es the black edition
March 2011
profitability BIV’s colour series examines how businesses in B.C. are striving for excellence in four key areas: profitability (black), sustainability (green), investment (blue) and philanthropy (white). Each publication is accompanied by a breakfast panel discussion. This year’s focus is using lessons from the past to chart a course for the future. Panellists are Chris Breikss, co-founder, 6S Marketing; Jeremy Miller, president, Houston Landscapes; and Amielle Lake, CEO, Tagga Media. See page 2 for event details
Trimming the fat Chris Breikss and 6S marketing crawl out of the recession’s grip with cost-cutting and upgrades Broadcast news Communications companies, like Amiee Chan’s Norsat, grow through diversification
Rooms with a niche Listel GM Jim Mockford helps run a game plan specific to small hotels
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Branching out Canfor’s Jim Shepard joins other forestry CEOs who are looking at Asian markets
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2 the Black edition
THE PRIMARY COLOURS OF BUSINESS EXCELLENCE
As the the economic dust of 2009 and 2010 settles, businesses are looking back on what worked to help keep their doors open, whether it was streamlining processes, creating beneficial relationships or aiming their product at new markets. This year’s Black Edition focuses on how companies are learning from these past lessons and applying them for future profitability. Speaking to the topic will be influential businesspeople at our Black Breakfast on Tuesday, March 29, 2011, at the SFU Segal Graduate School of Business, 500 Granville Street, Vancouver. Visit www.biv.com/colour – Baila Lazarus, news features editor, Business in Vancouver
Contents 4 Debt low, maintenance high Hotel owners invest in sustainability and monitor social media as successful profitability strategies
6 Keeping up with the chatter
Communications tech companies look to future growth through continued investments and seeking new markets
8 A time for replanting
After a near-devastating downturn, forestry returns to black
10 The pain that heals
A recession can be the catalyst for employers to make changes they should be making anyway
12 Weathering darker roads
Strong reputations and good business relationships were key to profitable 2010 for transportation sector
14 Profits follow expertise
Niche retailers thrive in Vancouver’s home interiors industry
18 Growing wealth
Long-term strategies and market differentiation remain key for advisers to attract the province’s wealthy
Business in Vancouver 102 East Fourth Avenue Vancouver, BC V5T 1G2 P: 604.688.2398 F: 604.688.1963 E: info@biv.com Publications Mail Agreement No: 40069240. Registration No: 8876. Return undeliverable Canadian addresses to Circulation Department: 102 East Fourth Avenue, Vancouver, BC V5T 1G2. E-mail: subscribe@biv.com
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March 2011 Business in Vancouver
Shape up and innovate
Instead of panicking, marketing companies overcame 2010 woes by cutting costs and overhauling processes
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Jenny Wagler
Selective pitching, cost-cutting and overhauling processes were key strategies used by local marketing and advertising firms who turned a profit in 2010. “You had everybody chasing the same few people,” said Lance Saunders, executive vice-president at local advertising heavyweight DDB, describing the frenzied climate in the industry in 2010. “Big agencies chasing really small revenue and small agencies chasing small revenue, and small agencies chasing huge revenue that there was no way that they could ever win.” In that context, he said, DDB chose to pitch more selectively, targeting potential clients who were well-aligned with the agency’s beliefs, or that allowed the company to stretch into spheres where it wanted to grow. The result, he said, was being able to focus resources and energy more effectively and achieve a higher “strike record,” which, he said, kept motivation and confidence high and translated into further successes. “The people who are working on the pitches feel better and passionate about winning and feel that they can win – and then they do win,” he said. “That confidence really shows in new business presentations and I think desperation shows as well.” Cost-cutting was another key strategy local marketing companies used to turn a profit in the difficult climate of 2010. “We got hammered in 2009 and we weren’t ready for it,” said Chris Breikss, cofounder and director of digital marketing company 6S Marketing. As the company focused on returning to the black, he said, it cut any unnecessary costs. “We had been investing heavily in infrastructure – new computers, new phone systems, new server, expanded office space, new furniture,” he said. “We stopped all of that and said, ‘Let’s make do with what we have and do the best with the tools we have and when we can afford to buy newer, fancier computers or new iPhones for the company, then we’ll buy those things.’” The company, he said, introduced policy and procedures around spending and established weekly cash flow meetings to make sure itwas sticking strictly to budget. Beyond that, he said, 6S reviewed its accounts and noted that, in some cases, it was working beyond its allotted consulting hours for certain small clients. To address that, he said, the company upgraded its time-tracking and project-management system. Bob Stamnes, president of Elevator Strategy Advertising and Design, similarly noted that general belt-tightening measures helped his company weather the recession – and generate profits – in 2010. He commented that his employees were very aware of the economic climat, and thus supportive of Elevator’s cost-trimming measures. “It wasn’t as if there weren’t an understanding out there that ‘Hey, maybe we’re Printed on a waterless digital offset press
