Armed with a degree in chemical engineering and an MBA, Barry Dane had worked in the pulp-and-paper industry for more than two decades.
As his career progressed he moved into senior management at an equipment supplier to the paper industry, and into consulting. With a major contraction of the sector in the late 1990s he decided to pursue a long-standing dream of owning a small business. His search led him to a small bed-and-breakfast property in Ontario.
Mr. Dane’s real-estate broker, who specialized in marketing bed-and-breakfast properties and inns, suggested he consider a larger property in New Brunswick to make enough income to support a family. The broker suggested the Marshlands Inn located in the small university town of Sackville, NB.
The property was originally a Victorian home built by William Crane in the early 1850s as a wedding gift for his daughter. The Read family purchased the home in 1895, added a third level and front porch in 1905, and converted it into an inn in 1935. The Marshlands Inn has played host to Canada’s notables and visiting celebrities, including the Queen of England.
After thorough investigation of other properties, Mr. Dane bought it in 2000, confident that his engineering and business background – coupled with his wife’s decorating and customer-service skills – would add value to the business.
Mr. Dane and his wife set out to restore the property to its former glory. The restoration took time and money but the results were soon appreciated by the clientele, who flocked to stay there.
One of the challenges the new owners faced was rising utility costs – oil, electricity and propane. The building was not well insulated and the heating equipment was old and inefficient. As oil prices rose those utility expenses grew exponentially and cut into the profitability of the business.
This, coupled with declining revenue at the time due to the SARS epidemic, an H1N1 scare and the sluggish economy, contributed to a bleak financial picture. Mr. Dane knew he could not pass on the extra cost to guests, as the inn operated in a competitive environment and rivals with newer, more energy-efficient buildings did not have the same high utility bills.
Mr. Dane had to come up with a solution to tackle this problem, and fast.
A pipeline was being installed to supply natural gas to households in the area. Mr. Dane ran some numbers and studied the options and decided to convert to natural gas. He waited a year to get better incentives from the gas company before signing a contract.
The new equipment converted the oil-fired heating systems, electric-water heating and the propane-gas stoves in the kitchen to natural gas. The conversion to new equipment significantly reduced the utility expenses. Later in the year, based on this experience, Mr. Dane switched to gas dryers for the laundry, increasing his savings even more.
For the next phase, he was keen to cut his utility bill further by installing independent climate controls in each room, allowing temperatures to be reduced in those that are not occupied. One year in, the changeover is complete and Mr. Dane and his wife are breathing a little easier and they have restored the inn to a healthier financial state.
Special to The Globe and Mail
Nauman Farooqi is an associate professor and chair of the Research Ethics Board in the Ron Joyce Centre for Business Studies of Mount Allison University.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.