My experience as a Self-employed Business Owner

December 2, 2023 by Magnus NIELSEN

My experience as a Self-employed Business Owner

In this article, Magnus NIELSEN (ESSEC Business School, European Management Track, 2023-2024) shares his professional experience as an entrepreneur and Business Owner.

About the company

Pilot Education ApS is a Danish aviation consultancy company that I founded in 2019.
The company originated as a vision to establish a flight school. Specializing in pilot training and revalidation services, my company initially focused on ensuring the continued proficiency of pilots through regular license revalidation processes, as well as the training of new student pilots.

As I delved deeper into the aviation industry and advanced in my studies at Copenhagen Business School, the company’s scope evolved. Expanding beyond traditional pilot training, the company began to establish connections with various stakeholders in the aviation sector. This growing network allowed me to provide valuable non-pilot services, transforming the company into a small dynamic aviation consultancy.

Presently, Pilot Education ApS is still a new player in the aviation consulting landscape, offering a range of services to small and medium-sized companies within the industry, and mostly to Danish firms. The company’s core areas of expertise include cost optimization, addressing strategic concerns, streamlining operational processes, and focusing on services that enhance overall value for its clients. As one might hear, this comprises typical and commonly encountered elements within the consulting sector. Nothing different about it, just in a much smaller scale compared to the large consulting firms, such as McKinsey and Bain and Company.

Pilot Education ApS has carved a niche for itself by combining practical aviation knowledge with business acumen. This unique approach has positioned the company as a trusted advisor in the Danish aviation sector, providing tailored solutions to meet the diverse needs of its clients.

I attempted to gradually foster the growth of the company; however, this endeavor was swiftly hindered by the impact of COVID-19 (which hit the aviation sector extremely hard) and time constraints arising from my academic commitments. Consequently, I faced a dilemma between maintaining academic performance and pursuing the expansion of the small consulting firm specializing in aviation. I choose the first option.

Working with the company has provided me with diverse experience across a variety of segments within the sector. This includes involvement with entities engaged in air travel (airlines), aviation mechanics, ground handling, and even organizations contributing to the education of air traffic controllers.

Similarly, through the company and its connections with clients and customers, I have had the opportunity to travel not only within Denmark but also to various parts of Scandinavia and Northern Europe. This has all been very valuable for me personally, and a unique way to work besides my university studies, allowing me to integrate practical experiences with theoretical knowledge and giving a holistic approach to my professional development.

Evolution and Expertise

“Be the master of one’s own destiny.”

As the company grew, I encountered the need for a deeper understanding of Danish tax law, and corporate law particularly during the transition from “sole proprietorship to a limited liability company”. This strategic shift was prompted by the company’s growth, underscoring the importance of adapting to evolving business needs and legal considerations. As Denmark is the best country for business in (Forbes 2021), it is easy to get advice from the government and municipalities. In the beginning I did all accounting myself, but quickly found it difficult to cope with all the tax rules and tax deduction/credit. Thus, I found the need to employ an accountant and a bookkeeper. I could then focus on core business tasks, while getting advice on financials by the accountant. Likewise, the annual report is also prepared and filled by the accountant.

Operating a consultancy firm demands a versatile skill set, as one must navigate various aspects of the aviation sector, handle client interactions directly, and manage the complexities of Danish business regulations. This multifaceted role involves not only consulting services but also to understand and comply with legal frameworks governing business structures and taxation.

Entrepreneurial Responsibilities

In contrast to traditional student assistant roles, where tasks may be more narrowly defined, the responsibility of running a small consultancy falls squarely on the entrepreneur. Direct client engagement is a key aspect, requiring a proactive approach to meet client expectations, secure projects, and ensure the successful delivery of services.

