NZ Entrepreneur - Issue 31

NEW ZEALAND’S E-MAG FOR ENTREPRENEURS AND BUSINESS OWNERS

June 2015

10

QUESTIONS with Sam Hazledine How to start a business without quitting your day job Teens bring business ideas to life Show Me The Money - Why Equity Crowdfunding? www.nzentrepreneur.co.nz

ABOUT / Short and sharp, New Zealand Entrepreneur is a free e-magazine delivering thought provoking and enlightening articles,

CONTENTS

industry news and information to forward-thinking entrepreneurs.

EDITOR / Jennifer Liew ART DIRECTOR / Jodi Olsson GROUP EDITOR / Colin Kennedy

4

From the Editor

6

How to start a business without quitting your day job

14 10 Questions with Sam Hazledine 22

When it Comes to Incentives, Relevance is King!

26

Teens Bring Business Ideas to Life

30

What price is the right price?

34

Entrepreneurial Intelligence

36

Show Me the Money

40

Young Innovator Awards & Forum 2015

44

Parting Shot

2 • www.nzentrepreneur.co.nz

CHIEF FINANCIAL OFFICER / Alastair Noble CONTENT ENQUIRIES / Phone Jennifer on 0274 398 100 or email jennifer@nzentrepreneur.co.nz ADVERTISING ENQUIRIES / Phone Jennifer on 0274 398 100 or email jenniferl@espiremedia.com WEBSITE / nzentrepreneur.co.nz

ISSN 2253-5683 NZ Entrepreneur is a GREEN MAG created and distributed without the use of paper so it’s environmentally friendly.

Please think before you print. Thank you!

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www.nzentrepreneur.co.nz • 3

EDITORIAL

I’VE BEEN TO some fabulous events over the past few weeks which is a great reminder of the importance of taking time out to invest in ourselves, connect with like-minded people and align ourselves with the right mentors.

Both the events I’ve been to recently (Roger Hamilton’s Fast Forward Your Business weekend and The Entourage’s 8 Steps to Entrepreneurial & Sales Mastery) were so valuable and although they both add their own unique value to entrepreneurs, they also share a couple of key messages in common.

1. Find your WHY? And make it big and truly meaningful to you. Your why needs to be your driving force something much bigger than you, a reason to keep pushing yourself out of your comfort zone, a reason to strive for excellence and continually grow, the reason you keep on keeping on when the going gets tough.

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2. Your business is a mirror of you. Ouch! Might be hard for some to swallow but unless we can accept this, take accountability and be willing to stretch ourselves to continually learn and take action on what we’ve learnt, our businesses will stay where they’re at.

As entrepreneurs the most important investment we can make is an ongoing commitment to our own learning and development.

One phrase The Entourage used was ‘Be the dumbest person in the room’. Meaning, always, always be open to learning, be a sponge, get mentors, read, go to relevant events, watch educational videos, learn from your experiences, etc, etc.

Some wise words from Donald Trump to follow on from that “Watch, listen, and learn.

You can’t know it all yourself.

Anyone who thinks they do is destined for mediocrity”.

Jennifer Liew

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ENTREPRENEURSHIP

HOW TO START A BUSINESS WITHOUT QUITTING YOUR DAY JOB Question: How do you take a huge risk if you’re not a big risk taker?

Answer: Break it down into a series of small risks that you can take.

BY RICHARD LIEW

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I WAS TALKING WITH a good friend of mine the other day about how he would love to be able to go into business for himself. This is someone I have known for over 20 years. We went to school and university together and he is one of the smartest, hard working and nicest guys I know.

Since university I have watched him work his way up the corporate ladder where he is now well positioned, if he so chooses, to capitalise on his experience and growing reputation to cement his place in corporate leadership within his industry throughout his forties and fifties.

On the other hand, he is now equally well positioned to capitalise on those same things and build a business of his own. And while there is a part of him that would dearly love to do it (his heart), another part (his head) worries about the potential impact that quitting his well paying job might have in regards to his lifestyle and being able to take care of

his financial responsibilities as a husband and father, a homeowner, and dare I say it, his reputation as a responsible, successful and respectable member of society. And rightly so. What kind of a person would you be if you didn’t carefully consider the potential impact upon the people you love most, and your financial wellbeing? A foolhardy, naive, reckless person is what.

This is one of the reasons it helps to start your entrepreneurial journey as young as possible - before you get accustomed to the security of a regular paycheck and have all the responsibilities we accumulate as we get older.

Does this sound familiar? Do you, or could someone you know, relate to this? Because over the course of my journey I have met hundreds of lovely people grappling with this exact same scenario. Their entrepreneurial spirit is locked in a perpetual and epic battle with the forces of logic, reason and ‘reality’.

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Really successful entrepreneurs (the ones who do it again and again - not just one hit wonders) learn how to set things up in a way that mitigates much of the risk involved.

And the worst part of it is, most people will end up losing this battle, their inner entrepreneur having been choked, suffocated and headlocked, just long enough for them to realise one day that it’s the end of the 10th round and they have left it too late. At which time the entrepreneurial flame is snuffed out altogether, and there is only darkness...

