Day 4 August 25 2009

Lead to WinSlide 1

Day 4, Tuesday August 25

David Hudson Overview of Days 4-6

Chuck Colford & Brian Hurley Operations

Mike McInerney & Irene Kohut Aligning human resources with business strategy

Kevin Goheen Optimizing SR&ED claims

Tony Bailetti Peer opportunity assessments

Doug Colley NRC Industrial Research Assistance Program (IRAP)

David Hudson Company introductions

Lead to WinSlide 2

Overview of Days 4-6

David Hudson

Lead to WinSlide 3 August 25, 2009

Overview of Days 4-6

Day 4• Founders, boards, teams and

operations• Human resources• SR&ED and IRAP• Peers’ opportunity assessment• Participants introduce their

companies

Day 5• Sales• Pricing and delivery• Key legal issues• Realizing business value through

patents and intellectual property

Day 6

• Reviewers’ opportunity assessment

• Phase III: Accelerate sales to first customers

• OCRI, Ottawa Chamber of Commerce and DE-CLD

• Social

• Certificates of Achievement


Requirements

• Establish businesses that can employ a minimum of 6 talented technology individuals in Canada’s Capital Region over the next three years

• Attend 100% of 6 training days

• Deliver presentations on Day 4 afternoon and evening as well as Day 6 morning

• Contribute to Phase III: Accelerate sales to first customers


Groupings: 34 individuals in 24 opportunities

I. Mobile applications

II. Content and media III. Health safety services and technology

IV. Software V. Consulting and applied technology

Location Case Room 1 Case Room 2 Suite 350 Case Room 3 Case Room 4

8:30 a.m. Nestor AmayaKenn Hussey(Ultra inexpensive wireless thing)

Donald Smeth(Media DigitalSignage)

Don Ellis, Alan Graves(Elder care application service provider)

Sharon Lewinson, Tom Lewison (Rideshark)

Bilal Ahmad(Margalla Works)

9:00 a.m. Ben Cliffe, Anoop Nannra(Mobile apps suite)

Daniel Crenna (Lunarbits)

Prakash Naidu,Kshirsagar Naidu(Multipoint stimulation)

Yi Li(Enterprise rights management)

Mihaela AndronicJerry Carver(Business environment mapping and shaping)

9:30 a.m. Randy Jones(Report away mobile)

Rob Johnstone, Louis Payant(Learnetica)

Reinhard Messner(ERP for ISO certification)

Joe Babiarz, Marvin Krym, Guyves Achtari (The unwired enterprise)

10:00 a.m. Jeff MacDonald (Mobile applications suite)

Chris Justus(Biz Quiz)

Art Munro(Seven Day Office)

Ian Brown(Career search engine)

10:30 a.m. Adam McNamara,Tariq Zaid (Hosting for business games and business applications)

Dinesh Shah(AuthorX)

David Nadeau (Infoglutton)

Terrence Chen(Inefficiencies in software development process)

11:00 a.m. Oscar Vargas(Warehouse tracking)

Pat Seemel(Structured group facilitation)


Lead to Win

“Operations”August 25, 2009

Chuck Colford andBrian Hurley

“The time has come,” the Walrus said, “To talk of many things”…

- Lewis Carroll

…A great many things indeed


Operations – Not such a dirty job

It can always be worse…


Scope of Operations

• Finance• Human Resources• Engineering• Manufacturing and Supply Chain• Customer Support• Product Management• Marketing• Sales• Site Management• ICT • Board of Directors• Investors• Advisors


Scope of Operations

• You will not be an expert in all domains – and don’t need to be

• You do need to know how to build a team and get results from the team

• You do need to know about where the bear-traps are – learn from the mistakes and pain of others


Operations – Practical Advice

Pay attention!

We will tell you some things that no-one else may have ever told you…

that might save you from a world of grief!

“In theory, there is no difference between theory and practice…

In practice – there is!”

Theory Practice


Agenda

• The Team• Steering the Ship• Selling Related Finger Food• Money Related Fun• Burnt Flesh Potpourri


Self-Awareness is Important toOperational Success

• Know yourself

• Cover your weaknesses

• Hire people who are better than you to strengthen the team

• Learn from your mistakes… or better yet, from the mistakes of others


Hiring Great People

• Structured interview approach against a written role description to probe if they are suitable candidates

• During initial call:– Be explicit about what the expectations are in your start-up

relative to a big company – better to scare them away then hire the wrong person

– Share company’s objectives and vision – they must want to be part of the quest

– Share your company culture – it must resonate

• Invest time and resources on candidate selection in stages, e.g.

– Call with designated internal recruiter– Meeting with hiring manager– Meetings with other team members– Reference checks– Offer/negotiation


Hiring Lots of Great People Quickly

• Get a professional to lead the effort

• Centralize the effort and establish a pipeline process

• Prepare a hiring collateral package

• Only bring in working staff for good candidates

• Get creative on attracting attention and buzz

• Great people know great people

• Keep the bar high

• Get a professional to lead the effort

• Centralize the effort and establish a pipeline process

• Prepare a hiring collateral package

• Only bring in working staff for good candidates

• Get creative on attracting attention and buzz

• Great people know great people

• Keep the bar highhttp://www.ottawabusinessjournal.com/288580326461284.php


Terminating People Who Don’t Fit

• Formal employment agreements make things easier

– “Without cause” terms should be defined in contract

• Engage HR professional – easier to do it right than to deal with consequences of a poorly executed termination

• Treat employee with respect• Never hire anyone you are not willing to fire

– Avoid hiring founder’s relatives or spouses– Avoid hiring friends– Avoid hiring investor friends or relatives– etc

• If you ever enjoy firing people you should consult a doctor


Rock Stars (“Big Names”) Can Help or Hinder

• Big Names can help – Experience– Open Doors– Reduce interval to sales– Help recruit

• Typical Roles– Advisor– Management– Board Member

• How– Personal relationships and

introductions– Don’t be shy

• Why– Exciting Vision– Upside– People– Personal visibility– Access to people or

companies– Retired and bored

• Big Names can Hinder– Big ego– May not actually work

very hard– May not deliver on

commitments– May not hang around

long– May work to replace the

founders– May try to redirect the

company into a company they want to do (or have done in the past)

– ….


Hiring is NOT your only option

• Escape your “employee mindset” experience– Many of you will bootstrap and grow by contracting– So why then is the natural instinct to fill up with employees?

• Advantages to using contractors– “Try before you buy” – Easy to escape bad recruiting

decisions– Limited obligation – reduces your liability– Supports variability of your business– Good sub-contractors can become great advocates

• Disadvantages– Less “loyalty” (often overstated – HBR “They’re not your

people”)– More turnover & recruiting efforts to replenish– Grant incentives may not apply (SRED, et.al)– Harder to establish “brand”

Best of both worlds is possible –

Contract first and hire if good fit


Outsourcing by Function

• Very common to outsource things that are not:– Your core competency– Where you build value

• Common functions– IT, Website development & maintenance– Office Manager, Clerical, Payroll– Bookkeeping, Accounting– Legal Counsel, IP (Patent Agent) work– HR– Specific Subject Matter Experts (SMEs) as required

• SRED or IRAP write-ups

• Sales, Marketing

Getting the right expertise when required may be critical to success


Outsourcing – Thinking Outside the Box

• Pay an open source or shareware developer to install, personalize or add a key feature to their application so it better serves your business

• Rather than cash: Can services be bartered, paid in stock or warrants?

• Variable rates: Pay one rate pre-revenue; then top up to premium rate post revenue?

Consider all possibilities! Do what makes sense.


Subcontractor Agreements

• When dealing with subcontractors, where you direct the work, you should always put in place a standard sub-contractor agreement.

• Why?– Rate, payment schedule, GST in/out, termination notice

periods are clearly established– It legally identifies them or their corporate identity including

business/GST number– Defines who owns IP– Liability: what if they damage clients facilities, breach

security?– NDA, confidentiality requirements. Any security clearances

or checks required– Reporting requirements; Scope of work defined.– Supports you when audited “So – what is this cheque you

wrote for?”

These are NOT rocket science –

your legal counsel will have one.

Use it!


