Small Business Month

C M Y K S M A L L B U S I N E S S M O N T H - S U p p L E M E N T T O T H E W I N N I p E g F r E E p r E S S - W E d N E S d A y , O c T O B E r 2 1 , 2 0 1 5 1 0 SoutheRn exPoSuRe Learn how to succeed in the U.S. market M any Canadian companies are naturally drawn to the U.S. when they decide to export or set up operations abroad. It's also a proven launching pad for expansion to higher-growth developing countries. But for too many entrepreneurs, a U.S. expansion ends in costly failure. That's because Canadian companies often expand to the U.S. without making the necessary preparations. "Entrepreneurs tend to underestimate the challenges of expanding to the U.S.," says Carl Gravel, Director of Global Expansion - Consulting at the Business Development Bank of Canada (BDC). "The U.S. actually has many different markets. There are 50 different ways of doing things, depending on the state." The first step to a successful U.S. expansion is to thoroughly research your market. Contact industry associations, research competitors and ask the advice of industry insiders. "U.S customers will ask, 'Why you?'" Gravel says. "What are you bringing to the market? What is your unique value proposition?" It's also important to seek out reliable local partners such as distributors, sales agents or joint-venture partners to help you gain a foothold in the U.S. You can use the extensive services of government organizations such as BDC, Export Development Canada, the Canadian Trade Commissioner Service and the Canada Border Services Agency. Canadian business owners should also beware of U.S. tax laws. They are complex and enforced at the federal, state and even municipal levels, meaning a Canadian entrepreneur aiming to do business in several U.S. states could be in for a tax headache. When Noel Asmar founded her apparel company back in 2002, she had no idea most of her business would come from the U.S. To avoid incurring major start-up costs, Asmar focused her sales strategy online, launching Spauniforms.com in December 2002. Her first orders came from south of the border and presented immediate challenges and opportunities. "I was really small and stocked goods in my home, dropping items at the post office personally," she says. The company has since experienced average annual growth of over 25%, with about 80% of sales coming from the U.S. "Doing business there can be challenging, so you need good advice," says Asmar, a BDC client. One important challenge for Asmar was logistics. As her company grew, it became imperative for Asmar to deliver in the U.S., in an efficient and affordable way. She outsourced logistics — setting up distribution in the U.S. through a third-party firm to avoid customs delays and fees. The move allowed her to cut costs, improve customer service and reduce her stress levels. Currency fluctuations can have a major impact on a Canadian business's bottom line. Asmar's response to a rising Canadian dollar was to begin hedging, and it's now a central part of her international strategy. Her most critical piece of advice on how to succeed in the U.S. is to build a strong brand with an equally robust digital presence. "Be prepared to spend at least 15% to 20% of your capital on building your brand," she says. "Regardless of whether you're in a niche market, you need to set yourself apart in the U.S." For more information, download a free eBook guide to exporting and expanding outside of Canada at www.bdc.ca. ❚ JuSt WatCh me! ConteSt Community Futures Manitoba's Entrepreneurs with Disabilities Program (EDP) wants to hear from entrepreneurs with health conditions or disabilities. S hare an inspiring success story, and you could be among the winners in EDP's Just Watch Me! video contest. Last year, winners included young Beausejour entrepreneur Sydney Deneka, a high school student who launched Kozy Kritters by Sydney in 2012. Sydney, who has a rare disorder called Coffin-Siris Syndrome, embroiders personalized blankets for pets and babies. Her successful home business has attracted regular customers, and it allows her to give back to the community with donations to pet charities. Sonya Nicholson, who has psoriatic arthritis, was another winner for her business partnership Cool Dozen Micro Golf in Selkirk. And Holland entrepreneur Nancy Weicker, who has spina bifida, shared a winning story about her Independent Epicure Consultant business. The contest has gathered and shared inspiring stories since 2011. This year, the contest opens on Dec. 3. The deadline for video entries is Jan. 20, 2016 and the public can vote for videos starting Feb. 4. Winners will be announced Feb. 18. For information about the contest and other Community Futures Manitoba initiatives, visit www.justwatchmecontest.ca or www.cfmanitoba.ca. ❚ A cquiring a company can be a smart way to expand your business — especially in markets where it's hard to gain a foothold. But acquisitions can turn sour for a variety of reasons, including poor target selection, weak integration and inappropriate financing. A critical element often ignored by entrepreneurs is making sure that buying a business is the right growth strategy for your company. "Analyze what new value you could add to your company," says Enes Kula, Director, Growth & Transition Capital, BDC Capital. "Then, ask if you have the internal capability to create that value. If you don't, then an acquisition could expedite the process." The next step is choosing the right acquisition target. List strategic criteria the target company must meet and stick to them. Businesses often get caught up in the excitement of shopping for acquisitions and make the mistake of buying companies that aren't a good strategic fit. Once you've narrowed your choices, it's vital to do due diligence on your potential acquisition, investigating everything from its gross margin to working capital and inventory turnover. "One danger when buying a business is paying too much, especially when shopping in a hot market," Kula says. "Overpaying reduces your financial returns and increases your risk." Swish Maintenance CEO Shane Mahoney's patient approach to buying a company has been a proven winner for the cleaning products manufacturer, distributor and retailer. Mahoney has embarked on an ambitious growth strategy at Swish that includes acquisitions. Swish had previously paid for acquisitions with traditional bank loans, advances from the owners and cash flow. However, when it came time to finance its purchase of S.K. Sanitary Specialities Manufacturing, Mahoney turned to BDC and mezzanine financing. It's a debt product with flexible repayment terms tailored to suit particular situations, including acquisitions. The acquisition gave Swish a solid anchor in Western Canada and, with sales up significantly, the company was well positioned for more growth. When Swish next acquired White River Paper in Vermont in 2014, Mahoney appointed a full-time project manager to oversee the integration for the first year. The result is "a much higher level of employee engagement on both sides." Mahoney also decided to keep the White River brand, widely recognized in New England, and to rename Swish's entire U.S. division Swish White River. As well, White River's employee benefits were superior to those at Swish while costing the same amount, so Mahoney adopted those benefits for Swish's existing employees. The moves built trust and morale on both sides, and reassured White River staff that the acquisition wasn't a cold-hearted corporate takeover. "It's emotional for all staff," Mahoney says. "There's always a sense of insecurity. If you are inclusive and give employees the feeling they have a say in the future business, you get much higher commitment." ❚ aCquiSition StRategy: How to buy the right company 1. Consider various financing options. It's important to consider a financing structure that maximizes your repayment flexibility and reduces personal risk. Useful options include vendor and mezzanine financing. 2. Get an outside evaluation. Entrepreneurs may overestimate the value of their company, complicating an acquisition. Seek professional third‑party advice on their valuation. 3. Appoint and reward a project manager. A project manager can oversee the acquisition. Compensation should be, in part, based on the performance of the acquired company. 4. Adopt best practices. Look for best practices at the acquired company that you can adopt throughout your entire business. here are Four steps to a sMooth transition:

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