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Now that’s depressing! So what’s the answer here? Well it’s true that starting any business involves an element of risk. But then so is relying on a job. And to be honest, as your entrepreneurial experience grows, the risk involved in starting new businesses diminishes as you become a better entrepreneur.

Why? Because really successful entrepreneurs (the ones who do it again and again - not just one hit wonders) learn how to set things up in a way that mitigates much of the risk involved. For instance, they won’t develop a product until they have validated demand for it in the market. They won’t launch a new venture until they have the investors they need lined up. They won’t enter new markets until they have already established partners in that market.

And it this way of thinking that can help those addicted to the safety of a paycheck make their business building dreams a reality in safe and steady fashion.

STEP

1

So I asked my friend, “Well if launching your own business now isn’t possible, do you think that if you began working on it now, it might be possible for you to be in a position to launch your business in ten years?”. Straight away, just by adjusting the time frame, I could sense that the idea shifted in my friends mind from being something that was impossible and implausible, to not just possible, but very plausible.

Overoptimism is one of a new entrepreneurs biggest blind spots and gets a lot of people in trouble. On the other hand experienced entrepreneurs know that everything inevitably takes at least twice as long and three times as much money as their best guess.

So if you dream of starting

your own business, take the pressure off yourself by setting a time frame that makes you go, “Yeah absolutely I could make it happen within that time.” Write down the words, “Within ABC years I will be living my dreams as the owner of a successful new XYZ business”. Then date it, sign it, and stick it somewhere you will see it everyday.

Better still, talk to your partner and get their support for your goal. Often half the job is getting them to believe it could be possible. And again by choosing a more believable time frame you are less likely to be met with the sideways glances, rolling eyeballs and scepticism that well meaning but smaller thinking partners often greet big ideas with.

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STEP

2

The next thing to do, is gift yourself a little bit of time each day or at a minimum once a week, to work, research, think or dream about the business you are going to start. In life, we get what we think about most of the time.

So the first thing you need to do, is increase the time you are thinking about your business from zero, to 10 minutes a day, or an hour a week or as much as you can manage. This will start to build a habit. The habit of taking action towards your goals. And obviously it will also allow you to start planning and working on your business.

Learn about building businesses. Learn about other businesses like the one you want to start. Learn about the skills you will need to acquire. Prepare a business

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plan because it will force you to answer a whole lot of questions you’ve never considered. You will never be perfectly prepared. But as much as possible, you want to go into your first business with your eyes wide open.

Learn about building businesses. Learn about other businesses like the one you want to start. Learn about the skills you will need to acquire. Prepare a business plan because it will force you to answer a whole lot of questions you’ve never considered. You will never be perfectly prepared.

STEP

3

Lastly, make money.

What do I mean by that?

If at all possible, make some sales before you launch your business. If it’s a product or service you’re able to provide without the need to invest much capital, create a prototype, or service offer, or draft (if it’s an informational product) and go out and make some sales.

Deliver on your promise to the best of your ability, while you are still holding down your day job. Yes you will be busy. But you will learn more from this than any other exercise and it’s better than being busy watching TV. If it’s a product or service you can’t deliver without capital or a contract, then go out and get some forward orders.

That is, validate the demand for your product or service by talking to potential customers.

Be upfront and explain that you’re wanting to create a product or service to help them solve a problem you believe they have. And share with them the idea for your product or service so far.

Ask them, if a product or service such as the one I have described was available, would you buy it? If so, what price would you be prepared to pay? If I could deliver said product or service in that price range, can I put your name down now so that I can come back to you when we are ready to launch?

If not, what would I need to do to this product or service to make it something you would buy? You can then take that information and use it to tweak your product until you know you have something the market wants.

Basically, your goal is to start to create cashflow, before you quit your job. Ideally, enough cashflow to replace the income you’re earning from your day job or at least cover your basic monthly outgoings. Or if that’s not possible, create a pipeline of customers who have already expressed their interest, with which you can more confidently go ahead and raise the money you need, or quit your job.

In other words, how you create a business without quitting your day job, is to create a business while you still have your day job.

Could you see yourself doing this within ten years time?

How about five? How about two? I wonder...

NOTE: The other option is of course to simply take a deep breath and dive on in. Many people will argue that in reality this is the fastest way to learn what you will need to learn.

But while stories of people who had an idea and within a week had quit their jobs, sold their houses, and jumped headfirst into the deep end of entrepreneurship make for entertaining and inspiring reading, this is certainly not what I would recommend for the majority of people. It’s like a beginner mountaineer trying to climb K2 on their first day out!

You are likely to do yourself an injury and put yourself off altogether. In fact, knowing what I know from doing this myself, I would only recommend this to people who are young, fit, childless, and have no financial responsibilities and are prepared to live on two minute noodles for as long as it takes. ■

Richard Liew is an Auckland based entrepreneur and founder of Espire Media www.espiremedia.com

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Introducing Alex or as we like to call her

Australia’s next top

‘Frock-Star’

Before discovering the entourage Alex had tried and failed for over 3 years to get her online dress rental business off the ground. Since discovering our community Alex has frocked her way to becoming the go-to-gal for the style needs of everyday divas, fashionistas, and TV stars alike.

