Adapting Your Vision: The Key to Scaling Your Business
- Entrepreneurs face significant barriers accessing capital.
- To be a successful entrepreneur, you have to be willing to adjust your vision throughout the process in order to reach your end goal.
- The entrepreneur’s DNA includes never being satisfied unless you are moving forward.
The Minister of Finance should address stock-based compensation and taxation so that entrepreneurs can attract and afford high-quality talent. The government should also invest in training and certification equipment and create an accelerated depreciation schedule that would allow small businesses to scale up effectively.
What important skills do entrepreneurs need in order to navigate COVID-19 and why did you decide to become an entrepreneur?
The qualities that entrepreneurs need during COVID-19 are being flexible, having an ability to adapt to rapid change and making high impact decisions with limited information. I think entrepreneurs tend to have the appropriate mindset to deal with a situation like COVID-19 as those are qualities that are needed on a regular basis and they were put to the ultimate test in this environment.
If an entrepreneur can adapt to this environment, they should be able to adapt to almost anything—which is a key skill for success.
I decided to become an entrepreneur because I wanted to be challenged in my career. I also wanted to take what I had learned throughout my 15-year career and apply it to an opportunity where value could be created.
The entrepreneur’s DNA, to me, means that you are never satisfied unless you are moving forward and really learning. You have a vision of where you want to get— and you focus on overcoming the obstacles in the way of that vision.
“The entrepreneur’s DNA, to me, means that you are never satisfied unless you are moving forward and really learning.”
The collision repair business has been in my family for many years, and I grew up in the business. My father emigrated from Holland, where he was a tradesman, and became a tradesman here. He started his own company importing paint from Holland and became a distributor and continued on to work in the collision repair industry for 40 years.
I went a different direction with my career, but when I spoke with my father, I realized there was a significant opportunity in the auto repair space. The demographics showed that most of the shops were owner-operated, and they had been built up over the last 30 to 50 years. There was a real succession issue in the industry, and that created the opportunity for a consolidator. If you combine that with the fact it is somewhat a non-cyclical industry, that people pay for the service upfront, and that the counterparts paying the bills are large insurance companies, it creates a significant business opportunity.
What are some the challenges you have faced as an entrepreneur and how did you overcome them?
One of the biggest challenges you encounter as an entrepreneur is raising capital. A key for any entrepreneur is finding long-term patient capital that understands your vision and is willing to ride out the start-up fees with you. To overcome this, we kept adjusting the business and refining our pitch to be able to articulate a vision that fit with the investment community. As much as you have a vision that you want to get out and execute, you have to be a bit flexible to ensure that it fits, and it can create the returns that the investment community is looking for.
“A key for any entrepreneur is finding long-term patient capital that understands your vision and is willing to ride out the start-up fees with you.”
A good example of one challenge we had, where we had to adjust, was raising capital in order to find the acquisitions. The investors were asking us to show them the acquisitions before they chose to invest in the company. So, we had to take a reputational risk, go out and sign deals with a few locations to show the investment community that we had acquisitions lined up in order to convince them that the investment made sense. We learned to be a bit malleable to fit the investment needs.
One of the key things in being an entrepreneur is that there is not always a clear path forward. You must have a vision in mind, but you also need to overcome obstacles that stand in the way and be willing to adjust your vision based on the current environment.
As we adjusted our vision, we kept track of our key performance indicators (KPIs) on paper. By doing that, you realize what KPIs you need to hit to meet your desired future outcome. You have to plan and have a pathway, but the pathway might take different directions as you reach your end state. I think you are more capable of articulating what that end state looks like if you are willing to adjust along the way to get there.
Another gap that entrepreneurs face—specifically industrial trade businesses, like ours—is talent recruitment. It is difficult to find the right people and train employees, especially because it is extremely hard to find young people who are interested in the trades. We believe this can be resolved by educating young people on the benefits of having a trade background. Many people do not realize that if you spend four years out of high school, you can earn up to $100,000 a year and increase that salary over time. People do not realize how good of a career it is to be a tradesman in Canada, and part of that is cultural.
“Another gap that entrepreneurs face—specifically industrial trade businesses, like ours—is talent recruitment.”
In Europe, a tradesman like a body technician or painter is seen as a true professional, alongside an accountant, doctor or lawyer. It is a different mentality in North America, and that is detrimental to the trades. It is difficult to change the culture and it is very ingrained in North America. The trades are rarely promoted in high school, even though they could be a good future career. There is also a significant regulatory burden on bringing in skilled foreign workers. This should be lessened so that these employees can be brought in to fill the gap we are seeing in the trades. Further, these small companies cannot pay for the best talent they need in order to scale properly. This has been a hit to small Canadian entrepreneurs.
Essentially, the government is looking to change the taxation of stock-based compensation from capital gains to income. You can see that this makes sense from the government’s perspective because everyone is getting paid and one is taxed differently than the other. But the reality is it hurts small companies who cannot pay market value salaries for their employees. A way to offset that is to have the ability to offer further upside in the growth of the company, and to do that on an efficient basis. To me, that is something that really helps to promote small companies to attract the people they need in order to be successful long-term.
