The Entrepreneurs Handbook II

About the Author

Dedication

Foreword

Reviews

Chapter 1 Introduction to Entrepreneurship and Intrapreneurship

Chapter 2 Advanced Business Models

Chapter 3 Self-Capitalization

Chapter 4 Guerrilla Marketing, Social Media, Guerrilla Marketing

Research, Negative Cost Marketing

Chapter 5 Strategic Selling and Negotiating—Turn Selling Into Buying,

Negative Cost Selling

Chapter 6 Cash Conversion Cycle

Chapter 7 Leverage, Internal Rates of Return, Real Estate Investing

Chapter 8 Pricing Models

Chapter 9 Personal Business for Life—Case Studies

Chapter 10 Advanced Product Management—Spreadsheet Use, Critical

Path Methodology and More

Chapter 11 Value Proposition, Differentiated Value and Pixie Dust

Chapter 12 Building Your Biz Model

Chapter 13 Entrepreneur’s Skill Set

Chapter 14 On Creativity and Innovation

Chapter 15 Intellectual Property

Chapter 16 Competition and Co-opetition

Chapter 17 Customer Service and Corporate Culture—the One Sigma Business

Chapter 18 Ethics and Trust

Chapter 19 25 Steps to Entrepreneurial Success

Chapter 20 Build and Hold

Chapter 21 Creditor Proofing

Chapter 22 On Leadership

Chapter 23 Logic has its Limits

Appendix I Startup Checklist

Appendix II Course Descriptions—Advanced Business Models (MBA level)

Appendix III Sample Exams and Answers

Appendix IV How to Make a Great Elevator Pitch

Appendix V Sample Media Releases

Bibliography

Author’s Note

Other Works Novels from Bruce M Firestone

About the Author

Professor Bruce Murray Firestone

B Eng (Civil), M Eng-Sci, PhD

Bruce M Firestone is best known as a professor, entrepreneur and founder of NHL hockey team, the Ottawa Senators and their home Scotiabank Place as well as Author of Quantum Entity Trilogy, Entrepreneurs Handbook II and Urban Nirvana (coming out in 2015).

Firestone is Executive Director of Exploriem.org, a Canadian registered Not-For-Profit corporation focused on educating and mentoring entrepreneurs, intrapreneurs and artpreneurs in Canada and around the world. He is also coaching and teaching via Learn By Doing School, an organization dedicated to providing student entrepreneurs with access to research, education and a network of high achievers not available elsewhere.

Prof Bruce has launched or helped launch more than 172 startups in fields including tech, real estate, design, art and services. He advises clients on business modeling, self-financing, smart marketing, social media, differentiated value, strategic selling and business development, market channel development, harnessing the Internet and mobile web, urban design, real estate development, design economics, product management, sponsorship, fundraising and development economics as well as issues related to entrepreneurial organizations including not-for-profits and charities.

In May of 2006, Dr Firestone joined the University of Ottawa’s Telfer School of Management at as its first Entrepreneur-in-Residence. He has previously taught or studied at McGill University (Bachelor of Civil Engineering), Laval University, Harvard University, University of Western Ontario, University of New South Wales (Master of Engineering-Science, Traffic and Transportation), Australian National University (PhD in Urban Economics) and Carleton University. Prof Bruce is now Entrepreneurship Ambassador for the Telfer School.

Dr. Firestone has been an operations research engineer, real estate developer, hockey executive, professor of architecture, engineering, business and entrepreneurship, real estate broker (with Century 21 Explorer Realty Inc), writer, researcher, columnist and novelist. He is a peerless husband and father of five great kids and one fine grandson.

You can follow him on Twitter @ProfBruce and @Quantum_Entity and read his blogs at http://www.eqjournal.org and http://www.dramatispersonae.org. You can find his novels at http://www.brucemfirestone.com.

You can engage with him on Facebook via—

http://www.facebook.com/QuantumEntityTrilogy and http://www.facebook.com/Exploriem as well as via LinkedIn at—

http://www.linkedin.com/in/profbruce. His real estate interests are at http://www.OttawaRealEstateNews.com and http://www.TheLandStore.org.

His YouTube channels include—

http://www.youtube.com/user/ProfBruce and http://www.youtube.com/user/quantumentitytrilogy. You can also send the first four chapters of Quantum Entity Trilogy to your friends for free from: http://www.exploriem.org/quantum-entity-subscribe/

His current motto is: "Making Each Day Count".

"Entrepreneurs follow a moral path when they first, take care of their business so second, the business can take care of their families so that, third, their families can take care of them so, fourth, they don’t become a burden on society or their fellow human beings, so, fifth, they can help others so that, sixth, others can help their business," Prof Bruce, 2013.

Dedication

I want to dedicate Entrepreneurs Handbook II, first, to my late father, Professor O J Firestone—entrepreneur, professor, economist, art collector, author, Royal Commissioner on Medicare and generous parent.

It is also dedicated to my former colleagues at Terrace Investments Limited, original parent company of the Ottawa Senators, who lived these many lessons with me as did my students, clients, suppliers and staff who sharpened this material by being willing and sometimes unwilling passengers on the bus.

Furthermore, I wish to acknowledge here my PhD Supervisor, the late Professor Max Neutze, Head of the Urban Research Unit of the Australian National University. He made me a better writer by first telling me (and scaring the heck out of me) that if I wrote my PhD thesis at the same level as my Masters thesis (of which I was inordinately proud), I would not be successful at the ANU and then by editing every word of my 450 page PhD thesis. He provided an example of professional writing at the highest level—concise, eloquent and sparse—every word was meaningful.

He also told me: "Don’t worry, Bruce, the first million words are the toughest."

It’s like everything else, you have to practice… a lot. As Malcolm Gladwell says in his book, Outliers, everyone requires at least 10,000 hours to get good at practically anything.

Listen to what Steve Nash, Canada’s greatest roundball player and two time NBA MVP, has to say on the subject, "A professional is a person who gets up to practice the day after the greatest game of their lives."

Anyway, entrepreneurs, intrapreneurs and artpreneurs need to bring not only talent to what they do but focus, effort and years of practice too. They need to be intensely passionate about what they do in order to be successful at it; you’re either all-in or you’re nowhere.

