Plan to succeed

By James Fuller


Have you ever dreamed of starting your own business, being your own boss, having every ounce of effort you invest be reflected by financial and personal reward?

Perhaps you have the kernel of an idea which could grow into a major venture but don't know how to take that first business step.

Passionate people have launched some of the world's great companies and age is no barrier. Henry Ford was 40 when he established the Ford Motor Company and the founder of local success story Comvita, Claude Stratford, was 63 when he began selling bee products from the basement of his home.

But passion is not enough on its own, says chief executive of Tauranga's Chamber of Commerce, Max Mason. His organisation is the first port of call for many with entrepreneurial aspirations in the Western Bay. More than 100 people walk through its doors each year with dreams of launching their own business.

"Don't just jump in on enthusiasm and back-of-an-envelope calculations. Plan it properly," said Mr Mason. "It's really important you do proper cashflow forecasts and business plans ... because if it's not going to work on paper it's not going to work in reality.

"People have to work really hard at understanding their business, who the competitors are, what the costs are, likely sales projections, etc. All those things are really important.

"The biggest single issue for business failure ... is that people start off with a skill like a plumber or chef and think that because they have that skill they can run a business. What they don't take into account are four things: financial administration; sales; marketing; and managing people.

"If they get all of those four together, in addition to the technical skill they already possess, they have a good chance of success."

The Chamber provides a multitude of services, advice and contacts for business start-ups.

"We provide one-on-one business advice where you can sit down with an experienced business adviser," Mr Mason said.

Sometimes the best service can be to advise against taking the leap.

"It might seem that we're here to promote the number of start-ups, and we are, but occasionally when we sit with people and talk through the realities of starting their proposed business the outcome is different," Mr Mason said. "They will think "Wow, this is going to be much harder than we thought" and decide not to go ahead. But that is much better than getting heavily involved and then finding out you're not cut out for it."

Mr Mason said despite the tough economic climate, Bay of Plenty people had a strong independent streak and there was still a steady stream seeking start-up advice.

"Sometimes people just come to bounce an idea around to see if it will work, or they've made the decision to start and want to know the process. Then again sometimes they've started, things are not going as hoped, and they come to see us for advice on how to get out of trouble.

"There's a strong degree of entrepreneurial spirit in Tauranga. People seem more likely here to say "Let's give it a go". A prime industry is construction. A high number of tradespeople who start out on their own as sub-contractors, they take on a couple of people for a job and then can grow into a more sizeable business.

"Personal services are another big area of start-ups such as hairdressers and massage therapists."

However, there is no escaping the fact that a large number of start-up businesses fail. It is the changing relationship between start-ups and failures during the past five years as the economy spiralled down, which is most revealing.

In 2007 there were 789 failures compared to 888 start-ups. By 2009 the failure rate had overtaken start-ups and last year there were almost 50 per cent more failures than start-ups with 732 businesses folding compared to the 495 being launched.

Even in tough times though, many of those who folded could have survived, said Mr Mason.

The Chamber's chief executive once worked for a similar business development organisation, the Enterprise Agency, in Scotland. He said start-up rates and failures there showed marked differences when proper planning and preparation were implemented.

"We monitored the rates very closely and found that the failure rate over five years was around 75 per cent. That stacks up with a lot of figures you will see regarding small businesses. However, of all the businesses the Enterprise Agency was involved in that figure dropped to 50 per cent. That represents a huge number of businesses still operating who would not have been otherwise.

"If that same principle is replicated for Tauranga it could mean huge benefits in terms of local employment and ongoing growth."

Mr Mason added that those establishing businesses were not always supported as they should be by central government.

"I also think that as a community we should give all the help we can to business start-ups because they are going to be the employers and wealth creators of the future."

One of those who took advantage of the Chamber's free business advice was Jenny Mays. Mrs Mays, who moved to Tauranga in 2010 with her husband David, said the help she received in launching her personalised resettlement service, New2NZ, was invaluable. The mother-of-three is a veteran of several international moves and has turned this experience into a business.

"My family has moved a number of times, from the UK to the Cayman Islands, then to Trinidad and Tobago, back to the UK and then out to New Zealand. I found the move to New Zealand the biggest of them all though ... but I've done it and I know the issues which crop up and how difficult it can be for people when they first arrive.

"Most people when they move from overseas go to one of the settlement support agencies based out of an office. You book an appointment, turn up, get some leaflets, some information and that's great but they're not able to be with you whilst you go around.

