PROFIT BusinessCast

It’s been 27 years since a high school student idling in the drive-thru lane at a McDonald’s had the flash of inspiration that turned into a major Canadian entrepreneurial success story. In line behind an old pickup truck with ‘Mark’s Hauling’ stencilled on its plywood sides, the young man saw a way to fund his college education—by starting a junk removal operation of his own. He called it the Rubbish Boys.

You probably know the company in question by its current name, 1-800-GOT-JUNK? And you’ve undoubtedly heard of its founder, entrepreneurial icon (and PROFITguide columnist) Brian Scudamore.

Nearly three decades after that fateful fast food run, Scudamore has built a business empire. Parent company O2E Brands has $250 million in system-wide sales from 250 franchisees and four offerings: the original, 1-800-GOT-JUNK?, a fixture on the PROFIT 500 Ranking of Canada’s Fastest-Growing Companies; WOW 1 Day Painting; You Move Me, which does local moves; and exterior washing service Shack Shine.

All O2E’s brands are service offerings for homeowners, and Scudamore says that’s by design. “It’s where I got my start,” he explains. “[I’m a] big believer that you grow where you’re planted.” The lessons from building his first venture in this market—call centre, marketing, customer experience, PR, and so on—apply easily to every subsequent one. “We’ve been able to cookie-cutter that into other industries [that] really aren’t that different.”

Whether you’re building your first venture or your fourth, Scudamore says there are certain keys you need to put in place to succeed and scale. Here’s are three things that took him from the McDonald’s drive thru to the head of a quarter-billion dollar business.

1. Vision

It’s crucial that you have a clear sense of what you’re hoping to achieve, says Scudamore. “Know where you’re going,” he counsels. “You don’t have to figure out how to get there [or] create the plan, but start with the vision.”

At 1-800-GOT-JUNK?, Scudamore and the team crafted a ‘painted picture’ of the future. Details included a presence in the top 30 cities on the continent and an appearance on The Oprah Winfrey Show, both of which they’ve long since achieved. Each O2E brand has a picture of its own.

Scudamore references construction to drive home his point. “You’ve got to know what the end game looks like before you build out the skyscraper and add all these different floors.”

Marilyn Barefoot learned the technique she now teaches from Tetra Pak—the company, not its namesake packaging. Barefoot, who spent most of her career in the advertising industry, was set to work with 600 of the firm’s employees at a conference in the south of France as part of the independent agency she then owned. “They asked me to come to Scandinavia for a few days in advance, because they wanted to train me in the facilitation style that their people at Tetra Pak were accustomed to,” Barefoot recalls.

What Barefoot learned was a way of coming up with new ideas based on the divergent-convergent thinking process created in the 1950s at the University of Buffalo-based Creative Problem Solving Institute (CPSI) conference. It’s a technique she now shares with corporate clients that hire Barefoot Brainstorming, the consulting and training firm she founded a decade ago.

Barefoot’s favourite part of working in advertising was ideation, the “blank page” that needed to be filled with solutions to a client’s problems. Here are a few things you can learn from her about fostering creativity in your company.

1. Lead by example

Leaders who are committed to the creative process inspire their teams to do the same. “Right from the very top, [leaders] have to embrace the idea of innovation,” says Barefoot.

It’s also important to create a culture where failure is celebrated, not stigmatized. “You won’t be chastised,” Barefoot says you need to communicate to your team. “Nobody’s going to look at you and say, ‘That’s a really stupid idea.’”

One way to lead by example is to make ideation a routine part of your company’s schedule. “[You can] encourage it by having people sit down and do a regular spitballing session,” suggests Barefoot. “Bring in an interesting lunch, and have [a few] people sit around it and throw around ideas.”

2. Make people comfortable

The biggest obstacle to creativity in most companies is fear, says Barefoot. It’s unusual for people to come into a brainstorming session with a great deal of enthusiasm, she notes. Most people are either open about their fear of participating, or disguise their misgivings by dismissing the process as a waste of time.

