The basics of the business model is that Frogbox drops off and picks up sets of hard plastic boxes which are sturdy and waterproof, at a cost to the consumer on par with using new cardboard boxes. A quick check of their website shows that renting 35 boxes with a dolly for a week would cost about $109 plus a delivery fee (in the case I looked up, the delivery fee was $40).

Robery Herjavec and Kevin O’Leary made the first offer with a valuation of $400,000 to which Arlene Dickinson pointed out that the offer was ridiculously low. Jim Treliving and Brett Wilson then put out an offer with an $800,000 valuation. Arlene, who had been pushing a higher valuation, made an equivalent offer to that from Jim and Brett.

Doug Burgoyne, after some discussion, came back with a request – that Jim and Brett join their offer with Arlene, which would mean that the investors would bring the full set of experiences needed. Jim, of course, with his various franchises, could show them how to scale their business to add new cities to their list. Brett could provide more general business experience. Arlene, the master of marketing, would help in bringing their brand into the public awareness.

On air, the dragons accepted, and the deal moved forward with the three dragons. However, after the show, Arlene stepped out of the deal when it became difficult to determine the exact role she are her business, Venture Communications, would play in the marketing of Frogbox. However, Jim Treliving and Brett Wilson continued with the deal and closed recently.

Part of coming on the den with a pitch is being prepared to explore new options. An entrepreneur who believes they know how to run their business better than anyone else and cannot listen to new suggestions will find themselves on the receiving end of harsh criticism from the dragons. At the same time, there are aspects to every business that are truly best understood by the people in the trenches.

Doug was aware that expansion was the key to making the deal go forward. The two offers dealt with the problem in different manners. Jim and Brett were likely to focus on the ability to franchise the business (starting in a new city had a cost of about $60,000 which is not unreasonable for a franchise model). Arlene was more likely to focus on how to market the business more extensively. During growth, both aspects of growing the business are important, but one needs to dominate the other.

Ultimately, the business would take one of the two paths, and that would be determined by conversations between the owners and the prospective investors. As smart business owners, they made the decision before the deal closed, and will be more likely to see success in their growing business.

Related posts:

1. Handy Solution Catches a Deal
2. Upsell Your Investors
3. Dragons' Den Episode 9

At some point during the life of a business, the amount of work coming in the door will exceed the limits of the business. Product based businesses will see this when demand outstrips their ability to supply, service-based businesses will see this when the demands on their time exceed the number of hours available to work. In a large business, this issue may have already been solved, either by having a process for increasing the supply, or by increasing the price to reduce demand.

However, smaller businesses walk with trepidation when faced with this issue. On the one hand, their ability to increase supply is severely limited – they may not have the necessary cash flow to handle additional hires, or to front the money required to pay for additional goods. On the other hand, the inability to supply the increasing demand may hamper their ability to expand, and may result in a negative impact on their existing business.

Additionally, there is the inability to see the future, which means that the business owner trying to decide whether or not the sudden increase in demand justifies hiring another employee must guess (hopefully with some helpful data) whether the sudden demand is merely a spike in activity, or if it is sustainable. This has ramifications on what is needed to ensure that the decision is made with appropriate resources allocated to support it, should the spike in demand be followed by a dip.

To determine how to best handle the spike in demand, it is necessary to look at the goals for the business. If the aim is to grow by hiring more people, to increase the supply, then the spike in demand can be one way of moving toward that goal sooner than expected. If the aim is to reach a certain level of activity, or, in other words, to cap the supply at a certain point (for example, to work 40 hours per week), then the decision that needs to be made is only how to go about reducing the demand – should you raise your prices, or merely refuse to take on additional customers?

Others, though, are stuck between the two decisions. While they don’t mind working more than a certain number of hours, or, in other words, to work with an expanding business, they also may not be actively looking to expand. As a result, they are unprepared for the expansion, both from a fiscal point of view, and psychologically as well.

Some may choose to bridge the gap by using sub-contractors to take on the work they are unable to do. This can help defer the decision until it is clear whether or not the increase in demand is going to be enduring, but it also exposes the business owner to various risks associated with delegating work (the quality may not be up to standard, managing the contractor can be complicated). Others may raise prices moderately, in an attempt to drive up margins while they debate internally how to handle the demand.

