Overnight Success Doesn't Happen Overnight

The business marketplace is littered with so-called "overnight success" stories. Because we live in a microwave society, we want everything fast.

We want to lose weight in a weekend by taking a pill. We want to download everything in a blink of an eye. And we certainly don't want to wait for success.

Here are some truths about the overnight success phenomenon that you should think about the next time you hear one of these stories.

It is the exception, not the rule.

Do you seethe with envy every time you read about an overnight success story? One of the most popular is how Roxio, the makers of the app sensation Angry Birds went from zero to hero overnight.

Yes, it was a great success story and they probably never have to develop another game (but they will). However, the truth is Angry Birds was the 53rd game that this company created. That would be 52 other games that went through development, testing, marketing, implementation and lackluster sales.

Overnight success? Hardly.

Sure, a company can get fast results and see their profits soar in a short amount of time, but for the majority of businesses success can't be rushed.

You're hearing the hype.

It looks good for a company to promote themselves as an overnight sensation because we all like a winning story. It also makes for good press to have the Cinderella syndrome play out of someone being plucked from obscurity and plopped down in their dream life.

However, a little digging will reveal the truth behind the hype. Even the simple act of filing corporation papers takes time.

The reality is that a company's success is often built on a lot of past failures. Those failures might not all be related to that company but you can bet the board of director, the developers and the sales staff have had years of experience in the business world that lead them to this point in their careers.

In fact, if someone has worked for just five years prior to starting that company, they are bringing close to 10,000 hours of experience. So, any time you hear a story about an overnight success just ask yourself, "What are they leaving out?"

Being number one could blow up your company.

Under the heading "be careful what you wish for" comes the notion that a true overnight success might actually blow up your company. Imagine the potential success of a Super Bowl commercial.

Not only will literally a hundred million people see that spot play out but it could also go viral, bringing in millions of more viewers. If that business isn't ready for the onslaught of potential customers then their website could crash, their staff will revolt and they'll lose a lot of business.

Planning for success is just that: "planning."

That should mean being ready when it finally arrives.

Things to Consider When Incorporating Your Business

Incorporating your business in Canada can provide you with a level of protection in terms of liability. It can also show potential investors that you're serious about handling your business in a professional manner. Before you enter into the incorporation process there are many factors you'll want to consider. 

Will I be able to conduct business throughout the country?

If you make your company a federally incorporated company then you'll be able to conduct business across all of Canada. On the other hand, a corporation who files under OBCA is restricted to doing business in Ontario exclusively, unless it obtains additional licenses. Understand that choosing between a provincial or federal incorporation would depend on the type of business that you run and your vision for the future.

What are all the filing requirements?

As a corporation you'll have to follow the laws of "general application, requiring registration, returns and/or fees" as they apply to each particular province. These requirements are all contained in the CBCA provisions. Additionally, any time there is a change in your corporation you'll need to make necessary filings. There are other restrictions under the Business Names Act which pertains to the name you can select for your company.  

Where can I hold my board of director's meetings?

If you are a federal corporation you can hold those meetings anywhere in Canada. With a provincial corporation those meetings must be held within your province. These requirements should be spelled out in the filing papers.

Filing for incorporation will require you to look ahead to the future of your business. It might seem less costly to do the minimum amount of legal work for a "simple" incorporation application. That approach could come back to haunt you when your business takes off and you look to expand throughout the country. There will be a lot of effort going into your incorporation filing. Make sure you explore all your options to ensure the greater potential for success. In other words, cover all the bases ahead of time and you'll come out on top! 

For more information on incorporation and to place an order to have our experienced paralegals draft  articles of incorporation on your behalf, please visit our website at www.CorporationCentre.ca.

Gender Diversity is Important for Your Corporate Board

Ideally, the best corporate board for a given company would be one that is diverse. Hiring board members with the same background and education could find your company "stuck” and unable to draw from variety of experiences.