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Business in Vancouver March 2011
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Chris Breikss of 6S Marketing says the company tightened up procedures, budgeting and time management in 2010
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not going to have the fancy Christmas party,’” he said. “And the staff really endorsed it because they really want to keep their jobs and I really want to keep my company.” Beyond pure cost-cutting measures, local marketing companies used 2010 to look inward and rework their systems for better results. Breikss noted that 6S, spurred by 2009’s disappointment, set about tightening and standardizing all its internal processes. “We wrote manuals for everything,” he said. “We wrote processes on how to write processes.” That overhaul, he said, eliminated any duplication of efforts and ensured that the company was delivering a consistent quality of service and product. Saunders commented that DDB also used 2010 to rework its internal approaches. “There’s nothing greater than being in a crisis to get you to think of new things,” he said. The result has been a shift away from a “relay” approach to projects – where projects are launched by a small team and then passed off to, for example, digital and social media experts to move the project along. In 2010, he said, DDB launched an approach that brings all areas of expertise together to brainstorm and develop ideas collectively. on 50% recycled, 25% post-consumer waste paper
William Wordsworth “The traditional creative people are helping the digital people make sure that CREATE A SIGN for any event, we have a great idea in this new techProfitability. It’s very simple. business or real estate development. nology,” he said. “And the digital people From business card size to billboard. are teaching the creative people how you What we do NOW affects our future. need to think differently in the digital and the social-media sphere.” Effective marketing NOW will have the biggest result Saunders, Stamnes and Breikss noted ADD VINYL to a vehicle, a wall, on future profits. that while 2011 won’t be without challena photocopier, slat boards, windows ges, they’re already seeing the their com…justeducate aboutor any smooth surface! Print can motivate, inspire. panies’ 2010 strategies pay off. Breikss noted, for example, that 6S had its best The time is NOW. We’re here to help. month ever in November 2010 and proceeded to beat that record in January 2011. Said Breikss, “Our company is Yes, per- we’re a printing company, but not just any printing compa forming on all cylinders now.”Looking • for value, passionate professionals, creative printing conc
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March 2011 Business in Vancouver
Debt low, maintenance high
B
Hotel owners say investing in sustainability and monitoring social media have been successful strategies
Glen Korstrom
British Columbia attracted 4% more overnight visitors in 2010 compared with 2009, but local hotel executives were not resting on their laurels. Profitability in the competitive sector relies on forethought and effective strategies to court the 4,271,422 overnight visitors who visited B.C. last year. Small hotels, such as the Listel Hotel on Robson Street, need to have a different game plan than big hotel operations, such as the Sandman Hotels Inns and Suites and Pacrim Hospitality Services. “We focus on a niche market, which is the arts,” said Jim Mockford, general manager of both the Listel Hotel on Robson Street and the Listel Hotel Whistler in that ski resort town. “So we have turned to our friends within the arts and try to partner as best we can to be as efficient as we can to drive as much business as possible.” Mockford gives visiting musicians at festivals such as the TD Vancouver Jazz Festival and Winterruption special discounted rates. During those jazz festivals, the Listel hotel has jam sessions in its adjacent O’Doul’s Restaurant and Bar between midnight and 2 a.m. Visiting musicians who hang out in the bar are encouraged to get on stage to improvise with each other. Many entrepreneurs claim to have Printing partner: PacBlue Printing
Accent Inns president Mandy Farmer: “customer reviews in the hotel industry are king”
introduced so-called green principles, but the Listel Hotel put its money where its mouth is a few years ago when it spent $300,000 to put solar panels on the roof and buy other heat-capturing machinery. “We’re noticing tens of thousands of dollars a year now in savings, and the
investment is for the most part paid off from those savings,” Mockford said. Being a small hotel also makes Mockford’s venue ideal for small corporate meetings, so he has invested in improving the hotel’s catering services. Vancouver’s Aquilini Group and Sandman Hotels Inns and Suites stand Printed on a waterless digital offset press
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Business in Vancouver March 2011
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Listel Hotel general manager Jim Mockford targets a market of musicians and art-lovers, in line with his belief that small hotels like his must establish a niche
Profiting from Challenge sophisticated and innovative managers. The increased importance of knowledge and technology, the globalization of markets and economies, and environmental and so-
