PROFIT HOT 50: Safer passage

Written by Laura Pratt

Challenge 1: Standing out in a commodity business

Shawn O’Reilly
President, Shorex Roofing Corp. (No. 18)
Commercial roofer, Barrie, Ont.

Fighting a mentality among customers who look for nothing more than the best quote is a constant challenge for companies in commodity industries. But we have lots of weapons.

For one, we’re a standout for having professional standards. Most roofing companies are small operators without sales, HR or service departments, or much of a corporate structure. We have all of those. We manage ourselves by the book.

And we have a brand. I hired a company to design a logo and an image, so it looked, from Day 1, like we had been around for 20 years. I created a brochure with a coupon, then had employees do door-to-door sales with it. We had about a 30% response rate. It wasn’t the brochure itself so much as that we showed up on their doorsteps. Just being a human presence in a commodity industry sets us apart. We’ve got the surprise factor working for us.

We also have the immediate-need factor. A potential customer could go through a phone book to find someone, or here’s a guy standing there with a 25%-off coupon. It’s the path of least resistance.

We have an excellent customer-service department that I pay a lot of attention to. When I launched, I drew up a business plan for the service department alone. I identified what overhead it would require and how much we needed to charge to get a return. Today, our gross profit margins on service work are about 55%.

There’s not a lot of traditional education in this arena, but most of the guys here, including myself, get regular training in industry-specific stuff. We can refer to historical data that point out, for example, that the average lifespan of a flat roof in North America is only 14 years. We then sell a product and installation that will last 15 to 20 years.

There’s definitely a customer base that has three pieces of paper with prices on them and chooses the lowest quote. But creating that brand, those high standards, that reference list, that excellent customer service has lifted us above the commodity level. And we’ve raised the image of the industry overall.

Challenge 2: Taking on big, established competitors

Gary Mauris
President and CEO, Dominion Lending Centres Inc. (No. 23)
Mortgage broker and equipment-leasing network, Coquitlam, B.C.

When we began, we had just one mortgage broker: my partner. Today, we have 1,500, and our company will help fund $8 billion in mortgages this year. We’re the largest independent mortgage and leasing company in Canada. We have 200 storefronts, and we represent all the banks, trust companies and credit unions.

Still, at the start, it was incredibly tough. Not only did we have to convince the public that we could pull it off, but we had to convince suppliers, banks and lenders, too. There were so many people laughing behind our backs, shaking their heads. But we had done so much homework, we were just so sure of ourselves. We never even considered being No. 2.

It’s important to turn off negativity. When you start a business in a very mature industry, it’s easy to second-guess yourself and become paralyzed by fear. For us, fear showed up in the expression of doubt among our people and in their ongoing questions, such as “Can we really pull this off?”

Fear can very quickly extinguish all positive belief, motivation and confidence. We would discuss every negative comment or circulating rumour, break it down and flush out the facts. And we would share each of our success stories and consistently remind our people that we’re an amazing team who, together, can create something that our industry has never seen.

One of the challenges with taking on huge rivals in the early days is that we lacked size and credibility — which established competitors loved pointing out. To counter that, we had to make sure we knew our business intimately and that we were unbelievably professional with everything we did. And we needed to look bigger than we actually were. From Day 1, our business cards, website, social-media links, storefront locations, signage, presentations and dress had to be the best in the business.

When your competitors are busy catching, they can’t pitch. We were constantly growing and taking market share away from them, so they were too busy reacting to launch an aggressive campaign against us.

And, from the start, we measured every single sales call, referral, ad response, success or failure. Tracking these things meant we were nimble and could react quickly if something wasn’t working — or if something was. We’re constantly improving and adjusting to maintain our leadership position against slower-moving, large corporate rivals.

Challenge 3: Managing with multiple partners

Wayne Sim
CEO, 3esi Innovation Inc. (No. 10)
Software developer, Calgary

There are six founders here, all of whom are still on the management team. This design sets up a more productive culture of ownership.

But management by partnership comes with challenges, too. When we put together the governance model for our company, we were keen not to become a hydra-headed monster of constant conflict, or an organization whose requirement for consensus would slow us down. We therefore assign portfolios to each partner, delineate each person’s responsibilities clearly and give complete autonomy to each portfolio head. They’re compensated based on overall corporate performance, but also on making their portfolio’s objectives. We communicate at weekly executive meetings, but only make committee decisions on big things, like once-a-year talks about corporate strategy.

And we keep this model dynamic by making the portfolios one-year assignments. Once a year, we re-examine our corporate goals and set our budget against those goals. This revised corporate strategy is then subdivided into portfolios, and the person who owns each is responsible for developing an individual operating strategy in line with our overall strategy.

Early on, we developed a corporate scorecard of performance metrics for each portfolio. This makes sorting through problems pretty much a mechanical exercise. If there’s a disagreement between sales and service, for example, and sales wants to give away service in order to support licence sales, we measure the conflict against these agreed-upon parameters.

To say that all the partners in the company are equal isn’t quite right; because, at the end of the day, I hold veto power over major decisions. When you end up with a Mexican standoff, you need a way of moving past that.

We’re actually a lot quicker at making decisions than other companies are, because everyone’s responsible for making up the strategy, and everyone knows where the goalposts are. We have a lot less turmoil around trying to bring consensus to the group because of that.

