The #Takeoff series is about crowdsourcing issues important to Canadian small businesses. They tell us about their defining moments and we write about their stories, the issues, and strategies for success or how to overcome obstacles.
Suzanne Scott returned to her native Prince Edward Island in 2010, after having studied and worked abroad for several years, with a clear vision for her future: She wanted to help the business her mother Daphne Large founded in 1973, Village Pottery, continue into a second-generation success.
Ms. Scott, 29, had developed a passion for making pottery jewellery at a young age, and also worked at Village Pottery, located near the island’s north shore in New London, as a teenager. But as a member of a generation that had grown up with technology, she knew the seasonal business could not continue to rely exclusively on the strong personal relationships forged with local people and tourists. It needed a strong Internet and social-media presence.
“We weren’t using social media or an online shop at that point. Four years [ago] I created the Facebook page, started on Twitter, and opened up an online Etsy marketplace. And in that period our business has grown, I think, 35 per cent in overall sales,” Ms. Scott says.
She adds that online sales now account for about 5 to 10 per cent of business, and they are growing annually, with increased shipments to the U.S. and other international destinations, such as Australia and Japan.
“Having an online presence [has] definitely opened us up to selling to any country, at any time of year,” Ms. Scott says. But “we’re now at the point that we’re really trying to keep up with the demand.”
Denise Wright-Ianni, a certified general accountant with a practice in Toronto and London, Ont., says Ms. Scott is to be congratulated on developing a social-media presence for the company as it moves into its second generation.
“[Ms. Scott] knows she needs to get online, which she’s done. The problem, though, is sometimes the success of social media can actually derail a company. Now she’s got [extra] sales, and is struggling trying to keep up with the back end of things.”
Ms. Scott and her mother, as well as her father Ian Scott and one of her brothers, Jack, are all producing pottery for the shop. About three-quarters of it, including jewellery (earrings, rings and necklaces), along with mugs, plates, bowls, and cream-and-sugar sets, is made by Ms. Scott, primarily during the off-season winter months. The store also purchases about 15 per cent of its inventory wholesale from other artisans.
But her parents would like to retire soon, and Ms. Scott realizes that increased output is necessary.
“I’m starting to see that the more we can make ourselves, the more profitable the business is. So I’m trying to figure out how we can produce more at a profitable margin. I know I need to hire another potter. [But] finding someone is so difficult,” she says, elaborating that she is weighing the option of whether to hire somebody full- or part-time, as well as whether to pay on commission (piecemeal for pottery produced) or salary.
To make an informed hiring decision, entrepreneurs need to understand their cost structure, including overhead, direct and indirect expenses. This will facilitate being able to calculate the level of sales required to break even, and an understanding of whether it is best to hire somebody full-time or part-time, and how they should be paid, says Janne Chung, an associate professor of accounting with York University’s Schulich School of Business in Toronto.
However, “at this point in time, I would probably hesitate to put on somebody full-time, mainly because it involves a lot of costs and payroll taxes and other things that she may not want to get involved with right now,” Ms. Chung adds.
Ms. Wright-Ianni notes that cash flow can also play a major role in deciding whether to hire somebody full or part-time, with a part-time hire having less impact in that regard. And if uncertain about whether to pay a salary or commission, “I think paying someone on commission is almost always the best because they have skin in the game,” she suggests.
Hiring an employee on salary means the employer has better control over what they do and how they produce. In contrast, if you’re paying somebody for piecemeal work, you need to be careful what you’re incentivizing that individual to deliver, says Saul Plener, national leader of private company services for PricewaterhouseCoopers LLP in Toronto.
However, there are potential pluses to the latter strategy for a seasonal business. “A contractor is a lot easier to use during the peak season because you can turn that tap on and off as required. You effectively don’t have to pay for idle time. So that’s an important advantage,” Mr. Plener says.
There are also human elements to consider. For example, “with 40 years of history [they] want to make sure that this individual is bringing the right culture, the right mind frame to be consistent with what [they’ve] developed,” stresses Mr. Plener.
Experts also warn about the legal obligations associated with bringing somebody else on board.
Canada Revenue Agency has specific rules when it comes to paying salary to either a full-time or part-time employee, dealing with issues such as Canada Pension Plan, employment insurance, withholding taxes, benefits such as vacation and sick leave, and severance costs if the individual doesn’t work out, Mr. Plener notes.
“If you don’t know where you’re going, it’s so difficult to hire someone,” Ms. Wright-Ianni says. “All of a sudden you have this employee and you, as the employer, are committed. You can’t just fire somebody. If you want to get rid of them, you have to pay severance, and there is all kinds of administration that goes along with hiring an employee, right to making sure source deductions are paid on time and filing T-slips for them,” she says.
Ms. Wright-Ianni notes that the skills required of an entrepreneur and an artisan are quite different, and Ms. Scott acknowledges finding it a challenge to tend to business administration issues during the peak season when she has to be in the store dealing directly with customers.
“Do I hire someone to manage that? What’s the best way to go about that?” she asks.
Ms. Chung suggests that hiring somebody to look after social media during periods when Ms. Scott’s constant presence is required is very important for a business such as Village Pottery, where a personal connection with customers is paramount.
Hiring a summer student on a part-time basis can yield government-incentive funding in certain jurisdictions and situations. And perhaps having a part-time employee to handle the administrative end of the business, such as to help with the website, might free up more time for creative work, Ms. Wright-Ianni suggests.
While Ms. Scott sees growth for Village Pottery, she knows that logistics and execution need to be carefully considered.