Jeff Dennis' Lessons from the Entrepreneurial Edge

Creditor Protect Yourself

2012-01-24T12:16:00.001-05:00

Here's another one of my Profit Magazine columns. I wrote it 5 years ago. It is still good advice today.

Recently I had lunch with the poster boy for entrepreneurs who crash and burn but live - quite comfortably - to tell the tale. He thanked me for saving his financial life. A few years ago Bill (not his realname) came to see me for some business advice. Bill was anxious to expand hisbusiness. I listened intently to Bill’s story and his plans. I reviewed hisbusiness plan and financial statements. I then proceeded to provide him withcomprehensive advice as to what I thought he should and should not do.

Unfortunately, Bill ignored virtually all of my advice andended up in corporate and personal bankruptcy a few years later. Fortunately,he did listen to one important bit of advice that I imparted to him on thatfateful day. The piece of advice that Bill did follow was to creditor protecthimself. As a result, when he went through the bankruptcy process and lost hisbusiness, he managed to keep his house and all of his personal financial investments.

I want to share this advice with you too, so that if youever end up in the same position as Bill, you too will have a nest egg withwhich to start over.

The nature of entrepreneurship is that we tend to be risktakers. Furthermore, to be successful we must be fully engaged in growing ourbusiness. Often this leads to the unfortunate result that we don’t look afterour own personal financial needs in the most responsible and/or timely manner.On top of everything, we tend to be risk takers in our personal investments.Many of us fail to put basic financial planning tools in place in order tosafeguard ourselves and our families. Simple things such as wills, powers ofattorney, life insurance, etc., are often left to be addressed at a later date.

My advice to you is to make getting your personal house inorder a priority.

The bottom line is that as an entrepreneur you are taking ontremendous risks. You are the officer and director of your company and,therefore, take on all of the statutory liabilities of your business such astax and other source deductions, health tax, employment standards, workerscompensation, HST and so on. You may have personally guaranteed all or part ofyour company’s debt. You may have even mortgaged your home to finance yourbusiness. If the s—t hits the fan, you could lose everything.

In most investments higher risks translate into thepotential for higher returns. Obviously, you embarked on your businessadventure with this goal in mind. However, typically (particularly in the earlystages of your business) you either pay yourself very little or, in many cases,nothing at all. By reinvesting your profits in your business, the ironic resultis that you are taking higher risks and receiving lower (current) returns.

Manage the Risk

What should you be doing to manage this risk? You can dosome basic things like diversifying. Rather than leaving your profits in yourbusiness as retained earnings, take money out of your business from time totime and build a nest egg by investing conservatively. Resist the impulse toinvest in other businesses in your sector or industry. Even though this may be within you comfortzone, if there is a downturn, you could easily lose it all.

Other suggestions involve making sure that you have plannedyour estate. Do you have adequate life insurance? Disability insurance?Critical illness insurance? Is your will up to date? What about a living will? Doyou have a power of attorney?

Separate Assets in Your Spouse’s Name

The first, simplest and least expensive credit protectionstrategy for your nest egg is to put assets in your spouse’s name (providedthat he or she isn’t also an officer and director of a company, has signedpersonally at the bank or has other potential liabilities). When Bill wentthrough personal bankruptcy, he and his family managed to keep their homebecause the title was in Bill’s wife’s name. Making your RRSP contributionsinto a spousal plan, rather than into an RRSP in your own name will safeguardyour retirement savings from your creditors.

Segregated Funds

Bill was also able to retain his personal financial holdingsbecause they were invested in segregated funds. Segregated funds areinvestments in mutual funds through an insurance company. Because these investmentsare insurance contracts purchased from an insurance company, they are governedby the insurance legislation in each province and are exempt from being seizedby creditors. The same is true of a traditional insurance policy. Most majorinsurance companies offer a wide range of mutual funds so that you can select aportfolio that is consistent with your personal investment objectives. Whilethe management expense ratios (MERs) for segregated funds are slightly higherthan the management fees payable for the same mutual fund purchased outside ofthe insurance contract, consider the higher cost a small price to pay for“creditor protection insurance”. Segregated funds can be purchased inregistered (i.e. RRSPs and RESPs) and unregistered investment accounts.

Individual Pension Plan (IPP)

Another relatively inexpensive way to creditor protect yourretirement savings is to set up an Individual Pension Plan (IPP). An IPP is adefined benefits pension plan that you can set up for yourself. As a pensionplan regulated under provincial and federal pension legislation, IPPs areadministered as trusts and are creditor protected. Afurther benefit of an IPP is that the contributions are not fixed as they arewith the maximum RRSP contribution. As you get older the tax deductiblecontribution increases every year. There is a lot more to IPPs than this simpleintroduction. Talk to a financial advisor who has an expertise with IPPs. Manyfinancial advisors purport to know about them, few really know what they aretalking about. You can always call me and I will refer you to someone!

Family Trust

A more expensive way to creditor protect yourself is to setup a family trust. In this instance, you would pay a lawyer to set up a trustnaming you and the other members of your family as contingent beneficiaries. Inother words, the trustee has complete discretion to decide whether to pay anythingfrom the trust to you. You could be the trustee or you can name someone else asthe trustee. As a contingent beneficiary you have no absolute right to theassets in the family trust. As a result, in theory your creditors cannot forcethe trustee to turn over the assets of the trust. There have been instanceswhere a court has ordered the trustee to turn assets over, particularly wherethe trust was established on the eve of an insolvency.

