In the fall of 2009, Alyssa Richard left her $70,000-a-year job in Toronto to spend a couple of months on a Hawaiian beach mulling over what to do next. A graduate of Queen's School of Business in Kingston, Ont., she knew it was time to launch something of her own. As an associate consultant for business consulting firm Bain & Company for two years, she was familiar with U.S. mortgage websites, so she focused on the online mortgage market in Canada, which she believed was under-served. When she came back in January, 2010, Ms. Richard founded RateHub.ca, a website that compares Canadian mortgage rates to help consumers find the lowest rates in one place. The company monetizes its traffic by selling leads to mortgage brokers.
The transition from employee to entrepreneur hasn’t been easy for the 26-year-old, who had to adjust her personal spending. As a young professional with a healthy salary, she had a certain lifestyle she enjoyed with her friends. While she’s chosen to invest her money in a business, her friends have continued on with their career trajectories and lifestyles, which sometimes leaves Ms. Richard with difficult choices.
“When you’re going from a salaried position to starting your own business, you’re investing a lot of your savings and your salary goes down, sometimes even to zero,” says Ms. Richard. “I had to eliminate dinners out whenever I wanted, shopping trips to the U.S. and vacations, as well. Now, for the first time, I find I can’t afford to buy my best friend a wedding present or go to the bachelorette [party]or do these things I used to do without thinking about it. So it’s changed how I live. That’s a challenge I hadn’t really thought about before.”
But Ms. Richard has no regrets about starting the business. She believes that the longer you spend in a corporate job – and as your salary and responsibilities increase with a mortgage and family – the harder it is to start something on your own.
“The sooner, the better,” says Ms. Richard. “Now is the time. I’m not married, I don’t have kids, I can take those risks. I feel blessed that I’m doing it at this stage of my life.”
As Ms. Richard reflects on her experience, Barbara Garbens, owner and president of B L Garbens Associates Inc., a fee-for-service financial planning firm in Toronto, offers her advice.
Ms. Garbens feels that at 26, Ms. Richard is more of a rarity than a typical entrepreneur. She sees her as mature and with a lot of confidence that not everyone has at that age.
What she thinks Ms. Richard has done right is that she’s been able to take her business management knowledge from Bain & Company and apply it to her own business. She also approves that Ms. Richard has kept her personal finances in order.
While Ms. Richard seems to have all the criteria she needs to succeed, she says that lot of people who start a business in their mid-30s and 40s have an advantage because of their experience, a more established network and savings, as well as potentially a dual income with a spouse or partner.
“Most people starting out need to build a network first and get some experience,” says Ms. Garbens. “You need to be practical and have money saved so you can support yourself and make sure your idea can fly.”
Debt load and expenses
Ms. Richard doesn’t have any dependents and very little personal debt (less than $2,000 on her credit card). Because she works from home, RateHub.ca covers a portion of her rent, leaving her with $525 in rent, plus a third of the utilities. She tries to keep grocery costs down by participating in a supper club and uses the subway as much as possible. Each month she has some left over from her current annual salary of $40,000 to spend on dining out and entertainment – her acknowledged weakness.
Her biggest cost is five full-time staff. Her only paid advertising is Google AdWords.
“She not bleeding and has very low debt,” says Ms. Garbens.
But Ms. Garbens is concerned that with five staff full-time on salary, Ms. Richard may have more staff than she needs and recommends she keep an eye on costs. She suggests that Ms. Richard automate as many processes as she can, which could help with costs, as she may not need as many staff. Also, if there is staff changeover, it’s a much smoother transition if there are established processes in place.
Financial planning before launch
Ms. Richard’s personal investment in the business was nearly $30,000 of her own savings. Since then she’s been earning "sweat equity" through her time and by drawing a reduced salary. She had seed investors from the beginning, which made it easier for her to launch the company. The trade-off is giving up equity early on, she says. Her one regret is not saving as well as she could have during the two years she worked for Bain & Company.
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