What would you do? How have you handled sudden spikes in demand beyond your abilities to provide?

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1. Growth, Expansion, and the First Hire
2. Growth and the Panic Response
3. Managing Accounts Receivable

There are a few types of businesses that make appearances. There are the truly good businesses, with solid number behind their smooth pitch, realistic expectations, and they generally walk away with a deal. These are the businesses that could have acquired an investment elsewhere, though the relatively easy access of the dragons leads them into the den. Not that getting the investment is easy, but getting the investors to listen is a lot more straight-forward.

On the other end of the spectrum are the spectacularly bad businesses, with lousy pitches, no numbers, and unrealistic expectations in regard to the value of their business. While some get deals, it is unusual, and often not because of the merit of the business, but rather to support some other cause (Brett Wilson is often the investor in those cases).

This week, one business arrived with a new reason for needing money – speed.

Sometimes, even a profitable needs money for rapid growth, for the simple reason that expansion happens in one of two ways. Either it’s done in bits and pieces as the cash flow in the business allows, or it’s done in a sudden spurt, in which case, outside financing will be required.

John Rowe and Justin Rowe from Honibe understood this. Their dehydrated honey business, offering a unique product with wide appeal, was already quite profitable. They could have continued along their path, slowly expanding into new markets as their internal finances allowed. However, they wanted to expand into the US, and for that, they needed money – a lot of it.

Robert Herjavec felt that the request for money was perhaps short-sighted, and that giving up equity for the cash would be a decision they would eventually regret. But the other dragons didn’t care about that – it was a good business, profitable, and the money was being directed toward something likely to provide a return. They were willing to back it to the tune of $1 million, split between an investment and an operating line of credit.

John and Justin took the offer, because $1 million is not an offer to walk away from lightly. I suspect that following their appearance, they’ve taken a look to see if they could acquire alternative forms of financing that would result in them keeping a higher percentage of teh company. However, they also recognized the value in having the dragons as major stakeholders in the company, and the eventual advice and experience they would have access to once the deal completes.

Related posts:

1. Say No to a Million Dollars – Again
2. Million Dollar Deal with no Numbers
3. The Right Time for Dragons’ Den

The true reason for having multiple plans is when there is an outside factor which can influence whether or not a plan is feasible. For example, if you’re planning a camp outing, you don’t have control over the weather. Plan A would then be for a beautiful sunny day, while Plan B would be in case it rains. Since you won’t be able to control this factor, having a second plan (or a third, as the situation demands) would be perfectly reasonable.

In business, however, having multiple plans can actually hamper your ability to succeed at your primary plan. Setting up your business, you have a path of how you would like to grow your business. Some parts of that plan are flexible, others are not. However, all your planning should be dedicated toward removing obstacles to Plan A succeeding.

As soon as you start to devote effort toward a secondary plan, you diminish the effort put into Plan A. Suddenly, with obstacles arising in your chosen path, it becomes easier to say you’ll switch to Plan B, rather than persevere toward your original goal.

To flip this around, not having a second plan can seem foolish – it’s known that life rarely follows along our ideas of perfection. As such, how can one justify not having a recourse?

The answer is that the recourse is to plan better – think through the various possible scenarios, all the things that could go wrong, and plan for them. If your flyers don’t generate a lot of leads, then you’ll adapt your marketing strategy to use direct mail postcards. If the average customer spends $50 in your store instead of the planned $75, you’ll implement a plan to increase the number of customers.

However, in the big picture, all these actions and plans are to achieve a single goal, whatever that might be. Plan B is merely one of several plans for when Plan A needs a bit of tweaking to succeed.

Related posts:

1. Effective Marketing Strategy
2. Plan for the Worst, Hope for the Best
3. I Have a Great Idea – What Now?

If you have an idea for a new business, a product, or a service, the first thing you need to do is to get customer validation – that is, confirm that someone with no ulterior motive (that rules out your parents/siblings/kids) would pay for a good execution of your idea. For more details on this aspect of getting started, read my earlier post on Starting a Business.

