Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue.
Some of the best business ideas are hatched when an entrepreneur recognizes an intersection of trends that spells opportunity. Such was the case for Terry Moshenberg.
In 2006, after selling his software company and pondering his next move, he noticed two things. The first was that the music business was imploding. "Professional musicians were in the sunset of an industry and looking to remain viable," he says.
At the same time, he recognized that many boomers with grown children were looking for opportunities to get back to the things they loved when they were younger – such as making music.
That's when League of Rock Inc. was born. The Toronto-based company, led by co-founder Mr. Moshenberg and business partner Topher Stott and supported by four employees and 15 contract workers, offers adults the chance to join a band and work with professional music coaches in a 10-week program – not unlike a hockey pick-up league. The company also sells corporate music-based team-building events and music leagues to businesses looking to boost employee engagement.
League of Rock has locations in Toronto and Ottawa, but Mr. Moshenberg is eager to expand into at least a dozen more cities across Canada and the United States. He would like to grow by selling licences across North America.
Finding interested people has been the easy part, says Mr. Moshenberg, who has relied on social networks and trade fairs to come up with potential licencees. It's qualifying them that has turned out to be harder than he thought it would be.
Mr. Moshenberg says he has met with at least 20 potential licensees, but he says he's wasted a lot of time and money developing relationships that, in the end, didn't work out for a variety of reasons.
He's trying to do things a little differently. He stopped looking for people with a music background and he is moving more toward those with an event-planning background. Recognizing that past interactions may have been too casual, he's also moving to formalize the process by drawing up a questionnaire that all would-be partners must answer.
But he doesn't think those initiatives are enough. "Am I asking the wrong questions?" he wonders. "What makes the right licensee?"
The Challenge: How can the company better qualify potential licensees?
THE EXPERTS WEIGH IN
Mark Satov, founder, Satov Consultants, Toronto
Being a licensor and being an owner/operator require different skill sets, and most importantly, each need attention.
I would be surprised if he has exhausted his growth potential at home. He should hire more employees at home with the aim of helping him run and grow the business to the point where he may be able to exit the day-to-day of selling and running events. Only then should he turn his mind to licensing. Hopefully by then the business will be big enough that it can afford to bring on a licensing expert to think through and execute all the elements of licensing, such as how to divide up territories, how to select and train licensees, what support to give them, and how to charge for his value.
A better questionnaire or checklist won't do it. Expanding through franchising or licensing is a serious business and you need to know how to do it well. He should stick to what he knows and get an expert in when he is truly ready.
J. Perry Maisonneuve, founder and principal, Mississauga, Ont.-based Northern Lights Consultants Corp.
First of all, it's a numbers game. How many people does (Mr. Moshenberg) meet with? He should expect a "close ratio" of 1 (per cent) or 2 per cent – so of 100 people you meet or who inquire, one or two people will actually close the deal. You have to be patient.
I recommend that he builds corporately owned locations first, then license them, rather than licensing right off the top. A potential licensee will have a chance to flip through the deposit books and look at the financials. They'll pay more when they don't have to take as big a risk. And he should focus on Southern Ontario first, so he can get in a car and drive to his locations to manage them instead of having to fly everywhere.
At the end of the day, it's about fit. He's looking for people who are similar but not quite the same as him.
Ken LeBlanc, co-founder and chief executive officer, Moncton-based PropertyGuys.com Inc.
We get 30 to 40 franchisee inquiries per week, and how we filter them hasn't changed much since we started the business 10 years ago.
First, we introduced technology as a filter. When people inquire online, we ask them questions like 'what territory are you in, are you willing to relocate, what level of investment are you comfortable with,' and other qualifying questions. This allows us to maintain a flow of franchisees with just one person working on it in our company. If he had to talk to these 30 or 40 people per week, it would never get done. The online questionnaire filters out about 50 per cent right off the bat.
Then we do a five-minute 'get to know you' telephone interview, where we're looking for character fit.
Step three is an online profile, which is based on the characteristics of our top 10 most successful franchisees. We profile them to make the Robocop of franchisees. We charge $250 for it. You'd be surprised how many fall off at that stage. If they aren't willing to invest, they aren't the right candidate. We don't make a dime off that $250 – it's a test to see if they're serious.
Now that we have a manageable number, we have a face-to-face interview.
THREE THINGS THE COMPANY COULD DO NOW
Build the business internally first
Hire more employees, open more corporate locations and expand more locally before going further afield.
Put a more detailed qualifying process in place
Use inexpensive technology, multiple layers of filters and several steps to weed out candidates and narrow the field to potential people with the right fit. Also be patient and ready to play a numbers game; a "close ratio" of 1 per cent to 2 per cent is likely.
Hire an expert
Stick to what you know and bring in a professional experienced in dealing with licencing.
Special to The Globe and Mail
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