With the help of our world class advisors and the support of our community to spur her on, Alex has gone from spruiking her own edgy threads to working with some of Australia’s leading labels including Josh Goot, White Suede & Nicola Finetti. Her growing Instagram following @herwardrobeaus is just the start of where this fast moving fashion sensation will go.

“I had all the right ingredients to LAUNCH

my business – a good education, experience & UNWAVERING PASSION, but it

wasn’t enough.”

The Entourage is changing the world through a new kind of business education.

THE-ENTOURAGE.COM.AU/NZENTREPRENEUR

Call 1300 755 855 or visit our website to find out how the entourage can help you create the life and business of your dreams. @theentourageoz

INTERVIEW

10

QUESTIONS with Sam Hazledine

Sam Hazledine is regarded as one of the brightest young business minds in the country. Award winning entrepreneur, best selling author, pro skier and dedicated husband and father. Sam shares valuable insights with us.

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Why did you become an entrepreneur and what did you do beforehand?

In 2003 I graduated as a doctor. I took a year out to compete as a pro skier and then I started working as a doctor. I saw that 25% of graduates were leaving the profession within three years of graduating and I hypothesised that it was because medicine hadn’t evolved to cater to the younger generation of doctors, so I set up MedRecruit to help doctors create a lifestyle in medicine.

I don’t think most successful entrepreneurs set out to be ‘entrepreneurs’ per se, I think they set out to solve a problem that needs solving. Entrepreneurship is the vehicle they use, not the end game.

What is it that you do now and why do you do it?

Sam speaking

I believe that anything’s possible, that any individual or organisation can be exceptional, and that exceptional people change the world.

We help doctors to live exceptional lives, because doctors living exceptional lives practice better medicine and that helps everyone.

I believe that to live an exceptional life you need a career that you find purpose in, you need to master your finances, and you need to live an inspired life.

We do this through three companies, MedRecruit, MedCapital, and MedWorld.

www.nzentrepreneur.co.nz • 15

Sam - EOTY Awards

You won the Deloitte Fast 50, fastest growing service business in 2009, you were Ernst & Young’s Young Entrepreneur of the year in 2012, and you were a Sir Peter Blake Leader in 2014, has winning these awards and going through the process to get there helped shape where you are now? If so, how?

Winning awards is cool, but it’s not what it’s all about. They are just a reflection of what you’re doing and achieving, which is what it is about.

However, winning awards does certainly help put you on the map and this makes opening doors a lot easier.

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How has becoming an entrepreneur changed your life and the lives of those around you for the better?

I can clearly remember the first time I flew internationally after I started MedRecruit and I wrote ‘entrepreneur’ on the customs form. To me being an entrepreneur is like being an alchemist: it’s about creating something magic and adding value.

I think a business is a reflection of the owner, the leader, so owning a business has been one of the best exercises in my own personal development I could possibly

experience. For my business to grow, I’ve had to grow; for my business to flourish I’ve had to expand both my mindset and skillset.

I never wake up dreading going in to work, I love what I do, so being an entrepreneur has allowed me to find what I love doing and to do it to the best of my ability.

It’s also made possible a quality of life for my family and me that we are incredibly grateful for.

What is the number one challenge you’ve faced as an entrepreneur and how have you overcome this?

For many years MedRecruit grew and grew and it felt like we could do no wrong.

Then, a few years ago, the wheels fell off seemingly overnight. In retrospect it was coming for a while. We were losing six figures a month and I had to turn it around and do it quickly.

I think in our lives we have good days and periods, and bad days and periods, but we aren’t going to know which is which at the time.

At the time I thought this was the worst period of my business life.

But it caused me to look deep, to develop a sound strategy and execute on that strategy relentlessly for a long period of time.

With my back to the wall I didn’t hesitate, replacing all of my senior management and half the team, I realised that structure was the price I needed to pay for success and I paid the price.

I learnt an incredibly valuable lesson about building strategy to solve real problems, then executing relentlessly on that strategy to achieve results. We came out of that period a better company than we ever were before, and I came out a better leader, a worthy leader, and we have grown at 100% per year since then.

It turned out that it was one of the best periods of my business life because it forced me to find what I was capable of, to face the challenge head on and rise up to it.

www.nzentrepreneur.co.nz • 17

The majority of entrepreneurs we encounter really struggle with creating a healthy work, life balance. You’re the founder and MD of MedRecruit, a committed husband and father, author of Head First and Unfair Fight and a national extreme skiing champion, what are your key tips for achieving balance and happiness in your life?

balance I get a life full of what’s important to me, and my family, and balance is something I don’t worry about.

that doesn’t stop me aiming for it. That way instead of

Because achievement without fulfilment isn’t success at all.

