The EQ Journal Blog

I sometimes bring Sens tickets and other giveaways to class or to speeches I give—people love FS (free stuff) and I love giving it away. Students work hard and don’t get much of a break. Plus they may not have a lot of surplus income so FS is welcome indeed.

Last week, Ted Wagstaff from Algonquin College and I gave a joint speech on Entrepreneurship and the Sports Business covering off six local cases: the Ottawa 67s, Mont Cascades and Pro Slide, Wilderness Tours and Mount Pakenham (done by moi) and Combat Sports (formerly Ballistik Hockey), Greco Lean and Fit and Ottawa Marathon done by Ted. My notes in PPT format are at: http://dramatispersonae.org/EntrepreneurshipAndTheSportsBusiness.ppt and Ted’s (in PDF format) are at: http://dramatispersonae.org/EntrepreneurshipAndTheSportsBusinessTedWagstaff.pdf).

To kick things off on the right note, I wanted to give away four tickets and a parking pass to Alicia Keys (actually performing tonight in Ottawa as I write this). How to do that in a public setting in an entertaining fashion but fast so as not to waste lecture time, allow us to finish on time and get everyone home to see the Canada Men’s Hockey team play arch rival, Russia (which Canada won 7-3).

In a smaller crowd, we usually just cut up pieces of paper, have the students write their names on them, put them in a hat and draw for a winner. That wasn’t going to work in this setting (a large hall in the beautiful and relatively new Desmarais building, part of the Telfer School of Management at the University of Ottawa.)

So here is the concept I developed about a ½ hour before the lecture:

1. Let’s play public hangman!
2. I drafted a student (Bailey) to play the role of Vanna.
3. Vanna drew the scaffold on the board and then this—
__ __ __ __ __ __ __
__ __ __ __ __ __ __ __ __ __

4. We explained the rules: you put up one hand, you get to guess a letter.
5. You put up two hands, you get to guess a letter and then the actual words.
6. The catch is, if you guess wrong, you’re out.
7. I was the MC selecting students and prompting them.
8. Bailey drew in the letters as they were correctly chosen or she drew a face, body, legs, etc. as the wrong guesses piled up. (This was really irrelevant since we intended to play until there was a winner so we would have added eyelashes, fingernails, etc. if necessary.)

But it wasn’t needed at all. The wisdom of the crowd soon solved the puzzle—we took perhaps six or seven guesses before the first person to raise both hands correctly guessed the answer: EASTERN CONFERENCE.

The whole exercise was done in less than two minutes, pretty efficient I think. We didn’t give any hints about category (despite being asked to do so) and we were right not to—if we had, the problem would have been solved in less than 45 seconds I am sure.

I don’t know if there is anything original about what we did, but it was fun, fast and somewhat relevant to the topic since I am a former hockey guy and I thought I would share the methodology with you. I think it would work even if you had 500 or 1,000 people in a room instead of 125.

Prof Bruce

The wonderful spectacle of the Vancouver Olympics inspired me this morning to return to a subject that has been a focus of mine since I read Carlos Casteneda’s The Yaqui Way of Knowledge in the 19070s—how to become an impeccable warrior. It’s not easy yet it is essential if you want to be a successful entrepreneur—most of whom bring incredible passion, focus and effort to their life’s work.

Here is a list of 20 elements that I put together in 2002 that can help you become an impeccable warrior.

1. Become an entrepreneur for the right reasons. Not to be your own boss but because you can: a) create more interesting things for you to do than other people can create for you to do, b) be a responsible person and take ownership over your own life and become an impeccable warrior, c) make more money than if you just had a JOB, d) help others as well.
2. Get the Business Model Right (http://www.eqjournalblog.com/?p=692) so the harder you work, the more money you make. Work smarter and harder.
3. Be someone other people can have trust in. We all make mistakes but make sure yours are errors of omission not errors of commission. One of the greatest compliments a person can receive is that: ‘he (or she) is the same person at home and in public.’ Atticus Finch, played by Gregory Peck in the 1962 film To Kill a Mockingbird, was that type of person.
4. Expect to work at least 60 hours each week. Personal success and professional success are hard work.
5. There is no such thing as overnight success—it takes at least 7 to 12 years to found a great enterprise. Reading about persons who have been successful in months is like reading about lottery winners: you can’t plan on winning the lottery so plan on taking years or perhaps decades to achieve success.
6. The world is a tough, competitive place and entrenched interests will not want you to succeed. So be ready to compete.
7. Commitment is important. So is focus. Don’t be a dilettante and flit from idea to idea—you’ll achieve nothing.
8. There is always some luck involved in success but the harder you work, the luckier you get.
9. Know when to quit/when something isn’t working, change to something new.
10. Lead by example and nurture your colleagues but never tolerate those who make the same mistake twice.
11. Entrepreneurship is an exercise in positivist thinking—if your partner or employees are negativists, dump them.
12. Entrepreneurship can be a lonely life. Embrace spirituality. Reach out to other entrepreneurs—there is comfort in knowing you are not alone in facing the challenges you do.
13. Find the right coach/mentor.
14. Manage your time efficiently so you can have some time with your family and friends too.
15. Don’t drink and think/don’t consume or use other substances.
16. Get regular exercise and watch your diet: less starches, less sugar, limited fruits, more green vegetables, more protein.
17. Complete your education. It is something you will always take with you.
18. Beware your fear of success**.
19. Surround yourself with positive people at home and at work.
20. The moral underpinnings of entrepreneurship are based on Adam Smith’s principal that your first duty to society is to ensure that you and your family do not become a burden on your fellow humans. So take care of your business so it can take care of your family and your family can take care of you.

Prof Bruce

**Fear of success is:

Most people have heard of fear of failure but fear of success, what is that? It’s counter intuitive and illogical but very real. Don’t let this happen to you.

Here is how it works:

1. “I won’t really work too hard on this project just in case it fails.” (The project then fails.)
2. “I wasn’t successful because I really didn’t work hard at it.”
3. “If I had worked hard at it, it would have been successful.”

This approach guarantees that: a) your ego is protected and b) that your project fails. Since it must result in failure, it must be that, logically, you sought failure not success in the first place. Therefore, you must have been more afraid of success than failure. Q.E.D.

To read more about What is Business Success and How to Achieve It?, please see: http://www.eqjournalblog.com/?p=630.

A lot of my students over the years have told me, as they get closer to graduation, that they’re going to leave our cold-weather city as soon as they get their degrees. Then they head to better weather places like Phoenix, South Florida, LA, San Jose, even TO and Vancouver. A few years later, I’ll hear a voice on the Sparks Street Mall or wherever and, sure enough, they’re back! Many foreign diplomats I have known over the years, after they retire, also tend to settle in this town and some of them hail from beautiful, exotic (warm) places. Why is that?

Here are the top ten reasons why I think Ottawa puts a ‘rubber band’ on people:

1. Ottawa is a (mostly) peaceful place. When I was campaigning to Bring Back the Senators, Mike Ilitch (owner of the Detroit Red Wings, Little Caesars and the Detroit Tigers and a good guy) asked me: “What’s the murder rate in Ottawa like?” I said: “About 8 to 12 people, Mike.” He asked: “A day?” “No Mike, that’s a year.” “We get that a day!”

2. We have a stable economy with lots of job opportunities in sectors as divergent as government/technology/health/services/tourism/real estate/education. Ottawa is a ‘get rich, slow’ type of place. Our economy doesn’t shoot up like some others but then again, it doesn’t often crater either. Even with disasters like the (unforgivable) meltdown of Nortel, companies like RIM have been hiring 5 software developers a day in Ottawa since November 2009. Why? RIM found that Ottawa was the place where they got the highest percentage of turndowns on offers they had extended to move away (to Waterloo) so they opened up shop here to take advantage of our skilled labour force.

3. You can live different lifestyles in Ottawa. Want to live in a mostly French-speaking community? Lots to choose from. Want to live an urban existence, sure, choose Westboro or the Glebe or the Byward Market or Centrepointe or … Want to live close to water? We have three enormous rivers running right through Ottawa-Gatineau and hundreds of lakes within 90 minutes. Want to live on the land and be independent? No problemo, there is an amazing amount of broad acres within the City limits: geographically, Ottawa is huge (way bigger than TO). Ottawa also has a clean environment, lots of providers of organic produce and a stake in green tech that is likely to get a lot bigger. If you like the outdoors, snow boarding, camping, hiking, canoeing, kite surfing, biking, sailing, it’s minutes away from your front door.

