Description
On this particular detailed breakdown pertaining to entrepreneurs economics key lessons from yp entrepreneurs randall collum.
12
Economist’s Corner
The draw toward entrepreneurship is
clear: The opportunity to control your
own destiny, reach your full potential, and
reap large profts all while doing what
you enjoy sounds pretty good, right?
The oil and gas industry is a veritable
breeding ground for those who want to
make this dream a reality. However, this
dream cannot be achieved without a
signifcant amount of personal risk and
hard work
YPs Can Be Entrepreneurs
According to the Global
Entrepreneurship Monitor’s 2011 and
2012 reports, there has been a dramatic
increase in startup businesses in
many countries throughout the world.
Given a sympathetic underlying
government policy and public support,
entrepreneurship is a real possibility
in many aspirant YP entrepreneurs’
career roadmaps.
Since its beginnings in the mid-
1800s, the capital-intensive oil and gas
industry has borne witness to many
visionaries who overcame myriad
obstacles to set up successful businesses.
Most lessons they learned apply to
those who want to take advantage
of opportunities and test their self-
belief, creativity, and determination
to do something for which they have
a passion.
What Matters Most?
Starting a business is constrained,
more than anything else, by fnancial
considerations. Among these are
fnancial readiness to fund the project,
access to capital funding from the
market, and the risk of departing from
monthly infows. Each year thousands
of potentially successful businesses fail
because of poor fnancial management.
Entrepreneurs especially must be
realistic about funding.
Getting a bank loan can be a
challenge for a startup company, so
most entrepreneurs need to cover
costs by putting up a signifcant portion
of their own savings, or charging
their credit cards. The graphical
representation (Fig. 1) illustrates
a typical life cycle of a startup and
the relevant capital sources at each
stage to meet the growing business’s
fnancial needs.
The most important aspect of starting
a business is, therefore, estimating its
Entrepreneurs’ Economics: Key Lessons
From YP Entrepreneurs
Randall Collum, Genscape; Jenny Cronlund, BP; and Prakash Deore, Fujitsu Consulting
Randall Collum Jr. is managing director of supply
analytics at Genscape, Inc., a global provider of fundamental
energy data and analytics. He formerly served as founder
and chief executive offcer of Spring Rock Production, LLC, a
North American oil and gas production forecasting company,
acquired by Genscape in April 2012. Before starting Spring
Rock, Collum was at Merrill Lynch Commodities Inc. (MLCI)
for 5 years, where he was vice president, strategic analysis.
For more than 5 years prior to joining MLCI, he worked at BP, where he served in
BP’s North American Strategy group and in the Gulf of Mexico asset. Collum earned
a BS in chemical engineering and an MS in petroleum engineering from the
University of Houston, and a certifcate in fnance and accounting from Rice
University. He is a registered professional engineer in Texas.
Genscape Inc. is the originator of real-time power supply information for energy
market participants. It was founded in 2000 in the US and expanded to the European
market in 2004. Today, Genscape is part of Daily Mail and General Trust’s USD-2.2-
billion portfolio of digital, information, media, and events businesses.
Fig. 1—A startup’s typical life cycle, showing relevant capital sources at
each stage.
13 Vol. 10 // No. 1 // 2014
fnancial needs. A startup will need
enough funds to survive until it turns
a proft. Many sources recommend
securing approximately 6 months’ to a
year’s worth of projected expenditures in
order to start a business.
Estimating how much that is can
be diffcult, but it must be done. This
involves developing a complete, well-
thought-through business plan. Because
most new businesses require signifcant
personal fnancial commitment, taking
the time to create a business plan is of
utmost importance.
A business plan is a document
delineating the viability of your
business and that it can make money.
It summarizes all aspects of the
business venture, including analysis
supporting the rationale for its existence,
and its fnancial, operational, and
marketing strategies.
A business plan ultimately sells your
business, and proves you have thought
through exactly why and how it will run.
This is very important for attracting
fnancial backers, potential clients who
will pay for your service or product, and
well-qualifed employees enthusiastic to
work for you.
