Ex­pect long hours, fi­nan­cial risk

The Citizen-Record (Cumberland) - - DOLLARS AND SENSE - BY JAMES RIS­DON BY JAMES RIS­DON

Two years af­ter mov­ing to Prince Edward Is­land, soft­ware pro­gram­mer Abra­ham Roy lost his job in a cor­po­rate re­struc­tur­ing and sud­denly had to scram­ble to find work.

He and his wife have two chil­dren and had then just bought a house. There were mort­gage pay­ments and bills. She has a good job as a soft­ware de­vel­oper with an in­for­ma­tion tech­nol­ogy firm on the Is­land but he still needed to get a job.

Soon, the calls from prospec­tive em­ploy­ers started com­ing in.

But not from Prince Edward Is­land.

“I was get­ting calls from other prov­inces and I didn’t want to leave for Toronto,” said Roy. “I’d al­ready bought my house here and I knew if I started some­thing on my own, it would prob­a­bly suc­ceed.”

Be­tween job in­ter­views and ap­pli­ca­tions, Roy started work­ing on a nim­ble and eas­ier-to-use con­tact man­age­ment sys­tem.

Last year – with an early ver­sion of that soft­ware ready to go – he put his job hunt­ing aside and in­stead made the plunge into en­trepreneur­ship, in­cor­po­rat­ing Con­tacts-DB with a part­ner with ex­per­tise in mar­ket­ing, man­age­ment and fi­nance. That com­pany makes, cus­tom­izes and sells the EZEE Con­tacts Man­age­ment Sys­tem.

“It’s home based. I’ve con­verted a part of my base­ment into a lab with my lap­tops and com­put­ers,” he said.

The 40-some­thing Is­land en­tre­pre­neur is part of a grow­ing trend of peo­ple turn­ing to self-em­ploy­ment to ei­ther sup­ple­ment or re­place the in­come from their jobs or who are work­ing on short-term con­tracts.

Last year, fi­nan­cial soft­ware com­pany In­tuit Canada and the Emer­gent Re­search con­sult­ing firm stud­ied the self-em­ployed and con­cluded “full- and part-time free­lancers, in­de­pen­dent con­trac­tors and on-de­mand work­ers are ex­pected to ac­count for up to 45 per cent of the work­force (in Canada) by 2020.”

Many of them are peo­ple sim­ply strug­gling to pay the bills. Ac­cord­ing to the study, nearly two-thirds of the self-em­ployed in Canada have a job on the side to sup­ple­ment their self-em­ploy­ment earn­ings. Roughly one in five of them are Cana­dian re­tirees try­ing to top up the money they get from their pen­sions.

Cer­tainly, the buzz sur­round­ing en­trepreneur­ship is pal­pa­ble in At­lantic Canada th­ese days.

“The ex­cite­ment around it is prob­a­bly at the high­est level I’ve ever seen and I’ve been around for 17 years,” said Michael Sanderson, act­ing di­rec­tor of the newly re­branded Saint Mary’s Univer­sity En­trepreneur­ship Cen­tre, for­merly known as the Sobey School Busi­ness De­vel­op­ment Cen­tre.

In all four prov­inces in the re­gion, there are govern­ment pro­grams to help peo­ple launch busi­nesses and get fi­nanc­ing.

But the re­al­ity is fewer and fewer At­lantic Cana­di­ans are choos­ing to go the self-em­ploy­ment route.

In a study un­der­taken to de­ter­mine what role un­em­ploy­ment might play in en­cour­ag­ing peo­ple to launch their own small busi­ness, three eco­nom­ics pro­fes­sors at the Univer­sity of New Brunswick dis­cov­ered the At­lantic Cana­dian prov­inces are buck­ing the grow­ing trend to­wards self-em­ploy­ment in Ontario, Que­bec and Bri­tish Columbia.

Men in At­lantic Canada in par­tic­u­lar seem more re­luc­tant than ever in re­cent years to create their own jobs, the study shows.

“Since the early 2000s, slowly ris­ing self-em­ploy­ment rates in the larger prov­inces of Ontario, Que­bec and (Bri­tish Columbia) have off­set larger de­clines in most of the smaller prov­inces,” the study’s au­thors note. “Sim­i­larly, strong growth in fe­male self-em­ploy­ment rates have off­set stag­nant or

de­clin­ing male self­em­ploy­ment rates.”

The de­cline in self­em­ploy­ment in At­lantic Canada goes back more than 20 years, to the mid-1990s.

