The Challenges of Being a Social Entrepreneur

social, entrepreneurLet’s start off by addressing that being an entrepreneur is difficult. However, being a social entrepreneur brings about its own set of challenges and obstacles. It combines social impact with sustainable business growth. Social entrepreneurs are faced with having to solve or alleviate a real-world issue while also maintaining positive financial performance. . Here are  the two main challenges social entrepreneurs face. Though considered challenges, many have overcome them in the past.

1. Competing on prices while having enough money to make a social impact

In order to remain competitive, social enterprises need to take advantage of creative pricing strategies. Social entrepreneurs need to establish a pricing strategy that will consider price point, allowing for enough revenue to serve their chosen cause, without compromising their customers’ expectation of their product. Though social enterprises have to overcome additional challenges when pricing, they can use original pricing techniques that are not as readily available to other start-ups. Social entrepreneurs should strategically highlight their cause and mission. Socially conscious consumers who agree with this mission will be willing to purchase at a higher price point in order to support the cause. Furthermore, bundling will incentivize sales. Shoe company, Toms, has made great use of this. For every shoe sold, a pair is donated someone in need. In order to build and grow brand equity, social entrepreneurs should also look into certification. For instance, being certified as fair trade, or B Corp will help maintain a positive reputation and better positioning.

2.  Quantifying your impact

Measuring impact for social entrepreneurs can be complex. Not only do you have to establish metrics for your business performance, you have to measure your social impact to prove credibility, as well as attract investors and potential business partners. Impact investments are investments that not only yield financial return, but social and environmental return as well. With the rise of the number of social enterprises, credible organizations have developed frameworks to standardize the calculation of social impact. The IRIS Framework consists of an organization’s description, product description, financial performance, operational impact, and product impact. If your mission is to have impact on a global scale, The Global Impact Investing Ratings System (GIIRS) gathers a range of information with regards to company’s work, size, sector, and region.  These assessments are carried out annually and validated by the GIIRS.

Many resources are available to Montrealers looking to take a step into social enterprise. Luckily, numerous grants, and funding opportunities are available, that do not require giving away equity or paying back an investor. YES Montreal, FuturpreneurQuartier de l’Innovation and  PMEMTL  all offer workshops and/or grant opportunities for social enterprises in the city, just to name a few.

With millennials harnessing the wave of activism and social awareness, social entrepreneurship has risen for the past decade. They are working towards incubating ground-breaking innovations, alleviating life-threatening issues, and pioneering some of the future’s most resourceful projects. While it is true that many obstacles can interfere with business operations, the key is taking advantage of the resources available your given city and finding creative ways of overcoming these challenges.

5 Must-See TED Talks for Entrepreneurs

TED Talks have a unique way of inspiring people to follow their dreams. TED Talks entail more than just watching people speak about their experiences. Viewers get a boost in creativity, and more importantly, exposure to perspective on a matter they hold near and dear. The words of another fellow entrepreneur that has gone through your struggles can introduce you to new strategies that you may not have thought of. Here are the 5 TED TALKS that every entrepreneur must take the time to watch. Take a gander, hopefully they will provide quality insight!

  1. Simon Sinek: How great leaders inspire action

This TEDTalk by Simon Sinek explores the idea of leadership and why some people are better at inspiring action than others. Starting with examples from Martin Luther King’s leadership in the Civil Rights Movement to Apple’s leadership in the business world, Sinek examines patterns that seemingly predict the success rates of various leaders.

 

  1. Navi Radjou: Creative Problem Solving in the Face of Extreme Limits

This TED Talk by Navi Radjou is about how to make something extraordinary out of very little (or nothing, in some cases). It’s a good one if you’re running short on runway. It’s also insightful if you don’t know how you’re going to do this while keeping your day job.

    3. Seth Godin: How to get your Ideas to Spread

This TEDTalk by Seth Godin spells out why, when it comes to getting our attention, bad or bizarre ideas are more successful than boring ones.

