Entrepreneurship: Craftadelic - Assignment Example

Case Study of Entrepreneurship: Craftadelic Outline This paper presents an interview with an entrepreneur, and analyzes the interview in terms of the literature on entrepreneurship. The company to be described is Craftadelic, an online store selling craft supplies, for card makers and scrapbookers, based in the UK, but selling worldwide. The paper will present the findings of an interview with the individual who runs Craftadelic, who has asked to remain anonymous, and then will relate the comments of the individual to key characteristics of entrepreneurs, as highlighted in the relevant literature. Entrepreneurship as demonstrated in the business, Craftadelic Craftadelic was set up in January 2004, a little over two years ago, by an individual who loved to make handmade greetings cards, using items found from her worldwide travels. Following a visit to a local craft store - Hobbycraft - the individual saw that crafts were very popular with other people, and started to think that there may be a future in selling the items she had found on her travels. Many people had commented on her cards, and when she had exhibited at local craft fairs, selling her cards, many people had asked her where the items she had used on her cards were from, and if they could be brought - other people therefore seemed interested in using the same items on their cards, as the items were very unusual, obviously reasonably priced, and of high quality. This fact, coupled with the fact that the local craft store was full of people buying supplies for their crafts, suggested that there would be a strong market for the goods she was thinking of selling. Within a few months of thinking of the idea to set up the business, her personal circumstances had changed, following a car accident, which caused damage to her shoulder and hands, and which left her unable to work on her main job (writing). At this point, she decided to use some of her savings to set up the craft business. She set about buying stock in bulk from her suppliers, whose names/addresses/business terms she had gathered on her travels. She had also located some British suppliers for some craft supplies that were too heavy, and therefore not cost effective, to post from abroad in small, initial, quantities (for example, card). It soon became apparent that in order to be able to buy in bulk from some suppliers, she had to prove her trading status, and so the decision was made at this point to register for VAT, which would give the business credibility, and which would be necessary anyway, as it was expected, from market research, that the business would be trading over the VAT threshold within its first few months of sale, and definitely within the first year of trading. Whilst the supplies were arriving, she made the decision that the business had to be run through an online store front, in order to catch the greatest number of customers, and in order that no initial outlay was made on renting premises, as in this way, the business could initially be run from her home, through the website. She set about using her local contacts to find someone who would be able to build the website for her, as she did not possess the relevant skills, and was not able, anyway, in her physical condition, to work on such a large project, involving such a lot of computer time. After a few months, the website was developed, through a collaborative process between the web designer and the individual. Many issues came up in the design process, such as branding and imaging of the business, graphic design, methods of payment acceptance etc., and in order to deal with these issues at the time of initiation of the business, and in an easily manageable, ongoing, manner, a plan was created by the individual for the development and implementation of these issues. For example, analyzing the set-up costs versus the ease of use, it was decided that PayPal would be used as a payment processor, not any of the more expensive payment processors (such as WorldPay), as many crafters use PayPal, as eBay is a popular source of craft supplies in the UK, and PayPal is free to set up, and runs at discounted transaction costs as compared to the other payment processors. The design and branding of Craftadelic was relatively easy, in that the individual decided that the website should look fresh, and that the logo should reflect the items sold. The logo (which is essentially the name, Craftadelic, formed in to an image by using items for sale to create the individual letters of the name) was designed and developed by the individual. The freshness of this logo was then carried across in to the design of the website - its background should be white, and fresh, and the menu of products should reflect some of the individual characteristics of the logo. It was decided that the front page of the website could be made into a coherent design by using a sunflower to link the logo with the menu and text presented on the front page. The business plan at this stage, aside from including decisions, and modes of implementation for design/branding/payment