Offshore Creditor Protection Trust

You can add a belt and suspenders and safeguard against anoverly zealous Canadian court by going offshore and utilizing a foreign thirdparty trustee for your trust. An advantage of this approach is that a Canadiancourt will not have any jurisdiction over the foreign trustee. In addition,depending on the foreign jurisdiction you choose, the foreign country will havea statute of limitations that provides that the claim must be commenced in theforeign country within a specific period of time. Usually, by the time yourcreditors complete their claim against you here in Canada and figure out thatthey will have to pursue your assets in another jurisdiction, the statute oflimitations will have expired.

One caveat - If you transfer your assets into any of thesevehicles when you are technically insolvent, your creditors may have the rightto trace the assets and unwind the creditor protection steps that you havetaken. Therefore, it is important to set up these protections well in advanceso that they are part of your ongoing estate planning considerations and notmerely a way to defeat your creditors.

Bill was able to buy me lunch because he took my creditorprotection advice. He put his house in his wife’s name and moved his financialassets into segregated funds. Billmay have lost his business, but he still has his nest egg so he can start overagain. Will you?

Partnerships - A Necessary Evil

2012-01-12T15:23:00.000-05:00

I have reviewed some of my earlier writing from my book, Lessons from the Edge, and from my Profit Magazine columns and have decided to share some of what I consider to be the "best of". Here's one on partners:

It’s said that business partnerships are like marriage: easyto get into, messy to get out of. Surely you’ve heard horror stories aboutbreakups that nearly ruin the business, if not the divorcees. When JanaMatthews and I polled entrepreneurs about their worst mistakes for our book, Lessonsfrom the Edge, well over half thestories involved partnerships.

It’s also often saidthat partnerships are a necessary evil. Whoever came up with that one got ithalf right. Partnerships are often necessary, but they are not necessarily evil. Whether apartnership goes bad depends largely on what its participants invest inmanaging it. In fact, there are many simple ways to foster the productivity andlongevity of even the most unlikely alliances.

Why doesanyone choose to have partners at all? Usually, an entrepreneur requiressomething only a partner can bring to the table (in exchange for equity, thatis), such as money, contacts or a skill set. Sometimes an entrepreneur needsthe confidence that can only be provided by working with someone else. Havingsomeone to bounce ideas off can be very helpful—after all, running your ownbusiness can get lonely.

You can trace the roots of most failed partnerships to thebeginnings of a business. The partners become so enamoured with the potentialof their venture that they jump into bed before determining whether they sharethe same values and expectations. In some cases, entrepreneurs spend more timeinterviewing and checking the references of prospective employees than they doof their future partners.

Even if they’ve met their perfect match, many partners fail todiscuss their respective responsibilities and contributions, such as what happens if more money orresources are needed, how decisions will be made and how they will get out thepartnership. And they neglect to put it all in writing. (I’ll grant you that ashareholders’ agreement can be very expensive, but far less expensive than alitigated breakup.)

But some partnerships fail despite their solid foundations.Differences in ambition, work ethic or simply the stage of life can result inthe relationship changing midstream.

As in marriage, don’t take your partnership for granted.Renew your partnership vows at least once a year. Go on periodic retreats to review your goals, roles andexpectations. And if you don’t? Inevitably, problems and frictions arise thatrequire patience and understanding to resolve. Employing a facilitator or coach to mediate a partners’ retreat can helpresolve issues that have percolated to the surface.

Face it: partnerships take a lot of work. To make it alittle easier, I’ve compiled a list of my favourite tips and tactics for makingalliances fruitful and long-lasting:

1. Check out your prospective partner. Make sure that youshare the same values, your skills are complementary and you have the sametimelines. A 50-something partner will want to retire when the 30-somethingpartner is just coming into his or her own. Don’t hesitate to conduct abackground check: investigate references, do a credit search. Create someconflict during your “courtship” to see how your prospective partner reacts.

2. Put it in writing. Ideally, you should have ashareholders’ or partners’ agreement drafted by a lawyer. The pact shouldaddress all aspects of the partnership: what you are contributing, howdecisions are made, how disputes are resolved, who is responsible for futurecapital injections and, most importantly, how you get out of the relationship.Even if you can’t afford a lawyer, at least write something down on the back ofa napkin!

3. Have an annual retreat. Get away from the office once ayear to review where you’ve been and where you’re going. Revisit your missionstatement, business plan, etc. Address any issues or festering problems. Don’tbe afraid to have it facilitated by a professional moderator or coach. It mayhelp you resolve some issues or reach higher goals.

4. Get out more. Talk tobusinesspeople outside of the partnership. An EO or YPO forum or discussion group can provide a useful venue for exploring issues before you are ready to raise them with your partners. After all, your fellow entrepreneurs mayhave already been there and done that. Better yet, they won’t be afraid to tellyou when the problem isn’t your partners, but you.