Assuming you can get your idea validated with a paying customer, it’s time to do some thinking about your ability to succeed at your project. This is, perhaps, one of the reasons that some advocate writing a formal business plan – because it will make you think about some of the questions you really should be answering:

• Who is your competition?
• What are they doing?
• What are some of the industry rules, processes, or expectations?
• How will you set yourself apart?
• What are the barriers to entry?
• What are your start-up costs and your operating costs?
• Where will the money to run the business come from?
• How will you make money, and how long will it take to prove profitable?

There are, of course, many other questions that a business plan covers. It will walk you through an overview of your business, industry analysis, marketing plans, sales, operations, finances. It will enable you to see the bigger picture of your own business before you risk a single dime.

I recently advised a couple of people who were setting out to build a business. Both were creating online stores to market and sell their products, and wanted to know what it would take to succeed. In both cases, the products were high quality, with a corresponding price tag. In one case, there was a large start-up cost in terms of machinery, other than that, the two businesses were quite comparable.

For both, I advised they start with the most basic eCommerce system available that could be quickly installed and configured, although it’s longevity for their business was questionable. The reason was that the system is free to install, and can get someone non-technical running with an online store in a matter of hours (this includes many kinds of reports, product management, newsletters, etc). However, once both their businesses start to be profitable, I suggested that they then invest in a better eCommerce solution, which would be more pricey.

In other words, both needed to understand that the distribution channel would not set themselves apart, and so they shouldn’t be focused on it (even though both would be primarily marketing via their websites). However, their product needed to be as good as possible, and that’s where the energy was directed.

If you want to succeed, you need to understand what it will take, and which parts of the road are not important. For the unimportant pieces, push it out to the most time- and cost-effective solution, while for the important pieces, spend the time and money to do it right.

Related posts:

1. It’s a Good Idea, Now What?
2. From Idea to Capitalization
3. A Novel Idea

However, if the new product or service is sufficiently different from the existing business operations, then trying to run with it within the existing business structure may not make sense. Even if legally this is possible (that is, you are not operating with a regulated industry which may object to running the two businesses together conceptually), there could be other reasons to run them independently of one another.

For one thing, isolating the two business operations from one another, when being run within a single business entity, becomes difficult, if not impossible. There is a strong bias toward using existing resources for the new venture, which can negatively impact existing operations.

Second, determining the true value of the business can be difficult, since there is no clear demarcation between businesses.

However, the mere existence of an independent business entity does not mean that the business will be any easier to manage, nor does it ensure that true measures of costs and income will be any easier to calculate. However, if the business succeeds, then spinning off the business to be operated independently, or to be sold, or to acquire an investment, becomes a lot simpler to do.

The advice I would suggest, though, is a cross between the two. Internally, consider the business to be separate, operating off its own accounts, with its own books, and “renting time” for any shared resources with other parts of the business. That way, even if the same people are working on the new idea, their contributions can be measured accurately.

If, after some time, it is determined that the business will succeed, then the effort can be made to set up a proper corporate structure for the business which will further isolate the separate business units. If the business does not succeed, then there has been no harm done, and the idea can be easily discarded.

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2. Slow Economy and Developing a New Business
3. Unique Value Proposition Turns into a Business

The interesting thing to note here is that creating a fitness agenda for a client lends itself to defining a SMART goal. Every aspect of setting such an objective highlights one or more proper goal setting processes.

For example, a common request to a Personal Trainer is to “get into shape” which is not measurable, making this goal impossible to be achieved. By clearly defining what the goal is, for example, to lose 20 pounds, or to be able to run a marathon, a measurable goal is created.

Taking the example from the opening paragraph, this goal is not sustainable. While there are ways to lose that weight in the specified amount of time, evidence shows that without changes to lifestyle, the weight will not stay off.

Removing a target date, though, may make the goal realistic, since it would eventually be possible to achieve that goal. However, since there is no date attached to the goal, it is no longer timely, and therefore is not a real goal.

Realism is also evident in setting fitness goals, with some people setting goals which are not physically possible to accomplish. One needs to look at their own reality to determine what might be a realistic goal for themselves. This is unlikely to be the same as the realistic goals for the next person.

Last, some goals are not actionable, in that they rely on an event outside the control of the person setting the goal to occur – for example, being selected to be part of a particular team. While the level of fitness to be selected might be actionable, the selection itself is not part of a SMART goal since someone else will be making that decision.