As an entrepreneur it’s very easy to live in the future, because we’re always aiming for something better than where we are right now. The problem with that, however, is that happiness is found in the present, meaningful The first thing is to forget relationships are found in about balance. Aiming for the present. I heard a saying balance is like aiming for that ‘heaven is when you mediocrity. If you value don’t want to be anywhere balance over excellence else’ but as an entrepreneur then you probably shouldn’t it can be seductive to always be an entrepreneur.

96% of businesses ultimately want to be somewhere else because you are always fail, or at least fail to fire, striving to be better and so to think that you are starting a business to have a achieve more.

I am training myself to be in better lifestyle is a sure fire the present, to appreciate way of losing. where I am right now, and I’m Instead of balance I aim for doing this through a guided exceptional in all the areas mediation in the morning and that are important to me. I through a belief of, ‘This is certainly don’t manage to heaven, right here.’ always achieve this ideal, but

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TRAINING - Sam and Ernie

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What are the three biggest things that you believe will prevent an entrepreneur from becoming successful?

‘yes’ to investing our time in anything we are saying ‘no’ to investing our time in something else. Successful people say ‘yes’ to the important stuff and ‘no’ to the unimportant; this is where passion is found.

Firstly, starting a business for themselves rather than to solve a problem for the customers. The market doesn’t And finally, when it gets hard care if you want a BMW. they do it hard. Successful Secondly, not educating people persist. Successful yourself in both mindset people understand that while and action. The psychology failure is inevitable, they will and skills of the owner are fall over, defeat is optional, the biggest chokeholds on because defeat is choosing to any business, so if you don’t stay down and not get back up. commit to your own education They understand that while you’ll hold the business back. you don’t get to control the And finally, aiming for height of the mountain, you balance, not excellence. do get to control whether you put one foot in front of the other; they persist.

You help people become more successful. For those that do succeed, what key attributes do they share in common?

Firstly they are hungry to the point of fanaticism. They do this by getting clear about what they want and why they want it.

Secondly, they are prepared to sacrifice who they are and what they have for who they need to become and what they want. When we say

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They are also hungry to keep learning and growing, and seeking out the experience of others because personal experience is an expensive teacher! I’m speaking at the Nurture Change Business Retreat in Fiji in November; it’s exactly the sort of forum that business owners and leaders attend to accelerate their learning, to learn from others, and to get inspired and connect with like-minded people.

Giving back is important to you. Tell us a bit about The Hazledine Foundation.

GIVING BACK Speaking to kids

What or who is your main source of inspiration and why?

After I sustained a life threatening head injury in 2002 I had to find reasons to stay the path to recover fully. Initially just the desire to think and operate at a high level was enough, but that wouldn’t have been enough forever. Six months after the head injury I met Claire, who I later married, and she continues to be the source of inspiration for me to be the best me I can be.

When you achieve success you have the opportunity to do good for others. Through the Hazledine Foundation we give back to young people to help them have happy nows and compelling futures.

We have funded rescue missions in South Sudan to rescue children from being child soldiers, and we are working on a program to help school kids create the habit of setting and achieving goals so they can make their lives into something that inspires themselves and others. ■

New Zealand entrepreneur, international speaker, and number one best-selling author of Unfair Fight, Sam Hazledine is regarded as one of the brightest young business minds in the country. Sam lives in Queenstown, New Zealand, with his wife and two daughters. www.samhazledine.com

www.nzentrepreneur.co.nz • 21

MARKETING

When it Comes to Incentives, Relevance is King!

IN THIS AGE OF infobesity, the relevance of your brand, your marketing and your message will be the difference between winning and losing, or just getting by. Relevance is king, even when it comes to the types of incentives we offer our market.

The competition for clicks, eyeballs, engagement etc. is as massive and overwhelming as a hot lava flow. In that context, we might be fooled into thinking that ‘different’ and ‘differentiation’, ‘entertaining’ and ‘desirable’ will help us to stand out and compel engagement.

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However, differentiation (the purple cow) may capture attention, but it’s likely to be just fleeting notice because, unless it is relevant to my personal priorities, needs and problems, I am unlikely to give the purple cow any more than a passing glance.

The purple cow must mean something to me. It must be relevant to my needs and situation. This means that not only should our brand, positioning and messages be relevant to our fast moving, easily distracted audience, but the offers and incentives we make them must also be relevant – a fact that was only brought home to me a few years ago through a relatively expensive learning experience with my daughter’s high school hockey team.

My teenage daughter played wing for her school hockey team. In my mind – think rugby and football – the wings score tries and goals… Thing is, we had gone half the season with no goals from her. Not one.

This was despite the fact that the team was very good, wellcoached and winning most games by five or six goals.

So I asked her why she thought she wasn’t scoring any goals. All I got was a non-committal shrug and a grunt in response. So I asked her, what if I offered her an incentive, would she make more of an effort?

My motive was to get her to try harder and experience the thrill of scoring. Playing is fun, but winning is more fun; and scoring goals is great.

Especially for dads. Right?