The entrepreneurial journey involves not just technical expertise but also resilience, adaptability, and a relentless commitment to client satisfaction. In the competitive field of aviation consultancy, success is contingent upon the ability to proactively pursue opportunities, work diligently, and deliver tangible results. It’s a journey where the dedication to achieving professional goals goes hand in hand with the responsibility of running a business. One must be the

My missions

Client Engagement

Directly responsible for client interactions
Proactively pursue opportunities to secure projects
Ensure client satisfaction through attentive and responsive interactions

Evolution and connections

Expanded the company’s scope beyond traditional pilot training
Establish connections with various stakeholders in the aviation sector

Entrepreneurial Responsibilities

Manage diverse aspects of the aviation sector
Navigate legal frameworks and comply with business regulations

Adaptability and Resilience

Demonstrate adaptability in response to challenges, such as the impact of COVID-19
Balancing academic commitments while fostering company growth

Required skills and knowledge

Operating a small company requires skills and knowledge that extend beyond conventional boundaries. One must not merely adhere to established norms but instead think innovatively, always ready to step out of the box and explore uncharted territories. The ability to think creatively is paramount, to uncover solutions and pathways that may not have been immediately apparent. In my experience I’ve learned that the capacity to think beyond traditional approaches is a key driver of success. Initially I didn’t expect to end up in the consulting world. But, when I saw the opportunity, I went for it.

Whether navigating legal transitions, devising strategies for cost optimization, or engaging with clients in the aviation sector, thinking outside the box has proven essential. It involves not just following a set path but actively seeking unexplored avenues, fostering adaptability, and finding solutions to challenges that may not have been initially apparent. If you do not like to do so, the lifestyle may not be for you.

It is crucial to bear in mind that in a small company, you represent the face of the business. You are intricately connected to every facet of the company’s operations and must actively participate in all activities that the company undertakes.

What I learned

Tax advantages in a limited liability company

Investment tax credit
Income split. One can choose to pay salary to the owner but may instead focus on the benefits to distribute profit as “dividends”
Tax deferral delay paying taxes on income until a later date, provides additional cash flow, that can be used in projects or in passive investments such as treasury bills

Financial Management and Planning:

Owning a company has provided insights into effective financial management, including budgeting, forecasting, and strategic allocation of resources to ensure sustained growth.

Regulatory Compliance and Legal Understanding:

Managing a business involves navigating legal frameworks and ensuring compliance with regulations. Learning about legal structures, and industry-specific regulations has become integral to the day-to-day operations. While it requires time to grasp, once mastered, it can become a valuable asset for the owner’s advantage.

Financial concepts related my internship

Game Theory Analysis

Game Theory, a branch of mathematics that analyzes strategic interactions between rational decision-makers, provides an advanced framework to model and understand the complex dynamics of airline alliances in the aviation sector. Despite the high level of competitiveness in the industry, and despite the impact of inflation leading to overall price increases, the cost of plane tickets has remained relatively stable, comparable to the prices observed three years ago.

The application of Game Theory to airline alliances involves the study of strategic interactions among airlines. Each client (airline) pursues its own interest in a very competitive environment.

Modeling the Strategic Interaction

The Nash Equilibrium, a central concept in Game Theory, represents a state in which no player has an incentive to unilaterally deviate from their chosen strategy. In the context of alliances, the Nash Equilibrium can be determined by analyzing the reaction functions of each airline to the other’s strategy.

The strategic considerations go beyond quantity decisions. Airlines must also strategically determine pricing, route allocation, and capacity sharing. These decisions can be incorporated into the game model to provide a more comprehensive analysis of the strategic landscape. Sometimes I try to quantify the Nash equilibrium, other times you should just keep it in your mind, and then look into strategy in a broader sense (not quantified). For instance, Ryanair is extremely good at providing low-cost air fares. While a customer choosing Air France, might expect more quality or at least a larger selection of flights to his/her destination.

Capital Structure optimization

Within the industry, a growing trend among airlines is the preference for leasing over direct purchases. This shift in approach calls for a thorough reassessment of fundamental business operations. The utilization of foundational financial modeling techniques, such as Discounted Cash Flow (DCF) analysis, becomes essential in making well-informed decisions when weighing the options between leasing and purchasing.

While calculating the Net Present Value (NPV) might be straightforward, accurately estimating the relevant parameters and acknowledging their uncertainties poses a more intricate challenge. To address this, I designate each parameter as a stochastic variable and conduct multiple simulations to compare NPVs across various leasing and acquisition scenarios.