Union Leadership is Missing the Point

2012-01-08T11:04:00.000-05:00

I was listening to a debate on 640AM Toronto radio the other day between financial guy and Mr. Happy Capitalism, Lou Schizas, and Ken Lewenza, the head of the Canadian Auto Workers union. They carried on the usual boring debate - Lou said Canadian unionized wages are low because that's all the market will bear and Ken said that it was unfair that CEO salaries are so high relative to the rank and file worker. Back and forth they went, without addressing what in my mind is the real issue.

As I see it, the 1% vs 99% debate comes down to simple economics. The high paying middle income jobs have been exported to lower wage countries (the 99%), while the scarcer and more skilled jobs remain in North America and earn substantial salaries (the 1%). It occurred to me that the North American labour movement is misdirecting their attention. Rather than focusing on the 1% while more and more of their jobs are leaving the country, the unions, and environmentalists and human rights advocates for that matter, should be working towards higher wages, improved labour conditions and basic human rights in the countries where the middle income North American jobs are going.

The unions, environmentalists and human rights advocates are busy attacking what's left of the North American economy, while China, India and the other BRIC countries grow at close to 10%. China and India are not part of the Kyoto process. In China workers have little in the way of human rights. So while the disgruntled workers and their leadership occupied most major North American cities in 2011, jobs continued to go to lower cost markets.

So, what's to be done, if fighting over the remaining scraps of the North American economy is not the answer?

I think that its time for the North American union movement to move on and grow up. Unionized workers in North America have the best working conditions in the world. What they don't have is demand for their labour skills because they can't compete globally at current wage demands.

The North American labour unions should take the fight to the real enemy - low paying labour in the developing world. Its time for the unions to organize and speak out on behalf of the workers who are taking their North American brethren's jobs. Rather than fighting over whether the CEO gets paid to much, why not fight for improved wages, labour conditions and human rights in the developing world. Imagine if Chinese factories had to meet the labour red tape that exists in North America. Imagine if Chinese factories had to meet the same environmental protection legislation that exists in North America. Imagine if workers in developing countries had basic human rights - such as freedom of speech and the right to vote. Their labour costs would rise and their competitive advantage would evaporate.

It is high time that the labour movement realize that they are fighting the wrong enemy. Their North American employers have nothing more to give if they are now fighting over whether their boss is being paid too much. They are rearranging the deck chairs on the Titanic, while their jobs continue to flow out of the country. Its time that the union leadership earn its pay and lead a global fight for fair wages, working conditions and human rights. The ultimate beneficiaries will be the North American worker, who will no longer have to compete with one hand tied behind their backs.

Jazz Thomas Cook and the Lost Art of Corporate Communications

2012-01-03T14:05:00.001-05:00

My family and I travelled to Nuevo Vallarta, Mexico for a one week all-inclusive vacation the week of Christmas for a much needed rest. The resort - the Occidental Grand Nuevo Vallarta - was fantastic. However, the flight to get there was a nightmare. Our carrier was Jazz Thomas Cook, which I believe is operated by Air Canada.

While delays can be expected at this time of year due to weather and traffic, however, poor communication regarding the reason and length of the delay cannot be excused, particularly in this era of instant communication - the internet, email, bbm, sms, Twitter, Facebook, etc.

Our flight was scheduled to depart at 9 am EST on December 23, 2011. We dutifully showed up at the airport 2 hours ahead of the departure time to check in. We were advised that the flight was on time and we were excited to start our vacation.

At 8:30 am or so, we were advised by the gate attendant that the flight was to be delayed due to unidentified equipment issues. By 10:30 am, it was announced that the flight was delayed until 9 pm and that we should go home until 7 pm. We were offered taxi/limo vouchers, on which the telephone numbers of a limo company and Jazz Thomas Cook were handwritten for our convenience. We were told to check the Jazz Thomas Cook website or call the number that had been provided to us. We weren't happy about the delay, but could understand that safety must come first. So, off we went home.

As the time for departure from home to go back to the airport approached, I attempted to find out whether the flight was still departing at 9 pm. I went to the Jazz Thomas Cook website, but could not find any information about our flight. (Either it wasn't there or the site was impossible to navigate.) I then called the number that I was given. After navigating through the usual menu of options and sub options, I finally got to the recording for "Today's Departures", which said that there were no departures today and promptly hung up. Finally, I checked the Greater Toronto Airport Authority website, which said that the flight was still departing at 9 pm. So, off we went back to the airport.

Upon arriving at the airport and finding the gate, the posting at the gate said that the flight was still leaving at 9 pm. However, as time went by it became apparent that 9 pm was no longer realistic as no plane had arrived. Finally, at 9 pm the flight number and departure time disappeared from the board at the gate, with no update. The passengers at this point got very agitated as there had been no public announcement about our flight since we were sent home at 10:30 am that morning. The GTAA employee at the gate either didn't know anything or was stonewalling for some reason. The natives continued to get more and more restless.

Rumours starting circulating that there was going to be an unscheduled stop in Windsor, Ontario (of all places). The GTAA employee (whose name was Brenda, with no last name) continued to stonewall. Eventually the plane arrived and was boarded without any explanation for the delay. When asked whether it was true that we were stopping in Windsor, Brenda refused to answer and simply said that the captain would provide us with the flight plan update.

Once on board, we finally took off at 11 pm, some 13 hours after the scheduled departure time. We did stop in Windsor for fuel (apparently, this plane with its load couldn't make it to Puerto Vallarta from Toronto).

