Want to expand your business? Past the start-up phase and you wonder “now what”? This second of a three part series raises some ideas to help you expand your business.
Your ability to grow your business by leaps and bounds depends in large part on “leverage.” Leverage, very simply, is the ability to get a lot from doing very little. If done properly, leverage can result in you making money while you sleep! Do you want to know how grow your business by using leverage effectively?
Read on.
Leverage Your Network
Depending on your industry, you may be able to pass referrals to your contractors, associates or service providers in return for compensation. The compensation may be direct payment to you, a discount for future services or a straight barter exchange. For example, a marketing company may receive referral fees for any services it has to outsource that it cannot directly provide to the client. Sales and marketing professionals may also receive a referral fee for bringing work to businesses. How do you ensure that the compensation is fair and paid on time? If you are in a business that can accept payments for referrals, please make sure that you ask a lawyer to draft a simple referral agreement that address these issues.
Sell Your Goods and Services on the Internet
If you are in the business of selling goods, have you thought about turning your own website as a sales channel by selling goods and services online? For example, some mortgage brokers can accept applications for clients on-line to find mortgages and obtain pre-approval without the broker and client ever meeting face to face. This saves the broker time and money since applications can be sent 24-7 without the broker having to visit clients or make sales calls. Alternatively, have you thought about eBay as a source to sell over-stock and out of season inventory? Many medium to large sized businesses now contract out experts in this field who create specific pages on eBay to market and sell products. The client continues to maintain the inventory and ships the goods but it has now created another sales channel that was either under-utilized or not used at all before.
As online marketing and sales becomes more popular, governments have enacted a growing body of laws and regulations to regulate it. For example, the Consumer Protection Act of Ontario dictates what can and cannot be said to enter into an online contract. A English executive of an on-line gambling website was recently arrested in the United States for allegedly breaking by taking on-line bets from Americans. If you don't follow this legislation, the transaction can be void. Please consult a lawyer to ensure your sales are legal and final.
License Your Intellectual Property
If you are in the business of selling a service, have you thought about selling your system of service delivery? For example, can you teach others through resource guides or tele-classes the keys to building a business in your industry? Sometimes referred to as “info-preneurship,” this allows you to create an alternative source of revenue that can be sold multiple times without a substantial investment of additional time after your first sale.
One of the more prominent examples of how this is done is Richard Kiyosaki's “Rich Dad, Poor Dad” franchise. Mr. Kiyosaki became self-sufficient by learning how to invest his money wisely. As an alternative revenue source, Mr. Kiyosaki sold his “system” by publishing a best selling book on how he became a millionaire (the “Rich Dad, Poor Dad” series of books) and then used the success of his book to sell his system (or his knowledge) in books, tele-seminars, personal coaching, public speaking, board-games etc. One suspects Mr. Kiyosaki continues to invest in what made him financially independent but he has also created another revenue stream by selling his intellectual property based upon his acquired knowledge.
The Rich Dad, Poor Dad “franchise” raises a host of legal and financial planning questions such as copyrighting, trademarking, licensing and structuring the business to be tax efficient. If you intend to pursue this revenue source, please make sure you consult a lawyer to properly set up this business.
Expand Internationally
Have you saturated your local market? Are you thinking about expanding abroad? Selling abroad presents a whole series of opportunities and challenges to any business. Do you need to set up a corporation abroad or can you continue on business with a Canadian legal entity? What laws will apply in the event of a dispute? What regulations govern the sale of your good or services outside Canada ? The inter-face between your corporation locally and your customers abroad raise legal and accounting issues that, if structured properly, can help you increase profits while potentially paying lower taxes in the long run. For example, did you know at least one state in the United States levies NO corporate taxes on corporations and does not require that you physically maintain a presence there to operate your business? Proper structuring can allow your Canadian and American operations to operate on the most legal and tax efficient basis. Thus, please speak with your lawyer and accountant if you wish to take your business global.
License or Franchise Your Business
What is the difference between licensing and franchising? On a very general basis, licensing and franchising both deal with the selling of certain intellectual properties, whether software, trademark or a business process, to third parties. However, franchising tends to have a much greater deal of control by the grantor/franchisor than a license.
For example, a typical franchisor will grant you the right to use their business process and the intellectual properties associated with that process (think of Harvey 's, Tim Horton's etc.) in return from purchasing from the franchisor (or designated third parties) the goods or services required to operate the franchise. A licensor grants you the right to use some distinctive part of your business in certain geographic areas. For example, Microsoft has given each user of its software the right to use their operating system. Microsoft is not concerned with how often you use the software or that you purchase it from a specified legal seller. Thus, the licensee's control is relatively less than the frachisor's.
For the purposes of this newsletter, there are two things to note if you wish to license or franchise your business. Firstly, licensing or franchising a business requires that the intellectual property underlying what you are selling is protected. Secondly, Ontario has a recent law that governs how you must treat licensees and franchisee (certain licensors under the act are treated as franchisor even if they do not advertise themselves as such). If you break the law, you could be subject to a class-action lawsuit.
If you wish to franchise or license your business, there are a few factors to consider: (i) have you systemized your business on paper so that a stranger can learn how to operate it? (ii) are the underlying sales, marketing and branding of this business protected? (iii) what is going to be your relationship with potential licensees and franchisees? How active do you want to be managing the business of licensing and franchising? (iv) Have you structured your business properly so that any tax and legal liability are minimized?
For many licensors/franchisees this means setting up a separate corporation for the purposes of selling and managing the business. This second corporation ensures that the licensor/franchisor is not “putting all their eggs in one basket” and exposing all their assets to liability. The existence of a second corporation may also help reduce taxes if structured properly.
Licensing and franchising are complicated and time-consuming ventures. The above information represents, on a non-specific basis, only some of the issues you need to discuss before undertaking any licensing or franchising opportunities. Franchising experts and lawyers can help steer you through this process. Thus, please contact these professionals before you wish to start this venture.
The above are general and non-exhaustive overviews of some ideas to help grow your business to the next level. As with all business ideas, context is everything. Thus, before you think about implementing these ideas, please consult your lawyer and accountant.
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