When it comes to gender diversity, a recent study supports the idea that women who are corporate board members tend to be more open to new ideas than their male cohorts. So, does this make women on corporate boards better than men?

And the survey says…

The International Journal of Business Governance and Ethics put up the survey that polled 624 board directors from all across the Canadian business sphere. The breakdown of those surveyed ranged from 75% male and 25% female. According to the results women were cited as being "more likely to use co-operation, collaboration and consensus building" when presented with the task of problem solving. Across the boardroom, the men were found to come up with their solutions by "using rules, regulations and traditional ways of doing business."

Chris Bart is a professor of strategic management at the DeGroote School of Business at McMaster University and a co-author of the study. Upon reviewing the results he concluded that "The way women operate as directors often contributed to a company’s success, raising the question of why women are still in the minority in Canada’s corporate boardrooms. Why would governance, nominating committees and board chairs not want to have that skill set, that competence available to them in abundance?” asked Bart.

Here are some other qualities found from the women board members who took part in the study:

• Women were less constrained in their problem-solving skills
• More likely to take into account the interest of a wider range of company stakeholders
• Considered fairness an "important factor" in decision making process
• Women are more inquisitive
• Can see more possible outcomes to situation

As for the men who participated in the study, Bart found that, "The old boys club culture is still alive and well in corporate boardrooms across all sectors. Men are pack animals and they are very much quick to recognize the hierarchy of the alpha males in the group,” he said upon the report's release. “They would be very unhappy with people coming in with different values or views to the board.”

Can you look at your corporate board and say it is as diverse as it can be? It might be time to consider shaking things up especially if your business has hit a wall. Nothing like "fresh thinking" to put a company back on track on the road to success. 

Accepting a Position as a Director in a Company

 

Being invited to join a promising young startup is certainly a boost to the ego. Clearly, your qualifications and experience have impressed someone enough to offer you a position as director. However, you have to think like a business professional. Put aside the compliments and ask “Do I know what I’m getting myself into?”

 

Because you might be taking a radical change in your career path it’s vital that you do research before accepting a position as a director. The following are some key areas you should thoroughly understand about the start up.

1)      Their Finances

Start with asking, “How much money do they have in the bank?” and build from there. What you should be looking for are actual funds and not the promise of investors coming on board. A line of credit is a good thing for the company to have but without working capital, that credit can quickly exhaust itself and add to the red ink in a ledger. Beyond the working capital, you also want to examine the company’s valuation. This will include income projections versus expenses. Bottom line: You need to get the complete financial picture.

2)      Their Competitors

Every startup begins with the notion that they are better than their competitors. It’s your responsibility to take off the “rose colored glasses” and garner a true look at the marketplace. Their competitors wouldn’t be in business if they weren’t doing something right. What exactly are they doing that your startup can’t do? The opposite question applies as well when asked about the strengths of your potential company’s abilities. Not only are competitor’s sales important to review but also their approach to marketing strategies. How will your startup do things differently?

3)      Their Investors

In your new position as director for a startup you might be charged with the task to bring in new investors. Hopefully, that company will already have a few investors supplying capital and intelligence. You would be at an extreme disadvantage if there were no investors already on board. That might prove to be too daunting of a challenge.

4)      Their Board of Directors

Who will you be working with in this new venture? This is crucial to understand because engaging in a startup will have your mettle tested. You might be asked to work long hours with this group in addition to making other sacrifices in your personal life. Will it be worth it? It’s hard to judge that until you have some tangible sales figures but you certainly don’t want to invest your time and energy with a group of directors who aren’t up to the task. Don’t ever forget that the solid reputation which earned you the offer to join the startup is the same reputation that will be at risk.

How to Remove a Poorly Performing Director from the Board

Any type of corporation will have a board of directors established to develop strategies, policies and implement those ideas. The board is beholden to the shareholders in the sense that it is their job is to increase the profits which are paid out as dividends. It falls under the responsibility of the board to make sure that all of the members are living up to the standards of excellence that have been established for that company to succeed.