  1. Linda Hill: How to manage for collective creativity

This TEDTalk by Linda Hill is perfect for entrepreneurs trying to maximize the creative potential of their top teams. Exploring different tactics as they are used by some of the world’s most respected and most created companies, Hill examines the root causes for creative greatness.

     5. Bill Gross: The single biggest reason why startups succeed. 

Bill Gross attempts to quantify all the reasons why one startup might be more successful than another. As a serial entrepreneur and a mentor for other startups, Gross has had much experience in the business world. He’s seen great businesses fail and questionable businesses succeed. This experience drove him to quantify exactly why these differences exist.

Finding the Right Location for Your Business

Finding the right location for your business is one of the most crucial tasks you’ll have to undertake as a business owner. The matter no longer solely questions the physical location of your business, but also whether a physical location is even needed. It’s a difficult decision that requires you to take into consideration almost all aspects of your business functioning, whether that be cost and revenue, or branding. There are many moving pieces to this puzzle. Here are the most important factors you should consider when looking for a business space.

1. Demographics of an Area.

When considering demographics, you should think about two important angles. First, you should think about who your customers are and how close they are to your location. This is critical for some service providers and retailers but not so for other businesses. The demographic profile that you have for your target audience will allow you to make this decision. The area you plan to establish your business in should be attractive to members of your target market. This, will be more important to some business owners as opposed to others.

For instance, those working in retail or the restaurant business should take this more seriously than those working in legal offices. The accessibility of your location to members of your market should be one of the first things you consider. Secondly, you should consider your community. Is your customer base local, and does a percentage of it support your business or match your customer profile? When choosing communities that are largely dependent on a specific industry, you need to be careful because a slump can be bad for business.

2. Look Out for Nearby Competition

Finding the right location is serious business. There are many factors to consider in your decision making and often times it will require compromise. Whilst a perfect business location is different for every business, covering these crucial areas will certainly give you the best chance of beating the odds and keeping your business on track for future success.

3. Consider the Foot Traffic of the Area

Foot traffic is simply the presence of movement of people walking around in a particular space. It is important for businesses since it refers to those exposed to commercial establishments, whether they are walking or driving by the building. While this may be of more importance for businesses in retail, it should not be undermined by those running offices. Accessibility is important regardless of your industry. It is crucial that you consider the kind of foot traffic you need, and do a scan of the area to see if your goals and foot traffic line up. Remember, not everyone who comes by your business is going to leave with a purchase. So the more people you have in proximity, and the more accessible your business is to the general public, the higher your chances of turning a profit.

4. Look at the Success of Other Businesses in the Area

As the old saying goes, you are who you surround yourself with. Have a look around the area to see how successful the businesses in the area are. If businesses in the area are booming, chances are the traffic they bring in the area will help you out. It can also mean that the area you are in is up and coming. On the other hand, if businesses aren’t doing well, you should probably rethink your move. For one, you shouldn’t be too confident as to carry the burden of reviving the area.

5. Is the Building High Quality with a Good History?

Surroundings aside, you should examine the property itself. Whether it is in good shape or needs renovation matters. Establishing whether the property management company undertakes responsibilities over common areas matters as well. In order to make proper assessment speaking to previous and nearby tenants is a must. If the property requires too much work and money, this is can be a red flag depending on the area and the cost associated. Additionally, if you are buying a large piece of land make sure to check the Registry for servitudes or other rights attached to your property.

6. How Much Would It Cost Monthly and What Does the Lease Look Like

Rent can be heavy burden to businesses located in hot-spot areas. What you must pay particular attention to is not just the cost, but the measures you will have to take if ever you want to get out of your lease. Make sure to read all details in order to see if there are any restrictions to the things you can do to the property (ex. Artwork on your walls, staying open after a certain hours, etc.)