"What I will be doing is meeting people at the airport, driving them around, finding them accommodation, helping them set up bank accounts, source cars, or the best place to buy things, taking them through the process of getting set up and established. It gives them time to find their feet, figure out what they're doing, get their bearings.

Mrs Mays, who launched her website www.new2nz.co.nz this year, does not have a business background.

Even so she said starting a business in such tough economic times was not seen as a disadvantage.

"I'm someone with a passion, I enjoy helping people settle in this region I love and now call home. I've seen a potential niche and I wanted to give it a go."

One of the biggest stumbling blocks for many starting out in business is finance and investment.

Entrepreneurs in Tauranga are fortunate in that they have one of best business investment organisations in the country on their doorstep. But Bill Murphy, executive director of Enterprise Angels, said his members are not seeing the volume or quality of business ideas coming forward that they would expect.

"Enterprise Angels acts as a facilitator putting together businesses seeking investment with business investors looking to invest," said Mr Murphy.

"We have nearly 100 members and it is a very impressive, high quality list. When we set up Enterprise Angels we set it up because there was an obvious need. It's now easier than ever for start-ups to get the investment and business people they need to make their start-up a success, but the fact is we're not getting a lot of people coming to us.

"We're not getting the types of opportunities which come from outside the region all the time. We're not seeing those come from within.

"There are so few local businesses that we have the opportunity to invest in and let me be clear we would like to invest locally.

"We do feel we have a strong economic development purpose so we will stretch out and help local people. If it's an opportunity from outside we take a harder approach to criteria."

Mr Murphy co-founded Enterprise Angels in March 2007 and since then its members have invested $6.52 million, with 40 per cent of that being invested in Bay of Plenty businesses.

"We've been approached and have assisted over 80 local start-ups since March 2007. We've invited 11 of those local start-ups to pitch to us for investment and we've invested in three of them," said Mr Murphy.

Part of the organisation's local focus is on display this weekend through its Business Startup Weekend.

"Anybody with an idea for a potential business can come to this weekend," said Mr Murphy. "We're hoping for 60 people and we go for the whole weekend from Friday night to Sunday night."

Business Startup Weekends are a global, non-profit initiative that bring together entrepreneurs from all backgrounds to pitch ideas, form teams and start companies in just 54 hours.

Participants have 60 seconds to make a pitch, which are prioritised into the top ideas.

Teams are formed to come up with several developed companies or projects which are demonstrated in front of judges and potential investors.

Mr Murphy said the event was evidence that there was still investment money out there for those with solid business propositions.

"Our members are resilient, they're risk-takers, they don't go pale if the economy takes a bit of a dip. I think that throughout the entire country there was a feeling that investors would disappear for early stage businesses but that hasn't happened.

"There has been a downtrend in the amount of money being invested but the money is still there.

"The opportunities are there, and there are new opportunities arising all the time. A good business is a good business whatever the economic climate. If it's a good idea with good people involved it will be looked at very seriously."

Mr Murphy said members of Enterprise Angels were typically senior figures who were not looking to take an operational role but rather become involved at board level and look at strategy and business implementation.

He said his investors had, through mentoring, money and contacts, been able to transform many business start-ups and urged people not to be nervous about seeking investment.

"Sometimes people are quite afraid of investors because they've heard stories of how they've taken advantage of people and taken their companies. The really important thing for people to understand is that this is a professional investment space. These are people who stand to lose a lot if they run around town and rip people off. They're not the slightest bit interested in doing that.

" Whether we invest or not that depends on the business proposition but don't be afraid to come forward. If we get overwhelmed with response we'll deal with it. That's not the danger right now."

Information technology had dominated new businesses in recent years, said Mr Murphy but the natural inclinations of his investors laid elsewhere.

"While we have made some significant IT investments we are more comfortable with things we can kick. If you look at the members most come from this region and have associations with the dairy industry, the horticulture industry, engineering and food.

"Invest in what you know, that's one of the main rules in investing. So we tend to have a slight inclination towards those types of opportunities."

The Enterprise Angels executive director said there was some standard advice for all prospective business owners.

"Whilst you have to have a personal passion about what you're doing you have to be able to step aside from it and objectively assess the real potential of your idea. Put your heart aside and take a cold hard look at the viability of what you are proposing.

"Inventors and entrepreneurs sometimes struggle with market validation and being able to prove that to potential investors.

"Angel investors are business implementation experts but you have to have done some work, some market research to prove your product can be commercially successful."

In the final analysis, Mr Murphy said business was not all about the bottom line.

"Business is not all about money, business is about helping people achieve and accomplish aspirations.

"I just get a lot out of helping to make these things happen."

- BAY OF PLENTY TIMES

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