In their pa­per en­ti­tled Push or Pull into Self Em­ploy­ment? Ev­i­dence from Lon­gi­tu­di­nal Cana­dian Tax Data, the pro­fes­sors were sur­prised to report in Au­gust last year that changes in the un­em­ploy­ment rate don’t seem to have any bear­ing on the num­ber of peo­ple who choose to launch their own busi­nesses.

The ag­ing of the labour force in At­lantic Canada may be a fac­tor in the re­gional trend since young adults are more likely to start busi­nesses, said Philip Leonard, re­search as­so­ciate at the Univer­sity of New Brunswick and a co-author of the study.

“It’s long-run de­mo­graphic and iden­tity things but the un­sat­is­fy­ing an­swer is we don’t re­ally know (why fewer At­lantic Cana­di­ans choose self-em­ploy­ment),” he said.

A se­rial en­tre­pre­neur him­self, Sanderson says it’s the de­sire to take con­trol of their lives that drives most en­trepreneurs.

“It’s that pas­sion,” he said. “When you start a busi­ness, you are the ar­chi­tect of your own dreams. You are re­spon­si­ble for grow­ing it and

En­trepreneur­ship can be a boon for those strug­gling to pay the bills by pro­vid­ing an ex­tra rev­enue stream but it clearly isn’t for ev­ery­one be­cause it of­ten means long hours and fi­nan­cial risk.

“The first year, I used to take calls at 5 a.m. be­cause some mem­bers of my team are in a dif­fer­ent coun­try,” said Abra­ham Roy, the soft­ware pro­gram­mer who founded Prince Edward Is­land-based Con­tacts-DB, in an in­ter­view.

Even though he al­ready had a bach­e­lor’s de­gree in en­gi­neer­ing and a post-grad­u­ate diploma in busi­ness ad­min­is­tra­tion, Roy put him­self through At­lantic Cana­dian start-up ac­cel­er­a­tor Pro­pel ICT’s 12-week en­trepreneur­ship pro­gram.

“It’s re­ally tough,” he said. “It’s like a crash MBA.”

Al­though self-em­ploy­ment, in­clud­ing part-time gigs, is up in Canada’s big prov­inces of Ontario, Que­bec and Bri­tish Columbia, it’s down as a per­cent­age of the labour force in At­lantic Canada and has been dwin­dling for decades.

Pro­vin­cial govern­ment pro­grams pro­vide fi­nan­cial and other sup­port for would-be en­trepreneurs. There are busi­ness ac­cel­er­a­tors to foster en­trepreneur­ship.

But run­ning a small busi­ness is no mean feat.

When he was still in his 20s, there’s a great deal of sat­is­fac­tion in do­ing that. It doesn’t feel like work be­cause it’s so driven from within.”

The ex­tra money that can come from self-em­ploy­ment, though, also helps.

“If you work for some­one else, there’s a cap on your earn­ings but in en­trepreneur­ship, there is no cap,” said Sanderson.

He ad­vises any­one think­ing of start­ing a busi­ness to first dou­blecheck to see whether there’s re­ally a mar­ket for its prod­ucts or ser­vices.

“You have the idea but you have to val­i­date that idea,” said Sanderson. “You have to go out and talk to peo­ple and see if they would ac­tu­ally buy this prod­uct. It’s not about talk­ing to one or two peo­ple. You have to talk to as many peo­ple as pos­si­ble.

“The ul­ti­mate val­i­da­tion is for them to sign a sales agree­ment,” he said.

Crowd­fund­ing sites like Kick­starter al­low start-ups to pre-sell Michael Sanderson, now the act­ing di­rec­tor of the Saint Mary’s Univer­sity En­trepreneur­ship Cen­tre, set up one such busi­ness. It was 1998. The busi­ness was called Sand­man Video. And it drove Sanderson to bank­ruptcy.

“It took me four years to drive it into the ground,” he said in an in­ter­view. “I took out a lot of loans … I didn’t know what I didn’t know.”

The video in­dus­try was then al­ready in a steep de­cline. The young en­tre­pre­neur tried to be in­no­va­tive, lur­ing in cus­tomers from nearby of­fice build­ings with a week­end rental deal for movies.

“That worked – but it worked too well and wiped out my store of movies on Fri­days and so there were no movies for my walk-in traf­fic,” he said. “If I had some­one in dis­tri­bu­tion with me, it might have worked.”

Sanderson later started up a side ven­ture, Chime­riam Pro­duc­tions, which made a short film for the At­lantic Film Fes­ti­val.

In ad­di­tion to the busi­ness risks that come with en­trepreneur­ship, be­ing self-em­ployed can also re­sult in a feast-or-famine roller­coaster of an in­come.

