http://iveylocal:8888/index.php/blogs/ en ejanssen@ivey.uwo.ca Copyright 2010 2010-07-28T17:59:17+00:00 http://www.iveyentrepreneur.ca/index.php/site/on_the_case_too_much_information/ http://www.iveyentrepreneur.ca/index.php/site/on_the_case_too_much_information/#When:17:59:17Z Without doubt, anyone who invests in a company is entitled to information about that firm’s performance. But how much detail should investors expect? Calgary’s Podium Participation Funds wrestled with that issue when its investors demanded that companies receiving backing disclose far more details than markets generally expect. The resulting dilemma landed Podium’s founders in a tight spot between their investors and the companies they back. Their challenge: finding middle ground.In Calgary,  investor demands for disclosure put an investment firm between a rock and a hard place Without doubt, anyone who invests in a company is entitled to information about that firm’s performance. But how much detail should investors expect? Calgary’s Podium Participation Funds wrestled with that issue when its investors demanded that companies receiving backing disclose far more details than markets generally expect. The resulting dilemma landed Podium’s founders in a tight spot between their investors and the companies they back. Their challenge: finding middle ground. Paul Readwin and Cameron Chell came up with a novel concept when they founded their Calgary-based private-equity corporation, Podium Participation Funds, in 2009: All investors, investing a set amount of $5,000 each, would have an equal vote on whether or not to back companies that approached Podium for funding. To enable this innovative approach, Readwin and Chell built a social-media platform and web-based voting system that allowed thousands of shareholders to bring their opinions to every aspect of the fund’s business. Podium’s approach to shareholder democracy was a key selling point, but Readwin and Chell’s strategy would be tested. This past April, Podium investors (as well as some prospective investors)  told them that they wanted the companies receiving funding to be fully transparent about their strategies and financial information. It was a big demand, one that would require firms looking for backing to share information that went far beyond normal expectations and legally required disclosure. Readwin and Chell found themselves in a difficult position. Firms that approached Podium already had to provide information and participate in several rounds of shareholder voting before receiving a term sheet for any deal. Now Readwin and Chell feared that even greater demands for transparency would discourage firms from doing deals with Podium. The problem was, they couldn’t simply overrule the democratic decision of their shareholders. For executives in the financial markets, “full disclosure” usually means providing just enough information to meet legal requirements. The rules are written to take into account the needs of two different stakeholders: investors,  who need information in order to make wise investments, and businesses managers, who must protect sensitive information from rivals who, in a highly competitive world, might use it against them. Information considered sensitive can range from sales figures and margin data, to plans for new products or services and strategies for marketing and production. For the purposes of monitoring their investments, most investors usually consider the level of information provided under the full-disclosure regulations sufficient to meet their basic needs.  Podium’s investors, however, were calling for full transparency. They wanted investee firms to lay out their plans and results in detail, even going as far as to suggest monthly sales tracking. Such information would certainly give them more confidence in their investments, an important consideration in the wake of the financial meltdown. And they argued that firms receiving funding could benefit from the disclosure,  as they’d have the experience of thousands of investors to draw upon if they encountered obstacles. Still, Readwin and Chell could see that some entrepreneurs would be uncomfortable providing such high levels of disclosure. In their minds, the transparency demands could lead to a drop in the number of deals that Podium would have an opportunity to participate in. But they simply couldn’t overrule the shareholder vote or try to convince shareholders they were wrong. That would amount to little more than biting the hand that feeds. Faced with a dilemma, Readwin and Chell knew they had to either find a balance or come down on one side over the other. But which route should they choose? This case study was prepared by Financial Post Magazine and the Pierre L. Morrissette Institute for Entrepreneurship at the Richard Ivey School of Business (University of Western Ontario).  The case method is a key learning tool in the cross-enterprise leadership approach used at Ivey. The views represented here are solely those of the case authors. Some details may have been changed to protect privacy. THE EXPERT VIEW Todd McCuaig, Managing Director, Cornerstone Industrial Group LLC Podium needs to make the case to its shareholders that the limited level of “full disclosure”  is the right solution. Podium’s goals are well-aligned with its two constituents: its investors and the businesses in which it invests. The primary objective for all is to grow the value of those investee companies. If Podium stays true to serving the primary objective of maximizing value creation, it will enjoy ongoing success. The starting point in determining the appropriate level of disclosure is the definition of the appropriate role for investors during the life of the investment. Podium’s model allows full participation by investors in making the initial decision to invest, and adequate disclosure must be provided to facilitate that initial investment call. However, from that point forward the shareholders’ role in the business is necessarily passive. The shareholders must empower the board of directors of the business to represent shareholder interests. The board must, in turn,  empower management to make business decisions with the board’s oversight and guidance. While a participative approach to the upfront investment decision is practical, shareholder involvement outside the traditional role of the board would paralyze the business. The business must be nimble and decisive to succeed and must not be slowed down by processing input from the larger shareholder group. What level of disclosure is appropriate for these passive shareholders? The level of disclosure will serve the following three needs or interests: evaluation of future investment decisions, including follow-on investments and divestitures;  remaining informed about the status of the investment for individual financial planning purposes; and satisfaction from following the progress of the investee business, or “investortainment.” Podium should honor the obligation to provide sufficient information to serve the first two needs; that is unquestionably necessary, and should be satisfied at the “full disclosure” level. As to catering to the desire for investortainment, Podium must ensure that no information provided on a discretionary basis does harm to the business. Podium should treat its shareholder group as an asset and should exploit that asset to maximize value creation. Where an individual shareholder is able to provide assistance to an investee business, that shareholder could be engaged on a confidential basis. A “shareholder advisory board” could be formed for each investment. Or Podium could maintain a profile of each of its investors to identify resources as issues arise over time.  