Essential to a Business Plan
An essential part of a business
plan’s fnancial strategy is a fnancial
management plan. Your fnancial
management plan should include an
estimated cash fow statement, income
statement, and balance sheet. A cash fow
statement shows how funds fow into and
out from your business over a certain
period (typically monthly or quarterly).
This statement helps project when and
under what circumstances the business’s
breakeven point could be reached.
Your projected income (or proft-and-
loss) statement estimates the results of
your business from an accounting point
of view over a specifc period of time
(typically quarterly or annually). It is
used to make a case for your business’s
potential to generate income.
A balance sheet is a status report
of a company’s fnancial condition
at a specifc point in time. While not
particularly useful for startup businesses,
it is usually required by lenders
and investors.
However, it is important and required
for a startup’s business plan to include
a personal balance sheet that gives a
snapshot of personal assets and liabilities.
Dispelling Misconceptions
Like all businesses, a startup’s viability
revolves around money.
Risk. As mentioned earlier, most
fnancial risk is on a personal level. You
may not be willing to risk your own
personal fnances, because, if the venture
fails, your savings are essentially lost.
You may also be required to assume
personal fnancial obligations exceeding
your personal net worth, and thus expose
yourself to bankruptcy.
To take that amount of personal risk,
you must be truly passionate about the
business you are starting.
Passion. Passion is important,
because you must also be satisfed with a
lower quality of life until the business gets
established. Long hours and groundwork
needed to launch a business can be
staggering. Especially if you are risking
your own personal savings, you have to
be willing to cut back on your personal
life to keep your business afoat until it
turns a proft.
According to Randall Collum
Jr., managing director of supply
analytics at Genscape, a global
provider of fundamental energy data
and analytics, “You have to have an idea
that you believe strongly in and then you
have to be willing to put forth the effort
to develop that idea. Ambition is the key,
along with the drive that comes with it.
When you’re starting your venture—
working 7 days a week, 20 hours a day,
it’s that ambition and drive and belief you
will be successful that keeps you going.”
Collum was formerly the founder and
chief executive offcer of Spring Rock
Production, a North American oil and gas
production forecasting company that was
acquired by Genscape in April 2012.
Work. Another misconception about
starting your own business involves the
level of work and effort to keep it going.
Many businesses that get off the ground
ultimately fail because the entrepreneur
is more enthralled by starting up a
business than by keeping it running—
lacking the drive to continue until it
makes money—and sustain it thereafter.
Taxes. Do not overlook the need to
pay taxes. No matter what country you
live in, taxes on small businesses exist.
For example, in the US, small-business
owners must get a tax identifcation
number, then pay quarterly taxes. The
taxes also need to be accounted for.
Legal Structure. Do the research to
determine what type of legal structure is
best for your business and register it as
such with the various government entities
you will need to contact.
There are several steps involved. The
US Small Business Administration has
a helpful article, titled “How to Register
Your Small Business in Five Easy Steps,”
on its website (www.sba.gov).
There are many types of legal
structure, and in the United States, many
entrepreneurships start out as a sole
proprietorship, in which one individual
owns and runs the business, and there is
no legal distinction between the owner
and the business.
But depending on your business
plan, you may want to expand to form a
type of corporation. For example, a
C corporation is a corporation that,
under United States federal income
tax law, is taxed separately from
its owners; an S corporation is a
corporation whose shareholders are
subject to tax on income based on
their shareholdings; and a limited-
liability company (LLC) is designed
to provide the limited liability features
of a corporation and the tax effciencies
and operational fexibility of
a partnership.
Networking. Do not underestimate
the power of networking.
Genscape’s Collum says, “[The best
way for entrepreneurs to manage their
fnances is] networking, networking,
networking. My funding source was
someone I had met 5 years earlier
and just stayed in contact with. I never
expected to have that person fund the
business, and it wasn’t until I told him
my idea that he offered to put up the
startup funding.” TWA
doc_636902019.pdf
On this particular detailed breakdown pertaining to entrepreneurs economics key lessons from yp entrepreneurs randall collum.