She thought this was a good idea. I asked her what would be a good incentive. She replied: “A GHD!” I said: “What’s a GHD?” She said: “A hair straightener”.

I thought: “A hair straightener? – That’s what, $40 or $50?” So I said: “Well for that I’m going to need two goals.”

We get home and she tells her mother: “Dad’s buying me a GHD!” I said: “Wait a minute, you have to score two goals first.”

She just shrugged her shoulders and my wife looked appalled. “Do you know how

www.nzentrepreneur.co.nz • 23

much a GHD costs?” she asked me.

I replied: “$20?” “$350!” My wife actually yelled at this point.

I was shocked, but I replied casually. “Half way through the season and she hasn’t scored yet. Don’t worry about it. We’ll be fine.”

Next morning in the car she said to me: “I can’t wait to get my GHD on Friday.”

“Score two goals first,” I replied, in the midst of a sense of humour failure.

At her very next game, that Friday, she scored two goals within the first five minutes of the whistle.

She got what she wanted.

I’m not sure that I did… because I didn’t understand my target market, nor properly what I wanted to achieve (belatedly I found out that the strategy her team played was to set the centre-forward up to score the goals, and it was a task she enjoyed doing).

HOW DOES THIS RELATE TO MARKETING? We marketers like to give away cool things, as promotional incentives; things like iPads and GHDs, because we know people won’t be able to resist, and we’ll get more clicks and visits as a result.

She gave me a thumbs up Even worse, we make it as and grin after the second goal that said: “Thanks for my simple as possible for them.

In the end, we may even sell very expensive GHD dad!” something… but how sure And then she never really are we that all the cool stuff bothered to score another will help us achieve our goal again (I think she may business objectives? have scored one more goal that season, but not because she was driven by any great desire to do so).

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What’s the value of a million ‘likes’ if none of them are potential customers?

A relevant incentive (giveaway, promotion etc.) is one that pre-qualifies customers who are in the market for what we are offering. If they need what we have, an iPad is not necessary to make them engage with us – the desire to engage is already there.

A good incentive is one that adds value to a customer who is serious about making a purchase. The person who is in the middle of an information gathering and decision making process, will appreciate incentives and offers such as informative articles, eBooks, video guides and other tools because

these things help him or her make a better decision.

Boring stuff to the majority, but relevant to our customer.

In fact, a white paper is a great qualifier. If somebody bothers to download your ‘whitepaper’ you can bet your bottom dollar that they are a serious prospect.

Offering good, value added content pre-qualifies your prospect, incentivises engagement, captures the details of people who are serious about buying, adds value to their decision making process and positions you as an expert that he or she can trust. ■

Colin Kennedy, Head of Content from Espire Media is a thought leader in content marketing strategy and communications in New Zealand. www.espiremedia.com

www.nzentrepreneur.co.nz • 25

Tomorrow’s Entrepreneurs

Teens Bring Business Ideas to Life

More than 3000 secondary students have created new businesses this year, through The Lion Foundation Young Enterprise Scheme (YES). Run by Young Enterprise Trust, YES is a year-long experiential programme where teens run a real business and provide real products and services. Young Enterprise CEO Terry Shubkin shares a few highlights so far.

LIQUID LIFE

Hutt Valley High School, Wellington Jordan Baker, Alana Kirby, and Sam Minot are three 17-year old Hutt Valley High School students who want to save lives in the water. They have created a canister which can be clipped onto a lifejacket.

If the wearer is lost overboard, the canister disperses fluorescent sea dye to highlight their position for rescuers. The canister

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disperses the bright dye each hour and it is clearly visible, day and night.

Liquid Life are creating partnerships with local companies and have been working with Callaghan Innovations on the prototype.

The product has already sparked interest from LifeFlight, Maritime NZ and Coastguard. Their long term goal is to expand and develop a canister for use around aircraft which crash at sea.

NURTURE

Nelson College Nelson

PIVOT POINT SOLUTIONS

Manurewa High School, Auckland Pivot Point Solutions are upcycling old-style school desks. The idea came from one of the company directors who did not have space for a desk in her bedroom which she shares with two others.

Their collapsible desk can fit under a bed and is designed to make studying comfortable, convenient and space-efficient.

The company’s goal is to create a better studying environment and in turn help a greater number of students to be successful in their studies. The company is in production talks with the newly opened Wiri Corrections Facility near their school.

Nurture’s Oceon Grady is a sole trader from Nelson with a great product idea to kill the White Cabbage Butterfly. The product has two components: a sticky artificial purple cabbage to place in vege gardens which is then sprayed with Nurture’s 100% organic spray made from Onion, Chilli and Garlic. This spray attracts and kills the butterflies in an entirely environmentally friendly way.

Oceon hopes to sell the products in NZ garden stores, starting locally in Nelson and then rolling out nationwide further down the line. Oceon’s product is gentle on the environment and tough on white cabbage butterflies.

Oceon is using a percentage of his profits to send seeds to Vanuatu to help people re-establish their crops after the devastating Cyclone Pam. Being Ni-Vanuatu himself, Oceon cares very deeply for this cause.

