PROFIT BusinessCast

The moment is coming for all of us, says author, entrepreneur and advisor Bruce Hunter — our last day of work. And a shocking number of business owners aren’t prepared for that day.

Hunter, who previously worked as VP of Marketing and later General Manager of Kraft Canada, is now president and CEO of Lighthouse 360, consulting with entrepreneurs to increase the value of their businesses and, crucially, preparing those businesses for sale or to pass them on to the next generation. He’s also author of The Success Cage, aimed at helping entrepreneurs who are feeling trapped by the businesses they built.

“One day you’re going to exit your business,” Hunter says. “The question you’ve got to ask is whether you design your future or you’re just going to let it happen to you.” Hunter notes that 50% of business owners say they intend to transfer their business on retirement—by selling it or transferring it to the next generation—but most have done very little to set that in motion. “The last thing people want to think about is life after work,” he says.

Hunter chalks it up to a phenomenon called the “Perma-Five”: whenever you ask an entrepreneur when they’re going the retire, the answer is always five years down the road. “Five years feels far enough away so that you don’t have to deal with it today.”

But more business owners need to think about how they’re going to exit their business, and they need to do it sooner rather than later. One of the most important things they can do is find ways to extricate themselves from the day-to-day operations. Not only is this good management practice, allowing you to concentrate on the long view–“looking around the corners and being the highbeams for the organization,” Hunter calls it—but it also increases the value of the business as you get closer to a sale: after all, the one thing that an acquirer won’t get in that transaction, by definition, is you. The more knowledge and expertise you can offload into the business, the more valuable the company is and the smoother the eventual transition.

“It takes 3 to 5 years to properly set up your business for transfer,” Hunter says. “Don’t start preparing tomorrow—start today.”

Many successful entrepreneurs pride themselves on pouring all their energies into their businesses, but according to Greg Weatherdon it’s important to take it easy sometimes.

Weatherdon, author of Get More Life Out of Your Business, has had an eclectic career, including as a rock-and-roll truck driver for KISS, and has owned and operated multiple businesses, often simultaneously. “As [entrepreneurs] we’re brave and we’re confident, and we feel invincible at times,” he laughs. “So we go try a bunch of different things, which typically fail. ”

At the Marketing Resource Group, which he ran at the same time as a TV commercial production company, Weatherdon says he was the last one into the office in the morning and the first one out in the evening. “It was a lifestyle company—it was designed that way, for my lifestyle,” he says. “I realized early on that I didn’t want to take the briefcase home at night anymore.”

Putting in the effort to help your business thrive is vital, of course. But Weatherdon says it’s equally important to know when you’re hurting and to stay focused on what you want to achieve as an entrepreneur in the first place. “Most of us have five or six key priorities [for] why we’re going into business,” he notes. “Eighteen months in, they’re out the window, [and] we’re miserable and working too hard.”

After all, you can’t enjoy your success if you’re always exhausted and glum. Weatherdon hopes his book will give entrepreneurs actionable advice to improve their lives. Here are the author’s three top tips:

1. Focus: “If you can stay focused, you become the expert,” explains Weatherdon. “As an example: who makes more money, the brain surgeon or the family practitioner? People pay for expertise.”

2. Delegate: “People say they can’t find good help…[but] usually the problem is with the owner or the manager,” Weatherdon suggests. “They don’t give people the opportunity to succeed.”

3. Don’t let your pride and ego get in the way of making the right decision: “If you realize early on you’re not going to be successful, pull the plug,” he suggests. “Live to fight another day.”

It’s not always so bad to lack funds in the early days of starting a business. That’s the belief of Richard Caballero, founder and CEO of ComLinked Corp. (the name stands for “companies linked”), an online marketplace in which businesses can connect with one another and develop better sales channels.

Caballero, a 25-year veteran of the tech industry, mulled over a few different funding options when plotting the launch of ComLinked. “We considered crowdfunding,” he says in this week’s BusinessCast podcast. “But we really wanted to launch it first, because it was very difficult for people to grasp the concept before there was a viable example live and functioning.”

