This article by Tracey Hanes originally appeared in the Globe and Mail on April 30, 2012
"User entrepreneurs" see a need for a product or service they could use in their own personal or business lives, create it, and then turn it into a business. Nearly half of innovative U.S. startups that have lasted five years were founded by such entrepreneurs, a study finds.
Who are user entrepreneurs? Looking for a winning business idea? Then maybe you should figure out something that you want or need for yourself, and create it. It’s the way some of the most successful entrepreneurs have started up businesses – and created companies with more staying power than others, a recent study found. Call them "user entrepreneurs." They have seen a need for a product or service that they could use in their own personal or business lives, created it and subsequently turned it into a business.
User entrepreneurs are behind 46.6 per cent of startups in the United States founded around an innovative product or service that have lasted five years more, even though they created 10.7 per cent of startups overall, the study by the Ewing Marion Kauffman Foundation found. The study found some notable differences between user entrepreneurs and other types of entrepreneurs, according to E.J. Reedy, one of the co-authors of the nearly decade-long study that looked at 5,000 new businesses in the United States.
User entrepreneurs tend to fall into one of three categories: “professional users” who develop products based on insights from their jobs; “end users” who create a product for personal use to fill a need in their daily life; and "hybrid users" who develop products because of both their work and daily lives.
Professional users, especially, tend to be more highly educated; have more years of industry work experience; are more likely to have founded a firm before; are more likely to receive venture capital financing; are more likely to have revenues; and are more likely to possess patents and trademarks.
End users, by contrast, are more likely to be women, members of minority groups, founded their businesses at home, more heavily self-financed, but are also more likely to have more education, have received venture capital funding and possess patents. And both generated the innovative or novel products and services upon which their firms were based through their own experiences as users, the study found. Experience, coupled with the fact they “know what they were going to use a product for and have a clearer picture of the market,” could be among the reasons for better survival and success rates among user entrepreneurs, Prof. Reedy says.
What the company does: Manufacturer of Holy Crap and other healthy cereals
When launched: 2009
No. of employees: 16
Annual sales: $4.5-million in 2011
Where the idea came from: When the Mullinses were forced to live for days without food and water during the Quebec ice storm, Corin Mullins, a former flight attendant, was inspired to create a high-protein food for survival kits. As well, her husband, Brian, had been diagnosed with early onset diabetes and their nephew had food allergies. So she started to experiment with low-salt, low-sugar cereal recipes.
How it turned into a business: The survival kit recipe never took off, but after Ms. Mullins experimented with and finally perfected a recipe for a healthy cereal, the Mullinses started to make it in a relative’s small food-processing plant, and sold it at a local farmer’s market. Ms. Mullins also took part in a self-employment training program to help create a business plan. Sales leaped after Mr. Mullins, who had extensive marketing and trade show experience, renamed the product Holy Crap (for its cranberries, raisins and apple pie flavours).
Sales soared even higher after a November, 2010, appearance on Dragons’ Den aired and $1.5-million in online orders immediately poured in. By mutual agreement, they didn't proceed with a deal offered by Dragon Jim Treliving, CEO of Boston Pizza (though he provided mentoring), and have financed the company through its growing sales. The gluten-free cereals with organic ingredients (their line now also includes Skinny B and Wild Chia cereals) are now sold in 11 countries, including 1,500 stores across Canada.
Observation: “This was originally never a money-making idea. It was out of love to satisfy a family need,” Mr. Mullins says.
Advice: “It’s easier to start in a small community than a big city, where you could get lost. Don’t be afraid to break rules. You have to do what’s right for you.”