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Elevator Pitch Workshop
Introduction
If you want to be a successful entrepreneur, CEO or leader, you have to be able to sell; sell your ideas,
yourself, your products and services. If you are looking for a job or a promotion today, it helps to have the
skill set of an entrepreneur including the ability to pitch your ideas successfully. Typically, you’ve got just
one or two minutes to do that! If you succeed, you will get to use your creativity, your initiative and your
energy in an exciting new project of your own design and get that promotion too… This workshop is
designed to help you understand what makes up a great elevator pitch and help you prepare one plus give it
as well.
Objective
To significantly improve the ability of entrepreneurs and intrapreneurs (people who want to learn and use the
skill set of the entrepreneur* but who don’t like the risk profile of being an entrepreneur) to deliver a
successful two-minute elevator pitch.
(* The entrepreneur skill set includes among other things: creativity, innovation, adaptability, discipline, focus, business modeling
and planning, bootstrap capital, smart marketing (guerilla marketing and social marketing), finding launch clients, checking
everything, doing everything in parallel, ability to think on their feet and sell, sell, sell.)
Duration
The Elevator Pitch Workshop will run for 90 minutes. (The workshop may also be done in just 60 minutes
by eliminating the description of the scenarios and leaving that to the individual groups to work through on
their own.)
Agenda for Elevator Pitch Workshop
How to Make a Great Elevator Pitch (15 minutes)
Describe Scenarios to be Pitched and divide into Teams (30 minutes)
Preparation by Teams — each attendee will join a group and work in their groups to prepare their 2-
minute pitches. Each group will select one member to make the pitch. (20 minutes)
Elevator Pitches — two minutes each plus one minute of feedback. Each pitch will be recorded and
may be placed online. (20 minutes).
Summary (5 minutes).
Teams
Teams should consist of from two to four persons. Each team must declare which scenario they wish to
pitch. More than one team may elect the same scenario. However, we will require that at least one team
present on each scenario so the organizers reserve the right to re-assign teams. The organizers may also want
to assign teams to scenarios by random draw.
How to Make a Great Elevator Pitch
Attendees must pre-read, if possible:
http://www.eqjournalblog.com/?p=339.
Judging Criteria
We will be using the following judging criteria to evaluate your performance:
Student Name: _______________________________
Idea: _______________________________________________________
PLEASE IDENTIFY TO WHOM YOU ARE PITCHING. YOUR AUDIENCE IS EITHER: A)
PROSPECTIVE INVESTORS IN YOUR BUSINESS; B) PROSPECTIVE CUSTOMERS OR
CLIENTS YOU ARE TRYING TO CONVINCE TO BUY YOUR NEW PRODUCT OR SERVICE;
C) A COMPANY YOU ARE TRING TO CONVINCE TO HIRE YOU FOR A JOB, D) A
PROSPECTIVE EMPLOYEE (OR SUPPLIER) YOU ARE TRYING TO RECRUIT TO (FOR)
YOUR COMPANY; E) YOUR BOARD OF DIRECTORS; F) OTHER (PLEASE IDENTIFY).
Personal Pitch—
Strength of presentation: conveys confidence, enthusiasm and /5
professionalism
Demonstrates strong skills and background necessary to launch and operate /5
a venture
Stimulates interest and/or ability to maintain interest /5
Explains opportunity succinctly and understandably /5
Total /20
Notes:
_______________________________________________________________________________________
_________________________________________________________
Idea Pitch—
Value proposition – problem being solved/differentiated value/negative /5
cost for customer/innovation or ‘pixie dust’/competitive advantage
Size of opportunity /5
Cost of customer acquisition/use of guerrilla or social marketing /5
Cash conversion cycle—ability to generate cash /5
Ability to execute /5
Scalability/network effects/reversing out the work to customers or /5
suppliers/custom outputs from standard inputs
Total /30
Notes:
_______________________________________________________________________________________
_________________________________________________________
Grand Total ____/50
Video Capture
The pitches will be recorded and may be placed on the Internet for the purposes of education. If any
participant is concerned about this, they should not make the pitch for their team.
AV Requirements
Projection Screen
PC and Projector
Access to the Internet
Sound
Video camera
One wireless lapel microphone plus one wireless hand-held microphone
Lapel mike and hand-held mike to be connected to video camera
Laptop showing online egg timer/stopwatch set to 2 minutes:
http://www.online-stopwatch.com/eggtimer-countdown/full-screen/
Creativity
Each team is encouraged to add their own ideas to each of the scenarios below—maybe you can think of a product
extension, another source of revenues, a new marketing technique. Feel free to experiment and innovate.