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The team from Kaika Energy

KAIKA ENERGY

Kaikorai Valley College, Dunedin Kaika Energy’s five directors have developed biofuel and liquid fertiliser products from food waste using an ‘Urban Digestor’. They wanted to revolve their business idea around their school’s urban farm proposal and working with the Urban Digestor seemed a perfect way to do this.

What they love most about their product is that it neatly reduces the volume of food waste going into

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landfill whilst providing sustainable fuel and fertiliser – two products which otherwise are widely known to cause massive environmental problems.

Kaika Energy have developed working relationship with local organisations such as such as the Dunedin City Council, Fonterra Grass Roots Fund, Reltveld Machinery, HyperPrint and Keep Dunedin Beautiful who are all offering industry advice and support.

RAD Roadsigns with some of their upcycled clock

RAD ROADSIGNS

Waiuku College, Waiuku RAD Roadsigns are transforming old road signs into clocks. The team is working with NZTA, Fulton Hogan and Transfield Services to source the signs which cannot be recycled due to their reflective nature.

Each clock is unique, with different dents, scratches and textures providing a slightly vintage effect.

RAD Roadsigns live the fact that upcycling is an important

approach to creating new products – building a business upon the idea that the future can be made from the past.

They believe too much emphasis is placed on ‘recycling’ which is an energy-intensive process that provides relatively few solutions to current environmental problems compared to upcycling and reusing old products. They launched at Waiuku’s ‘Steel and Wheels’ and are busy taking further orders. ■

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SALES

WHAT PRICE IS THE RIGHT PRICE? Sue Hirst shares some valuable tips on what to consider when setting pricing for our customers.

HOW DO YOU determine the price to charge customers for your products and services?

Here are some typical methods: • Charge a bit less than or the same as competitors • Charge a bit more than the product or service costs • Charge as much as you need to earn to cover your costs i.e. break-even • Charge what you can get away with • Charge what you think it’s worth • Cost’ the product or service and calculate a mark-up to provide an acceptable profit

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?

CHARGE A BIT MORE THAN THE PRODUCT OR SERVICE COSTS

LET’S DISCUSS THE MERITS AND PITFALLS OF SOME OF THE ABOVE METHODS.

FOLLOW COMPETITORS OR THE MARKET The problem with following competitors is that you don’t always know how they calculated their price. It may be unsustainable in terms of the costs to deliver the product or service.

You may win sales from them in the short term but unless you develop a better way of pricing you are likely to go out of business eventually if the price doesn’t cover costs.

They may have cash reserves to cover the shortfall between costs and price for a while and you may not. They can ‘sit it out’ until you go out of business trying to compete and collect all your customers later.

This may sound a bit extreme but we see it all the time in business… look at the airline industry, this is a classic strategy they have employed.

The $64,000 question here is ‘How much does the product or service cost?’. If you have looked closely at financial reports you will have seen the term ‘COGS’ which means ‘Cost of Goods Sold’. This is purely the cost of getting the product or service out of the door. COGS does not include overheads such as administrative staff, advertising, office rent, stationery etc.

You can see the danger then of charging a bit more than the product or service costs.

You still have to cover the cost of overheads and these need to be factored into the price.

The danger is that if you don’t work out your ‘breakeven’ situation you may be making a gross profit but after paying overheads you are makinga loss. Breakeven analysis is the practice of calculating how much revenue you need to cover COGS and overheads. It is an absolute ‘must’ in business to know your ‘break-even situation’.

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The issues relating to Price are as follows: • Get the price right • Know thy costs • Keep the price right

CHARGE AS MUCH AS YOU CAN GET AWAY WITH This is a great strategy so long as it covers your COGS and overheads. It may work at first but if you don’t keep a close eye on COGS and overheads and they ‘creep up’, it may turn out to be unprofitable in the end.

CHARGE WHAT YOU THINK IT’S WORTH Worth is an interesting concept isn’t it? It can mean different things to different people. What the customer thinks it’s worth may be quite different to your perception.

Again, if this figure at least covers the COGS and overheads, that’s OK but most of us are in business to make a profit. You still need to keep a close eye on costs to ensure your margin is not being eroded by increased costs.

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• In order to get the price right you need to: • Determine the cost of delivery of the product or service to customers excluding overheads.

• Know your overheads so that you can work out your ‘breakeven’ situation and how much you need to sell.

• Decide how much profit you want and calculate this into the price.

• Know your margin and report on it regularly to ensure it is not being eroded by increased costs.

• Know your customer satisfaction levels.

Dissatisfied customers won’t pay any price.

• Regularly review pricing and do small increases to cover increased costs. It is much easier to do small regular price increases than irregular large ones.

Worth is an interesting concept isn’t it? It can mean different things to different people. What the customer thinks it’s worth may be quite different to your perception.

KEEP THE PRICE RIGHT

rises. For many businesses failure to incorporate this into Price increase can be a very their price means they are controversial subject. Many business owners fear increasing absorbing increased costs and eroding margins. prices because they think customers will go elsewhere.