The bottom line is that Jazz Thomas Cook treated us like mushrooms in the dark for over 12 hours. There was absolutely no meaningful communication with the passengers for a ridiculously long time and I can't for the life of me figure out why. Passengers, particularly Canadian passengers, are inherently reasonable. Had Jazz Thomas Cook opted to provide us with periodic updates as to the status of the flight, a lot of angst and anger that was directed at the carrier and GTAA staff could have been avoided. I am told that this is typical communication protocol for most airlines. We have all heard horror stories about passengers stuck on a plane for 7 or 8 hours without food, water, restrooms, access to the gate or an explanation. I just don't get it.

The prevailing wisdom elsewhere in business regarding corporate communication is to get out in front of the issue (think about the way Michael McCain handled the listeria crisis a couple of years ago). Why do airlines treat the passengers with such disrespect? Jazz Thomas Cook has a lot to learn about corporate communication best practices.

Where Have I Been?

2011-12-15T10:35:00.005-05:00

It has been over a year since my last blog. Where have I been, you might ask?

As you may know, in November 2010, I sold an early stage solar development company to Oneworld Energy Inc., which was on the verge of completing a going public transaction. The plan was for Oneworld to provide funding for our many projects. Well, the going public transaction never happened due to very weak capital markets and other reasons. The upshot being that the much needed capital never came in.

I have spent the past 13 months working as a consultant to assist Oneworld in a restructuring process. It has been a difficult task to say the least. When the smoke finally clears, it is probably worth a lengthy blog on the restructuring process. In the meantime, my commitment to Oneworld only has a few months left and its time for me to move on and find my next gig.

As many of you know, I have spent my professional life either as a serial entrepreneur or as a trusted advisor to entrepreneurs. I am a lawyer by training, but have a unique perspective having been both a practicing lawyer as well as an entrepreneur living on the edge.

I have worked with a variety of entrepreneurs over the past number of years, the most notable of which is Razor Suleman, founder of Achievers (formerly I Love Rewards). I met Razor at one of my speeches promoting my book, Lessons from the Edge. Razor was at a critical point in his business. From that time, I helped Razor create his first advisory board (with me as chairman), I coached him through his first strategic planning process and, ultimately, I helped him raise his first round of outside financing, a combination of venture capital, angel and "friends and family" money. Since that time, Achievers has been a tremendous success, with the latest benchmarks being a major investment by Sequioa Capital, one of Silicon Valley's premier venture capital firms (think Apple, Google, Yahoo, Linkedin and YouTube, to name a few) and Razor being named Ontario Ernst & Young Business to Business Entrepreneur Of The Year.

So, what's next? As my responsibilities at Oneworld wind down, I have started the process of reviewing new opportunities. To broaden my search, I am doing a number of things to "get back out there". I am volunteering as an advisor at MaRs, I am ramping up my speaking engagements, I am networking with various friends and colleagues and I am starting to write again (beginning with this blog post).

I am looking to meet a future E & Y Entrepreneur of the Year, who I can mentor to take his or her business to the next level.

Stay tuned. There will be more blogs to come. Let me know what you are interested in reading about.

Jeff

jmdennis@calefinancial.com

Make Money on Your Roof

2010-09-16T14:41:00.006-04:00

There's big money on the roofs of industrial and commercial buildings in Ontario as a result of the Feed in Tariff Program under the Ontario Green Energy Act. If you avoid the pitfalls, you can take advantage of this huge opportunity by putting a solar PV power plant on your roof.

As you are no doubt aware, the Ontario government enacted the Green Energy Act a little under a year ago. The Green Energy Act implements one of the most generous feed in tariff (FIT) programs in the world. As a result, many international players in the renewable energy space are beating a path to Ontario. Our company, Oneworld Energy, being a Toronto based diversified renewable energy company with a global footprint, is well positioned to take advantage of the opportunity presented by the Green Energy Act.

One of the most profitable opportunities under the Green Energy Act involves the development of photovoltaic (PV) solar power plants on the roof of industrial and commercial buildings. The FIT Program provides a 20 year contract with the Ontario Power Authority (OPA), whereby the OPA buys 100% of the power produced on your roofs at a fixed price. The feed in tariff varies by the size of the power plant, however the sweet spot is systems between 10 kW and 250 kW, which will pay CDN $0.713 per kWh for the life of the 20 year contract. Someone who owns the system on their own roof can earn returns in excess of 15%, depending upon a few variables.

Some people are even renting their roofs to passive investors who are aggregating multiple rooftop systems into portfolios. The market for rent seems to be around CDN $0.40 to $0.50 per square foot of useable space.

When considering whether to rent your roof or own your a system on your building, there are a number of important considerations that you should take into account:

1. Do I need a new roof?

Yes and no. The system will be on your roof for 20 years. Most flat roofs have a life span of 20 years as well. The bottom line is that if you are due for a new roof in the next few years, since you will have to replace the roof anyway, you might as well as do it now so that you can take advantage of the FIT Program.

2. Will my roof leak or cave in?

No and no. Virtually all roof mounted systems designed for flat roofs are non penetrating. Instead, we use a ballast system which sits on top of the roof membrane and is weighed down by gravel or paving stones which evenly spreads out the weight of the system. The Ontario Building Code dictates requirements for weight and snow load, among other things. Provided the system meets Building Code requirements and is properly installed, the roof will have no problem supporting the system.