Leadership and Acting
This elevator pitch workshop is designed to assist individuals develop their leadership skills. Entrepreneurs must be
able to lead to be successful.
Leadership is different than management. Management skills are necessary for the enterprise to function well on a
day-to-day basis. Entrepreneurs also need to be sound managers. Leadership is about the ability to “create and sell an
alternative vision of the world, a better one in which we are an essential part. Philosopher Isaiah Berlin wrote that
Churchill idealized his countrymen with such intensity that in the end they rose to his ideal,” Warren Bennis in The
Essential Bennis.
According to Bennis most “leaders acquire greatness when a role requiring it is thrust upon them.” It is interesting
that he uses the word ‘role’ because leadership is partly about acting the role of a leader. Most of us are not born
leaders, we have to learn how to be one.
Bennis points out that leaders need:
to be able to leap into the unknown;
to accept the risk of failure;
to show adaptability;
to create and sell their vision;
to inspire the people around them;
be authentic;
be consistent.
These are pretty useful attributes to demonstrate when making an elevator pitch.
The Scenarios
What: Qwantz.com
Who: You are presenting to the Guinness Book of Records on why they should grant your comic strip the record for
the longest running comic where the characters never more or change. You realize if GBoR agrees, this will double or
triple the online traffic to your site and result in a marked increase in the amount of dino merchandise you can sell.
Ryan North, a brilliant IT professional, started qwantz.com in the learn-by-doing part of Entrepreneurialist Culture,
one of the courses I teach. Qwantz.com is an online dinosaur comic strip.
The only problem Ryan had was that he couldn’t draw. Like most entrepreneurs, he turned a weakness into a strength.
His comic strip has six panels with two dino characters—all images are taken from free, publicly available clip art. The
key is that the panels and characters NEVER change. They are the same, day-to-day.
What changes is the dialogue between the characters—T-Rex is a large, stumbling, know-nothing and chauvinistic
loud mouth. The other character, Dromiceiomimis, is a Utahraptor, who is loving, warm, smart and wise. From this
somewhat inauspicious start, Ryan has become an internationally known writer who creates and self-publishes the only
daily comic strip with images that never move or change. It is the subtlety of the dialogue that creates interest and a
strangely compelling read that becomes more interesting the more you read it.
It doesn’t hurt that Ryan is brilliant and quirky. Here is T-Rex’s take on entrepreneurship:
Ryan’s daily routine is to get up and answer his fan mail for about an hour. Mixed in are requests for merchandise.
That is one of Ryan’s revenue streams. He sells a ton of t-shirts and, wisely, he handles the money while outsourcing
fulfillment.
Sample T-Shirts
After an hour or so, he turns his mind to the comic of the day. By noon, he’s done and ready for the rest of his day. He
travels widely, does appearances at comic conventions where he signs copies of his books (such as Your Whole
Family is Made of Meat) and has time to fool around developing an advertising engine (Project Wonderful) that was
profitable within ten days of launch. He makes a ton of money and has a wonderful life.
Ryan North and Friend in a Tree
Ryan started qwantz.com with less than $100. His marketing budget was around $20. He bought the domain name
poo.ca and put up cardboard cutouts of T-Rex around the University with this domain name on it and nothing else.
Students started checking out the mysterious site and got hooked on his comic.
(If you type in poo.ca it still resolves to the qwantz.com URL. The comic has been continually published since Feb 1, 2003.
Revenue streams include: merchandise, appearance fees, book sales, Project Wonderful ads.
Ryan also allows guests to create their own Qwantz.com panels. Here are two of mine based on my experience in Australia where I
did both me Masters degree and PhD and also a send-up of our Bring Back the Senators campaign. See below.)
What: Village of Kalmandhai, India
Who: You are requesting a $900 grant from WaterAid in the UK to construct a new latrine in your village.
I read an interesting article years ago in the Globe and Mail (by Luke Harding of the Guardian News Service, February
10, 2003) about micro entrepreneurship in Kalmandhai, India.
There, slum dwellers erected latrines—one for men and one for women and a third for children only. Charging just one
cent per use, they built a profitable business using only $900 USD in start-up capital advanced to them by UK based
WaterAid.