Just because someone has been named to an executive board is no guarantee that they’ll be up to the task. In certain circumstances it might become apparent to all that a particular board member needs to be removed. Usually the reasons are that they have become ineffective or are having difficulty working with the other board members.

When it is obvious that a move needs to be made, the board of directors will be restricted by the guidelines they have established in their bylaws. Here are some examples of bylaw clauses which can determine how a poorly performing director is removed from a board.

Term Limits

A majority of corporations have built in term limits for their board of directors. Typically, a director might serve out a three-year term and then be rotated out. In some cases a board member proves to be extremely valuable. For them to outlive their term limit a special vote would have to be conducted.

On the other hand, if a board director that has been targeted for removal has only a few months left on their term it might make sense to let them simply retire as opposed to creating a potential “dust-up” in the company.

Asking for a Resignation

Often the targeted board member might not have any idea they are being looked at to step aside. This would require a personal intervention from the chairman to this director. In the meeting, the chairman would spell out the areas of concern and ask for that person’s resignation.

On many levels, this is a “face saving” gesture. It allows for a smooth transition and doesn’t automatically tarnish the reputation of the board or the member being asked to leave. To insure this is all above board, it is advisable that the company’s lawyer be present during the discussion.

Impeachment

Impeachment is the formal process by which an executive board can remove a member. The process should be clearly spelled out in the bylaws including all the specific reasons for dismissal. For an impeachment to pass you will need a 2/3 majority of the board.

It is important that any such action like the removal of a board member be supported by a unified front. A bad press report can drive the price of a company’s stock down. Board shake-ups would certainly qualify as bad news.

That is why it’s best if the company can get out in front of the story with a definitive press release explaining the transition. The goal is to insure the shareholders and the stock traders that business will proceed as normal.

Getting Incorporated: Tips on Incorporating a Business

There has been a lot of talk recently about whether or not a corporation can be considered a person. While pundits debate those points, the courts have already decided: a corporation is a legal entity that can enter into lawsuits, be taxed and buy land just as any individual will. As a small business owner you might soon discover there is very little space between you as a person and your corporation. The biggest advantage of incorporating is that it can protect your personal assets. Those should always be kept separate from your corporate umbrella.

The following are tips to follow as you head down the road of incorporating your company.

1)      Decide Where You’ll Incorporate

The three options for business incorporation would be within your own state or province, within your own country or in a foreign country. Most small businesses start out by keeping it simple and incorporating within their own region. However, it is worth exploring other options if for no other reason than the possible tax breaks you might receive. Once you are incorporated all the general laws will apply no matter where your company chooses to file the paperwork.

2)      Decide Your Board of Directors

The next step is to create a pre-incorporation agreement. This agreement will establish who will be on your board of directors and in what position. It will also have you establish the value of your company stock. Note that these stock shares have more to do with position than actual trading. For instance, when Facebook started up, investors and employees were offered stock options as part of their compensation. Years later, Facebook is finally going to go public and those original stock options will hold true value based on what the market decides.

3)      Decide Your Company Name

You’ll next have to file an official registration name for your corporation. Before doing this, you’ll have to research your name to make sure no other corporations that have the same title. You could simply file without the research but if your company name is rejected then you’ll have to start all over again.

4)      Decide on Your Articles of Incorporation

This will become the bulk of your incorporation paperwork and is not something you’ll be able to handle without a corporate lawyer. The procedures for creating these articles will be based on the rules and regulations that have been established in the region where you’ll be incorporating. When these articles have been filed, you’ll be sent an official certificate of incorporation. Once you sign that, you’re an official, fully recognized corporation.

Along every step of the way, there will be filing fees and legal costs you’ll have to pay out. There are some law firms that specialize in filing incorporation papers and offer affordable packages for start-up business. After you’ve completed all of these incorporation steps, you’ll need to hold your first board meeting and set up your own bylaws.