at the other end of the spectrum because they are both large hotel operators. Sandman owns 40 hotels, including new properties in Prince George, Edmonton and Calgary. A Langley hotel is also set to open “imminently,” according to Sandman’s vicepresident of marketing, Salim Kassam. Much of Sandman’s success stems from keeping up with “amenity-creep” – continually upgrading rooms with ever-more creature comforts. “A lot more attention goes into bathrooms. Some rooms have heated floors now. What people put in their own homes they want to have when they travel,” Kassam said. Aquilini’s Pacrim Hospitality Services owns nine hotels outright and has a partial interest in 43 other hotels. Pacrim also manages all of those hotels, which are variously branded Holiday Inn, Crowne Plaza and Candlewood Suites. “One of the most important things in the hotel industry is not to over-leverage your property. You should keep your debt under 60% of the value of the property when you acquire it,” said Pacrim president Glenn Squires. “That’s one of the key strategies, because often during good times when the values of hotels go up, people will go out and refinance them.” Squires’ other main strategies are to: • spend up to 4% annually to maintain hotel rooms and site exteriors; • actively ensure that guest experiences are satisfactory by monitoring social media and surveying customers; and on 50% recycled, 25% post-consumer waste paper
• ensure that staff are adequately compensated and believe the hotel is a good place to work. “If your employees aren’t happy, it will be reflected in guest service,” Squires said. Pacrim owns the hotel Internet marketing company Intergy, which monitors social media and works to get Pacrim properties high on search results on Google and travel websites such as Travelocity.ca. “In the online world, everyone is writing reviews, whether it is in Google Maps, Tripadvisor.com or Booking.com,” said Mandy Farmer, president of the six-hotel Accent Inns chain. “Customer reviews in the hotel industry are king.” Farmer hired someone a couple years ago to focus on social media and monitor the chain’s online presence. She agreed with Squires that maintaining properties is vital, although she does not allot a specific percentage of revenue to do that. Rooms tend to be renovated every five to seven years. She is also taking advantage of the current sluggish economy to snag some good deals from tradespeople. “We’ve got a very different approach this year. We’ve decided to spend money. We put $1 million into renovating the exterior of our Victoria property. We’re also putting millions of dollars in renovations for our Richmond and Burnaby properties,” she said. “It’s a great time to do renovations. We want to be poised for when the market does return. That’s when we’ll look brand spanking new.” •
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March 2011 Business in Vancouver
Keeping up with the chatter Two of B.C.’s most profitable communications technology companies keep an eye on future growth through a cloud of economic uncertainty
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Curt Cherewayko
Given the ever-increasing speed of communication, companies that facilitate the variety of ways we connect with one another, as people and as businesses, cannot afford to stand still no matter what the short-term economic outlook may be. During the recession of 2009 and the gradual recovery of 2010, communications companies such as telcos, Internet providers and satellite providers had to address the fact that businesses and consumers had changed some of their communication habits. However, some of the communications companies that are thriving today are doing so not because they sat out the downturn, but because they continued to invest, sought out new markets or made nimble business manoeuvres in what is one of Canada’s most competitive markets. Providing an example of how an economy affects communications, Peter Rhamey, a communications sector analyst with BMO Capital Markets, noted Printing partner: PacBlue Printing
Bob McFarlane, executive vice-president and CFO, Telus Corp.: the Vancouver-based company’s $500 million investment in a new wireless network is helping grow revenue from data users
that, in contrast to previous recessions, a mobile phone was considered a necessity or a mass-market good during the last recession. In previous economic dips, mobile phones, having had marginal market penetration, were considered luxury items and, as a result, were obvious items for a business or a consumer to cut out. Nonetheless, both consumers and businesses reduced their phone bills in 2009. “During the recession, people who subscribed to extras like an optional $3 service started peeling back on those services,” said Rhamey. That reduced the three major Canadian wireless carriers’ average revenue per user – which is a key metric of success for telcos. “You saw some peel-back on average revenue per user reflecting that people were getting a little cost-conscious,” said Rhamey. And while Canada didn’t see the same volume of bankruptcies as the United States, there were some, which resulted in a reduction of revenue for companies
that provide IT, web and phone services to businesses. Vancouver-based telco Telus Corp. made some serious cutbacks during the recession, but it was also necessary for it to make some major investments. The company’s upgrade to a nextgeneration wireless network in November 2009 was one of the key highlights in Canada’s communication space that year. The upgrade came with a hefty price tag of $500 million for Telus, but it gave it and network partner Bell Canada the largest wireless network in Canada. As well, the new network broke Rogers Communications Inc.’s exclusive grip on the top-selling smartphone, the iPhone. Rogers had been fortunate enough to operate the only network compatible with the iPhone when the device launched in Canada in July 2008. Now at 21 megabits per second, Telus’ network is the fastest in Canada, and positions Telus comfortably in the future as Canadians consume more and more data via their smartphones. Printed on a waterless digital offset press
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“Our view was that we were operating at a time when broadband investment is critical to delivering all these new applications and services” — Bob McFarlane, executive vice-president and CFO, Telus Corp.