7. Check for Adequate Parking and Accessibility

There is nothing a person hates more than driving around to look for parking, just to realize their time is better spent elsewhere. Being located in an area with enough parking isn’t mandatory. But if this is not the case, make sure the area is easily accessible by public transit. This is not only important for your customers, but for your employees as well. Subsequently, if you decide to create or buy an existing parking lot, make sure it is well taken care of.

8. How Does Your Business Plan to Operate?

This is all about figuring out your style of operation. Are you going casual? Professional? Formal? The area you where you will set up shop, especially for restaurants and retailers, has a lot to do with the vibe you are putting out. You must make sure that your style of operation and the area you are in are compatible. It must be in line with the demographics and audience you are working with.

 

Finding the right location is serious business. There are many factors to consider in your decision making and often times it will require compromise. Whilst a perfect business location is different for every business, covering these crucial areas will certainly give you the best chance of beating the odds and keeping your business on track for future success.
 

 

Daniel Blumer Co-Founder Revols

How to Read an Income Statement

financials

For many new in the business world, reading an income statement can be a confusing and intimidating experience. However if you know where to look you will realize that it is not as intimidating as it may appear. Understanding an income statement is a very important skill to have for entrepreneurs as it aids with making sound business decisions. Basically, an income statement tells you how much money came into your company during a specific period, how much a business spent in order to generate income, and how much profit a business has after having paid all expenses. Here are a few points that will make income statements easier to understand.

  1. Income statements cover a period of time

Before you delve into reading the income statement, make sure to take note of the specific time period covered. Questions you should be able to answer for the said period include: What are the revenues of the company during the period? Have the revenues increased or decreased over the last few periods? What are the various components of cost? How profitable was the company during this period? What are the earnings attributable to a share or the Earnings per Share?

 

  1. Income statements follow a simple formula

Income statements may have slight variations, depending on the company. However, they all possess the same data. Essentially, total revenue, total expenses, and net income (Total revenue-total expenses= Net income). Additional information is simply added in order to give the reader a more detailed depiction of financial status.

  1. Don’t let the jargon throw you off

What can make income statements difficult to understand is wording. Keep in mind that businesses can use different words to describe the same concept. For instance, the term “sale” or “income” can be used instead of “revenue”. The word “expenses” can be used instead “costs.” “Profits” and “net income” are also interchangeable.

 

  1. Expenses are often split into different parts
Expenses tend to be broken down into components. Cost of Goods Sold is the direct cost attributable to goods sold. Selling, General and Administrative Expenses combines payroll costs, except for what has been included in labour costs. Depreciation and amortization are charges with regards to fixed and intangible assets that have been capitalized on the balance sheet over time. Sales & marketing, as well as Research & Development costs are also almost always included in income statements.

 

  1. Keep an eye for cash flow
Comparing an income statement to a cash flow statement is highly recommended. The reason for this is to see if the profits earned are supported by the cash coming into the company. High profits on an income statement paired with low cash flow can imply weak quality of earnings. Know your key drivers and manage them. Keep a careful eye on areas that affect cash flow: accounts receivable collections and inventory turnover. How are you doing compared to past performance and your peers? Watch key areas that affect profits, net and gross margins, labor and fixed asset utilization. Though this is more acceptable with start-ups since they likely have to make substantial inventory investment before collecting from customers, this is something that should improve over time.

 

  1. Take note of the profit margin and earnings per share

The profit margin will give you an indication of the percentage of revenue that is left for shareholders after expenses are paid. Earnings per share will tell you the portion of earnings you would be entitled to if you owned one share.

 

Income statements can be very intimidating if you are a first-time business owner. If you are an entrepreneur needing help with your financial statements, remember that some aspects of running a business are not worth saving money on. There’s no need to turn yourself into a CPA, but you must be able to read financial statements, talk with better qualified financial people and assess your company’s performance.This will lower your stress level and get the job done efficiently.