In business, goals are exactly the same. They need to be realistic, not idealistic. A classic example of this is with sales projections – many small businesses project to take over an entire market, but this is idealistic, not realistic. A realistic goal might be to become a major provider of a service within a specific geographic region.

Likewise, the goal should be measurable. Carrying on with the previous example of sales projections, the goals should include a way to measure the success of the business in reaching those goals. They should also include a time frame for reaching those goals – 6 months, a year, some fixed period.

The goals should be based on actions that are under the control of the business. Setting a sales goal is only SMART if a means of reaching those goals (for example, increasing the conversion rate on the business website) is part of the goal.

Last, make the goals sustainable. It doesn’t help you in the long run if you misrepresent yourself in the short-term.

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With this validation under their belt, he hoped that the VC he was meeting with would see the promise. However, he left the meeting empty-handed, though the VC parted significant amounts of advice on how he might proceed. The reason he gave for declining the investment, though, was something along the lines of:

It’s not big enough for me to get involved. I think your business will do well, and will be profitable in the near future. However, you have a long road in front of you to reach the market, and the competition is quite strong. It’s not for me.

There are actually two types of investors who would make such a comment, and trying to differentiate between the two is complex at best, impossible at worst.

The first investor knows the industry, the competition, the existing products, and understands the business idea you’re proposing. He’s looked at how it compares to the current offerings, and has made an educated guess as to how the target market will respond. He’s factored in changes in the nature of the market itself – in this case, it’s age-specific, so understanding the generation that will be targeted to adopt the product is a key requirement to being able to project the business’ performance.

Once all this has been taken into consideration, this investor feels that the adoption rate will not be high, the product will not redefine the market as a whole, and there will be stiff competition. It’s unlikely that the business will do much beyond turn into “yet another” player in the specified market.

The second investor is likewise well-educated in the industry, but is also looking at it from the perspective of his own generation. That is, he sees how his generation would react to such a product, and projects that thought onto the current market. With limited adoption by that generation, a generalization of how it might be adopted by other markets is created, resulting in the same conclusion.

The difference between the two types of investors is that the first has made a properly balanced argument for why the business will not be the next shining star. The second, however, has merely projected an attitude against a new business, whose market he does not really understand. When the advice comes from the second investor, it should be taken dubiously, since he clearly does not get it.

The problem, however, is how to tell the difference between the two. For that, you need to know the people involved, past investments they’ve made, and then make a judgement call based on that.

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2. Financial Planning and Advice
3. Get Some Skin in the Game

The first thing that needs to be realized is that getting validation that the idea is a good one has ramifications for how to proceed. Some potential clients can help by working with you to refine the service or product. Other times, you have to go off on your own and figure it out.

One of the biggest mistakes someone new to the business world can do is to go out and try to raise capital. The reason is quite simple – you don’t know yet if you actually need any. Sure, it would be nice to have a budget of millions that you can spend on fancy offices and a huge staff, but do you NEED it?

The first approach, therefore, should be to determine how much of the product or service can be developed with what you have – namely, yourself (and any partners you may be working with). Commonly known as bootstrapping, you should be trying to build out with the minimum amount of resources possible.

If that’s not possible, see what you can get by reaching out to your network. People don’t expect to work for free, but you may be able to barter something of value (and note that shares in your business currently have little value at all) for work.

Don’t forget that you need to be thinking about multiple aspects to your business. You need more than just an idea, product or service – you need to be able to sell it. If there are legal ramifications to that, make sure you work them out up front. You may need a marketing plan, you might need to work out pricing schemes. If you know someone who’s been in business, talk to them – you should try to get a mentor if you can, if only to steer you clear of issues that you might not need to face.

However, start your approach with an eye toward frugality. That doesn’t mean trying to pay less than the value of a given item, but rather determining if you need the item in the first place. There’s a gray area between good enough and perfect, and usually, perfect isn’t worth the effort over good enough (though of course there are many exceptions to this).

Related posts:

1. I Have a Great Idea – What Now?
2. From Idea to Capitalization
3. A Novel Idea

First Time in Business

If you are in business for the very first time, then what you need to do is go out and find some customers. No fancy business plan, no expensive incorporation, just a phone number or email address at which you can be reached. Reach out to your network, announce that you’re in business (explain what type of business you’re looking for), and ask people to send you leads.

