Accountant turns dream into reality From number crunching to a dynamic recruitment start-up firm, this professional did it by the book

ALTHOUGH MICHAEL FOK Sze-chai trained as an accountant and spent 10 years working his way up in the profession, he always knew deep down that he wasn’t really cut out for that kind of life.

“I am a very outgoing person and like to ocialize, so I was never a typical accountant. That’s why I decided to set up a business and start working for myself,” said Mr Fok, who is now managing director of M & Davich Executive Recruitment.

Before taking that step, he had completed an accounting degree at Shue Yan College in 1990 and then held a series of roles as an auditor, financial manager and financial controller, working for companies in Hong Kong and North America.

In 2001, he decided to do an executive MBA, thinking it was time to brush up on his management theory and learn everything about running a business.

“The idea had always been at the back of my mind,” he said.

Because Mr Fok wanted to build on his accounting experience rather than discard it, he decided to set up an executive recruitment firm catering to the finance industry.

“I had already dealt with many recruitment agencies over the years when looking for jobs,” he said. “I thought it was a really cool industry, so I decided to pursue this option.”

After completing his EMBA in 2003, Mr Fok drew up a business plan and presented it to a few friends. It included profit and loss projections for the first two years of operation.

To ensure the estimates were accurate, he spoke to numerous people who knew about recruitment services, either as clients or candidates.

“They provided valuable data and advice that helped me put the numbers together,” he said.

The basic plan was to keep costs tightly under control until the business could generate a positive cash flow.

One major advantage was being able to use offices belonging to one of his partners. This contributed to considerable savings.

Mr Fok was turning a profit within months and, soon after that, he was ready to hire full-time staff.

David Simpson, co-founder of Canada’s New Enterprise Workshop and a lecturer on family business and entrepreneurship at the Richard Ivey School of Business in Western Ontario, said many first-time entrepreneurs used similar tactics. Like Mr Fok, they looked for help from their “natural allies” when funding a new venture.

“Virtually all start-ups are funded by an ally that generally falls into one of three groups,” Mr Simpson said. “The first is friends and family which, in this context, includes the entrepreneur’s own savings. They provide seed capital based more on the relationship with the entrepreneur than an analysis of the opportunity. They have a strong desire to support the fledgling business, but may have little or no business experience themselves.”

The second group of investors is known as “angels”.

“For the most part, they are experienced entrepreneurs who have achieved success and have available capital which they want to put back into play,” Mr Simpson said.

Angel investors generally put their money into industries which they understand, and where they have done well previously. They can offer funds and expertise, both of which are invaluable for the new entrepreneur.

“Typically, they prefer to invest with people they know or are reasonably close to. They may not know the entrepreneur directly, but would probably be familiar with the industry and know some of the lawyers, accountants or friends involved.”

Angel investors are different as they evaluate each project strictly on its business merits and an assessment of acceptable risks and returns.

“You can think of this type of investment as ‘tough love money’ because the business angle comes first,” Mr Simpson said.

“One of the advantages is that it tends to validate the project and becomes easier to attract other money if a seasoned investor likes your idea.”

The third group of allies is potential clients or suppliers who could benefit from the new business. If the idea is good, it should solve problems, offer benefits or provide a product or service. Other companies should see an opportunity to benefit from lower costs or higher sales.

“The potential customer has an economic interest in seeing you succeed,” Mr Simpson said. “He can be a form of investor either by providing preliminary contracts against which you can borrow with the guarantee of future sales, or by taking a direct stake in your project.”

Some suppliers might be willing to provide capital indirectly by agreeing to deferred payments or generous credit terms. They might also be willing to invest directly.

When it comes to drawing up business plans, Mr Simpson warned against trying to reinvent the wheel. He suggested using any company which has accomplished what you hope to as a model.

“Generally speaking, most new ventures are not that revolutionary,” he said. “There are usually some others you can compare against.”

Few investors expect your initial financial projections to turn out exactly as stated.
“Remember that start-up budgets are never right. Initial projections are a written summary of precisely what won’t happen,” Mr Simpson said.

However, entrepreneurs should ensure that each part of their plan explains the relevant thinking or assumption behind it. Then, when the actual figures are different, as they are sure to be, it will be easier to cross-reference, explain, and understand what needs to be changed in future.

Saturday, September 16, 2006
SOUTH CHINA MORNING POST