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case study

Vidcruiter's Sean Fahey


After graduating with a bachelors degree from the University of Moncton in 2004, Sean Fahey started his MBA program at Florida Atlantic University.

Knowing his entrepreneurial bent, he set a target for himself to become self-employed by the time he completed the degree. The business program, based in an affluent neighbourhood of Boca Raton, Fla., was home to a number of successful entrepreneurs who were regular guest speakers at the university. Mr. Fahey's ambition to become a successful entrepreneur was reinforced by listening to their success stories.

Partnering with a friend, he set up a small retail business selling belt buckles in malls. The business grew and, by the time Mr. Fahey graduated, the company had 13 locations in Canada and the United States employing more than 30 people.

Mr. Fahey moved to Toronto in 2007 and started to plan an expansion of his business, which was generating $1.5-million in annual sales. However, recession hit the business during the Christmas, 2008, season, driving down sales by almost half during the peak sales period. With sales sliding every month, Mr. Fahey took the difficult step of cutting his losses, closing the business in 2009 and starting to look for a job.


A new insurance startup hired Mr. Fahey to recruit sales agents across Canada. He soon realized that his work could be made much more efficient if he had a software tool that could streamline the hiring process. Looking around and finding nothing to match his needs, Mr. Fahey realized he'd found a market niche and the idea of Vidcruiter – an online job interview tool – was born.

After discussing the idea with a software developer friend and some recruiters, Mr. Fahey decided to take the plunge, setting up shop in Toronto to create the software in partnership with his friend.

The software provided savings of time and money by allowing human resource departments to filter applicants and provide an applicant tracking system to facilitate the hiring process.

Despite positive feedback from recruiters who expressed an interest in buying his software solution, Mr. Fahey realized that that he knew little about the HR and recruiting industry. He found that HR departments were not profit centres and did not figure high on the spending priority list of companies.

He also realized that a typical sales team did not have the necessary skill set to sell to HR departments, which found it difficult to change their practices.

With disappointing sales and money running low, Mr. Fahey decided to revisit his business model and make a strategic retreat. He moved back to Moncton in June, 2010, to work with his development team and focus on a more tech-oriented business model.


Mr. Fahey realized that his biggest challenge was to get HR departments to try out his software solution because of the high price.

He started off cutting prices by almost 70 per cent by introducing a subscription model, which was based on the number of users.

Although the price drop resulted in low sales revenue, it did the trick of attracting new HR departments to try Vidcruiter. Mr. Fahey calculated that low margins would be offset by high volume of business.

Next, he addressed the sales team issue by launching an affiliate program under which existing clients would get a finder's fee commission to refer new business.

He knew that word-of-mouth referrals would go a longer way to convince new clients to try out Vidcruiter than any direct sales effort would.

One of the leading items driving the burn rate in his business was the cost of personnel. Mr. Fahey moved away from a model of salary to one in which he offered employees compensation in the form of equity ownership in the company.

He did offer cash, but the premium of return grew as an employee moved from cash compensation to an equity compensation plan. The employee could also choose a combination of cash and equity as well.

Mr. Fahey obtained third-party valuation for the company to determine the worth of the ownership stake he was selling. Although this plan would dilute his ownership, he was more comfortable sharing the company with people he knew rather than outside investors.

The revised business model is working well as more and more companies sign up to try Vidcruiter. Mr. Fahey is putting the finishing touches on an aggressive marketing plan to be launched in January and is working on further fine-tuning the software to enhance the recruiting experience.

Special to The Globe and Mail

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.

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