Volunteers

• Part of almost every early stage start-up• Launching can take up to a year or more• Volunteers have a typical “shelf-life” of 4 – 6 months

– Volunteer commitment can range from a few hours a week, e.g. typically 8 hours for someone already employed and up to 40+ for unemployed volunteer

• Commit in “chunks”• Formalize ownership as appropriate, e.g. restricted stock, stock

options• Protect your IP (if appropriate), e.g. assignments, NDA’s and

“consideration”• Understand and appreciate volunteer motivations, e.g. learning

something new, like the people, “plan B”, etc– Be aware of impact of decisions/progress to help anticipate need

to back-fill/re-commit, • Expect volunteers to “come and go”


Advisors Can Fill Gaps Inexpensively

• Engage experts to be advisors:– In areas of weakness (e.g. sales)– Where it is too early to hire a full time person– Where they can provide a customer perspective– Where they are a potential partner or channel

to customers– To provide credibility

• Limited time commitment – a few hours a week or a month

• Advisor compensation:– Free – usually as long as the work is

interesting, pleasant and not excessive– Stock– Retainer/honorarium/contract (i.e. cash)


Mentors Can Help

• Mentoring is a process for the informal transmission of knowledge, social capital, and the psychosocial support perceived by the recipient as relevant to work, career, or professional development; mentoring entails informal communication, usually face-to-face and during a sustained period of time, between a person who is perceived to have greater relevant knowledge, wisdom, or experience (the mentor) and a person who is perceived to have less (the protege)” [Bozeman, Feeney, 2007]

http://en.wikipedia.org/wiki/Mentoring


Agenda



Managing Teams – Vision, Culture

• Vision– Points the way, generates

excitement and common purpose

• Culture – Sets the context for

independent and group actions in situations not formally specified, establishes norms

“There go my people. I must follow them, for I am their leader”

– Mahatma Ganhdi


Managing Teams – Take Charge

• Only one leader – Not a democracy

– All the founders can not be the CEO

• Set Roles and Responsibilities– Reporting structure – formal organization chart

– Decision Making Authority

– For work and people management – not rigid communications silos

– Orients new staff

• Setting Objectives– Company, Individual

– Must do, WBN

• Staff performance management– Dealing with low performance

– Dealing with disruptive individuals

– Regular reviews and feedback

• Staff development– Informal, formal

– Selective apprenticeship

“When in command… take charge”


Managing Teams – Day to Day

• Regular staff meetings – efficient, regular (even if you are not there)• Action registers – with follow-up and load balancing• Make compromises explicit and formally managed• Common (enforced) secure file repository (more on this later)• Common (simple) reporting

– Limit formal reporting to what is required to get the job done and consistent with phase

• All-hands meetings – inform, motivate, celebrate, socialize• Transparency – be open in sharing information and responding to

questions • Accessibility

– Open door policy– Management by walking around – engage, ask to hear the problems and over-

communicate the vision/plans/successes– Skip-level lunch meetings – inform, engage, socialize

• Carry the water when required• Lead by example – your actions define the acceptable “norm”• Formal policies as (and when) required, e.g. use of open source,

working from home, vacation management, travel, expenses


Bringing the Team to Bear

• Listen more than you talk– Use active listening techniques where you

summarize for understanding and confirmation

• Seek out and engage all team members– Control group discussions in a positive manner

to draw out the quiet members

• Use delegation effectively and frequently• Learn and use common methods to allow

a team to:– Make decisions

– Solve problems

– Develop new ideas

– Learn from the past and look to the future

– Engage in continuous improvement

– Manage conflict constructively


Delegation

• Clearly define the task– What– When– Scope of authority– Resources available– Reporting requirements

• Select the best person for the job• Train your staff for the tasks• Motivate people by trusting them• Get and give feedback

– How do they feel about their progress?

• Let the assigned people to do the work!– Avoid jumping in or interfering

Bring everyone to bear on building the business


Problem Solving Techniques

• Appreciation - Extracting maximum information from facts• 5 Whys - Getting quickly to the root of a problem.• Cause & Effect Diagrams - Identifying likely causes of problems• Affinity Diagrams - Organizing ideas into common themes• Appreciative Inquiry - Solving problems by looking at what's going right• Flow Charts - Understanding process flows• Risk Analysis and Risk Management• SWOT - Analyzing your strengths, weaknesses, opportunities and threats• PEST Analysis - Understanding "big picture" forces of change• The Marketing Mix and the 4 Ps - Understanding how to position your

market offering• The Ansoff Matrix - Understanding the different risks of different options• The Boston Matrix - Focusing effort to give the greatest returns• Porter's Five Forces - Understanding the balance of power in a situation• Core Competence Analysis - Get ahead. Stay ahead.• USP Analysis - Finding your competitive edge• Critical Success Factors - Identifying the things that really matter for

success• The Greiner Curve - Surviving the crises that come with growth• The McKinsey 7S Framework - Ensuring all parts of your organization

work in harmony

www.mindtools.com


Leveraging Creativity

• Reversal - Improving products and services

• SCAMPER - Generating new products and services

• Attribute Listing, Morphological and Matrix Analysis - Creating new products, services and strategies

• Brainstorming - Generating many radical ideas

• Reverse Brainstorming - A different approach to brainstorming

• Reframing Matrix - Looking with different perspectives

• Concept Fan - Widening the search for solutions

• Random Input - Making creative leaps

• Provocation - Carrying out thought experiments

• DO IT - A simple process for creativity

• Simplex - A powerful problem solving process

• TRIZ - A powerful methodology for creative problem solving

www.mindtools.com


Decision Making Techniques

• Pareto Analysis - Choosing what to change

• Paired Comparison Analysis - Working out the relative importance of different options

• Grid Analysis - Making a choice taking into account many factors

• PMI - Weighing the pros and cons of a decision

• Force Field Analysis - Analyzing the pressures for and against change

• Six Thinking Hats - Looking at a decision from different perspectives

• Starbursting - Understanding options better by brainstorming questions

• Stepladder Technique - Making better group decisions

• Cost/Benefit Analysis - Seeing whether a decision makes financial sense

• Cash Flow Forecasting with Spreadsheets - Analyzing whether an idea is financially viable

• Decision Trees - Choosing by valuing different optionswww.mindtools.com


Decision Making – Who, What, When

Key concepts:• Who owns the responsibility?

– Designated– Delegated

• What stakeholders are affected?• Quality - Are all the facts and alternatives known? • Time - How long until the call must be made?

A BAD decision is one that:– Is made by the wrong person - Violates delegation or authority– Does not consider the impact on the stakeholders– Is unsupportable by the majority of stakeholders– Is made in haste (before facts and alternatives are understood)– Takes too long (occurs too late to have impact, squanders

resources)Don’t confuse a bad decision with a bad outcome


Decision Making – Calling the Shots

When the person who owns the decision is known (lets assume it is you), various styles may be employed to make it:

1. You decide alone.

2. You seek information and then decide alone.

3. You consult with individuals and then decide alone.

4. You consult with the group and then decide alone.

5. You share the problem with the group and you all mutually decide what to do.

• None of the above are wrong.

• The person who owns the decision chooses.

• When choosing to consult for information or advise, be careful not to send the wrong signals – if you plan to make the call yourself.

Leadership is always situational!


Decision Making – Balancing buy-in with Action

• Since the Magna Carta – the King has not had absolute power:– The CEO serves at the pleasure of the Board– The customer can take their business elsewhere– “They’re not your people” – They can leave with 2 weeks notice– So… Buy in is important

• You must balance need for “buy-in” with need to move forward• You will fail if you try to please all the people all the time

– Leadership is not about popularity– All your decisions will not be loved (It sucks to be you - get

over it!)• You will exhaust yourself and your team if everyone needs to be

involved in everything– Use decision style #5 sparingly – for serious or “bet the

company” issues– Beware compromise – It produces horrible results!

Compromise is often a position that no-one supports.– Instead, strive for consensus – A decision that everyone can

agree to support (rather than undermine)

Very few decisions are fatal –

Get on with it!


Decision Making Tips – “House Rules”

1. Wait until the last minute - but not a minute later. "If you're not going to do anything differently tomorrow by making a decision today, then don't make it today. Situations change; markets shift. That's not an excuse to procrastinate. But the best decisions are just-in-time decisions. You should decide as late as possible - but before you need to take action."

2. Don't be afraid to argue."Conflict is good for an organization - as long as it's resolved quickly. Unresolved conflict is a killer. That's why real leaders deal with conflict head-on. They take individual feelings seriously, but then they get beyond those feelings. One way to make progress on a tough decision is to agree on what the question is. Agree on the wording and write it down. Debate often stems from having different ideas about what's being decided."

3. Make the right decision, not the best decision."People can spend months debating the 'best' decision without actually arriving at any decision. Every decision involves risk. And if there are 10 ways to do something, 8 of them will probably work. So pick 1 of the 8 and get going. Life's too short. You have 10 more decisions to make after this 1."

4. Disagree - and then commit."Not everyone gets a chance to decide, but everyone should have a chance to be heard. Without at doubt, the most vigorous debates yield the best thinking. But once a decision is made, you should not be able to tell who was for it and who was against it. Fully supporting decisions that have been properly made is a condition of employment."

- Dave House – Bay Networks


Conflict Management

• Conflict is natural - happens in every organization

• Conflict is good – brings out different points of view

• Unresolved conflict is a killer – stops progress, destroys teams


Conflict Management – Straight Talk

• Address the issues directly with the person with whom you have the conflict– You may have misunderstood– They may have misunderstood– They may not have all the

information you have– You may not have all the

information they have

• If possible do it privately and 1 on 1



If you are in disagreement:

• State up front that you disagree – explain why

• Ask the other person to state why they came to their decision

• Do not attack• Actively listen – ask questions

and get clarification – be open to change

If someone disagrees with you:

• Listen to their position• Do not be defensive – consider

alternative options• Actively listen and feed back what

you think you heard• State your position• Ask questions – be receptive to

change



Recognize the conflict

Address directly

State your case

Listen

Escalate

Discuss

Gather more data or meet with consultant

Implement

AgreementNeed

information/consultant

YES

YES

NO

NO


Time Management

• Time management is extraordinarily important!