3. Does the installer have experience?

As the Feed in Tariff Program is less than a year old, most of the people who have jumped into the market have absolutely no experience in designing, installing or operating the systems. Before, someone puts a power plant on your roof, be sure that you check out their credentials. Oneworld Solar and its team have been installing roof and ground mounted systems in Europe (Germany and Italy) for the last number of years. We have experience in dealing with virtually any situation that can arise and we have key relationships with global players (suppliers, financiers, etc).

4. What's this I hear about "domestic content"?

Ontario has one of the most generous FIT programs in the world. However, in order to be entitled to the high rates for solar, generators are required to use a certain percentage of "domestic content" or made in Ontario components. Its 50% this year and 60% in 2011.

The first phase of the FIT Program is supposed to involve 2,500 MWs of solar projects. Over 750 MWs have already been approved. Currently, there is substantially less than that in supply of modules and inverters, the key components of a solar PV power plant. The upshot is that there are a number of installers running around making promises about timing and pricing that they cannot possibly meet. Be sure to ask a potential installer about their source of domestic content.

Oneworld Solar, due to our deep relationships with global component manufacturers, has over 100 MW of "domestic content" for 2011. We are a 65% "domestic content" provider.

5. What returns can I expect?

Its much better to own the system, rather than simply be a landlord. A 50,000 sq ft roof at CDN $0.40 per sq ft will generate CDN $20,000 in annual rent. Not bad considering your roof has historically been a cost centre.

By owning the system, you can earn between 10% and 20%, depending upon the leverage in the deal. In a market where real estate returns are under 10% and tenants' creditworthiness can be in question, where else can you get these returns from a government agency guaranteed for 20 years. If you bought a 20 year Ontario bond, you would get a return between 4.5% and 5%. WIth a solar power plant you are getting returns that are between 3 and 4 times the returns you would earn from the same credit risk. Not bad!!

I would be pleased to talk to anyone interested in learning more about how you can take advantage of the Ontario FIT Program. Get in touch with me at jdennis@oneworldenergy.com.

Still Green - Part II

2010-05-11T22:18:00.003-04:00

I can't believe that its been over a year since my last installment. So, what's new?

Much has transpired since March of 2009. COU Solar Inc., the company John Gamble and I founded, has grown to be a >$50 million company. We sold ourselves for shares to Oneworld Energy Inc. Oneworld is a diversified renewable energy company with operations in North America and Europe. Its 3 operating divisions are:

Wind development and power production
Solar development and power production
Operations and maintenance for both solar and wind

The company has over 1.5 GW of solar and wind projects in both North America and Europe slared to be developed over the next couple of years.

Oneworld's revenues have increased steadily from $2.5 million in 2007 to $25 million in 2009. Revenue for 2010 is projected to exceed $100 million.

I now run the solar business for Oneworld along with my co-founder John Gamble. John looks agter the European business and I am focused on the Ontario market with the advent of the Green Energy Act.

Oneworld is in the process of going public by way of a CPC. We should be publicly traded by the end of June. Stay tuned for further updates.

I'm Still Green - Lang AG

2009-03-19T13:10:00.006-04:00

You may be wondering what my next project is. I have been retained by Lang AG to assist it in getting to the next level in its business development. We are financing this project by taking Lang public on the Toronto Venture Exchange by way of a reverse take over.

Lang AG is in the property improvement and solar integration business in Germany. Their property improvement business services some of Germany's largest property owners, providing a turn key solution to their renovation needs. When Germany was unified, the government privatized large portfolios of government housing. The private equity investors are obliged to bring the properties up to current “green” standards. Government subsidies are in place to assist with this. Many of the property owners outsource this to companies like Lang.

In addition to the property improvement side of the business, Lang is also developing ground and roof mounted (for their property owning clients) PV solar power installations. We have partnered with a Canadian fund to provide the equity for these projects.

At this stage, we are looking for public distribution of a pre-RTO round in order to comply with the distribution requirements of the Toronto Venture Exchange. The minimum investment is CDN $5,100. The maximum is CDN $25,500. We will be looking for a more substantial round of financing in the fall once we are publically trading.

Our plan is to fund Lang's growth of both the property improvement division throughout Europe as well as the solar division on a global basis. The solar division's initial focus will be roof and ground mounted projects in Germany, but we also intend to expand into other markets in Europe and North America, particularly with our team based in Ontario given the new initiative announced last week by the provincial government.

Green business is one of the few industries that will experience growth during this economic downturn. I suggest that you join me in going green. Otherwise, you might be green with envy!

Jeff Dennis' Lessons from the Entrepreneurial Edge: I'm Back!!

2009-03-15T12:33:00.000-04:00

Jeff Dennis' Lessons from the Entrepreneurial Edge: I'm Back!!

http://www.jeffreydennis.ca/

I'm Back!!

2009-03-15T12:19:00.005-04:00

Its been over 6 months since the last entry on my blog. The reason for the hiatus was a combination of being very busy in my role as interim President & CEO of SonnenEnergy Corp. and the risk of writing about the goings on at the company given the disclosure rules of the Toronto Venture Exchange. Frankly, I wasn't too sure about what I could and couldn't write about. So, I chose not to write at all.