Managers of investee businesses should be encouraged to survey investors when it might be a benefit to the company to hear a broad range of opinions on an issue. Vincent Bulbrook, Founder, Entresociety Readwin and Chell are right to be concerned about the scrutiny requested by investors, but they also need to be responsive to their point of view. They need to provide a balance between the full disclosure provided by publicly traded companies and the full transparency investors seek. Venture-capital investing provides a reference point in considering how much disclosure is adequate or desirable. Venture capitalists review business plans in detail and perform high levels of due diligence prior to investing in companies.  They usually have a seat or two on the board as well, but overall, they are backing the ability of an entrepreneur to execute on the business plan. And they give the entrepreneur the freedom to do so. Meantime, the company receiving funding regularly reports on its progress. As long as the company is meeting its targets, it is given room to operate. If it misses the targets, it is subjected to more scrutiny, which may include advice from the investor. Readwin and Chell can use this model to craft a process for Podium. It could work like this: * A small sub-group of investors could sit on the board of each investee company and report back to the rest of the investors. They can also bring advice from the investors to the firm. The investor group can also monitor remediation plans if an investee company starts missing performance targets. * Companies can be asked to provide an annual presentation to the group and respond to questions. This presentation can be part of the annual planning session for the businesses. *  There can be regular forums in which companies can participate on a voluntary basis. They will have the ability to go to the investors with specific problems or questions. They can also test out new product ideas. * The backgrounds of the investors can be published to the investee companies, as individuals may have special knowledge or contacts. This approach would not be intrusive to entrepreneurs and, in fact, may be seen as a selling feature. THE OUTCOME Readwin and Chell decided that they would accept their shareholders’ call for full transparency. The fund would lose some opportunities, but Readwin and Chell believed it would ultimately work in everyone’s favour.  “Executing a business plan separates the winners from the pack,” Readwin says. “Our shareholders want us to work with entrepreneurs who aren’t afraid of constructive feedback. If a firm is transparent about their challenges, the crowd will fund it and help build it. That will be Podium’s difference.” ————- This case study was prepared by Financial Post Magazine and the Pierre L. Morrissette Institute for Entrepreneurship at the Richard Ivey School of Business (University of Western Ontario). The case method is a key learning tool in the cross-enterprise leadership approach used at Ivey. The views represented here are solely those of the case authors. Some details may have been changed to protect privacy. Mini Case Series 2010-07-28T17:59:17+00:00 http://www.iveyentrepreneur.ca/index.php/site/when_i_say_fiti_you_say_yogurt/ http://www.iveyentrepreneur.ca/index.php/site/when_i_say_fiti_you_say_yogurt/#When:15:28:10Z “Fiti probiotic yogurt, allegedly Africa’s first probiotic yogurt, has had its official launch party. We organized a massive music festival to celebrate Fiti –complete with the hottest musicians, free yogurt samples and t-shirts, face painting and dance, rap and yogurt chugging competitions! Fiti was the hit of the town and hundreds of people came from all over to join in on the party.” Kinleigh is one of four HBA students participating in the Ivey Heads East program working with a small yogurt business in Tanzania and Kenya.Kinleigh Heads East Fiti probiotic yogurt, allegedly Africa’s first probiotic yogurt, has had its official launch party. We organized a massive music festival to celebrate Fiti –complete with the hottest musicians, free yogurt samples and t-shirts,  face painting and dance, rap and yogurt chugging competitions! Fiti was the hit of the town and hundreds of people came from all over to join in on the party. It was an absolutely incredible day and the end goal of our concert was achieved – to increase brand awareness and explain the health benefits of probiotic yogurt. While the day of the music festival went off much better than expected, we had a few hiccups leading up to the big day. The first thing that should be noted is that the festival was originally supposed to happen the week before,  July 16th. Three days before the festival we were informed that there was going to be a “YES” rally (supporting the upcoming referendum) on the same fairgrounds we had booked. We decided to push everything back, which in hindsight was a very good decision. There is no way that we would have been able to complete everything in three days, it was even a close call with the extra week. The hiccup that caused the most stress was the screen printing of 4,000 plastic yogurt bags and 100 t-shirts. We had placed our order almost a month in advance of the original date of the festival, but seeing as everyone works on ‘African time’, the order was obviously not completed until late the night before. We budgeted extra time into our schedule for ‘African time’ laybacks, but we never anticipated a full week. One of my goals coming over here was to learn about the implications of culture on business. Organizing this music festival has really opened my eyes to the differences in business operations and practices between the Western world and Africa. Customer appreciation and service is very rare, few people follow deadlines and the quality standards of products are much lower. For example, the t-shirts we ordered were given to us covered in ink stains, with huge holes, dirt and oil marks and the actual screen printing was illegible. Back home anyone would have immediately returned the product and asked for a refund or replacement free-of-charge. We had to accept most of these t-shirts and paid an additional fee to have the defective products repaired. This is only one of the many differences I have experienced thus far; I’m interested to see what else will happen in my remaining few weeks. All in all, the festival was a huge hit and Fiti is now the talk of the town. We had the audience laughing at skits, dancing on stage, drinking yogurt and generally having a great time. The mamas sold tons of yogurt and got to meet a lot of new clients; I cannot wait to see the results of our marketing efforts in a few weeks’ time! While the festival was a great day for Fiti and the mamas, there are some underlying problems that are affecting operations. Most of these issues we are facing have arisen due to cultural differences and communication problems. First of all, the structure of the overarching Fiti organization is supposed to support fellow kitchens and promote teamwork. We’re trying to encourage the mamas to share their best practices with the sister kitchen, rather than view it as competition. A few serious issues were brought to our attention after the festival was over.  