Who would have thought that you could make a successful business out of a latrine but that is apparently what the
women of this village did. I was intrigued so I sat down and did a spreadsheet on it this morning and here is what I
conjectured:
Village of Kalmandhai, India with assistance from WaterAid, UK
Cost of Construction of New Latrine
Men's $450 USD
Women's $450 USD
Children $0
Total $900 USD
Revenues Per Use $0.01 USD
Daily Use Men 300
Women 375
Children 400 free
Total Use 1,075
Total Paid Use 675
Total Daily Revenue $6.75 USD
Annual Revenue $2,463.75 USD
Maintenance 10% $90
Night Watchman 1 $450 $450
Cleaning Staff 3 $1,350
Net Revenues $573.75
Return on Investment 64% p.a.
So they achieved a (possible) 64% p.a. rate of return on this investment, which is impressive. Just as importantly, there
are significant health benefits that accrue to these people from proper disposal of human wastes. Plus they generated
additional activity including:
a. the construction of a shower block for traveling truck drivers that pass through the Village and for the villagers
themselves (and more fees);
b. the use of their 'product' (from the latrines) in their herb garden (for self use and third party sales);
c. start-up of a composting business;
d. money lending to women in other villages to start similar enterprises.
Think about the number of jobs they created-from a latrine! Give a human a fishing rod, not a fish.
What: Best of Kanata, ON
Who: You are pitching a potential advertiser on why he or she should advertise in your Book.
My friend, Richard Rutkowski, who is a former City of Kanata Councillor is an intriguing person—he very sure of
himself, a good marketer, a good promoter and a sure handed politician (now a successful REALTOR with his own
Brokerage.)
I asked Richard if he did something else beyond being a REALTOR and, sure enough, he hauls out this cute little
magazine called The Best of Kanata. Now this is a really low tech—essentially, local businesses advertise in it, so that
is one revenue stream for Richard.
It costs about $600 for a half page and there are lots of pages. Then, people buy these books for 20 bucks and in the
back of the magazine, there is a 'member's card' about the size of a credit card, which entitles them to 10% off at all
stores and services featured in the book.
When I did a Google search, there was no mention of it. So, Richard hasn't even bothered with a web site.
Well, this is a pretty simple business and folks advertise in it like crazy because they like Richard and it works for
them and it is pretty inexpensive.
Richard sells 5,000 copies of the book, so you can figure out for yourself the economics pretty easily.
The business model has more depth to it that it might first appear. Revenues are generated from advertisers and book
purchasers. But it turns out that Richard’s clients are also his suppliers and his suppliers are also his clients.
Advertisers supply ads which form the content of the book plus they supply the 10% off cards that drive sales to the
public. But interestingly, the advertisers also stock the books for sale to members of the public. If you place a half page
ad in the book for, say, $350, and you sell the book for $20 and you get to keep $10), you only need to sell 35 books
before your ad cost you nothing.
Think about the compelling value proposition that Richard can present to a single customer—you can buy an ad for a
negative cost if you can sell more than 35 books.
In this way, his clients form one of his sales channels. Another sales channel consists of local charities and other good
causes. The Kanata Food Cupboard, for example, sells each book for 20 bucks and keeps 15. Minor hockey teams use
it too—to raise funds for hockey tournaments, for example.
There have got to be a zillion of these kinds of ideas. Do you know what I told Richard: "NEVER, NEVER sell this
thing; it is like a sinecure, a franchise, a license, a concession ... it is your 'pixie dust' forever."
It is low tech and low intensity to manage this particular micro business and it is a kind of concession because it is so
local, so focused and Richard is so well known locally that everyone who is anyone in the 'urban village' that is Kanata
is going to be in it.
The cost to start the Best of Kanata was negative—Richard was able to pre-sell enough advertising so that the cost of
printing the first book was more than offset by deposits from advertisers. They gave Richard 50% of the cost of their
ads upfront because they trust Richard and because they want Richard to succeed since it’s in their best interests that
he does.
What: Digg.com
Who: You are pitching an Angel Investor—you are asking them to fund the first six months of your new startup
involving an amount equal to $500,000 USD in return for 10% of the biz.
Digg.com’s founder, Kevin Rose made $60 million in 18 months. Kevin was just 29 years of age so there is still time
for you!
