After only nine months in business,
Brent Banda, founder and owner of The Entrepreneurs Marketing Source Inc. (EMS),
felt like he was facing the biggest challenge of his career. His business cards promised
to provide "ideas, advice, and solutions" to other companies in Saskatoon, yet
Brent wasnt sure what advice to give himself regarding the future of his company.
The City: Saskatoon
is the largest city in Saskatchewan with a population of 219,000. Situated along the banks
of the South Saskatchewan River, the city prides itself on developing riverside parks and
recreational facilities. Saskatchewan traditionally has relied on the agriculture industry
and one-third of Canadas agricultural biotechnology companies are located in
Saskatoon. Recently, Saskatoon has steered its growth toward becoming a transportation and
supply centre for the mining industry. It is home to mining head offices for potash,
uranium, gold, and diamonds. See Saskatoon Regional Economic Development Authority (SREDA) for information about Saskatoon's busines climate.
The Company: EMS
||Brent started EMS in Saskatoon just
months after he graduated from the University of Saskatchewan with his Commerce degree in
Marketing. Although EMS is incorporated, Brent owns 100% of the shares and is its only
employee. He has operated EMS out of his home for the past nine months and aims to break
even by the end of the year.
mission statement of EMS is to "establish the company name as a reliable source of
practical marketing information to North American small and medium-sized businesses."
The idea for EMS was generated while Brent was working on projects for his university
classes. He noticed many small businesses had little knowledge about, or expertise in,
marketing. However, marketing was a crucial element in their continued success.
Brent created EMS to develop and sell
a practical marketing workbook that could be used by small businesses in Canada and the
United States. The workbook was envisioned as a general guide to help small business
owners with no marketing experience create strategies tailored to their unique business
situations. Brent was confident that, in the future, he could branch out and create a
series of workbooks that focused on specific marketing problems, such as advertising or
new product development.
The first set-back occurred when Brent approached his
banker for a $7,000 business loan to start EMS. The banker demurred that a workbook would
take some time to develop and suggested that EMS offer personalized, marketing consulting
services to small business clients in Saskatoon. The consulting would furnish real-life
examples that Brent could incorporate into the book and would provide EMS with steady
income during the workbooks creation. Brent knew that EMS could not survive without
the bank loan, so he agreed to become a consultant in the short-term while developing his
long-term plans. He was worried, however, that his consulting projects would slow the
progress of the workbook.
That worry turned out to be correct. Nine months
after EMS was created, its consulting business is flourishing. However, Brent finds
himself working 50 to 60 hours per week on personalized consulting and the workbook still
is not completed. He also attends many meetings and community events in order to develop a
referral network of small business consumers for his consulting activities.
The Entrepreneur: Brent Banda
Brent was raised in a working-class family, and
worked as a waiter and in other service jobs to put himself through university. As a
waiter, Brent had to talk to up to 25 strangers a day and he credits this training with
giving him the confidence to approach new people when the opportunity arises. Brent does
not consider himself to be a "thrill-seeking" risk taker, but feels that
starting his own business is a risk that he can afford because he has nothing to lose. He
is single with few assets and is just starting out in life, so even if EMS does not become
successful, he can always start over working for another company.
Brent credits his education at the University of
Saskatchewan for gaining business knowledge, project experience, and writing skills. The
most difficult part of starting EMS for Brent was feeling confident in his ability to
apply his education to practical problems. However after a short time at EMS, Brent
realized that other small business owners did not possess extraordinary business skills
either and Brent learned to be confident in his strengths.
Brent is constantly involved in business planning for
EMS, both for the short-term and the long-term. Early on, Brent realized that he could
achieve business success by either creating an image for EMS or creating an image for
himself. Because he did not have the money to launch an image campaign for EMS, Brent
chose to create an image for himself as a successful entrepreneur and small business
owner. He was head of the committee for North Saskatoon Business Associates where he
produced their awards banquet for two years. Recently, he has been named to the board of
directors for the Provincial Exporters Association. Brent is described by others as
outgoing, motivated, and hard-working.