processing etc at this stage also included ways of taking the business forward (i.e., advertising and marketing). The website was launched in January 2004, and was advertised, initially, with a small classified advert in a major national magazine, Crafts Beautiful. It was decided that a small advert in a national magazine would be more beneficial, in terms of attracting more potential customers, than a larger advert in a more local, or regional, magazine or newspaper, which would have a smaller catchment area, and which would therefore attract a smaller customer base. Five days after the magazine was issued, the first order came through, and within days of this, orders were coming through on a regular basis, all from the small advert in this magazine, which was regularly repeated. The business plan included for this level of sales generated from this level of advertising, and included for the reinvestment of some profits in to advertising more widely in national magazines. Within the next few months, adverts were placed in other national craft magazines. Sales increased and some of the profits were re-invested in order to be able to continue with such wide, national, advertising. The aim of this investment in advertising was to get the Craftadelic name known by the crafting community as quickly as possible, with a view to 'word of mouth' advertising taking over as the main source of new customers within a year or eighteen months of launch. With this aim in mind, customer service was at the forefront of the business ethos. Orders placed online were processed the same day, for orders received by 2pm, and the next day for orders placed after this time (allowing the individual to get to the Post Office to post parcels out). Customers were thrilled with this level of service, coupled with the quality and reasonable cost of the products, and the business was soon getting repeat business, and word of mouth recommendations. At this stage, about six months in to the business, it was decided that the product range should be expanded, and some of the profits were re-invested back in to the business, in order to buy different stock. Some of the profits, at this stage, were also re-invested in order to increase the stock levels of items already stocked, as the higher volume of orders meant that increased stock levels were necessary. Through this re-investment of profits in stock and advertising, little profit was left for paying a salary, for example. The individual did not pay herself a salary, only took out essential personal expenses, for the first year of trading. As the business had taken off so dramatically, it was necessary to move the business out of her home, at this stage, and in to business premises. There simply was not enough space to live and work in the same space any longer, and it was decided to move the business from near her home to near the region in which she was born, as the rents there were around 10% of the rent in the area in which she lived. She therefore moved her home and the business, in order to be able to consolidate the business in a cheaper area, arguing that this move would increase the real profit level in the business, compared to living and working in the area in which she had previously been living and working, as in this way, she would not be taking a huge chunk of revenue simply to pay for the rental of business premises. In the second year of business, the focus of the business switched to avoiding competition. Other, similar, online businesses had sprung up in her first year of trading, selling craft supplies online, often for far less than the RPP, and questionable practices on eBay, for example, meant that some craft supplies were also being sold on eBay for far less than the RRP, for example. Two measures were taken to overcome this threat. Firstly, the unequal competition practices, on eBay, and on other online craft stores, were reported to the Office of Fair Trading, which is currently reviewing the case, and also to the trade press, in which a debate was started about these unfair practices. Through the debate generated in the trade press, many UK-based suppliers now refuse to sell their supplies to eBayers, or to online business that cannot prove their trading standard, or which do not operate from a bricks and mortar business address. Secondly, to combat competition from fly-by-night individuals and businesses, the it was decided that the quality-aspect of Craftadelic's service and products should be highlighted through a campaign, as it was the belief of the individual that the quality of her products and customer service would shine through the competition, and that loyal customers and new customers, alike, would continue to shop through her business. In order, therefore, to reinforce the Craftadelic brand, she began a PR campaign, regularly sending new products through to editors of magazines, and arranging give-aways in the same magazines, and in more local and regional newspapers and magazines. The editors and staff of these magazines loved the products and loved the look of the website, and the friendliness of the