PME Mentor: Nancy Cleman

Mentorship is at the heart of PME’s success. On this 18th anniversary, it would only be appropriate to give thanks to our mentors. Our mentors spend countless hours helping our entrepreneurs reach their full potential. We recently got the chance to catch up with our longtime mentor, Me Nancy Cleman. Nancy is a member of the Quebec Bar and the law society of Upper Canada. Over her years of experience, she has provided legal advice to a variety of corporate and commercial clients, including a range of industries such as software, fashion, film and services for the elderly. Nancy is also an accomplished speaker and author. Here are her thoughts on mentorship, and why it matters.

Q: What aspects of mentorship do you enjoy most?

A: What I enjoy most about mentorship is being introduced to entrepreneurs and learning about their visions. Speaking to them and offering guidance businesses they are seeking to build is an essential part of being a mentor. I enjoy offering perspective and working collaboratively with entrepreneurs.

 

Q: How can an entrepreneur make the best out of their relationship with their mentor?

A: The entrepreneur can make the best of the relationship by respecting the relationship that is being built with a mentor. As mentors, we get many calls, however often times there is no follow up. The relationship of mentor and mentee is one of respect and trust. Mutual trust and respect is the only way of getting the work done in an efficient manner.

 

Q: What advice would you give an entrepreneur thinking of working with a mentor?

A: It is important to listen and to be clear with the facts. Thank the mentor for his or her time. If you have an appointment then keep it or tell the mentor, you cannot make it. Mentorship is a rewarding relationship for both parties. As a mentor, I benefit from the opportunity to learn new things and share my experiences.

Our mentors are passionate people dedicated to helping others. With their help, entrepreneurs have been able to reach great heights. Thanks to the efforts and unwavering dedication of professionals like Nancy, we look forward to what the next 18 years have in store for PME.

What Is an Economic Moat?

The term economic moat, coined and popularized by Warren Buffett, refers to a business ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms. Imagine McDonald’s without cost, convenience and golden arches, Nike without technological and trademarked innovation, or Amazon without its timely customer service innovations. They would be relatively unpopular companies struggling to survive in their respective industries. Business mogul, Warren Buffet has introduced the world to many of his lifelong lessons over the decades. One of the lessons that seems to have stayed relevant throughout the years is related to the coined term, “economic moat”.

As the age-old saying goes: Being the best is great because you’re number one, but being unique is greater because you’re the only one. Buffet has explained the importance of economic moats specifically when describing his investment strategy. His strategy centers on companies with strong economic moats, as they are more likely to withstand their competitors, and remain successful and unique. A company having a competitive advantage that further differentiates it from the competition will help through the highs and lows of operating a business. In its most basic form, a company without an economic moat is like a movie without an engaging hero, or storyline. In such a situation, there would be no way of creating a loyal consumer following, and subsequently no way of overcoming challenges that arise over time. On the other end of the spectrum, companies with competitive advantages can be threatened by competitors who replicate their methods. Establishing economic moats can therefore help companies protect long-term profits.

Thankfully for today’s business leaders, Buffet didn’t simply coin a theory-based term that required a bunch of scholarly analysis. The concept of building economic moats is a tangible one that can be leveraged through different business strategies. For instance, economic moats can be achieved in five ways: cost advantages, the network effect, high customer switching cost, efficient scale and intangible assets. The way you choose to build your economic moats all depends on the nature of your business. Think about what would be a good fit for the strategy you plan to execute. Buffet emphasizes the economic moat as an institution. It is not the mere elements that customers will like. Companies that build moats carve them around their businesses to keep competitors at bay. For instance, people loved Coca-Cola 50 years ago, and it’s fair to assume that they will 50 years from now. This is because Coca-Cola utilized the five sources of economic moats in order to create a loyal consumer base.