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forecasted long-term stability or growth – primarily health care, energy and government. McFarlane said Telus now generates between $250 million and $500 million in annual revenue from health care, which is the largest of Telus’ targeted business verticals. “Provincial health-care authorities and the like are in drastic need of services and applications that can cut their costs but improve the quality of care,” said McFarlane. In another communications sector, Richmond-based satellite-maker Norsat International Inc. saw business decline in parts of 2009 as broadcasters – one of its key customer bases – held off on satellite purchases because of the broadcast industry’s stagnant advertising revenue at the time. The company shifted focus to the military market – where ups and downs are more predictable. Historically, the military market only represented a few million in Norsat’s annual revenue mix. In 2009, Norsat generated roughly US$9 million of its US$21 million in revenue from military customers. “We had to diversify,” said Norsat president and CEO Amiee Chan. “First, we had the U.S. military as a major customer, but in the last few years, they have been pulling out of Iraq, so we started diversifying further into other militaries.” Norsat now has 14 military customers around the world helping to offset some of the business it lost for a period of time from its customers in the more fickle broadcasting sector. To maintain sales in the broadcasting sector, Norsat created a division called Norsat Capital, which is a financing arm that customers can access for capital for
buying or leasing satellites from Norsat. “It enables us to service those broadcasters that do not have a huge capital budget, but that need equipment to cover news stories, to be able to buy or rent our products,” said Chan. With its growing military clientele, and with Norsat Capital helping to maintain sales in the broadcaster market, Norsat is on track after three quarters to post revenue and profit in 2010 that is in line with the US$21 million in revenue and US$4.6 million in profit it recorded in 2009. Said Chan: “It was a combination of things that allowed us to survive and at the same time grow in segments we weren’t in before.” •
Dominic Schaefer
Although the network investment was the key driver of Telus’ record capital expenditures of $2.1 billion in 2009, the company is already seeing major returns on the network. With consumers gobbling up more and more wireless data through things like audio and video downloads, Telus’ annual revenue from wireless operations in 2010 was, for the first time, larger than annual revenue from its wireline, or landline, operations. Telus’ wireless revenue grew 6.6% in 2010 to more than $5 billion, with data revenue growing 30% to $1.1 billion. Wireless revenue more than offset a 3% decrease in wireline revenue that was driven by 9% and 14% decreases in revenue from increasingly obsolete local and long-distance landline calling. As a result, Telus grew its profit by 3.6% to more than $1 billion in 2010. “[The network upgrade] was an opportunity for us to gain a competitive advantage,” said Bob McFarlane, Telus’ executive vice-president and CFO. “So at a time when others may have been cutting back, we were increasing our investment. Our view was that we were operating at a time when broadband investment is critical to delivering all these new applications and services.” He said the company was in a position to boost investment because it had consciously maintained a conservative balance sheet during a time when leveraged buyouts were the norm in corporate Canada. “We put a little more debt on the balance sheet, but we had a conservative balance sheet so we’re okay,” said McFarlane. As far as selling communications services to businesses, Telus has focused on becoming an expert communications consultant to specific verticals with
Amiee Chan, president and CEO, Norsat International Inc.: creating financing to maintain satellite sales in the broadcasting sector Printing partner: PacBlue Printing
8 the Black edition
March 2011 Business in Vancouver
A time for replanting After a near-devastating downturn, the forestry sector has returned to profitability on the back of cost-cutting measures and Chinese demand
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Three years after one of the worst cyclical downturns in the history of the forestry sector, the survivors are back in the black. Their strategy? Trimming the fat, strengthening their bottom lines and parlaying their sales expertise to break into new markets on the other side of the world’s largest ocean. “The last two to three years have been really difficult, but I have to tell you there’s been a whole lot of positives that have come out of one of the worst recessions I’ve ever been in,” said Dominic Gammiero, chairman and CEO of Western Forest Products. Late last year, the Duncan-based lumber producer climbed into positive territory for a fourth consecutive quarter, started its Ladysmith sawmill and added 170 employees to bring its total employment to 1,606. It’s a remarkable turnaround given the near-crushing blow the industry was dealt when the U.S. housing market collapsed a few years ago, effectively crippling Canada’s number 1 buyer. In April 2009, U.S. housing starts sank as low as 477,000 units compared with nearly 2.3 million in January 2006. Between 2007 and 2009, B.C.’s forest industry shed 32,200 jobs. Exports to the U.S. were 54% lower in 2009 than they were in 2006, and overall B.C. exports of forest products were down 44% to $7.5 billion in 2009 when compared with 2006. The downturn caused every major forestry company to trim its sails, curtailing Printing partner: PacBlue Printing
Dominic Schaefer
Joel McKay