Apparently the mamas were selling yogurt at varying prices depending on who the customer was. For example, if a person of known superior status was purchasing yogurt, they would charge them an extra 5 Ksh. Also, we had purchased 2,000 samples from the kitchens to give out for free for people to taste. It turns out that the mamas were charging people for these samples. Finally, some of the mamas were charging 50 Ksh for one bag of yogurt that should have cost 10Ksh during the “Buy 50 Ksh of yogurt and get a free t-shirt”. We are working with the mamas on topics like these to help them understand the importance of customer service and establishing a good brand name. We want them to understand why treating a customer well is important and we need people to see Fiti as a fair, healthy and trustworthy company. These are just a few of the things that we’re including in our business lesson this week –hopefully it will be well received. Read more and see pictures here: http://kinleighheadseast.blogspot.com/2010/07/blog-post_994.html Featured Leaders 2010-07-28T15:28:10+00:00 http://www.iveyentrepreneur.ca/index.php/site/jesse_heads_east_-_walking_on_the_wrong_side_of_the_walk/ http://www.iveyentrepreneur.ca/index.php/site/jesse_heads_east_-_walking_on_the_wrong_side_of_the_walk/#When:18:46:23Z “The work with the yoghurt Mamma’s has been less hands on as of late.  Since informing them of their less then ideal financial situation, they have been doing a much better job of getting out to the market, and July has seen a noteworthy increase in sales and profitability.” Jesse is one of four HBA students participating in the Ivey Heads East program working with a small yogurt business in Tanzania and Kenya.JESSE HEADS EAST The ProjectThe work with the yoghurt Mamma’s has been less hands on as of late. Since informing them of their less then ideal financial situation, they have been doing a much better job of getting out to the market, and July has seen a noteworthy increase in sales and profitability.There were two major issues regarding the internal relations of the kitchen, and the other interns and I think addressing them has and will continue to go a long way into getting the kitchen back on track.  First, due to the fixed schedule that resulted in the Mamma’s always working with the same people, two different “groups” formed, each under a different leadership figure. Both groups thought that either they were doing more work, or that the other group was making more money.  This resulted in individuals not putting in the extra effort required, and caused overall productivity to drop.Secondly, one of the two leadership figures in the kitchen recently decided to start up a second yogurt business of her own. While not really in competition with the Tukwamuane kitchen, it has created a lot of resentment from the other Mamma’s.  Not only does it show a lack of commitment from the groups appointed chairperson, but it has also resulted in a sizable decrease in the time she spends working with the group. Interestingly enough, instead of using this to unite the remaining group members, the second leadership figure responded by starting another yogurt kitchen of her own. She has also been having the Tukwamuane buy extra milk to sell to her at cost,  in some way shoving her other business in the face of her co-workers. In addition to the previously mentioned issues, Western Head East (WHE) is upset because the yoghurt these two Mamma’s have been distributing is not probiotic, the main reason they were given the skills to make the yoghurt in the first place.While the first issue appeared to be having a larger effect on the kitchens operations, it has also been much easier to deal with. Since the Mamma’s have recently been spending more time at the market, they have been working in larger groups, and no longer with just the same people.  Additionally, since the two “leaders”  of the group have been spending less time with their fellow Mamma’s,  the rest of the group has in some way bonded over the bitterness they feel towards the whole situation. The second issue has been more difficult, as all Mammas’ are part owners of the business, and are therefore difficult to discipline.  In addition, WHE has no legal authorization over the kitchen, so as interns we can only make “recommendations”. However, the apparent plan is to have everyone sit down together, and basically give the two “lone” Mamma’s an ultimatum in regards to which kitchen they plan to go forward with.  In addition,  they will be holding a vote at the next group meeting for a new chairperson, letting the two Mamma’s know that their power is not guaranteed.  Finally, we hope to update the group’s five-year-old constitution, and make opening a rival business just cause for expulsion.ChangesIntern’s success year to year hasn’t always been as great as many individuals hope. This has largely been contributed to cultural differences, and the Mamma’s unwillingness to change.  But I have also found that a large reason is that many of the changes made are just changed again by the next set of students.  The biggest example of this is bookkeeping, with each new set of interns trying to change it in some way.  While there are many things I would have done differently from the start, I have to weigh any changes I want them to make against to likelihood that it will just do more harm then good.The biggest modification I hope to make is in regards to their pricing scheme.  Presently, there is no discount for buying larger amounts, and in many cases customers could buy multiple cups of the smaller sizes, and end up getting more yoghurt for less money.  The problem with this change is it’s not just the Mamma’s who have to adjust, but also their entire customer base (many of whom are quite used to taking advantage of the pricing, as the better value sizes sell much better).ExpansionWHE hopes to open a new kitchen in Mwanza in the near future, so working towards this goal has been taking up an increasing amount of our time.  We have recently met with a one new woman’s group, and plan to meet with one or two more, at which point we will decide who we think is most capable of running a kitchen efficiently and effectively. However,  before a group can begin operations, we will need to obtain start up funding to purchase the necessary equipment. To do this, we have been looking through different local, national, and international organizations that give money to like causes. We have found many potential grant opportunities, but most will take at least a couple months (at best) to receive, meaning we would have to leave the finishing touches to future interns. In our favour is that we are also looking for loans of little to no interest in the place of a grant.  Many times, when a group is given everything for free, they never understand the full value of what they have, and do not work as hard as then need to to be sustainable.  