The Consumer: Small-business Owners
EMS targets small and medium sized businesses in
North America that do not have full-time marketing staff. These companies are usually
managed by one owner. Industry Canada estimates that 60% of all Canadian businesses are
run by one self-employed owner. An additional 30% of businesses have fewer than 5
employees and this number has grown by 30% in the last 10 years. The number of small
businesses by province is provided in Table 1. See Strategis for useful information on
small business in Canada. In addition, over 13 million home-based businesses exist in the
United States. In addition, over 13 million home-based businesses exist in the
Compared to larger companies, small businesses often
lack depth and expertise in many business functions, including marketing. While larger
companies have marketing departments and operate with a marketing plan in place, many
small businesses have no formal marketing plan, strategy, or objectives. In fact, many
small business owners are unclear what exactly marketing is and how to apply it to their
situations. Consequently, they are unlikely to seek marketing help.
To understand the small business owner better, Brent
conducted a focus group interview in Saskatoon. The informants agreed that they had a poor
understanding of marketing concepts and felt that a marketing plan was too theoretical and
difficult to use. They were interested in learning more about how to advertise their
products, however. They indicated that they were too busy to read long books about
marketing, but were enthusiastic when Brent introduced a prototype of his workbook and led
the group in a strategic planning seminar. Brent felt that the positive response to this
workshop indicated that his marketing workbook could be a success.
EMS Consulting Service
EMS is likely to meet its first-year objectives of
breaking even and developing a consulting practice that provides a steady income to
sustain the business. Table 2 provides EMSs financial
results for the first nine months of operations. Examples of EMSs first-year clients
include a husband and wife team who wanted to make their photography hobby into a
full-time career, an architect who was losing clients to his competition, a real estate
firm trying to attract developers, and a glass company that didnt know how to
advertise. Customers like these contract with EMS to provide marketing research, create a
marketing plan, and/or develop promotional strategies. Beyond marketing advice, an
important part of EMSs service is the education Brent provides to small business
owners. Instead of handing over a report, Brent explains the basis for his decisions and
provides EMSs clients with long-range perspectives on their marketing situations.
Before any consulting work is started, EMS provides a
written quote. Currently, EMS charges $75 per hour for consulting services, but Brent
plans to increase this fee to $85 next year and to $100 after that.
Billable hours are recorded as the work is completed and used as a guide
when quoting future projects. However, if billable hours exceed the original estimate, EMS
only charges the amount of the original quote. In the first year, Brent often has
underestimated the amount of time a project would require, but he expects to improve this
variance with experience. All clients provide a 25% deposit and are invoiced after the
work is completed with 15 days to make payment. EMS has had no trouble collecting
receivables from clients.
Many other companies offer marketing services in
Saskatoon. Large consulting and research firms and advertising agencies provide specific
services to larger clients with marketing departments. These consultants do not actively
solicit small business clients given that small businesses lack marketing and promotional
plans, require extra time and effort, and may not be able to afford their consulting fees.
In addition to large consultants, sixteen small marketing consulting firms are listed in
the Saskatoon Yellow Pages. Finally, many small businesses rely on media agents to help
them with their marketing plans; for example, a local paper or radio station may design
ads or help with strategic planning if a small business owner buys advertising space or
time. Media agents provide this service free of charge.
To attract clients to EMS in this competitive
environment, Brent has established a network of business contacts in the local community.
A free newsletter offering practical marketing tips is mailed to these contacts each
month. The newsletter is intended to build the awareness and credibility of EMSs
service as well as prompting referrals and repeat business. The newsletter has a
professional appearance and has been well-received by its recipients. A sample newsletter
is provided in Figure 1.
Although EMS creates promotional strategies and
develops advertising plans, Brent is not a graphic designer; he relies on other local
companies to create finished ads, artwork, and web pages. One design firm he has worked
with is called Imagine and is owned and operated by two young designers who quit their
jobs with a large local advertising agency less than a year ago when they became "fed
up" with their boss. Many of the agencys clients transferred to Imagine shortly
after the split.