What you are trying to do is get some momentum, and the simplest way to do that in the early days of a business is to find one person who will pay for what it is you have to offer.

One friend started his business with $500 in his pocket – he unpacked the coffee machine, pulled out a list of phone numbers for every person he knew, and started calling each to let them know he was in business. A few years later, he has several people working for him on a variety of projects, and has some idea about where he’s taking his business. But the start was informal – just a bunch of phone calls.

What it comes down to is networking to find one client. Once you have that one client, you can worry about determining where your business should go – taking legal steps to protect yourself, setting yourself up to be as tax friendly as possible, etc. The first step for someone in business for the first time is always networking.

Been There Before

If you are starting your second or later business, then the steps are different. Finding your first customer isn’t as important as figuring out what this business will do. You have to reflect on your previous business to determine, from a business perspective, how you can do better. In that case, a formal business plan might be wise – you may have the time to do this, and can afford to spend valuable time researching your target market, the industry, raising capital, etc.

The steps aren’t as clear here either – what was the end of your previous business that pushed you to start a new business? Would you call your previous venture a success? How would you apply the lessons learned there to your next venture?

These questions, and other related questions, need to be answered in order to determine your best approach to starting anew.

Summary

If it’s your first time in business, then don’t over-think it – just go out and find someone who will pay you to do the kind of work you want to be doing. If it’s not your first time, then reflect on your previous endeavors and figure out how to apply the lessons learned there to your next venture.

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1. Documenting Business Plans
2. First Steps for a New Business
3. I Have a Great Idea – What Now?

These are common spins on how to set your business apart from the competition, but we wanted to take this a step further. Eventually, we landed on offering a custom service that would be given to her clients at no charge, for as long as they were her clients. In the short-term, this might have reduced the amount she could charge each client, but it would also ensure that clients would stay with her for many years.

Working in IT, I went to determine how complicated it would be to build the web application we envisioned. I came back a day later and realized that the application itself, what we had considered to be a unique value proposition for one business, could actually fill a void in the market. That is, many of her competitors and non-competitors (i.e. people offering the same service to a different geographic market) would love such a service, and would likely pay to use it.

The assessment continued to the point where a price could be placed on developing the application, as well as sales models for it (usage and membership fees), as well as marketing angles (it’s a B2C service, so market it to other businesses). The whole business could actually be run in conjunction with her existing business, taking little effort to set up new users on the system (most of this would be automated), but would require significant effort upfront.

What ended up happening is that a business was created for the sole purpose of giving a unique value proposition to ONE client. However, anyone who wanted to use the business, even competitors, could do so – but for a price. That is, we found a way to get the competition to pay to be the competition.

When looking at a business, and its approach to attracting customers, sometimes it will be discovered that something that was added to the business to make it more appealing is actually part of another business. When that’s the case, it might be smart to spin that part of the business off into its own entity, so that you can charge your competitors for using what you give away to your clients.

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This came up during one of the sessions, when one attendee asked what it would cost to get a business plan written professionally, and the instructor replied that it cost about $3,000. However, he added the caveat that he would not recommend that an entrepreneur, or, as he called the class, micro-entrepreneurs, have someone else write the plan for them.

This evolved into a quick discussion about the fact that there are actually a few types of business plans, and the course is focused on one in particular. There is the plan that you use to show bankers or investors, for which you might pay someone else to write it to be sure it caters to the expectations of the readers. There is also the formal plan which may be several pages long that you use internally to help you manage and grow your business. Last, there is the brief, informal plan that I feel is the most important for people starting out in business.

The formal business plan has many guises, but it essentially runs through all aspects of any business, and summarizes them as it pertains to your business in particular in a single document. Starting with an Executive Overview, running through Market Research and Cash Flow Analysis, it brushes Marketing, Development, Sales, Distribution, and a variety of other topics. It is, all in all, a fairly detailed and comprehensive piece of documentation.

For many businesses, this document is much more than they need.

That’s not to say there isn’t value in it, but that for starting a business, you don’t need this much. What you really need is the much shorted business plan, the one that can fit on one or two pages. You need to know what it is you’re selling, an example of someone you might sell to (or already have), and a vague idea of where you would like your business to go.

