When Mike Duffy looked at the adverse cash-flow position of his fledging landscaping and snow-removal business, he recognized he should have put more money in his reserve account.
His company, Yard Guyz, based in Sackville, N.B., was operating in an environment where his competitors were extending credit to customers over several months. They had the deeper pockets of more established companies to fund their operations and not worry as much about getting paid quickly.
To reduce overhead costs and to offer a more competitive price, Mr. Duffy had decided to mostly use his own money to finance equipment purchases rather than rely on bank debt. The strategy seemed good on paper, but in reality it made it difficult to secure bank financing to cover his working capital needs. To sustain Yard Guyz in the short term he had to come up with a plan to increase his cash flow.
As a kid growing up in Amherst, N.S., Mr. Duffy experienced first-hand the challenges and rewards of the entrepreneurial lifestyle, as his father, grandfather and aunt all owned and operated garages and gas stations in town. In 1999, after completing a BComm degree from St. Mary's University, he started working for an insurance company in Halifax. Over the course of six years, he climbed the ladder and became the youngest manager at the firm.
With the new position came a bigger territory and he ended up spending a significant amount of time away from home and family. With his work-life situation imbalanced, in 2004, Mr. Duffy decided to accept a branch manager's position in Moncton at Floors Plus, a retailer of flooring solutions. He had previously worked with the company on insurance claim cases.
It turned out to be a good move. Mr. Duffy excelled in his position. But in 2011, a strategic review led to downsizing and Mr. Duffy found himself out of a job.
Instead of seeking a new position, he decided to take charge of his future and start his own business. He vowed not to let something like this happen to him again. He had made significant amounts of money for other people, now he wanted to create some wealth for himself, and he was willing to live with the consequences of any failure.
After a great deal of research, Mr. Duffy decided on the yard maintenance and snow-removal business – he found a significant gap in the local market resulting from an exit by a landscaping company. While there was competition in the area, he was confident his personal interest and sales experience would give him a leg up. The business launched in November, 2012.
Mr. Duffy started out by giving customers discounts for early payments, taking advantage of lower overhead costs than his competitors. The next step was to aggressively build his client base by taking on smaller jobs that other companies would pass on, and that paid faster. His sales training was put to good use – he went out of his way to provide quality service to his clients.
For example, when one of his earliest customers asked him to paint parking lines at a rental property, instead of saying 'no,' Mr. Duffy bought the necessary equipment and did the job himself, earning a loyal client. His personalized service led to referrals, which increased his customer base.
This simple solution allowed Mr. Duffy to get his new venture in the black in the first year of operation. He added to his fleet of vehicles with bank financing and he hired two people to help with the increased work load. He's constructing a warehouse and looking at buying a competing business, which will add clientele.
He should be able to stabilize his cash flow and expand his business to nearby communities.
Nauman Farooqi is a professor and head of the department of commerce 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.