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.
The turning point for Men in Kilts, a window cleaning company with headquarters in Surrey, B.C., can be traced to the moment in 2009 when Tressa Wood picked up the phone and called the company’s founder, Nicholas Brand, a Vancouver resident of Scottish descent.
Ms. Wood, who had just left her post as vice-president of operations for the successful Vancouver-based franchise 1-800-Got-Junk, had noticed Men in Kilts’s trucks, which feature an image of a squeegee-wielding man in a pleated tartan skirt – much like the company’s window cleaners, who all show up for work in kilts and work boots (with shorts or leggings preserving their modesty or body heat).
“I really noticed the brand, which reminded me of 1-800-Got-Junk,” recalls Ms. Wood. “And one article I had read about them mentioned that they were interested in franchising the business, so I reached out to them.”
Today Ms. Wood is chief executive officer of Men in Kilts, and the enterprise has transformed from a single, company-owned operation to a franchise operation with five locations in British Columbia, Alberta and Ontario, and five more in the United States. In the two years since it converted into a franchise operation, Men in Kilts’s revenue has grown to a projected total of almost $7-million this year from about $1-million in 2012, Ms. Wood says.
“Franchising, which involved systemizing our operation and centralizing certain functions, such as our call centre, really helped us grow so quickly,” Ms. Wood says. “When you have it all centralized, you can just focus on growing the business.”
Going the franchise route can be an effective business strategy for rapid geographic expansion and revenue growth, says Norman Friend, founder and president of Franchise 101 Inc., a consulting firm that advises on expansion strategies such as franchising, licensing or dealership models.
But the move toward franchising must be done with extra careful consideration, Mr. Friend says.
“You have to really analyze your business to see if it will work as a franchise model,” he says. “Can you duplicate your procedures or are they too complicated? Is it a nice business that will get enough people interested in it? And most important of all, is there something you offer that a franchisee cannot do without, that justifies a franchisee making an investment so he can operate a business with your particular brand, products and systems?”
Ideally, Mr. Friend says, a franchise strategy will include a plan to build locations in clusters, instead of in scattered sites. This is important, especially in the early stages of building a franchise network, because franchisees should be able to get together regularly to share best practices, he says.
For Ms. Wood and Mr. Brand, what made it possible to realize their vision of going franchise was their decision to form a partnership with Window Works, a Calgary window cleaning company that was twice the size of Men in Kilts. The owner of Window Works came in as a shareholder and partner, and converted his own company to a Men in Kilts franchise.
“We didn’t want to just go out and raise a few hundred thousand dollars; we wanted an investor who could add value to the company,” says Ms. Wood, noting that Window Works brought in 20 years of experience in the industry and a large customer base. “He wanted a brand – his company had been flat for about a year – and growth.”
What Men in Kilts got from their investor and partner was “smart money,” notes Mark Satov, founder and leader of Satov Consultants Inc., a Toronto-based business strategy consulting firm. Smart money, says Mr. Satov, is cash infusion with added value – such as an investor’s experience, business connections or customer base.
“Getting smart money is critical to the success of a small business,” Mr. Satov says. “They usually need advice that’s wide-ranging and free, and the nice thing about smart money is that the people who have given you the money are motivated to give you sound, free advice because they want to see a return on their money.”
While there are risks when small businesses pursue partnerships with larger entities, Mr. Satov says the earlier revenues of Men in Kilts and Window Works put both companies in the small-business category. But their combined size and experience created the heft needed to start franchising.
Still, whether they’re negotiating with a $3-million company or a multinational, it’s easy to see how small business owners can feel intimidated when dealing with a larger enterprise, Mr. Satov says.
“But you shouldn’t be intimidated,” he says. “Find out what the large company is looking for – obviously you’ve got something that interests them or they wouldn’t be talking to you – and negotiate with confidence.”
Mr. Satov suggests getting professional help that “matches the sophistication” of the larger company.
“Large companies will have lawyers, finance people and templated documents and agreements,” he says. “They’ve been down that road many times before, so be sure you’re coming in with someone who has experience negotiating funding deals.”
Paul Woolford, a partner at KPMG Canada’s enterprise practice, says it’s important to ensure that both negotiating parties – the business seeking cash and the investor – don’t become too focused on the financial aspects of the deal.
“Too often people come together only for economic results,” he says. “But the more successful relationships happen when both parties are sitting on the same side of the table, not across from each other with one of them saying, ‘You’re going to do this because I have to get my equity or principal back.’”
With their shoestring budgets, small-business owners can sometimes be too quick to accept investor dollars, Mr. Woolford says. He urges caution – and a lot of homework.
“Do your due diligence and really get to know the core values of the people you’re getting into bed with,” he says. “And make sure they really get to know you – be an open door and tell what all the risks and benefits are, because it’s easier to get married, tough to get a divorce.”
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