The Best Location For Your Business

A common question when starting a business is in regard to choosing a jurisdiction under which to operate. For example, here in Canada you can incorporate provincially or federally. In the US, you can incorporate in any of the states, provided you meet their requirements. Other countries will allow you to form a corporation under their auspices, which may have various benefits to you and your business.

To decide the answer as to which jurisdiction is best for your business, you need to think about the basic reasons why you incorporate to begin with. First, it offers you as a private person protection from the liabilities of the corporation (with a few exceptions). Second, it offers you options for taxation purposes. Third, it gives you a vehicle under which to operate your business, raise capital, etc.

The first benefit is pretty much standard fare for a corporation, and so is basically irrelevant to this discussion.

The second would require some serious consultation with your accountant and lawyer, who could work out the most beneficial way to organize your business.

The third would imply that you look at what you intend to do with your business, and what requirements might ensue from that activity.

For example, if your entire business is operating in Toronto, with no business activity outside Ontario, you would be unlikely to have any reason to incorporate anywhere other than Ontario (except for possibly incorporating federally instead). If you will need to borrow money, you should look at what requirements banks and similar institutions have in regard to whom they will lend money to, and at what terms.

The simplest rule of thumb, though, is to incorporate in the same place that your business operates. If you don’t operate in the Cayman Islands, than why are you putting your corporation there? An audit of your finances might reveal this holding, and could result in penalties if you’re caught doing something like this, under the premise of tax avoidance. If you think that isn’t likely, both Canada and the US have recently been catching people with exactly this type of arrangement, and the fines have been incredibly steep, far beyond any potential savings the arrangment might have provided.

Finding Ideas for Business

One question that comes up time and time again is how businesses find ideas – whether it be for a product, a service, or anything really that they can get people to pay for. The answer to this question, perhaps, could be an entire business on its own.

However, there are a few different ways that people use to locate and refine business ideas, and they are worth discussing.

The first is what is usually called scratching an itch. That is, you have a problem which you face on a regular basis, and find a solution to it. You then try to see if there is, perhaps, a market for that solution, and build a business around it, if there is. If your solution is truly unique, and the problem sufficiently common, then this has the potential to create an entire market on its own.

The next option is to look at an existing product or process, and refine it. That is, your product is based on improving something which already exists. The upside is that you are well aware of who uses the product, and perhaps, how to market to them. The downside is that you will need to steal customers from other vendors, which can be extremely difficult for the new player to do.

Alternatively, you can build a business by bundling other services or products together in a unique combination. This is one of the strategies suggested by the book Blue Ocean Strategy which worked for Cirque du Soleil, as an example, combining the circus with other forms of theatre entertainment. While perhaps riskier than entering well-defined markets, the rewards can also be greater. Additionally, much of what will build such a business already exists, and the innovation is in how it is presented and delivered.

There may be other ways of coming up with ideas, but these strategies should provide some measure of relief in that they show the groundwork for ideas is right around you, if you know how to open your eyes to the opportunities.

Decision Making

During the course of recent reading, I came across several discussions about the concept of making decisions. One of the more interesting facts I came across is that there are two types of decision makers – those who take the safe routes, and those who dare. Reflecting over various events, along with supporting evidence provided in various texts, I agree with one of the authors, who opines that those who dare should be encouraged.

Those who dare are not necessarily the same as people who are reckless. That is, their decisions may appear to be daring, but reflection on those decisions will show that there was a logic to the process. When evaluating options, they look to the benefits of all options, and weigh the risks against them. Choices are made on the basis of potential outcomes, not merely the known outcomes.

Additionally, it can be difficult within a large organization to get decisions made. Those who will follow the safe paths will tend to avoid making decisions where possible, deferring to others. Those who dare will make a choice, which serves at a minimum to drive momentum. The example one author cites is a decision as to which direction to move. One who dares might choose East, then discover that the true direction to move in is North. Having made a decision, though, it provided the stimulus to start moving, even if a corrections needs to be made later.

Unfortunately, such decision makers are often at risk for their decisions. By daring in their decisions, their achievements will be noted, but their failures will speak even louder. Sadly, this can cost an organization such people – it is not a requirement that people be infallible, but that they act responsibly on the basis of what they know, and that they make use of sources of information and opinions appropriately. That is, they should not be acting recklessly, but to err is not the same thing.

Out-sourcing and Risk Management

A recent project was a real learning experience about the risks associated with out-sourcing. Not that it would stop me from out sourcing any other work, but rather it taught me how to manage the risks of using someone outside your company.

The project began with everyone positive and upbeat, but then things began ton deteriorate. The schedule began to slip, and the quality of the project began to slide as well. Once this was realized, action was taken to remedy the situation, but it might have been too late. Trust with the client had begun to falter, and action was needed.

As part of the effort to rebuild trust, I drafted up an outline of the things that went wrong in the project, and how I might avoid at from happening in the future.