After he graduated high school, Daniel Dubois spent six months backpacking in Australia with a friend. For part of their time Down Under, the two were put up by a local family. “We’d wake up early in the morning and go surfing with the dad or biking trips with our neighbours,” he recalls. “It was incredible how we were on the other side of the world but all of a sudden part of this tight-knit community.”

That Australian experience inspired Dubois to start ShareShed, a platform for renting outdoor gear from locals. Dubois likens ShareShed to Airbnb, except rather than letting out someone’s spare room you’re borrowing their kayak or tent for a couple of days.

The young founder and CEO is making waves, winning the 2016 Canadian instalment of the Entrepreneur’s Organization’s Global Student Entrepreneurship Awards and taking third place in the main competition in Bangkok from a field of 50 national champions.

Dubois admits he’s typically skeptical of business and pitch competitions, but EO’s version focuses more on a contestant than his or her company, he says. “The most important factor was proving that entrepreneurship is in your DNA,” he suggests. “I think that’s something you can’t really fake.” Dubois certainly has that criteria covered—he got his start in business selling moss to neighbours for $5 a bag as a five-year-old, he quips.

While he’s learned plenty from that and other childhood ventures—including two clothing lines and a laneway housing company—what has really driven the way Dubois has built his current business is the sense of community he experienced while technically on vacation in Australia.

The Silicon Valley “build it and they will come” mindset doesn’t always work anymore says Dubois. No matter how innovative the technology or product, the real attraction for users is the service you provide, he believes. “We’ve found that people weren’t necessarily using ShareShed because they wanted a canoe, but they were using it because they felt the sense of belonging, and they were able to have an authentic experience,” he explains.

So ShareShed doesn’t simply facilitate transactions. The company formed a group on the popular community-organizing platform Meetup—it now has over three thousand members—and hosts events to help users connect in person. That’s led to some long-lasting friendships, like the one formed via one of ShareShed’s first transactions, in which an out-of-town couple rented a local’s canoe. Dubois and his team went on to keep in touch with the canoe owner and seek his advice, which led to a more permanent association. “Since then, he’s actually invested and joined the team full-time,” Dubois says. “Even just the way we’ve built our team, a lot of them have come from our community.”

Communicating with that core audience and using their feedback and ideas to improve is crucial to ShareShed’s strategy. “I think a big part of it is getting out of the office—it’s very easy to be on our computers all day and sending emails,” he notes. “The challenge is in continuously talking to users, and really being of service.”

Thanks to her generous parents, Arti Modi made it through university without student loans. Modi did have a credit card, but she almost never used it. It’s the kind of responsible behaviour she should have been rewarded for.

But to a financial institution, the then-recently graduated Modi’s debt-free conduct made her an unknown quantity. “I go to the bank and I try to get a really good loan out,” she recounts. “But unfortunately, I don’t have any credit files, so I don’t have the credit history to be able to receive an affordable loan rate.”

That was just over a decade ago. Today, Modi is the founder and CEO of Lending Arch, one of the many startups recently launched in the financial technology (fintech) space. The consumer borrowing platform, which went live last year, serves customers with the kind of profile Modi once had. Lending Arch, calls them “future prime”—meaning that they may not have a big credit score or a heavy credit file yet, but still have the potential to be good borrowers.

Here are three key lessons Modi learned while starting Lending Arch.

1. Build something more than an MVP

There’s a line of thinking in technology that you should get out in front of potential customers as quickly as possible, and worry about fixes and improvements later. This minimum viable product (MVP) strategy holds that “if you’re really happy with the way that [the product] works, you probably worked on it too long,” explains Modi. She disagrees. “You only get one chance to look good.”

It’s important to be proud of the product you put out into the market, Modi says. But she doesn’t dispute the wisdom of constant improvement. “Use [your MVP] as a stepping stool to be able to do further iterations,” she counsels.

2. Figure out the customer acquisition strategy

Like any good entrepreneur, Modi believes her company has a defensible strategy that differentiates it from the competition. In Lending Arch’s case, it’s the kind of borrower the platform serves. Most lenders work off a potential client’s credit score, but Modi’s firm factors in details like employment, industry, education, and financial literacy. “There’s a huge amount of data that we’re able to put together … to be able to find those future-prime borrowers [among] those that have dropped off what our competitors are able to underwrite, or who the banks simply cannot look at,” she explains.