4. Ottawa doesn’t measure up in all areas of Richard Florida’s creativity index but it does enough. As a G8 capital, we have fabulous national institutions like the Canadian Museum of Civilization, the NAC, the War Museum and the recently revamped Canadian Museum of Nature. We have several privately-run theatre groups and dozens of festivals each year that are among the best in the world including Winterlude which is completing another mega successful year today as I write this. There is even the Ottawa Art Gallery where they house my family’s Group of Seven art collection.

5. Ottawa is an old (for North America) northern shelf city with some great architecture (and, of course, some crappy stuff too). When friends visit me from Australia, Europe or the US, they visit the Parliamentary Precinct, the Byward Market and artifacts like world heritage site, the Rideau Canal; they can’t believe what a fantastic place this is, compared to, say, Atlanta.

6. People miss friends and family when they move away. So they come back. Plus it’s a great place to bring up a family and the kids can go to cool schools like Canterbury High School for the Arts (where 4 of my 5 kids went.)

7. People miss the four seasons. If you’ve never experienced a tough Canadian winter, you can’t understand how much Ottawans treasure a warm, sunny summer day. They’re like plants: they stand there and face the sun as it goes down and photosynthesize the very last light beams with their eyes…

8. Ottawa is one of the most affordable places to live while still enjoying most of the creature comforts and creative enterprises that exist here. It’s affordable for first time homebuyers (try to buy a house in Vancouver, for example). It’s affordable for corporations too; they can hire great workers who are loyal and don’t job hop every two years.

9. Ottawa-Gatineau has a population of > 1.2 million people and when urban agglomerations get to that point, their city-state economies start to be self-generative. Add to that four great higher education institutions (U of O, Carleton, Algonquin and Université du Québec en Outaouais) and young people can now stay here and create world-class enterprises. We have 100s of not-for-profits in this City, more than 30,000 private corporations and more being created every week. You can become part of something bigger than yourself, part of a team that does great things. That will create powerful feelings of well being in a person. It’s addictive (people feel special just for having toughed out an Ottawa winter) and will bring you back if you ever leave. It did that for me (I spent seven years in Oz which I also loved.)

10. It’s home to the Ottawa Senators.

Prof Bruce

ps. to see how your city measures up, see how many urban catalysts (and anti-catalysts) are active in the community: http://www.dramatispersonae.org/Catalysts.htm.

pps. to better understand how the Sens helped build Ottawa, refer to: http://www.eqjournalblog.com/?p=35.

ppps. lastly, in 2003 in a speech for the Kiwanis Club, I wrote about 21 conditions for economic takeoff; read more at: http://www.dramatispersonae.org/KiwanisEntrepreneurshipAndSustainability.pdf.

I recently gave a training seminar at Scotiabank Place with Trevor Wilkins (of Holis.ca) on this subject. We covered:

• Do you want to learn how to really make people want to buy from you?

• Do you want to learn negative cost selling?

• Are you in the solution selling business?

• Do you know how to get on the ‘same side of the table’ as your customers and clients?

• Do you know how to think in terms of 2-D and 3-D business models so that you can not only take care of your clients but your clients’ clients too?

The reason we did a seminar outside of (say) the Telfer School of Management (where I work as the Entrepreneur-in-Residence) is that most universities (maybe all of them) are not ready for a course in HOW TO SELL. But the point was, if you can’t sell your ideas, your employees, your BOD, your suppliers and, of course, your clients and customers, you can’t be a Founder, entrepreneur or CEO.

Selling is a very creative process (or it can be) involving many different disciplines plus it can be a huge source of change and innovation since your salespeople are on the front lines (where your CEO should be too) and will pick up all kinds of hints from your stakeholder group on features they want to see in your products and services. Product Managers should be deeply involved in the sales process: they will find inspiration from client contact that is not available anywhere else.

The objectives of our seminar were to understand:

1. The power of the brand: how marketing leads to greater brand recognition which leads to greater trust which leads to sales.

2. ‘Intricate’ your clients: create a business ecosystem and secure your place in it on a sustainable basis for the long term.

3. Solution selling: learn how to ‘sit on the same side of the table as your clients’ and provide solutions, not problems, for them.

4. Negative cost selling: understand your clients’ businesses almost as well as they do. Demonstrate your value proposition by showing your clients (using a spreadsheet) how your product or service will either lower their costs or raise their revenues (or do both) by more than the cost of your services so that they are, in effect, experiencing a negative cost. That is, you can show your clients ‘how you will pay them to hire you!’

You can download my lecture notes as a Word Doc using the following link to read up further on the above: http://dramatispersonae.org/TurnSellingIntoBuyingTakeaway.doc.

If you don’t think that sales is a sine qua non in any enterprise, just think about this for a minute. Say, you are a Product Manager at Cisco. You wake up at 3 am with a super idea and you write a few notes so you won’t forget your brainstorm. The next day you go in to see your boss and tell her: “I have this great idea for a new product or service… It’ll take two years of R&D at a cost of $10 million but the potential market is huge.”

Your boss says: “That’s really interesting. Build a business model, do a biz plan, work up some revenue numbers, get some market research done and then come back and see me. If I still like it, I will take to the Director. If he likes, we can take it to the Vice President and if it passes that test, we get to take it to the CTO. After that, we still have to tackle our CEO and BOD.”

Your shoulders hunched, you walk away thinking this is going to take a long time before you get the green light.

Meanwhile, one of your peers has also approached your boss. She said: “I have this great idea for a new product or service… It’ll take two years of R&D at a cost of $10 million but I got four strategic partners to each pitch in $2.5 million and they are willing to be our launch clients too and take the first 18 months of production plus the potential market is huge.”

She is using a negative cost selling model on her boss and she is an intrapreneur. She has the full skill set* of an entrepreneur but she is applying them within a large established organization.

(* Do you want an employee who has the skill set of an entrepreneur? Do you want someone who can: take initiative, doesn’t need a lot of direction, is innovative, can do everything in parallel, will find launch clients, knows how to build cashflow, understands the value of a client and customer, will use bootstrap capital, can sell/sell/sell, knows how to use guerrilla marketing and social marketing to build the brand and capture market share at a reasonable cost, is not afraid to try new things, understands negative cost selling, knows how to build a sustainable business model with a lot of ‘pixie dust’ in it, can set goals and achieve them, is dynamic and has high energy, can create a business plan and be ready to change it when the market moves in sudden and unexpected directions?)

Now whose project is more likely to get the go ahead, which project is going to launch first and which person is going to be promoted first?

There is nothing more rewarding in your professional life than working on a project you had a hand in initiating and creating. To be there at the first glimmer of an idea, to help it grow and develop, to see it launched into the world, to see it successful and meeting real needs and helping people to achieve their goals—that’s what I mean by being a self-actualized human being. And a self-actualized person is a highly-motivated, serene, confident person who is terrific to have around.

I have hung out with NHL coaches and they are all, to a man, self-actualized people. They make everyone around them feel special; they make everyone around them feel like they are part of something bigger than themselves. They make everyone around them better at what they do. They put round pegs in round holes and square pegs in square holes and they tell you it’s OK if you are a square peg—they have a place and role for you.

That is the essence of leadership and it is an ingredient missing in many working lives. Here is hoping that you will have people like this in your life and that you will be one of those people too.

Prof Bruce

Recently, I had a chance to sit down with a former student and look at the deal structure he was planning to put in place with two partners to open a new restaurant franchise in Baltimore. They needed to raise $1.8 million, part of it debt, part of it equity. They wanted to start with a LTV (Loan to Value) ratio of 50/50 so that meant they needed to raise $900k in equity. They had already secured (via a long term lease) an excellent downtown location and a bank loan for $900,000, contingent on raising the balance in the form of equity.

Each of the other two wealthy partners were prepared to put in $400,000 and Bill (not his real name—other facts have also been changed to protect the identity of the individuals involved) had saved $70,000 of his own money and secured a soft capital loan from his aunt for the remaining $30k.

This would give each outside partner 44.4% of the business and Bill, 11.1%. The trouble was Bill, although still young (just 29), was the only partner with experience actually managing a pub. So he was expecting to put in the most hours operating the new franchise and yet he had a tiny share in the enterprise. To assist him, the other partners were willing to enter into a shareholder agreement that would let Bill buy more equity over time (to get him to a 20% share eventually) using a complicated formula based on the FMV of the shares less a certain percentage.

What I suggested instead was that they all go in as equal partners—1/3 each right, from the get go. Bill’s concern was, of course: “Where will I get $300,000? I put everything I own on the table just to get to $100k.”

The answer is that you can often capitalize a business (or your share in it in this case) right from the deal flow itself. It’s easy!

I told Bill: “What you’re going to do is ask your partners to each loan you $100,000 for seven years and you’ll agree to pay them interest at 6.5% p.a. But for the first two years, while you’re building the business, there won’t be any principal or interest payments—interest will be capitalized. Then over the last five years, you’ll pay monthly principal and interest to them.”

