Lessons from startup school

Written by Michelle Warren

David Akhlaghi was leafing through a magazine about the Internet in 1998 when he saw a list of Canada’s top 10 retail websites. It was an epiphany for the Toronto businessman, who had always wanted to run his own company. The desire had smoldered while he climbed the ranks at a major Canadian shoe retailer, but something about the list stoked his entrepreneurial fire. Akhlaghi knew he wanted to be on it; the only question was how.

Luckily, he found himself unemployed. On the dole, with limited savings, he set out to open a bottle-it-yourself wine and accessory store, Wine Cave Inc. Again, the question was how. “I needed support,” he says. “I had business experience, but nothing on my own.”

Akhlaghi was an ideal candidate for the Self-Employment Benefit program (SEB) delivered by Service Canada, a how-to course to help EI recipients launch a business. Close to 13,000 people take the course each year, which is offered through an array of private organizations and educational institutions across Canada.

The Centre of Entrepreneurship (COE) at Centennial College in Toronto launched the flagship SEB program 13 years ago. Its course, run by entrepreneurs for entrepreneurs, fields about 1,000 applicants each year, but only one in four gets in, based on their business idea and an interview. Participants attend classes full time for eight intensive weeks, learning fundamentals such as how to write a business plan, secure financing, set up operations and design sales and marketing strategies. For the next 10 months they’re mentored by seasoned entrepreneurs who monitor the startups during their launch.

A reputation for providing graduates — 3,000 so far — with a solid foundation from which to launch a business prompted demand from people who, although employed, also wanted in. This June, COE will open up its entrepreneur school to everyone by launching the New Business Starter program: a condensed version with 18 hours of evening and weekend classes, as well as three months of mentoring, all for $495. So far this is the only such course in Canada to be offered to the general public; however, the COE is looking at licensing the format to make it available to more people.

“The objective is to give you straightforward, practical know-how,” says COE manager Phil Smith. “We’re not going to turn you into a bookkeeper, but you’ll understand an income statement.”

Of course, not everyone is cut out to run their own firm. “You can teach people about entrepreneurship, but you can’t teach people to be entrepreneurs,” acknowledges Smith. Some traits — such as dedication, discipline, intuition and vision — are inherent. Just as one can take ski lessons and never become a gold-medal winner, one can take a course in business fundamentals and never develop a successful company. Still, a gold medalist wouldn’t likely reach their potential had they not learned the basics.

Entrepreneurship courses offer those basics-nuts-and-bolts information, guidance on developing a viable business plan and a bit of hand holding. But true entrepreneurs are those who, at the end of the course, opt to go for it despite the risks involved.

You can call Akhlaghi a true entrepreneur. While other students waited on tables, he financed his degree by “importing” — in a suitcase — mini-stereos and cell phones from Cyprus to his home base in Turkey. Nevertheless, he says the course was essential to getting off on the right foot: “It opened my eyes to the realities. When you work for someone else, you don’t think about the little things, like how the electricity gets paid and how to hire staff.”

He also re-evaluated his business plan when an instructor pointed out that his sales targets were unrealistic, which would turn off lenders. As well, “I learned to leave some things to the professionals.” For instance, he hired an accountant, who he met through the COE, rather than try to manage finances himself.

The day after the course ended, Akhlaghi hosted the grand opening of Wine Cave in Toronto’s increasingly trendy Roncesvalles neighbourhood. Within six months he launched and focused on building the business online. Initially, wine was to total 80% of sales, with accessories the rest. But Wine Cave soon branched into high-end gear for wine cellars — racking systems, cabinetry and refrigeration — that now yield 50% to 70% of revenue.

Akhlaghi says his instructors drummed into him that survival calls for this kind of flexibility. “You have to be open-minded, adjust to the demands of the market and change your business plan as you go along.” Today his revenue is about $500,000 and growing 10% to 15% per year. Wine Cave is expanding in part thanks to a global presence through a paid listing on Google and sales of gear through eBay. Akhlaghi says a startup can use eBay to tap into an international consumer base without traditional advertising. “Consider eBay like setting up a phone,” he says. “It’s something you have to do to start your business.”

He has been invited to share his online business acumen with the 60-odd entrepreneurs expected in the first New Business Startups class. The pilot course will emphasize using technology and strategic alliances to operate a lean and profitable business model, though still offer plenty of nuts-and-bolts advice, such as how to register a company, set up bank accounts, find a lawyer and hire staff.

“The real value is you don’t simply walk away — the follow-up support is there,” says Smith of the one-on-one mentoring that motivates and provides new business owners with advice on everything from how to create a customer database to opening doors. Smith says courses like this give new business owners a leg up: “One of the mistakes is [entrepreneurs] think they can just charge ahead, but the odds are so stacked against them.” Only 50% of startups are still in business after three years, according to Statistics Canada.

Akhlaghi made it to the three-year mark in 2001 — the same year Wine Cave cracked that list of Canada’s top 10 retail websites, placing just behind Future Shop and Lee Valley Tools.

Four essentials for startup success

Graduates of the Centre of Entrepreneurship at Centennial College in Toronto learn that it’s crucial for anyone launching a business to get these things right.

Watch cash flow as if your company’s fate depended on it (it does): A huge share of new businesses run out of steam before gaining momentum. Budget enough to cover all your startup and operating costs for at least the first three months, and preferably six (most new businesses don’t have positive cash flow until the sixth month).

Research, research, research: Extensive market research can make the difference between flourishing and failure. Understand your customer base and what they’re looking for; know your competitors and determine what will set you apart; build relationships with a variety of suppliers; and use all this information to develop competitive pricing and a viable, well-thought-out business plan.

Avoid getting mired in the small stuff: Don’t set up a business while trying to run a business. Get the mundane essentials — filing paperwork, securing financing, setting up bank accounts, finding a lawyer, insurance broker and accountant — out of the way so you can focus on customers and growing your business.

Make sure you seal the deal: Too often entrepreneurs concentrate on marketing and forget that survival depends on actually closing sales. It’s vital to figure out how you plan to prospect, secure leads, open doors and — most importantly — close them.

© 2006 Michelle Warren

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