Where a lot of companies fall down — whether they’re a group of partners or a single leader — is in linking strategy to execution. For us, the people who are responsible for putting together the strategy and the people who carry it out are the same. That’s important.

Challenge 4: To boldly do what no one has done before

Grant McKeracher & Blake Appleton
Co-CEOs, Keen Technology Consulting Inc. (No. 2)
IT staffing agency, Toronto

At the time we founded Keen, when we sat down to decide whether we were actually going to take this leap of faith, we felt that there were serious gaps in the industry and a lot of room for improvement. A lot of competitors were forgetting about the basics. They were focusing more on their margins than on what’s best for the customer.

In most of our industry, if a client asks the job candidate they’re interviewing whether the vendor [staffing agency] met them, nine times out of 10 they’ll say no. That vendor is in a race against time to get that resumé over to the client. But we don’t operate that way. We won’t be pressured into believing that the only way to win is to have a race.

The challenge we faced when we started was how to deliver on our promise to do business differently so that we would, in fact, focus on what was best for the customer. So we asked ourselves, “How do we improve upon what’s wrong with how most other companies in the industry operate?” And we determined that it’s in treating your staff how they want to be treated. That ripples out to allowing us to do a lot of great things.

We’ve all worked in bigger companies where the goals are so grand, and so is the need for lots of people to accomplish them. But there’s really no contact, no communication among levels of employees. You hire all these people, and they go out and do the work; but there’s no caring about them, no way of monitoring what they’re doing.

It’s easy to compete with that when your company is small. You can easily monitor the quality of people you’re hiring and the work that’s going on, because it’s all happening right in front of you. The challenge is to maintain this mentality as you expand.

We believe that we can do that, building a large company while maintaining high standards of quality, client service and, most important, career satisfaction. We do this by hiring the best people and then building a rewarding career path for them. As opposed to a large competitor, where your job may be the same for a decade, we’ve organized our team to be responsive to employees’ strengths and preferences, so all paths lead to jobs they’ll love. That way, they’ll stay with us for many years, thus sustaining a consistently positive client experience.

And because our biggest focus is our staff, convincing customers to take a chance on us isn’t as much of a challenge as it may sound. Getting in a prospect’s door comes down to having people who are good with relationships, who feel respected, who get the education they need to feel confident.

Based on our experience, training in the larger firms is very high-level, and their people are generally left to fend for themselves when it comes to learning and growing. We provide more personalized, focused training than many of our competitors do. We work closely with each team member to help him or her become an expert in his or her field.

We use two methods to do that. We hook every employee up with a mentor, who works closely with them and focuses on their individual needs. And we have mandatory weekly group training for every staff member, which provides in-depth education in areas such as technology and industry trends.

Along with this training comes the notion of specialization. In the next year, we’ll be focusing on vertical specialties, so that team members can better understand our clients’ technical initiatives and improve their ability to properly screen and find the most appropriate candidates quickly.

Our company has grown so quickly because we’ve focused on getting back to the basics. We know our customers appreciate that greatly because we’ve gotten such a large number of referrals. In fact, a large majority of our business has come from referrals.

Challenge 5: Managing employees who own the company

Michael Gokturk
CEO, VersaPay Corp. (No. 1)
Credit- and debit-card payments processor, Vancouver

I went into this with a very Warren Buffett mindset. If you read his annual reports [for his company, Berkshire Hathaway Inc.], employee ownership is one of the main reasons his subsidiary companies do so well. That’s because their wealth moves with their stakeholders.

At our company, we use our stock as currency to incentivize our current employees to stay with us, as well as to attract new talent. This is not free stock, but options to buy stock. As a result, well over 50% of VersaPay is owned by employees and insiders, very much giving them the controlling stake.

People worry about employee-owned corporations because they feel it’s going to be like a union — where the employees elect leaders, and the leaders aren’t necessarily responsible to the employees. But our mandate is quite the opposite. We are responsible to our employees. We got here because of them.

In spite of what people might think of an employee-run company, VersaPay is not run by committee. Management operates the company with every employee’s best interests in mind. Their livelihood grows with our livelihood.

And the key to pulling this off? Our ability to point to the company’s successes, and the way that makes employees realize what motivates our decision-making. Because we’re demonstrating growth, because we’re showing success and because they see that their personal performance and livelihood have improved, they feel comfortable entrusting us to make the right choices. We’re the stewards of their future.

When we’re implementing a decision, we ask employees for their advice. From our receptionist to our call-centre people, everyone has a voice. Management engages employees on a daily basis to learn their thoughts, ideas and strategies. We’re very mindful of the fact that we have built this company together and it’s our duty to grow it together.

We’re not stuck all day in our offices — many of our managers sit with employees in open-area spaces, so we’re always discussing ways to make VersaPay better. This process of inclusion is not a once-a-week thing; it’s daily, if not hourly. This may seem tedious, but all it requires is listening to your people.

We’re fortunate enough to have shareholders who believe in management and their vision. They have supported us since our inception and have entrusted us to continue growing VersaPay as we have.

It’s been important, too, that the company’s management makes it known that the majority of our own invested capital is in VersaPay. We don’t have side projects or deals.

When an employee is working for you, they wonder whether your heart and soul are committed to the company — and, by extension, to them. When they see that 100% of our work ethic is dedicated to VersaPay, they know they don’t have to worry. They realize that if something goes wrong, we suffer more than they do.

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