Next time you are travelling Where else would they go? in the country check the We can show examples where a price increase combined with a small decrease in revenue may not be such a bad thing. This scenario can have a positive impact on both profit and cash-flow.

It is often more difficult to increase revenue than to increase prices.

Many customers don’t even notice a small increase and fully accept one to cover Consumer Price Index (CPI)

prices of some ‘National Fast Food Outlets’ compared to those charged in city locations. You will see that their prices are different.

It may only be a couple of cents and most people don’t even notice it. This is due to higher costs in city areas such as rent and staff wages.

In order to be profitable they have to account for this in the price calculation.■

Sue Hirst helps small and medium sized businesses to gather the crucial information that entrepreneurs, MD s and CEOs need to support their day-to-day and strategic decisions. You can find out more at www.cfooncall.com.au

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PERSONAL TRAINER

Entrepreneurial Intelligence

with SandyGeyer

I’m an entrepreneur with a small team and can’t understand why they’re not getting the results they promised they’d get when I hired them. They’re all supposed to be experienced in their fields. Why can’t they just get on with it and work as hard as I do? I’m lost, how do I get the best out of my team when I have really limited time to give?

YOU NEED TO TAKE the time needed to effectively empower your team. To do this we look at how you need to position yourself as the business leader. I call this the EnQ 3 Zone- Forward/ Backwards Leadership Model.

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When we start out as the entrepreneur we are in the “front zone”. In this zone we pioneer, break down barriers and focus forwards. As our business grows we need to move backwards into the ‘middle zone’.

This is where we take the time to position people around us effectively, communicate our vision, train accordingly and empower them to continue to move forwards without us.

Whilst they move forwards, we move backwards again into the ‘back zone’.

This is where we monitor and track progress, keep a clear headspace to think creatively around obstacles and make clear decisions from what we can visibly see is working ‘in the real world’ and what isn’t.

empower your team, and then move back again to the back zone to monitor their progress and guide them only when necessary.

Remember that their expertise is only part of what they bring to your business. Their vision, incentives and accountability will come from how you position and then lead them.

This positioning takes some time but it’s an investment you cannot afford to avoid as the business leader.

Once your structure is set you can move into the front zone Your problem with your team on another venture if you is that you are still in the front like that territory most (as we zone. In other words, their so often do). The back zone problem is you. In this zone you will be hard to follow. They takes far less time than the front and middle zones do if can’t see past you to where set up correctly. you are headed and they are not clear on what you need There is an e-Book around from them. this leadership model here.

Move backwards into the middle zone, carefully select, communicate with and

The book further explains this process that you can download and follow to assist you.■

In each issue, Sandy will be answering commonly asked questions from new entrepreneurs. If you have a question for Sandy to do with entrepreneurship, building successful businesses or the challenges and difficulties faced by entrepreneurs, email the editor at jennifer@nzentrepreneur.co.nz Sandy Geyer is an entrepreneur and mentor and teaches the principles of entrepreneurial intelligence (EnQ), to entrepreneurs in New Zealand, Australia and South Africa. You can visit Sandy’s website at www.enqpractice.com

www.nzentrepreneur.co.nz • 35

Investment Corner

ShowMe TheMoney The Crowdfunding Chronicle

BY WILL MAHON-HEAP

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Why Equity Crowdfund?

Before we continue down the track of exploring the more complex interactions of equity crowdfunding we thought it best to first address why a business would equity crowdfund.

As part of this evaluation we will dismiss some of the common misconceptions about the process.

Show me the money The most obvious reason to crowdfund is access to capital!

Often entrepreneurs and even more established businesses suffer from the incorrect belief that they cannot raise beyond their network.

This is not the case, for instance in our last offer we had a substantial amount of interest from wholesale (high net worth individuals) and retail (‘mum and dad’) investors in both Australia and New Zealand, investors which had previously not been across the company involved.

Further, governments worldwide are seeking to lower

the cost of raising capital, and many are seeing equity crowdfunding as an integral part of this. Recently North America, the U.S, and Taiwan have followed the UK and the rest of Europe by regulating equity crowdfunding.

Part of this global recognition is due to traditional forms of raising capital being laborious and timing consuming, which is a tidy segue into the next point…

Is it efficient?

Traditional rounds of capital involve much paperwork and meetings, with of course no guarantee that investors will sign. An equity crowdfunding platform allows you to legally advertise an offer of shares in your company to the entire country.

The simplicity is staggering, investors then need only go through the platform’s registration process, consider the offer material and warning statements, before investing in the offer. No more back and forth with documents, or waiting on settlement, it’s all streamlined.

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The offer is open to retail and wholesale in New Zealand. One common myth here is that you are going to end up with a huge share register of retail investors, that looks unattractive to a buyer. Interestingly, crowdfunding campaigns are increasingly generating wholesale interest.

What’s the catch?

Who is involved?

The offer is open to retail and wholesale in New Zealand.

One common myth here is that you are going to end up with a huge share register of retail investors, that looks unattractive to a buyer.