  • If you cannot see the person working, then make sure that you can communicate on a regular basis, and that you are seeing their handiwork often to ensure that progress is being made.
  • Never assume anything about the project. Always ask about every little detail, so that you truly know where the project stands.
  • When budgeting, make sure that you use a buffer sufficiently large that were things to go severely downhill, you could still deliver within budget.
  • Use milestones to cap the amount of work that needs to be done at any one point in time. That way, if any pArt of the project falls bend, there’s a limit on the amount of damage to the entire project it can cause.
  • A tiny percentage of projects in IT finish both on time and on budget. Don’t stick to one to the absolute exclusion of the other.

There are other lessons, but theism I feel, real get to the gist if what can go wrong. Sometimes you need to sacrifice part of a project to meet a successful conclusion, and sometimes, the decisions that need to be made are tough.

That’s why not everyone is cut out for this kind of work – you can become a pretty unpopular person at times, but if you’re patient, the reward will come.

Diversity and Focus

In last week’s episode of Dragons’ Den, there were two pitches that were of particular interest, since both had the same issue, but from the exact opposite perspective. In one case, the issue was in regard to too much diversity and not enough focus, in the other, it was the lack of diversity which drove the dragons away.

The first pitch was from a pair of entrepreneurs from Vancouver, pitching their clothing line, Skyler Clothing, which they said would soon be the next Lululemon. Having worked at their business for four years, it came as a surprise that Christina Marcano and Hayley Gregg were still in debt, and perhaps because of some hard lessons learned.

During the recession, their diversification into having their own stores, rather than focus on online sales and use of various shopping channels turned the business’ finances into a nightmare. Three of the stores were eventually closed, with the fourth, their headquarters, being kept. While the products were good, and they learned much about how they could have handled the recession better, the company was under severe financial strain.

While they did not get a deal, they did get a piece of advice from Jim Treliving – close the last store and focus on getting the wholesale marketm selling to distributors, rather than trying to create their own shops, a rather expensive proposition.

In the other case, the entrepreneur had been in business for fourteen years, and had a solid product. Olivier Soap made creams and lotions that when presented by Pierre Pelletier and Clarence LeBlanc were well-received, but despite his strong business, they failed to get a deal.

The business had several stores, and was looking to move into the business model like Arbonne, in which people pay a small fee to represent the company, and then earn a commission from any sales they make. The problem was that such a strategic move required a significant amount of cash, something the business seemed to have in short supply.

While the model might work, and the products seemed to hold up under scrutiny, the dragons were still not interested. The reason, perhaps, is that the business is in a stage of transition, which makes the investment more risky than most. With a business using an established model, while there is risk that the model might not work, the business can be assessed based on past performance with that model. When, however, a business starts to tread new ground, investors may shy away for the simple reason that they have no means to assess the current owner’s ability to run such a business.

Is diversification a good thing, or a bad thing? It really depends on what stage your business is in, and what you are trying to do with your business.

When times are tough, it may be better ton focus on one or two models that are known tone profitable. While this may hinder your ability to act on new opportunities, it can also limit your exposure to risk.

Alternatively, if your business is stable and profitable, then looking to diversify, whether in the form of new products or services, or to try new marketing and distribution models, may be a wise strategic move. Finding an investor at the same time, though, may be difficult.

Don’t Confuse Me with the Facts

I was reading the book All Marketers are Liars by Seth Godin, in which he discusses the approach to marketing that has been rapidly made into the norm for successful businesses – learning to tell a story. That is, a successful marketer will connect with their audience by telling them a story, which, as a side effect, results in the purchase of a particular product or service. They will not put any emphasis on the logical meris of their product, but on the emotional merits.

While I thought the book was quite good and made sense, it didn’t really hit home with me until I did a product demo for one of my clients. At the demo, I was showing their main salesman how he could present the product I had built for them to his prospective clients.

I made a first presentation in which I outlined the technical merits of the product, and how it satisfied all the needs of the client. I showed how it addressed both the needs and the wants of the prospective buyers. However, while the salesman listened patiently, he clearly could not use my presentation as the basis for his own sales pitch.

After a break in which we discussed other aspects to the product and project, I decided to present the pitch again, and this time, I presented on the basis of emotion.

I touched on the problems, the pains, the established feelings of existing products. I discussed the concerns, the wants of the eventual users. I talked about the people involved in the decision. Finally, I demonstrated the answer in the newly developed product.

I didn’t get involved in the facts (what are the margins, cost of distribution, market size, IP), because marketing doesn’t care about the facts, at least, not during the presentations. Marketing should be concerned with the story. If needed, the facts are available to back up the story, but it’s not part of the pitch.

How are you selling yourself and your products? Are you continuing to throw the facts at your prospective market, or are you connecting with your audience and telling them stories that happen to involve your product?