• Self-discipline • Key elements of effective

time management:– Goal Setting– Activity Planning– Prioritization– Prioritized To Do Lists– Scheduling– Managing Interruptions

http://blog.iqmatrix.com


Avoid Busywork from Investors

• Investors will tend to use their portfolio companies– To extend their own personal research and support groups– Which defocuses you and sucks time and energy – Common practice is to call up a portfolio company to do

research on other deal flow items• “What do you think about…”• “I need a white paper on…”• “How would your offer stack up against…”

• Even if you delegate, you will be dragged into discussions later

• It is a slippery slope– Carefully balance collaboration goals with need to keep your

business focused on winning customers. – Once you have done a few, the precedence is established and

it is more work to wean them off– Be mindful what is occurring.


Meeting Tips

• Very few meetings make you any money – minimize these– Always ask yourself “Why do we need to have this meeting?”– Know before it starts – Know what you will have when it is done.

• Not everyone needs to be in every meeting– When you have a small team, it is important to manage time well since it is so scarce.– If a key player is missing consider rescheduling; rather than having the same meeting

twice.– Bring who you need to meeting but not more then you need

• “Start on-time/finish on-time” is a cultural thing– You will set the example and lead culture – You get what you demonstrate and tolerate.– No golden rule, but avoid mixed messages.

• Informal (break and meal) times are often highly productive– Frequently seen to be more valuable than the formal portion – Don’t skip these– Especially when bringing multi-site people together– For off-site meetings to pay; you need to keep people together off-hours to extract the

value• Get in the habit of documenting

– Purpose, Participants, Agreements and Actions– Blog, Wiki probably better than email– You can then see if you are getting value, – And if you are following through


Meetings - A Team Model (Projects)

• Core Team:• this is the project team accountable for the

deliverables• the team sets it’s objectives and plans • members are on the team for the project duration

and commit to be at all team sessions• should identify a set of Subject Mater Experts , or

Interested Presenters for info/skills required

• Subject Matter Experts, Invited Presenters:• are prepared to provide info or give team detailed

technical guidance• are not required to be at team meetings unless

needed by core team• are able to use their time in team interaction more

effectively

• Listeners:• people with applicable interest in the outcome of

the team• may be on distribution for all team minutes• can send info to team or give feedback

• Core Team:• this is the project team accountable for the

deliverables• the team sets it’s objectives and plans • members are on the team for the project duration

and commit to be at all team sessions• should identify a set of Subject Mater Experts , or

Interested Presenters for info/skills required

• Subject Matter Experts, Invited Presenters:• are prepared to provide info or give team detailed

technical guidance• are not required to be at team meetings unless

needed by core team• are able to use their time in team interaction more

effectively

• Listeners:• people with applicable interest in the outcome of

the team• may be on distribution for all team minutes• can send info to team or give feedback

Listeners

Subject MatterExperts

InvitedPresenters

CoreTeam

TheCurious


Operations – Risk Management

This is simply a tool to gauge risk

Bias your energy to Mitigate –

Not DebateL M H

IMPACT

L

M

H

2 2

1 1

PR

OB

AB

ILIT

Y2 1

• Prioritize which ones to attend to first; which next (if capacity remains).• Considers the two dimensions of risk • Goal is to quickly identify KEY risks for attention / action• Allowed to be subjective - minimize discussion, debate - Save time for action.


Decision Aid – Consider Boundaries

Consider boundary conditions –

In practice, outcomes are often nearer the extremes than the centre.

Beware opposing corners.

Best thing that can happen is…

Worst thing that can happen is…

Party A Party B

Best thing that can happen is…

Worst thing that can happen is…


Agenda



Don’t Let People See the Dog

• PowerPoint template – fonts, colors, format

• Email signature

• Logo variants allowed – on dark or light background, with tagline and without

• Letterhead template

• Business cards template and common vendor to produce

• Brochure template

• Establish basic common collateral set: company/product awards, corporate overview, product overview, etc

• Domain name and standard email naming convention, e.g. [email protected]

– Don’t use personal email addresses for business purposes!

• Professional website – even if only one slick-looking page

• Use a professional to polish important presentation slide sets, e.g. www.bittnerdesigns.com


Sales Management Basics

• Define:– Sales plan – target customers and characteristics– Sales process – steps from qualification to close– Sales pipeline – estimate volume at each sales step, ratios don’t

lie– Sales targets – quarterly, core element of business plan– CRM tool – Salesforce, SugarCRM, etc

• Staff to ratios as necessary to meet your sales targets• Hire appropriate to your stage and your sales model

– Not all “sales” roles are the same (e.g. hardware/software) and include roles such as: Business Development, Channel/Partner Development, Sales, Inside Sales, Marketing, Technical Sales Engineer, Product Manager

• Establish compensation plan based on need/phase – First sale? Volume? Margin? New Market Penetration?

• Weekly sales team reviews– Review from CRM tool – make it the bible– Look at what isn’t working – adjust, adjust, adjust– Replace sales staff that are not a good fit or are not delivering


Lead to Win Example 2009 Pipeline

Pipeline Stages

Conversion % From One Stage to the Next

Numbers for LTW To Generate 1 New Business


Tip: Not all Customers make good Leads

Customer Leads not same as Lead Customers

• Must differentiate amongst the three to use finite resources/time wisely.

• Early wins are about relationships –Must manage to a small number of simultaneous trials - staggered windows; make each one “feel” special.

• Managing expectations is just as important as managing deliverables.

• Validate before you scale up.

• In ramp – methods change – Can’t make each customer feel special.

Customer Leads not same as Lead Customers

• Must differentiate amongst the three to use finite resources/time wisely.

• Early wins are about relationships –Must manage to a small number of simultaneous trials - staggered windows; make each one “feel” special.

• Managing expectations is just as important as managing deliverables.

• Validate before you scale up.

• In ramp – methods change – Can’t make each customer feel special.

3 types of pre-sales “customer encounters”

1. Baiting the Hook – Generate awareness, interest, pull– Demo, Trade Show, Press, Partner or channel

recommendation

2. Product validation– Get your product right– Alpha Trial, Beta Trial, pre-GA soak

3. Customer acceptance– Generate revenue – Lab Trial (CAT), Bake Off

You may blow your brains out if you try to do validation with #3

(Early adopters are a different breed)


Calling on Customers - Tips

• Respect the customary dress codes– Business attire as appropriate to the locale

• Manhattan, TO Financial District – Suit & Tie (gents)• Pressed shirt, Belt• Silicon Valley – No tie; Golf shirt; jacket probably

– When was the last time those shoes were polished?– Personal grooming is important – Haircut, Shave…

• Take an extra shirt– Coffee spills happen at the worst times!

• Be on time– Traffic sucks in big cities (even if you know they way)– I usually skip hotel breakfast; get to the client’s building early

and eat nearby– If so, take toothbrush and/or mouthwash to freshen up before

meeting

• An umbrella can be a life saver

Treat EA’s with great respect – They can literally open or close doors


Contain Feature Creep

Resist the urge to add in “features” before the core product works.

-Graphic

-– Peter Evans (Riverdale Partners)


Agenda



Money Related Fun Stuff

• Managing Cash• Managing Cost• Managing Equity


Budgeting and Cash Management

How Any Firm Fails: Run out of MoneyAirplanes crash when they run out of altitude prematurely.

Cash is your altitude!

Dollars (& credit) on hand + Money IN- Money OUT ---------------------must be > $ 0 to survive

NO MATTER HOW GOOD THE IDEA!

Starting altitude + rate of climb x time- rate of descent x time ---------------------must be > 0 to survive (unless you are over a runway.)

EVEN IF THE PLANE IS PERFECT!

• Someone in the firm MUST be responsible for managing cash flow– Monthly projection of what is coming in / going out

– Accounting package or spreadsheet is fine

– Closer management when the cash is getting low

– Keep track of all liabilities

– Always remit your payroll taxes!


Watch Cash Outflow & the Bottom Line

OUTFLOW DEC JAN FEB MAR APR

Payroll Expenses 162,000$ 162,000$ 170,000$ 170,000$ 185,000$

Payroll: Sales Bonus -$ 1,125$ 7,750$ 12,400$ 18,083$

Payroll: Other Bonus

Payroll (Nov 30 due) 162,000$

All other Expenses 67,000$ 72,000$ 72,000$ 72,000$ 75,000$

Expenses (overdue) 20,000$ 20,000$ 10,000$ 10,000$

Supplier-A $40,000

Non-payroll Taxes (due) $35,053

Debt: Interest Payments $90,500

Debt: Principal Payments $50,000

($434,803) ($177,625) ($135,750) ($254,067)Net Cash Flow

• Early detection creates more opportunity to work the issues.

