The Big Decision

Investor Insights: Episode Six, Season Two

2012-11-28T20:09:31Z

Jim Treliving and Arlene Dickinson have added published author to their lists of career achievements. Harper Collins has published Jim's Decisions: Making the Right Ones, Righting the Wrong Ones (Get it online from Amazon or Indigo) and Arlene's Persuasion: A New Approach to Changing Minds" (Get it online from Amazon or Indigo.

Every week we'll publish an excerpt from one of these books that ties into the lessons from that week's episode. This week we turn to page 221 from Arlene's Persuasion:

"The Trouble with Losing

Sometimes I've walked out of a pitch with a sick feeling in my stomach, knowing we don't have a prayer. Other times I've left on a real high, certain we're going to land the account. In the first case, I don't think I've ever been wrong. In the second, I definitely have been - we've failed to win some accounts where I thought we'd knocked it out of the ballpark. Either way, losing doesn't feel good, though it's hardest to accept when you've mentally placed yourself in the winner's circle. Then you can torture yourself, wondering "what went wrong?" It's especially difficult to answer the question when actually, upon review, you can't imagine things going any better than they did. You're pretty sure you did everything right.

"And maybe you did. But even when things go perfectly you can't always manage to persuade people to give you what you want. They may have been looking for someone older and more experienced. Or someone younger and cheaper. Perhaps your presentation really was but another candidate's was even better. Or maybe the other candidate had an inside edge: he went to college with the interviewer - or had a picture of the CEO in a compromising position. Chances are, you'll never know for sure why you didn't win.

"In my experience, the feedback or explanation you receive won't be very helpful. At Venture, we've heard it all: "your agency is too big." "Your agency is too small." "Your approach is a little too edgy for us." "We're looking for something a little edgier." And so on. Generally, the explanation you're given isn't the real reason. It's a little like dating. No one ever says "Look, I don't want to see you again so I took the time to jot down a detailed and brutally honest list of everything I dislike about you. Consider it my parting gift." What people say when they're just not interested is "It's not you. It's me." Or some other nonsensical platitude that doesn't leave you feeling enlightened and doesn't give you the information you need to avoid making the same mistakes again. Instead, you're left still puzzling over, what exactly, went wrong."

Chemistry, that sense of emotional connection or the possibility of one, is so important when you're pitching. Many times, selecting a winner from the shortlist will come down to a single question: who would I rather work with more? If they didn't choose you... Well, that's life, and beating yourself up over it won't help."

Planning to Plan

2012-11-27T20:46:06Z

By Lew Turnquist, Senor Managing Partner, Kirchner Private Capital Group and featured expert on Episode 6, Season 2. Find out more about Lew Turnquist

A common struggle for the early-stage company CEO is the business plan.

Often, it seems like a luxury that costs too much precious time to create and doesn't provide the immediate benefit that knocking to-do's off the list seems to. The problem that this creates though, is that the business suffers from a lack of direction and won't advance forward except by luck.

This is a case of focusing on the urgent at the expense of the important.

The business plan is the CEO's way to draw on her experience and knowledge and plot the course forward for her company. Done well, it also allows the chance to trace the interdependencies between all parts of the business and its operations and thereby optimize where resources (like that precious time) are spent.

It starts with the Company's vision for what it will be. In tonight's episode, we saw that this was missing, or, at the very least, couldn't be articulated.

The vision should be mindful of the Company's core strengths (e.g., competitive advantages, operational competencies, management experience and skills). But it can't be only that, it must also serve to inspire and point the way forward for the Company through the "fog of the now." In so doing it must be mindful of what is going on in the world around the Company (e.g., market trends, competitive activity, economic climate).

This strategic, not tactical, start dictates the practical executional elements that the business plan will describe in detail.

A simple outline for a business plan is as follows.

0 EXECUTIVE SUMMARY
1 COMPANY BACKGROUND
  1.1 Products & Services
  1.2 Progress
   1.2.1 Recent Key Milestones Achieved
   1.2.2 Upcoming Key Milestones
  1.3 The Proposed Financing
2 MARKET RELEVANCE
  2.1 Current Market Trends
   2.2 Product Fit [how the product plays to the trends, how necessary is it?]
3 PRODUCT
  3.1 Objectives/Goals/Intents/Benefits of Products
  3.2 Product Overview [how it works]
  3.3 Intellectual Property Strategy
  3.4 Product Evolution Path
  3.5 Development Status & Short-Term Enhancements/Developments
  3.6 Development Capability
4 COMPETITIVE & ENVIRONMENTAL LANDSCAPE
  4.1 Market
   4.1.1 Market Size
   4.1.2 Market Dynamics
  4.2 Competition
   4.2.1 Overview of Competitive Landscape
   4.2.2 Known Competitor Profiles
5 SALES & MARKETING STRATEGY
  5.1 Marketing Strategy
   5.1.1 Segmentation
    5.1.2 Product Positioning & Differentiation
   5.1.3 Pricing
   5.1.4 Communications
   5.1.5 Distribution
  5.2 Sales Strategy
   5.2.1 Targets
   5.2.2 To-Date Sales Successes, Reference Accounts
6 ORGANIZATION
   6.1 Management
  6.2 Shareholders, Voting Blocks & Directors
  6.3 Org Design, Expansion Plans, Requirements
7 THE EXIT
8 FINANCIAL OVERVIEW
  8.1 Assumptions
   8.1.1 Revenue Assumptions
   8.1.2 Expense Assumptions
   8.1.3 Capital Assumptions
  8.2 Base Case Summary Projections
  8.3 Sensitivity Analysis & Stress Cases