Bill’s next question was: “Why would they agree to that?” Here’s why:

1. Bill is in possession of asymmetric information—he is the only skilled operator amongst the group and they need him. His partners should not even think about going into this business with no experience—they’ll get eaten alive by the competition. Bill has leverage he didn’t even realize.
2. In many ways, his partners are better off by lending Bill their money to become an equal partner. A happy managing partner is a productive one. Plus they will have a Bill deeply ‘intricated’ into the business—he is on the hook personally for one third of the loan from the Bank and he owes them personally $100k each. That means, if the business goes broke, their risk capital has been reduced by $100,000 each—because Bill still has to pay it back using his own resources, which means he’ll have to go get a JOB to repay the loans.
3. They are making a return on their capital (6.5%) which isn’t particularly great but for two middle aged investors, it’s still better than most of their IRAs and other investments are paying (from 3.15% to 6%).

From Bill’s point of view, this solution is elegant because, based on his cashflow projections, he will never actually have to pay these loans back himself. Huh? That’s because Bill estimates, based on his experience, that the franchise will produce a reliable stream of free cashflow of ~ $325,000 annually from year 3 to year 7. Bill’s share of free cashflow is one third or $108,333 less what he has to repay to his partners over the five years from year 3 to 7 ($54,383 annually). So his actual distribution is a net of $53,949 per year. So the business is actually repaying his partners, not Bill.

During that period, Bill is still seeing a great ROE: he is receiving nearly $54,000 a year from the biz on his actual out of pocket investment of $100k or nearly a 54% p.a. rate of return. After he pays off his two partner loans, his ROE (in year eight) jumps to over 108% p.a.

So Bill has, in part, bootstrapped himself to a one third ownership position in a valuable concession by looking for capital in the deal flow itself. He is on his way to becoming wealthy—he will have created an ‘annuity’ for himself—reliable, reproducible, recurring cashflow produced by an asset he owns or controls.

Prof Bruce

Postscript 1: Many student entrepreneurs, when they are building their PBSs (Personal Balance Sheets), forget to add their equity and sweat equity. Just as Bill should not forget that he has leverage based on him being the only partner to actually have experience in this business, he should also show on his PBS (in addition to his cash investment of $100,000), the SE (Sweat Equity) he has created. To do that is easy. If we use a capitalization rate of 9% (a pretty typical rate for this type of franchise and location), Bill’s share of the business can be valued at $1.2 million after year 7 (when he has retired the partner loans). After deducting the initial $100k outlay, Bill will have created about $1.1 million in value through his own efforts after just seven years. It’s hard to save your way to wealth (hardly anyone can actually do that) but you can invest your way there as Bill plans to do.

[You can see all the numbers in the spreadsheet below or you can download it from our server in .xls format at: http://www.eqjournalblog.com/DealStructure.xls.]

Postscript 2: I was involved in a transaction like this at about the same age. I had no money but wanted to buy a 62 acre piece of industrial land in Kanata (a western suburb of Ottawa).

The Canadian economy was in a tough recession and, as a famous Frenchman once said (Baron Rothschild in 1871): “Buy (real estate) when there’s blood in the streets.” This is easier to say than do because: a) people tend to run in herds—there is tremendous psychological pressure to sell when everyone else is selling and buy whenever everyone else is buying, b) Banks won’t lend you any money when times are tough—they too are subject to herd pressures—so financing dries up. The answer? Bootstrap it!

I had the opportunity to buy the property for just 15 cents per sq. ft.—a price that hadn’t been seen in Ottawa since the Great Depression. The landowner, who was in trouble, was willing to finance half of the transaction for a period of three years. The balance I would have to find in cash. That meant I needed more than $200k to close.

I managed to find two wealthy investors, each willing to put up one third and to lend me one sixth. They wanted 8.5% interest on their loans but were willing to capitalize their interest for three years. Again, they were willing to help me because they needed me—I was in possession of asymmetric information and skills. They need me to find the land, negotiate its purchase, put Seller Take Back financing in place and then find a Buyer when the markets and the economy came back a few years later.

We bought the land for just over $400k and, luckily for us, less than three years later both tech and the land markets bounced back, we sold the property for about 90 cents per sq. ft. or ~ $2.43 million. Each partner received their one third share (plus principal and interest in the case of my two outside partners and one third less principal and interest, in my case).

[All the numbers are shown below or you can download the spreadsheet from the link provided above.]

This example demonstrates a few things about deal structure, deal flow and bootstrapping yourself:

1. Bootstrapping often involves an early stage of trading—where you trade in whatever markets you have some knowledge and expertise, gaining advantage from asymmetry. You need to generate ‘table stakes’ and many entrepreneurs start this way. You have to watch it—if you keep flipping assets, you eventually will “flip ‘til you flop” so you have to know when to stop and build and hold instead.
2. Bootstrapping also involves looking for finance in the deal flow—in this example, I used two sources—the original owner loaned us half the purchase price and my partners financed me.
3. I was able to use a form of NCS (Negative Cost Selling) on the partners by showing them what I thought the deal would look like. I used a spreadsheet much like the one below except I felt a seven year period was more appropriate—land cycles tend to be five to seven years in Ottawa and I just felt more comfortable showing a lower return and a longer payout. The fact that there was a payout in just under three years was a bonus. The original pitch was that they by investing $100k each, they would see a return of $650,000 after seven years, an IRR of 30.7% p.a. Their cost of investing? A negative $550,000! I also realized you can bootstrap finance this way: NCS is the basis upon which they could borrow from their future earnings to finance me today. They agreed.
4. Lastly, don’t cry for the original owner—he inherited the land for free from his family. Don’t shed any tears for the tech company who bought the land—in the years since they bought it from us, it has gone from 90 cents per sq. ft. to $8.00! And think how well the two co-investors did. They each put up about $100k (including the amount they loaned me to buy my share). Less than three years later, they got each got a cheque for $785,000. This represents an IRR (Internal Rate of Return) of 97.9% p.a., a heck of a lot better than a GIC from their Bank which today pays around 3.15%. Of course, my IRR is infinite since I had no money at all invested. Still I can’t gloat—all that money (and a lot more) went into the Ottawa Senators, where it remains to this day—only problem is, the team is owned by someone else!

Spreadsheet:

Feb. 14, 2010 Deal Structure: Bill and the Restaurant Franchise

Deal A

Capital Required $1,800,000
LTV Ratio 50%
Debt $900,000
Equity $900,000
Partner A $400,000 44.444%
Partner B $400,000 44.444%
Bill $100,000 11.111%
100.000%

Deal B

Capital Required $1,800,000
LTV Ratio 50%
Debt $900,000
Equity $900,000
Partner A $300,000.000 33.333%
Partner B $300,000.000 33.333%
Bill $300,000.000 33.333%
100.000%
Loan from Partner A $100,000.00
Loan from Partner B $100,000.00
Bill Borrows from A and B $200,000.00
Term 7 years
Interest Capitalized 2 years
Balance of Term 5 years
Interest rate 6.50%
Amount of Interest Capitalized $13,000.00 year 1
$13,000.00 year 2
Principal Owing after Year 2 $226,000.00
Repayment to A and B ($4,531.95) monthly
($54,383.41) annually

Expected Cashflow from Operations $325,000 annually from year 3 to 7
Bill’s Share of Cashflow $108,333.33
less amount paid to A and B ($54,383.41)
Bill’s Net Share of Cashflow $53,949.93

Bill’s Equity $100,000
Bill’s ROE 53.9% p.a. from year 3 to 7
Bill’s ROE 108.3% p.a. after year 7

Capitalization Rate 9.00%
Bill’s Share of the Business Valued at $1,203,703.70 after year 7

Bill’s Sweat Equity Valued at $1,103,703.70 after year 7

Deal Structure: Land Transaction, Kanata ON

Area 62 acres
43,560 sq. ft. per acre
2,700,720 sq. ft.
Price $0.15 per sq. ft.
$405,108.00
Seller Take Back $202,554.00 50%
Term 3 years
Interest 0%
Equity Required $202,554.00
Partner M $67,518.00 33.333%
Partner N $67,518.00 33.333%
BMF $67,518.00 33.333%
100.000%

Loan from Partner M $33,759.00
loan from Partner N $33,759.00
Term 3 years
Interest 8.50%
Interest Capitalized $5,739.03 annually
$17,217.09 over 3 years

Sale Price $0.90 per sq. ft.
$2,430,648.00
Less Amount Owing to Original Landowner ($202,554.00)
Net to Partners $2,228,094.00

Distribution to M $785,065.54
Distribution to N $785,065.54
Distribution to BMF $657,962.91 $2,228,094.00 check

IRR (Partner M or N)

0 ($101,277.00)
1 0
2 0
3 $785,065.54

IRR 97.9% p.a.