service, that they were soon regularly featuring Craftadelic on their editorial pages. Through this seal of approval by trusted magazines, the Craftadelic name therefore became widely known, culminating in the nomination of Craftadelic as Website of the Year 2005 in a poll in one national magazine. At this stage in the business, two years in, the individual is consolidating the business, bringing more new products in to the business regularly, and looking to expand in to new areas of crafting, such as scrapbooking, which is a massive market in the US, and which is expected to expand rapidly and exponentially in the UK within the next few years. This will ensure that the business continues to develop ahead of the market, so that Craftadelic will always be one step ahead of its competitors. To this day, customers still say how wonderful the products are, and how great the service is, and this is still the key part of the business: to offer quality quickly, in a friendly manner and at a reasonable cost. The individual was keen to stress that she always listens to her customers, and with this in mind, she intends to introduce a bulk buying feature to the online store. Many customers call or email, wanting to buy items in bulk, for wedding invitations, for example, or for craft groups or demonstrations. Now the business has stabilised, in terms of the monthly revenue, and profit levels, it is possible to take the business this extra step, and to offer products at high volume. The business plan for Craftadelic takes Craftadelic in to the future, constantly re-inventing and responding to market conditions and the needs to the customers. One of the main things that shone through in the interview with this individual was her passion, for example, her passion for the business that she is extremely proud of and which she fights for, through hard work and determination, every day, and also her passion for life and for her beliefs, which have led her to this success. An Analysis of the Key Entrepreneurial Skills Revealed in the Interview with the Owner of Craftadelic What key skills and characteristics can we identify in this individual The individual showed innovation, and an entrepreneurial side, in that she was already making and selling her own cards at local craft fairs. It is often postulated in the literature that entrepreneurs are born with a natural flair for business, and this creativity in thinking 'outside the box' allowed her to utilise skills she had, and information she had at hand, to set up in business doing what she loved (see, for example, Southon, 2006 or Southon and West, 2005). She showed she had an eye for a good idea, in that she realised that the products she would be able to offer would be welcome by other crafters, and that crafters were now buying craft supplies in far greater numbers than previously, meaning that the time was ripe for a business idea such as hers to be born, to blossom and, hopefully, to flourish (Reuvisd, 2006). This is another key characteristic of the entrepreneur: they are hopeful, and optimistic (Timmons and Spinelli, 2004). She knew she had a good idea, but unlike many other people who think they have a good idea, she had enough confidence, and was full of enough hope and optimism, that she made her idea a reality. She had identified that the time was ripe for someone to set up a business selling craft supplies, to launch in the papercraft market, which was taking off in the UK at that point, and she used her innate optimism to carry her idea forward to become a practical reality (Woods, 2003). She risked some of her savings to set up the business, at a time when those savings were most needed (i.e., when she was unable to work, and had little income coming in) showing a high risk acceptance threshold. This is a common trait identified amongst entrepreneurs in general: entrepreneurs are known, through personality tests etc., to have a higher risk acceptance threshold as compared to the rest of the population (Bolton and Thompson, 2003). Where this higher risk acceptance threshold comes from, and how it is maintained, is not known, but it is thought to come from a combination of hope and optimism coupled with a strong belief in their own abilities, such that the option of failure becomes, to them, quite simply, not an option (Power, 2005). The confidence in her idea and abilities was manifested in many ways in the initial setting up of the business, and in the continuing development of the business: for example, VAT registration was done early on, as she was confident in the knowledge that her idea, and the products that she would be selling, would generate sufficient interest to generate a good level of profits, well over the VAT threshold. Entrepreneurs are often more willing to self-sacrifice than non-entrepreneurial members of the population. She demonstrated this in many ways - she did not, for example, take a salary in the first year of trading, again a common trait amongst entrepreneurs: they are willing to subject themselves to short-term sacrifices, in order to achieve a long-term goal, through their total belief in their