By integrating statistical methodologies into corporate finance, a more nuanced and informed decision-making process emerges. This approach enhances the accuracy of predictions, allowing for a more robust evaluation of leasing versus acquiring propositions in the dynamic landscape of the aviation industry. Navigating the details of debt financing terms and adhering to covenants is also paramount in the process. The objective is not only to secure operational flexibility for aviation-related activities but also to ensure alignment with financial agreements and covenants.

In the end, it is the management of the respective company that makes decisions based on their strategic intuition, complemented by data and suggestions compiled by my company.

Why should I be interested in this post?

Entrepreneurial Exposure: The entrepreneurial journey of a business owner, and how you should shed light on the challenges and triumphs of managing your own firm. This firsthand experience is invaluable for anyone interested in finance, as it provides insights into the financial intricacies of running your own business.

Financial Management: The aspects of running a company, including budgeting, forecasting, and strategic resource allocation. These financial management skills are directly applicable to finance roles, where expertise in budgeting and strategic financial planning is highly sought after.

Application of Financial Concepts: If one is interested in applying financial concepts learned at ESSEC or another top Business School, directly into business related challenges, while being the sole responsible to the results. Then you need to consider starting you own minor company.

Versatile Skill Development: Operating a consultancy necessitates a diverse skill set, including financial management, client engagement, and legal understanding. The development and application of such skills is crucial to survive against competitors.
Remember that when being a business owner, you cannot hide behind an excel sheet. You are the sole responsible for the survival and growth of your company and your wealth.

Useful resources

Denmark Tops List Of Best Countries For Business

Business demography statistics

About the author

The article was written in December 2023 by Magnus NIELSEN (ESSEC Business School, European Management Track, 2023-2024).

My experience as a student assistant at KMD

April 4, 2024December 2, 2023 by Magnus NIELSEN

My experience as a student assistant at KMD

In this article, Magnus NIELSEN (ESSEC Business School, European Management Track, 2023-2024) shares his professional experience as a student assistant at KMD. A company located in Denmark, mainly focusing on software solutions for the public sector in Denmark.

About the company

KMD A/S, is a Danish IT company, within development and delivery of software and service solutions tailored for municipalities, government entities, and businesses in Denmark, alongside selected segments in Scandinavia. The company, with branches in all major cities in Denmark, operates as a subsidiary of the NEC Corporation (Japanese multinational corporation). The KMD group works primarily in Denmark, but has recently expanded to Norway, Sweden, Finland, and Poland, boasting an annual turnover of approximately DKK 4.8 billion and a workforce exceeding 3,000 employees.

A significant player in the Danish IT landscape, KMD traces its roots back to 1972 when it was established as “Kommunedata” (translated to; “municipality data”), a merger of all Danish municipal IT centers. Until March 2009, the company was owned by Kommune Holding A/S, giving it close relations to the government. After 2009 it was privatized in a large selloff by the municipalities.

KMD’s systems play a crucial role in administering various Danish income transfers, including welfare, child benefits, maternity benefits, unemployment benefits, disability pensions, and old-age pensions. With a clientele exceeding 1,500 from both the public and private sectors, KMD serves around 800 Danish and international companies. Main competition comes from NNIT, Netcompany, TDC Group and SimCorp. Representing the forefront of the Danish IT industry.

In the evolution of its ownership structure, KMD transitioned from municipal ownership to becoming part of “EQT Partners and Arbejdsmarkedets Tillægspension” (a special pension fund system in Denmark) in 2009. Subsequently, in 2012, EQT Partners sold its stake to the private equity firm Advent International. Notably, KMD expanded its portfolio in 2015 through the acquisition of Banqsoft, a Nordic software company specializing in financial services.

The year 2019 marked a significant milestone for KMD as Japanese company NEC acquired the company for 8 billion DKK, solidifying KMD’s position in the ever-evolving landscape of IT solutions.

Logo of the company.
Logo of
Source: the company.

My internship and the department

Being a part of KMD in the role of a student employee within the Finance department is an enriching and dynamic experience. The company’s role in developing and managing over 400 IT systems that support the welfare of Denmark adds a sense of purpose to the work environment.