Kevin Rose, Entrepreneur (With nearly 1.2 million followers on Twitter)
While I think great execution is really important, having some type of innovation in your business model can help you
create a sustainable advantage; i.e., you need to have some type of ‘pixie dust’ or differentiated value in your
organization’s business model. This creates a franchise or concession for you that is hard for others to copy.
Let’s look at the Digg.com model. What makes it different? What is its differentiated value?
1. It is a new model for a newspaper uniquely adapted to the Internet.
2. It is not simply the online version of the New York Times or some classified advertising page transferred to the
Internet.
3. It is a digital community made up of a fairly homogenous demographic: 80% are male, mainly young techie readers.
4. Readers are also contributors.
5. Readers dig up interesting stories from all over the web and post brief synopses to the site and links to them
whereupon other readers vote on them—the most popular ascend the page.
6. The site harnesses the competitive instincts of the readers/contributors to compete to see whose story will lead.
7. The site works because of its homogeneous demographic—contributors only post stories that will be of interest to
the group.
8. The site is dynamic—leading stories change by the minute or hour.
9. Digg.com’s cost for headline writers = ZERO.
10. Digg.com’s cost for journalists = ZERO.
11. Digg.com’s cost for editors = ZERO.
12. Digg.com’s cost for distribution = ZERO (at least, the marginal cost is practically zero).
This is a lot of pixie dust. I think Digg.com is important for another reason—I believe that it is important for
communities that are working together to be reading the same things, to share a common culture. If you think about it
for a moment, many of the communications you have in a given day are made much easier by possessing a common
culture; you don’t have to explain where you are coming from and the context of what you are saying in every
conversation you have.
Now the innovative nature of Digg.com would be pretty useless without good execution so creativity is a necessary
condition for the kind of success Mr. Rose has had but not a sufficient condition.
What: GradeATechs.com
Who: You are pitching a Homeowner on why they should call GradeATechs.com when their PC is having trouble.
So you want to start a new business? Which one should you select from that list of ideas you have?
Selecting the right one is very important—one of the things you learn about successful entrepreneurs is that they know
which ideas to choose to put their efforts behind. Even more importantly, when they choose wrong, they admit it and
go on to other more worthwhile endeavours.
When some of my engineering students from the Sprott School of Business and the Telfer School of Management
came to me after graduation with their list of six 'great' ideas, five were either impractical, required an amazing amount
of R & D, needed the world (read markets) to come to them or required a huge amount of startup capital. Then there
was the sixth idea—which turned out to be GradeAStudent.com (today rebranded as GradeATechs.com).
Their value proposition was simple—we will come to your home or place of business and fix your PC or network: on-
site computer repair and training at a fraction of the cost of the computer repair industry. The results have been
outstanding.
There was only one problem they said– NerdsOnSite.com was already up and going.
Is this a problem?
No!
Why not? Because they had:
a strong value proposition;
a huge and growing market.
If it is a good idea, there will be competition. If it is a bad idea, there won’t be but so what?
It’s a BAD idea!
What they needed to do was out-execute the competition by:
Providing superlative Customer Service;
Using GASnet to reverse out the work to clients and suppliers.
GASnet was a match-making service; it linked techies and clients. For first time ever, a service business is scalable
due to the Internet.
GradeAStudent.com was not the first at home computer repair service but their execution was good and they used their
back end system (GASnet) to automate their appointments and their billing systems.
They have turned it into a multi-million dollar biz (Ottawa, Mississauga, Montreal, Tampa, Bellville, Brockville,
Oakville, Gatineau, etc.)
Your biz idea/biz model has to meet the following criteria:
1. you must be able to bootstrap it (GAS was started with around $10,000);
2. you must be able to use Guerrilla Marketing (GAS used lawn signs and market by press release);
3. it doesn't have to be the very first of its kind (GAS had NerdsOnSite to contend with);
4. but you don't want to face humongous competitors though (like if Dell or HP were in the GAS space say);
5. there has to be BIG demand (probably 20 to 30% of PCs in NA don't work at all or less than optimally at any one
time; so GAS' market is probably 120,000,000 PCs just in NA alone at any one time);
6. you must be able to get customers without killing yourself and they must become repeat clients which gives you
recurring revenues (once people hear about GAS and use GAS, they use them over and over again);
7. the biz must be able to grow big enough so that you get more out of it than if you just worked for someone else in a
JOB (GAS could be a $100m per annum biz);
8. you need to bring some creativity and differentiators to the industry (GAS uses GASnet to match student techies and
customers and to invoice instantly; they also use fixed pricing);
9. you need to be able to explain your value proposition in less than two minutes (GAS provides at-home COMPUTER
SERVICE at prices you can afford; no need to disconnect your PC, take it to a repair shop, wait three weeks, pay an
unknown amount, take it back home, reconnect it to find it still doesn't work properly or your hard drive has been
wiped or both.)