When the money needs to be paid back,  it lets them know that failure is a possibility, something we don’t think the Tukwamuane group has ever really felt. Read more at: http://jesseheadseast.blogspot.com/2010/07/walking-on-wrong-side-of-walk.html Featured Leaders 2010-07-23T18:46:23+00:00 http://www.iveyentrepreneur.ca/index.php/site/kinleigh_heads_east_t.i.a._-_this_is_africa/ http://www.iveyentrepreneur.ca/index.php/site/kinleigh_heads_east_t.i.a._-_this_is_africa/#When:17:01:43Z “We are currently trying to juggle the launch of our marketing campaign,  the competition problems between the two kitchens and compiling and   analyzing the data we collected from our market research project. We are   balancing all of this on top of the daily tasks associated with the   kitchens.” Kinleigh is one of four HBA students participating in the Ivey Heads East program working with a small yogurt business in Tanzania and   Kenya.KINLEIGH HEADS EAST These past three weeks have been a whirlwind of excitement, disappointment and a lot of hard work. We are currently trying to juggle the launch of our marketing campaign, the competition problems between the two kitchens and compiling and analyzing the data we collected from our market research project. We are balancing all of this on top of the daily tasks associated with the kitchens. The thing is that these projects could be completed efficiently and effectively back home in no time. However, this is not Canada. This is Africa and that minute detail changes everything. T.I.A.  has become our motto because culture plays a predominant role in everything we do. Everyday is an incredible learning experience and it’s going to be interesting to see what will happen over the next month and a half. Conducting our market research was an interesting experience as we interacted with locals on a more personal basis and we got a lot of insight into the needs and wants of consumers. We wanted to interview 200 people from Oyugis and surrounding towns where the yogurt mamas sell their yogurt.  The market research went well, especially with the aid of our translators, and now we have to compile and analyze the data. This is a substantial task seeing as the surveys are four pages of qualitative data. The end result will be worth it because the data will enable us to help the mamas increase sales and improve customer satisfaction. While we want sales to increase so that Fiti will be sustainable in the future, there are two other underlying motives. First, the mamas want higher wages, which relative to the number of hours they are contributing to the project every day, it is a fair request. Also, their current daily salary is barely enough to buy food to feed their family dinner that night. We told them that it is their decision to raise wages, but we had to explain that they must improve sales in order to cover the higher wages. They have really made an effort to increase their market presence and attendance at local events, as well as improving their customer service. It’s going to be interesting to see the results in a few weeks’ time. The second reason we want to increase sales is to support people suffering from HIV/AIDS who cannot afford to purchase the yogurt. This was the original purpose behind this project –  to empower women and support people suffering from HIV/AIDS through the nutritional benefits of probiotic yogurt. If the kitchens are able to earn profits after production expenses and wages have been factored in, we are hoping that they will be able to support more of these patients with free yogurt over the long-term. I have been approached by several former clients who were receiving free yogurt for a research study, but have since been cut off. Their friends and family say that the yogurt significantly improved their weight and strength,  but they have now lost all of that since they stopped taking the yogurt.  Yogurt is considered a luxury good here and most of these families cannot afford to pay 10Ksh for a bag of yogurt, which costs about $0.13 CAD. The reality of the situation is very sad, but we are hoping that our market research and marketing functions will increase sales and benefit the entire community. In order to increase awareness of the product, we are throwing a music festival. Everyone loves music here; it’s the heart and soul of this place. We decided to tap into this passion and throw a giant music festival. Throughout the music festival the mamas will be selling their yogurt, there will be dance competitions, yogurt chugging contests and other fun events to get the hype started about Fiti. Now that we have finally designed and branded the product, we are putting the logo on free t-shirts and head scarves, stamping it on to people’s hands and printing it on the yogurt bags. The entire town is going to be covered in Fiti writing by the end of the day! We were originally going to hold the festival on July 16th and after spending weeks organizing everything, we had to postpone the event three days before show time.  Turns out there was a ‘YES’ rally (supporting the upcoming constitution)  that day on the grounds that we had booked. We wanted everyone’s attention to be on Fiti that day so we made the decision to push it back to July 23rd, hopefully everything will go smoothly. Cultural differences have proven to be one of the largest challenges we face. Simple things that we would never have considered to be a problem are turning out to be the biggest road blocks. For example, we were promoting our event as a ‘music festival’  because we associated that with a complication of different musicians and artists playing for a large group of people. As it turns out,  ‘festival’ means competition here and we had people asking us what the final prize would be. We were also informed that we needed to handout individual invitations to people, otherwise they would not attend.  Unfortunately between the number of posters and invitations we have printed off, there is one less forest on this Earth. As a random side note, we were told to use porridge as glue for the posters –it’s like cement! I cannot imagine what it would do to your intestines. We are all hoping that everything will go as planned this week, but this is Africa, half the time you are left disappointed but the other half pleasantly surprised. Next week’s blog will hold the verdict… Read More: http://kinleighheadseast.blogspot.com/2010/07/tia.html Featured Leaders 2010-07-20T17:01:43+00:00 http://www.iveyentrepreneur.ca/index.php/site/run_fast._now_run_faster/ http://www.iveyentrepreneur.ca/index.php/site/run_fast._now_run_faster/#When:20:19:56Z Many hands make light work. Or so the old chestnut goes. But hiring those hands costs money—something that’s not always easy to come by in the business world. That’s the source of the dilemma in this month’s case. Ctar corp., a small firm,  has more work than its founders can handle. Problem is, they don’t yet have enough business to cover the cost of taking on staff. Should they hire anyway in hopes that business will increase? Or should they grow first? There’s no easy answer. When Your Business Starts Taking Off, You Should Hire Staff. But How Do You Know You Can Afford It? Many hands make light work. Or so the old chestnut goes. But hiring those hands costs money—something that’s not always easy to come by in the business world. That’s the source of the dilemma in this month’s case. Ctar corp., a small firm,  has more work than its founders can handle. Problem is, they don’t yet have enough business to cover the cost of taking on staff. Should they hire anyway in hopes that business will increase? Or should they grow first? There’s no easy answer. Tina Gokstorp and Stephanie McLarty needed help. That much was clear. Business was growing quickly at their four-year-old company—CTAR Corp., an asset-recovery service that enabled companies to resell, donate and recycle their surplus equipment —and the two founders were being run off their feet. Their work weeks had ballooned to 75 hours apiece, much of that time spent moving equipment from customers’ locations to third-party warehouses. Between that and finding buyers for the equipment, they faced a growing shortage of time to pursue new clients—a development that was starting to put severe restrictions on their ability to build the company. Clearly, they needed to start hiring employees so that they could delegate their workloads. But that wouldn’t be an easy step to take. Although CTAR was a growing company, it was still small.  