The focus of my position is primarily on maintaining and enhancing financial reporting for the business. The responsibilities extend to supporting the monthly closing process in collaboration with experienced controllers. This hands-on experience allows for a deep dive into the intricacies of financial operations, providing valuable insights into the core of KMD’s activities.

The role involves working with a substantial amount of data, requiring proficiency in tools such as Excel, PowerPoint, SAP, and Power BI. This emphasis on data analysis and modeling adds a layer of complexity to the tasks, making it an intellectually experience.

The position was for 15-hour per workweek which is normal in Denmark to do besides studies. Instead of internships, students often work in between 15-25 hours a week whil also keeping track of their academic

My missions

Strengthening Financial Reporting: Playing a key role in maintaining and enhancing financial reporting for the business.

Monthly Closing Support: Collaborating with senior controllers to facilitate the monthly closing process, involving the analysis of statistics from the previous month. This includes identifying areas where company performance may have fallen short and investigating the underlying reasons. Additionally, overseeing the tracking of consultants’ work hours and assessing their productivity.

Data Analysis and Modeling: Participating in data-related tasks, encompassing analysis and model development. Leveraging tools such as Excel, PowerPoint, SAP, and Power BI for efficient data management. SAP serves as the primary system for obtaining accountable data, subsequently analyzed using Excel and Power BI.

Required skills and knowledge

My position in KMD’s Finance department demanded a blend of both soft and hard skills essential for the dynamic responsibilities associated with financial reporting and analysis. On the soft skills front, effective communication was paramount, as conveying complex financial insights to diverse stakeholders required clarity and precision. Including the elaboration and communication of complex financials to non-financial employees.

Additionally, a high degree of analytical thinking was indispensable for interpreting data and contributing meaningfully to the monthly closing process. Being detail-oriented was crucial, ensuring accuracy in financial reporting and tracking of consultants’ work hours.

On the hard skills side, proficiency in tools like Excel, PowerPoint, SAP, and Power BI was fundamental. The ability to navigate and extract actionable insights from SAP, the primary system for accountable data, was essential for comprehensive financial analysis. Moreover, a solid foundation in data analysis and modeling techniques facilitated the creation of meaningful reports that contributed to the strategic decision-making processes within the department. The use of PivotTables thus exemplifies how technical skills, in this case, mastery of Excel functionalities, played a crucial role in the success of tasks within the dynamic environment of financial analysis at KMD.

What I learned

Financial Analysis and Communication

Analyzed corporate information and financial statements
Prepared pitch-books and presentations for effective communication with stakeholders
Utilized evidence-based conclusions and strategic thinking to propose innovative initiatives aligned with industry innovations and key success factors
Enhanced collaboration skills through engaging with diverse stakeholders.

Global Industry Understanding

Understanding value creation within the IT industry, drawing parallels with academic studies in competitor theory
Explored potential channels for international expansion, broadening perspectives on global finance dynamics
Applied financial modeling and analysis skills in a real-world context.

Financial concepts related my internship

DuPont Analysis

A powerful and simple financial tool, holds particular relevance in the financial reporting function at KMD. Rooted in financial ratio analysis, DuPont Analysis breaks down Return on Equity (ROE) into three key components, providing an understanding of the drivers behind financial performance.

The theoretical foundation of DuPont Analysis lies in the decomposition of ROE using the formula:

Return on Equity (ROE)

Net Profit Margin (NPM): The first component assesses profitability, reflecting the proportion of each revenue dollar that translates into net income. The formula for Net Profit Margin is:

Net Profit Margin (NPM)

Asset Turnover (ATO): The second component, Asset Turnover, evaluates the efficiency of asset utilization in generating sales. The formula is:

Asset Turnover (ATO)

Equity Multiplier (EM): The third component, Equity Multiplier, gauges the financial leverage used to magnify returns. It is calculated as the ratio of total assets to shareholders’ equity:

Equity Multiplier (EM)

By breaking down ROE into these components, DuPont Analysis enables a more structured assessment of financial performance. The application of DuPont Analysis enhances the finance department’s ability to interpret and communicate the multifaceted nature of financial performance within the context of KMD’s operations. Likewise, it provided an opportunity to pinpoint areas where improvement actions could be initiated.