production at mills and in some cases shutting them down altogether. Nearly four dozen mills in B.C. were shuttered between 2007 and 2009, according the Forests Ministry. Outgoing Canfor president and CEO Jim Shepard called it the “worst market condition of a lifetime.” But he, along with executives at Western Forest, West Fraser Timber and TimberWest, each had a plan for survival. “The first thing you’ve got to do when you go into a storm is make sure the ship doesn’t sink,” Shepard said. “It isn’t a question of where the ship is going – it’s making sure it doesn’t sink.” When he took the reins at Canfor in the summer of 2007, Shepard implemented an immediate cost rollback. He cut his salary 25%, cut his execu-
Canfor president and CEO Jim Shepard says B.C.’s timber business has traditionally been a tough business to survive in, but new Asian markets are changing all that
tive’s and management’s salary by 15% and 10%, respectively, and sold the company jet. Shepard told Business in Vancouver he wanted everyone in the company to know that he was in the trenches with them. The story isn’t all that different at Western Forest. Gammiero said the company adopted its own “action plan” to survive the downturn. “We focused on reducing our inventories, reduced our operating cost by downsizing and we only operated cash positive operations,” Gammiero said. “So we really did have some pretty significant curtailments of operations.” As the recession continued, industry leaders soon realized the U.S. housing market wasn’t going to bounce back any Printed on a waterless digital offset press
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time soon. They needed a white knight. The savior that came galloping to the rescue was China. With an emerging middle class and a population in excess of 1.3 billion, the Asian giant was on the hunt for natural resources to feed its red-hot economy. About the same time, Russia, one of the largest suppliers of logs to China, implemented an export tax on raw logs in an attempt to stimulate its own manufacturing industry. That caused the Chinese to look elsewhere for logs, notably B.C. TimberWest president and CEO Paul McElligott said the Russian tax allowed his company to start selling logs to China in a big way. “The biggest single thing we did was diversify our end markets and put more of our timber volume into Asia … our log volumes in 2009 had increased by about 80 or 90% over what they were in 2008, but then in 2010 they almost tripled,” McElligott said. Meanwhile, the provincial government began organizing trade missions to Asia, rounding up executives from various companies to spread the word about
B.C. wood products. “It’s just really been a real success story for the industry,” said Chris McIver, vice-president of lumber sales and corporate development at West Fraser. “There’s lots of great work going on with the provincial government, federal government and industry partnering with the Chinese on expanding the use of wood-frame construction.” Both West Fraser and Canfor pointed to China for their positive financial results in 2010. Canfor’s Shepard said that back in 2004 and 2005 the company shipped enough lumber to China to “build a couple of cigar boxes.” “Today, we are shipping to China the equivalent production of four of our sawmills, … hundreds and hundreds of our employees are working today because of our sales success in China,” Shepard said. Thanks to survival tactics at home and market success abroad, Gammiero said B.C.’s coastal forest has shed its reputation as a “sunset industry.” “We’re very excited about it … we’ve come out of that mode and the company is in great financial position,” Gammiero said.
Western Forest Products CEO Dominic Gammiero: “management accepted the economic downturn was going to be more severe … than any of us had anticipated”
“The biggest single thing we did was diversify our end markets and put more of our timber volume into Asia” — Paul McElligott, president and CEO, TimberWest
Duncan’s Western Forest Products says it only produces what it can sell profitably on 50% recycled, 25% post-consumer waste paper
More importantly, as long as Asian customers keep buying and forest companies continually diversify their customer base, the industry’s cyclical nature might be a thing of the past. That, at least, is how Canfor’s Shepard sees it. “Going into the future, the market for lumber from British Columbia will be a market comprised of the United States, Japan and southeast Asia,” Shepard said. “The lumber industry of British Columbia will no longer rise up and down like a bobbing float with the housing starts of the United States.” • Printing partner: PacBlue Printing
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March 2011 Business in Vancouver
The pain that heals
L
Dominic Schaefer
An economic downturn can be the catalyst that forces employers to make changes they should be making anyway – and it doesn’t have to mean layoffs or cutting advertising
Barry Sharp, president, AMA Management: “this is exactly the time you’ve got to spend some time and effort marketing”
Nelson Bennett
Like the heart attack that forces someone to start living a healthier life, a recession can be the critical event that forces companies to do what they should have been doing all along, say local change-management experts. That may mean layoffs, restructuring or outsourcing – or none of the above. “Change management, I think, is just so much about communication and putting systems in place,” said Cori Maedel, CEO of Jouta Performance Group Inc. “If there’s not alignment, you’ve got lost productivity.” Too often, Maedel said, companies build up a workforce without a plan in place, which can result in duplication of services and lost opportunities because Printing partner: PacBlue Printing
employees don’t fully understand their roles or the company’s objectives. In the fall of 2009, Maedel worked with a company considering a workshare program in order to avoid layoffs, after the recession hit B.C. “It ended up that the company never had to go on work-share, but everybody was positioned for the fact that it could,” Maedel said. “Everybody rallied together and started working better, stronger, harder.” Even companies that manage to grow during a downturn can use help. “At some point, as you’re adding more people, it’s more difficult to make sure everyone’s on the same page, unless you’re doing it on purpose,” Maedel said.