Alanis Morissette at 17 was honourary captain of the Ottawa Senators first year team and an ‘overnight success’ that year (1992/93) as well, selling millions of CDs. She was a perky, cheerful, talented person and was everything the Sens could have wanted for that role. But what some people forgot was that she had been performing in public since she was a little girl and had at least 10,000 hours of practice in her before her ‘overnight success’. She was a hard worker.

This was my SCHEDULE that I, as a part time novelist, kept to complete book 1 of my new Quantum Entity Trilogy as I did all the usual things I am responsible for in my day job too, like being Entrepreneur-in-Residence at Telfer School of Management (now Entrepreneurship Ambassador there), Executive Director of Exploriem.org, Real Estate Broker at Century 21 Explorer Realty Inc and, of course, peerless husband and father of five great kids and one fine grandson.

- Go to bed at 10 pm on a weekday

- Get up at 2 am

- Write until 7 am

- Do yoga and run on our treadmill from 7 to 7:30 am

- Go to at least 1 of my day jobs

- Get home at 6 pm

- Be with famdamily until bedtime

- Repeat until weekend arrives

- Get home 6 pm Friday

- Be with famdamily until bedtime

- Get up at 2 am Saturday

- Start a hackathon session that will last until Monday at 7 am with sleep periods lasting between 10 minutes and a maximum of 2 hrs

- Wake up because new ideas are flooding my conscious mind from the subconscious

- Repeat every weekend until after a 5.5 week sprint beginning to end, first draft of Quantum Entity is completed

- Eat sparingly during this entire process, no more than twice a day

- Occasional glass of red wine indicated to ward off heart attack and turn mind off for brief periods

- Crash for 10 hours

- Get up and go to work!

Talent is nice to have but without focus and hard work, you won’t get anywhere. I had a chance years ago to sit down with Sir Terence Matthews (billionaire founder or co-founder of Mitel, Newbridge (now part of Alcatel), Dragon Wave, Bridgewater Systems, March Networks, Wesley Clover and dozens more enterprises in tech and real estate).

I was congratulating him on growing Newbridge to a few hundred million in sales and having $70m or so in cash on their balance sheet in just five years. "You’ve built a great business, Terry," I naively said.

Frowning, he answered, "It’s not a great business, Bruce, but it will be. It takes seven to 12 years to create a great business."

So while it takes Terry seven to 12 years, it’s probably going to take you and me longer. I tell student entrepreneurs (and, by the way, we are all student entrepreneurs—it’s a field where you can never stop learning, growing or changing) that if you want to learn how to get rich quick, leave now. I don’t know how to get rich quick and I am pretty sure that you would have better odds of getting rich quick by buying lottery tickets than you do in professional practice or business.

Here are the ten guiding principles that every startup must follow in Sir Terry’s stable of companies. These are called ‘Terryisms‘ by everyone living inside the Matthews bubble—

1. Form an early (and lasting) attachment to the customer.

2. Follow the fastest (least effort) route to revenue.

3. Pursue only those goals that are consistent with the overall objectives of the enterprise.

4. Stay team focused—superstars must park their egos at the door.

5. Follow your mentor’s advice.

6. Create a great biz first and cool tech second.

7. Keep your costs down.

8. Leverage the investment with government grants and OPM, Other People’s Money.

9. Follow a global mandate from the get go—Canada is too small a market to be the primary focus.

10. Not only should you go after every geography, you also want to go after every vertical.

When a team proudly reports to Terry that they have met their quarterly sales goals, Matthews ‘berates’ them for not having doubled or trebled it.

They leave quite chastened.

Whatever, the formula seems to work—every dollar invested in this group of companies over the last 30 years, has returned $13. Thank you, Sir Terence.

Over the years I have worked with several thousand entrepreneurs and student entrepreneurs and, at last count, launched or helped launch 172 companies including two not-for-profits: Ottawa Senators Foundation (also a charity) and Exploriem.org (focused on teaching, research and mentoring entrepreneurs, artpreneurs and intrapreneurs).

This Handbook is dedicated to all of these people—I have learned as much from them as they have from me, maybe more.

Lastly, I must thank my wife, Dawn MacMillan, co-astronaut on my entrepreneurial journey through life, my mother-in-law, Cora MacMillan, another one of my heroes and my five kids who put up with me and encouraged me in good times and not so good times then good times some more.

ProfBruce

March 2013

Foreword

Do you want to learn how to create significant value for yourself and your family in an enterprise that you own and control—value that can provide you the freedom and security to realize your lifetime goals? Then read this Handbook to learn how to bootstrap yourself to success in the 21st Century.

This Handbook is directed toward the great majority of businesses and startups that are not VC-funded. Instead they are bootstrapped by their Founders through the many clever ways that entrepreneurs have learned over the years to extract value from revenue streams and other opportunities around them. In fact, most entrepreneurs remind me somewhat of Bilbo Baggins in J.R.R. Tolkien’s novel The Hobbit—they are barrel riders, perilously perched on top of unstable barrels rushing down the river of life. It’s tough to get on top and then even tougher to stay there. The life of an entrepreneur is not for everyone.

This Handbook also shows intrapreneurs, artpreneurs, CEOs, CTOs, product managers, Executive Directors and others how to adopt and implement the entrepreneur’s skill set in their work lives and embed it within their organizations. They will learn how to be more efficient and effective when launching new products and services whether in for-profit enterprises or charities, NGOs and not-for-profits.

***

What is the number one reason people decide to become entrepreneurs? A) To make more money? B) To be their own boss? C) Because they can't get any other type of work? D) To work fewer hours or have greater flexibility in their schedule? E) Because they believe they can create more interesting work for themselves than others can create for them? Most often, the answer turns out to be E).

Entrepreneurs believe in themselves; they have confidence that they can create insanely great new products and services and, in the process, create new enterprises that will outlast them. They are driven to put their creative energies to optimal use.

Being a successful entrepreneur allows them to exercise greater control over their own destiny, both professional and financial. Many people think that having a JOB is more secure but entrepreneurs, intrapreneurs and artpreneurs believe that real security comes from the skills, knowledge, training, creativity and experience they possess and they know that anyone can be laid off from any JOB at any time.

