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Personal Business for Life, PB4L. The Road to Financial Security and Independence Prepared for: Legacy Date: October 2, 2010
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Personal Business for Life, PB4L The Road to Financial Security and Independence • Prepared for: Legacy • Date: October 2, 2010 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.eqjournal.org
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?
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 them—the most popular ascend the page.
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 demographic—contributors only post stories that will be of interest to the group. • The site is dynamic—leading stories change by the minute or hour.
Personal Business for Life, PB4L • Digg.com’s cost for headline writers = ZERO. • Digg.com’s cost for journalists = ZERO. • Digg.com’s cost for editors = ZERO. • Digg.com’s cost for distribution = ZERO (at least, the marginal cost is practically zero).
Personal Business for Life, PB4L • Digg’s 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.
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!
Personal Business for Life, PB4L Scotty’s story: • Butcher in local supermarket. • Arthritis before age 30. • Buys a PC and cutter/self-teaches sign making. • Mr. Charming– he can sell, sell, sell. • Donates one $25 banner to the Ottawa Senators.
Personal Business for Life, PB4L Can he produce? • Works out of his basement/moves to warehouse. • Delivers on time and on budget. • Outcompetes much larger, more established rivals. • Turns one banner into $3 million in sign sales.
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 > taxes invested at 3% p.a. = $45k per year!
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.
Personal Business for Life, PB4L What is a PB4L? • Stable business. • Fallback position. • Bootstrapped so you end up owning it.
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.
Personal Business for Life, PB4L Ryan North, (now famous) online comic: • Can’t 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.
Personal Business for Life, PB4L Key facts: • Turns disadvantage (can’t 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 < 10 days > launch.
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.
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…
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.
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.
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.
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!
Personal Business for Life, PB4L • NEVER, NEVER sell this. • It is like: a sinecure, a franchise, a license, a concession, a Personal Business…for life.
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. • It’s a fallback position or, as my Dad used to say, your “iron reserve”.
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..."
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…
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.
Personal Business for Life, PB4L Bootstrap Capital • When student entrepreneurs or others tell me that can’t start because they have no money– that’s just an excuse. • So how do you start? • Another example– the NHL’s Ottawa Senators!
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.
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.
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.
Personal Business for Life, PB4L • Oh, this doesn’t 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.
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.
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.
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!
Personal Business for Life, PB4L • I could bootstrap a Lunar Colony! • Just ask me how!
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. • That’s 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?
Personal Business for Life, PB4L LIVE FOREVER…!
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. • That’s $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 year’s rent up front! • I could build a lot of spaceships and lunar condos with 18 trillion dollars!
Personal Business for Life, PB4L • So don’t tell me you can’t 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,
Personal Business for Life, PB4L • Primary sources of bootstrap capital (cont’d): Consulting, Partners, Receivables factoring, Financial leasing, Sponsors, Trading activity, Credit cards,
Personal Business for Life, PB4L • Primary sources of bootstrap capital (cont’d): Co-guarantor, Extended family savings, Retainers and deposits, Franchising, Sweat equity.
Personal Business for Life, PB4L Build and Hold—The 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 Shaq’s pay check is wealthy.”
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?
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.
Personal Business for Life, PB4L • Malcolm Gladwell’s (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, it’ll take you and me a lot longer.
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.
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 Petty’s DON’T BACK DOWN. • We get a unanimous vote from the NHL! • In entrepreneurship, results count and results come from a fundamental source: trust— remember this— “People like to buy from people they like and trust.” Thank you!