Hiring at this stage would eat into its cash resources. Gokstorp and McLarty would even have to cut their own salaries to help cover costs,  and their salaries were already below market rates. True, taking on staff would give them time to focus on generating new business. But there was no guarantee when that business would materialize. If it took too long, the wait would be damaging to CTAR. Gokstorp and McLarty, friends who had both worked at a large telecommunications firm in southwestern Ontario before starting their business, came up with the idea for CTAR when Gokstorp was asked by her manager to dispose of some obsolete equipment. She started learning about the secondary market for used equipment and became intrigued. She brought in McLarty to help her with the project, who found it equally fascinating. They launched CTAR in 2006 and, over the next two years, built up an impressive client list. Not only did they help clients manage the whole process of recycling obsolete equipment, they also provided environmental reports on the amount of material recycled and reused. Gokstorp and McLarty kept the operation lean, outsourcing many of the transportation and storage services to a third party, then handling the balance of the operations between the two of them. But as CTAR grew, Gokstorp and McLarty noticed their reaction times to client inquiries were slowing and their ability to manage the volumes was becoming more of a challenge. By the end of 2009, it was clear they had reached a stage where they would have to start hiring. McLarty could see that an additional salesperson could increase the resale potential of equipment and be useful in helping CTAR manage more customer interactions. New markets outside of Canada could also be explored. But hiring a salesperson would mean that a salary would have to be paid—probably in the neighbourhood of $60,000 —and both owners wanted to preserve their equity in the company. They would also have to find time to train their new hire, which would distract them from work. For these reasons, putting off the decision to hire for six months seemed like a prudent measure. If they waited, Gokstorp and McLarty could focus their efforts on growing the business, which would offset the initial cost of hiring. They would also have time to approach potential investors for funding to support the hire and to determine if their business was truly scaleable. All of these were valid considerations, but Gokstorp and McLarty still faced the fact that CTAR’s operations were consuming the lion’s share of their waking hours. If they waited to make their hire, there were no guarantees they’d be any further ahead than they were now. For Gokstorp and McLarty, making a first hire was turning into one of the most challenging decisions they’d faced. THE EXPERT VIEW Don Cameron, Vice-president, WasteLESS Environmental Services Inc. CTAR’s founders are right to be concerned about hiring as they deal with the next phase of their growth: In business-to-business services the hiring decisions are critical. The direct expense is one issue, but if an employee fails to represent CTAR well in the marketplace, the brand could be damaged and CTAR’s ability to grow impaired. CTAR needs to define the role of the new hire. Sales are critical at this stage and that role may best be left to one of the founders. In any case, many of their large clients and prospects will want to deal with an owner/decision-maker. A new hire working in operations or customer service could relieve some of the work pressure. They would also come on board at a lower salary than a sales manager, which would reduce the financial impact. As Gokstorp and McLarty think about CTAR’s scaleability, they need to address their launch process for new clients.  Signing contracts now, but delaying or staging actual client launch,  will give time for the hiring and training process, not only now but also as the company expands its geographic reach. As long as any delay in launch is addressed early in the sales process, many prospective clients will agree to a staged launch of services. The training issues can be addressed in part by hiring from the industry or from related industries. With the recession, there is a great pool of talented people available, many of whom would enjoy the opportunity to work with a start-up. Some people will accept a lower wage to work for a smaller firm, especially if there is flexibility in hours and schedules. Finally, CTAR needs to be opportunistic in hiring. If they identify a great candidate who they feel will strongly fit the company well, then it could make sense to take the risk of hiring now,  before the business is fully on board to support the position. Just as it would be damaging to hire the wrong person, hiring the right person can be a catalyst for growth. CTAR is entering a great business space at a time when awareness about the environment has never been higher. Sustainability issues survived the cuts of the recession intact.  Companies that are offering real solutions to environmental problems can succeed. Dan Crook, Chief Executive Officer, Emperex Corporation CTAR must look at the underlying reasons and causes for expected continued growth and determine if it is realistic to expect same to continue. A pragmatic and realistic sales forecast is crucial in such decisions and many small-business people are consistently—and unjustifiably—optimistic when forecasting potential sales. I would caution CTAR against factoring international expansion as a justification in hiring a new salesperson. The key at this point is to focus on whether or not the potential business in the current territory justifies a new hire. I would question CTAR’s assumption that it would be able to find an investor to fund the hire. After three years in business, the two founders are not able to draw market salary. Venture capitalists will not touch a firm like CTAR. More traditional sources of investment would likewise be uninterested. To this end, CTAR will have to fund a hire itself unless friends or relatives are willing to advance funds. Given the employment situation in March 2009, CTAR could consider hiring a part-time employee with the goal of growing the position into a full-time one once business justified it. Murray Bryant was my professor for Managerial Accounting and Control in my Ivey