What: MINI HERB FARM IN THE SUBURBS
Who: You are pitching a landowner in the suburbs on why they should rent you their garden for the season.
You never know where a Personal Business for Life (PB4L) may pop up (so to speak).
Here is an example from BusinessWeek and the Wall Street Journal, where they are turning small properties in the
suburbs into profit-making herb gardens.
It is not just that this represents local food growing and a (small) contribution towards a more environmentally
sustainable economy, it could be a cool thing to do with your family as well:
Here is a bit of analysis on the above:
Mini Herb Farm in the Suburbs Analysis
Area 0.125 acre
43,560 sq. ft. per acre
5,445 sq. ft.
Cost of Plot $5,500 BW
Start up Cost $2,000 BW
Sales $15,000 est.
Gross Margin 30% est.
Gross Profit $4,500
IRR Cashflow
0 ($7,500)
1 $4,500
2 $4,500
3 $4,500
4 $4,500
5 $10,000
$20,500
IRR 58% p.a.
Assumptions:
a. You sell for the same as you purchased for at end of year 5.
b. You can probably require most developers to put aside
more than 5% of their lands for parkland and mini farms
too. You might even be able to get a plot for a de minimus
annual rent.
To download the above in .xls format, please go to: http://dramatispersonae.org/MiniHerbFarmInTheSuburbs.xls.
You may also want to introduce some innovation of your own—perhaps you could stress organic farming as a
competitive advantage here or instead of renting property (you pay the landowner), you could get the landowner to pay
you! E.g., you could open a ‘school’ and teach the landowner how to start his or her own mini herb garden. You could
also sell them seeds, fertilizers, soils, books, manuals, even merchandise. You could help them to sell their produce
and take a cut. You could act as a middleperson and arrange for a local merchant to sell their products.
What: Two Monkeys Coffee & Tea House Inc.
Who: This is a case study of a new coffee house set up in suburban Ottawa by two partners, both in their 30s, Jill
Sheppard and Rob Kay, who each own 50% of the business. The current business environment is fraught with peril—
they have opened during a world-wide economic crisis that began in October 2008 and continues, the location is a
suburban mall (in Barrhaven, a suburb outside of Ottawa, Canada) that is close to a relatively prosperous residential
area but the storefront is not easy to see or find, there is a lot of competition from established national chains like
Starbucks and Tim Horton’s as well as local chains such as Bridgehead.
The students’ job is to read Jill’s description of the business below and identify the risks for the business in addition to
the ones described above.
The elevator pitch that comes out of your analysis must describe the risks you have found and identify possible
solutions. You are talking to an audience made up of family and friends who are thinking of investing in this business.
The Case
From: Jill Sheppard
Sent: Friday, September 04, 2009 12:27 PM
To: Firestone, Bruce
Cc: Rob Kay
Subject: Two Monkeys Coffee & Tea House Inc.
Hi Bruce,
It was a pleasure to see you yesterday in the shop; it seems life after we worked together at (unnamed tech co., ed.) has
been good for both of us.
I was thrilled to hear you enjoyed your muffin and tea yesterday - the next time you come in I will try to coax you into
trying one of our loose leaf teas, I know you will enjoy every drop.
I have attached photos of the shop in hopes of taking you up on your offer to be one of your students’ case studies. In
terms of our "secret sauce", we believe there are four major components that contribute to our ongoing success.
A. The first is my mom - she does all our baking and soup making. That’s not just a name we put on the cook, she
really is my mom. Everything we serve is made fresh on site. Our soup is made daily from fresh ingredients and lots
of love. Our regulars don't even ask what the soup and sandwich of the day is, they just order it and tell us: ‘It doesn't
matter what it is, it's going to be good.’