Are you tracking to plan?

Getting better or worse?


Group Benefit Plans

• Your company can buy coverage similar to big firms– Dental, Vision care, Prescription and Hospital

• Typically need 6 members or more– Varies by supplier

• Small groups will likely need medical evidence for each participant– Histories– Medical tests

• Suppliers: Insurance brokers or Canada’s large Insurance companies

• Beware: US coverage can be VERY expensive• Initial US coverage options:

– Use COBRA and pay their benefits cost– Pay a monthly supplemental benefit for them to use for a private plan

(which goes away when company plan is in place written in as part of employment contract)

• Possible to put in place self coverage– But make sure it is capped (unlimited exposure would be bad!)– Understand administration effort required


Travel Cost Tips (Small team)

• Even as a small team, you can manage your travel costs well– Plan ahead; arrange multiple visits on each trip– Visit your local travel agents – find one who wants your

business and book through them; Saves you time– Leverage your client’s corporate rates/travel agent– Negotiate with hotels; Ask for the day manager; Visit while on

other trips. Even on a few trips this can make a difference– www.priceline.com plus BetterBidding.com (see

www.mahalo.com/how-to-successfully-bid-on-travel) – Flights: www.flightnetwork.com (Canada) www.webflyer.com– Hotel FFPs – Save on food, internet, phone– IP Phone or Skype work well in many locations– Beware cell-phone plan roaming charges; hotel LD charges

• You can go too far!– Safety is important– Location is important– Cleanliness is important

Always a balance of time vs. money –

Don’t waste $100/hr time for something that can be done for $10/hr


Travel Cost Tips (Large team)

• Travel approval process – control, control, control – what, who, why – do you really need 2 people at the same conference?

• Travel and expense policy – limits, expectations on what is considered allowable/reimbursable, rentals, hotel rates, meals, sundry, entertainment, economy/biz class, etc

• Designate one person who is authorized to book and manage all authorized travel arrangements – consistency, speed, expertise, accountability -- $10/hour versus $100/hour labor

• Traveling to same location repeatedly (or having staff come to main office repeatedly) – negotiate a special rate at a hotel and mandate its use, rent an apartment

• Use corporate credit cards – tracking, simplify expensing, make it easier for employees

Control

Process

Mandate


Avoid Costs (time, goods, legal) Due to Theft

• Locked filing cabinets

• Locked management offices

• Locked, controlled access to labs

• Controlled access to labs

• IT staff access to files/systems

• IT security (control of root/admin passwords), password logs

• Document shredding, e.g. ShredIt

• Employee badges and electronic access

• Sign-in of guests

• High value asset control and security, e.g. processor chip vault, laptops

• Desktop security, e.g. locks, passwords

• Laptop policy, e.g. lockup in desk afterhours, locked to desk during day

• IT security, e.g. WiFi WPA security, SSL VPN, Firewall

• After-hour access

• Backup of all desktop, laptop, server data, e.g. incremental and off-site storage/rotation of backups


Costs – Tips for other than travel

• Space– Sublet from someone who has downsized– Share with others– Beware the long term lease commitment! Fixed costs

can be deadly

• Capital Equipment– Borrow from someone who has it– Buy used (eBay, Kajiji, Craigs list, your peer network …)– Auctions (Going out of business sales)– Bank lease to cover

• Your banker can help with these (secured credit easier to get, but likely will not finance the full value of the asset)


Maintaining Shareholder Records

• Your corporate lawyer may be a good place to keep your minute book

• They may also have facilities to securely store founders stock certificates so they never get lost – ask.– It can be a major issue if those stock certificates get lost

– They may be needed for surrender to close certain exit deals

• They or you will need to maintain a Shareholder’s Register:– Simple 5 column spreadsheet

– Who owns what

Date of Issue

Name Address Shares

Class

April 1, 2009 John Smith 1 Endless Loop, Cupertino, CA, USA

1000 Class A Common


Cap Table – Example (pre Series-A)

Shareholders

Common Options & Preferred Options &Shares Warrants % $ A Shares $ Warrants Shares %

Founder 1 1,000,000 25.0%Founder 2 1,000,000 25.0%Founder 3 500,000 12.5%Founder 4 500,000 12.5%ESOP 500,000 12.5%Angel 500,000 12.5% 100,000Series A VCTOTAL 3,500,000 500,000 100.0% 100,000

After Series A RoundFully Diluted

Seed Round Series A Round

$100,000500,000

= $0.20/share

Post-money Valuation

Pre-money Valuation

Contributed Capital4,000,000 x $0.20 = $800,000

($100,000)

$700,000

Private investor negotiates to buy

12.5% of company for $100,000


$4M pre + $4M new = $8M post


Pre-money Valuation

Contributed Capital10,000,000 x $0.80 = $8,000,000

($4,000,000)

$4,000,000

An Up Round $8,000,000 10,000,000

= $0.80/share

Cap Table – Example (post Series-A)

Shareholders


Founder 1 1,000,000 25.0% 1,000,000 8.9%Founder 2 1,000,000 25.0% 1,000,000 8.9%Founder 3 500,000 12.5% 500,000 4.5%Founder 4 500,000 12.5% 500,000 4.5%ESOP 500,000 12.5% 1,175,000 1,675,000 15.0%Angel 500,000 12.5% 100,000 500,000 4.5%Series A VC 6,000,000 4,000,000 6,000,000 53.7%TOTAL 3,500,000 500,000 100.0% 100,000 6,000,000 4,000,000 1,175,000 11,175,000 100.0%



VC negotiates to invest $4M, and “gives” you a pre-money value of $4M

- But you must top up option pool to 15% first




Pre-money Valuation


($4,000,000)

$4,000,000

An Up Round $8,000,000 10,000,000

= $0.80/share


Shareholders





VC negotiates to invest $4M, and “gives” you a pre-money value of $4M





Pre-money Valuation


($4,000,000)

$4,000,000

An Up Round $8,000,000 10,000,000

= $0.80/share


Shareholders





$4,000,000 6,000,000

= $0.67/share


Pre-money Valuation


($4,000,000)

$3,450,000

An Up Round

Must factor in the added ESOP Dilution!VC negotiates to invest $4M, and “gives” you a pre-money value of $4M



Cap Table – Impact of Dilution & Valuation

Shareholders

Shares Value Shares Value& Equiv % $ & Equiv % $

Founders 3,000,000 75.0% 600,000 3,000,000 26.8% 2,000,000ESOP 500,000 12.5% 100,000 1,675,000 15.0% 1,116,667Angel 500,000 12.5% 100,000 500,000 4.5% 333,333Series A VC 0 6,000,000 53.7% 4,000,000TOTAL 4,000,000 100.0% 800,000 11,175,000 100.0% 7,450,000

After Seed Round After Series A Round

• In this example:– Founders holdings more than doubled (grew by $1.4M)

– Your Angel did not get crammed down (it was an up-round), but they did not participate pro-rata on the follow on

– The VCs used the Option Pool trick to give you a seemingly higher pre money value

– You lost control – you are now an employee, and the VC’s have enough options to incent/recruit your replacement


Ways to Use Stock Options

• Attracting Talent– Sharing in success / upside– Negotiation flexibility

• Retaining Talent– Key employees

• Incentives to Drive Results– Give bonus options on completion of a

milestone– Can be partially vested upon award

• Cash Conservation– Give more options, less cash


Agenda



Potpourri - Definition

1. A combination of incongruous things

2. A miscellaneous anthology or collection

3. A mixture of dried flower petals and spices used to scent the air


Know Your Personal Risk Tolerance

• As an entrepreneur – know your risk tolerance

• Look at the worst possible outcome scenario for you personally – financial loss, lost reputation, lost opportunity, etc

• Can you live with the worst possible outcome?

• If not – stop now


Venture Backed - Survey Says!

• Entrepreneurs who succeeded in a prior venture (i.e., started a company that went public) have a 30% chance of succeeding in their next venture;

and first-time entrepreneurs have only an 18% chance of succeeding, and entrepreneurs who previously failed have a 20% chance of succeeding [Gompers, Kovner, Lerner and Scharfstein, 2006]

• Only 14% of venture-backed start-ups will make it to initial public offering (IPO), 33% will be

acquired, and the rest - over 50% - will fail [Global Insight, 2007].

• More than 50% of the time venture capitalists

replaced the Chief Executive Officer (CEO) in a venture-backed company before exiting [White, D’Souza and McIlwraith, 2007]


Small Business - Survey Says!

• 2004 Statistics Canada study on small business failure rates found that the first few years were critical. While almost three quarters of small business startups survive

the first year, less than one third of micro companies (less than five employees) were in business after five years.