While Caballero hasn’t ruled out crowdfunding entirely—especially now that ComLinked is up and running—he opted instead for a DIY approach to financing his new venture. And that has yielded some surprising benefits.

“I bootstrapped it and paid for it out of pocket, with some help from family members. Due to limited funds initially, the platform took longer to develop than originally planned,” says Caballero. “But at the same time it enabled us to really, thoroughly test the platform with beta users. Not only in Canada, but across companies in Europe, the Middle East and Asia-Pacific.”

Caballero feels that early feedback has been essential in allowing his company to develop a platform good enough to take to market.

Even with a ton of competition, it’s not at all impossible to launch a unique, in-demand business. Consider the experiences of Derek Szeto, CEO of Wirkn, an app that helps young job-hunters identify and apply for positions more quickly, and the guest of this week’s BusinessCast podcast.

A serial entrepreneur, Szeto founded of RedFlagDeals.com, which grew to be Canada’s largest bargain-shopping community before being sold to Yellow Pages Group in 2010. He also serves as entrepreneur in residence at startup accelerator Kinetic Café. So he knows some things about launching successful ventures in even the most challenging competitive environs.

That’s a good thing, because Wirkn operates in a crowded space. There are countless recruiting and headhunting firms out there that are competing heavily to connect job-seekers with employers. And LinkedIn and its imitators have amassed a huge user base online. Yet Szeto believes that Wirkn’s market (young people) and platform (mobile) make it stand out.

Want to know what Szeto believes is needed to disrupt a busy market? Read on:

1. Have a clear mission

From the start, Wirkn’s core purpose was about more than selling stuff: there’s a social element at play, too, and it’s one thing Szeto thinks makes the company unique. “What really excited me about the opportunity is that it can really help youth unemployment,” he says. “That’s a big topic these days, since the recession. Employment rates for youth have skyrocketed. We want to be part of the solution, and we think mobile will be a big part of it.”

2. Look to serve more than one need

Part of the beauty of Wirkn, Szeto says, is that it doesn’t just seek to solve a single issue: it aims to help both employers and potential employees. And having a dual purpose makes any new offering all the more appealing. “We wanted to bring to market something that fulfilled the needs on both sides: the needs of employers and the needs of employees,” he explains.

3. Enlist someone who knows the pain points

The idea for Wirkn came from a man who knows firsthand how hard it is to match supply and demand in the job market: Francois Jobin, former vice-president of HR at Aldo Group. “He’d been brewing on this idea for 12 years at Aldo and 25 years overall, as he’s seen the shift in the retail from full-time to part-time jobs,” Szeto explains. “At the same time he saw that youth weren’t engaged as they used to be. He thought there was a solution we could build.” Having Jobin—who understands the pain points of the modern labour market more than most—on the roster gives Wirkn credibility and invaluable insight into the problems it’s trying to solve.

Crowdfunding gets a lot of buzz, and for good reason: when done right, it can be a great way to test a product and to drum up cash for development. But for every wildly successful effort to raise money there are countless failed bids.

You can put Ben Webster’s efforts firmly in the first category. Webster is founder of Toronto-based sound system producer Mass Fidelity, which holds the honour of running the most successful Canadian Indiegogo campaign to date. As of publishing time, its efforts to fund development of The Core wireless speaker system has raised $940,297—nearly 2,000% higher than the company’s goal of $48,000.

In this week’s BusinessCast, Webster reveals why he thinks his firm’s campaign has been such a hit, and offers advice for others vying to do the same:

1. Use it to validate your offering

From the outset, Webster decided to approach his Indiegogo campaign as a giant focus group. If people responded, great; if not, it’d be time to retool. “We look at crowdfunding as a proving ground for the product and the technology,” he says. This is especially useful when you’re dealing with discerning customers: “It is a great way to gauge market interest in a very tough segment, which in our case is early adopters.”