But Modi is also aware that there’s no shortage of companies trying to attract the attention of Lending Arch’s target demographic online. That’s where capital comes in. “You need to have a decent marketing budget to be able to actually position and market the platform that you’re putting out there,” she explains.

A prospective customer who approaches Jon Voigt’s firm about a project is likely to hear one question a lot: Why? Voigt and his team aren’t just mimicking the inquisitive phase of childhood. They’re gathering critical information.

More than half of what you’re likely to hear from clients in an initial meeting or phone call is the ‘want list’ says Voigt, the co-founder and CEO of Toronto-based cloud content management system builder Agility. Clients will often come in with a fixed idea of the solution or product they’re looking for, so they’ll skim over a crucial subject: their goals. “They think, I know what my goal is. I’m going to figure out what I want and need to do that, and [that’s what] I’ll tell them,’ says Voigt.

That’s not good enough. It’s possible to fulfill a customer’s wants and needs but get to a different outcome than their actual initial goal, notes Voigt. Here’s how he and his team figure out what their clients’ real goals are and help meet them.

1. Pick service-minded people

When Agility was founded in 2002, Voigt took charge of the technology while his then-business partner handled sales and marketing. But now that he’s in sole charge, Voigt doesn’t simply hire in his image. Many of Agility’s employees come from outside the technology world.

What Voigt looks for is an instinct and talent for service. “They want to make sure the customer’s successful, and they naturally keep working with them to … figure out what their goals are,” he explains.

Finding such workers isn’t easy, so Voigt has developed ways of identifying whether a job candidate has the necessary mindset. “We ask them ways that they’ve used service in the past or shown really good service, and seen a good result,” he says. References are also asked if a candidate would exhibit Agility’s core values if they were to be hired.

2. Listen, listen, listen

That’s the mantra Voigt emphasizes to his employees. As soon as a prospective client gets in touch, Agility is trying to figure out what their goals are and how to meet them. “We take the [first] phone call as a requirement-gathering initiative, and we try to absorb as much [as we can],” Voigt says.

It’s also crucial to get buy-in from all the stakeholders in the customer organization. “Make sure you get as many people involved that could influence the end-goal [as possible],” he says. Final decision-makers and employees with responsibilities related to the project may not feel the need to participate early on, but Agility makes an effort to involve them anyway.

There’s no shortage of things to do in the days after you decide to go into business for yourself. Your list will include big decisions such as what your company will do and be called, where it will operate from, and so on.

In these heady, possibility-filled days, legal matters aren’t usually top of mind. But getting the right documents and systems in place at the beginning can save you a lot of expense and hassle later on.

Over the last couple of years, Fogler Rubinoff LLP partner Matt Norris has helped a new cohort of entrepreneurs start companies. A lot of these startups have built significant public profiles. That’s a good way to attract business, but it also has downsides. “It opens you up to possible claims,” he notes. When a startup gains traction, people begin to emerge from the woodwork—unhappy customers, jilted former workers, or patent trolls claiming your intellectual property as their own. In each case, having legal defences can go a long way to ensuring you live to do business another day,

Here are six legal matters Norris says startups need to tackle as early as possible.

1. Incorporation

Entrepreneurs—particularly those going solo—often skip the lucrative and risk-reducing step of incorporating. That’s a mistake, says Norris. “What a corporation does, versus some of the other business entities, [is] it allows you to [limit] liability to the assets of the company,” he explains. “So it insulates the founders from any personal liability.” (The exception is a personal guarantee offered to secure a bank loan in lieu of company assets; in that case forming a corporation doesn’t limit liability to creditors, but “still insulates you from the public”).

Most companies eventually need to raise money, and incorporating can make attracting outside investors easier. It also simplifies tax planning, and may help to reduce the amount you have to pay by enabling income-splitting.

