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Ugi Fitness co-founders Sara Shears, Deb Karby and Melanie Finkleman, and their Ugi ball (ADAM ROOTMAN PHOTOGRAPHY/COURTESY OF UGI FITNESS)
Ugi Fitness co-founders Sara Shears, Deb Karby and Melanie Finkleman, and their Ugi ball (ADAM ROOTMAN PHOTOGRAPHY/COURTESY OF UGI FITNESS)

John Warrillow

Looking to the future: How Ugi can set itself up for sale Add to ...

Writing for The Globe and Mail over the past two years has been a treat for me but I've decided it's time to stop talking about running a business and get back to actually running one again. I've recently launched a new software business and will be dedicating my time to it and so this will be the-last week that I will write my column. My last column will appear on Nov. 30. Thank you, readers, for sharing your time with me.

Ugi Fitness Inc. has come a long way since we first met back in October.

At that time, Ugi was suffering through its worst month in recent memory with inventory for its Ugi ball – the centrepiece of the company’s 30-minute full-body workout system – on back order.

Since then, Ugi has been on a roll.

It now has inventory and is starting to ship its product again.

Ugi co-founder and chief executive officer Deb Karby has inked a new deal with a distribution centre in Denver that will lubricate the process of getting its product from its Chinese factory to its customers.

November sales were up over 500 units, which represents a 50-per-cent jump over October.

The company has hired a full-time customer-service person, which not only relieves co-founder Mel Finkleman from a lot of tedious work, but also increases its employee head count by 25 per cent.

Sara Shears, also a co-founder, has passed her preliminary screen test at the home shopping channel QVC and will shoot her first segment in January. The hope is to sell 500 balls in 15 minutes.

The three co-founders have come a long way in a short time, but they’ve still got work to do before Ugi is a valuable, and sellable, company.

If the Ugi team ever wanted to sell their business, they’d need to focus on a few things:

Diversify their affiliate base

Right now, Ugi receives a lot of its traffic from a popular website called Bodyrock.tv, and, in return, Ugi sends Body Rock a cheque for every one of its users who buys a Ugi at Home system.

It’s a symbiotic relationship, but to become a sellable business, Ugi needs 10 more just like it.

An acquirer would likely get cold feet after finding out that such a high percentage of Ugi’s customers come from one affiliate. The company is simply too exposed to Body Rock.

Create a recurring revenue stream

Right now, Ugi works hard to get a customer and then sells to that customer once.

It needs to change its model to better capitalize on the customer base it is cultivating.

Acquirers want to know how revenue will continue once founders head for the exit door.

Having a recurring revenue model – like a subscription, a membership program or a series of products sold to existing customers over time – will help demonstrate that Ugi is a business that will continue after its founders sell.

Start measuring Net Promoter Score

The single best predictor of customers re-purchasing is a customer satisfaction survey called the Net Promoter Score.

It involves one question:“How likely are you to recommend the Ugi at Home System to a friend or colleague?"

By measuring the percentage of people who answer that question favourably, the Ugi team will have a forward-looking barometer of the health of their business.

When it comes time to sell, potential acquirers will be impressed with how long they have been using this measurement, which is employed by the majority of Fortune 500 companies, and many private equity firms, to measure the health of a customer base.

Figure out their growth strategy

Ugi’s founders need to decide if they are going to design their business around the Ugi ball or diversify into a broad lifestyle fitness company.

I think either strategy could lead to a sellable business one day, but deciding soon will allow them to focus their direction.

If they decide to make it all about the Ugi ball and go deeply into producing Ugi-ball-centric content, I think they could turn their business into an acquisition candidate for a direct-selling fitness company looking for the next hot product to sell to its existing fitness-oriented customers.

A different strategy would be to focus on their brand, bring out a number of products under the Ugi name, and sell a broader range of fitness-related products to their loyal community of users.

With a broad line of lifestyle products, Ugi might be an interesting acquisition candidate for an adjacent company with similar brand values – like a Lululemon Athletica Inc.– that wants a quick entry point into the fitness-products business.

It’s been a pleasure working with the Ugi team over the last couple of months. This is the last instalment of the series, so I want to say a special thanks to Ugi’s co-founders, who have let me into their lives over the last eight weeks.

It was a privilege, and I, for one, will be watching and cheering from the sidelines in the coming years. Good luck, Ugi!

Special to The Globe and Mail

John Warrillow is a writer, speaker and angel investor in a number of start-up companies. You can download a free chapter of his new book, Built to Sell: Creating a Business That Can Thrive Without You.

Join The Globe’s Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT

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Follow on Twitter: @JohnWarrillow

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