Now, it should be noted, of course, that every company has different needs and so, naturally, each company's business plan should be different too. For instance, if a financing is not intended in the short term, section 1.3 wouldn't be necessary. But business plan authors should be cautioned against carving too much out of that outline - the real value of it is in considering the whole business.

Investors as a rule demand business plans when considering putting money into a company. But not strictly for the reasons you might think. It is less to grade the quality of the content of the actual plans within - seasoned investors know what seasoned entrepreneurs know, that plans will and must change dynamically as the world around the Company changes and are probably out of date as soon as they are printed. No, investors want to see that the CEO has a vision and has thought through all the implications of how the Company must execute toward that vision. That is, has everything been considered by Management and is there consistency within the plan across all facets of the business. By demonstrating that she has thought through all the issues and planned for them, the CEO demonstrates to the potential investor that she is capable of doing that going forward, as the world changes around her.

Put another way, this common struggle for the early-stage CEO, the business plan, is a case where the journey is as important as the destination. And it begins with the single step of the company vision.

Investor Insights: Episode Five, Season Two

2012-11-21T20:12:34Z

Every week we'll publish an excerpt from one of these books that ties into the lessons from that week's episode. This week we turn to page 191 from Jim's Decisions:

"Never Mess with the Brand.

I remember talking to the president of Wardair, the now defunct airline. We were at some ceremony or other and he turned to me and said, "Jim, I think I've lost control of my company." He used to know the name of all the crews, down to the last flight attendant. But his company grew fast, too fast, and it entered the commercial market, which he was unfamiliar with. Wardair was about charters, and he said he should have grown more in that market before branching out in commercial space, where competition is fierce and the market unpredictable.

"I think this also applies to me. I'm a brand - in many respects, we all are. To make a leap and overcome my fear of being on TV, I told myself I just had to be myself. That was my only job. I had to trust that the producers wanted me, my brand, and not some other version of me. And I have to remind myself of that all the time, whenever I'm tempted to be any different than what I am. That takes away the fear. After all, I can only be me. That has to be enough.

"Reactions aren't Decisions.

That's an important distinction. Reactions are usually actions taken in haste and made with fear. A decision is a plan - without the action. Ideally, there is a small space between the decision and the action that follows, which will allow for tweaking. You can't often take that time as a police officer, but you sure as hell better as a leader."

Key Points for a Strong Brand

2012-11-21T18:06:52Z

By Laurie Decosse, President and CEO of Lynk Marketing Solutions, a one-stop marketing agency based in Vancouver, BC, and featured expert on Episode 5, Season 2. Find out more about Laurie Decosse and Lynk Marketing

An internationally-renowned branding strategist once defined brand equity as: "a set of assets (or liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service..."

We like this definition because it emphasizes that branding can often be a double-edged sword; if a brand is poorly managed, it can become a liability instead of an asset. Branding that is inconsistent and/or out of touch with the needs of customers can have a significant negative impact on your business.

With that in mind, here are a few key points that can help you develop a strong, recognizable brand:

Know your customer. Always ensure your branding is focused on the mindset, needs and values of your target audience. Do your research and make sure you know everything possible about them.

Study the competition and your industry. Study your competition's branding and positioning. What are their strengths and weaknesses? How are they marketing, and what are you doing that's different? Do you see any new emerging trends in your industry? Technology and the internet has changed everything - stay on top of it, or you will get left behind.

Position your brand. What makes your product or service unique, and why should a customer choose you over your competitor. What's your niche? Be specific in your communications and highlight the features, advantages and benefits of your brand.

Develop brand guidelines. A messaging and branding guideline document will help identify various customer profiles and needs of people who could potentially interact with your brand. Ensure features and benefits of your product are consistently communicated across all of your marketing materials. Developing brand guidelines will ensure that your messaging is being applied within across all communications.

Be Consistent and Repetitive. The old saying, you have to be heard seven times to be remembered is TRUE. Brand recall is about repetition and consistency in messaging. Think about a favourite product or service that you purchase or consume on a regular basis. How often do you see and hear about that brand in your daily activities? Can you recall the tagline for that brand? If you can, then someone is doing a great job at branding!

Customer service counts. Extend your branding through everything you say and do in your business. Remember, your branding is a promise to meet the needs of your customers. From your office or store front image, to how the phones are answered. How do your employees behave when dealing with customers? Are customers greeted with a warm friendly smile? Your current customers are biggest fans, so treat them like royalty, and give them reasons to come back to you.