“You can always convert to other business entities at a later date,” notes Norris. “But the sooner you [incorporate], it kind of limits your tax and legal expenses that go with converting down the line.”

2. Shareholders’ Agreement

Founders used to operating on a handshake don’t always see the need for a formal document outlining their rights and duties. “But when you get into business—especially if you’re going to be successful down the road—you’re going to run into issues around ownership, commitment, management decisions, and [eventually] buying and selling the business,” says Norris. A shareholders’ agreement addresses these issues

As any entrepreneur knows, raising funds for a successful startup can be inconvenient at best, and hopeless at worst. But for those dreading knocking at VC’s doors, take heart: there may be a new way to raise the capital you need, without all the hassle.

Just ask Andrew McLeod, Chief Strategic Office of RentMoola. An online global payment network, RentMoola allows tenants and owners to pay rent and other dues online. McLeod oversaw Canada’s largest equity crowdfunding campaign to date, which used a offering memorandum and funding portal listing to net over $5 million for a 13% equity stake.

Does an equity crowdfunding campaign sound like the perfect solution for your funding woes? Follow these steps:

1. Do your research

Many startups go through a familiar fund-raising trajectory: friends and family, angel, seed, Series A, B, C, and so on. RentMoola did very well in the first two financing stages, but considered a range of options once it got to VC phase.

McLeod says it’s important to consider if an equity crowdfunding campaign is right for your company. “I think there’s a certain type of company that should go that route, and there’s a certain type of company that shouldn’t,” he notes. “If you have a really great elevator pitch and you’re a really great marketer, I think crowdfunding’s amazing, and it’s going to be really successful [for you.] So before you make that investment, you want to make sure that there’s a right fit.”

2. Pick a crowdfunding exemption

Once you’ve decided you want to pursue an equity crowdfunding campaign, you need to decide which crowdfunding exemption you want to use. McLeod says the easiest option is the accredited investor exemption. But you can access a bigger pool of backers via the crowdfunding and offering memorandum (OM) regimes. Both require you to do a certain amount of paperwork.

“We decided to use the offering memorandum exemption because there’s a lot more flexibility around it,” explains McLeod. (The company also used the crowdfunding exemption). “It basically allows anyone to invest, regardless of whether they’re an accredited investor or not, and it doesn’t really put the same limitations that the crowdfunding exemption would have on your fundraising initiatives.”

3. Choose a funding portal

“Equity crowdfunding platforms are fantastic,” says McLeod. “They help with the compliance, it’s easy to set up, [and] they help with the distribution channel for you to get your message and your story out there.” He says finding the right portal is key—RentMoola used Vancouver-based FrontFundr. The portal helped with the application and the setup of the campaign.

Snowbirds may flock to Florida for the Sunshine State’s balmy weather, but Canadian technology entrepreneur Oscar Jofre found something even better on a trip to Orlando: an idea for a new business.

Jofre had his eureka moment while listening to Douglas Ellennoff, Jason Best and Sherwood Neiss, who played major roles in developing the portion of the 2012 JOBS Act which enabled equity crowdfunding in the U.S. He turned that inspiration into Toronto-based KoreConX, which helps clients navigate the myriad requirements regulators and equity crowdfunding portals impose before companies can raise capital from the public.

Equity crowdfunding represents a significant broadening of the investor base for cash-seeking companies according to Jofre. “In the past, you would go to a broker-dealer, [who] would take your deal to the 10 or 15 or 100 people they knew,” he explains. Listing your offering on a registered platform expands that number dramatically.

Regulations that took effect in six provinces in January have brought plenty of attention and interest to equity crowdfunding. But Jofre says the new rules are not the first of their kind in Canada. “We are one of the countries with the oldest crowdfunding rules in the world,” he says. Though they didn’t necessarily use the term, the accredited investor and offering memorandum exemptions allow companies to raise money from individuals.

Whichever exemption you plan to use, platforms require a significant amount of documentation and due diligence before you can list. “Portals turn down 80% of companies, [and it’s] not because you’re bad—in fact, they would love to take you on and list you,” says Jofre. It’s failures of readiness that could deny you a listing.