Let’s use the example of low-cost advantage. Suppose you have decided to make your fortune by running a lemonade stand. If you buy lemons in bulk once a week instead of every morning, you can reduce your expenses by 30%. This allows you to undercut prices of competing lemonade stands. While profits would increase, it wouldn’t take long for competitors to notice your method and replicate it. However, suppose you develop and patent a juicing technology. This technology would allow you to get 30% more juice out of the average lemon. This time, it would be a lot more difficult for the competition to duplicate. In this example, your economic moat is the patent that you hold on your proprietary technology.

The nature of capitalism is that others will want to come in and take what you have built. The goal for every business should be to build a durable fort around its castle.  The goal is to protect it from any attack that would come from the competition. Sometimes an economic moat is having more talent, other times it’s establishing legally protected patents. Just remember to remain patient. You should stay persistent because it may even take a few tries until you get your strategy right.

 

6 Tips for Reading an Income Statement

The income statement is one of three financial statements that you need to become familiar with (the other two are balance sheet and cash flow statement). Understanding an income statement is essential in order to analyze the profitability and future growth of your business however reading an income statement can be intimidating to many people. Especially, if you’re at the early stage of starting your first business. To make the process slightly easier for you, here are 6 tips you should consider while looking over any income statement. It may not be as difficult or as confusing as you think it is.

1. Every income statement follows a simple formula
There is one formula that every single income statements follows:
Revenue- Expenses= Profit.

2. Income statements cover a period of time
The income statement will inform you of the amount your business has made over some time. usually, The statement will represent how much was made over a month, a quarter or a year. The “year-to-date” reflects business activity since January 1 to the present date (usually end of month).

3. Multiple names for one item cause complexity
Don’t let the financial jargon throw you off. Confusion can stem from the vocabulary used in in statements. People can use different terms to describe the same things. For instance, the words “sales” and “income” can be used interchangeably, as opposed to revenue. The term “profit” can be used instead of “net income”. “Expenses” are sometimes called “net income”.

4. The breakdown
Often times, expenses are split into multiple parts. Furthermore, profit is calculated at interim levels. For example, expenses will often be broken down into revenues, cost of goods sold, gross margin, selling, general and administrative (SG&A), and profit. Cost of goods sold are costs directly related to the products sold. Materials bought to make a product fits within this category. SG&A are costs not directly related to the making of the sold good. For example, salaries and office supplies are calculated for this.

5. Gross margin percent should be relatively constant
Gross margin is revenues less cost of goods sold. Also referred to as gross profit, gross margin is the money you receive from the products and services you sell, minus what it cost you to deliver them. It is essential because that the cost of goods sold move with revenue. The gross margin percentage is your gross margin divided by revenue. It should remain relatively constant over time. Any dramatic change with this regard should be seen as a red flag.

6. Dollars spent on SG&A should be relatively constant
Any significant and abrupt change in SG&A should be considered as alarming. It should remain constant overtime, and all dramatic and unjustifiable change should be looked into.

Understanding how to read an income statement is important, as it summarizes the overall financial health of your business. Not only is it simple once broken down, there are also many tools available online for you to deepen your knowledge on the matter.

What to Do Before Accepting VC Funding

All start-up investors are not the same. Struggling entrepreneurs are often so happy to get a funding offer that they neglect the recommended reverse due diligence on the investors. Taking on equity investors to fund your company is much like getting married, it is a long term relationship that has to work at all levels.  Investors will conduct due diligence and  have a number of questions about your startup . But it is equally important that you understand the venture firm and the individual venture capitalist or angel investor who is considering an investment in your company. Though likely tempted to accept more capital, there are certain things all entrepreneurs must consider before accepting VC funding. More money is great, but weighing what this can imply for the future of your startup is crucial. In order to avoid accepting an investment you will regret down the line, here are a few things you should do before accepting VC funding.