2. Offer something that won’t bore your target audience

That said, Webster had no interest in putting forward a half-baked product. The early-adopter audiophiles Mass Fidelity is after are a smart group: they spend lots of time on online discussion forums debating the relative merits of different offerings. “They’re usually well-educated about the technologies being offered, so they’re not easy to please,” Webster says. “On the whole, the have a very good BS detectors.” That’s why he was diligent in making sure what Mass Fidelity had to offer was truly unique and novel before putting out a call for cash. “We learned that there wasn’t a product that you could compare directly to ours,” he explains. “That got the community very excited.”

3. Don’t get greedy

In crowdfunding, nothing looks worse than setting a sky-high target—then falling massively short of it. Mass Fidelity’s Indiegogo goal—$48,000—might appear to be modest, but that was a strategic decision, says Webster. “That number was directly related to production costs and cash flow,” he explains. “We already had a relatively successful product in the market before this. We wanted to increase production volume on The Core because after doing a bunch of demos for various sales channel partners, we were fairly confident that demand would far surpass supply. So that $48,000 number was directly related to us trying to meet what we saw as the guaranteed supply of the existing sales channel.” Any money that came in beyond that? Gravy.

4. Treat it as a short-term solution

Crowdfunding is useful as an initial way to boost funds, but it shouldn’t be a permanent solution, Webster says. “It’s really important to understand that crowdfunding on its own is not a viable long-term business model. Looking at it as a way to jump-start a business is, I think, the safest way to look at the platform.”

The gaming industry is becoming one of the most important segments in Canada’s thriving tech sector. Gaming employs 16,000 people and contributes $2.3 billion to Canada’s GDP annually—and both figures are rising fast. “The business of games includes everyone from very small gaming companies with one or two people working out of a basement, to very large companies like Ubisoft,” explains Christa Dickenson, executive director of Interactive Ontario on this week’s BusinessCast podcast. “It’s an industry to watch.”

Dickenson—a former film and television executive who is currently busy organizing Interactive Ontario’s GameON: Finance 2014 conference, which takes place November 20 and 21 in Toronto—believes the gaming sector is at the cutting edge of the Canadian economy. And she shared a few of the reasons why.

1. Agility

Like many creative industries—including television, film and music—the gaming sector relies heavily on contract and/or freelance employees. Why? “Because a gaming company’s end results are project-based,” Dickenson explains. “They’re based on creativity, and run by creative directors who usually want to bring in specific people to do the work.”

That not only means the right people are working on the right jobs, it also gives developers the agility to scale up and down as the market demands. That’s particularly useful for the many small developers across the country, she says. “A smaller company has to be so much more agile,” she explains. “Once they are able to land some financing for a project they’ll bring in six contractors.”

2. Innovative pricing

Game developers have been at the forefront of the “freemium” movement, offering their programs to users for no initial cost, with the end goal of generating revenue through ancillary add-ons or other creative markups. In Dickenson’s view, smart developers are learning to navigate this tricky pricing model. “Whether someone will pay depends on their buying patterns. It depends on their DNA as a user, a shopper and a player,” she explains. “But it’s important for developers to remember the user is smart.” Savvy developers have learned that it’s very difficult to “trick” end-users into paying for something.

3. Growing applicability

Gaming developers aren’t just appealing to the needs of couch potatoes craving distraction. They’re making a big difference in some surprising places, including health care. Dickenson cites the example of a hospital in Toronto, which has partnered with a developer to create a video game that helps children with cancer manage their pain. This is just one instance of many in which “gamification” is permeating the mainstream—and developers stand to play a crucial role.

Like many entrepreneurs, Bijan Vaez is no stranger to pinching pennies. Vaez is co-founder and CTO at EventMobi, which develops mobile apps for events and conferences. He founded the company with his brother in 2009, shortly after the iPhone 3G was announced: “We had an inkling that we were into the next technology revolution with the introduction of these smartphones,” he says in this week’s BusinessCast podcast. Today, the company has more than 55 employees and serves clients in 40 countries.