Real options valuation

The application of real options valuation (ROV) methods in the context of KMD’s IT projects involves adapting and selecting appropriate models to capture the dynamic and uncertain nature of these projects. Considering that KMD’s projects may span various stages and encounter multiple uncertainties, the valuation method addresses American-styled exercises and incorporate flexibility throughout the project lifecycle.

When large uncertainties surround costs and revenues of a complex IT project, where development costs already is initiated before the actual contract is won, the traditional Black-Scholes approach can be used to estimate the value. When multiple uncertainties exist Monte Carlo simulation can also be a way to estimate the value of a project.

One must understand the concepts of IT projects, as these are put out to tender. And development cost almost always arise before the company even know if they have won the tender offer. Thus, there is a chance that the option will never get exercised, and the value is lost.
In the context of an IT project, the real option is often more analogous to a call option than a put option.

Call Option Characteristics:

A call option provides the holder with the right, but not the obligation, to buy an asset at a predetermined price (strike price) within a specified period (expiration date).

Similarly, in an IT project, the company holds the real option to proceed with the project but is not obligated to do so. The company has the flexibility to exercise the option if the conditions (such as winning a tender) are favorable.

With a call option, the holder’s downside is limited to the premium paid for the option.
In the case of an IT project, the development costs incurred before knowing the tender outcome represent a limited downside. If the tender is not won, the company may choose not to exercise the option, limiting the financial exposure.

This is a simple case. And the real option of KMD’s IT projects are often much more complex.

Monte Carlo simulation can be a powerful tool instead of the Black and Scholes formula.

In the context of an IT project’s real options valuation, Monte Carlo simulation involves modeling the project’s uncertainties using stochastic variables and running numerous simulations to estimate the project’s value. Here’s how it can be applied:

1. Identify Stochastic Variables

Project Success Probability: The likelihood of winning the tender or securing the project
Development cost: The cost associated with developing the IT project
Exogenous factors: External factors impacting the project, such as changes in technology, regulatory environment, or market demand.

2. Define Probability Distributions

Assign probability distributions to the identified stochastic variables. For example:

Probability of success: Following a beta distribution representing high degree of uncertainty/
Cost of development: Triangular distribution based on optimistic, most likely, and pessimistic estimates
Market conditions: Following a gaussian distribution

Denote that one can assign any distribution to the stochastic variables, depending on what is assumed to fit best.

3. Run the Monte Carlo Simulation

Generate random values for the stochastic variables based on their probability distributions. For each set of randomly generated values, calculate the project’s Net Present Value (NPV) or other relevant financial metrics. Repeat the process for thousands of iterations to create a distribution of possible outcomes.

Finally one may analyze the result, and present the obtained results for a managing director, who will take the final decision together with the executives. Depending on NPV of the project and the degree of uncertainty, the executives may agree to bid for the tender offer, or not to engage.

Why should I be interested in this post?

For an ESSEC student aspiring to build a career in finance, this post offers an opportunity to explore the intersection of finance and information technology. The practical application of financial concepts, such as DuPont Analysis and Real Options Valuation, within the IT industry at KMD provides a valuable insight in the daily life of a Danish software firm.

The position requires a holistic understanding of financial operations within the company. Working with technologies like SAP and Power BI enhances your skill set, making you more versatile and competitive, particularly in a digitalized financial landscape.

The exposure to real-world scenarios involving strategic decision-making under uncertainty, as emphasized by Real Options Valuation, equips you with a strategic mindset—vital in finance roles where decision-making is critical.

Understanding the inner workings of a major IT company operating in Denmark and other Nordic countries, like KMD, provides insights into the challenges and opportunities in the competitive IT market. If you ever aspire to work in Denmark, this post offers international experience, giving you a taste of the Danish business environment and company culture.

Useful resources

About KMD

Goran Avlijaš (2019) Examining the Value of Monte Carlo Simulation for Project Time Management Management Journal of Sustainable Business and Management Solutions in Emerging Economies

Black F. and M. Scholes (1973) The Pricing of Options and Corporate Liabilities The Journal of Political Economy, 81(3) : 637-654.

About the author

The article was written in December 2023 by Magnus NIELSEN (ESSEC Business School, European Management Track, 2023-2024).