Brent was surprised when the partners at Imagine
approached him with a business offer. They wanted to create a strategic alliance with EMS;
EMS would refer all of its clients design work to Imagine, and Imagine would send
its clients in need of marketing help to EMS. In addition, EMS would share office space
with Imagine; the design firm is housed on the top floor of a building in the trendy
Broadway district of Saskatoon. Although rent in this district can be pricy, Imagine was
willing to let EMS share the space for only $185 per month. EMS would receive one office
and share the reception area and meeting room.
Brent could see the benefits of aligning EMS with
Imagine. He would have access to Imagines clients, many of whom were much larger
than those he currently had. Although the partners of Imagine would not allow him to see
their financial statements or discuss their operating income because Imagine would remain
a separate company from EMS, Brent had a good working relationship with Imagines
partners. In addition, the partners valued Brent because he wrote clear marketing
strategies that allowed them to "concentrate on the fun part of the business --
making ads." However, if EMS enters into the proposed strategic alliance and receives
new clients from Imagine, Brent can see that all of his time will continue to be eaten up
by consulting. Publication of the workbook would be delayed for at least another year.
If EMS does not enter into the strategic alliance
with Imagine, Brent feels that he can reduce his consulting time by taking fewer clients
and finish writing the workbook in the fall. He would like to begin marketing the workbook
in Canada in January of Year 2 and enter the U.S. market in Year 3. Brent is encouraged by
the fact that consumers purchased over $3 billion of products through direct sales in
Canada in 1994,with books, newspapers, and magazines accounting for $1 billion of these
Many marketing reference books, video and audio
tapes, and seminars already exist and can be found in bookstores,
public libraries, and economic-development facilities like Industry Canada. However, many
of these materials require a significant amount of time to read, understand, and apply.
The strength of the planned EMS workbook is that it will be a practical, hands-on workbook
that is concisely written for the small business entrepreneur. Brent plans to conduct
focus group interviews to further refine the workbook. In addition, focus group interviews
can help in the creation of a direct response campaign where small business owners can buy
the workbooks by phone after reading a print ad.
The workbooks will be sold through a two-part direct
response campaign. First, direct response ads will be placed in magazines that the small
business owner is likely to read such as Home Business Report or Income
Opportunities. The average Canadian magazine is published quarterly, reaches 50,000
individuals, and charges $2,500 per ad. The average U.S. magazine is published monthly,
reaches 300,000 individuals, and charges $5,000 per ad. The planned EMS ads will be
one-half page size and in colour. On average, 0.2% of magazine readers order products from
direct-response ads in the first month that the ad appears and 0.15% of readers order
Direct mail will also be used to generate orders. The
mail piece will contain a magazine-style article on a small-business topic and a
description of the workbook. Several companies sell lists of businesses that employ five
or fewer employees for $.15 to $.45 per business name depending on the number of names
purchased. In the future, when more than one type of workbook is available from EMS, past
workbook customers will receive updated product lists through direct mail as well. On
average, 3% of individuals who receive a direct mail solicitation respond; the response
rate increases to 15% for individuals who have ordered from the company in the past.
Customers responding to the ads will order through a
toll-free number. All orders will require payment in advance, which is standard with
low-cost, direct-response products. A message service will take the order, including
shipping information and credit card number. This information will be faxed daily to EMS
and the order will be mailed through Canada Post the next day. EMS is able to take both
Visa and Mastercard orders. EMS will include a postage-paid survey with all orders to
gather information on its customers.
Brent estimates that the workbooks will cost between
$6.12 and $6.39 to produce and mail, depending on whether they are sent to Canada or the
U.S. Table 3 provides workbook cost information. EMS will
sell each workbook for $29.95 (Canadian) which includes shipping, but does not include
taxes. The type of marketing activity planned and the estimated number of workbooks sold
in Year 2 and Year 3 are presented in Table 4. Brent also
has estimated the amount of income he expects in Years 2 and 3 from workbook sales, given
the above assumptions, which is shown in Table 5.
Brent likes consulting and working with Imagine. The
offer to form a strategic alliance with Imagine is tempting, given their larger client
base. However, Brents true dream is to complete and market the workbook. He is
worried that another company may publish a similar product aimed at the same market. A
tremendous amount of potential profit would be lost. Given the time that consulting
currently takes, Brent is sure that he will only have time to pursue one option: the
strategic alliance with Imagine or completion of the workbook.