EventMobi is an entirely bootstrapped company; the Vaez brothers opted not to take on debt or court external investors to build their company. It was a conscious choice that has at times made things difficult, but Vaez is confident it’s an essential component of the firm’s success. Here, he shares three of the lessons he’s learned about building a successful business with no outside cash.

1. Make it part of your firm’s DNA

EventMobi is the second company Vaez launched; it’s the fourth for his brother. In their past experiences, both had experienced firsthand the challenges and headaches that can come from trying to secure external funding. For that reason, bootstrapping “was a goal for us,” he says. From the start, financial self-sufficiency was part of the company’s DNA. “We wanted to create a product that added value for people that we could sell from the get-go,” he explains.

2. Target an industry with money to spend

“As a bootstrapped company, we wanted to have revenue from Day One,” says Vaez. Of course, it wasn’t that simple; for the first year or so, EventMobi did give the product away to some early adopters so the brothers could refine the offering and better understand what the market needed. “But our goal was never to offer a ‘freemium’ product,” Vaez said.

EventMobi was able to quickly get out of the freebie ghetto by carefully choosing to serve a market that a) had money to spend, and b) offered the prospect of repeatable revenue. The corporate events and conferences sector was the perfect fit, and money started coming in shortly after launch.

3. Be frugal (and stay that way)

A major reason bootstrapping has worked for EventMobi is the penny-wise nature of the Vaez brothers. “Being frugal was definitely useful,” says Vaez. He was only 20 when the company began; since he had “no strings attached,” he moved back in with his parents to save money. His brother did the same, and together they built the business with little more than two laptops as overhead. “We didn’t have any extra costs to spend money on for the first few years,” says Vaez. “We were working all the time.” It was an experience that he says forged EventMobi’s culture: “We’re still fairly frugal to this day.”

For many entrepreneurs looking to build a nest egg for retirement, real estate holds a lot of appeal—especially in such white-hot markets as Vancouver, Calgary and Toronto. But it’s not something to go into blindly, according Cindy Daly and Kevin McCarthy, realtors at Royal LePage Real Estate Services Ltd. Johnston & Daniel Division, Brokerage, and the guests of this week’s BusinessCast.

If you’re looking to real estate as an investment—that is, something that will not be your primary residence, and that will contribute to your net worth—there are a few smart avenues to pursue. “I like to buy very manageable small residential investments,” says McCarthy. “Things like a triplex or a small apartment building.” Daly agrees, adding that condominiums remain a solid investment in cities such as Toronto, where rental buildings are relatively scarce. “Condos are a big thing for a lot of my clients,” she says.

Commercial real estate investments can also be lucrative, but they’re not for the dilettante: according to McCarthy, “It’s a different business model than residential. It requires a level of sophistication that the average investor may not have,” he says. You really have to have a solid business plan in place before you make your investment. You have to understand what is happening in the areas you’re looking in: what is the transportation situation? Is it an area of heavy immigration, or is it gentrifying?”

Whether you’re interested in commercial or residential real estate, Daly and McCarthy say there are three things you must do for your investment to be a success:

- Know your area. This, Daly says, will make sure you know what you’re getting into. “Know what the trends are in that area. Know who lives there, where they shop, how they use transportation,” she says. “Know what you’re getting into.”

- Have a well-articulated business plan. “Work within it,” says McCarthy. “Have a long-term vision, and, wherever possible, add value to the property.

- Be trustworthy. Being a slumlord is not good business. “Keep your integrity with everyone you deal with,” says Daly.

“If we don’t innovate, then someone else is going to do it for us,” says Jared Simon. “And that wouldn’t be a good situation.”

Simon is a veteran of both the tech and travel industries who now sits as COO and co-founder of Silicon Valley-based hotel-booking app developer HotelTonight.com. HotelTonight is just 3.5 years old, but it’s building a strong following for its exclusive focus on offering users tailored, localized lists of inexpensive last-minute hotel bookings. (Currently, the app features hotels in more than 500 cities in 28 countries around the world.) “It’s proven to be a great discovery tool for consumers, says Simon. “And it’s a great tool for hotels to sell off what they call ‘distressed inventory.’”