• 1997 study by Statistics Canada “Failing Concerns: Business Bankruptcies in Canada” found major internal factors of small business failure was management deficiency, financial management problems and poor marketing. http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=61-525-

X

http://www.ic.gc.ca/eic/site/sbrp-rppe.nsf/eng/rd01001.html


You Need Support

• Launching a new business is – hard work, long hours, stressful, can take you away from home for long periods of time, reduces your earnings at the front-end, can deplete your savings, …

• Ensure you have the support of your spouse and family


Multi-site operations for young companies

• Access to mail– Gmail; imap; hosted exchange; Webmail via your ISP

• Access to Calendar– Gmail; hosted exchange; Plaxo; Tungle

• Contacts Database– Gmail; hosted exchange; Plaxo; Linked-in

• Voice/Voicemail– SIP (BYOD); Primus; Vonage; Skype; Good cell plan

• All data must be secure– SSH, VPN access to home office; between offices– Laptops should always have encrypted storage; and cable locks (in

office and on the road)– Never trust a computer you don’t know – Assume it is compromised

• Centralized document repository– SharePoint; Hosted server; Yahoo Groups; Google Docs (ITutility.net

is a local player)– Multiple people in groups need to collaborate – so authentication

and security controls are essential

Essentials• Files• Email• Voice• Schedule

Make sure your repository is backed up

Keep all needed templates there!


Company Knowledge is Gold

• Knowledge is core to any business – product, design, customer relationship contact information, market research, HR information, marketing collateral, financial planning information, etc

• Must be centralized not distributed in an adhoc manner or held in people’s heads or held on people’s laptops or on scraps of paper…

• Uniform access to knowledge multiplies the team’s effectiveness

• Need to protect against people hoarding knowledge -- what happens if they leave or are terminated?

• Setup as appropriate CMS, file repository, CRM, ERP

• Enforce and audit usage• Ensure backed-up• Ensure secure


Live IT-free

• Avoid internal IT infrastructure (e.g. servers, internal applications)

• All basic business functionalities are available as an online service

• Cheaper then doing it yourself, e.g. hosted exchange, hosted SharePoint, hosted QuickBooks, hosted SVN, hosted CRM

• Less staff, less staff playing with IT, more functionality for less cost, backups handled automatically, available anywhere, pay as you grow, enforces a company standard


NDA Practical Perspective

• Use to protect your ability to patent IP • Have a standard set of papers• Clear process on who signs and

authorizes changes• One person responsible to

receive/confirm and file the signed agreements

• Assume everything you say or share will eventually end up with a competitor


Legal - Read the Fine Print on all Documents

The big print often draws your attention from the truly important messages


Cheques & Fraud Prevention

• Authorizing outgoing cheques– Good practice is to have 2 authorized persons sign cheques

above a specified dollar amount; Some organizations require two for all

– Sign as “Authorized Agent” or “Authorized…” – not personally

– NEVER pre-sign cheques • I shouldn’t have to tell you this, but I’ve seen it done!

• Endorsing received cheques (yes Virginia – This is why we Invoice)

– Rather than have an authorized person sign them – have the person who receives mail – STAMP them “For Deposit Only”.

– They may ONLY be deposited in the Company bank accounts.


Pay Attention to Your Signature Line

• You will sign lots and lots of documents running your business

• Only authorized officers can bind the company into contracts

• Pay attention to the signature line – Exactly on who’s behalf are you signing (“as”, “for” or “per”)– Make certain your company name is complete and correct– Ltd. Limited Inc. ,Inc. Corporation Corp. are not the same

• At law, if you sign on behalf or a company that does not legally exist, you may be personally undertaking the liability

MYCORP, INC.Per:________________John SmithPresident

________________John SmithMyCorp

THE SMITH FAMILY TRUSTPer:

Authorized Trustee


Insurance

• Directors and Officers• Errors and Omissions• General Liability• Key Person


Sh*t happens – Get over it!

If something has been done wrong – Don’t fret; Just fix it!

Don’t compound problems.

Learn from mistakes.


Learning from the Past

• Hold “Good/Bad/Ugly” working sessions after each major milestone – product, sales, financing, etc

• Typical meeting flow:– Brainstorm using sticky notes – Good, Bad, Ugly– No ass-covering – open, honest, non-rationalizing– Group sticky notes into “like”– Rank the groups in each category

• Embrace and celebrate the Good• Reflect back on the top Bad and Ugly items

– Why, how could have been avoided or mitigated, etc

• Reflect forward/brainstorm on what to do differently

• Develop forward looking actions

Those who don’t learn from history are doomed to repeat it.


Perseverance is Critical to Success

The Dark Night of

the Innovator

OP

TIM

ISM

PE

SS

IMIS

M

SCEPTICAL

WEEKSOR MONTHS

UP TO TWO YEARS

ENTHUSIASM BRASS BANDS AND FIREWORKS

THIS IS TAKING TIM

E

RESULTS AREN’T VISIBLE

EXISTING BUSIN

ESS

IS SUFFERING

IS IT

WORH IT

?

START TO SEE P

AY OFFS

MAYBE NOT A

BAD ID

EA

IT WORKS


Key Indicators to Watch During The Dark Night

• Competition – changes in the landscape

• Sales Pipeline and Progress• Financial environment (if raising

financing)


Entrepreneur’s Mindset

• Employee1. Paycheck

2. Benefits

3. Options

– Not forever– RRSP– Pension– Move to next job/

retire

Break out of the employee mindset

• Entrepreneur (Owner)1. Profits – Dividends

2. Salary

3. Benefits

– Not forever

– Sell company or wind-up

– Profits - Capital Gains

– Start next company/ retire

• Keep your eye on your end-game– Generate wealth

– Put yourself out of a job


So much advice – so little time

If you follow ALL the advice you are given, by all the people who give it…

you will be doomed to fail.

Consider the source – Is it credible and applicable?

Figure out what makes sense to YOU.


Wrap

• The walrus having drunk too long from the fire hose… took a much needed break.

Good luck – And Thank-you


Small Business - Survey Says!

United States• NFIB estimates that over the lifetime of a

business, 39% are profitable, 30% break even, and 30% lose money

• The Small Business Administration study “Financial Difficulties of Small Businesses and Reasons for Their Failure” in 1998 found several causes of small business bankruptcy: outside business conditions (38.5%), financing (28%), inside business conditions (27.1%), taxes (20%), disputes (18.8%), personal calamities and other (32.9%)

http://purl.access.gpo.gov/GPO/LPS95139

http://www.businessweek.com/smallbiz/news/coladvice/ask/sa990930.htm


Effective Executives

Acquire knowledge they need

• Ask “what needs to be done?”• Ask “what is right for the organization?”

Convert knowledge into effective action

• Focus on opportunities rather than problems • Develop action plans• Take responsibility for their decisions• Take responsibility for communicating

Make the entire organization feel responsible and accountable

• Ran productive meetings• Always use “we” and not “I”


Build and operate effective Boards

Upon completion, you will know about:• what entrepreneurs and investors want from Boards• gaps in Board memberships

And you will be able to:• select Board members• define Board responsibilities• help Board operate effectively


Entrepreneurs want Boards to:

• Help obtain key resources (e.g., capital, information, partnerships, customers)

• Provide services (e.g., legal, mentoring, expertise)

• Guide changes in business strategy and respond to opportunities and crises

• Promote the company’s reputation


Institutional investors want Boards to:

• Monitor executive behaviour, performance and compensation

• Select, control and replace the CEO

• Be independent from management

• Act in the interest of shareholders

• Guide changes in business strategy and respond to opportunities and crises

• Guard against infringements of the law


Board emphases

• What Boards emphasize depends on:– Company’s stage of development– Number of outside vs inside directors

• Early stage Boards emphasize resource acquisition and services

• Mature stage Boards emphasize executive performance, legal issues and community impact

• Outside directors emphasize reviewing executive performance, employees and community

• Inside directors emphasize shareholders concerns


Build an effective Board

• Select members who the CEO views as peers and have the time

• Each member must bring at least one competency

• Board as a whole must have knowledge of all important issues and major stakeholders

• Board members must be able to work together

• Significant proportion must be independent and not subordinate to CEO


Build an effective Board

Select members who:• CEO views as peers • have the time• bring at least one competency

Ensure Board:• has knowledge of all important issues and major

stakeholders• is able to work together as a team • has a significant proportion of independent members


Define Board responsibilities around

• Development of detailed strategies that produce large amounts of pixie dust

• Development and evaluation of strategy implementations

• Development and evaluation of CEO and senior management team

• Management of crises

• Monitoring legal and ethical performance of executives and company


Operate Board effectively

• Define Board responsibilities• Bring Board members up to a minimum level of knowledge concerning

key issues they may face• Welcome constructive feedback• Have Board decide how it will work as a team in time of crisis• Have Board members interact with customers, employees and

suppliers • Provide information that is accurate and timely in a clear way• Provide information from multiple data sources• Provide scoreboards that measure company performance in the eyes

of different stakeholders• Define a process for employees to contact Board about illegal or

unethical practices• Review development plans and appraisals for key executives• Motivate Board members through recognition and money• Schedule enough time to examine facts and make decisions


Lead to Win

Aligning Human Resources and Business Strategy

August 25, 2009

Mike McInerney, VP, Aon ConsultingIrene Kohut, Senior Consultant, Aon Consulting


Objective of Today's Session

• To provide a framework for thinking about and developing an effective Human Resources strategy that will align with and support your business.

