Personal Business for Life, PB4L

1
Personal 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/

2
Personal 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?

3
Personal 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.

4
Personal 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.

5
Personal 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).

6
Personal 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.

7
Personal 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!

8
Personal 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!

9
Personal 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!

10
Personal 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.

11
Personal 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.

12
Personal 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!

13
Personal 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.

14
Personal Business for Life, PB4L

• What is a PB4L?
• Stable business.
• Fallback position.
• Bootstrapped so you end up owning it.

15
Personal 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.

16
Personal 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.

17
Personal Business for Life, PB4L
18
Personal 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.

19
Personal 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.

20
Personal 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

21
Personal Business for Life, PB4L
22
Personal 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.

23
Personal 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.

24
Personal 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.

25
Personal 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!

26
Personal Business for Life, PB4L

• NEVER, NEVER sell this.
• It is like
• a sinecure,
• a franchise,
• a license,
• a concession,
• a Personal Businessfor life.

27
Personal 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.

28
Personal 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..."

29
Personal 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

30
Personal 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.

31
Personal 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!

32
Personal 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.

33
Personal 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.

34
Personal 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.

35
Personal 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.

36
Personal 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.

37
Personal 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.

38
Personal 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!

39
Personal 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!

40
Personal 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.

41
Personal Business for Life, PB4L

• I could bootstrap a Lunar Colony!
• Just ask me how!

42
Personal 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?

43
Personal Business for Life, PB4L
LIVE FOREVER!
44
Personal 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!

45
Personal 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,

46
Personal Business for Life, PB4L

• Primary sources of bootstrap capital (contd)
• Consulting,
• Partners,
• Receivables factoring,
• Financial leasing,
• Sponsors,
• Trading activity,
• Credit cards,

47
Personal Business for Life, PB4L

• Primary sources of bootstrap capital (contd)
• Co-guarantor,
• Extended family savings,
• Retainers and deposits,
• Franchising,
• Sweat equity.

48
Personal 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.

49
Personal 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

50
Personal 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.

51
Personal 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.

52
Personal 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.

53
Personal 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.

54
Personal 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).

55
Personal 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.

56
Personal 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.

57
Personal 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.

58
Personal 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?

59
Personal 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.

60
Personal 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.

61
Personal 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.

62
Personal 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.

63
Personal 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!