Expanding Beyond Your Core Business Model

History is laden with examples of businesses that have broadened their repertoire of products and services, yielding both remarkable successes and monumental failures. On the other hand, there is really no such thing as “playing it safe.” Just as many companies have foundered by deviating too far, too fast from their traditional business model, others have lost their edge by hewing too closely to convention, like old dogs that failed to learn new tricks. A famous example of the latter is Smith-Corona, which by the 1980s had firmly established itself as the world’s premier manufacturer of typewriters, only to watch its signal technology fade into obsolescence due to the advancement of the personal computer.

Of course, the prospect of expanding a business model is daunting, and the temptation of risk-aversion is strong. But the choice to “stick with the core” entails its own risks. There are no guarantees. But there are strategies companies can employ that will enhance the probability of a successful transition or expansion.

Assess your current capabilities. Where does your business excel? What can you do better?

If you’re running a profitable business already, it’s a sign that your clientele values what you have to offer. Take the time to realistically determine your strengths and weaknesses as an organization, and where they stack up against your major competitors. Equally important, stay abreast of any new techniques, technologies, and business opportunities that your competitors may be exploring.

In his influential book Understanding Media, cultural analyst Marshall McLuhan advanced the thesis that technology—including tools, vehicles, and furniture (which he broadly defines as “media”)—are effective extensions of the human body and mind, geared toward a particular purpose. Using this concept as a framework for analysis, we can infer that a successful transition from one medium to another requires organizations to first recognize a distinction between what they provide, and the means (media) by which they provide it.

For example, the best restaurants are not exclusively in the business of serving food; they afford customers a social, environmental, and gastronomic experience. The technology corporation IBM is not merely a manufacturer of computers and software; its primary purpose is to facilitate the storage and transfer of vast amounts of information. Computers are a medium which serves that end.

Think about the primary purpose of your business, and the experience you would like your customers to have. Are there easier, more efficient, or more cost-effective ways to achieve that goal? What are the tools, or media, at your disposal?

Seek out windows of opportunity.

Once you have a clear idea of the raison d’être of your business, you can think about broadening the range of products and services on offer. Amazon, which began as an online book retailer, now distributes DVDs, music, and even fashion accessories. Netflix, once a mail-order DVD rental service that came close to bankruptcy, is now a highly profitable video-on-demand website with an increasingly global customer base. Both companies recognized that they were in the business not only of moving product, but of catering to the lifestyles of busy professionals by providing easy, convenient gateways for shopping and entertainment.

Do your research first.

 

Occasionally, the opportunity to open up a niche or neglected market presents itself, if you are fortunate or imaginative enough to find prospective customers who are underserved, or to devise a technique that hasn’t been tried yet. But in most transitions or expansions to new markets, you’ll find an established group of firms with a strong foothold. Invariably, those competitors will tenaciously resist your attempts to siphon away their clientele, and will have the advantages of experience, skill, infrastructure, existing relationships, and inside knowledge on their side.

This is why advance research is so important. Before you embark upon a new endeavour, survey the terrain. Get to know your prospective customers and their needs and habits. Identify and examine the most prominent incumbents in the industry, and understand why they are successful.

If you’ve done your homework, feel confident that you can offer a better deal than what’s already on the table in your target market, have a viable business plan, and have secured the capital and cash flow you need, then you’re ready to make a move.

Canadian Corporate Taxes

How to Maximize Your Return

It’s that time of year again –the dreaded tax season.  For business owners with incorporated corporations whose fiscal year has ended, this means having to file two separate returns – personal and corporate. It’s a daunting task to say the least, which is why many businesses chose to hand over their paperwork and receipts to a trusted accountant. But for those of you who are do-it-yourself types, here’s a guide to help you maximize your corporate tax return.

Type of Corporations

There are various types of corporations in Canada, all of which are subject to tax rates dependent upon corporate status. The corporations that have the lowest tax rate are Canadian-controlled private corporations (CCPCs).  These are entirely private corporations controlled and operated within Canada. CCPCs are eligible for the Small Business Deduction which, at this time, stands at 11%, the lowest tax rate available to corporations. All other corporations that do not fall under this category, whether private or public, are taxed at a higher rate. It is worth investigating at the outset the potential of having your business structure set up as a CCPC in order to benefit from the deduction.

Corporate Tax Credits

Research and Development Tax Credits: To qualify for an R&D tax credit (or the SR&ED Program) your company must be involved in experimental development, applied research, basic research and support work which would lead to advancement or address uncertainty in technological and scientific areas. This can encompass a wide range of R&D and is particularly useful for tech and environmental start-ups that are developing new products or improving upon existing products in the marketplace.

Tax Credits for Small Businesses: In addition to R&D tax credits, Canadian businesses can benefit from a range of tax credits for small business. Some credits are dependent on jurisdiction or depend upon industry, while others are Canada-wide and not industry-specific. Tax credits include areas such as apprenticeship job creation, designated activities on qualified property, child care spaces and pre-production mining.

Corporate Income Tax Deductions

If your corporation doesn’t qualify for any tax credits, take a look at potential corporate income tax deductions, you may be surprised what can be included! Below are some examples:

·         Gifts to employees
·         Automobile expenses
·         Insurance
·         Office expenses
·         Mortgage interest & security
·         Business meals/entertainment
·         Conventions
·         Canadian advertising expenses
·         Accounting/legal services
·         Home-based business expenses

Taking the time to research all the available tax credit and deductions for your small business can definitely help you save money in the long run. Take advantage of the incentives the Canadian government provides small business – that’s what they are there for! Good luck and happy filing.

How to Protect Your Idea without Using a Patent

Taking your idea from the drawing board to the store shelf is going to take many months (or, in some cases, years!) of dedicated work. During that development process, someone could swoop in and steal your idea right out from under you.