New initiatives to help our City develop don’t always have to involve heroic measures like getting major projects such as Lansdowne Live approved. There are more prosaic things that our City can do that could have a significant impact on our city-state economy.

A few years ago, I worked in the south end of Ottawa for a successful local tech company and pretty much each day I would pass this sign on Prince of Wales:

Not a very impressive welcome for some of the more than 5,000,000 tourists who visit Ottawa each year. This got me thinking about directional signage.

If you are operating a major tourist destination like Disney World or Granville Island, you need to be thinking about way-finding signage and I don’t just mean once you have arrived on site. I think we should be thinking of Ottawa-Gatineau as one entity that we are marketing to Canadians and the world.

I remember, before amalgamation of Ottawa’s 11 municipalities and regional government into one city, being chided by friends from Toronto who upon leaving Scotiabank Place to return to their downtown hotels after a Sens-Leafs game would see a west-facing sign on Highway 417 that said: “Welcome to Ottawa, Population 325,000”. This was at a time when Ottawa-Gatineau’s population was actually 1.1 million (it’s now about 1.2 million). “Why in the world, Firestone, would you ever put a NHL team in a town with 325,000 people?” I would be asked.

Now this isn’t just an issue for visitors or media from out of town—getting the right information out there about Canada’s Capital City is important to people who live here too.

I recently gave the keynote speech at an entrepreneurship conference in Halifax. They are in tough—at any one time, 40,000 students (many from out of Province) are enrolled at colleges and universities in Nova Scotia (the highest density of tertiary students in Canada) but they lose 45,000 young people to other jurisdictions over a four year period. Exporting talented, well-educated people is a huge drain on Nova Scotia—as a result they have the oldest demographics in Canada and it is aging fast.

My thought was that it was very important for people who live here to know that we have a metro population in excess of one million and that, partly as a result, you can stay in Ottawa and create world-class enterprises. I would guess if you did a poll of young people between 15 and 25, who live in Ottawa-Gatineau, fewer than a third of them could correctly guess how big our urban agglomeration has become.

I want young entrepreneurs that I teach and others like them to stay here after they graduate and not move down the road to TO or other larger cities.

There are seven main engines for growth in Ottawa (Government, Technology, Tourism, Health, Education, Real Estate and Entrepreneurship) of which four appear to be doing fine and three (Technology, Tourism and Entrepreneurship) could stand to see some improvement. I proposed a number of years ago, that we erect large scale signs like that shown below at key nodes 50 km and 100 km from Ottawa as well as inside the city. This would help tourism but also entrepreneurship and tech.

Some locations I had in mind included:

1. Scotiabank Place.
2. East end—Highways 417 and 174.
4. South end—Highways 416 and 16.
6. Intersection of Highway 416 and 401—east bound.
7. Intersection of Highway 416 and 401—west bound.
8. Interstate Highway 81.
9. South end—Highway 31.
10. Sparks Street.
11. By-ward market.
12. Quebec Highways (174, 50 and 5).
13. Highway 7 towards Carleton Place.
14. West end of Highway 417 towards Arnprior.
15. Ottawa International Airport.
16. Ottawa Convention Centre.

Some of the locations are in-town like the Sparks Street Mall. This is obviously for educational purposes not way-finding…

My hope was to create something really striking featuring: a red maple leaf, NRC time, Environment Canada weather and a Stats Canada population counter for Ottawa-Gatineau and for Canada. As a former Vice-Chair of CIRA (the Canadian Internet Registry Authority), I thought to maybe add a real time dot-CA counter too—Canada’s land grab on the Internet is an important way of building Canada’s brand in virtual space. This would be another way to get more people to at least think about using the dot-CA as opposed to a US-based dot-COM.

Now these 10 to 15 metre-high signs are not inexpensive so I also added an activision component that could support the whole enterprise without government funding. Sponsors would appear on the signs and pay for that time but the signs could also be used to promote festivals like Winterlude, the Dragon Boat Festival, Hope Beach Volleyball … Events and attractions at the NAC, Canadian Museum of Civilization, War Museum, Canadian Art Gallery, the OAG, SBP and so forth could also be featured.

We have organizations here in Ottawa that have access to sponsors who could sustain an effort like this. We also have other organizations whose responsibility it is to get initiatives like this off the ground. Carpe Diem.

Professor Bruce M. Firestone, Entrepreneur-in-Residence, Telfer School of Management, University of Ottawa, Founder, Ottawa Senators, Executive Director, Exploriem.org, Broker, Partners Advantage GMAC.

Guest Blog by Scott Annan of mercurygrove.com

In early 2000, just recently out of school, I was recruited by a fortune-500 manufacturing company and worked for them for six years. During that time, I progressed from a business analyst role in the European e-business group to a leadership role in the corporate headquarters as Global Director of sales and marketing systems with over 50 people reporting to me, a $15 million budget, reporting to the CIO and the EVP of worldwide marketing with frequent presentations to the Board of Directors, in the executive development program plus I was earning well over a 6-figure income. I was 28 at the time.

In retrospect, there were three core principles that I applied to become a successful intrapreneur:

1. Vision: constantly presenting new opportunities to management and volunteering to lead new projects;
2. Execution: putting value creation ahead of cost reduction;
3. Passion: upholding the core belief that “we can do and achieve more”.

I’m not sure if people at in the company would have described me as a “visionary” or as a “zealot”. When I had convinced myself about a new project or opportunity, I would spend days putting together a workable plan that outlined my vision, its ROI and a plan to show how it could be executed.

I ensured that I covered all the information that was necessary to get the project off the ground including case studies, financial models, potential concerns and how we could solve those. I would anticipate questions management would have and be prepared to with answers.

Then I would mount a campaign to get in front of the right people whose endorsement or support the project would need. I never thought: “This isn’t really in my department or responsibility or beyond my current scope”. If it was a good idea that had great potential, I would work hard at developing it and seeing it come to life – sometimes without the approval of management. It was my belief (and it still is) that nobody gets fired for working hard to do the right thing for the company.

I would also volunteer to lead these projects. This was important to me and I was able to accept both praise if things went well and criticism if things didn’t work out. As one colleague once put it to me: “Management is constantly give you just enough rope – to either make a success of or hang yourself.”

Many of my colleagues focused a great deal of their time on the cost side of projects (which I have found is a typical corporate focus) but what I learned was that a big corporation shouldn’t care about their costs, they should care about creating value – and, of course, adding to their bottom line.

There is a big difference between cost controls and investing and I always looked to ensure that the money being spent on my projects was an investment, not a cost. Several times I overspent my budget, but I was able to demonstrate a great return on the investment and a much better outcome for the company so I ‘got away with it.’

I always believed in trying to achieve the best outcome for the corporation. In every meeting, I would question whether the current direction was the absolute best decision – no matter whose idea it was. This is a difficult and often unpopular thing to do.

Corporations rely on hierarchy and well-orchestrated teamwork. Many employees and managers feel threatened when people ‘push back’ on entrenched business methods and it is hard for people not to take criticism personally. It does not take long for co-workers or managers to start labeling you as a troublemaker and disruptive to the team. Still, I always questioned and promoted what I thought was the best idea. For me it wasn’t a matter of pride but it was part of generating enthusiasm and commitment to the work we were doing. I couldn’t accept working for a company that wasn’t trying to achieve great things.

I wasn’t working for money or promotions but these were byproducts of the intrapreneurial approach I took. I thought of the business as if it were my own and management could tell.

I also wanted to learn new skills. After working in five different departments and two countries, I ultimately left because my pace of learning had slowed. Much like being an entrepreneur, an intrapreneur is constantly searching for new opportunities, often working against the ‘status quo’ and is potentially a difficult to fit inside a corporation unless they have a culture that tolerates and encourages innovation and change. Still, intrapreneurs are highly sought after and rewarded by corporate executives who realize that companies run on passion, creativity and hard work.

Scott Annan
mercurygrove.com
613-680-1458
Blog: mercurygrove.com/blog
Twitter: scottannan

Postscript: To read a bit more about the entrepreneur’s skill set and the subject ‘Can you hire an entrepreneur to work within your corporation’, refer to: http://www.eqjournalblog.com/?p=408. Prof Bruce

Many people feel today that you have integrated social media into your Biz Model because you happen to have a Facebook group or you are on Twitter or you have a blog. To me, this is outbound social media and it is a bit hum drum today. After all, anybody can do it. The air of novelty quickly wore off.

Now it’s true that Facebook et al are ways to (perhaps) get your message out quickly and inexpensively (disclosure: I use all three tools and like them) but the use of the relational data base which was the precursor of social media is, in many ways, far more meaningful for an enterprise and its business model.