One of my former colleagues from the GOC (Government of Canada) was laid off in the recession of the mid-1990s from what he perceived to be a secure position—doing post project reviews to measure if GOC programs had, in fact, delivered what was promised to Parliament. He had a PhD in anthropology and 27 years experience doing post project reviews.

He asked me, ‘What do I do now? I still have teenagers to put through university and my 18 months severance won’t last me and my family much longer than… well, 18 months?’

I suggested that he buy an existing business, preferably a franchise, because he wasn’t really cut out for the life of an entrepreneur, per se, and his options, in his 50s at the time, seemed limited to me. He declined. ‘I am going to type up my CV and send it out!’

Six months later, de nada. Not a single interview from over 500 submitted CVs. Not even a phone call or email. Absolutely nothing. The private sector was not apparently crying out for PhDs in African Anthropology or a 56 year old with loads of experience doing Government reports, most of which never saw the light of day.

He came back to me for advice. ‘Buy a franchise,’ I advised again.

‘Which one?’

‘I don’t know. Let’s look around.’

Eventually, we found him a sandwich shop that was losing $3,000 a month. It was a franchise with a terrific brand in a good location but terrible management and ownership. Usually those two things go together. To me, it spelled opportunity. To Bill (not his real name) and his other advisors (basically lawyer, banker and accountant), it was something to stay away from.

But after some persuading, he bought the place for $65,000*—of which he had to put down 50% in cash while the Seller took back financing for the balance to be paid off over the next four years without interest. Bill had to pay monthly principal and interest but there were no payments during the first six months during which his entire efforts were directed towards turning the business around.

(* Typical restaurants of the type were selling for anywhere from $145,000 to $350,000 in that period so he got a good deal, assuming he could turn the business around. Buying any type of business to lose money or as a 'tax write off' is always a bad idea.)

Seller financing is an example of bootstrap capitalization. There is no bank involved, no angel investor and, obviously, no VC (Venture Capital) funding either. Bill also has no partners*. The financing is, in effect, being derived from the business itself and, if Bill can turn around the operation, he will, in fact, have paid just $32,500 of his own out-of-pocket in cash to own it—the balance is in effect being paid from the revenue streams of the business itself. A friendly seller or a desperate one is part of this equation.

(* There are still two chairs in Heaven waiting for the first two partners to get there and still like each other. If it wasn’t possible for the two McCain brothers (Harrison and Wallace) to make it (they had a falling out over succession after decades of being co-CEOs of the McCain Empire) then you and your partner probably can’t do it either. So why have one in the first place?)

Next we worked on Bill’s marketing program which basically consisted of simple ‘Dollar Off’ coupons. He printed a gazillion of these (remember, this was in the time before Groupon et al) and he did two things with them—a) he got permission from a neighboring national retailer to place these under windshields of parked cars from 10 am to 11 am each day (he also promised to come back every evening and remove any coupons thrown away in the parking lot plus he gave the national retailer franchise owner a tonne of coupons to give to his employees as part of their incentive program) and b) he created heaping platters of freshly cut sandwiches. With these he would visit offices (around 11 am) within ten kilometers of his store. Just as people were getting kind of hungry, there would be Bill with a giant platter of sandwiches and still more Dollar Off coupons.

He has an open, trustable face and in his franchise's uniform, he somehow managed to finagle his way past security at most local tech companies—all they did was waive him past security to ‘deliver’ his sandwiches. He never asked for permission. Bill is one in a long line of entrepreneurs who would rather ask for forgiveness than beg for permission.

He would then run back to his store and watch customers line up…

He not only does his own marketing but also hires and fires, does staff training himself, runs his own accounting software, is big in catering and loves what he does. As long as he keeps a good relationship with the master franchisor, no one will ever tap him on the shoulder again and tell him he is too old or not wanted or both.

He owns two shops now and has no plans for any more. His first year (with his first shop), he netted $30,000 (down from his GOC salary of around $110,000), his second year, he made $90k, his third, $120k and, with two shops, he now regularly makes more than $150k. This is his cash (after paying everything including income taxes) or as my wife likes to call it, 'IGA money', money you can touch, feel and spend. He told me recently (he's now in his late 60s), ‘I never thought I would earn this kind of money and I never thought I would be as happy as I am now. I'm gonna do this forever or until I drop, whichever comes first.’

This simple example has a few lessons:

1. Entrepreneurship is not necessarily riskier than having a JOB.

2. Mentored businesses tend to be more successful than those without a support network.

3. But you need the right mentor—not necessarily a lawyer, banker or an accountant who are not really entrepreneurs anyway.

4. You need to be able to sell to be a successful entrepreneur.

5. Marketing and sales are not the same function and, any time you see someone with the title ‘VP, Marketing and Sales’, you are looking at someone who doesn’t know what they are doing.

6. As CEO, Founder, President, Executive Director, Entrepreneur, you can not delegate or outsource core competencies like marketing, sales, finance, cashflow management, banking, accounting, business modeling and HR even if you don’t like one or more of those functions.

7. You can often find financing sources in the deal itself. This is part of bootstrapping yourself to success.

8. Buy low, sell high or, put another way, buy when everyone else is selling, sell when everyone else is buying, buy what no one else is buying and sell what no one else is selling. Have the courage of your convictions.

9. Remember, entrepreneurs would rather ask for forgiveness than beg for permission.

In this Handbook, you will go on a voyage to create the most compelling business models for the 21st Century. We are going to look deep into the past (as far back as the beginning of trading economies circa 10,000 B.C.) as well as show you models from the past decade and the new one we are currently in that may amaze you—ones that generate cash on three sides (not only getting cash from customers but from suppliers and marketers too).

You will learn how it is now possible to reverse out much of your work, to create mass customization in products and services, turn products into services and vice versa, engage in negative cost selling and negative cost marketing and much more.

"You can think your way to wealth a lot faster than you can work your way there," Prof Bruce.

Who should Read Entrepreneurs Handbook II?