  1. Think about whether your investor can offer more than just a check

    It is crucial that you research VCs thoroughly before you submit your pitch deck. Every venture capitalist has an investment thesis, strategy and approach to making decisions. If your business is technological, seek venture capitalists who help entrepreneurs in the tech field. Likewise, seek VCs who fund businesses in your stage of development whether it is a startup or an expansion.  Having more capital is great, but think about other attributes that can benefit you long-term. Your research will help you determine if your business and team are aligned with the venture capitalist’s process.

    You should ask about your investor’s investment track record. This is a follow-on about domain expertise and the experience of the specific VC. What are they most proud of? What was their contribution to the success of startups? This is also a way to identify other CEOs that have worked with this VC and get their perspective about the contribution the VC. Also, all investors do their due-diligence about a startup before investing. Entrepreneurs should be doing the same regarding investor. Reverse due-diligence is a process whereby entrepreneurs seek to validate the track record, operating style and motivation of their potential partner.

  2. Analyze the terms of the investment

    If a VC plans to embark on the journey with you, make sure you understand what his intentions are. Read the contract terms carefully. Have an experienced third party review the conditions of your partnership. For instance, it is important to know how involved they plan to be in the decision-making, and the stake they want to take. If a VC plans on taking a board seat, you want to make sure they will add value. Making sure you have the best people at the table is important.

More money is definitely tempting, especially for startups lacking capital. But it should be understood that receiving money from a VC has long-term consequences. For this reason

don’t succumb to the temptation to take funds from investors that you are not totally comfortable with. It is important to make sure that the partnership is a good fit, and compatible with your goals and ambitions.That means you and your business must benefit from both the money and mentoring from the investor, and the investor will win from getting a larger return sooner. Win-win relationships get better over time, whereas win-lose go downhill fast. Never underestimate the importance of doing your due-diligence, and reading the fine print.

PME Mentor: David Horowitz

As the saying goes, the best way a mentor can prepare another leader is to expose him or her to other great people. Mentorship is an essential part of the PME Program. On this 18th anniversary, it would only be appropriate to give thanks to our mentors. We may not have all the answers, but what we can do is introduce you to someone who does. We recently got the chance to catch up with our longtime mentor, David Horowitz. David is a seasoned executive always interested in promoting entrepreneurship and international business. With over 30 years at Senior Management level, involved in the manufacturing, marketing and distribution, David wishes to pass on his knowledge gained from 10 years of teaching experience to aspiring entrepreneurs.

Q: What aspects of mentorship do you enjoy most?
A: Gaining the intrinsic rewards of helping others. When you decide to mentor someone, you really do not know how far they will go, but mentoring does make a difference. Whether you help shape the next great entrepreneur or help someone achieve their dreams, making a difference is all that matters. It feels great to know that you are a positive influence in someone else’s life.

Q: How can an entrepreneur make the best out of their relationship with their mentor?
A: Be prepared. Yes, the mentor’s time is valuable, but take advantage by being well prepared. Have an agenda. You want to use the time with mentor on your most pressing business issues. Be humble. Ask for criticism and feedback. Sometimes questions the mentee has are needed to be answered sooner than the planned meeting. Keep a swinging door policy so that ‘smaller but important decisions’ that need answering quickly are just an email away. These fast answers can save the entrepreneur time, but more importantly, can save the young firm money.

Q: What advice would you give an entrepreneur thinking of working with a mentor?
A: The relationship has to be authentic and there should be a baseline chemistry between the mentor and mentee, so pick your mentor accordingly. Be prepared to act on the advice given, rather than think the mentor is there to validate your shenanigans. Always remember the benefits a mentor can bring to the table, and never forget the statistics of small business failure- 80% of business start-ups do not make it past their 5th year. So don’t be shy to ask questions, listen and absorb as much as you can, and you can hopefully avoid getting as many scars as us mentors have had to endure.

Our mentors are passionate people dedicated to helping others. With their help, entrepreneurs have been able to reach great heights. Thanks to the efforts of people like David, we look forward to what the next 18 years has in store for PME.