• To provide perspective on why it's important to consider Human Resources issues early in the business planning cycle;

• To provide an overview of key Human Resources considerations for new businesses.


Today's Agenda

Overview – The Path of A New Business1

How can your Human Resources strategy drive the growth of your business?2

Important Considerations in Developing Your HR Strategy3

Building a Human Resources Strategy & Programs4

Other Considerations5

Q&A and Closing Comments6

Introduction to Aon Consulting



• A global human capital consulting, technical services and outsourcing firm

• Four practice areas:

– Owned by Aon Corporation, www.aon.ca, a global risk management firm

Retirement Strategies(Pension & Actuarial Consulting, Financial Planning, Investment)

Employee Benefits Outsourcing(Pension & Benefits Administration,

Claims Administration)

Health Strategies(Benefits, Integrated Absence

Management, Wellness)

Human Capital(Total Rewards, Compensation,

Communication, Survey & Benchmarking, Recruitment

Strategies, Talent Strategies)



• Aon Consulting Canada is an industry leader in human capital consulting and outsourcing services across the country

– More than 800 employees, with bilingual capabilities in 14 offices across Canada

Irene Kohut Senior [email protected]

Michael McInerneyVice [email protected]


Aon works with Leaders / Leadership Teams to:

LeadershipPerformance

Collaborate Scale

AlignSpeed


The Path of A New Business

3 Different Growth Curves

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

Time

Re

ve

nu

e

$-

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

Co

mp

en

sa

tion

&

Re

wa

rds

Equity, hybrid roles,

high risk

Cash, defined roles, market

driven

Limit of the Entrepreneur

Idea Generation

Initial Growth

Differentiation

Success

Plateau

Failure


The Path of A New Business

Growth Curve Characteristics of Business Characteristics of HR Strategy

1) Success

(red curve)

high, profitable growth

mature and scalable business

HR strategy aligned with business strategy;

market-driven roles with increasing responsibility;

reward systems designed to drive business performance;

2) Plateau

(blue curve)

marginal to no growth

limited growth in new business areas;

HR strategy likely not fully effective, for example:

reward systems may not link to business performance or not promote the right type of performance

Employment brand may not be strong enough to attract / retain critical talent;

3) Failure

(yellow curve)

poor business performance;

declining market share

HR strategy likely misaligned with business strategy, for example,

business requires innovative, risk-takers but rewards systems may attract / retain risk-averse employees;


Driving Strategy through HR

An effective HR Strategy drives: – organization performance

• aligns employees with business direction– culture – the values, beliefs, behaviors:

• establishes the norms for being part of the organization– competitiveness:

• creates a competitive advantage in the "war for talent"– attraction / engagement / retention

• supports the business need to maintain a strong talent base• determines what's it like to work there – which drives what employees

will say to others about what it's like to work there– compliance / governance:

Investing time in building your HR Strategy early in your business cycle – establishes a strong base for future growth


HR Strategy Aligned with Business Strategy


Important Considerations in Developing Your Strategy

• Think about the "end goal" – this will determine your Human Resources strategy:

– will you grow the business organically – or through M&A?

– will you sell the business once it reaches a certain size?

• Understand what you need from employees to make your business successful;

Important questions:

– What external and internal environmental factors are you facing:• External: legislation, competitive environment, economic factors• Internal: attrition, engagement levels, skill requirements

– What kind of culture and work environment do you want to create?– What do you want your company to be known for and what will differentiate your

company from competitors for talent? (e.g. challenging work, flexible time) – What skills and behaviors will drive business success?

• What you measure is what you get– What are shareholders/ stakeholders expecting?


Focus on what's most critical first…

Not everything needs to be done immediately – focus on the most criticalelements first to build an HR strategy to help move up the growth curve faster….

Year 1-2 Year 2-3 Year 3+

HR Strategy

Recruitment

Pay

Performance

Training

Pay & Benefits

Learning /Leadership Development

Succession Planning

Workforce Planning


Building a Human Resources Strategy

Workforce Planning / Recruitment & Selection

Idea Generation & Initial Growth • understand the kind of people you want to attract to your organization (e.g. risk-takers, innovators, collaborators, etc)• be clear on the skills that you need to attract• know your competitive advantage in the market for talent• know what you can afford to spend to attract the talent that you need

What next?…..

???



Workforce Planning / Recruitment & Selection

Idea Generation & Initial Growth• understand the kind of people you want to attract to your organization (e.g. risk-takers, innovators, collaborators, etc)• be clear on the skills that you need to attract• know your competitive advantage in the market for talent• know what you can afford to spend to attract the talent that you need

Differentiation• assess your workforce requirements in the future – and build a plan to meet the requirements – combination of internal development and external recruitment• implement a more formal selection process to ensure the right kind of talent is brought into the company.• build your employment brand

What next?…..



Rewards

Idea Generation & Initial Growth• understand what you can afford and what your competitors are doing (e.g. which programs, how much, etc.)• start with the basics – and grow from there:

• base pay – what can you afford?• equity programs (e.g. stock options) – can this offset a lower base pay rate?

Remember:• compensation programs are highly effective in driving behaviors• it's hard to take something away once it's in place

What Next?…..

???



Rewards

Idea Generation & Initial Growth• understand what you can afford and what your competitors are doing (e.g. which programs, how much, etc.)• start with the basics – and grow from there:

• base pay – what can you afford?• equity programs (e.g. stock options) – can this offset a lower base pay rate?

Remember:• compensation programs are highly effective in driving behaviors• it's hard to take something away once it's in place

Differentiation

• basic policies – to meet legislative requirements (e.g. pay equity, overtime)

• understand your desired market positioning – for each element and overall;

• be deliberate about how you want to differentiate yourself from competitors – know what they are doing – but, more importantly, understand how to use reward programs to create a competitive advantage and drive your business results;

• be particularly cautious about Executive Compensation – highly scrutinized.

What next?…..



Rewards – Understanding the competitive landscape

Idea Generation & Initial Growth

• free salary information on web – e.g. salary.com,

• use this publicly available data with caution – not accurate as compensation surveys conducted by professional survey companies

• ad hoc data points:

• information from headhunters

• ad hoc posting of salary information

• recruitment experience

Differentiation

• purchase credible compensation surveys from professional survey organizations

• For example – Aon Radford survey ( www.radford.com )

What next? …..



Performance

Idea Generation & Initial Growth• communicate, communicate, communicate….

• help employees understand your vision, values and expectations

• make sure employees know what it takes to make the business successful

What next?…..

???



Performance

Idea Generation & Initial Growth• communicate, communicate, communicate….

• help employees understand your vision, values and expectations

• make sure employees know what it takes to make the business successful

Differentiation• establish a formal performance management system;

• figure out how compensation programs can help drive business performance – and design plans to achieve this goal;

• base pay strategy

• incentive plans

• recognition programs

What next? …..



Learning


• focus on "on-the-job" learning and development

• encourage teamwork and cross-functional interaction

• limited external training sessions – focused on technical skills

What next?…..

???



Learning


• focus on "on-the-job" learning and development

• encourage teamwork and cross-functional interaction

• limited external training sessions – focused on technical skills

Differentiation• develop a strategy that can be communicated – and used as a differentiator• balance between on-the-job learning and external training

• understand the competencies and skills required to drive the business and develop programs to develop / enhance;

What next? …..



Leadership and Succession Planning

Idea Generation & Initial Growth• build a strong leadership team to get your business started

• may need to pay premium to get the right people • look for "fit" with your values and the culture that you want to drive

• diversity of skills, opinions, experience• keep talking to your leadership team to ensure engagement / retention

What next?…..

???



Leadership and Succession Planning

Idea Generation & Initial Growth• build a strong leadership team to get your business started

• may need to pay premium to get the right people • look for "fit" with your values and the culture that you want to drive

• diversity of skills, opinions, experience• keep talking to your leadership team to ensure engagement / retention

Differentiation• define your strategy for ensuring you have the appropriate leadership bench-strength:

• build leaders internally – OR – buy leaders externally• develop a strategy to create and sustain a strong bench of leaders

• internal development programs / external training programs / planned job assignments, • implement a formal succession planning process to ensure back-up to address unexpected attrition in key roles.

What next?…..


Other Considerations

• Rapid Growth Growth by acquisitions

• Integration challenges Organic growth:

• Selection / fit is critical• Don't lose focus on retention

• it costs between 1-2 times annual salary to replace experienced

talent. Recognize when you are big enough to need more HR infrastructure, e.g.:

• salary ranges, detailed policies and procedures, integrated reward strategies, etc.