Entrepreneurs/CEOs/CTOs/Product Managers—Get the business model right, so the harder you work, the more money you make; find out why Apple’s Steve Jobs and IBM’s Sam Palmisano spent nearly 40% of their time on business models instead of individual products or services.

Artpreneurs/Artists/Designers/Architects/Novelists—Get rich while you are still alive.

Intrapreneurs/Engineers/Technologists/CFOs/COOs/HR—Learn and adopt the entrepreneur’s skill set so that your next product/service launch is ultra successful and the next promotion is yours.

Executive Directors/Managing Directors—Adopt a model that makes your not-for-profit/charity/NGO both efficient and effective.

Reviews

Your material is informative, entertaining and practical; feedback has been unanimously positive. They all enjoyed learning about best practice business models and reading about examples of successful and unsuccessful business models.

-Barbara Orser, M.B.A., Ph.D., Deloitte Professorship in the Management of Growth Enterprise,

Telfer School of Management, University of Ottawa

Professor, I wanted to let you know that the Elevator Pitch and your Business Model Competition were a big part of what inspired me to actually go out and start Incogna.com. Otherwise, I'd probably have just gotten a JOB when I graduated. But this is way more fun!

-Kris Woodbeck, (Engineering Graduate, U of O), Founder, Incogna.com

This helped me conceptualize and add a social media aspect to my startup. With the addition of this concept, we were able to develop a next generation learning management system designed to allow for a level of collaboration and knowledge sharing between students and instructors never before possible.

-Craig Schoen

Startup DNA was different from anything I have taken to date at the MBA or undergrad level. It provided me with both a practical understanding and creative outlook on the how to's of building a business model. Prof Bruce equips you with the knowledge and the courage to stop 'thinking' about entrepreneurship and start 'doing' it—all the while reviving your entrepreneurial spirit.

-Ziad Geagea

Startup DNA helped me see entrepreneurship from another angle. I already knew THAT it was possible to set up a company with no money, after this class I know HOW!

-Mr. Pierrick Balmain

Prof Bruce’s material created one of the best classes I've taken in University. It will give you skills which you can use throughout the rest of your life.

-Benjamin Butty

This was my favorite course that I have taken in my four years of education. Even if you are not an entrepreneur, it’s a very interesting course and Prof Bruce has a lot of interesting stories.

-Jason Sones

Entrepreneurialist Culture is a course unlike any other. You're not learning the material, you are living it. And this is the best teaching experience a student could ask for—learning by doing. I am an engineering student that, before this class, had very little business experience. This class provided me with invaluable learning experience and a strong business foundation that will last me a lifetime.

-Patrick Trahan

This is a spontaneous and exciting experience! You never know what to expect next! It gives you hope and confidence to think outside the box, to pursue your dreams and to reach for the sky. The concepts and advice you learn and receive are indispensable and will be useful for your future projects and endeavors!

-Dania Balaa

Startup DNA filled a hole in the MBA program—business modeling is an essential skill for all MBA grads regardless of whether s/he is an entrepreneur or manager. The experience was enhanced by Prof Bruce's innovative teaching style. Of the 20 MBA courses I've taken, this one is in the top two!

- Joe Krenosky

Startup DNA has been the most value-added course I have taken in the MBA program. It was different since it is based on the Prof Bruce’s experience as well as research. It was the most profitable course I took this year and I think it should be a mandatory class, since it would provide MBA students with a different state of mind to approach business, whatever the career they will be involved with.

-Thibaud Clement

Prof Bruce, I've wanted to mention this for some time now, but haven't had the chance. Your course was maybe the best course I've taken at University. The concepts I took away from it will be with me forever and I appreciate the passion with which you teach.

-Tyler Steeves

I've always envisioned playing by my own rules, working on the things that interest me most, and making a difference—all the while getting paid for it. Turns out there is a name for that—entrepreneurship. Thanks to Prof Bruce, the entrepreneur within me has been unleashed, and I have learned key concepts such as bootstrapping, business modeling and guerrilla marketing.

-Daniel Beauchamp

My mind has been opened up to the degree to which entrepreneurs can create large projects from thin air. Now, all I do is think big and long term.

-Siavosh Noruziaan, Empire Deck and Fence

We recently finished another good season here at Wilderness Tours. Thanks to Prof Bruce we changed our biz model and added a ton of programming. As a result, we have since expanded our market by 40%.

-Joe Kowalski, President and Founder, Wilderness Tours

I had a nice chat with some of Prof Bruce’s students at this morning's breakfast... they simply said you were the best Prof they have had since coming to this University four years ago. I am sure it is a shared belief by many of your other students.

-Luc Lalande, Carleton University Entrepreneurship

I wanted to thank you for an awesome experience this semester. I can definitely say that this has been the most educational experience I have had during my university career. I met some brilliant people that I have learned a lot from and most importantly, I have a much clearer vision of what I want to do in the future. You were by far the most influential and motivating professor I have ever had and I hope to keep in touch with you for many years to come.

-Richard Isaac, Engineer, RealDecoy

Entrepreneurialist Culture is a course that nurtures self-realization, motivation and a higher order of thinking, while introducing students to essential entrepreneurial and business tools. Reflection upon this course has led me back to a truth I heard long ago. With anything you do, you will get out as much as you put in. Out of every course I have taken, I have never seen a Professor put in so much, or a greater level of participation from students. Business and engineering students will likely get at least as much out of this course as they put in.

-Geoffrey Waddington, Engineer and Founder, RealDecoy

I believe it is important for anybody who is remotely thinking about starting their own business sometime in the future to enroll in at least a few entrepreneurship courses. The knowledge you will gain by listening to Prof Bruce will be crucial to the success of your future enterprise. These courses will teach you how the real world works and how to survive in it.

-Martina-Ann Gargano

Our society is run by the business model and engineers are not exempt from that. The better I understand business, the better engineer I am. If I take a regular business class, I'll learn about abstract concepts that I understand but those concepts don't mean anything to me. By taking a course in entrepreneurship with Prof Bruce, those abstract concepts have relevance because it is in the context of building a real business.

-Robin Chahal, Engineer

Simply put, we nominated Bruce for an Ottawa teaching award and given our testimonials, he won!