For example, Jeff Bezos, Founder of Amazon.com, said one of their most important innovations and one that helped Amazon finally become profitable was the introduction of a seemingly simple question: “Would you like to see what other people who bought this (book, CD, DVD, etc.) also bought?” As a result, the average order size increased substantially for Amazon and the utility of the site increased significantly for users.

Any researcher, say, wanting to build a bibliography, could easily go to the Amazon.com site and see (for free) what other texts were bought by people who had bought books that already appear in his or her bibliography. In effect, the researcher could borrow the brain power of Amazon users to extend his or her own—they were exploiting the wisdom of the crowd.

Who would have thought that a simple URL shortener like www.bit.ly could integrate social media (as I am using the term here) into their biz model—and they do it in two ways. First, any user (you don’t even have to create a user account— bit.ly automatically recognizes your IP address) can see how many clicks have taken place on each link they have created, including individual ones used for, say, an individual client (perhaps even to check on whether the client actually bothered to click on a link you previously sent to them. Thanks to a student of mine for pointing this devious application out.)

Plus you can see what links are being created on bit.ly that are the most popular—i.e., you can find out what the latest trends are before practically anyone else just by looking at what links are being created, how many people are clicking on them and where they will take you.

And by keeping track of all the links that you personally have ever created on bit.ly (you can see them all at a glance—where they link to and how many people have clicked on them since their creation by you), bit.ly keeps their users locked in to a site that otherwise could be easily knocked-off by a competitor.

Can you see a way to integrate the wisdom of the crowd/social media aspects into the core of your biz model; that is, can you harness the data you are generating from your website and your operations to extend your firm’s utility for clients and suppliers as well as for your enterprise?

Let me give you another example. Users of Multiple Listing Services in the US and Canada find these websites difficult to navigate and understand—their user experience is somewhat lacking to be sure. But can you imagine the increase in utility that would be possible if we simply asked Jeff Bezo’s question on MLS.com or MLS.ca: “Would you like to see what other listings people who have looked at this one have also looked at?”

Prof Bruce

Earlier this season, the Ottawa Senators were having some trouble filling their building after years of sell-outs and near sellouts. The causes? Well, the performance of the team (missing the playoffs the previous season and being swept in the first round the year before by the Pens) is obviously a factor. The downturn in the national economy and US economy as well as relentless bad news on CNN also had an effect even though the Ottawa economy itself is isolated in part by the large presence of the national government here. Another factor influencing attendance is the on-going issue of civil servants not being able to accept complimentary tickets—the concern is that they might be unduly influenced by such largesse.

As a result, the Ottawa market (of 1.2 million people in Ottawa-Gatineau and 1.7 million within 60 minutes drive time of Scotiabank Place) is actually quite a bit smaller than the numbers would suggest because you can deduct more than 100,000 people employed in government.

Having said all this, only one team can win the Stanley Cup each year and if Ottawa were to win it on a pro rata basis, the team would only be a winner once every 30 years. Meanwhile, you still have to fill your building.

How do you do that? Negative cost selling can help.

Most pro teams sell their tickets on the basis of it being some type of beauty contest. “Look at our great players!” “How about our beautiful building!” “Did you know you can escape our parking lot in just 25 minutes!” “What a great logo we have and our merchandise, my, my!”
Or they try to guilt or bully you into buying a ticket: “If you don’t buy a ticket, the team will move!” “What kind of a person are you, don’t you have any civic pride?”

But remember, negative cost selling is about understanding your clients business almost as well as they do. Actually, what you want is to understand that plus your clients’ clients’ business almost as well as they do. And you want to be able to put all of that down in black and white, preferably in a spreadsheet that proves you can make money for your clients (by increasing their revenues or reducing their costs or doing both such that higher revenues and lower costs more than offset the cost of buying your product, in this case, tickets, sponsorship, suites or signage…)

I did a sketch (see below) of some examples of negative cost selling that the Sens (or any pro team) could use.

Let’s say Jay is a salesperson for the Sens and he is going to drop in on the woman (Dilys) who sourced the mortgage for the home he bought last year. This is a warm call—he already has a business relationship with Dilys and her firm. In fact, this will be a form of reverse selling—why shouldn’t the people you buy from, buy from you?

The answer is NOT that they should buy from you because they sold to you; the correct answer is that they should buy from you because you have a compelling value proposition and you can demonstrate it. The fact that you already have a relationship with them is a plus as is the fact that you know and have learned a great deal about their business (and their clients too). These factors help you get in the door but they don’t close the deal for you—negative cost selling does that.

I show what a negative cost selling approach looks like below and I also provide a link so you can download the spreadsheet. Based on this analysis, Jay, would be able to say to Dilys:

a. “I want you to think about investing in Sens tickets this year and next and making it an integral part of your marketing program.
b. Every homeowner that sources a mortgage through you, is going to get a pair of tickets to a Sens game!
c. The cost to you for two tickets to every regular season home game will be $55 less a 15% discount since you are making a 2-year commitment. [Note: Jay really wants at least a 2-year commitment. He knows that if he only gets a 1-year term on this deal, he’ll forever be doomed to the role of a baseball player—he will have to hit 40 homeruns each season and be subject to the ‘what have you done for me lately’ syndrome from the team. Instead, getting 2-year commitment from his clients (or longer if he can) means that Jay can really build a sustainable business for the long term. And like all good salespeople, he thinks of his sales efforts as his own business since he is earning a commission on top of his salary. He views the team as one of his suppliers!]
d. You are currently spending about $2,945 per year on marketing—if you divert 40% of that to the Sens, your marketing budget is going to increase by about $2,655 but here’s the good news. If you get just two more clients per year, you’ll break even and most of my other clients in this industry are finding that they are generating five or more clients per annum.
e. That means for an extra investment of $2,655 in each of the next two years, you’ll make an additional $6,695 per year or a total of $13,385.
f. Your net cash gain will be nearly $8,075 over that period. This represents a ROI of 152% per annum—a lot better than what you get from your Bank these days on your GICs (about 3.15% p.a.), wouldn’t you agree?
g. I guess what I am basically saying is that your cost to buy your Sens tickets is a negative $8,076.70. I am essentially paying you to buy the tickets from me… [As a student of mine once said: “I’ll pay you to hire me” when he used the negative cost selling technique on a future employer.]
h. In fact, I prepared a spreadsheet for you to go over with me. Notice that I took the Brokerage’s share of your commissions out before I calculated your rate or return. [This shows that Jay really gets his clients’ businesses.]
i. Hey, that reminds me: isn’t it true that if you do more than $10 million a year in mortgage biz, you’ll get a volume bonus from Mortgage Alliance? Well then, it looks like the investment in Sens tickets is just the ticket, so to speak—you’re at $9 million right now and the spreadsheet shows you at $10.125 million at the end of the year so your actual ROI will be even higher and the cost will be even more negative after you nab one of those year-end bonuses. How about that.
j. You just have to initial here, here and here, sign and date there.
k. Thanks. See you soon.
l. Oh, by the way, can I call you at the end of the season for a testimonial for my personal website?”

Sens and Mortgage Broker: Negative Cost Selling

Sens Tickets 41 regular season home games
Number of Tickets per Game 2
Total Number of Tickets 82
Cost per Ticket $55 posted prices
Discount for two year commitment 15%
Actual Cost per Ticket $ 46.75
Annual Cost $ 3,833.50

Typical Mortgage $225,000
Typical Fee $1,912.50 0.85%
Mortgage Agent Share $1,338.75 70%
Number of Mortgage per Annum 40 $9,000,000
Mortgage Agent Revenues $53,550.00 per annum
Mortgage Agent Current Marketing Budget $2,945.25 6%
Percent of Current Marketing Budget Diverted to Sens ($1,178.10) 40.00%
New Marketing Budget including Sens $5,600.65
Increase in Marketing Costs $2,655.40
Number of New Mortgages Needed to Breakeven 1.98
Number of Actual New Mortgages Written 5 $10,125,000
Increased Revenues due to Investment in Sens -ve Cost Marketing Program $6,693.75

ROI on Marginal Increase in Marketing Costs due to Investment in Sens (IRR) 152% per annum

Cashflow Profile

0 ($2,655.40)
1 $4,038.35
2 $6,693.75 $13,387.50
Cash Gain over Period $8,076.70

Note: this example is for demonstration and learning purposes only.

[You can download this as a spreadsheet from our server in .xls format: http://www.eqjournalblog.com/SensMortgageBrokerNegativeCostSelling.xls]

There’s no reason why Jay can’t extend this analysis to all of his clients. In fact, because he understands business modeling, he can take it one step further (we call this 2-D or 3-D biz modeling).