“We have seen a lot of small investment dealers essentially shut down because the regulatory burden is too high.”
Another challenge that should be addressed is the regulatory environment for smaller investment banks. This regulatory burden should be reduced so that smaller investment banks can help entrepreneurs access pools of capital. Right now, the regulatory burden is one-size-fits-all for large banks and small investment dealers, and we have seen a lot of small investment dealers essentially shut down because the regulatory burden is too high. I think creating an environment where small dealers are able to survive and thrive would help Canadian entrepreneurs access capital.
Why did you take the Canadian Business Growth Fund (CBGF) investment and what will it enable you to do?
We took the CBGF investment because they are a long-term investor with a time horizon that matched the development of our company. That was key for us and for our success. The Canadian Business Growth Fund were not concerned about results over the next 12 months, they were concerned with results over the next five years. That makes a really big difference for a small entrepreneurial company looking to grow. Our company needs time to execute its growth strategy—it is a consolidation strategy, so we really need an investor that could be supportive of that long-term. And, CBGF was one of the few investors that would partner with a company of our size as a large minority investor rather than a control investor. The CBGF investment really enabled us to execute our growth vision, and that has really built the company to a size that made it more attractive to larger investors. So, it ended up being a good fit.
“The CBGF investment really enabled us to execute our growth vision, and that has really built the company to a size that made it more attractive to larger investors.”
There was also a clear cultural fit between what the CBGF was looking for and what our clear direction for the company was. Also, the values that they hold and the investments they want to make really fit with what we are looking to do—create a large company in Canada from a small company, from entrepreneurial vision through growth. They are the Canadian Business Growth Fund, and that is really what we are: a growth company that they are looking to finance and back. It helped us bring our company to the next level, and the CGBF is crucial to helping develop small companies into large companies that stay in Canada.
Content continues below ↓
What are the challenges you faced with your business model?
As an entrepreneur it is not always smooth sailing, especially for growth companies. One of the key challenges we faced is that as a consolidating company, you need to build a platform that can execute on that vision of growth. We needed to invest in the platform upfront, which meant a couple of years of losses while we built the platform and grew the company. The key there is that we needed a proper growth-oriented investor that saw the future state of the company and was willing to invest now in order to develop the platform.
“As an entrepreneur it is not always smooth sailing, especially for growth companies.”
We also realized really quickly that each time we acquired a business, it would have a different system—different management systems, and different IT environments. In five acquisitions, they all had different systems and we realized that we would not be able to scale without a unified system and a clear process for getting a new acquisition onto the Lift system moving forward.
We spent a lot of time centralizing bookkeeping, payroll, marketing and human resources. We took that into corporate so that new acquisitions could step in on day one. We brought new technology infrastructure and switched over to the management and accounting systems on the first day so that we could have clear information that was comparable across our locations. It was key for us to develop that, and now we have a clear transition team that can go in, preplan for weeks prior, and be there for one- or two-months post-acquisition to truly integrate into Lift’s operations.
Our plans going forward include adding $40 million of revenue per year for the next few years, and we believe we should be able to scale up beyond that as well. We are hoping to move from $40 to $60 million two or three years down the road—so pretty significant growth. We have built a team and an execution platform that we feel could do one acquisition a month and be very successful at it, and if the opportunity presents itself, we could scale that up by building additional transition teams.
As the car industry adapts and evolves, how do you keep pace and how do you plan for that?
Over the last 10 years, we have seen cars become exponentially more technologically advanced. Sensors are a particular problem. It used to be a few hundred dollars to fix a bumper on a Honda Civic. Now, it can be a few thousand dollars because the bumper has many sensors that need to be replaced and recalibrated. As the technology improves and vehicles become safer, they also become more expensive. Therefore, we are certainly seeing the average cost of repairs continue to increase in the collision repair space.
This has created a burden for the industry— but, as a consolidator, we see this as a real opportunity. We have a better platform to invest in technology and the training necessary to fix cars properly compared to single owner-operators, where it is becoming more difficult.
“We have a better platform to invest in technology and the training necessary to fix cars properly compared to single owner-operators, where it is becoming more difficult.”
One key approach we have taken is that we are a strong believer that the future state of collision repairs is going to be focused on original manufacturer certifications. That is where each brand, like BMW, Mercedes or Toyota have specific repair guidelines for their vehicles, and they have specific training requirements in order to fix their vehicles properly. We have focused our business to invest in ensuring our shops are certified in fixing vehicles so that they maximize the use of the equipment and the trained technicians to be on the leading edge of this certification process. This ensures that we are fixing vehicles to the highest quality possible.
There are a few things, however, that mitigate our concerns about advancing auto technology. If we have autonomous vehicles with non-autonomous vehicles there will be a transition period where the cost of repairing collisions will continue to increase even though the number of collisions will go down. Again, this would strongly favour a larger consolidated entity. In the future, if everything were to become autonomous it would significantly reduce collisions. We feel that as the market turns towards autonomous vehicles, they may not need collision repair, but they will need some level of service. As a larger consolidated entity, we hope to be in a position where we could offer the services that are necessary.