EMBA course. He was adamant that “cash is king!” I agree. It appears that CTAR is strapped for cash. It needs to do a cash-flow analysis that takes into account: -  any lost revenue due to the founders having to interrupt sales efforts in order to train the new hire, - the ramp-up time required for the new hire to start bringing in sales, -  the impact of failing to meet sales forecasts, -  the expense of terminating an employee in Ontario and, -  the impact on cash flow. If it is determined that a shortfall in forecasted revenues after hiring a new employee would spell the end of CTAR, I would strongly advise against hiring at this time. THE OUTCOME Gokstorp And McLarty put off their hiring decision and looked at their options more creatively, particularly the idea of using government-funded training programs to test their theory at a subsidized cost. In 2010, they hired an intern originally from Latin America with telecommunications experience via the Enhanced Language Training program, which provides job-specific, advanced-level English training to new Canadians. With an extra pair of hands on board, 2010 is shaping up to be a great year for CTAR. ————- This case study was prepared by Financial Post Magazine and the Pierre L. Morrissette Institute for Entrepreneurship at the Richard Ivey School of Business (University of Western Ontario). The case method is a key learning tool in the cross-enterprise leadership approach used at Ivey. The views represented here are solely those of the case authors. Some details may have been changed to protect privacy. Mini Case Series 2010-07-15T20:19:56+00:00 http://www.iveyentrepreneur.ca/index.php/site/microfinance_a_means_to_eradicate_poverty_in_the_developing_world/ http://www.iveyentrepreneur.ca/index.php/site/microfinance_a_means_to_eradicate_poverty_in_the_developing_world/#When:19:58:04Z This week Kathleen looks at microfinance through progress with the Yogurt Project. “Microcredit has captured a lot of attention in recent years—often being referred to as a revolutionary mechanism for the developing world.  However, it hasn’t worked nearly as well in Africa as it has in parts of Asia.”KATHLEEN HEADS EAST Microcredit has captured a lot of attention in recent years—often being referred to as a revolutionary mechanism for the developing world. However, it hasn’t worked nearly as well in Africa as it has in parts of Asia. This has said to be in part because it is newer in Africa and the models haven’t been adjusted, or because populations are more rural and dispersed, or because the underlying economies are growing more slowly and so investment opportunities are fewer. Sub-Saharan Africa (SSA) has experienced slow economic growth over the past several years primarily due to its poor capital accumulation. Individuals do not commonly save their own money in Africa yielding a general dependence on public savings. This contrasts to Asia where private savings are critical.  Microfinance may not be the only solution but it can be an instrument used to promote much-needed private savings so as to generate sustainable economic growth. Micro-financing institutions could make capital accessible for the poor and more importantly, allow them to securely invest their savings so they can earn interest off of those deposits and make larger investment expenditures in the future. Microfinance also yields non-material benefits for its participants. It brings individuals to feel confident and self-empowered as they obtain the financial means to play a larger role in their development. The potential of microfinance far exceeds the micro level, scaling up to address macro problems associated with poverty eradication. This alone does not build roads, supply water and develop communities, but it is an essential means to achieving these things. Microloans come with very high interest rates, which sometimes places its participants in a worse situation than before. These small loans are extremely expensive, and so borrowers often pay annual interest rates of 20 to 30 %. This becomes an issue because when the money is not invested soundly, the borrower becomes stuck in mounting debts. MF is commonly thought of as small loans, but this sector provides access to savings accounts and insurance services that would not otherwise be accessible on account of economic and/or social status. Micro lending has proven itself to be a powerful system for helping people become self-sufficient. Ultimately, you are giving low-income people an opportunity to empower themselves by providing a means of saving money,  borrowing money and accessing insurance. Women constitute the vast majority of users of micro-credit and savings services. Interestingly enough, it has done more to bolster the status of women, and to protect them from abuse, than most laws have been able to accomplish (Half the Sky, Kristof & WuDunn). One reason why microloans are almost always made to women is because women tend to suffer the most from poverty. Mortality data shows that in famines and droughts, it is mostly girls who die, not boys. When Tanzania experiences extreme rainfall patterns, the numbers of unproductive old women killed for witchcraft doubles, compared to normal years. Other murders do not increase, only those of “witches”. This was found in a study done by an American development economist, Edward Miguel. Another reason is to place more monetary control in the hands of women. One early pair of studies found that when women hold assets or gain incomes, family money is more likely to be spent on nutrition, medicine, and housing and consequently children are healthier. In developing countries, females are a commonly marginalized group. If the family savings are in the woman’s name, and thus in her control, that gives her more heft in family decision-making. It is not just for anyone living below the poverty line, but also for segments of the poor population that are considered to be economically active. Those who carry out activities of their families, even if these revenues are low and precarious. Micro finance offers help to get them started by giving them access to financial services they are generally excluded from, and in ways that are suited to their economic and management skills. Micro financing is not a new concept. This idea of providing small microcredit has existed since the 1700s. The rate of payment default for loans is surprisingly low – more than 90 % of loans are repaid. It is not just a financing system, but a tool for social change, especially for women. MFI’s might also offer plus activities such as entrepreneurial and life skills training, and advice on topics such as health and nutrition, sanitation, improving living conditions, and the importance of educating children. http://kathleenheadseast.blogspot.com/2010/07/microfinance-progress-with-yogurt.html Featured Leaders 2010-07-15T19:58:04+00:00 http://www.iveyentrepreneur.ca/index.php/site/kathleen_talks_distribution_in_tanzania/ http://www.iveyentrepreneur.ca/index.php/site/kathleen_talks_distribution_in_tanzania/#When:16:07:43Z “Now that we are in the stage of developing the distribution segment of this business, we are trying to obtain a license to sell our product in various stores and restaurants. However, before we can do this we must have our product approved by the health authorities.” Kathleen is one of four HBA students participating in the Ivey Heads East program working with a small yogurt business in Tanzania and   Kenya.KATHLEEN HEADS EAST Last Monday was a big day for all those involved working with the kitchen.  