Mom’s Cooking
Is delicious
B. The second is our kids’ zone. Without a doubt, we are the most family friendly coffee shop in the city. We are
parents first and we have designed the shop from a parent’s perspective. We have given the front of our shop a
traditional coffee house layout to ensure we satisfy the need of those without “little monkeys”. We feel it’s a great
blend of both worlds. (Moms and Dads can actually go someplace and get a tea of coffee and bring the tykes. No
complaints here about rambunctious kids, Ed.)
Kids’ Zone
C. We wouldn’t be an outstanding coffee shop without our fair trade, organic, locally roasted coffee, prepared fresh
15 minutes from our shop. It could only be fresher if we roasted in the shop ourselves, which we won’t do for several
reasons. Our tea selection is growing almost daily. The best thing about being independent is the ability to react to our
customers’ requests. We can order any flavor as often as we need to. Our suppliers are first rate and our relationship
with them ensures continued success for all.
D. And of course, we couldn’t be a great place to hang out if we didn’t have a décor that worked for adults too—
with comfortable seating, lots to read, Wi-Fi wireless Internet (for free) and great service.
It’s about the Décor too
I welcome the opportunity to discuss this with you in more detail. Obviously I am passionate about my business and
could talk endlessly about it. I love what I do and I love making Moms and Dads happy when they are here. One of
the best comments I have heard in our short five months is: “I spoke in full sentences today and I had my kids with
me.” The formula is easy… make the little ones happy and Moms and Dads are happy too.
It was also nice to hear you say: “Why didn’t they have a place like this when my five kids were little!”
As you know, we hope to start franchising the business and spreading the joy to other areas too…
I look forward to seeing you again and hopefully providing you with excellent service and outstanding products!
Kindest regards,
Jill Sheppard, Two Monkeys Coffee & Tea House Inc.
Instructors’ Manual
This section is not to be read by students until they have completed their analysis and elevator pitch.
The risks the business is faced with include:
1. There are still two chairs in Heaven waiting for the first partners to get there and still like each other. Will Rob
and Jill (who are business partners, have kids and are married but not to each other) put in the same amount of
capital, put in an equal share of the work and have the same objectives over the long term?
2. A 50-50 partnership is one where there is no controlling mind—maybe the two partners face a crisis and can’t
decide what to do about it—they are paralyzed/stalemated by their equal say.
3. Suburban malls tend to age poorly—there is little to prevent a newer mall from opening up nearby and
drawing traffic away from established malls. Unlike most downtowns in Canada and Europe, there is no
scarcity of space that creates long lasting traffic patterns that also support long lasting businesses.
4. They are renting space—many Landlords will raise rents for successful tenants so that, if Jill and Rob are
successful, the cream may end up in the Landlord’s pocket.
5. Landlords are also fussy about changes to the premises and outside as well—they may be limited in what they
can do over time to change and renew their premises.
6. What about relying on Jill’s Mom for part of their ‘pixie dust’/secret sauce/differentiated value (DV)? What
happens when Mom retires?
7. Suburban neighborhoods change over time—kids grow up. Whole streets tend to evolve together—soon the
kids are teens and not going to Two Monkeys for play time. Middle aged parents don’t tend to go out as much
either. Will Jill and Rob’s business dry up and blow away?
8. What about the name? ‘Two Monkeys’ may work today but will it work long term? Aren’t demographic trends
(favoring smaller families or households with no kids) working against them?
9. What about City of Ottawa policies favoring downtown inside the Greenbelt development over suburban
development? Will that curtail growth in Barrhaven where they are located?
10. They are thinking of franchising their concept but are they a generation or two too late?
11. Will franchising work without Mom in each store? Is there enough pixie dust and DV to sustain a franchising
expansion plan?
12. Should they focus on getting their first store to the stage where they have proved the concept, that it is
sustainable, that they can make real money before even thinking of franchising?
13. How can they survive competition from established chains like Starbuck and Tim Horton’s?
14. Could their competitors mimic part of their secret sauce by, for example, adding playrooms for kids?
15. Maybe they shouldn’t have opened during the worst recession since the 1930s?
16. Lastly, what is their ‘Magic Marketing Button’? Their storefront is a bit hidden. What is something
inexpensive and effective that they can do to attract customers for the first time? We can be pretty certain that
they will probably keep their clients coming back once they have stopped by once; but how to get them in the
door that first time? If they can’t find some marketing that really works in a cost effective manner, their
business is sunk.