Say, Jay drops in on a restaurant owner. Her name is Shelly. Shelly has told him that the two weeks preceding Fathers’ Day have become more important over the years, coming closer in volume to Mother’s Day bookings but she would like to find a way to drive that volume higher. Jay knows that most of Shelly’s clients during that time are women calling and making reservations. Who are Shelly’s clients’ clients? During that period, they are, of course, men. What do men want? Well, a lot of men like pro sports. So Jay sells Shelly some Sens tickets that she can bundle with restaurant meals. If she breaks even on the Sens tickets but drives her restaurant’s utilization rate higher, it would be a pretty simple job for Jay to show Shelly how the purchase of these tickets was a negative cost.

You can extrapolate from these examples for florists, Banks, auto dealerships, spas, REALTORS, Accountants,… Once you understand the concept, the rest is just ‘making license plates’ (to borrow a phrase from Neal Stephenson’s Cryptonomicon.)

I did another sketch below on how this approach might work for REALTORS and Accountants (actually tax preparers). In the latter case, Jay would want to give his client (the tax preparer) something that would appeal to his clients—the answer again, Sens tickets! Now Jay’s clients’ clients’ client is CRA (Canada Revenue Agency) so he should stop at 2-D. CRA auditors won’t want (and obviously can’t accept) Sens tickets! But you get the picture—look at least 2-dimensions deep and sometimes 3 or more will be appropriate and useful and new ideas and ways of using negative cost selling will occur to you.

The Ultimate Negative Cost: Free

In the summer of 2003, Rob Hall, a brilliant Internet guy and owner of Momentous.ca (Internic.ca, Zip.ca, etc.) came to see me with a new business model. He wanted to enter the domain name backorder business which at that time was dominated by Snap Names. Rob had this idea of giving the product away for free and I had heard a lot of pitches for giving things away for free on the Internet many of which had come to grief so I wasn’t too keen at first.

But Rob hit another home run with Pool.com. He launched it later that summer and it was a runaway success. Here’s why Pool.com was a “heads Rob wins, tails Rob wins”, revolutionary business model:

1. SnapNames.com was the recognized leader in backordering deleting domain names. So say you owned the domain name MyGreatCompany.ca or .de or .uk or .ne or .com.au, and you wanted the dot-COM TLD (Top Level Domain) equivalent but someone else had it.

2. With Snap Names, clients had to pay $60 USD per year for each domain name they wanted to backorder and if the name you want was deleted by the dot-COM domain name registry (Verisign), then they would try to get it for you (but there are no guarantees).

3. So along comes Pool.com.

4. Now you can register any domain name that you want to back order for free with Pool.com. Hundreds of thousands promptly do. You only pay if Pool.com is successful at getting your backordered domain name.

5. More than 20,000 dot-COM names are deleted each day. (There are about 80 million dot-COM domain names registered as of Q1 2009 (Source: Versign Domain Name Industry Brief). Pool.com is bound to have many names on its list that drop every day.

6. If there is more than one client that has backordered the same domain name, then here is what they do:

“You pay only when we successfully secure a domain for you. We charge a low US$60 fee which includes a 1 year domain registration. In the case of a domain backordered by multiple users, a short auction will take place and the winning bid replaces our standard fee.” Pool.com, December 2003.

7. They are currently doing over 3,000 deleted names a day (at $60+ USD each), 7 days a week. Note that almost 60% of backordered names are wanted by more than one client so mini-auctions are happening all the time, with an average price exceeding $200 USD, so do the math. This became a significant business from nothing in just a few months. Gross margins are in excess of 80%.

8. The $60 USD also includes a one year registration so they are automatically locked in to their domain name registrars and Rob can sell them many other things like email, hosting, etc.

9. Having millions of domain names backordered through Pool.com gives Pool.com a chance to sell them other things even if their backordered domains never come up.

10. Rob has developed a good algorithm for attacking registry sites with multiple channels (as of November 2005, he had over 120 registrar channels to the registry) so his success rate at getting deleted names was more than 60%. (Snap Names at that time was less than 50 %.) Pool.com’s goal is 80 % with maybe 70+ % actually do-able.

11. Many IP lawyers, domain name speculators and sophisticated Internet users moved over to Pool.com in just a few months.

12. This business went through an intense geometric growth period.

So basically if you are an Intellectual Property law firm that had backordered 40 domains with Snap Names at $60 each, Rob’s company can come to you and say for a -$2,400.00, you can back order the next 40 domains with us. Now that is a compelling sales proposition.

Pool.com Negative Cost Selling

Domains Backordered with Snap Names 40
Cost of Backorder with Snap Names $2,400 $60 per backorder
Cost to Backorder with Pool.com $0
Negative Cost of Backorder with Pool.com ($2,400)

Conclusion

Negative cost selling is a technique that finds many applications. Whether you are a former student of mine telling a would-be employer: “I’ll pay you to hire me” or a top-flight HR recruiter showing a CEO how by paying your firm $30,000, they can save and make an additional $390,000, you’ll be much further ahead if you master this technique in many ways.

You and your firm will make more money, not only by selling more but by selling more to each client (the average order size will increase) and your batting average will rise too. That is, you will close a higher percentage of the pitches you make. If you are closing 2 out of every 10 potential clients and you can move that up to 3 or 4, think what that will do to your income and how it will change your place in your company.

I use these techniques and I have been able to improve my closing rate to 7 or 8 out of 10. No one closes every deal but I try.

It also takes a lot of the fear out of selling—you go into each meeting knowing almost as much about your clients’ businesses and their clients as they do. This gives you confidence and confidence is the sine qua non of moving your closing rate upwards. But it isn’t artificial confidence—it’s real, the best kind and its authenticity will shine through—your clients will pick up on it just as they can pick up on the reverse.

Humans are incredibly good at picking up signals that say ‘this person is lying to me.’

Why don’t more people do this?

Some don’t know about it or don’t know how to do it but I find a lot of salespeople are just plain lazy. They figure the beauty contest approach is easy and simpler and will work often enough that they don’t have to put themselves out to learn much if anything about their clients’ business ecosystems. This is not sustainable—in a tough, competitive world, a negative cost selling master will eat their lunch.

If you can’t sell, you can’t be a CEO, Entrepreneur, Founder or a Self Actualizing Human Being. If you can’t sell your ideas, your suppliers, your clients, your bosses, your colleagues, your Bank, your Board of Directors, your Faculty, your sponsors, your patrons, then you can’t be a researcher, a supply chain manager, a sales executive, an upwardly mobile hot-shot product manager, a middle manager, a CFO, a CEO, a Dean, an Executive Director of a Charity or Not-For-Profit or an Architect or Artist. That’s a lot of ‘can’ts’.

If you don’t believe me just think about this for a minute. You are a Product Manager at Cisco. You wake up at 3 am with a super idea and you write a few notes so you won’t forget your brainstorm. The next day you go in to see your boss and tell her: “I have this great idea for a new product or service… It’ll take two years of R&D at a cost of $10 million but the potential market is huge.”

Your boss says: “That’s really interesting. Build a business model, do a biz plan, work up some revenue numbers, get some market research done and then come back and see me. If I still like it, I will take to the Director. If he likes, we can take it to the Vice President and if it passes that test, we get to take it to the CTO. After that, we still have to tackle our CEO and BOD.”

Your shoulders hunched, you walk away thinking this is going to take a long time before you get the green light.

Meanwhile, one of your peers has also approached your boss. She said: “I have this great idea for a new product or service… It’ll take two years of R&D at a cost of $10 million but I got four strategic partners to each pitch in $2.5 million and they are willing to be our launch clients too and take the first 18 months of production plus the potential market is huge.”

She is using the negative cost selling model on her boss and she is an intrapreneur. She has the full skill set* of an entrepreneur but she is applying them within a large established organization.

(* Do you want an employee who has the skill set of an entrepreneur? Do you want someone who can: take initiative, doesn’t need a lot of direction, is innovative, can do everything in parallel, will find launch clients, knows how to build cashflow, understands the value of a client and customer, will use bootstrap capital, can sell/sell/sell, knows how to use guerrilla marketing and social marketing to build the brand and capture market share at a reasonable cost, is not afraid to try new things, understands negative cost selling, knows how to build a sustainable business model with a lot of ‘pixie dust’ in it, can set goals and achieve them, is dynamic and has high energy, can create a business plan and be ready to change it when the market moves in sudden and unexpected directions?)

Now whose project is more likely to get the go ahead, which project is going to launch first and which person is going to be promoted first?