12
Economist’s Corner
The draw toward entrepreneurship is
clear: The opportunity to control your
own destiny, reach your full potential, and
reap large profts all while doing what
you enjoy sounds pretty good, right?
The oil and gas industry is a veritable
breeding ground for those who want to
make this dream a reality. However, this
dream cannot be achieved without a
signifcant amount of personal risk and
hard work
YPs Can Be Entrepreneurs
According to the Global
Entrepreneurship Monitor’s 2011 and
2012 reports, there has been a dramatic
increase in startup businesses in
many countries throughout the world.
Given a sympathetic underlying
government policy and public support,
entrepreneurship is a real possibility
in many aspirant YP entrepreneurs’
career roadmaps.
Since its beginnings in the mid-
1800s, the capital-intensive oil and gas
industry has borne witness to many
visionaries who overcame myriad
obstacles to set up successful businesses.
Most lessons they learned apply to
those who want to take advantage
of opportunities and test their self-
belief, creativity, and determination
to do something for which they have
a passion.
What Matters Most?
Starting a business is constrained,
more than anything else, by fnancial
considerations. Among these are
fnancial readiness to fund the project,
access to capital funding from the
market, and the risk of departing from
monthly infows. Each year thousands
of potentially successful businesses fail
because of poor fnancial management.
Entrepreneurs especially must be
realistic about funding.
Getting a bank loan can be a
challenge for a startup company, so
most entrepreneurs need to cover
costs by putting up a signifcant portion
of their own savings, or charging
their credit cards. The graphical
representation (Fig. 1) illustrates
a typical life cycle of a startup and
the relevant capital sources at each
stage to meet the growing business’s
fnancial needs.
The most important aspect of starting
a business is, therefore, estimating its
Entrepreneurs’ Economics: Key Lessons
From YP Entrepreneurs
Randall Collum, Genscape; Jenny Cronlund, BP; and Prakash Deore, Fujitsu Consulting
Randall Collum Jr. is managing director of supply
analytics at Genscape, Inc., a global provider of fundamental
energy data and analytics. He formerly served as founder
and chief executive offcer of Spring Rock Production, LLC, a
North American oil and gas production forecasting company,
acquired by Genscape in April 2012. Before starting Spring
Rock, Collum was at Merrill Lynch Commodities Inc. (MLCI)
for 5 years, where he was vice president, strategic analysis.
For more than 5 years prior to joining MLCI, he worked at BP, where he served in
BP’s North American Strategy group and in the Gulf of Mexico asset. Collum earned
a BS in chemical engineering and an MS in petroleum engineering from the
University of Houston, and a certifcate in fnance and accounting from Rice
University. He is a registered professional engineer in Texas.
Genscape Inc. is the originator of real-time power supply information for energy
market participants. It was founded in 2000 in the US and expanded to the European
market in 2004. Today, Genscape is part of Daily Mail and General Trust’s USD-2.2-
billion portfolio of digital, information, media, and events businesses.
Fig. 1—A startup’s typical life cycle, showing relevant capital sources at
each stage.
13 Vol. 10 // No. 1 // 2014
fnancial needs. A startup will need
enough funds to survive until it turns
a proft. Many sources recommend
securing approximately 6 months’ to a
year’s worth of projected expenditures in
order to start a business.
Estimating how much that is can
be diffcult, but it must be done. This
involves developing a complete, well-
thought-through business plan. Because
most new businesses require signifcant
personal fnancial commitment, taking
the time to create a business plan is of
utmost importance.
A business plan is a document
delineating the viability of your
business and that it can make money.
It summarizes all aspects of the
business venture, including analysis
supporting the rationale for its existence,
and its fnancial, operational, and
marketing strategies.
A business plan ultimately sells your
business, and proves you have thought
through exactly why and how it will run.
This is very important for attracting
fnancial backers, potential clients who
will pay for your service or product, and
well-qualifed employees enthusiastic to
work for you.
