Monday, April 6, 2015

The Entrepreneur and Relative Risk

The spring issue of SKY Magazine features an interview with Nadia Williamson, Chair of the Regina District Chamber of Commerce and Yaya Wang, President of Saskatchewan Young Professionals and Entrepreneurs.  They make the point that entrepreneurship is not easy - that it needs to be approached from a business planning perspective, with considering given to the financial risks that are inherent in business.

It’s true that business comes with risk, and at the beginning the risks are just as big as when a business is established because risk is relative to what’s at stake.

Starting a business requires capital.  The Regina District Chamber of Commerce has a loan program for new businesses but it has to be used for tangible items, they told me. So if a person is opening a product based business for a new store, for example, the money can be used to buy the things associated with a store.

But what if your business is not a tangible items kind of business. What if you are in the service industry?  In the service industry, the overhead and start up costs are in marketing, training ad ongoing development, employee benefits (even if you are the only employee), administrative support and accounting services.

Nadia and Yaya make the point that often times money is at stake in a business - your banker’s money, your investor’s money and quite likely your family’s money.  While an entrepreneur is building a business, chances are any money earned is used to finance the business and pay for overhead such as lease / office space, telephone, marketing, salaries, benefits, legal bills, gas, car expenses, etc. There is the lost opportunity capital that has to be considered - by that I mean while the entrepreneur is building a business, and quite likely not supporting himself or herself - how much money could he or she have made in that time as an employee?

The question of age entered the discussion, and the conclusion was that age is not a factor in entrepreneurship, but the risks are different.

A few issues back, Barbara March-Burwell, Certified Financial Planner for RBC Dominion Security spoke of the changing work environment, and the fact that some people are not retiring, instead they are starting businesses, which delays retirement and infact might put their long term financial stability at risk.

In this issue, Yaya says that younger people today are more likely to want to pursue their own business rather than work for someone else - but the question is whose money is at risk, especially if that young entrepreneur has no financial track record yet? That’s when it comes back to family, and even affecting his or her parents’ retirement.

Entrepreneur’s give up their financial security to open these businesses.  Many entrepreneurs have multiple jobs and interests in order to maintain cash flow.  The short and long term issue of financial security is a big one.  In this issue of SKY,  Barbara March-Burwell has some interesting things to say about this in her column, and she offers a guide of for entrepreneurs, which I would recommend.

Today I had a discussion with a business owner who said that our city is not very entrepreneurial, citing too many restrictions on the part of the city’s administration.  He said, if you want the city to grow, it’s not - we don’t want that kind of business in that kind of neighbourhood or area of the city - we want your business, how can we help.

I hope you enjoy the spring issue of SKY Magazine - and if you know an entrepreneur, I hope you will support their business. If you are a decision or policy maker, I hope you will support all of our businesses.