At least that might be your biggest fear.

This is why you want to make sure your product or idea is patented, right?

Although that may make sense, during the development and start-up phase filing for a patent can be a costly and time-consuming process. So, should you put your great idea on hold?

Absolutely not! Here are some ways you can protect your idea without using a patent.

Non-disclosure agreement (NDA)

If you have any proprietary information or plans that you're going to share, you should make sure you get a non-disclosure agreement signed by that person before you show them anything. This is a binding contract that compels the second party to confidentiality. They can't talk about your product or idea to anyone else without your permission. You can get a lot of work done with a NDA without worrying that your idea will get stolen as it is developed.

Non-compete agreement

This is an agreement you sign with someone you are hiring for your company. It will compel them not to start a competing business that could take direct aim at your profits. For instance, if you've come up with a great new ice cream making process and you share that with your workers they can't turn around and use that same process in their own store if they've signed a non-compete agreement. Of course, if you want to sell them franchises go for it!

Work-for-hire agreement

This is an agreement you'll enter into with a freelance worker who will be lending some of their talents on certain elements of your product development. With a work-for-hire contract, you will own all the work that person creates on your behalf. If they design a killer logo for your brand, under this contract, that logo will be all yours.

Go provisional

Another layer of protecting your idea is by filing a provisional patent. This is something you can do yourself using resources found online. The provisional patent can throw a "protection net" over your idea for up to one year. With this type of patent, you can make the claim of "patent pending." In that year, you should be working out the kinks and lining up investors. Then you can pull the trigger on the patent. You might also find that your product has changed greatly in that year. Better to get it right than to rush into a patent. 

The Google Patent Search Tool - Does This Affect Your Intellectual Property?

A patent is all about protection for your intellectual property. The United States provides patents to give inventors the right “to exclude others from making, using, offering for sale, or selling their invention throughout the United States or importing their invention into the United States.”

Every country can grant a patent which would govern that property in that country. It is conceivable that a patent granted in the U.S. or Canada doesn’t necessarily offer protection against infringement in a country like China or Russia.

Still, it is advisable for a business that has a piece of intellectual property to have it patented in as many countries as possible.

Google has created a patent search which is becoming a huge asset to many businesses. When you consider that there are 8 million approved patents and 3 million pending patent applications in the U.S. alone then you can see the need for a search engine. Now Google has put that database of the United States Patent and Trademark Office online for easy access. How can this help you protect your intellectual property? Consider these benefits:

Clearing the Field

The first obvious benefit of a Google patent search is to see if somebody beat you to the punch. In other words, has your brilliant idea already been developed? This is a search that really should be conducted once the plans for an item are ready to go to the prototype stage. If you find that your idea has been patented you’ll either have to rethink it entirely or scrape the project. Better to learn that in the early stages of development.

Borrowing Innovations

Suppose you’re in the kind of business that needs to create a machine to make the perfect widget. You’re really selling the widget but it has to be mass produced to be cost effective. That special machine you design to make the widget could be patented. However, you might find that another business has a similar machine you can adapt. There’s no need to go down the expensive patent review process when you can license the right to use that technology from the original patent holder. Remember, you want to get to your “widget” and the most affordable and stress free path to that goal is the way to go.

Getting Inspiration

There aren’t a lot of secrets when it comes to granting a patent. If you’re working through a challenging design you might do a patent search for similar products to see how other inventors overcame their hurdles. Who knows? You could be inspired to take your idea in a new direction that no one has thought of.

Inventor 411

It could be that you’re so impressed with a particular product or piece of intellectual property that you want to know more about the originator of that idea. The patent search will let you trace the inventor and find out what other ideas they’ve worked on.

Small business financing - tapping into Ottawa's R&D tax incentive program

SRED is known as the Scientific Research and Experimental Development (SR&ED) Tax Credit program. According to the Canadian Revenue Agency – the SRED program is meant for the businesses that conduct research and development in Canada. It is the largest source of funds from the government in regards to R&D programs that supports industrial research.

In terms of the amount of credit received, the SRED program offers:

• For a Canadian controlled private corporation (CCPC), they can earn a 35% federal credit on their first $3 million in R&D expenditures.

• For large companies that exceed certain taxable income or capital limits, the federal credit drops to 20%.

For a small business, this means that you can claim up to 65% of your engineering team’s overhead – especially those involved in R&D. As an example - if you spend $2 million in salaries for your R&D team, you receive $1.35 million refundable tax credit, when the overhead rate is included in the calculation. So when you are considering outsourcing your R&D, consider that the government will pay YOU money to keep the intellectual research in-house!

What qualifies for the tax credit?

To determine whether your company qualifies for the tax credit, ask yourself these questions:

• Do you deal with challenges of a technical nature – software, hardware or industrial.

• Did you spend money to solve the technical obstacles?

If you said yes to both questions, you qualify for the credits. They can also be claimed on any work that meets these criteria:

• Experimental Development- to create or improve materials, products or processes.

• Applied Research- to advance knowledge with a specific application.

• Basic Research – to advance knowledge without a specific application.

• Support work for the above.

As you can see, the scope of what can be claimed is broad and could probably apply to most Canadian business.

Tech company start-ups know that they can file for the SRED claims, and for many, these refunds help them get through to the early stages of the company. Almost all of a start-up’s expenses can be claimed for R&D credit and are highly encouraged. This doesn’t mean that engineering, architectural, and programming firms cannot apply for the SRED credit, even if they are under contract from clients. They should be filing their claims immediately if they have been contracted to provide R&D services.

Check the Canadian Revenue Agency site, as it has all the information regarding contracting for services, including contract requirements. The best way to determine if you qualify is to download one of their industry specific guides that will outline the SRED application process.