SIDO –Small Industries Development Organization—came by for a scheduled inspection to check the general hygiene of the kitchen and its processes for making the yogurt. SIDO provides business services on demand to promote the development of private small enterprises. Now that we are in the stage of developing the distribution segment of this business, we are trying to obtain a license to sell our product in various stores and restaurants. However,  before we can do this we must have our product approved by the health authorities. We initially looked into obtaining approval from the TFDA –Tanzanian Food and Drugs Authority—but this proved to be more difficult than we anticipated. The TFDA deals with larger enterprises, so the kitchen fell short of meeting a few of its qualifications on account of its smaller size. We then sought out SIDO’s assistance in authorizing our product. We went to their office, explained Fiti Yogurt’s business model in conjunction with its social objectives in hopes of catching their interest to partake in this process. The meeting went well and they agreed to come to the production facilities and complete a health inspection. Once approved by SIDO, they will recommend our product to TBS – Tanzanian Board of Standards –so Fiti Yogurt can obtain a seal of approval. This behaves similarly to how an FDA approval would work in Canada. Once SIDO has a good understanding of the procedures they will write the Mammas a letter recommending them to the market. The meeting went very well on Monday and the inspectors seemed to enjoy our product. The Mammas had two fridges full of yogurt and were very enthusiastic when interacting with the company representatives. The inspectors were also pleased with the way the yogurt was being packed. We are waiting to speak with them again later this week to receive their feedback from the inspection. This last week Jesse and I focused our efforts on creating more accurate record keeping templates to document the kitchen’s yogurt production as they expand to grocery stores and additional markets. We will keep track of production rates over the next little while and look into creating growth charts for the women, so they can understand where existing production is relative to projected targets. This will assist the Mammas in running the kitchen as a business with targets, growth and planning. The Mammas are no longer running their side operation during the summer months –the breakfast kitchen—so we are hopeful they will be ready and motivated to commit themselves to growing sales and distribution of the yogurt. Right now they have one junior mamma selling 12 L per day in the main market downtown Mwanza. She sells out every day, illustrating an existing market for our product. However, the kitchen only had one portable tub to transport the yogurt and the women did not understand the need for external distribution as a fundamental component for upping our sales. The outcome of our meeting today was positive—everyone concluded that an emphasis should be put on getting our product out into the market so as to generate a brand name that resonates with different communities and increases our overall market share. We also have existing funds remaining from the Charity Ball Grant, so next week we begin subsidizing yogurt consumption for 25 people living with HIV/AIDS. On Wednesday we will be meeting with the Director of the Kivulini Women’s Rights Group to discuss getting other groups involved with the expansion of additional yogurt kitchens. We know there are several groups in the Mwanza region that are interested, so the more difficult aspect will be locating funds to get them up and running. We worked on a proposal for a grant donor—that supported the Touch foundation—looking for an entrepreneurial-based project in Mwanza, but they found another project. Locating start-up funds is quite difficult in Mwanza, so I have been looking into the option of applying for a loan from organizations that provide micro financing. The primary concept with micro financing lies within the initial group formation of the individuals applying. The composition of the people within the same group is very important as it determines how effectively each member can cater to his or her own needs. When applying in a group you also generate this pressure among the social collectors to pay off any debt—a mechanism that has proven to work quite well considering default rates are averaging well under 5 % in micro credit scenarios within the MF industry. Yesterday, I had a meeting with the Director of Catholic Relief Services in Mwanza to discuss microfinance in Africa. CRS is an American organization founded to assist the poor and disadvantaged outside of the country.  They operate in over 100 countries. Their Tanzanian offices focus on their AIDS Relief program. This program aims to provide high-quality antiretroviral therapy and other medical care to people living with HIV.  Majority of its funds come from the U.S President’s Emergency Plan for AIDS Relief (PEPFAR). We exchanged information about the project I am working on here and its viability as a candidate for microfinance. He has a lot of experience working in the micro finance industry so his insights were extremely valuable and greatly appreciated. Read more on Kathleen’s blog: http://kathleenheadseast.blogspot.com/ Featured Leaders 2010-06-25T16:07:43+00:00 http://www.iveyentrepreneur.ca/index.php/site/the_move_to_kenya/ http://www.iveyentrepreneur.ca/index.php/site/the_move_to_kenya/#When:16:16:03Z “My research is more interesting here in Kenya because there are two yogurt kitchens I get to work with.” Kinleigh is one of four HBA students participating in the Ivey Heads East program working with a small yogurt business in Tanzania and   Kenya.KINLEIGH HEADS EAST My research is more interesting here in Kenya because there are two yogurt kitchens I get to work with. There is one in Oyugis where we are currently living that was started up last summer and there is one in a town called Kadongo,  about a 20 minute bus ride away. While they were both started up by the same people, they are polar opposites. The Oyugis kitchen is composed of the Orande women’s group and has about 10 mamas working in both the kitchen and selling in the market. The Kadongo kitchen however is made up of 2 different women’s groups for a total of 24 women. This larger group of women has really helped them to increase their sales as more mamas venture out to sell the yogurt at their work, hospitals, schools and on the streets. These women are incredible sales people! Some of the issues we want to work out over the next few months pertain to incentives and motivation to work, compensation, pricing and marketing of the product.  