In the class were a few people who had already started their businesses. Some of them described the fact that their business evolved as they found new customers. I don’t think anyone in the room already had a business plan, but I think that some of the people in the room would have been misled into believing that they needed a plan to be successful.

You can be successful running things by the seat of your pants. It’s been done before, and it continues to happen all the time. However, if you don’t run through the exercises that writing a business plan forces you to do (how can you fill out the Market Research section if you don’t know who else is in the industry, and what they’re doing to be successful?) then you strongly hinder your own ability to succeed.

The catch is to not get hung up on the document itself, but all the questions and answers it generates. If you choose to write it down in long-form, it can help you when it’s time to look for outside capital, or if you are trying to get a partner to join you. But it’s not a requirement.

Answering the questions, or at least identifying which questions need answering, is absolutely crucial.

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1. Starting a Business
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3. Writing Proposals

With recent developments, the nature of the products was changing, and it was realized that this person is actually a fantastic marketer, but not a salesman, much to many people’s surprise.

The difference between the two, however, is quite important, and in growing businesses, these two roles will eventually diverge from one another.

The marketer is concerned with getting people to look at the product, to consider its merits, sometimes in light of competing products. He listens to what potential customers are saying about the product, and requests changes to be made to the product. He does not, however, work with real products, but rather with demo versions, wish lists, and spec sheets.

The salesman deals with a completed product, getting people to actually pay for it. He will follow up on leads created by the marketers to get people to pull out their credit cards and pay. He will work on pricing models, support contracts, and return policies. He will focus, in short, on getting the working product into the end user’s hands.

The skills needed for both these roles are similar, but not the same. If you see your product struggling to be adopted by your target market, think about whether the problem is one of knowledge in the market at large, or in closing deals. Do your potential customers know about your product, and how it fits into their view of the world? If not, the problem is likely one of marketing. If, on the other hand, people know about the product but are not buying, then your problem may be in sales.

Knowing your problem is one of sales at least gives you a place to start your research into why people are not buying. It might be because you don’t have appropriate staff to follow up on leads, or it might be because your product fails to fulfill the needs you think it does.

However, at least you have been able to narrow down the problem into a set of solvable questions.

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Upon consideration, however, it was decided that development would continue, though the focus of the project, and how it would be marketed to potential consumers, would need to change. After all, the features of the product were sufficiently different from what the competition was offering, to the point that there was little concern as to whether those features would appear in future versions of the competing product.

That being said, the few hours of crisis during which there was uncertainty about the future of the product was extremely beneficial to the product. Everyone involved had to reflect on what exactly the project we were working on was trying to achieve. Everyone had to get more focused on what set us apart.

Competition does that – when competing with many other products, the differences may be price, features, availability, marketing spin. When competing on new products, the differences may go deeper than that, dealing with different needs, different consumer bases, or even different approaches to the same problem. The more prevalent the competition is in your market, the more carefully you will be forced to examine your customers, and why they buy from you rather than from anyone else.

Likewise, you will have to pay better attention to what gives you an edge in a certain market – what are the true barriers to someone else entering your market? Is it actually surmountable, or have you created, by way of completely filling a need, made the concept of competition irrelevant?

While making competition irrelevant may lead to lawsuits under anti-trust laws, it is the place where many businesses would like to be. Offer something so unique, and available to everyone who needs it no matter their location, at a price they can all afford, and the competition will have no reason to exist. After all, any consumer will already be shopping from you, and are happy to stay with the established status quo rather than risk jumping to a new-comer.

In your business, are you looking for ways in which you can consolidate your customer base and build loyalty so that there is little reason for them to move to an alternative? Or are you focused on the growth of your business today, with little thought to the longevity of your business, especially in light of the fact that there eventually will be competition to any business which does not properly care for its consumers.

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Entrepreneurs often think that if they don’t act quickly, the opportunity will disappear. And there’s never been anything more false than that.

The initial reaction to this is that Arlene may have erred in her statement – after all, opportunities come and go, and rapid action is often needed to take advantage of a given opportunity. Reflection, however, shows that Arlene’s years of experience are coming into play as she highlights one of the critical issues with an entrepreneur’s mentality.