Interestingly, crowdfunding campaigns are increasingly generating wholesale interest.

Statistically speaking the average investment for our platform has so far been around $5000, and nationally $4000. A large share register can be further limited by structuring your offer appropriately, the subject of another NZ Entrepreneur post.

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The upfront costs of equity crowdfunding are low, for most platforms it is literally the costs of the legals and production of a video, the latter most companies already have as a promotional tool.

Assistance is on hand, equity crowdfunding platforms should have specialists as part of the company who can help draft offer material (i.e. a structured information memorandum detailing the company and the offer).

Again, this may even be something the company has prepared before! It could be as simple as repackaging the company’s current material and putting it into the platform.

The crowd doesn’t just validate your company, it also becomes your most steadfast advocate and loudest voice. It leads to national, and often international, advertising. This can often result in further investment.

Speaking of the crowd…

Have you validated?

This is the dreaded question of have you proved your concept, are you growing, and what are you worth! A successful crowdfunding campaign demonstrates to the market that your product is on point, and that your valuation has credibility.

It allows the crowd, your customers, and more sophisticated investors to expressly back you, and valuable thing.

The crowd doesn’t just validate your company, it also becomes your most steadfast advocate and loudest voice. It leads to national, and often international, advertising.

This can often result in further investment.

Conclusion These are some of the benefits of the evolving industry that is equity crowdfunding. I look forward to traversing the landscape further with you in the next issue! Stay tuned for the next chronicle. ■

Will Mahon-Heap from Equitise. Crowdfund enthusiast, alternative finance follower, big data reader, internet of things watcher, escaped corporate lawyer. www.equitise.co.nz

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Ecosystem

Young Innovator Awards & Forum 2015 So great to see what’s happening in the entrepreneur ecosystem in the Bay of Pleny. The YIA’s vision and support of our youth and contribution to NZ overall is to be commended.

If you can and it’s relevant to you get involved.

NOW IN ITS SIXTH year, the Young Innovator Awards (YIA) was established to develop a culture of innovation in the Western Bay of Plenty through inspiring and encouraging young people to become true creative innovators.

The idea for the YIA Innovation Forum was established in 2013, when six of NZ’s leading innovators were invited to judge the Young Innovator Awards.

The awards were attracting some seriously exciting and innovative people - what a great opportunity for them to share their untold stories with the business community – the YIA Innovation Forum was born.

The competition asks secondary school students and young Professionals to come up with an idea for an innovative product or service with the supreme winner taking Past speakers have included Sir home a prize of up to $8500.

Ray Avery, Sir Paul Callaghan, The programme is a joint and Mark Pennington. All the initiative between leading money raised from the Forum innovation hubs - Priority is injected back into the awards One, Locus Research, Woods – a perfect little ecosystem Creative & ExportNZ BOP all ensuring the awards continue passionate about bringing into the future as everyone that great ideas to life and creating attends will be doing there bit a unique and thriving culture of to inspire the next generation of innovators. innovation in The Bay.

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About the YIA Innovation Forum: • Hear the inspiring, unique and untold stories from six of New Zealand’s legendary innovators at the Trinity Wharf on 7th August from 8am-12pm.

• Past keynote speakers have included Sir Ray Avery, Sir Paul Callaghan, and Mark Pennington • The theme for 2015 is ‘Join The Legends’ - over the course of a morning, be surprised, delighted and entertained by six exceptional speakers, all with a unique take on innovation across a range of fields including music, technology, digital, marine and culture.

• Speakers include self described ‘tornado’ Jenene Crossan, who turned from high-school drop-out to digital extraordinaire launching the hugely successful nzgirl.co.nz amongst other successful online ventures and ‘Local Legend’ Barry Vercoe, a pioneer of the digital music revolution and co-founder of MIT Media Lab • Early bird tickets are just $95 before 1st July 2015 or $125 thereafter including refreshments. Only 100 tickets available at www.yiaforum.co.nz.

• All profits raised from the Forum are poured back into the Young Innovator Awards for the following year

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About the Young Innovator Awards: • The competition gives young professionals and school students in the Western Bay the chance to enter their ideas for an innovative product or service.

• Submissions are judged by a panel of New Zealand’s legendary innovators who go on to share their untold stories at the Innovation Forum the next day • The supreme winner will take home a prize of up to $8,500

• We are running 2-part workshop on 22nd June and 6th July for the Over 18s category where The Bay’s innovation experts are on hand to guide submissions and make them into a winner.

• Deadline for secondary school students is 3rd July and 13th July for Over 18s category - submissions to be entered at www.yia.co.nz Register for workshops here or for more information about the awards visit www.yia.co.nz. ■

The Young Innovator Award’s purpose is to develop a culture of innovation in the Western Bay of Plenty region through inspiring and encouraging young people to become true creative innovators. http://www.yia.co.nz/

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PARTING SHOT

“Watch, listen, and learn. You can’t know it all yourself.

Anyone who thinks they do is destined for mediocrity.”

- Donald Trump

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