We need to get the mamas from the Oyugis kitchen selling more yogurt in the market instead of waiting for clients to come to the kitchen, which will be challenging because they like the status quo. I have taken a special interest in the environmental impact of these yogurt kitchens as they each use about 400-500 plastic bags per day for packaging. The problem lies in the disposal of these plastic bags because there is little concern for the environment here. As of now, the kitchens dump their garbage, which includes everything from these plastic baggies to diapers to old utensils, into a pit in the ground. My goal is to create some kind of recycling program within the kitchens and hopefully establish a better system for garbage disposal. I want to perform an environmental impact assessment of both kitchens in hopes of determining their carbon output. One option is to establish a tree nursery to offset their carbon emissions and to even provide them with their own firewood. A big problem that we need to tackle is that of marketing. Very few people have heard about the product even though the mamas have been selling it for a year now. We have a few different ideas to generate awareness, but we have to carefully analyze the cultural implications of our more western-culture marketing techniques. We were just informed that the government has started a community dairy initiative where people can come from all around to deposit their milk at these dairy factories.  These buildings are sprouting up everywhere and we have about a year to establish a solid consumer base before these factories open up. This means that are marketing campaign has to be extremely effective and long-lasting. The list of things to do continues to grow everyday. I hope that by the end of this summer both kitchens are more successful and that we have made a lasting difference. Read more from Kinleigh at http://kinleighheadseast.blogspot.com/ 2010-06-21T16:16:03+00:00 http://www.iveyentrepreneur.ca/index.php/site/welcome_associate_professor_j._robert_rob_mitchell/ http://www.iveyentrepreneur.ca/index.php/site/welcome_associate_professor_j._robert_rob_mitchell/#When:20:56:26Z The Institute is delighted to welcome Associate Professor J. Robert (Rob) Mitchell to the entrepreneurship group.The Institute is delighted to welcome Associate Professor J. Robert (Rob) Mitchell to the entrepreneurship group. Rob comes to Ivey from the University of Oklahoma where he taught in the areas of entrepreneurship and strategy. Prior to this, he completed doctoral studies in entrepreneurship, with a minor in strategic management, at the Kelley School of Business in Bloomington, Indiana. Rob’s research interests bridge entrepreneurship and strategic management in that he studies how cognitive, environmental, and behavioral factors lead to the creation of new value. Prior to pursuing his Ph.D. at Indiana University, Professor Mitchell worked in a technology startup in Salt Lake City, Utah and was involved in emerging enterprise consulting in Victoria, British Columbia. Professor Mitchell’s research has been published or accepted for publication in Entrepreneurship Theory and Practice, Journal of Business Venturing, Strategic Entrepreneurship Journal and Strategic Management Journal. In addition to his research, Rob will be teaching Creativity & Opportunity Recognition (HBA) and New Venture Creation (HBA and MBA) commencing fall 2010. Community News 2010-06-15T20:56:26+00:00 http://www.iveyentrepreneur.ca/index.php/site/new_blogs_from_the_four_hba_students_in_tanzania/ http://www.iveyentrepreneur.ca/index.php/site/new_blogs_from_the_four_hba_students_in_tanzania/#When:17:14:38Z Thanks to the hard work of the previous interns, the kitchen has finalized a packaging for the yogurt and is ready to expand its product into the city’s market. Today, we have surveyed a couple supermarkets in town to gauge their interest on our product with the new package, but received mediocre response. However from that we now know what information the supermarkets are looking for and ways to pitch our product to the retailers. From Jackel’s blog: http://jackelheadseast.blogspot.com/ L to R: Kinleigh, Jesse, Jackel, Kathleen The project is slowly picking up pace. We recently videotaped the Mama’s weekly meeting and got caught up to date on the status of the project. It seems as though the project is progressing very smoothly. Each of the Mamas have assigned roles and an election is held once in a while for a new leader. The Mamas told us that there is a treasurer that does the bookkeeping of the business, but we have yet to see the records. Hopefully we will be able to see it soon to check the financial status of the business. Moreover, thanks to the hard work of the previous interns, the kitchen have finalize a packaging for the yogurt and ready to expand its product into the city’s market. Today, we have surveyed a couple supermarkets in town to gauge their interest on our product with the new package, but received mediocre response. However from that we now know what information the supermarkets are looking for and ways to pitch our product to the retailers. In addition, we’ve started interviewing the Mamas at the kitchen. We are glad to hear positive responses from the women group about the Western Heads East program. Most of the Mamas do recognize the hard work the interns have put in on their behalf, and they described the interns as being like their own daughters and sons. From Jackel’s blog: http://jackelheadseast.blogspot.com/     We conducted our first meeting with the Yogurt Mammas this past Monday and it went extremely well. The focus of the meeting was to teach the Mammas how to package and seal the yogurt containers with the new supplies and sealer machine recently purchased in Nairobi, Kenya. This meeting was viewed as a milestone in terms of progression for this venture. For the past several years the Mammas in conjunction with various interns have struggled to find proper packaging for yogurt distribution. The lack of packaging has held the women back from selling the yogurt in locations outside of the main production facility in Mabatini. The meeting ended with two of the Mammas successfully packaging two containers in their first attempt –leading to an eruption of clapping and cheering from everyone in the kitchen. We returned on Tuesday to perform some further research –narrowing in on personal testimonials from the women about the project. I am mesmerized by these women and how far they have come with this project. I am now beginning to understand how these types of projects simultaneously help people abroad and inspire and educate those contributing their efforts. There is no individual beneficiary in these types of situations. Two of the Mammas, when asked to recall their favorite moments with the development of the kitchen, spoke about the interns from Western. They exclaimed how excited they were when students arrived and how appreciative they were of the change Western Heads East brings them. The women strive to join the “yogurt production industry” and soon generate enough revenues to employ further women in efforts to empower even more Mammas. This illuminated that the women have minimal entitlement issues and want to help out their local communities as much as possible. The mammas’ eagerness to grow and begin mass-producing the probiotic yogurt was interesting. Expansion is not simply an objective listed on paper for this venture, but a personal goal held by the Tukwumuane Women’s Group as well. From Kathleen’s blog: http://kathleenheadseast.blogspot.com/ Read more from Kinleigh: http://kinleighheadseast.blogspot.com and Jesse: http://jesseheadseast.blogspot.com/ Featured Leaders 2010-06-14T17:14:38+00:00