I left SonnenEnergy a little over a month ago. I have been asked by many people why I left. The bottom line was that the board of directors and I were in a dispute with Hans Hager, the founder and major shareholder of the company. It got to the point that Herr Hager commenced litigation against the company and me personally. He was able to get injunctive relief that made it virtually impossible to deal with the many problems of the company without a court order or his consent.

Despite many attempts to settle the litigation or obtain Herr Hager's consent to some of the changes that the board and I had brought forward, we simply couldn't move the company forward. In addition, we were needlessly spending a huge sum of money on litigation. We came to the conclusion that it was not in the best interest of the company to spend money that we didn't have to fight the litigation. As a result, we resigned and turned the company over the Herr Hager and his new board.

The ball is now in the new board's and Herr Hager's court to act in the best interest of the company. I remind them that they must take into account the interest of the company as a whole when making decisions about the future of the company. I wish them well, particularly since I am still a significant shareholder of the company.

President & CEO of SonnenEnergy Corp.

2008-09-03T17:16:00.002-04:00

The last week and a half have been crazy for me. Since November, 2007, I have been chairman of the board of directors of SonnenEnergy Corp. (www.sonnenenergy.com), a public company that trades on the Toronto Venture Exchange (TSXV:PWR). The company is a solar energy integrator and independent power producer with most of its operations in Germany.

Last Monday, the day before our annual general meeting of the shareholders, the board of directors decided that we needed a change in the leadership of the company. On short notice, I agreed to step in as President & CEO until we can conduct a search and identify an appropriate candidate for the job. The next day I addressed the shareholders and two days later I did the earnings conference call for shareholders and analysts.

You can hear the webcast of my conference call at http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2394480.

In between these meetings and over the past weekend I have been busy getting my head around the issues, communicating with key stakeholders and planning a trip to Germany to review our operations.

As I see it, my goals are as follows:

1. Conducting a thorough and comprehensive search to find a new CEO to lead this company, ensure that we execute on our business plan and create value for our shareholders;

2. Working diligently to ensure that we deliver on the projections laid out by management and that revenue from future projects comes in as projected; and

3. Making it a priority to secure the funding we require in order to fund our future growth and meet our installation and power production targets in this year and the years to come.

With the whirlwind that I have jumped on to, I may not be blogging on as regular a basis. Stay tuned.

All Your Eggs in One Basket

2008-08-17T15:43:00.005-04:00

Much has been heard and written about businesses that have too much of their revenue tied to one customer. If the customer goes elsewhere, you lose your business.

In fact, a friend of mine who shall remain nameless for confidentiality purposes was just about to submit a letter of intent to buy a business that had 90% of its revenue coming from one customer. During his due diligence, my friend heard a rumour that the customer representing 90% of the business had recently decided move to single sourcing for this product and the target company apparently was not going to be the single source. Yikes.

Another example of having all one's egg is one basket involved my client Auctionwire Inc. This is a supply side situation. Auctionwire is the leading auction agency for top brand companies and non-profit organizations. Historically, they ran all of their high end auctions exclusively on the ebay platform. Ebay was effectively their sole supplier of the back end of their auctions. A number of months ago, Auctionwire had a dispute with one of their customers when the customer failed to deliver the auction item and Auctionwire refused to forward the purchase price opting to protect the buyer. A complaint was lodged with ebay, who rather that ajudicating whether the complaint was valid, began to arbitrarily suspending some of Auctionwire's other auctions even though they had nothing to do with the dispute.

Auctionwire began to realize that it had all of its eggs in ebay's basket and that their entire business was at risk. Ebay could arbitrarily and unilaterally put Auctionwire out of business because of the onerous terms of their standard form user agreement. Because of the near monopolistic position that ebay has in the market, Auctionwire has no ability to negotiate the terms of the user agreement. They have to take it or leave it.

Auctionwire decided to leave it. They took immediate action to diversify their suppliers of the online auction back end. Auctionwire successful found another platform and was able to secure the exclusive licence to use this online auction software. Now Auctionwire controls their own destiny because they have complete control over their online auction back end systems and no longer are dependent on ebay.

Be very careful if you have all of your eggs in one basket, whether it is on the supplier or the customer side. Being so dependent on someone puts your business in a very vulnerable position. Whether they have greater bargaining power, end up going out of business or being bought by one of your competitors, having all of your eggs in one basket could result in the death of your business.

Indian Drilling Company

2008-07-30T16:30:00.004-04:00

I just returned from a week in Calgary with my new client Mohit Gupta of Geo Drilling Ltd., a coal bed methane (CBM) start up in India.

I met Mohit when I was in Delhi in 2004 as part of the speaking tour that I did in connection with the launch of my book, Lessons from the Edge. Mohit was the president of the Entrepreneurs' Organization chapter in Delhi and was my host during my stay.

Mohit is now working with some partners with coal industry experience to build an Indian CBM drilling company. Apparently, while there are any number of traditional deep well drilling companies in India, there are virtually no competitors in this specialized space. Shallow well drilling for CBM requires unique skills.