• Expanding outside of Canada Cultural differences Legislative differences Labour market differences


Closing Comments

• Know your end game – that will drive your HR Strategy

• Leadership team is critical;

• Culture and rewards will directly impact your business performance;

• Your employment brand can be your biggest asset in attracting, engaging and retaining critical talent;

• Difficult to change culture, behaviors, work environment once it's in place;

• Think about retaining expert Human Resources support early in your business planning:

– Full time or part time human resources professional– External consulting services as needed


??


Professional Profile

Michael McInerney Vice President

Position and ResponsibilitiesMichael is Aon Consulting’s lead for our Canadian Executive Performance and Rewards specialty.

Areas of Specialization With more than 30 years of broad-based corporate human resources and consulting experience, his specializations include human capital analytics, business strategy execution, organizational governance, rewards strategy, and executive pay and performance. Michael is known for his crisp articulation of ideas and his poignant ability to tie deep insights and advice from his broad knowledge base.

BackgroundPrior to joining Aon Consulting, Michael was the Canadian leader of Axiom Consulting. He was also the President of Sibson Canada, served on the Board of Directors of Sibson, and built the Change Business for Sibson Worldwide. Prior to Sibson, Mike held executive positions with various companies including IBM, Xerox, Gulf Oil and Northern Telecom (Nortel). For the past nine years he has been on the Board of Directors of Bank of America Canada (formerly MBNA Bank Canada).

EducationMichael has a MBA from the University of Western Ontario and an Honours Bachelors degree in English from York University.

Publications & AffiliationsMike is widely quoted in the business and trade media, including Macleans Magazine, The Toxic Workplace, The Globe and Mail and The National Post. He has also given numerous radio and television interviews with CBC and CTV. Mike is the creator and host of the “6 Symposia on the Organization of the Future” and has co-authored the “Knowledge of Pay” and “Compensation for Chief Executive Officers – A test of Corporate Governance”. Mike is a speaker for the Conference Board of Canada, The Federated Press and Insight Conferences, and is currently developing a program for the Institute of Corporate Directors (Rotman School of Business) on Human Capital Risk. He also serves on the Blue Ribbon Commission on the Governance of Executive Pay in Canada, is an instructor for the WorldatWork, and is helping to develop to the next generation of HR leaders by lecturing at the Queens University MBA program.

Contact information145 Wellington Street West, Toronto ONTel: 416-542-5681 | Fax: [email protected]


Professional Profile

Irene Kohut, BA, MBA, CCP Senior Consultant

Position and responsibilitiesIrene Kohut is a Senior Consultant in our Ottawa office. She is responsible for working with private and public sector clients, primarily in the Ottawa area, to address their business issues related to human resource management.

Areas of specializationIrene advises clients on all aspects of people management including total rewards strategy, compensation, performance management, employee engagement and retention, succession planning, organizational design, and change management. She works with senior executive and management teams to facilitate strategy development, decision making and implementation of programs to increase the value of human capital in organizations.

Business experienceIrene joined Aon Consulting in July 2009, after 25 years at Nortel Networks. During this time, she developed critical skills in all aspects of talent management, with a particular emphasis on compensation, employee engagement and organization effectiveness. Over the last 10 years, she has led a variety of global teams at Nortel developing talent management and total rewards strategies, as well as implementing supporting programs around the world. Recognized for her own "management excellence", she has provided ongoing consulting to both business unit and corporate executives with respect to people management.

Academic Background• MBA, Human Resources Concentration, University of Ottawa • BA, English/Psychology, University of Ottawa• CCP (Certified Compensation Professional)

Associations• Chairperson, Global Advisory Group, WorldatWork (2007-2008)• Chairperson, Compensation Advisory Board, WorldatWork (2005-2007)• Ottawa Compensation Group• Ottawa Region Rewards Association

Contact information1525 Carling Avenue, Suite 712, Ottawa (ON), K1Z 8R9, CanadaTel: 613.288.3811 | Fax: 613.728.5534 | Toll Free: 800.567.5544 Extension 236 [email protected]


Lead to Win

Optimizing SR&ED ClaimsAugust 25, 2009

Kevin Goheen


SR&ED Program – Overview

• Canada’s largest federally supported program for industrial R&D incentives

• Program has existed since the 1980’s

• Over 19,000 claims made each year

• >$4 billion in tax credits

• Small and medium companies submit 75% of these claims, generally $20,000 to $2,000,000 in expenditures


SR&ED Program - Overview

• Canadian Controlled Private Corporations (CCPCs) can earn refundable 35% investment tax credits (ITCs) on first $3M of expenditures

• Public companies (non-CCPC) can earn 20% ITCs, applied against federal tax

• 10% provincial tax credit for SR&ED performed in Ontario

• 20% Ontario Business Research Institute Tax Credit• R&D costs CCPCs approx 30 cents/$ expenditure• Individuals can also claim SR&ED


What is R&D Practically ?

Indications that you MAY be doing R&D:

• Technical attempts to make things faster, cheaper, better

• Lower than average manufacturing yields• Prototype failures• Large warranty costs

Each case must be analyzed within the definition of eligible activity


SR&ED – The Concept

Point A‘base level’

Point B‘Technological Objective’

Barriers, Constraints, Uncertainties, Challenges

Work elements•Systematic•Uncertainty

•If?•How?

• Better yield• Less polluting• More capacity• More users•Faster response•Lower energy use•etc…


Software Engineering

Some examples of advancement are: • New architectures, algorithms or database

techniques• Performance increases (response time, speed, user

or database scalability, reliability)• Interfaces between two or more existing software

packages• Development of new in-house development tools


Mechanical Engineering

Some examples of advancement are: • New packaging equipment and procedures• Non-routine substitute of materials in injection

molding• Eliminating lead based solders in PCB manufacturing• New fuels in cement manufacturing• Emission reduction in cement manufacturing• New hockey tape production equipment• Development of new in-house CAD tools• Developing new machinery to enhance production


Other Sectors

Some examples of advancement are: • Development of new pharmaceuticals• New growing techniques for grape vines in cold

climates• New endodontic treatments


Eligible Expenditures

• Labour• Capital goods• Contractors

– in many cases; be careful with wording• IP ownership

• Location

• Service vs. Product

• Management of R&D project

• Material• Overhead


Timing

• SR&ED claims must be submitted within 18 months after the end of every fiscal period

• December 31, 2009 is the deadline for submitting claims for fiscal periods that ended on June 30, 2008.

• e.g. You can prepare two claims for your fiscal periods that ended on December 31, 2007 and 2008 at same time, and submit them both to CRA before June 30, 2009.

• CRA has committed in writing to help fix administrative omissions and errors if received 90 days prior to 18 month deadline.

• SR&ED cheques usually arrive ~3-4 months after CRA receives your SR&ED documentation.

• However if you have already submitted your T2, it will need to be amended. This will delay your first SR&ED cheque, so it arrives in ~6-8 months. Subsequent SR&ED cheques will likely arrive in ~3-4 months.

• The Ontario cheque (used to) tend(s) to arrive a few months later.• Many third parties will lend against filed SRED claims.• Note that there is no filing deadline for the Ontario Innovation Tax

credit


What’s New?

• New T661 form for YEs after Dec 31, 2008• Electronic filing• New terminology• Hard word limits on various sections of technical

descriptions; no pictures or graphics allowed• All projects to be filed after 2010 (not just top 20)• Explicit requirement for contemporaneous

documentation• HINT: Not enough space to describe projects, hence will

be more audits. Write a long technical description, cut and paste into new form and keep the long form for the inevitable audit.


CRA Web Site


What is Involved in Filing a Claim?

• Scoping of projects• Preparation of technical reports for each project• Gathering and analysis of costs• Preparation of tax R&D forms and attachments• Submission of claim by 18 months following the year

end


Technical Descriptions

Five components• A: Scientific or Technological Objectives• B: Technology or Knowledge Base Level• C: Scientific or Technological Advancement• D: Description of Work in this Taxation Year• E: Supporting Information.


A: Scientific and Technical Objectives

• Preface this section with a brief description of the company and its commercial goals.

• What did you intend to achieve?

– Your work will qualify for SR&ED if you generate new knowledge to do new things and make technologies perform in unusual ways. You must intend to advance knowledge of your subject.

– Use numerical goals where possible.

– Emphasize the “methods and practices” that you wanted to develop.

• For multi-year projects, include a technology roadmap which you probably have from a business plan.


B: Technology Knowledge Base

• Describe what you knew internally about the project before beginning and what other companies have done

• You are not expected to know “trade secrets” of others.

• Area B is very important for software claims, where common knowledge evolves rapidly. Is often challenged at technical review.


C: Scientific and Technological Advancement

• Describe what achievements you hope to gain:– “It would be an achievement if…”

• What was difficult? Stress uncertainty. Begin your paragraphs using these phrases: – “We did not know how to…”– “We were unsure whether we could…”– “We could not understand why…”– “Our problem was difficult to solve because…”


D: Description of Work in Taxation Year

• For multi-year projects, described the status as of the first day of the FY

• What did your employees and contractors do?– Describe the systematic way they investigated your

technical challenges.– Describe approaches they contemplated, but abandoned.– What tests and analysis did they perform?– Described what lessons you finally learned.– Don’t use certain phrases (“trial and error”, “beta version”,

“optimize”)• Describe the status of the project on the last day of the FY

and, for multi-year projects, your plans for the next FY.