It is true that opportunities come and go, and that action is required if you are to take advantage of such an opportunity. However, even when action is required, it should never be done on the basis of it leaving, but rather, because the opportunity is a good one. That is, the action should be taken because after careful evaluation (which is not necessarily a slow process), it was determined that the benefits of the opportunity are worth pursuing, and you are capable of succeeding with it.

As an example, a person who manufactures custom jewelery may have the opportunity to get featured in an internationally read magazine. This would have the potential to seriously increase her exposure, and then sales. However, reflection would show that since she crafts each order herself, the realistic limit on the number of orders she could fulfill is much smaller than what that exposure would provide. As such, the exposure would have some short-term benefits, but until the infrastructure is in place to handle a major increase in volume (for example, using some junior designers to produce the work once it has been designed, with a hiring structure that is easily scaled), the opportunity would actually be bad for the business.

This has happened to many businesses, where they over-extended themselves, and then found themselves unable to meet demand. The action that precipitated the situation was often one of lost opportunity – or rather, a refusal to acknowledge that some opportunities should not be acted upon. If a business wishes to be successful, they need to learn to reflect and to act on careful evaluation relative to the amount of risk the opportunity can create.

And yes, sometimes you will have to act, and sometimes you will have to make decisions quickly. But the decisions should be based on logical evaluations, not emotion.

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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.

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Jason Bellissimo came onto the show pitching his new tray to assist waiting staff at restaurants, which he called the Handi-Tray. (In my search for his site, I discovered that there’s actually another product called the Handi-Tray, which is not, as far as I can tell, in any way connected to Jason’s product.) It was designed to allow for easier use by wait staff, along with a spot for including advertising around the edge of the tray.

The first dragon who I thought would be interested was Jim Treliving, who could easily get it into his chain of restaurants, Boston Pizza. However, while he liked the product, Jim didn’t feel it was right for him, with a limited appeal and a lack of connection to the advertising component of the tray.

Next was Arlene Dickinson, who might have been interested on account of the marketing aspect to the product. The display around the rim could have been a secondary product to the tray with its own marketing appeal, but again, Arlene indicated she could not connect to Jason or his Handi-Tray.

Brett Wilson, though, was interested in the product and in investing, but not at the stated terms. While Jason offered a royalty based investment ($1.50 per unit sold), Brett wanted more say in the business itself, and offered the $100,000 investment in exchange for 50% of the business.

The concern Jason had was that he wanted to retain creative control of his company, though he seemed to understand that his need for cash and connections far out-weighed his need for control of the business. An equal partnership also meant that he was likely to gain significant input from Brett along with the cash, the kind of mentorship that many small business owners dream of having. The deal was struck.

Sometimes, it really is worth giving up control of the company, if the person gaining that control can bring more value to the company that you currently have. Additionally, if your business is facing more than just cash flow issues, then looking to banks and such for loans and lines of credit may only serve to lengthen a problem while hiding another.

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One company I work with, though, is currently undergoing such a transformation, and they’ve managed to figure out how to expand without any major change to the culture.The CEO of the company, to date, works in the same room as all the employees of the company. While there’s no pool table in the middle of the room and nerf balls are noticeably absent, it still has the feel of a start-up. The culture is pretty laid back, with a focus on the work produced rather than the time worked. Meetings are generally avoided unless absolutely necessary, and delegation of work rules the day.

With the arrival of several large projects requiring a significant staffing increase, his company is about to be put at risk for changes to this culture. After all, while he is able to both pursue new clients, work on the details of any of his projects, and manage his team of half-a-dozen people, in addition to the inevitable trouble-shooting when incidents arise, with the number of staff about to double in the very near future, and possibly double again within 6 months, the style of the business is about to be shocked.

However, as someone who has worked with large corporations, he understands how management does and does not fit into a business, and he is reluctant to create a level of management that could precipitate the company becoming top-heavy.

Instead of looking outside the company for the needed level of management, he has turned inside the company to create an environment that promotes from within. Forget the MBA-toting personalities – he’s looking for people with solid technical skills who have lived and worked inside the culture he wants to maintain. Those who demonstrate leadership qualities may find themselves directing other people in the company on various projects. As new people are brought into the company, they are given a mentor in the form of a more senior employee who inducts them into the culture.