Jofre calls the preparation process “pre-crowdfunding.” Get your corporate and minute books in order, and make sure your lawyer has done all the necessary paperwork. “Portals are going to be watching this very carefully, in light of the very first equity crowdfunding fraud in the United States,” notes Jofre. So itemize every detail of how you plan to spend the money, and be prepared to provide regular updates about your progress once you’re finished raising it. KoreConX facilitates due diligence and reporting, and helps entrepreneurs apply to 1,200 portals across the world rather than just the 12 operating in Canada at the moment.

There’s also marketing planning to be done. The new provincial regulatory regime restricts what companies trying to raise money can say significantly. Marketing is limited to saying, “We’re on ABC portal—look at our documentation there.” But if you’re using the offering memorandum exemptions, there’s more room to market, and to do that you need a plan. “What kind of advertising are you going to do?” Jofre asks. “What are you going to do with your social media, your video, and your PR?”

The marketing limitations are one reason Jofre prefers the offering memorandum exemption to the new rules. The January regulations also make it difficult for individuals to invest across provincial borders. “That’s why I’m a fan of Canadian-wide regulations, because that’s the only way we’re going to be able to have true crowdfunding,” says Jofre. KoreConX also operates in the U.S., U.K., Australia, China, Singapore and Thailand—all of which have cross-country legal frameworks.

While regulations will doubtlessly evolve over time, companies are already making good use of equity crowdfunding. Jofre says six deals have closed in the last 60 days in Canada, with the average investor pitching in $1,500 under the offering memorandum exemption. In the country’s first blockbuster deal, Vancouver’s RentMoola raised $7.5 million over three months.

Jofre anticipates there will be 30 portals operating in Canada in the next 12 months, with real estate leading the charge, and that deal sizes will grow.

At an age when his friends were busy hanging out and knocking back beers, Nick Karadza was flipping houses. “I started investing when I was 21 years old—probably too young to know any better,” he recalls.

Without much by way of real estate knowledge, Karadza bought and sold a property, making “a few thousand bucks” off the deal. It turned out he had a gift for the trade. After getting his real estate license and partnering with his brother on a few properties, Karadza co-founded Rockstar Real Estate, a brokerage that works primarily with investors. The Oakville, Ont. company took the #174 spot on the 2015 PROFIT 500 Ranking of Canada’s Fastest-Growing Companies.

By his own admission, Karadza isn’t your typical realtor. “If someone told me, ‘Hey, I like the home but the carpet is the wrong colour,’ my reaction wouldn’t be what a good salesperson would say,” he admits. “My reaction would be, ‘Well just change it.’” Instead of trying to be all things to all people, as he says many realtors are wont to do, Karadza chose to focus on a very narrow niche: residential real estate investors.

Just as his friends hadn’t understood his early foray into the space, so his real estate peers were skeptical of Rockstar’s singular focus. “We had people in the industry telling us we were crazy, [that] you need to list properties or you can’t really build a business,” Karadza recalls. But focusing on buyers who are investors at heart helped the company build a valuable reputation as a specialist in its area.

Even within that niche, Karadza is selective about who he’ll work with. Here’s how Rockstar vets potential customers and why having fewer clients has allowed Karadza to build a bigger business.

1. Find a gap

Early experience flipping houses meant Karadza didn’t have to go searching for a niche need to meet—he’d already identified one. “We took some real-estate training classes and paid a chunk of money for [them],” he recalls. “Then we tried to take those lessons that we were taught and implement them in the real world, and it was quite difficult to do that.” Other aspiring real estate investors were probably having the same experience, Karadza realized. So he focused on helping them.

A similar strategy can be applied by anyone in business: look around and identify the gaps in your own business or sector. “Are there consistent themes or frustration points that you’re seeing from people that you’re working and dealing with on a daily basis?” he asks.

A common pain point that any business can solve is implementation. “People generally want results without having to do the work,” Karadza observes. Offering to actually install or implement the services or products you’re selling is a great way to expand the amount of business you do with your clients and to make them happy.