Be "uniform". What kind of attire does your staff wear at work? Branded uniforms? Whatever the dress requirements may be for your business, be consistent, and make sure your logo is evident wherever possible. Think about your last visit to MacDonald's, or the last parcel you received from UPS... do you remember what the staff wore? That's effective branding.

Review the policies and procedures. Be flexible whenever possible to meet the needs of your customers. Customer-friendly return policies go a long way in securing brand loyalty. Look at businesses like Costco and Ikea to see how customer focused policies can be effective.

Define and implement your organizational culture. An integral aspect to the success of any business is to ensure that your employees are aligned with your company brand and values. Develop a mission and vision statement, and ensure everyone on your team is on the same page with regard to personifying your company's ideology.

Time invested into your brand is time worth spending. By developing and maintaining a consistent, well-researched, value-added brand, you will put your company in a solid position to both attract new business and retain repeat customers and stay ahead of your competition.

12 Criteria of Franchisability

2012-11-20T21:20:15Z

By Norman P. Friend, President of Franchise 101 and featured expert on Episode 5, Season 2. Find out more about Norman P. Friend

While it is impossible to determine the franchisability of a business concept without a significant amount of analysis, with Franchise 101 Inc. there is a series of 12 predictive criteria that assess the possible readiness of a company for franchising and the likelihood that it will achieve success as a franchisor.

Credibility - To sell franchises, a company must first be credible in the eyes of its prospective franchisees. Credibility can be reflected in a number of ways e.g. size of organization, number of units, years in operation, look of the prototype unit(s) (the "footprint"), publicity, consumer awareness of the brand, and strength of management.

Differentiation - In addition to credibility, a franchise organization must be adequately differentiated from its franchised competitors. This can come in the form of a differentiated product or service, a reduced investment cost, a unique marketing strategy, or different target markets.

Transferability of Knowledge - To franchise, a business must generally be able to thoroughly educate a prospective franchisee in a relatively short period of time. Generally speaking, if a business is so complex that it cannot be taught to a franchisee in three months, a company will have difficulty franchising. Some more complex franchisors offset this handicap by targeting only franchise prospects that are already "educated" in their particular field.

Adaptability - How well a concept can be adapted from one market to the next? Some concepts do not adapt well over large geographic areas because of regional variations in consumer tastes or preferences. Other concepts work only because they are in a very unique location and some work because of the unique abilities or talents of the individual behind the concept.

Refined and Successful Prototype Operations - A refined prototype (i.e. a 'Footprint') is necessary to demonstrate that the system is proven.

Documented Systems - To be franchisable, the company's systems must be documented in a manner that communicates them effectively to franchisees. Policies, procedures, systems, forms, and business practices must be documented in a comprehensive and user-friendly operations manual and/or computer-based training module.

Affordability - Affordability reflects a prospective franchisee's ability to finance for the franchise in question.

Return on Investment - A franchised business must allow enough profit after a royalty for the franchisees to earn an adequate return on their investment of time and money.

Market Trends and Conditions - While not an indicator of franchisability as much as a general indicator of the success of any business, market trends and conditions are key to long-term planning. Is the market growing or consolidating? Will the franchise's products and services remain relevant in the years ahead? What are other franchised and non-franchised competitors doing? And how will the competitive environment affect your franchises likelihood of long-term success.

Capital - While franchising is a low-cost means of expanding a business, it is not a "no cost" means of expansion. A franchisor needs the capital and resources to implement a franchise program. A major reason for the failure of franchise systems is the franchisor relying on non-recurring revenue from over optimistic franchise unit projections.

Commitment to Relationships - Successful franchisors focus on building long-term relationships with their franchisees that are mutually rewarding. Strong franchisee relationships enable the franchisor to sell franchises more effectively, introduce needed changes into the system more easily, and motivate franchisees to provide a consistent level of products and services to the end user.

Strength of Management - Probably the single most important aspect contributing to the success of any franchise program is the strength of its management. In franchising you bet on 'jockeys' rather than 'horses'. The product or service is important but the quality of the leadership is critical, especially when the system has to be modified to adapt to changes in the marketplace.

Business Intelligence

2012-11-20T13:13:32Z

Taking data and turning it into meaningful information

By John Cho, Partner, KPMG Enterprise

A number of Canadian businesses have been impacted by these current, uncertain economic times. As a result, for many companies, weaknesses in management reporting procedures, supporting technology and fundamental data have been revealed. Several finance professionals have been left scrambling to cope with the demands for continual and dependable information. To run a company effectively and compete in the marketplace, timely, reliable and relevant business intelligence information is a must.

Business Intelligence (BI) is a phrase that can mean many things to many different people. Essentially, it is a compilation of intelligent information that assists business owners and leaders to make better business decisions that ultimately boosts the overall value of the company. BI can help identify key business drivers and answer important questions such as:

Who are my most lucrative, money-making customers?
Which services and/or products are earning a profit and which are losing money?
Which procedures are effective and producing desirable results?
Which markets are earning a profit and which are losing money?