-Trevor Grant

Chapter 1

Introduction to Entrepreneurship

1.1 Create Value—More than if You just had a JOB

This Handbook is not just relevant to business and engineering students and graduates contemplating starting their own enterprises. It is just as relevant to people who intend to seek employment within large companies or, indeed, are going to enter public service or, work with NGOs (Non Governmental Organizations), charities, museums, hospitals, universities, public school administrations, not-for-profits and the like. These people, if they embrace concepts presented in this Handbook and adopt the skill set of entrepreneurs, are called intrapreneurs. Great organizations in any field need creative, determined ‘heroes’; self-starters and independent-minded intrapreneurs who think outside the box, do everything in parallel, understand the value of getting launch clients and building cashflow, use smart marketing and bootstrap capital, know how to control costs, who have the courage to pioneer new ways of doing things and start new things.

These intrapreneurs are people who get new projects green-lighted and they get promoted too. Whose project is more likely to get approved? Alex who has a pet project, presents it to his boss. He says it will take two years of R & D to develop and requires $10 million in funding. Meanwhile, Tanya is also pitching her idea—which also takes two years of R & D plus $10 million in funding but she has lined up three pre-launch clients who are each willing to kick in $2.5 million in development funds and take the first six months of production. Who is more likely to get their project green-lighted and who gets the next promotion? Tanya of course.

Artists, architects, writers, musicians, poets, novelists, designers and other creative persons are also entrepreneurs and they can benefit from studying entrepreneurship so that 'death isn't a career move' for them; that is, they can learn how to 'get rich while they're still alive'.

Reading Entrepreneurs Handbook II you will learn (among other things) how to—

- Select the right idea for your next startup, product, service, app, campaign what have you…;

- Create business models for the 21st Century that produce great results so that the harder you work, the more money you make;

- Add differentiated value, i.e., 'pixie dust' to your business model;

- Create a compelling value proposition and learn how to clearly demonstrate it to customers and clients, managers, investors, partners, suppliers and Boards of Directors;

- Self- capitalize (bootstrap) your new enterprise/product/service/campaign which will provide you with independence and creative control as well as, in certain circumstances, ensuring that you end up owning it not a VC firm or other investors, partners or Angels;

- Find free or inexpensive startup capital in the deal flow, from clients or customers, from suppliers or from anyone else who stands to benefit from your success;

- Use smart marketing (guerrilla marketing and social media) so you can acquire customers and clients cost effectively;

- Mass customize products and services using the Internet so that, for the first time in history, you can get custom outputs from standard inputs;

- Reverse out some of the work to your clients, customers, suppliers and marketing channel partners using the Internet so that you create a scalable enterprise that can produce more value than if you just had a JOB;

- Add intelligence to your business model so that you can match client needs to supplier abilities by adding an Intranet ‘brain’ in your enterprise’s ecosystem—this will make even mundane service businesses scalable for the first time ever;

- Find pre- launch and launch customers using negative cost selling techniques and outstanding value propositions to sell, sell, sell;

- Execute expertly;

- Innovate and improve constantly;

- Make your own rules;

- Get sponsors, strategic partners and others ‘intricated’ into your model to leverage your marketing dollars and also to provide you with additional capital;

- Learn how to use negative cost marketing and co- branding to deliver your message and capture customers integrating them in the processes;

- Exercise leadership;

- Use social media and other Internet tools including cloud computing to reach world markets effectively and inexpensively, using applications that were previously only available to large businesses;

- Compete effectively with hard charging entrepreneurs from China, India and other Tigers by having a business model that cannot be easily duplicated or dislodged and around which a community forms that will provide you with a lasting, sustainable competitive advantage, concession and franchise;

- Study new enterprise formation and analyze case studies to learn what others did right and what they did wrong;

- Add a social giveback dimension to your model with its own sources of revenues, its own supply chain and clients as well as business model which also acts as a kind of stalking horse marketing for your for- profit business.

1.2 Hire Up

What does it take to create a successful, large-scale entrepreneurial organization? Can you stock it exclusively with rebels who bring creative energy to it? What if, instead, you have top-down military style leadership? People who are real doers. Will that work? Or how about having a lot of order takers on hand. Will that help?

You need all types but they have to work cohesively as a team, they have to be able to execute and, at the top, you need one competent, clear thinking controlling mind. After all, there are still two chairs in Heaven waiting for the first two partners to get there and still like each other. Put another way. I am not a believer in co-CEO governance models. If brothers Harrison and Wallace McCain (who ran the McCain food empire together for decades) couldn’t make it successfully to the end (they had a falling our over succession with Wallace leaving with his family to takeover the Maple Leaf food conglomerate based out of Toronto instead of Florenceville, New Brunswick) then you probably can’t either. Again, you need ONE controlling mind at the top of an organization. This provides for faster decision making, cohesive direction for your team and the greatest opportunity for success. Of course, it must also be the right mind—more on this in the chapter on leadership. Nothing is more crucial to enterprise success and survival than the person at the top. That is why great CEOs get paid so much. What was Steve Jobs worth to Apple?

The most important decision most entrepreneurs make other than the one to actually start their new enterprise is who they hire—it’s people who produce income and profitability for a business, not assets. So hire up.

What is the blend of skills required to be a successful entrepreneur? Well, you need to be part Order Taker (Administrator), Rebel (Entrepreneur) and Doer (Top-Down Military Commander). You need a bit of all three to really build a great organization. My friend Dave Ready, former President of the Ottawa Senators Foundation, told me, "You have good students & good student entrepreneurs but not necessarily in the same person." It’s true—it’s hard to find someone who can competently lead an entrepreneurial organization but if you find the right person, it makes all the difference.

At Zappos, they will pay anyone, no questions asked, $1,000 cash to quit after a few months on the job. This is one of the best investments that company will ever make. Why? Because getting rid of unhappy, negative employees is a huge bonus for the ones who stay and it’s a cheap way to do it.

"In looking for people to hire, you look for three qualities: integrity, intelligence and energy. And if you don’t have the first, the other two will kill you. You think about it; it’s true. If you hire somebody without [integrity], you really want them to be dumb and lazy," Warren Buffett.