2. Test your hypothesis

A good idea alone isn’t worth much. Early on, Rockstar ran marketing campaigns targeting the kind of people the company was looking to work with. When those efforts received a positive response from prospective clients, Karadza knew he was on to something. “But if we ran some marketing campaigns and there was no response, then maybe it was a sign that there was no demand in the market for what we were offering,” he says.

3. Limit access to your expertise

Most businesses worry about having too few customers and prospects, not too many. Rockstar is not among them. Prospective clients must join a membership program to get access to the company’s brokerage services. “Unless they [are] an active paying member, we [are not] going to invest time with them and work with them as client,” Karadza explains. “That really narrowed down the number of people we were working with.”

Rockstar isn’t interested in exclusivity just for the sake of it. “We realized that many people would gladly use our time and not be as serious as we would have hoped,” Karadza explains. And there’s no better indicator of seriousness than cash—hence the membership program.

Once a niche funding source for personal projects and products no consumer would ever want to buy, crowdfunding has evolved into a legitimate, common form of capital for startups and innovative businesses.

Want proof? Look no further than the agenda of the second annual Canadian Crowdfunding Summit, held at the MaRS Discovery District on March 3, 2016. Panelists and speakers at the event, hosted by the National Crowdfunding Association of Canada (NCFA), included a who’s-who of Canadian and international entrepreneurs and experts. And Ontario Finance Minister Charles Sousa was on hand to open the conference.

“The future of crowdfunding is now,” believes NCFA Executive Director Craig Asano. Here are eight ways to take advantage of crowdfunding, courtesy of the entrepreneurs and experts who spoke at the Summit:

1. You need to do your homework

Raising capital from the crowd seems like a relatively straightforward process: shoot a video and start a campaign on Kickstarter or another platform, then sit back and watch the money roll in. If only it were that simple.

Before the Revol Technologies team put their custom-fit earphones on Indiegogo, they studied past successful crowdfunding campaigns. “I reached out to as many people who have done campaigns in the past [as possible] to get valuable information on the do’s and don’ts of their campaigns,” explains Dan Blumer, the co-founder and CEO of Montreal-based Revol. “So essentially taking the templates of others and doing them ourselves.”

It paid off, big time. Revol’s original goal was U.S.$100,000, but the campaign ended up raising U.S.$2,570,000, and the company has since made an additional six figures in pre-sales on Indiegogo.

2. You need to educate your angels

New regulations around equity crowdfunding allow companies in most parts of the country to tap retail investors for capital. But simply building the largest pool of civilian backers you can won’t lead to the best results. “It’s not sufficient to assume that just because they’re rich they’re necessarily going to be able to add value to the shareholders agreement [or] understand the down rounds [or] how to value a business notes Bill Morrow, CEO of Angels Den Funding Inc, a British platform founded in 2007.

The U.K. has had equity crowdfunding for several years now, and Morrow’s opening keynote at the Summit detailed what it takes for a country to make the financing model successful. “For Canada to actually be able to progress, you kind of need to have an education program for both entrepreneurs—Canada’s really good at that—but for the angels as well,” he told me.

For example, retail investors may not be familiar with the risk-reward calculations in niche or specialized industries. “The challenge for us is that as a research and development-oriented enterprise, the message can be complicated,” admits Buck Young, the co-founder and Operations Manager of CannTx Life Sciences, a medical marijuana company. “Our challenge will be to really simplify that and condense it.”

3. The fundamentals still matter

His main business is software, but Michael Hyatt also has a side-gig investing in startups as a Dragon on Next Gen Den, the online spinoff of the hit CBC entrepreneur pitch show. Hyatt says the same rules of success apply today as a decade or a century ago. “Great businesses show great value to clients and are something they really, really need,” he says.

One particularly important skill for entrepreneurs: the ability to pivot. “Do I like their market and do I think they can make it?” Hyatt says he asks when evaluating an investment opportunity. “And do I think they can pivot when one of the founders leaves or they lose funding or something else happens? Because inevitably it does.”

The same rules apply to investors looking to back a company through a crowdfunding platform, or to founders seeking capital via one.