As optimistic as Simon is about the strength of his product, he knows he’s operating in a hyper-competitive market niche; inertia would be akin to business suicide. That’s led him and his two co-founders to prioritize innovation within the company above all else. In this week’s BusinessCast, Simon reveals what he’s done to make disruptive thinking part of HotelTonight’s fabric. Here are three of his top tips:

1. Hire people who embrace disruption

Before Simon and his partners hired a single employee, they put a lot of thought into the culture they wanted to create. “From Day One, we figured out what we stood for as an organization and what kind of people we wanted to hire,” he says. “We established a set of values for the company.” HotelTonight, they decided, would be a place for employees who value hard work, who ask a lot of questions, who criticize the status quo and who aren’t afraid to take risks—all while behaving respectfully towards their colleagues and customers. And that became the lens through which the company has done all its recruiting. “We make sure we hire people looking for the same experience,” says Simon. “As long as we stay consistent in applying and enforcing those values, we can work with just about anyone, anywhere.”

2. Encourage criticism of what you do

Simon’s business is one in which criticism of practices and processes is not just accepted—it’s encouraged. “We want our people to question just about everything that we do,” he explains. “In fact, we want them not just to question, but also to come up with solutions. And to not be afraid to try those solutions, even if there’s risk involved.” This approach, he says, amps up creativity and keeps everyone from getting complacent.

3. Let everyone have a say

At many firms—especially in tech—innovation is the purview of a few developers and/or engineers. Not so at HotelTonight. The company hosts a quarterly meeting it calls the “war room,” in which all employees gather to pitch whatever ideas they have for the app. Every pitch is vetted, no matter who it came from. This brings in diverse perspectives and keeps everyone focused on the next big thing. As Simon explains, “everyone has an equal opportunity to pitch new ideas.”

Startup success depends on so many variables. It’s seldom easy to predict what will be a hit and what will flop. Jamie Shulman has some thoughts on what it takes to get it right. Shulman is co-founder and co-CEO of Toronto-based Hubdoc Inc., a 2.5-year-old business that automates bookkeeping for small businesses. “We automate the data-entry element of bookkeeping,” explains Shulman.

Shulman—who is the guest on this week’s BusinessCast podcast—has a lot of experience in the startup world. Before launching Hubdoc, he was a Silicon Valley-based lawyer specializing in technology. After that, he started and sold marketing software firm Sparkroom with Jamie McDonald, his partner at Hubdoc.

Throughout Shulman’s career, he’s seen a lot of startups with great potential fail spectacularly. It’s made him determined to avoid that fate with Hubdoc. In his view, there are four things a Canadian startup must get right in order to succeed:

1. The business plan

Too many startups either underestimate or misunderstand either the scope of the market they want to serve or the demand for the product or service they plan to offer. (In some cases, they misread both.) Shulman took extra pains to understand what he was getting into with Hubdoc: “With subscription software businesses like ours, it was important to know there was a big enough market and that we had an efficient way to acquire customers,” he said. “It involved a lot of asking, ‘Is it a big enough idea? Is there a business there?’

2. The flexibility to pivot

Hubdoc started as free consumer software, with a plan to get enterprise clients, such as banks and telcos, to pay for the software as a means to encourage clients to go paperless. But it soon became clear that the most enthusiastic users of the platform were small business-owners and independent contractors. So Shulman and McDonald decided to change the focus of the business. “We quickly realized small business was the real opportunity for us,” Shulman says.

3. The timing

Far too many businesses fail because they go to market too early or too late, Shulman says. “Sometimes great ideas and great businesses are just too early,” he reasons.

4. The ambition

“Some businesses just focus on Canada,” says Shulman. “There’s a lack of desire, or maybe a lack of capability, to really go for it, to go big.” This aversion to risk stymies businesses that could otherwise experience tremendous success internationally, he adds: “Especially if you’re in the technology sector, you can’t just be focused on Canada.”