E: Supporting Information

• What documents exist? – high-level overview– functional specifications– Prototypes– source code– log books, bug reports– emails– minutes of meetings, etc…

• Just the titles. Do not submit copies of the documents to CRA.

• List all the contractors and describe what they did very briefly.


New Documentation Requirements

Base Level Knowledge

Uncertainties Systematic Work Resources

Planning Docs X

Time Sheets X

Experiment Design X X X

Lab Notebooks X

Source Code, System Architecture, etc..

X

Trial Run Records X

Progress Reports, Minutes

X X

Test protocols, data and results

X X

Photographs and videos

X X

Prototypes, scraps X X

Contracts X

Others X X X X


Preparing for your SR&ED Review

• Technical– Prepare a slide deck from the T661– Rehearse, rehearse, rehearse– Let the reviewer present– Don’t let the reviewer “wander around” your shop.– Silence is your friend; shut up.

• Financial– Can be extensive– Examples


Relationship with IRAP

• Advantages of having both– Usually SRED technical review goes better (or doesn’t

happen)– Forces documentation– Cash flow improves 18 months– Financial risk drops– ITAs are usually on your side; CRA reviewers are not on your

side.• Disadvantages to having IRAP

– Reduces SR&ED claim, unless you get IRAP to pay for non-eligible activities

– e.g. R&D project with $50K salaries, $16.5 contractors, 65% overhead

• With $50K IRAP Small Project support, total cost to loss making CCPC is ($5060)

• Instead get IRAP to pay for marketing or IP; total cost to company will be ($27,060)


10-minute Exercise

• Work in LTW Groups• Define technical objectives• Define technical uncertainty• Define work performed• Identify costs• Identify documentation


Thank you!

Kevin Goheen, PhD, P.Eng.

613.726.1010 X.227

[email protected]


Lead to Win

Peers’ opportunity assessment

Tony Bailetti


Peers’ opportunity assessment

• Use same forms that external reviewers will use on Day 6• Use same rooms and groupings we will use on Day 6• Max 20 minutes per opportunity – end to end• Two participants per group are responsible for:

– Distributing the Day 6 Opportunity Assessment Form to all reviewers in the group

– Keeping time

– Running smooth opportunity assessments

– Ensuring that peers properly complete Day 6 Opportunity Assessment Form

– Collecting Day 6 Opportunity Assessment Forms and providing them to opportunity proponents

– Dealing with whatever issues may arise during the opportunity assessments


Peers’ assess opportunities on day 4

Group I: Mobile applications

Case Room 1 Nestor Amaya & Adam McNamara

Group II: Content and media

Case Room 2 Chris Justus & Daniel Crenna

Group III: Health services and technology

Suite 350 Don Ellis and Prakash Naidu

Group IV: Software Case Room 3 Yi Li & Reinhard Messer

Group V: Consulting and applied technology

Case Room 4 Jerry Carver & Pat Seemel


NRC-Industrial Research Assistance

Program (NRC-IRAP)

Lead to WinDoug Colley, Industrial Technology

Advisor

August 2009


Program Overview

Customized advisory services and contributions to Canadian Small and Medium sized Enterprises (SMEs) to support and enhance their innovative S&T projects.

Range of complementary S&T and business services through linkages to many other organizations to meet SME developmental needs.

Contributions are specifically towards specialized labour costs and clients typically co-invest at least 50% of the total project costs.

Supporting innovative *Canadian firms grow stronger, grow faster, grow bigger, through technology

BTI Photonics, Ottawa, ONBTI Photonics, Ottawa, ON

Médicago, Québec, PQMédicago, Québec, PQ

*Small- and medium-sized firms with up to 500 employees*Small- and medium-sized firms with up to 500 employees


158

NRC-IRAP Sites Across Canada


Ottawa area IRAP Staff

• Llynne Plante, Director, supported by three staff (Wendy McEvoy - Contributions, Karen Logan- Admin/ Contributions, and Monique Tremblay- Admin

• Area ITAs: Doug Colley, Ken Hitchmough, Jeff Linton, David Lisk, Bryan Murray, Bernie Schmidt, Janice Singer, Vern Sulway, Harriet Waterman (Kingston), Grégory Fruchet, Dan Trudeau, Mike Barré, Liza Medek, Pierre Meloche (Gatineau), Michel Mirota (Gatineau)


160

Field Staff of the IRAP ProgramThe *ITA Advantage

Experience 240 field staff 75% have Masters or PhD 80% have specialized

industrial experience 45% have run their own

R&D facility 65% have some experience

in working at other federal government labs or departments

34% have been entrepreneurs

Outreach Field staff are located in 147

offices / 100 communities Each work with 42 clients per

year 11 of their clients will receive

funding from NRC-IRAP Typically make 105 client site

visits a year

Services R&D project advice Competitive technical

intelligence Networking and linkages Project follow-up Financial resources

*Industrial Technology Advisor - ITA*Industrial Technology Advisor - ITA


IRAP Business Model

Network,Linkages

Diagnostic ($)

InternationalReadiness

IntellectualProperty management

New, qualified personnel

Y ($)

Strategic planning,Market assessment

($)

R&DContributions

($)

Technical, engineering and business advice

CLIENT

CLIENT

Strategie d’in

novation

Innovation stra

tegy (Plan)


IRAP Services to Firms

• R&D Project Advice

• Competitive Technical Intelligence

• Networking Opportunities and Linkages

• Project Follow-up


Funding Opportunities & Programs

• Contributions to Firms for R&D Projects

• Contributions to Innovation Partners

• Youth Employment Strategy


Total Expenditures by Industry Sector in 2007-2008 ($ in Ms)

164

What are the challenges faced by our clients?

78% of NRC-IRAP clients have fewer than 50 employees – and most (60%) of them have fewer than 20

Do not typically have large, developed R&D departments nor technical expertise on hand

Management capacity challenges

Limited network nationally and internationally

NRC-IRAP worked with some 7,645 clients in 2007-2008; of which 1,971 received some form of funding

Given current economy, are having difficulty accessing or sourcing investment capital

NRC-IRAP’s Number of Clients by Province in 2007-2008


2009 Federal Budget

Canada’s Economic Action Plan

Additional

$200 M

over two years

Purpose 2009-2011 Projected Impact

Contributions to firms $170 M 1,400 firms

Graduates through YEP $30 M 1,000 post-secondary

graduates

With existing organizational structures and existing operating dollars

What about this new (Jan 2009) announced funding?

165


For information on NRC-IRAP To reach an ITA

Call our toll-free number: 1-877-994-4727

Contact us


167


Lead to Win

Company introduction

David Hudson


Participants introduce companies

• LTW participants wish to hear what other participants are working on

• Hard limit: 3 minutes per firm• No Q&A• Opportunity to:

– Practice your value proposition– Identify what you need to advance your business (a partner, a

skill set, a service, etc)

• If anyone wants to talk to you further, they can find you afterwards and during the next two days


Groupings: 34 individuals in 24 opportunities

I. Mobile applications

II. Content and media III. Health safety services and technology

IV. Software V. Consulting and applied technology

Location Case Room 1 Case Room 2 Suite 350 Case Room 3 Case Room 4

8:30 a.m. Nestor AmayaKenn Hussey(Ultra inexpensive wireless thing)

Donald Smeth(Media DigitalSignage)

Don Ellis, Alan Graves(Elder care application service provider)

Sharon Lewinson, Tom Lewison (Rideshark)

Bilal Ahmad(Margalla Works)

9:00 a.m. Ben Cliffe, Anoop Nannra(Mobile apps suite)

Daniel Crenna (Lunarbits)

Prakash Naidu,Kshirsagar Naidu(Multipoint stimulation)

Yi Li(Enterprise rights management)

Mihaela AndronicJerry Carver(Business environment mapping and shaping)

9:30 a.m. Randy Jones(Report away mobile)

Rob Johnstone, Louis Payant(Learnetica)

Reinhard Messner(ERP for ISO certification)

Joe Babiarz, Marvin Krym, Guyves Achtari (The unwired enterprise)

10:00 a.m. Jeff MacDonald (Mobile applications suite)

Chris Justus(Biz Quiz)

Art Munro(Seven Day Office)

Ian Brown(Career search engine)

10:30 a.m. Adam McNamara,Tariq Zaid (Hosting for business games and business applications)

Dinesh Shah(AuthorX)

David Nadeau (Infoglutton)

Terrence Chen(Inefficiencies in software development process)

11:00 a.m. Oscar Vargas(Warehouse tracking)

Pat Seemel(Structured group facilitation)

Day 4 August 25 2009

Technology

maximum booking

human resources

production

development

initial growth

selectionidea

initial growth

effective