In a study pub­lished last year by fi­nan­cial soft­ware com­pany In­tuit Canada and the Emer­gent Re­search con­sult­ing firm, 59 per cent of the self-em­ployed re­ported they didn’t have enough pre­dictable in­come.

There are, though, up sides to self-em­ploy­ment. Start­ing a small busi­ness can pro­vide a great deal of flex­i­bil­ity for the en­tre­pre­neur, re­wards him or her based on per­for­mance, and al­lows the self-em­ployed per­son to fol­low his or her pas­sions. their prod­uct even be­fore it ex­ists, giv­ing th­ese start-ups a safety mar­gin be­fore go­ing into pro­duc­tion.

At Con­tacts-DB, the fi­nan­cial base for launch­ing the com­pany was an early deal with the PEI BioAl­liance. That or­ga­ni­za­tion’s ex­ec­u­tive di­rec­tor, Rory Fran­cis, has since then of­fered up a glow­ing tes­ti­mo­nial of EZEE Con­tacts Man­age­ments – and that’s helped the fledg­ling com­pany land other clients.

Al­though many small busi­nesses are sole pro­pri­etor­ships, said Michael Sanderson, it’s im­por­tant to build up a solid ex­ec­u­tive team. Sanderson is act­ing di­rec­tor of the newly re­branded Saint Mary’s Univer­sity En­trepreneur­ship Cen­tre, for­merly the Sobey School Busi­ness De­vel­op­ment Cen­tre.

“The op­ti­mal team size for ven­ture cap­i­tal is three peo­ple,” he said. “You’re look­ing for the skills and abil­i­ties that will carry that busi­ness for­ward. You can out­source

“Life is too short to spend 40 years or 30 years of it – or what­ever – do­ing some­thing you don’t love,” said Sanderson.

Be­sides, be­ing self-em­ployed also comes with tax breaks.

The best bit of ad­vice for those look­ing to go out on their own is to plan care­fully be­fore mak­ing the jump.

“You need to build a sus­tain­able rev­enue model so that you can take home a salary and have re­tained earn­ings so that you can re-in­vest them in the busi­ness and grow it in scale,” said Sanderson. some of the skills but it’s good to have the core of them on the team.”

At EZEE Con­tacts Man­age­ment, Roy brings the soft­ware ex­per­tise, his busi­ness part­ner adds know-how in man­age­ment, fi­nance and mar­ket­ing, and the ecom­merce side of things is be­ing out­sourced to Char­lot­te­town­based Re­sults Mar­ket­ing.

That com­pany is build­ing a full e-com­merce site for EZEE Con­tacts Man­age­ment and will also be han­dling its pro­mo­tion when the web­site is launched by Au­gust, said Roy.

He is hop­ing that e-com­merce site will al­low EZEE Con­tacts Man­age­ment to ex­tend its reach and land sales in ev­ery Cana­dian prov­ince within a cou­ple of years. With a con­tract to cus­tom­ize his soft­ware for one client, Roy is al­ready look­ing to hire an­other part­time pro­gram­mer.

But it’s not all clinched deals and money in the bank. Many of the self-em­ployed hang onto their jobs or get a steady gig to ride out the ups and downs of their busi­ness.

Sanderson’s ad­vice is to be pre­pared and per­se­vere.

“You can’t go in with blin­ders on,” he said. “You have to know there are go­ing to be good days and bad days. When you hit a bad day and you give up, that’s the be­gin­ning of the end.”

When Roy was still de­vel­op­ing his con­tact man­age­ment soft­ware, naysay­ers were ev­ery­where – and money was of­ten tight.

“There were days in my first year of busi­ness when I would think twice be­fore go­ing to a Tim Hor­tons … I needed to put ev­ery dol­lar into the busi­ness,” he said.

A good way to stay mo­ti­vated dur­ing the tough times is to get ex­cited about the busi­ness – and ig­nore the crit­ics.

“In­still­ing pas­sion into the process is cru­cial. When you’re do­ing some­thing you love, the pas­sage of time and the ef­fort you put in is viewed very dif­fer­ently,” he said. “No­body comes back from va­ca­tion and says, ‘Man, I spent way too much time on the beach!’”

On the Is­land, Roy worked on this soft­ware pro­gram even as many tried to dis­suade him be­fore he landed clients which now in­clude a lo­cal Re/Max bro­ker­age, BDO Canada and the PEI BioAl­liance.

“For the first year, it was tough un­til I built the base be­cause a lot of peo­ple give you neg­a­tive com­ments,” he said. “Slowly, things started chang­ing and I started grow­ing. And thank God for that!”

Run­ning a small busi­ness is no small feat

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