1.3 Goal Setting

Goal setting is an important part of future success for would-be entrepreneurs. Enterprises that set goals and track their metrics are growing at 7x the rate of enterprises that don’t according to a Silicon Valley study published in May of 2011 called Startup Genome Report 01 by Max Marmer, Bjoern Lasse Herrmann, Ron Berman, 2011, http://www.eqjournal.org/Startup_Genome_Report.pdf.

Question—what would you rather do? Race a downhill ski course before or after your chief rival? Well obviously, you would choose afterwards. Humans are capable of incredible feats when they focus and set goals. When you know the split times of another skier, you might be amazed to see that your times are fractions of a second better on each part of the course.

When we first brought the Senators to Ottawa, I set a very public goal that we would get 22 points that first season—I told the media, the players, the coaches, everyone that that was our goal for the year. Now why did I choose 22 instead of say 30 or some other number? Because the worst ever team in NHL history (the 1974/75 Washington Capitals) got 21. I wanted to avoid the ignominy of being the worst ever NHL team and, once I told the players and coaches that, they did too. Does anyone remember what our point total was in our first year? 24.

We were fortunate to get 24 points instead of 22 because we had an 84 game season instead of the 80 which the Caps played. So if we had actually ended up the year with 22 points, this would have given us a winning percentage of .130952. The Caps winning percentage was .13125, better than ours by .0002976 so perceptive fans would have argued that we were in fact the worst team ever.

I know some of the Caps players from that era and, trust me, they are hoping some team shows up that is worse before they die. They hate the fact that now in middle age, fans will still say things to them like this, ‘Oh, you were on that team. Weren’t you guys the NHL’s worst ever?’ Our winning percentage from 1992/93 ended up being .142857 a healthy .011607143 better than theirs.

Here are my calculations—

I believe that if you set your goals, if you visualize them, if you internalize them, if you can see yourself achieving them, you have a great opportunity to be successful. I suggest to all student entrepreneurs that they write a simple equation everywhere—their homes, their offices, wherever they can see it, N = ? where N is number of clients, customers, visitors, revenues, patients, donors, sponsors… anything that measures organizational performance. It seems simplistic but if everyone in your organization buys-in to a single goal and all efforts are focused on achieving that, you will.

Notice I said set your goals; I haven’t said a word about planning how to get there. Plans are useful guides but they are like war plans—they change as soon as you come into contact with battlefield reality. Whether you are an entrepreneur or you are working for a large company or a Not-For-Profit organization be prepared to be flexible—life has a lot of surprises in store for you and you need to be able to change as things change in your environment—adapt or perish. Entrepreneurs and intrapreneurs need to be Kings or Queens of the workaround-on-the-fly.

If you remember Sigourney Weaver’s role as Ripley in the Alien series, she showed remarkable ability to make the best of her situation. She would constantly remind her colleagues (usually just before they were eaten, decapitated, eviscerated or infected) just to: ‘Deal with it!’ The US Marine Corps’ unofficial motto is: ‘Show Some Adaptability’.

When we won the NHL franchise for Ottawa in December 1990, what was the first thing we did?

a) Have an all night blow out party?

b) Come back from West Palm Beach, Florida (where the NHL’s Board of Governors met) to launch our first ever season ticket blitz?

Answer: BOTH. We partied then we got back into town the next day and sold $22.5 million in season tickets in cash in the next ten days.

An entrepreneur or intrapreneur is like an engineer—they can do for a dollar what any fool can do for $2. S/he is also someone who can create $2 in revenue for every $1 that any fool could generate. Most successful entrepreneurs (by definition) start with (practically) nothing.

Now if you had to choose just three things for your startup from the following list, what would they be?

1. Launch clients and customers;

2. Access to VC financing;

3. A great, never-tried-before idea;

4. A good business model;

5. Sound execution;

6. Approved bank financing;

7. A good partner;

8. Access to government grants?

If you chose 1, 4 and 5, go to the head of the class. I tell my students, don’t waste your time pursuing VC money or government grants, the best partnership is often none at all, banks only lend you money to people who don’t need it (i.e., people with collateral) or maybe the reason the never-tried-before idea has never been tried before is because it is a bad idea.

Entrepreneurs and intrapreneurs who start with nothing often build much stronger businesses, focused on getting real clients, building real cashflow and putting real profits on the bottom line. If you have real clients and real cashflow, you will get financing today, not the other way round.

I’ll bet the now departed Steve Jobs after launching the Mac, iPod, iPhone and iPad spent very little time resting on his laurels.

FOCUS, SET GOALS, PREPARE, WORK HARD, BE FLEXIBLE. After all, the harder you work, the luckier you get.

There are many lessons for readers who want to be successful entrepreneurs, artpreneurs or intrapreneurs which include:

A) Set goals for yourself and your team;

B) Be a self-starter;

C) Practice as hard as you play;

D) Focus on your goals;

E) Work hard;

F) Be flexible in how you achieve your goals/show adaptability;

G) Bring innovation to what you do;

H) Create a PB4L, Personal Business for Life—one that you own, control and keep;

I) Protect your reputation and understand and apply ethics in all that you do;

J) Be prepared to deal with uncertainty and stress;

K) Execute expertly—don’t be a dilettante;

L) Take care of the business and it will take care of your family who will take care of you!

We will explore these lessons and many more in this Handbook.

1.4 Chris Rock and Michael Jackson

I really like comedian Chris Rock. According to Chris, the NBA’s Lebron James is RICH but the guy who signs his paycheque is WEALTHY. Chris Rock has it exactly right. You can get rich (for awhile) by winning a lottery, becoming an NBA Star, speculating, asset flipping, gambling, picking the right parents or prospecting for gold, diamonds, nickel or whatever, but you can’t become wealthy doing any of these things.

Wealth derives from control over a factor of production, a license, a franchise, a territory, a concession, some IP (Intellectual Property like the secret formula for Coca Cola or the 11 secret herbs and spices that the Colonel uses to make fried chicken), a competitive advantage, a comparative advantage, property ownership—anything that creates a sustainable, repeating and renewable income stream; it is your ‘pixie dust’—the magic that really makes your business work.