“For CEOs, they’re so busy trying to keep the doors open. Who’s got their eye on the inside? Often there isn’t anybody. That’s when we get the call and they say, ‘We need help on the inside.’” For small business, the immediate concern in maintaining profitability when revenues drop is getting a handle on costs, says Richard Truscott, a director with the Canadian Federation of Independent Business. Rather than lay off trained staff – whom they will need again when the economy turns around – some small-business owners stop paying themselves, as a stop-gap measure. “My advice to small business would be to maintain firm control over expenses and that will go a long way to improvPrinted on a waterless digital offset press
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Dominic Schaefer
— Richard Truscott, Canadian Federation of Independent Business
ing profitability as business begins to pick up,” Truscott said. When revenues drop suddenly, the kneejerk reaction is often to cut staff or marketing budgets or both, something Barry Sharp of AMA Management says can make the hole they are in deeper. “This is exactly the time you’ve got to spend some time and effort marketing,” Sharp said. That doesn’t mean simply pumping more dollars into the same tired old marketing strategy, especially if it’s not providing good value. Sharp cited a client who came to him in the fall of 2009. A small businessman, he was worried about falling revenue. Ninety per cent of his advertising dollars went to Yellowpages. His website, meanwhile, wasn’t generating traffic. Sharp recommended putting less money into Yellowpages and more into the website by updating it and signing up for pay-perclick web page optimization. “Since then, we’ve more than doubled his sales,” Sharp said, adding his client has added three employees to the five he had when the recession hit. When companies do resort to layoffs, Sharp said, many smaller companies tend to lay off sales staff but keep their office staff. “You end up with very strange ratios,” Sharp said. “You find a much higher proportion of your expenses are non-selling, non-productive-type work – and I’m an accountant, so I don’t want to say office is not productive. But it tends not to generate revenue.” If sales staff do have to be laid off, Sharp suggests training office staff to pitch in and on 50% recycled, 25% post-consumer waste paper
help with things like building and maintaining client lists. Employees may resist such change, however. They may end up feeling they are being asked to do a job they weren’t hired to do. That resentment can be aggravated if new responsibilities are foisted on employees without clearly explaining why it’s being done and providing the necessary training. Too often employers will invest in new technology then expect employees to learn how to use it on their own time, Sharp said. “I see this a lot. The upgrade in technology probably costs a couple of hundred bucks a seat. The decline in productivity while people figure it out is probably a hell of a lot more than that.” •
THE PRIMARY COLOURS OF BUSINESS EXCELLENCE
We lead. Profit follows. From the A3 to the R8, Audi constantly strives to achieve a delicate balance between ergonomics and aesthetics. Whether it’s the elegant exterior lines, the clean simplicity of the instrumentation panel or ventilated leather seating with a 22-way pneumatic massage function, you’ll find that design and craftsmanship work together in sublime harmony. In an Audi you’ll discover the meaning of Vorsprung durch Technik, a philosophy in which every aspect of design is driven by the goal to give drivers a distinct “advantage” through integrated, progressive technology. Over 100 years on, Audi continues to make every turn in the road as exciting and rewarding as ever. As for our profitability, it’s evident in our ability to heavily invest in the future. If its not evident in the double-figure growth we experienced in 2010 across all our global markets, or our 13 production starts planned for Q1 2011, or our 2011-2015 investment plan of €11.6 billion (€9.5 billion of which will go to developing new products and technologies of the future), its evident at your local Audi dealer. Visit your local Vancouver dealership and experience a test drive in one of our exceptional 2011 models. We have a feeling you will work the rest out for yourself.
Cutting staff and advertising to maintain profitability during a recession may be unnecessary, say change-management experts like Cori Maedel of Jouta Performance Group Printing partner: PacBlue Printing
12 the Black edition
March 2011 Business in Vancouver
Weathering darker roads
Strong reputation and good business relationships key to profitable 2010 in transportation sector Trucking companies like Coastal Pacific Express faced drops in consumer demand and trucking rates, plus new competition ushered in by an at-par Canadian dollar
W Jenny Wagler
“In 2010 we had competitors where we didn’t even recognize their names, and suddenly they were potent threats to our existence” — Jim Mickey, co-owner and co-president, Coastal Pacific Express
Printing partner: PacBlue Printing
With low consumer demand shrinking cargo volumes, increased competition driving down rates, and an at-par Canadian dollar eliminating the country’s North American edge, transportation companies faced serious challenges to achieve profitability in 2010. “I guess the only way to describe it would be god-awful,” said Jim Mickey, co-owner, Coastal Pacific Express Inc. trucking company, describing the early-2010 transportation landscape. Mickey said that the trucking sector, already scraping by with 3%-4% profit margins prior to the recession, got walloped with the combined impact of lower cargo volumes, lower rates and new competitors ushered in by Canadian dollar parity with the United States. “In 2010 we had competitors where we didn’t even recognize their names and suddenly they were potent threats to our existence.” Eugene Fenton, president of AquaMar Shipping, a boutique international air and ocean freight forwarding company, had a similarly dark view of the early days of 2010. “There was little grounds for optimism,” he said. “We’re a fairly parasitic community and we’re totally dependent on the economy, the exchange and the price of fuel, and we’ve no control over it.” However despite the grim times, Fenton, Mickey and Klaus Kaufmann, president and CEO of Astra International Moving & Shipping, all managed to turn a profit in 2010. They credit their success to a range of factors, including long-standing business Printed on a waterless digital offset press
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Coastal Pacific Express co-owner and co-president Jim Mickey: it’s important to know when to walk away from a bad deal
relationships, sound company reputation, cost-cutting measures, shifting business emphasis and having the discipline to walk away from bad business deals. Long-cultivated business relationships, Mickey said, proved a key strategic edge for his company in 2010, when contracts came up for renewal among fierce competition and price wars. A history of good, reliable service, he said, was often what persuaded a customer to stay with Coastal Pacific Express, even when the company was being undercut by competitors. But he cautioned that nurturing those relationships can’t be done last minute. “You have to work on relationships long before a challenge like 2010.” Klaus Kaufmann noted that his business was somewhat insulated from the challenges of 2010 because the overseas relocation market, his company’s core focus, didn’t diminish as much as the commercial shipping market, where the company saw revenues drop. But he noted that the company’s reputation was key to its ability to stay profitable in a difficult market. “We have a good reputation and word spreads around,” he said. “Referral is a great deal of our business.” Both Mickey and Fenton noted that on 50% recycled, 25% post-consumer waste paper