When sufficient employees have been brought into the company, a new team is formed, with one of the existing employees taking on the role of team lead. That person is intended to act as the CEO of that team, being able to delegate work to the team, manage entire projects, and run small budgets for acquiring resources outside the company.

The CEO himself could then distance himself slightly from his involvement in the management of the individual projects. While he would not want to reduce his involvement to the point where he is out of touch with the realities of the business, he can reduce his workload and begin to delegate more. He could continue to wine and dine new clients, getting them to sign on for more projects. He can work on promoting the business. When problems arise, he can step in and help as required.

However, the culture of the company can still remain unchanged, since growth is being done organically, from within. People are brought in at the bottom, and rise according to their aspirations and abilities. As they are brought in, they are shown the culture, and are given the chance to adopt it as their own.

While this strategy begins to degrade as the size of expansions increases, it can work well when working with smaller companies who are undergoing moderate staffing changes. Start the changes from the bottom, not the top, and you’ll see the culture remain stable. Start at the top, and big changes may occur, with little ability to control those changes.

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Many businesses define themselves as being either a product-based business or a service-based business. While there are certainly those businesses which encompass both categories, and certainly many who will primarily think of themselves as providing both of those, it is the thoughts of the customers that matters in how the business is defined.

For example, my lawyer provides me with documents and contracts, but I think of a law firm as being a service-based business. On the other hand, the company that takes care of my lawn would be a product-based business, since what I care about is that I have a nice lawn, that is, a final product.

As a business owner, it is important that you first identify which of these two categories your business belongs to, and, as a consequence, what that means in terms of the growth and development of your business.

Product-based Business

If your business is based on a product, then your concern should be about making that product be as good as it can be in whatever way it is that you choose to market it. If it’s supposed to be high quality, then that’s your focus, it it’s supposed to be cost-effective, then you need to find ways to reduce its cost to the consumer. However, your interactions with customers are limited to finding out how you can make your product better, and the relationship with the consumer is of secondary importance.

To think about this in more practical terms, think about buying cereal at a store. You, as the consumer, generally don’t consider your relationship with the cereal manufacturer to be important, as long as the cereal itself meets your needs. The manufacturer knows this, and therefore will usually focus on the product, and reach out to consumers in order to find out how to improve those products, or create new products to meet a new demand.

Service-based Business

When your business is based on a service, then your concern is two-fold. On the one hand, you need to offer the best service possible, which may involve improving a product. Additionally, you are working directly with clients to make them happy, and as such, you must spend significant amounts of time on networking. That is, when you meet customers, it’s about more than just improving the deliverable, it’s about finding out how you can better meet the needs of that customer.

If my lawyer merely provided me with well-written contracts, I would be happy with the product, but perhaps not with the service. As such, he spends some time to understand what it is I’m trying to accomplish, so that he can anticipate my future needs. However, if the product he delivered wasn’t up to par, then even good service could not keep me with his business.

The problems a business in this situation faces is that they have to deal with all the issues of the product-based business, as well as those of networking and consumer relations. The rewards are appropriate as well, but a business that fails to take this into account is one that is thinking tactically, not strategically – owner beware.

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Around the office where I work, we were discussing the story of an employee, who made a mistake that resulted in losing his employer ten million dollars. He went to his boss, Tom Watson, and expected to be fired for his costly error. However, the response was far from what he was expecting – he was told: “Fired? Hell, I spent $10 million educating you. I just want to be sure you learned the right lessons.“

Perhaps the story is somewhat of an extreme example – after all, how many people could justify a loss of that magnitude. Additionally, making such a statement involves a large amount of emotional control, considering what prompted the statement. However, there are still lessons to be learned from this.

Punishment for a mistake is generally a function of an emotional response to the situation. As such, while it may feel good to take such action, it does not really solve any problem. That being said, if the lesson of the mistake was not learned, then it would be prudent to prevent a recurrence by whatever means deemed necessary. But, the consequences are not of making the mistake per se, but rather of failing to learn.

Life is all about learning from mistakes – and in business, people who learn from their mistakes are important to have around. With someone who has not erred, you do not know how they will react to having made a mistake. As such, I would choose to keep people around me who confess to their errors and learn from them over people who I don’t know if they’ve ever made a mistake, let alone been able to learn from them.

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