There is nothing more rewarding in your professional life than working on a project you had a hand in initiating and creating. To be there at the first glimmer of an idea, to help it grow and develop, to see it launched into the world, to see it successful and meeting real needs and helping people to achieve their goals—that’s what I mean by being a self-actualized human being. And a self-actualized person is a highly-motivated, serene, confident person who is terrific to have around.

I have hung out with NHL coaches and they are all, to a man, self-actualized people. They make everyone around them feel special; they make everyone around them feel like they are part of something bigger than themselves. They make everyone around them better at what they do. They put round pegs in round holes and square pegs in square holes and they tell you it’s OK if you are a square peg—they have a place and role for you.

That is the essence of leadership and it is an ingredient missing in many working lives. Here is hoping that you will have people like this in your life and that you will be one of those people too.

Prof Bruce

Optimizing for Google and Google Maps
By Steve Hampton, Guest Contributor, Search Marketing Specialist – BIGLocal.ca

Introduction

Search engine optimization (SEO) is perhaps one of the fastest growing buzz terms in the business community.

Slowly (and I do mean slowly), Canadian businesses are realizing that consumers have, in general, replaced that notorious, bulky 1,000 page yellow directory with a much more efficient search engine when they are researching a product, service or business.

While SEO is a specialized area of expertise, there is a major distinction you need to be aware of if you are looking to “put your business on the map”.

That distinction is that Google has VERY different algorithms for their organic results (their main search engine product) and their local/maps results (“Local Business Results”).

Depending on your business goals, you will need to adapt different strategies to achieve a page-one result on either of Google’s search engines (SERP’s).

Organic SEO Factors

The first distinction is that there are “On-Site SEO” and “Off-Site SEO”.

While there’s no accurate way to tell, experts suggest that approximately 85% of the weighting Google uses to determine its rankings is attributed to Off-Site SEO.

Let’s look at some of the main areas of Off-Site SEO…

One-Way Links: A one-way link is a link to your site from another site, where you do NOT link back to their site.

Google’s culture can be summed up in one-word: Democratic. Google’s algorithm is setup to allow people to decide what’s relevant & what’s important.

Think of a one-way link as a popularity vote. Every time you go to their search engine and perform a search, the algorithm goes out and “asks” the internet to vote on the most relevant sources of information.

But Google doesn’t take every vote at face value. Google also looks at “Who” is casting the vote – and will give priority to the “most popular”., in their own right.

This means, if you want to make your one-way links count, you need to get them from popular websites with high page-rankings (essentially Google’s “Popularity Meter” – the higher the PM, the more weight that link gets).

Two-Way Links: The difference between a one-way link and a two-way link is reciprocation. If you are being linked to by a site in which your website links back to them, this is a two-way link.

Two-way links are important for SEO. However they do not hold the same weight that a one-way link does.

Anchor Text: Having another website link to you is important. Almost as important is how that link is worded. The wording of the link is called “Anchor Text.”

Here’s an example:

Poor Anchor Text: To Visit xyz.com, click here.

Strong Anchor text: If you are in need of a widget, visit xyzwidgets.com – they are the top supplier of widgets.

The difference between the two as you can see is that important keywords (if your business is selling widgets) are anchoring the link in our “Strong” example.

Whenever you are setting up links with partners, ensure that the right keywords are strategically placed within that link.

Click-Through-Rate: Staying with Google’s democratic philosophy, Click-Through-Rate (CTR) percentages are another important factor when their search engine ranks your webpage’s relevancy.

CTR% measures the percentage of people that click on your link. (For example, if 100 people see your link, and 10 click through then your CTR% = 10%.)

Google believes that if a link exists and people click on it at an aggressive rate, then that information must be relevant information that people WANT to read. Furthermore, if Google displays 10 results, and one of them receives significantly more clicks than the rest, then Google will bump up that particular result.

Online Presence: With the anticipated release of Google Caffeine (Google’s codename for their improved search algorithm), your businesses online presence within social media has become an even more important factor being ranked.

Facebook, Twitter, Yelp and others have become important eco-systems to help your business survive.

Diversity of Links: Google also weights the variety of websites that are linking to your site/page. Having lots of links, from lots of different sources is an important off-site SEO factor.

Negative/Spam Techniques: One of the easiest ways to sabotage your business these days is to try to “scam” your way into results. While there are a variety of “black-hat” tricks out there, getting caught doing just one of them (accidental or not) can get your site a lifetime ban in their search engine.

It’s critically important to only take part in ethical SEO practices. This is one major reason why organizations have opted to hire SEO specialists, since it can be easy to have your site barred by accident.

There are several other factors to off-site SEO that have slight effects on rankings. Typically these factors “take care of themselves” if you follow best practices described above.

The other side to organic SEO is on-site SEO best practices.
Let’s take a minute to look at the most important on-site SEO tasks you can use to boost your website ‘s ranking in SERP’s.

Keyword In Body Text: In order for search engines to even consider your web page as relevant, the body of the page (the content) needs to be relevant to the search term a searcher uses. While there’s no magic number in terms of how often the keyword appears on the page, experts agree that 2-3% keyword density is a great place to start.

It has also been shown that content on the top of the page (especially the top-left of the page) is given the most weight.

You can further increase the importance of your keywords by putting them in bold or italics (but if you go overboard with this, you’ll just get yourself black-listed – once-twice is plenty.)

Just like in off-site SEO, negative, or black-hat tactics will get your page penalized instead of ranked, so having the keyword appear 10 or 20% of the time is NOT a best practice.

The best way to ensure your page is relevant is to simply write passionately about the topic, and allow the keywords to find themselves in the copy. When reading over what you’ve written, you may find some practical places to include a keyword, in which case do it. If you follow this formula, your page will be deemed relevant by Google – which is the first step in getting on the top of results.

Other Important Places For The Keyword To Appear:

Along with having your targeted keyword in the body of the page, there are several other places the search engine looks when determining what your web page is about.

Header Tags: These are the titles and sub-titles within your page.

Title Tag: This is the title to the page (E.g. www.YourSite.com/Page-Title.html). Noticed I used a dash to separate each word in the page title. This is the only way you can ensure Google can read each word. For the most part, the algorithm has a hard time deciphering things like www.mysite.com/thisismypagetitle.html

Meta Tags (keyword & description tags): At the top of the page (in your HTML code), there is a spot available for you to include keywords that sum up what the page is about. Keep in mind that Google and other search engines have gone on record to say they no longer use meta tags in ranking pages,. However, many search engines still rely on meta tags, and there’s still no conclusive evidence that Google doesn’t use meta tags in some capacity.

Navigation Links: Nav links are the links that allow people to visit each of the pages on your site. It’s important to at least theme those link titles to your sites content. For example, consider modifying “Contact US” to “Contact the Widget Experts”.

Alt-Tags: As you can imagine, a search engine is unable to “read” pictures/images. That’s why there are alt-tags. An Alt-tag is a description of the image you are showing on the page. Google relies pretty heavily on these alt-tags to determine what the page and image is about. Instead of labelling a picture “Picture of me”, try instead to label it “XYZ Widgets Expert, John Smith”.

Domain Name: The domain name is still used to weight results by a search engine. It may not be quite as important as it was, say, in 2003, but it is still used. In some of the longer tail keywords (key phrases with more than 3 words in it), having the exact key phrase as your domain name is enough to put you in the number one spot! This is pretty rare, and I wouldn’t use it as my number one SEO strategy; however, it is a good thing to do in a well-rounded SEO plan.

The domain name’s age also plays a small role in ranking the site.

On-Site SEO isn’t all about having keywords in the right place. While keywords are essential to having the search engine consider your content in the first place, there are several other on-site factors the search engine algorithm uses to determine your webpage’s ranking in the SERP’s.

Ensure your SEO strategy addresses these areas as well.

In-Page Links: Having lots of links in your copy is a great way to boost your rankings. In case you haven’t noticed, Wikipedia has secured the top spot for literally hundreds of thousands of keywords. If you look at the elements of a Wikipedia page, you’ll see that throughout the body of every page are dozens of links offering users further information on the subject. Try to emulate this best practice in your own web pages.

Account Structure: It’s important that Google’s spider (the program that crawls across the web, indexing everything) can actually find all your pages. This means having a clean, logical account structure throughout your site. You can also help the search engine by submitting a site map that includes links to all your sites content.

URL type: Some of you may be using dynamic URL’s (URL’s that change themselves based on the search term used) in your site. Google’s crawler (spider) doesn’t index these URL’s as often as they used to, because many spammers are setting them up in a way that they have infinite URL’s, which as you can imagine overloads the spider while indexing. It is much better to have static html URL`s (URL`s that stay the same all the time).

Site Updates: If you build a site, and then never update it, you might as well forget about the search engines as a means for generating customers. Search engines look very heavily at how often the site is updated, as well as the amount of content/pages within the site.