It is the information extrapolated from these types of questions that will help the organization gain meaningful insights on the cost drivers of the business - where there are opportunities and where to invest resources and money that can have the largest effect on profitability while effectively managing risk.

The main question for virtually all BI projects is where exactly to begin. Reviewing finance and management reporting procedures typically makes for a good starting point, but many Canadian private companies have made hardly any changes to enhance or better their reporting and the tools needed to get the necessary information required by the company. A number of businesses grapple with improving the timeliness and quality of support for decisions. Information is only valuable and helpful if it helps a business owner make better business decisions. By mapping your BI information requirements with your business plan, you can eventually build a foundation for greater performance measurement, competitive intelligence and efficient decision making.

A large number of private companies still leverage spreadsheets to maintain performance management and reporting. The finance team cannot and should not spend the majority of its day downloading and manipulating data in an effort to deliver meaningful information to the business. Instead - prior to bankrolling new BI technology - it is essential to understand the quantity of data, the numerous data sources and how much effort and energy is associated with generating the information required by the organization. To have a well-organized and efficient BI solution, Finance should first invest to align facts and figures with fundamental and strategic business metrics and focus on making certain that the data is accessible and dependable.

Finance should lead the way in creating a BI program for the organization. It should serve as a call to action to:

Ensure your organization has the information it needs to prepare for the future
Recognize crucial performance metrics that drive the business and support the overall business plan and organizational goals
Have professionals on your team with the skill set required to evaluate, understand and adapt the data into comprehensible actions for the company
Steer clear of the spreadsheets that result in a massive amount of statistical manipulation
Establish the tools and procedures that drive more adaptability into reporting and facilitate efficient decision making.

Organizations willing to adopt BI are better able to provide the right information, to the right people at the right time. Throughout the journey, they will realize how meaningful, focused information can give their organization a genuine competitive advantage.

John Cho is a Partner with KPMG Enterprise™. He can be reached at 416 777 3994 or johncho@kpmg.ca.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

How do you cater to a new market when your product has been doing business with the same customers for years?

2012-11-14T18:14:11Z

By Troy C. of Rowan Sky and featured expert on Episode 4, Season 2. Find out more about Troy C.

"How do you cater to a new market when your product has been doing business with the same customers for years?"

When a company decides to attempt entry into a new market place after many years of doing business with the same client base, it has the potential to either take the business to a whole new level or can backfire tremendously and sometimes even crushing the already existing customer base. Considering a few things when taking the company outside of it's box can save a lot of grief and provide a clearer depiction on the best way to proceed. After 14 years in the shoe business, we have learned some of these things the hard way when they could have been avoided by some preplanning on execution of ideas.

Use focus groups when making changes to your usual business structure. If you don't have access to focus groups then try crowd sourcing through the internet. You would be amazed at how many people, designers, and other business groups will take the time to weigh in on your project, especially if they have the future potential to do business with your company. In the case of Viberg, we think they would have been better served by getting women's input on the product they were trying to create. It could have eased their process and possibly eliminated a few arguments about the best direction to take while creating the initial prototypes to enter the women's footwear business.

Be prepared to meet demand if the product or idea takes off. If you are not able to fulfil your customers needs, they will go elsewhere. In today's global marketplace, there is always somebody else who can fill the demand if you cannot.

If you are in need of financing to expand your company or brand, you must be prepared to demonstrate your business is scalable. Know your numbers, a clear depiction of your current customer base, and a realistic projection of where the company is going.

Be weary of family & friends opinions when it comes achieving honest input for your project. They are often more concerned with your feelings and want to be supportive. This can create a false sense of security in making a solid concept. Unless of course you are creating a concept for your family and friends. Then you must pray you have a lot of them to fulfil the business end of things.

Don't fall too in love with any idea or product because this will cloud your ability to look at it from a business perspective. Emotional decisions in business do not always pave the easiest path to growth.

If completely rebranding your existing product, be careful not to confuse your existing clients while trying to vie for new business through redevelopment of logo's, web-site, and customer demographic.

Make sure you have financial cushion to survive the lead time before the product or idea connects with your new market. Along with money, be prepared to commit the time and extra work to get the product/ idea off the ground. It's easy to get complacent when you've been doing the same routine for many years and you have to be ready to focus new energy to take you new company structure to whole new level.

The last thing is know when to say when. Because you might be passionate about your concept, it can be difficult to acknowledge that it just isn't taking off. This is when you are simply operating in survival mode and hoping the next day will be the day it all comes together. It is a slippery slope once you are going down this road and it can take it's toll on your family, your health, and your wallet.

How to succeed in business in Canada - give customers great value.

2012-11-13T21:52:22Z

By Joanne Nemeroff, Senior Vice-President, Sears Canada and featured expert on Episode 4, Season 2. Find out more about Joanne Nemeroff.

Canadian retailers need merchandise to fill the shelves and sell to customers, so what are the most important qualities necessary when those retailers select a vendor?

A customer looks for great value at the right time when shopping - good quality for a good price. A business needs suppliers that can fulfill that need, either in Canada or overseas. Manufacturing costs may be lower outside of Canada, however the speed of delivery can be faster inside Canada.