they cut costs in 2010. Mickey commented that in the trucking sector, those cuts reflected a new reality, where shippers are willing to forego excellent service with high on-time performance for a lower-cost, “good enough” alternative. “Sometimes we had to reduce our expectation of the quality of service we had sold in the past,” he said, noting that throughout the industry, companies are no longer staffing and maintaining equipment to cover rare peak periods. “Today, a shipper is routinely exposed to days when a load is unable to move because the carrier of choice doesn’t have the resilience and the redundancy that we used to.” Kaufmann said Astra International didn’t have to pare down costs in 2010, but he noted that that’s because there was little to cut. “It’s not easy times anyway for this industry, so we are careful, always, anyway,” he said. Another strategy the executives mentioned was switching the emphasis of their businesses to accommodate a different customer base. Mickey noted that Coastal Pacific Express has, in some cases, extended its role beyond only being a supply chain component to provide more value-added
services, such as warehousing and product management. Fenton commented that in the international shipping realm, where dollar parity has seriously harmed export volumes of manufactured goods, his business is now focusing on the import market, which had previously been less appealing due to being less lucrative. “We’ve given [importers] more time than we did previously,” he said. “We essentially have to be more resourceful.” Finally, Mickey noted that to achieve profitability in a difficult climate, sometimes a company just has to know when to walk away from a bad deal. He cited recent times when a contract has come up for renewal and the customer has demanded an impossibly low trucking rate. “[The customer] says hey, we love you guys but here’s the rate you have to work at for me to sign off on this,” he explained. “And you look at it and you get a little shiver going through your spine saying, ‘How’s that going to work?’ and so you have at that point to say ‘Thanks, but no thanks; we just can’t do it.’” Walking away from business, he said, has been a difficult choice, and has the ancillary consequences of having to cut staff and sell equipment into a down market. But in the end, he said, it’s paid off to not lock the company into moneylosing multi-year contracts. “We just can’t perpetuate the situation,” he said. “It was marginal before and this makes it outrageous.” •
William Jans, Vancouver Port Authority
Business in Vancouver March 2011
In 2010, shippers faced low commercial export volumes as manufacturers struggled with the recession and the high Canadian dollar Printing partner: PacBlue Printing
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March 2011 Business in Vancouver
Do it better and profits will follow Niche retailers thrive in Vancouver’s home interiors industry
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Success happens if you find something you do well and do it better than anyone else. That is the experience of three Vancouver furniture and home decor retailers who have prevailed in an industry known for big-box dominance. Niels Bendtsen, owner of Inform Interiors, is renowned internationally for his innovative, contemporary designs; Vancouver sofa retailer Sofa So Good has withstood the test of time with its huge selection of custom-sofa options; and newcomer Mint Interiors is carving out its niche with unique and whimsical artisan pieces for the home. “We haven’t missed a beat,” said Bendtsen, when asked how the store weathered the economic downturn. “I’ve been nervous about it, but it hasn’t hit us at all. We’ve chugged through it without any problems.” Bendtsen’s group of companies (in addition to three Inform locations he also owns Bendtsen Manufacturing and a multi-residential kitchen design company) has grown and thrived, largely due to his reputation for quality manufacturing and design. Printing partner: PacBlue Printing
Dominic Schaefer
Victoria Noble
Niels Bendtson, owner, Inform Interiors
He is gearing up to open another 10,000-square-foot show room this summer that will target the design and architecture trades with products like doors and hardware. Inform has about 40 employees and Bendtsen employs about 150 all told. “I’ve been doing this since 1970, so I guess we have a history of longevity,” said Bendtsen, who began his career with his father at Park Royal’s Danet Interiors. Superior customer service is another reason Inform has done so well. “We’re way more than the store,” he laughed, explaining that customers come in with house plans, and continued on page 16
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March 2011 Business in Vancouver
continued from page 14
staff will help them with tasks like finding a good designer. “Part of what drives our business now is we have these relationships with people and we really work together to get the best solutions.” Inform also invests in keeping up with the latest trends and passes that knowledge along. “We spend a lot of time travelling the world to make sure we’re on target,” he said. “It’s pretty hard for people to keep up with everything that’s going on and we’re closer to it, so we have the ability to do that.” Sofa So Good co-owner Paul Rasmussen said his store survived the downturn by cutting back on overhead – but it didn’t cut back on marketing and advertising. “Not only do you reap the benefits initially but it’s compounded when things turn around – you have a faster recovery, which we have certainly seen.” Sofa So Good offers customers the ability to design their own pieces from choices the store makes available. “People want to have a certain size, a certain style, a certain fabric, a certain type of comfort,” he explained. And with about 6,000 fabric samples to choose from, even Rasmussen describes the choice at Sofa So Good as mind-boggling. Rasmussen opened Sofa So Good in 1997 on the heels of his previous venture, Georgia Interiors. Rather than try to be everything to everyone, Rasmussen decided to focus on selling just one type of furniture. “It’s the one piece that everybody needs and the one they use everyday. It’s the main piece of furniture in everyone’s home. And it’s what we’re good at.” The future is bright for Sofa So Good, which employs a staff of seven at its location at Cambie and Hemlock. While 2010 saw a dip below profitability due to a lull after the Olympic Games and the HST implementation, 2011 is already back up to pre-Olympic profitability. “We’re back on track now,” said Rasmussen. Mint Interiors is new to Vancouver’s home decor retail scene, but co-owner Michael McNamara is confident that it’s here to stay. Sales have been on target since November 2010 when the store opened in the burgeoning Armoury design district between Burrard and Granville, just south of downtown. Printing partner: PacBlue Printing
Michael McNamara and Rien Sharma from Mint Interiors: sales on target since the store opened in the Armoury district east Burrard just south of downtown
“We’re pretty happy with where it’s going,” said McNamara who, along with partner Rien Sharma, also owns and operates Revamp Home Staging. Mint has artisan-made products like hand-blown glass pendant lights and end tables with legs that look like the bottom half of a
small, with a 1,600-square-foot store and three employees. The venture has been financed by their previous company, and the two are determined to grow Mint slowly and organically. They share warehouse space and a truck fleet with Revamp.