Plan for the Worst, Hope for the Best

I spent a few hours this week at a conference on family law, hosted by a law firm, and catering to accountants and financial advisors. The subject of the conference, which takes place annually, was succession planning, something that people don’t really want to talk about until it’s too late (and sometimes not even then).

A point raised by one of the presenters focused on why – that is, with people purchasing life insurance to protect their family in case the worst happens, and yet do little or nothing to protect their businesses. At first it may seem like perhaps they don’t care what happens, but usually this is not the case. Where family members are involved in the business, there is often the expectation that the business will remain in the family.

The psychology of what people go through when not planning for succession is quite interesting, as it often raises a variety of questions to reflect on. However, the focus of this article is not family-specific, but rather, businesses as a whole.

In any business, but especially small businesses, there is frequently a high density of knowledge residing in a very limited number of individuals. This has an inherent risk, as there is no assurance that the person with the critical knowledge will always be around, nor that they will have time to train their successor (imagine a car accident). To alleviate this risk, it is absolutely critical that businesses plan for this dreaded scenario.

In fact, this is no different than disaster planning, something larger businesses tend to plan for, though some do a better job of this than others. It’s merely another form of disaster planning.

In planning for this eventuality, the idea is to ensure that critical knowledge for the business has been recorded somewhere accessible in case it should ever be needed and the keeper of that information not be available for any reason. This can be done, ideally, with cross-training, which ensures that the information is disseminated in such a way as to be understandable to the people who would need that information. Alternatively, with confidential information, it can be placed under trust with a lawyer or a bank vault, only to be accessed under certain conditions.

That’s not to say every minute needs to be filled with dread that someone may be hit by a bus that particular morning. However, when no plans are made for such a scenario, should disaster ever strike, the business would have no one but itself to blame for its lack of foresight. Unfortunately, such lack of foresight can lead to the demise of the business, and as such, the risk should be managed in a timely manner.

Mixing Work and Home

By nature, I like to be around people, but I’m significantly more productive when I’m alone, or close to it. In a room filled with people I can relate to, I like to have conversations, and find myself easily distracted by what the people around me are doing.

For a variety of reasons, I don’t want to leave my current office space – besides getting along with all the other people working there, we’re great resources for one another, especially when a little bit of expertise is needed that can save hours of time. Additionally, with the number of projects being worked on which involve people from different businesses in the office, it’s more than a little convenient that we’re all in the same room.

However, productivity is the price paid for this convenience, as more frequently, I find myself being distracted, or, as often as not, the one doing the distraction. In an attempt to increase productivity without compromising the benefits of the shared office space, the alternatives were examined. This introspection I believe will benefit anyone looking to set up office, and wondering which of the alternatives below may best suit their needs.

Home Office

As I live in an apartment, this is something that was a moot point. My home computer can be used for work, but the environment is generally not productive, and so I try to keep the work at home to a minimum. A requirement for a home office is that the space designated for office be isolated from the space designated for home. This requires, among other things, the ability to visually block the two areas from intruding on one another.

If you have the space to create a home office, ensure that you are, in fact, able to isolate the office from the rest of the home. To this end, ensure that the room has a door, which, when closed, is considered a clear indication to the rest of the family that you are not to be disturbed.

Coffee Shop

The home of many starting businesses, coffee shops offer the convenience of a place to meet clients in what is perceived to be neutral ground. In an effort to have more people spend their days in their shops, many coffee shops offer Internet access, making it an even better place to work, not to mention the constant availability of your favorite form of caffeine.

The downside is that the shop is not your own space, and therefor imposes limitations on what you can and can’t do there. At the end of every day, you need to gather your notes, pack your bag, and leave, returning the next day to repeat the cycle. Additionally, the ambient noise can be pleasant at times, but it can also be a distraction, often when you most need it not to be.

Business Office

If your budget can afford it, a personal business office may be what you need. This will give the solitude that you need to be productive, a place where you can bring clients for meetings, and a place you can call your own. The downside is that you’re now responsible for the space, and the costs can be prohibitive. While this may be an eventual move, especially if you start bringing other employees into your business, it is, perhaps, the one to be avoided while it’s possible.

Shared Offices

This is most similar to the situation I described at the start of this article. Sharing space gives you the benefit of working with other people, but at the same time, reduces your overhead and responsibilities in terms of caring and maintaining the offices. The downside, though, is the same as that of coffee shops – when you need to focus, it can often be quite distracting.

My Balance

My situation is being resolved with a balance between a few of these options. While I continue to work primarily from a shared office space, I also have given myself the ability to work from anywhere – namely, a laptop set up as a desktop replacement. When I need to focus, I can always leave the shared space and find a quiet corner for a few hours or days. Since I’m leaving my comfort zone to do this, I can use a coffee shop as a temporary office.

If you’re looking for some options, look at what co-working options are available in your area. If you can find two, then consider using one as a primary office, and the other for the days you’re just trying to buckle down and get some work done.