Merchandise that is made in Canada may give a retailer a leg up on the competition that imports its products from overseas. Staples in a wardrobe and fashion of the moment can be delivered faster if the factory is here in Canada. Whether the client is low to mid to high-end, fast, reliable delivery of goods is important to all retailers.

Speed is the greatest advantage a Canadian manufacturer has. Quite simply, to succeed a company must set itself up to work swiftly.

Products that are manufactured in Canada do not have far to travel and can be made and delivered quickly. Small runs of a particular product can easily be expedited to a retail store, and with no fees for freight, duty or customs, the manufacturing costs can be controlled. These savings are passed down to the retailer, which are in turn passed down to the customer.

Companies that are physically located close to their clients gives them the opportunity to know the customer better, and they can develop a close relationship with frequent interactions. There is no greater way to build trust than through regular face-to-face meetings, where questions can be answered quickly and issues resolved in a timely manner. This is the case whether the vendor is here in Canada or based overseas.

No matter where, how or with whom you do business, find your comfort niche and get a return for the money invested. Few products are made in Canada today as we are no longer a manufacturing society. However, there are still companies based in Canada that produce quality merchandise, quickly, for a good price. If you see value in goods being produced, so will the customer. Ultimately the business owner must decide what is more important - the lower cost to produce or the speed to deliver.

Acquisition as a growth strategy

2012-11-13T19:37:54Z

By John Cho, Partner, KPMG Enterprise

Today, many entrepreneurs are looking at acquisition as a prospective path to growth. This has both its pros and its cons. One pro is that acquisition can have exactly this effect - it will lead to definite growth. One significant con worth mentioning is that over half of acquisitions among small to mid-sized enterprises fall short of expectations.

How come? Because acquiring a business is a painstaking process that is all too frequently circumvented and short-circuited. A lax approach to the acquisition process can lead to a loss of value and uncomfortable surprises.

Do your homework: Gather industry knowledge

Begin by conducting a strategic assessment. This phase of an acquisition is arguable the most vital and the least time-consuming. With that said, it is also the phase that is most ignored by business owners.

How should the assessment be performed? To preserve objectivity, it should be performed by a team of professionals preferably comprised of senior managers coached by professional advisors. Your purpose is to analyze and define

The company's existing mission and vision
present goals and objectives
current business plans and the business' core competencies (basis of competitiveness)
the business' internal strengths and weaknesses
the business' external threats and opportunities
existing gaps between the business' vision and the business' experience

When evaluating your research from an internally-focused perspective, concentrate on the most important strengths and weaknesses that affect growth. Next, begin to evaluate your company's external situation by focusing on markets, customers, supply chain and competitors - really tap into your industry knowledge. Your external assessment might uncover threats from existing competitors and possible newcomers, or it could be a sign of potential opportunities ripe for the taking. Finish with a candid assessment of your business culture, paying special attention to ownership and management style. Ask yourself:

How do you deal with change?
Are you prepared to invest the time and capital required to take your business to the next level?
If yes, is your company capable of planning and implementing the necessary and agreed upon changes in a way that will yield desired results?

Throughout this phase, you and your team may benefit from the knowledge and experience of independent professional advisors. This process will offer you insight into existing gaps between your vision for the business and your current experience.

Some additional questions to ask when considering strategic acquisition options and their financial implications:

Is establishing a strategic alliance or association with another business the best option?
Should you consider entering into a licensing agreement?
Does it make sense to seek equity investment in your own company from another member of your industry?
Is purchasing (either partially or completely) another business that enhances and/or complements your own operation the best option?

If, after all of your research and strategizing, it looks like acquiring another company is the best way for your company to grow, be strategic when selecting target companies. Create an acquisition target profile that identifies characteristics of the 'model company' and how the company will be able to advance your strategic goals. Consider and asses the following when identifying your ideal target:

Lines of business
Business location
Core competencies
Profitability
Estimated growth rate
Projected rate of return
Customer base
People and talent
Technological capabilities
Established processes and procedures
Affordability

Once you have identified your targets, you are ready to move on to the next stages of acquiring a company: planning, execution and completion. But, before you pull the trigger, remember: acquisitions at their best can create dynamic synergies and at their worst can leach value out of your existing

John Cho is a Partner with KPMG Enterprise™. He can be reached at 416 777 3994 or johncho@kpmg.ca.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Investor Insights: Episode Four, Season Two

2012-11-12T17:29:59Z

Every week we'll publish an excerpt from one of these books that ties into the lessons from that week's episode. This week we turn to page 157 from Arlene's Persuasion:

"A lot of people approach a pitch as a performance, to be followed by a Q&A session with the audience. But it's not a monologue - or shouldn't be, anyway. If you can turn a pitch into a dialogue, you greatly increase the likelihood of creating the kind of connection that will help you be more persuasive.