My mandate is to find a Canadian joint venture partner for Geo Drilling. While Geo Drilling has capital, labour and local expertise and contacts, they require a Canadian JV partner with the specialized skills to drill for CBM. We had a very successful trip. We identified a couple potential partners and we are now getting to know them better in order to identify the ideal partner. We will then negotiate the terms of the JV.

Its all gloom and doom here in Ontario these days. Real estate prices are drifting in the wrong direction and the lay offs in the manufacturing sector are piling up. Calgary on the other hand is in full fledged boom town mode. It was reinvigorating to be in an environment where there is a sense of confidence about the economy. I look forward to spending more time in Calgary and India as we put together this exciting Indo Canadian joint venture.

A Personal Branded Website

2008-06-26T09:12:00.008-04:00

I have decided to create a personal website. It has been an interesting process. As I go through the design stages, it begs a number of questions:

Why do I want one? Is a personal brand the right way to go or should I be creating a corporate site for Cale Financial?
What is the call to action? What am I looking for? Clients for my advisory practice? Corporate director opportunities? Exposure for my writing? Speaking opportunities?
Should it be in first person ("I do this; I do that") or third person ("Jeff Dennis does this; Jeff Dennis does that")?
What domain name should I use (unfortunately the jeffdennis.com and jeffdennis.ca domain names are taken)?
Then there are the design issues of colour, font, layout, etc.
Finally, I have to learn about search engine optimization strategies so that someone will come to my site.

Why a Personal Brand?

I've decided to go with the personal website because I am building a personal brand. People know me as Jeff Dennis, serial entrepreneur and trusted advisor to the CEOs of fast growth companies. My company, Cale Financial Corporation, has been in existence for over 10 years and has no brand recognition. I have merely used it as a vehicle for my capital raising activities since it is registered with the Ontario Securities Commission as a limited market dealer and as such is entitled to do "private placement" transactions with accredited investors. I am known as having expertise in the entrepreneurial field - strategy, finance, etc. If they search for me on Google, they will likely look for Jeff Dennis, not Cale Financial. A personal website will reinforce this.

What Am I Looking For?

My first draft of the copy for the website was all over the map. It was neither here, nor there. A little bit of this and a little bit of that - advising, capital, writing, speaking. Confusion.

It was a great process to map out the site as a flow chart and then write the copy for each page of the site. As I refined my writing, I kept asking myself what I was looking for? What is the call to action? I decided that my bottom line is my bottom line - I want new advisory clients. Everything else simply provides credibility as to why someone would want to hire me.

First Person?

The jury is still out on this question. Some would argue that first person is better because its less formal and creates a more approachable tone. On the other hand, you can come across as egotistical as you blow your own horn. My instinct is to go with a third person voice. It comes across as a testimonial so it is less self serving sounding. But, I may still change my mind.

Domain Name

The jury is still out on this one as well. I was disappointed that jeffdennis.com and jeffdennis.ca were taken by a jeweller and a real estate agent, respectively. Stay tuned as I figure this one out.

Design

I am using Teresa Gamble to design my site. She designed my wife's site - www.talktherapy.ca - which has been very successful. Lori gets the vast majority of her clients from Google searches that land on her site.

SEO

SEO or search engine optimization is something that I am just learning about. Teresa has clearly done a great job with Lori's website. I am doing some research and will rely on Teresa's expertise. From what I have read, the bottom line seems to be coming up with key words and having your site linked to other sites.

As soon as my website is up and running I will update my blog with more of the process and my learning. Stay tuned.

The Forest Hill Barber Shop Golf Tournament

2008-06-16T17:27:00.004-04:00

On Spadina Road in the Forest Hill Village there is a small barber shop that has been there forever. Certainly longer than my 50 years. The barbers are Nick, the patriarch, who has been there as long as I can remember; Mario and Terry, Nick's sons-in-law; and Nicola.

The Forest Hill barbers have a thriving business that's a throw back to the good old days of barber poles, straight razor shaves and no appointments. Because of their location in the Forest Hill Village, their clientele are the whos who of Canadian business, law and medicine. On any given day you can see captains of industry waiting in line for the next available barber. There's a family feeling as Nick and the boys seem to know a little bit about every customer and their families. In addition, many a deal has been done while waiting for your turn. I myself can think of at least 2 opportunities that came to me while waiting to get my buzz cut.

What most impresses me about the Forest Hill barbers is that 13 years ago they started a charity golf tournament to raise money for Sick Kids Hospital. I just attended the 13th version a couple of weeks ago which raised over $100,000. Over the years, they have raised well over $600,000.

Nick, Mario, Terry and Nicola enlist the support of their Forest Hill clientele, the local Forest Hill Village business community and their Woodbridge friends and family. It is an amazing event. It not only has the usual trappings of the typical charity golf tournament, but they also have homemade favourites set up at various holes such as Italian wine and cheese and expresso and Italian pastries.

The barbers are on their feet cutting hair from 9 to 6 five days a week. They then put this incredible event together in their spare time. The Forest Hill Village barbers are amazing entrepreneurs in every sense of the word.

Looking for an Acquisition for a CPC

2008-05-29T14:50:00.003-04:00

As you may know, I am the chairman of the Eminence Capital Group. We are a group of "eminent" people who have come together to create a series of capital pool companies or CPCs under the CPC program of the Toronto Venture Exchange.