Now let’s just look at an example of wealth. Let’s say someone controlled the early Beatles catalogue (say, someone like the now departed Michael Jackson). Michael bought the catalogue in 1985 for $47m (but lost his friendship with Paul McCartney in the process). By 1993, MJ’s company was reportedly earning $30m annually from it (albeit, MJ had added other songs by other artists by that time but let’s ignore this for the moment) and it was estimated to be worth $300m by then. This yields a cap rate (capitalization rate, which is NOI (Net Operating Income) divided by SP, Selling Price or FMV, Fair Market Value) of 10, which is pretty typical for this type of privately held asset. No one knows what kind of income stream he was getting in the early part of this Century but it had a rumoured value of $1 billion at that time. MJ still owned 50% of it, the balance was owned by Sony.

With a cap rate of 10 and given that MJ owned half the catalogue, we can guess that MJ was getting $50m a year in income from his share of ownership circa the early 2000s. Plus the Beatles were making a huge comeback—as my then 14 year old daughter, Jessica, could attest. All she wanted for her birthdays were Beatle CDs. She knows just about every word to every tune the Beatles ever recorded. So it wouldn’t surprise me if MJ’s income was going up every year from the catalogue. This is called wealth.

However, let’s say MJ was in need of some quick cash (which, alas, he often was during his troubled life) and decided to sell his interest to Sony for, say, $500m. Now MJ would be rich for a period from selling his interest in the catalogue but he would no longer be wealthy because he has lost the ability to renew his wealth every year by producing a recurring and rising (inflation-protected) income stream from control over this particular factor of production.

But what’s that you say? He could have invested the proceeds in T-Bills, Muni Bonds and GICs (Guaranteed Investment Certificates). Sure he could, but they produce puny 0.7% to 3% rates of return. If MJ had paid ~$100m in capital gains taxes from this hypothetical sale, he would have been left with $400m, which would give him an income stream of $2.8m to $12m a year with no inflation protection. If MJ (or MJ’s estate after his untimely passing) had instead continued to control this catalogue, he or they could always increase the price (aka royalties) paid for each tune if inflation takes off and starts to bite into their revenue stream. But even ignoring inflation, why would MJ or his estate trade an income stream of $50m a year that made him wealthy to become a remittance man getting $2.8m to $12m a year? MJ had already turned down many offers to sell; presumably because he understood the Chris Rock difference between becoming rich and being wealthy*.

(* Somehow I doubt whether Lisa Marie Presley ever understood this difference. In December 2004, it was announced that Lisa had sold her father’s image and name as well as 85% of Elvis Presley Enterprises Inc to Robert Sillerman-controlled SFX Entertainment for a reported $100 million, which included some stock in a new SFX-controlled business. So not only does Lisa no longer own, control and direct a valuable franchise (her father’s estate, which brought in $45 million the previous year), she didn’t even get all her compensation in the form of CASH. As any entrepreneur knows, cash is KING. (Pardon the pun, Elvis). Now compare that with JK Rowling’s absolute and tight control over the Harry Potter series—not only the publishing rights but also the film rights and other media and Internet rights as well. It has made her the richest woman in the UK, worth more Queen Betty.)

Did you know that many, maybe most, lottery winners blow their entire stake in less than five years? By that point, their spouses have left them, they are alienated from their old friends, they have got a whole new set of ‘friends’ who are only around while the money lasts and they don’t even have their old job to go back to. Many of them have picked up nasty habits along the way like taking drugs or abusing alcohol. It’s absolutely amazing how many of them end up in bankruptcy. They are much worse off for their ‘good fortune’.

Here’s a typical story from MSN Money—

William ‘Bud’ Post won $16.2 million in the Pennsylvania lottery in 1988 but now lives on his Social Security. I wish it never happened. It was totally a nightmare, says Post. A former girlfriend successfully sued him for a share of his winnings. It wasn't his only lawsuit. A brother was arrested for hiring a hit man to kill him, hoping to inherit a share of the winnings. Other siblings pestered him until he agreed to invest in a car business and a restaurant in Sarasota, Fla., two ventures that brought no money back and further strained his relationship with his siblings.

Post even spent time in jail for firing a gun over the head of a bill collector. Within a year, he was $1 million in debt. Post admitted he was both careless and foolish, trying to please his family. He eventually declared bankruptcy. Now he lives quietly on $450 a month and food stamps.

I'm tired, I'm over 65 years old, and I just had a serious operation for a heart aneurysm. Lotteries don't mean (anything) to me, says Post.

The Internet is filled with pathetic stories like this.

I am increasingly certain that people in the 21st Century are going to need what I call a Personal Business for Life (PB4L). It seems to me that there are so many fast changes in local, national and global economies going on and so many things can and do go wrong, that it might not be a bad idea after all to have a fallback position. We will look at case studies of successful PB4Ls in a later chapter.

1.5 China and India

How did China and India become the great success stories of the last quarter of the 20th Century? Hundreds of millions of people in both countries now enjoy a lifestyle unimaginable just one generation ago. Was it because of wise government oversight, a great leap forward engineered by central planners or a new set of five-year plans issued by state edict? None of the above I would suggest. It was the unleashing of their entrepreneur class along with freer financial markets, better education systems and access to international trade that largely powered their economic ‘miracles’.

Millions of people in China and India independently pursuing their own objectives (directed only by Adam Smith's Invisible Hand) alleviated poverty and created wealth there. Governments in those countries deserve credit for getting some of the pre-conditions for economic take-off right but mostly for not getting in the way of progress.

1.6 Individuals Count

You do not need to have a large number of entrepreneurs to change the face of your city or town. In my hometown of Ottawa, Canada, if you removed just a handful of people from the last 25 years, you would have a much diminished place. Ottawa would be very different if you removed just four people—Terry Matthews (Mitel, Newbridge, March Networks, Wesley Clover), Mike Cowpland (Mitel and Corel), Mike Potter (Cognos now IBM), and Bruce Firestone (Ottawa Senators and Scotiabank Place). So individuals count.

1.7 Moral Underpinnings

While it is true that the entrepreneur is largely following his or her own self interest, there is a moral underpinning for this—one's first obligation to society is to take care of yourself and your family so as not to become a burden on that society. Once this is achieved, humans who are uniquely interdependent and co-dependent, have a further obligation to take of their fellow human being.