"Your goal is to get the other person to speak first. This is not some kind of clever strategic gambit. It's just common sense. You don't want to sit and talk at somebody - but you can't talk to somebody unless you have some idea of what the other person values. So, at the beginning of the pitch I usually say something like "since we're about to talk about something that's hugely important to you, your business, it would be great if we could hear from you first." And then I almost always ask "what does success look like to you?" This is a tough question for many people. It forces you to step back and consider the big picture, and often people start thinking aloud as they puzzle it through. So not only is it a good conversation starter, it also gives you crucial information about what's important to the other party. And this will help you in your pitch to show how what you want dovetails what they want.

"If clients say "no, no, we want to hear from you first," I always look for a way to connect whatever I'm saying back to them, to get input that will help me understand them. What are the hurdles to their success? What are they afraid of: competitors, internal company conflicts, falling sales? What's the thing that they've accomplished that they're most proud of? What type of professional relationship are they looking for with our company? What's been successful - and less than successful - in past relationships? The more you can get them talking, the better you will understand them and the more likely you are to frame your pitch in a way that's relevant to them."

Investor Insights: Episode Three, Season Two

2012-11-08T16:22:07Z

Every week we'll publish an excerpt from one of these books that ties into the lessons from that week's episode. This week we turn to page 79 from Jim's Decisions:

"Surround Yourself with People Who Want You to Succeed.

This is tricky. Sometimes people with bad ideas continue down a destructive path because they're surrounded by people who tell them only what they want to hear. That's not what I'm talking about. If a big decision has passed your head, heart and gut test, and you know you're on the right path, you have to tune out the naysayers. As happy as some of my fellow officers were for me when I told them I was leaving the force, many weren't. Some tried talking me out of it. Some dropped subtle hints that I might not be cut out for the work of running a restaurant. Maybe it was jealousy, I don't know. But it's a crucial stage when you've made a big decision. I've come to realize the fundamental importance of surrounding yourself with people who genuinely want you to succeed. They can oftentimes carry your enthusiasm for you in those moments when it all gets to be too much.

A decision isn't an Action; it's Just a Decision.

Think of the old adage about three birds sitting on a wire. One makes the decision to fly away. How many birds are left? Lots of people answer "two," but it's actually three. The bird made only a decision. The pointy is, get cracking. This goes back to my police training. Always do something."

Getting ready to sell your business? Now is the time to solve tax issues.

2012-11-07T15:18:30Z

By John Cho, Partner, KPMG Enterprise

Getting ready to sell your business? Now is the time to solve tax issues. As you prepare your business for sale, think about making it as appealing as possible to prospective buyers. When considering all of the factors that can shape the business' value to a buyer, remember to include tax matters. If questionable tax issues remain unsettled, it can reduce the offer amount you may receive for your business. On the other hand, being able to transparently show your company has a positive tax position can help boost your business' value.

In today's economic market, tax issues and risks are coming under increased scrutiny which can lead to a longer sale process and necessitate more negotiation. Prospective buyers may seek a reduction in price or payment holdbacks if your company has unresolved tax issues.

How can you avoid these problems? Simply put, by being as well prepared as possible. If you pinpoint tax issues and risks a buyer may be worried about prior to the onset of the negotiation period, you'll likely have the much needed time to asses and diminish these risks. Furthermore, recognizing these issues can help you deliberate the most tax effective sale options for your company and evaluate the prospective advantages of a pre-sale reorganization.

As part of your preparatory process, contemplate whether your company has unclaimed losses for tax principles. The new owner of the company could profit if the losses are still accessible for use to counterbalance income and decrease tax after they obtain control of the business. But, not all losses remain accessible for use after an acquisition of control; for example, capital losses will not exist after the acquisition.

You may wish to look at past sales deals and operating activities to decide whether the enterprise has any noteworthy losses from property or discontinued businesses that might possibly expire on acquisition of control. In some instances, you might be able to take actions so that the losses are utilized to generate prospective tax deductions for a buyer after the acquisition of the company.

If you've decided that the enterprise has unclaimed losses that can benefit a buyer, you might be able to raise your price if you can demonstrate the tax benefits of the tax losses to a prospective buyer.

Buyers will also concentrate on tax risks linked to any overseas operations you may have. They will want reassurance that these matters are under control, seeing that this is a sensitive area for Canada Revenue Agency reassessments. With that said, you should confirm that your transfer pricing studies are up-to-date and complete, and that you have carefully examined the tax implications to operating in other jurisdictions. By doing this, you can help diminish the need for holdbacks.

It's also useful to make sure your tax filing positions are properly documented and noted. You may wish to contemplate the tax treatment of capital gains aside from sales of shares, the tax treatment of past deal fees, support for exempt dividends appropriated from overseas affiliates, and sizeable adjustments that do not recur year over year, to name a few.

When beginning the due diligence process with a prospective buyer, make sure to have the following information at your fingertips:

Records such as tax returns, financial statements and supporting schedules for all open years (i.e., years that are not statute-barred)
Memos from tax advisers
All CRA information such assessments and reassessments as well as audit proposal letters
Support for tax exposure supplied in the tax provision to the financial statements
Transfer pricing documents
Compensation to non-resident shareholders
T106 forms (information returns of non-arm's length deals with non-residents), T1134 forms (information returns pertaining to foreign affiliates), and NR4 forms (statements of sums paid or credited to non-residents of Canada) in the event that you have any transactions with non-residents of Canada.