long-term goal (Hayashi, 2003). This is thought to be due to their innate confidence, and the high levels of optimism they live with. The individual is interesting, in that she shows continual entrepreneurial thought - using PR as a means of consolidating the reputation of the business, expanding in to scrapbooking, for example, whilst the market is open for this; all of these, and more, show that she does not stand still, is not happy standing still - only forwards is the correct way to go, onwards and upwards (DeGraff and Lawrence, 2002). As we have seen, throughout the setting up of the business and its continued development, she showed continual personal sacrifice - not only not taking a salary, but also living and working in cramped conditions for the first year of business, and then moving home to relocate her business to a cheaper area of the UK, for example. This, as we have seen, is a key feature of entrepreneurs - their belief in their ideas and themselves is prime above all other concerns (Drucker, 1993). She showed determination (Power, 2005), and the ability to anticipate blockages to her business, in that unfair practices were reported to the Office of Fair Trading, and to the trade press. This resulted in the case being reviewed by the Office of Fair Trading, and to several UK-based suppliers refusing to sell to e-Bayers or to online stores without bricks and mortar premises. This not only has assured some short-term stability, but also long-term stability, in that the craft market is now guaranteed not to be cheapened by people offering reduced prices for goods. In this way, the market would have 'shot itself in the foot' so to speak. Conclusion The current business plan for Craftadelic takes Craftadelic in to the future, constantly re-inventing and responding to market conditions and the needs of the customers. It's strength, and thus the strength of the business, lies in the key skills of the individual running the business: her beliefs in herself, in her ideas, the total belief that her idea was good and would work in practice, that the developments of her initial idea would work in to the future, her ability to face crises (for example, the introduction of competition) and her creativity in the face of these crises (seeking multiple solutions to the introduction of competition to the market, for example), and most of all, her optimism and drive, all of these flagship entrepreneurial skills will serve her well in to the future in her drive to build her business. Entrepreneurs, essentially, build economies, and much of the UK economy is currently built on small businesses, such as this one; it is a shame, noted the individual, that many tax laws and employment law is built against the interests of small businesses. As I finished the interview with this individual, she was off to a meeting of the Federation of Small Businesses, to discuss the introduction of 30 days compulsory annual holiday for all employees, and the effects this would have on small business. An entrepreneur truly never rests. References Adams, R. and Adams, T. (2003). Start your own import/export business (Entrepreneur Startup). Entrepreneur Press. Ashton, R. (2004). The Entrepreneurs Book of Checklists: 1000 Tips to Help You Start and Grow Your Business. Prentice Hall. Barringer, B.R. and Ireland, D. (2004). Entrepreneurship: successfully launching new ventures. Prentice Hall. Bhldt, A. et al. (1999). Harvard Business Review on Entrepreneurship (Harvard Business Review Paperback Series). Harvard Business School Press. Bolton, B. and Thompson, J. (2004) Entrepreneurs, Talent, Temperament, Technique 2nd Edition Elsevier, Oxford Birley, S. & Muzyka, D. 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Kitchen table entrepreneur: an inspirational guide to turning your hobby into a profitable business. How To Books. Reuvisd, J. (2006). Working for yourself: an entrepreneurs guide to the basics. Kogan Page. Southon, M. and West, C. (2006). The Beermat Entrepreneur: turn your good idea into a great business. Prentice Hall. Southon, M. and West, C. (2005). The Boardroom Entrepreneur. Random House Business Books. Timmons, J.A & Spinnelli, S. (2004) New Venture Creation: Entrepreneurship in the 21st Century (6th edn) Irwin, New York. Woods, C. (2003). From acorns: how to build your brilliant business from scratch. Prentice Hall. CONSENT FORM Entrepreneurship I have read and understood the information sheet and this consent form. I have had an opportunity to ask questions about my participation. I understand that I am under no obligation to take part in this study. I understand that I have the right to withdraw from this study at any stage without giving any reason. I agree to participate in this study. Name of participant: __________ANONYMOUS______________________ Signature of participant: _______________NOT WILLING TO PROVIDE_____ Signature of researcher: ________NOT WILLING TO PROVIDE_____________ Date: ______26 MARCH 2006___________ Contact details of the researcher Name of researcher: HELEN Address: VIA WWW.ACADEMIARESEARCH.COM Email / Telephone: VIA WWW.ACADEMIARESEARCH.COM Read More