Daily updates are ideal; however, at a minimum, you should be updating your site on a weekly basis. This doesn’t necessarily always have to be new pages (although that is best), it could be that you update information you previously posted on your site to freshen it up, or update it based on new developments.

Leaving a site stagnant is the worst thing you can do in SEO (besides getting yourself banned for black-hat tricks).

Web page load time: Speed is an essential part of the “new Internet”. A large reason for Google’s success has been the speed with which it has been able to return results. Google founders, Larry Page & Sergei Brin have been obsessive about load times for their results, and that philosophy has moved into the algorithm’s ranking strategy. We all want a fast experience as an Internet user. Ensure your pages load quickly. Things like java & outside hosted images as well as video can cause slow load times.

Domain Name Length: Having a domain name like, www.mywidgetsarethebestwidgetsintheworld.com is an easy way to have your site ignored (or simply ranked on page 248). Short precise domain names are looked at as professional by search engines, and will at least get you a seat at the table during a keyword ranking.

Domain Name Type: .org .edu & .com are among the best weighted domain names. All things being equal, if a search engine needed to rank mysite.com, mysite.net & mysite.tv – they would likely be ranked in that order.

Server Reliability/Uptime: If the crawler finds that the server returns an error more than 0.2% of the time, your site will be penalized in the rankings. Ensure you are hosting your site on a reliable server that guarantees 99.9% up-time.

Content Uniqueness: Google (and other search engines) rely on engineers who can “cut the fat” out of the indexing process. One way they have managed to do this is by refusing to index pages that have duplicate content. If your page includes content that was copied and pasted from another source, the original source will be indexed as normal, but your page will not.

Amount of Content: For indexing purposes, the more content the better. Having said that, it’s been proven in multiple tests I’ve been a part of, that less content generally means more sales. This means, you have a decision to make when creating a page on your site, which is; do you want to design a page that will sell products/services, or do you want to design a page that is ideal for researching a product or service, for a later purchase.

Mis-Spellings & Grammatical Errors: If your page includes multiple spelling errors, or sentences that don’t make sense, the algorithm will identify them, and penalize your ranking.

Use of “Robot.txt File”: A Robot.txt file is a simple text file that tells the spider what pages you don’t want indexed. While this file may not always be necessary, having the page there shows the search engine you know a thing or two about web site creation, and therefore they will give your site a slight bump in rankings.

Age of site: The age of the site is used in determining the rankings. The reason behind this is that the majority of websites created are abandoned by their owners within the first 6-months. To weed out abandoned sites, Google typically ranks older sites first.

Trust Factors: There are several things Google looks for when determining the trustworthiness of your site. Things such as a privacy policy, terms of service, and badges from eTrust/Hackersafe are important factors for the area of trust.

Popularity of Website: Things such as number of unique visitors, length of time on site, and bounce rate are looked at when determining your site’s popularity.

While this list may look like a pretty exhaustive one, there are a reported 200+ main factors in the Google algorithm! Obviously, when you look at all the sub-sets of those 200 factors, you can be looking at tens of thousands of factors that go into ranking the world’s webpages for each individual keyword searched in search engines.

Having said that, if you can focus on the areas listed above you will have a clear advantage in your market.

Local Business Listing SEO

The algorithms used to determine organic results and the “Local Business Listing” are very different.

Most of the organic results best practices I’ve listed above will go 80% of the way to helping your business being ranked on page one of the Local Business Listing search results (i.e., in Google Maps). Simply by adding the geographic region you want to target in your keyword (e.g. Organic Keyword: Widgets – LBL Keyword: Widgets Ottawa, Ontario), you are there.

But there are several additional, VERY important factors in getting your results ranked on the first page of a Google Map search.

Again, there are both off-site & on-site factors used in determining your LBL ranking.

Off-site factors – Local:

Local Directories: Possibly the single most important factor for being ranked at the top of local results is having a strong presence in local directories. For Canadian businesses, look to be included in the Internet Yellow Pages, Canada411.ca, wcities.com, where.ca, ziplocal.com and yelp.ca. Speculation is that directories published by the Better Business Bureau and your local Chamber of Commerce are also used by Google’s local algorithm; however, there’s no conclusive evidence.

Restaurants, hotels & other tourist related businesses should also look to be included in TripAdvisor, VirtualTourist, IgoUgo & restaurant.ca.

Google Local Business Center: Google has begun creating “Place Pages” where information about your business is listed in a webpage format for users of local business listings. These pages exist for most businesses whether you do anything or not. Business owners are able to claim their place page, and include all the important information about their businesses. An essential first step in optimizing for local results is to claim your company’s places page, and update it until the status shows 100% updated. This means adding images, hours of operation, videos, etc.

Google Local Business Center Reviews: The user reviews section of the Place pages has proven to be a very important factor in ranking local results. There’s some great ways to get customers to review your business through Google including running a contest, or asking them to review it on your in-store computer immediately after helping them with something. You can also give away a free gift if they print off their review and bring it in.

Geographic Location: The dynamic part of local results is that Google will boost or drop your rank based on where you are relative to the searcher’s location (and yes – Google knows where you are when you search on their search engine – at least for most of you).
Local News: Having your business mentioned in a local news story is a great way to boost your local business ranking. A very well known local blog mention can also help.

Paid Search: This is perhaps one of the most controversial subjects; whether or not advertising in paid search (using local keywords) affects your rankings in the LBLs. My own personal research has shown than it does help, but if you search around, you’ll find there`s as much evidence to suggest it does not.

Local Groups & Social Media: The Internet has turned social. Twitter, Facebook, Yelp, Digg & other sites/services are looked at very heavily by search engines when determining local results. They look at where your circle lives geographically, how many people reference your business locally, and several other factors that suggest your local presence is prominent. Make sure to put your business in ALL of these social eco-systems, and remain active within them.

Updated WHOIS Information: If your WHOIS information is from a different geographic region than you are trying to rank for, it will have a negative impact on your LBL. If, however, the owner of your domain name is local to the area you are targeting, make sure the information is not hidden, and is fully updated to correspond to the contact info on your site and on your outside directory listings.

You can use the on-site SEO list for organic ranking to boost your local business listing by simply adding the geographic region to the keywords you’re looking to rank for. Local rankings also include several other important factors that would not be factored into organic rankings.

Here’s a list of the most important on-site SEO factors for local business listings:

Address & Phone Number: If you want to rank well for your geographic region you can’t simply have your contact information on a single page in your web site. It’s essential to have your phone number & address prominently displayed on every page on your site. The most traditional place for your phone number is on the right hand side of your header. Your address can be placed on the bottom of each page.

Also – 800 numbers have been proven to negatively affect your local ranking! Ensure that you have a local number listed.

Keywords to Match LBC Categories: When claiming your Google Local Business Listing, you are able to place your business in up to 5 categories. To boost your ranking within those categories, ensure the name of each category is within your site (without being “spammy”).
Google Map-Widget: Google has an easy to place map widget that allows you to place a map on your site with your address pinned to it. For best results, place this map on every page of your site (typically in the left or right column).

Links to Local Information: If you have the opportunity, place links to local sources of information within the content of your page(s). For example, if you’re talking about widgets and your local newspaper has a great article on the subject, reference & link to it in your page copy.
HCard: Many of you are familiar with VCard’s (Microsoft Outlook’s Virtual Business Card File Format). Perhaps less well known is the HTML version of these, called “HCard’s”. This helps the search engine’s spider find your contact information, as it is formatted in a clear, concise way that the spider recognizes right away.

KML File: A KML file is basically an XML file that is formatted for Google Maps/Earth. It allows you to place custom information in Google Maps/Earth where your business is. You can submit this file as well as include it in the structure of your website.

Conclusion

Canadian businesses, in general, have a lot of work to do to get up to speed in the area of Internet marketing. With a majority of people professing to using search engines exclusively to make purchasing decisions in virtually every vertical, there’s no excuse for prioritizing things like flyer delivery, and telemarketing above search engine marketing.

If while looking over this list you begin to feel overwhelmed, just remember that you don’t need to do everything all at once, and you don’t need to be perfect every time. Keep at it, and if you ever feel overwhelmed just remember that what you are actually doing is improving your customer service. They rely on search engines as their primary source of information, and it’s up to you to ensure they get the information they want.

To Your Success!

By Steve Hampton, search marketing specialist – BIGLocal.ca

BIGLocal is a full service search engine marketing agency based in Canada’s Capital, Ottawa, Ontario. BIGLocal specializes in pay per click search marketing, and guarantees to place your business on the front page of Google & every other major search engine every time a potential customer searches for your product, your service or your business. You can reach BIGLocal by calling (613) 424-3867 or visiting biglocal.ca.