The keys to entrepreneurial success
Millennials are using different tactics to generate cash flow and get their business moving
Anthony Morgan, founder of Science Ninjas Inc., was spending six to eight hours at a day working at the Ontario Science Centre. Then he’d come home to concentrate on his burgeoning business, turning science into performance art for television shows such as Discovery Channel’s Daily Planet, YouTube videos (from which he garners ad revenue), as well as events and cultural venues. His shows have been featured at the ROM and Ryerson University, and on the CBC’s Steven and Chris.
The problem: “Most of the people I needed to contact were not in the office when I was able to call them,” he says. So a couple of months ago, the 30-year-old took “a leap of faith” and quit his job to work on his business full-time.
It’s a move many millennials dream of making. But it’s not for the faint-hearted. Meridian Credit Union’s 2016 Small Business Banking in Ontario survey found 52 per cent of small-business owners flagged cash flow as their top concern.
When it comes to opening your own business, “It pays to be prepared,” says Toronto-based personal finance expert and blogger Barry Choi, 34.
Read on for tips from those who’ve been there and done that.
Build an emergency fund
Before launching your business, pay down debt and build some cash “so you have a buffer” to get you through those early days.
Choi advises setting up an automatic withdrawal plan that feeds into a separate savings account, even if you’re only setting aside $25 a paycheque.
Don’t rush to give up your day job
Daniel Lewis, 28, the co-owner of T by Daniel Inc., which sells a range of specialty teas through farmers’ markets and a small retail shop, was so enthusiastic about his new business that he quit his managerial job at Domino’s Pizza cold turkey in 2011.
“Wrong, wrong, wrong,” he says. “I lasted about three months. And then I had to get some work again.”
Working through a temp agency proved the perfect compromise for Lewis. It allowed him to focus on the business and take work when he needed it to pay personal bills and upfront business expenses, like incorporating and logo design. Unless you’re independently wealthy, “the move to entrepreneurship should be a transition,” he says. “Let your job fund your business.”
Watch your everyday expenses
Keeping your personal expenses lean can give you time to get your business up and running, Choi says. But in order to cut back on costs, you have to know what you’re spending in the first place.
“Track your spending and then take a detailed, analytical look at what you can adjust,” he suggests, whether by cutting back on cellphone expenses, jettisoning the vehicle to take the TTC or nixing the daily non-fat Chai latte.
Morgan shops in independent grocers rather than big-box chains.
And he lives on the border of North York and Scarborough, where he pays just $500 a month for rent.
“That’s very affordable,” he says. “But I’m still accessible to the city.”
Turn that “stuff” into moolah
Worn clothing, DVDs, furniture, cellphones and collectibles can all yield cash thanks to Craigslist, Inc., Kijiji and consignment stores, Choi points out.
As a guy who sold his action-figure collection online, he feels your pain. But, he says, “You’re using that money to reach your next goal.”
Get a credit card that turns purchases into cash
Choi is a Loblaws/No Frills shopper, so he uses a PC Financial World Elite MasterCard to earn points on purchases that can be used toward free groceries.
If your job requires lots of business travel, on the other hand, you might look for a card that gives you travel benefits, he suggests.
And make sure you know exactly what you’re getting to avoid duplicate payments. “If your card includes travel insurance, there’s no need to pay for that,” Choi says.
His caveat: no matter which card you choose, pay your bills on time or the interest you pay will more than outweigh any benefits.
Get a spot in an incubator program
Toronto has many business incubators and accelerators that aim to help startups get off the ground.
They can provide access to valuable perks such as shared equipment and services.
Morgan, for example, operates out of Ryerson University’s Transmedia Zone (TMZ) lab, which gives him free office space, access to cameras and lighting equipment to make videos and student interns who are eager to help.
By using the lab, he has student status, “so I get a discount card on my Metropass and restaurants,” he says. And there are lots of startup-related workshops offered through the Zone giving free advice — and food.
“You get to learn a little bit more about how to run a business,” says Morgan, “but you also get some free pizza, which is pretty cool.”
Consider your cuspids
“The reality of running a small company is that you may not have health or dental insurance,” Morgan says. “You need to think of ways to manage that ahead of time.”
If you have a spouse with benefits, that’s a bonus, he says.
But there are cheaper ways to get dental work done as well, namely becoming a guinea pig for students at a school.
“Just this morning, I was at the U of T dental school,” Morgan says.
“You can get discounted dental work done there and they have profs overseeing the students to make sure it’s done right.”
Put aside money for taxes
Guess what?
Your obligation to the taxman doesn’t go away just because you’re self-employed.
“As soon as I get paid, I put aside 25 per cent of that money for taxes in aseparate account,” Choi says. “And I don’t touch it.”
Get by with a little help from your friends
“You feel a bit breathless when you give up your day job,” Morgan says. “It helps to have people around you who can support you mentally and maybe take you out to lunch now and then.
“You have to be humble and willing to accept help from anyone and everyone who offers it.”