Conclusion of the Case
At the end of the day, every enterprise is started not because a hard-headed analysis says it will be worthwhile doing.
New enterprises are started as an article of faith—the founder or founders believe that they can make a difference and
that their endeavour will succeed.
This is not an argument against quantitative analysis—setting goals, financial and otherwise, is very important.
Knowing what your breakeven is, aiming for that plus enough to sustain you and your family and your employees and
suppliers and other stakeholders is incredibly important.
But most new enterprises take twice as long as you thought to get off the ground and twice as much money plus three
times as much effort. In most cases, if you knew then what you know now (to paraphrase Bob Seger), no one in their
right mind would start a new business.
But I am proud of Jill and Rob and their new place and I believe it will be successful. It is up to you, students, to deal
with the problems I have outlined above and identify other challenges and their solutions. I get to be a cheerleader for
these entrepreneurs.
What: LeNakedLunch.com
Who: You are the Chef running a high-end restaurant at 4816, rue Wellington, Montréal, Québec and you are trying to
convince your two partners to sell the restaurant to your employees and focus exclusively on canning your recipes and
selling them across the planet in specialty shops and at trade fairs and shows like the Fête des vendanges in Magog-
Orford, Quebec.
You just came back from a visit with your accountant and he told you that last year you made around $55,000 from
your restaurant and deli counter. You worked unbelievable hours running the restaurant and you have a dedicated
client base that love your food.
You speak some English but like many Québécois, you feel more comfortable in French.
As you were leaving your accountant’s office, he offhandedly told you that one unusual thing he noticed was that your
deli counter made le Chef and his partners almost 80 grand last year. You didn’t think too much about this but a few
days later, you found yourself awake at 3 am with a thought: “If we made $80k from our puny nine foot long deli
counter but only $55k overall from the whole enterprise, is there a message here for us?”
You know you are a great chef with unbelievable recipes—this is your business’ ‘secret sauce’. Colonel Saunders had
his 11 secret herbs and spices, Coca Cola has their secret formula but how many people know how to make your
Smoked Meat de Canard that sells for $18.95 per tin (CAD) or TAJINE DE LÉGUMES À L'OLIVE ET À
L’AGNEAU that sells for $14.95 for a tin that holds 530g? Answer: only one person knows how to do that—you.
What if you could work 1/3 fewer hours, travel the world selling your stuff, visit fabulous places, meet cool people,
sell online and in specialty stores? What if you could actually make money by selling your restaurant to your
employees and make still more money by selling them your products on an ongoing basis too? Is the fact that you
made more money from your tiny nine foot long deli counter selling take home products than running a complex
operation like a high-end restaurant with its long hours, demanding clients, needy employees and greedy landlord, is
this telling you something?
Prof Bruce
Postscript: It's interesting to note that when you disaggregate results for even quite small businesses, you
can learn something new. In this scenario, the deli counter is making an $80,000 profit while the overall
business is seeing just $55,000 on the bottom line. That means the restaurant itself is losing $25,000 per
annum.
When we ran the largest mini-office operation in eastern Ontario, we found that we made money renting minis
but lost money in our word processing and services division. Rather than closing it, we did something similar
to what the owners of Le Naked Lunch did: we sold it to an entrepreneur. Within six months of buying it from
us, she had turned a $3,500 per month loss into a $4,500 per month profit. Meanwhile, we received $45,000
from selling the biz, its equipment, client list and lease plus we turned a monthly loss into a new rental
income stream (she paid us rent for her space).
Also, when we were a partner in Rentalex Tool and Equipment Rentals, our analysis found that the 16 locations
in Ottawa were making money and all 17 locations in Toronto were not. We sold the locations in TO to our
chief competitor and between the money we got from our leases there, our inventory and goodwill, we made
enough to recover all our losses from the Toronto operations since their inception. We also turned an overall
annual loss for the company from a negative $800,000 to a positive $1.4 million per year in just two years.
As my father, the late Professor O.J. Firestone, said: “Keep the winners and dump the losers.”
Please note: that the accounting scenario presented above for Le Naked Lunch is created by the author as a
plausible set of circumstances for the change that took place for the Chef and his two partners based on a
discussion with one of the partners in Magog, Québec in September 2009.
Copyright. Dr. Bruce M. Firestone, B. Eng. (Civil), M. Eng.-Sci., PhD., Ottawa Canada. Sept. 2009.