“We’re way more than the store. Part of what drives our business now is we have these relationships with people and we really work together to get the best solutions” — Niels Bendtsen, owner, Inform Interiors
dog. The two felt Vancouver had a need for more unique home decor items. “We have a lot of designers actually thanking us for bringing something a little different to Vancouver.” McNamara and Sharma have started
“This is the second company we’ve started and we’re going to take the same approach,” said McNamara, “not overstaffing, watching the dollars that are going out and making sure they’re well spent.” • Printed on a waterless digital offset press
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March 2011 Business in Vancouver
Growing wealth Long-term strategies and differentiation remain key for advisers to attract the province’s wealthy
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John Nicola, founder and CEO, Nicola Wealth Management
Richard Chu
With the proportion of the country’s millionaires in B.C. growing, the market for wealth-management firms would seem vast. But competition remains fierce in an increasingly challenging market where profitability is not as assured as it used to be. Some of the chief challenges facing the sector revolve around the demographics of the rich. According to Toronto’s Investor Economics, about 40% of Canada’s millionaires are already 65 years of age, and the proportion of baby boomer households with financial assets in excess of $1 million will only increase over the next decade. That demographic reality is leading to a shift in the risk profile of investors. From a focus on relatively more aggressive portfolio asset growth, retiring baby boomers have been shifting toward more conservative goals of wealth preservation and investments generating cash flow used to fund retirement or philanthropic endeavours. A McKinsey report suggested boomers were most interested in investment strategies that not only mitigated any decline in the performance of their investments, but also included a plan to deal with any unforeseen medical expenses or health issues that might eat into a retiree’s portfolio. To grow business, however, wealthmanagement firms have needed to not only cut costs, but struggle to increase their market share. Some smaller firms have resorted being acquired by bigger Printing partner: PacBlue Printing
players in the industry to create economies of scale. However, organically growing market share has been more challenging for firms in an era where investor trust of advisers was rocked by the massive declines in equities following the financial crisis. But some firms have been taking advantage of the market turmoil. Macquarie Private Wealth, which was formed initially from the acquisition of Blackmont Capital a couple years ago, has grown its number of investment advisers by nearly 20% and continues to grow its assets under management to $13.7 billion. Peter Maher, the global head of Macquarie’s banking and financial services group, told Business In Vancouver that it’s managed to grow it business by providing various investment strategies that suit the various types of high net worth clientele managed by their advisers. Among the fastest growing wealthmanagement firms in Canada is Vancouver’s Nicola Wealth Management, which has seen its revenue and profit more than double over the past five years, with assets under management rising 150% to $1.2 billion. A combination of strengths has helped keep the company growing even during the downturn. As a fee-based wealth-management firm, Nicola Wealth has remained focused on providing an investment strategy emphasizing cashflow-based investments to a target market of incorporated professionals, busi-
ness owners and executives. “Our market is very defined, and remains very defined,” said John Nicola, the firm’s founder and CEO. “We want to invest in a way that makes sense for us as owners [of the business] and for our clients.” To reduce market volatility, the company focuses on building and managing a diversified investment portfolio that not only includes public equities, but a range of assets from mortgages, bonds and real estate to precious metals and private equity. The strategy has kept the company growing through basic word-of-mouth referrals and relatively little marketing. While the company does continue to attract wealthy investors who may be shopping for a new adviser, it is looking beyond boomers as it develops and grows its business. In addition to mentoring younger advisers with experienced professionals in the firm, Nicola Wealth also attracts young professionals as clients who are just beginning their careers. While many have modest portfolios, or even just debt, Nicola said these financial-planning clients have the potential to become wealth-management clients in the future. “If you start working with someone in their 30s, you can develop a long-term relationship that holds over time,” said Nicola. “I’m very cognizant of the fact that having younger business owners and executives as part of our client base is quite important.” • Printed on a waterless digital offset press
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