You should also have tables of years that are open or closed to tax authority challenges, and R&D tax credit claim acceptance letters.

Also, don't forget indirect taxes such as GST and HST, applicable provincial sales taxes, any payroll and withholding taxes, as well as customs duties. If your enterprise does business in the US, you might have sales tax issues there as well. You may benefit if you can assure your prospective buyer that these taxes have been handled properly.

These are a handful of issues you'll need to think about when getting ready to sell your business. The tax consequences of selling a company are generally far more complex than this brief summary can communicate. Consider reaching out to a professional to get detailed, comprehensive advice to help you make sure all tax implications are carefully addressed and considered. Making tax planning a fundamental component of your preparations to sell your company can help the process move more efficiently and help you get the best price for your business.

John Cho is a Partner with KPMG Enterprise™. He can be reached at 416 777 3994 or johncho@kpmg.ca.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG LLP. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Having The Perfect Pitch

2012-11-06T15:00:00Z

By Probal Lala, CEO of About Communications and expert for The Big Decision. Find out more about Probal Lala and About Communications

Many Canadians have grown very successful private businesses without ever having to raise external funds or take on specialized advisors.

On occasion, whether it is because our businesses have been growing too fast or sometimes too slow, we may find ourselves in a position where we need to partner with investors who can either provide us access to financial capital and/or access to some very unique intellectual capital.

A key way to attract the attention of potential investors is through our company "Pitch."
When first pitching our business to potential investors, it's easy to forget the key disciplines that have gotten our business noticed with our customers in the first place - Marketing and Sales. These two disciplines, when directed by the right objectives, can be powerful tools in winning over the hearts and minds of not just customers but investors as well.

The term Elevator Pitch has been around for years. It is a laser focussed marketing and sales presentation of your business idea. As the title implies, the Elevator Pitch should be the time it takes to make an average elevator ride and it should last no more than ninety seconds.

The objective of the Elevator Pitch is NOT to get the investment but rather to get the investor. The fundamental premise of the pitch is that "less is more." As you only have ninety seconds to "WOW" your potential investor, you will have a lot more success if you can first make a positive connection at an emotional level before getting into the factual details of the business. Studies have shown that people use the emotional part of the brain to make rational decisions, and connecting at that level will make a more lasting impression.

Making that emotional connection requires a good understanding of what excites your investor. While there are many different motivators, many individual investors who invest their own time and money get excited by a combination of profit, people and planet driven causes. So if you can show an investor how you can make them rich, have them work with some really great people along the way and help improve the lives of global citizens you probably have the makings of a winning pitch.

So what are some of the basics ingredients of an elevator pitch:

Recognized Market Pain and Unique Solution - Your investor needs to understand the problem you are about to solve and how your solution is different from the competition and other solutions in the market.
Market Size - The investors need to understand how wide spread is this pain. Most investors like to hear about large growing markets as it not only appeals to their sense of profit but it also reduces risk.
Business Model - How does your business make money. Is your model scaleable ? Fundamentally investors are looking for a financial return and they need to know how the business will provide this return.
Who is the Company - This is the people motivator - "Bet on the jockey, not the horse" - ultimately individual investors are betting on you and the team.
"The Ask" (and Return) - What is it that you are looking for from the investor and what will they get in return.

Finally, remember that most individual investors are NOT experts in your field so you need to educate them about the opportunity not only in exciting ways but in simple and easy to understand ways.

The Mission Critical Supply Chain

2012-10-25T17:13:02Z

By Gerry Sylvia, Senior Supply Chain Operations Manager and featured expert on Episode 2, Season 2. Find out more about Gerry Sylvia

What is a 'supply chain' and why is it so critical to the success of a business?

As we have seen in previous episodes of The Big Decision, the 'supply chain' involves the supply of materials and services, the transformation of that material into a product and the delivery of that product to the customer. In some cases, it can also include the proper environmental disposal of a product at the end of its life cycle.'

In essence, buy it, build it, ship it. Sounds simple enough so why is this so hard? If we look at a symphony orchestra, we can draw some analogies that are very similar. For example, all of the musicians need to be playing the same piece they all need to play the right parts, at the right time. Can you imagine what it would sound like if the string section was playing at a slower tempo than the rest of the orchestra? The strings would come in late, miss their cues and the piece would fall apart. The orchestra would be misaligned, producing a disconnected set of sounds rather than a well synchronized melody.

The same concept applies to the supply chain. Imagine that a particular supplier is late delivering materials. This could cause production to to stop and wait for that material to arrive. Having the production team sitting idle is a cost to the business in terms of salaries, idle equipment and schedule slips. Since they cannot build, they cannot ship and invoice the customer to cover these costs. We can take that further. If the suppliers need to be paid before you can ship and invoice, that adds additional cost. We also need to consider that transportation cost may increase as premium overnight shipping methods may be used to make up some of the lost time. A business can also end up with a misalignment of inventory with too much of some parts, not enough of others. There are also additional handling costs to storing material in the warehouse until it is ready to be used. All of these costs add up and can affect the profit margin and potentially end up shipping the product at a loss. There are hard costs as described above, and there are also costs such as customer satisfaction and reputation that are harder to measure but are critical as these may have long term impacts to the business.