Essential to a Business Plan
An essential part of a business
plan’s fnancial strategy is a fnancial
management plan. Your fnancial
management plan should include an
estimated cash fow statement, income
statement, and balance sheet. A cash fow
statement shows how funds fow into and
out from your business over a certain
period (typically monthly or quarterly).
This statement helps project when and
under what circumstances the business’s
breakeven point could be reached.
Your projected income (or proft-and-
loss) statement estimates the results of
your business from an accounting point
of view over a specifc period of time
(typically quarterly or annually). It is
used to make a case for your business’s
potential to generate income.
A balance sheet is a status report
of a company’s fnancial condition
at a specifc point in time. While not
particularly useful for startup businesses,
it is usually required by lenders
and investors.
However, it is important and required
for a startup’s business plan to include
a personal balance sheet that gives a
snapshot of personal assets and liabilities.
Dispelling Misconceptions
Like all businesses, a startup’s viability
revolves around money.
Risk. As mentioned earlier, most
fnancial risk is on a personal level. You
may not be willing to risk your own
personal fnances, because, if the venture
fails, your savings are essentially lost.
You may also be required to assume
personal fnancial obligations exceeding
your personal net worth, and thus expose
yourself to bankruptcy.
To take that amount of personal risk,
you must be truly passionate about the
business you are starting.
Passion. Passion is important,
because you must also be satisfed with a
lower quality of life until the business gets
established. Long hours and groundwork
needed to launch a business can be
staggering. Especially if you are risking
your own personal savings, you have to
be willing to cut back on your personal
life to keep your business afoat until it
turns a proft.
According to Randall Collum
Jr., managing director of supply
analytics at Genscape, a global
provider of fundamental energy data
and analytics, “You have to have an idea
that you believe strongly in and then you
have to be willing to put forth the effort
to develop that idea. Ambition is the key,
along with the drive that comes with it.
When you’re starting your venture—
working 7 days a week, 20 hours a day,
it’s that ambition and drive and belief you
will be successful that keeps you going.”
Collum was formerly the founder and
chief executive offcer of Spring Rock
Production, a North American oil and gas
production forecasting company that was
acquired by Genscape in April 2012.
Work. Another misconception about
starting your own business involves the
level of work and effort to keep it going.
Many businesses that get off the ground
ultimately fail because the entrepreneur
is more enthralled by starting up a
business than by keeping it running—
lacking the drive to continue until it
makes money—and sustain it thereafter.
Taxes. Do not overlook the need to
pay taxes. No matter what country you
live in, taxes on small businesses exist.
For example, in the US, small-business
owners must get a tax identifcation
number, then pay quarterly taxes. The
taxes also need to be accounted for.
Legal Structure. Do the research to
determine what type of legal structure is
best for your business and register it as
such with the various government entities
you will need to contact.
There are several steps involved. The
US Small Business Administration has
a helpful article, titled “How to Register
Your Small Business in Five Easy Steps,”
on its website (www.sba.gov).
There are many types of legal
structure, and in the United States, many
entrepreneurships start out as a sole
proprietorship, in which one individual
owns and runs the business, and there is
no legal distinction between the owner
and the business.
But depending on your business
plan, you may want to expand to form a
type of corporation. For example, a
C corporation is a corporation that,
under United States federal income
tax law, is taxed separately from
its owners; an S corporation is a
corporation whose shareholders are
subject to tax on income based on
their shareholdings; and a limited-
liability company (LLC) is designed
to provide the limited liability features
of a corporation and the tax effciencies
and operational fexibility of
a partnership.
Networking. Do not underestimate
the power of networking.
Genscape’s Collum says, “[The best
way for entrepreneurs to manage their
fnances is] networking, networking,
networking. My funding source was
someone I had met 5 years earlier
and just stayed in contact with. I never
expected to have that person fund the
business, and it wasn’t until I told him
my idea that he offered to put up the
startup funding.” TWA
doc_636902019.pdf