I would sum up the morality of capitalism this way—

1. Our first priority as entrepreneurs is to take care of our business;

2. So our business can take care of our families;

3. So our families can take care of us;

4. So we don’t become a burden on society or our fellow human beings;

5. So we can look after the interests of our fellow human beings;

6. So that they can help our business.

1.8 Micro Entrepreneurship

I read an interesting article years ago in the Globe and Mail (by Luke Harding of the Guardian News Service, February 10, 2003) about micro entrepreneurship in Kalmandhai, India. There, slum dwellers erected latrines—one for men and one for women and a third for children only. Charging just one cent per use, they built a profitable business using only $900 USD in startup capital advanced to them by UK based WaterAid.

Who would have thought that you could make a successful business out of a latrine but that is apparently what the women of this village did. I was intrigued so I sat down and did a spreadsheet on it and here are my results:

Village of Kalmandhai, India with assistance from WaterAid, UK—Cost of Construction of New Latrine

Men's $450 USD

Women's $450 USD

Children $0

Total $900 USD

Revenues Per Use $0.01 USD

Daily Use Men 300

Women 375

Children 400 free

Total Use 1,075

Total Paid Use 675

Total Daily Revenue $6.75 USD

Annual Revenue $2,463.75 USD

Maintenance 10% $90

Night Watchman 1 $450 $450

Cleaning Staff 3 $1,350

Net Revenues $573.75

Return on Investment 64% p.a.

So they achieved a 64% p.a. rate of return on this investment, which is impressive. Just as importantly, there are significant health benefits that accrue to these people from proper disposal of human wastes. Plus they generated additional activity including—

a. the construction of a shower block for traveling truck drivers that pass through the Village and for the villagers themselves (and more fees);

b. the use of their 'product' (from the latrines) in their herb garden (for self use and third party sales);

c. startup of a composting business;

d. money lending to women in other villages to start other enterprises.

Think about the number of jobs they created-from a latrine! Give a human a fishing rod, not a fish. If these ladies could create a thriving business from a $900 investment just imagine what privileged people like us in developed nations and certain developing countries—with all the advantages we have like great education programs, access to capital and customers, free, civil societies and much more—can do.

1.9 What’s More Important? Good Execution or the Next Big Idea?

If you ask me, the big idea is LESS important than good execution. Most of my students think that the big, NEVER BEFORE TRIED, idea is more important but there are lots of companies that do very well with good execution of fairly mundane things.

I am pretty sure that the only thing that is in infinite supply is ideas; numbers, for example, represent an idea and they are infinite. Prime numbers, the basis for code making, are probably in unlimited supply. The point is that each number or prime number represents an idea. The number zero, for example, plays a central role in mathematics as the additive identity of integers, real numbers and algebraic structures. It was invented by Persian Muhammad ibn Ahmad al-Khwarizmi in 976. So you must agree that since numbers are not limited, ideas aren’t either.

But other than ideas, we do not know anything else that is unbounded. The Universe and time may be bounded—it depends on the value of the Cosmological Constant which we have been unable and may never be able to determine. So the Universe may, one day, contract into an invisibly small point or expand indefinitely until the very fabric of matter, space and time decay over unimaginably long periods of time to nothingness.

There are probably more than 25 million smart Americans in their basements at any one time trying to come up with the next big idea (like, say, Google or the iPhone or Angry Birds or Kickstarter). They are generating a huge volume of new ideas; this suggests, in economic terms, a surplus of ideas while the skills to implement them are in much shorter supply and, hence, the latter will generally be expected to attract a higher price.

The market for new ideas, such as it is, tends to put a low price on them (just try to sell your BIG IDEA at business model stage and you will see—a) how hard it is to do that and b) just how little you will get for it). Obviously, a startup that combines some type of innovation with good execution is better off than one with just sound execution. Fred Smith, when he started Fed-Ex, brought the hub and spoke system to the overnight package delivery business, essentially creating that industry. Before he did that, it was thought to be an impossible challenge—if you had 60 cities as both origins and destinations in a network, this meant 3,600 overnight flights would be needed to connect them all, an obvious impossibility. But Fred discovered that if you had instead five hub airports within easy trucking distance to the rest, you could get by with just 25 overnight flights…

Most successful startups do not create new industries and they are not necessarily first movers. Google wasn’t the first search engine; however, they did bring significant innovation to the table including—neutral search rankings, search rankings that reflected traffic loads on and links to a site and trusted, fast results. Later came paid search links (Ad Words) with its auctioning system. GradeAStudent.com, now GradeATechs.com, was not the first at home computer repair service but their execution was good enough and they used a back end system (GASnet) to automate their appointments and billing systems so that they could grow into a profitable eight figure business.

I have felt for a long time that many VCs have been heading in the wrong direction; they should NOT fund startups. Rather, they should wait until startups prove themselves in the marketplace. It’s kind of like watching for tall shoots in a field of poppies. Those are the ones they should fund. It’s better for VCs, better for the national economy and, interestingly, better for startups too.

It’s better for VCs because they will fund more winners and fewer losers and probably generate better returns for their investors. This, in turn, will attract more capital to their industry which is good for innovation overall. It’s better for the national economy since careful rationing of scarce capital will provide higher overall growth rates. And finally, it’s better for startups, in my opinion, to focus on—a) building a sound business model, b) self capitalizing, c) using smart marketing to capture customers inexpensively and d) generating real cashflow from real clients and customers.

The founders of these businesses will find it much faster and much less frustrating to find customers first rather than spending six, nine months or more hoping to attract VC or Angel funding or going after government grants. They will also get help from clients in other ways such as designing and refining the final product or service. As soon as your contemplated business model comes into contact with customers, it will change; they will force changes that YOU CAN NOT PLAN FOR, ONLY DISCOVER.

Finally, the founders of these businesses will get to keep more of the equity in their businesses if they do a deal with a VC firm later when their businesses are more mature and, frankly, they are more mature. Nothing gives you more leverage in negotiations with VCs than the fact that you are cashflow