sources of bootstrap capital (contd)
- Co-guarantor,
- Extended family savings,
- Retainers and deposits,
- Franchising,
- Sweat equity.
48Personal Business for Life, PB4L
- Creditor Proofing
- the way I have kept a good relationship with my
Bank (the Royal Bank of Canada) for over 40
years, Bruce, is that they have always owed me
more money than I borrowed from them, Harold
Shenkman, Founder of Shenkman Corporation. - The best way to stay out of creditor trouble is
to not get in trouble in the first place.
49Personal Business for Life, PB4L
- Symptoms of Pending Trouble
- you do not pay off your credit card balances
every month - you receive multiple applications for other
credit cards in the mail and you complete these
and get those cards too - you miss payments
- your bank lines are maxed out
- you bounce a few cheques by mistake
- you cant keep track of all the payments you have
to make - creditors start calling your house
50Personal Business for Life, PB4L
- Symptoms of Pending Trouble (contd)
- your spouse goes out to buy an appliance on OAC
(On Approved Credit) and she is rejected because
your credit rating (measured by your Beacon
score) has fallen below 620 or 600 - your bank calls your personal loans
- you cant get another mortgage on your house
- your bank wants you to change your Line of Credit
into a term loan so you pay it off and then they
wont renew it - you need to go to private lenders for loans at
much higher than prime lending rates. - you cant get any new financing at all.
51Personal Business for Life, PB4L
- Personal bankruptcy is your last option.
- If you go bankrupt, you will end up paying for it
THREE times over - You will probably have to pay something to your
creditors anyway. - You will have a new boss a bankruptcy trustee
who you will have to pay (and they are not
cheap). - Everything, from your cell phone to your cable TV
will cost you more because your credit score is
horrible.
52Personal Business for Life, PB4L
- Some Tips
- Your principal residence should go in the name of
the spouse with the lower risk profile. - (Dont worry, if your marriage breaks up, youll
probably get half anyway under family law). - Incorporate a PHC, Personal Holding Company.
- Your PHC can be owned by you and your family.
- Your PHC owns any operating companies and a real
estate company. - Your operating companies rent at FMV from your
real estate company.
53Personal Business for Life, PB4L
- You can pay your PHC dividends tax free from your
eligible Canadian subsidiaries. - You can be tax efficient and pay your spouse and
your kids too (once they reach age 14) dividends
and a salary for income splitting purposes. - If you have a capital dividend account, that will
create an opportunity for tax-free dividends. - Your real estate company (which owns your real
estate except for your principal residence) will
generate capital cost allowances that can be
deducted from income.
54Personal Business for Life, PB4L
- Your PHC will give you some protection against
creditors. - There are some insurance products (e.g., seg
funds) that are also protected from creditors. - Your RRSPs are NOT protected.
- Some liabilities may breach the limited liability
of the corporation e.g., source deductions for
employees, environmental contamination. - Bankruptcy does not relieve you of family law
payments (in most jurisdictions).
55Personal Business for Life, PB4L
- It can happen to anyone.
- One of the main causes someone who owes you
money doesnt pay and strands you with
unmanageable amount of debt.
56Personal Business for Life, PB4L
- Imagine a world where if you fail as an
entrepreneur, you would be shot immediately. - Any volunteers?
- The idea of creditor protection, is to allow you
to start again dont throw out valuable human
capital, i.e., you.
57Personal Business for Life, PB4L
- Build and HoldThe Difference between being Rich
and Being Wealthy - Let me quote actor and comedian Chris Rock
- Shaq (Shaquille O'Neal who plays in the NBA) is
rich but the man who signs Shaqs pay check is
wealthy.
58Personal Business for Life, PB4L
- Remember Scotty, the former butcher?
- Why go through all the trouble, risk and stress
to capture lightning in a bottle just to sell it
or see someone else take it over?
59Personal Business for Life, PB4L
- The Impeccable Warrior
- Ever wonder how Actors get Shakespeare right? How
do they memorize all the lines in Hamlet, for
example, and deliver them so eloquently and
profoundly? - They practice. A lot.
60Personal Business for Life, PB4L
- Malcolm Gladwells (Outliers) research says that
it takes at least 10,000 hours to master a craft
(or a business). - Terry Matthews, a tech billionaire in Ottawa says
it takes 7 to 12 years to create a great biz. - If it takes Terry 7 to 12 years, itll take you
and me a lot longer.
61Personal Business for Life, PB4L
- Be someone others can have trust in. Trust is the
foundation of a successful life in business and
in your personal situation. - Dec. 6, 1990, the NHL awarded franchises to the
cities of Ottawa and Tampa. - But really they awarded them to Phil Esposito
(for Tampa) and Bruce Firestone (for Ottawa). - They trusted us.
62Personal Business for Life, PB4L
- Lydia Leeder calls us the day before we were
awarded the franchise and says its like the
Canada-Russia series of 1972, everyone is
counting on you. - 15,000 PRNs, 500 corporate sponsors, 32 Original
Corporate Sponsors, 100,000s of Canadians in
Ottawa are counting on you. - Now thats pressure.
63Personal Business for Life, PB4L
- The night before You will never, EVER get a
franchise for Ottawa. - Did we give up? No way!
- The next morning, we keep campaigning from 6 am
until they close the doors to the BOG meeting at
8 am. - So does Phil Esposito.
- Our theme song Tom Pettys DONT BACK DOWN.
- We get a unanimous vote from the NHL!
- In entrepreneurship, results count.
- Thank you!