So how do you keep all of the all of the individual components of the supply chain aligned to avoid incurring these additional costs? Just as the conductor of the orchestra has the master score that keeps all of the musicians aligned, the master production planner also has a build plan that keeps the production process in sync. There is generally a sequence of steps involved in building a product with materials required at each of these steps. Consider a large product with a long build cycle time, we may not need to have 100% of the materials available before production can start. In other words, let's say the product takes 5 days to build, and you don't need the 'day 4' materials on 'day 1'. This allows the business to schedule the delivery of some materials later in the process, reducing the overhead cost of that material as it gets consumed as soon as it arrives; less handling less cost. This method is known as "just in time" or JIT. It can be very effective, especially with higher cost materials as it reduces handling and extends the supplier payment cycle. The less expensive components can be stocked on the production line and consumed as required. Never a good thing to have a $5,000 product being held up by a missing $0.50 component!

This type of method provides visual feed back, in other words you can see how many parts are available. They are not hiding in the warehouse collecting dust or lost. This method is called 'point of use replenishment' and can be very cost effective. The theory behind it is based on 'days of supply'. In simple terms when the bin is full, it may represent say for example 30 days of supply (quantity of parts that will get used up in 30 days of production). When the bin is half full, or at 15 days, this can be used as a visual signal or trigger that an action is required. The action may equate to the time it takes to get more parts from the supplier. This is called 'lead time'. If the lead time for the part is 15 days, an order signal is sent to the supplier when the bin is half full which should arrive in time to fill the bin up to 30 days again just before it runs out. This way production only has parts that it needs, when they are needed, avoiding additional inventory, storage and handling costs. The other advantage of this method is that it should require less attention from the buyers as it is more self managed. They don't have to place purchase orders or manage the parts, letting them concentrate on managing the more expensive parts.

In the above examples, I have outlined two commonly used methodologies. There are many more. The trick is to use combinations of methods where it makes the most sense. I keep emphasizing that there is no real magic behind these methods, but when you have 30 or 40 or more suppliers and hundreds of different parts and multiple products with different build schedules, it can get pretty intense.THIS is why it gets so hard to do it right. Doing 'one-of' is easy, kind of like grocery shopping. Keeping a production environment in sync with all of the moving parts is a very different story. This is where good supply chain people become such an asset to a company. It's all good when everything runs perfectly but when a snow storm in Toledo delays a critical delivery, then what? Understanding the supply chain, ensuring lead times are not too tight and understanding the product is critical in assessing the best course of action when something does not go according to plan. Good supply chain people never let the line go down. Bottom line? A lot of planning, hard work and discipline are what make it happen. Anticipating what may go wrong and having back up plans is critical. There are many balls in the air. Orchestrating all of this so it sounds like a great melody, that is where the magic is that is the value of good supply chain people.

In summary:

Understand your supply chain's capabilities and your product, and maximize flexibility.

Respect the fundamentals; lead time is lead time we don't have Star Trek transporters!

Use different materials management methods where they make sense.

Plan not only for the product but anticipate what can go wrong and plan for it as well.

Hard work and discipline; stick to the plan have your back ups.

Follow up! Don't assume some thing will just happen, make sure before it's too late.

Investor Insights: Episode Two, Season Two

2012-10-24T19:22:33Z

Every week we'll publish an excerpt from one of these books that ties into the lessons from that week's episode. This week we turn to page 131 from Arlene's Persuasion:

"Preparing for persuasion is only partially about figuring out what you want and what you have to offer. It's primarily about trying to figure out what matters - or what should matter - to the other party. In marketing, venture is often asked to bid on new business, and we know going into these types of meetings that we're up against other good firms that will pull out all the stops to try to dazzle the client and land the account.

"As much as possible, I try and get our team to focus not on the other contenders and what they might say or do but on the client's actual business. We survey the marketplace, figuring out what the client's competitors are doing well (and not so well); we look at historical trends; we look for possible niches and opportunities for the client; we keep an eye out for obstacles and looming problems; we try to find out as much as possible about a client's corporate culture and the leader's personalities. We try to immerse ourselves in their world and learn to speak their language in an attempt to understand what motivates and drives them. Gearing up for a single meeting can take a team of people weeks of research.

"The main purpose of all this, though, is not to blow the client away with our brilliant insights into their industry. It's to ensure that we know the lay of the land well enough that during the meeting, we can look outward and focus on the client and the client's input, rather than looking inward and racking our brains for facts, figures and something smart to say. When we know our material inside out, we can give the client our full attention. As with job interviews, or even dates, you have only a matter of minutes to persuade people that you're genuine and try to spark some sort of emotional connection. The better prepared you are, the more you can focus on keeping the other person engaged."