A CPC is essentially a shell public company. It has between $300,000 and $2 million in cash, a minimum of 200 investors and at least 3 public company eligible directors. The CPC has 2 years from its inception to acquire an operating business that otherwise meets the listing requirements of the TSXV.

The Eminence Capital Group is working on its second CPC. We are just about to complete our IPO and we are reviewing potential acquisitions. Our criteria for an acquisition is as follows:

Experienced, quality management in place
At least $5 million in annual sales with the prospect of reaching $10 million in sales within 12 to 18 months
Profitable or at or nearing breakeven within 6 to 12 months
$15 million market cap within 12 months
Rapid growth potential
Current public market appeal, including interest from institutional investors
Company has public peers

Obviously there are always exceptions to each of the criteria. For example, we would look at resource opportunities that don't necessarily have revenues.

Please let me know if you are aware of any companies that are interested in going public and meet our criteria.

Cubapreneurship

2008-05-21T09:37:00.002-04:00

I just got back from an incredible 5 days in Havana. I went with my brother-in-law for a "boys" weekend to celebrate my upcoming 50th birthday.

I had never been to Cuba before and didn't know what to expect. I had previously wondered about whether it was appropriate to go, thereby supporting a repressive regime. My love of Cuban cigars (and a rationalization of helping the Cuban people with my meagre tourist pesos) enabled me to get on a plane.

I was struck first by the fact that Havana is stuck in a time warp. Little has changed from January 1, 1959, the date of the revolution. The cars and the buildings seemed to have been stopped in time. There was a certain charm about it, however, it indicated the lack of money available to the people to buy basic things and to the government to improve infrastructure.

There is tremendous potential for Havana to become a world class city. All of the components are there - wide boulevards, a mix of beautiful architecture (especially in Old Havana), history and a young and vibrant population. They just need a little freedom and some much needed capital for investment.

I understand that things are starting to change. Since Fidel's illness, his brother Raoul has taken over the reins of leadership. Once considered the heavy, Raoul is now much loved by the people for the few small freedoms that have been instituted in the past month or so. Cubans can now go into hotels and restaurants that were previously the sole domain of foreigners. They can also legally buy computers and DVDs.

Just as the country has 2 currencies - one for the locals and one for foreigners, Cuba also has 2 economies. The vast majority of the Cuban people live on $20 per month and have little available to them other than some basic necessities. On the other hand, there is a vibrant capitalist economy working, mostly serving foreigners and Cuban entrepreneurs who serve foreigners. You can find privately owned and operated restaurants as good as any in the world. There are entrepreneurs selling cigars out of their homes and on the street. There are cab drivers and of course sex workers.

With more freedom, I predict that money will flow into Cuba. For example, if foreigners are allowed to own real estate, other than as a vacation home, capital will flood into the country and the wonderfully beautiful Spanish colonial buildings that are currently in such a state of disrepair will be restored to their former glory.

If the recent changes by Raoul are a sign of things to come, even if democracy is slower to come, capitalism can come to this beautiful island and unleash the pent up Cuban entrepreneurship. Look what's happening in China.

To Blog or Not To Blog, That is the Question

2008-05-12T09:29:00.005-04:00

I have been mulling over for some time whether I should be blogging. In my upcoming column in Profit Magazine, I share with my readers my personal journey into the blogosphere as well as some tips that I have picked up along the way about blogging.

This is my inaugural blog. At this point I am not sure where this is going to go. My initial thoughts are to share with anyone who cares to read my blog my tips for entrepreneurs that I have learned (mostly the hard way) as a serial entrepreneur for the last almost 20 years. I also plan on spouting off with my views on business, the economy and politics. Finally, I will keep you up to speed as to what I am up to with my latest ventures (within the confines of the law in the case of any publicly traded situations).

Blogging has become ubiquitous. Everyone is doing it in the US. Canadians, at least Canadian journalists and political junkies, have jumped on the bandwagon. Corporate blogging and blogging by CEOs has not really caught on in the Great White North. While I am not currently the CEO of a company, other than my own advisory business, I have quite a bit of experience as a CEO and I currently work with a handful of CEOs of fast growth companies as I help them in their quest to take their companies to the next level. Its time for me to take the plunge and to become a blogger, perhaps as a way to inspire other entrepreneurs to do so.

Right now only one of my CEO clients or former clients are blogging. Razor Suleman's company I Love Rewards Inc. has a corporate blog. Razor, as CEO, is one of a number of authorized bloggers. The purpose of their blog is to:

provide greater public awareness of their brand
get external feedback about the things they do
give their employees the ability to tell their story

They chose an initial roster of 7 authorized authors (including Razor), representing their vision committees. They implemented a policy document after studying examples from other well known companies such as Google. And then they got going - http://www.iloverewards.com/blog/.

Frankly, I was initially a little nervous about I Love Rewards blogging. What would people say? What would the comments be? Would a disgruntled employee air dirty laundry? Ten months later the I Love Rewards blog has been a great success.

Because of its success and my own exposure to blogging, I am moving into the blogosphere myself. Wish me luck.

Please read my upcoming column in Profit Magazine on blogging. I hope my column and my blogging will inspire you to start your own CEO or corporate blog. In any event, I invite you to comment on my blogs or columns right here in my blog.