Interview by Lindsey Norris

What is your current cash flow situation?
Mark Holtom: With the economic slowdown, investors took their chequebooks and ran. That pushed back our plans, because this is a company that needs investment. The government has helped, but navigating the municipal, provincial and federal grant proposal guidelines – and even knowing where to go and where to look – is a real skill. There are people whose full-time career is writing grant proposals. The more I learn about it, the more I understand the phrase, “Your network is your net worth.”

How are you managing in the meantime?
Ben and I have decided not to take salaries from the company to ensure there will be money there for “oopsy-daisies.” We know that things are going to happen; nothing goes according to plan.

How did you work out the business model?
We know that the original sale price of the machine will need to provide money for us to build the machine and cover our overhead cost. We will charge the cost of building the machine, plus 10 or 15 per cent. Our actual profit will come on the per-square-foot charge. We’re taking a percentage of the savings that the tool gives customers. If they’re realizing a $20-per-square-foot savings, we’re going to take $6.

Are you worried this will be tough to quantify?
Yes, people have told us: “Word of caution – with those cost savings models, it’s tough to quantify everything.” The customer is going to fight tooth and nail to say they aren’t saving much; we’re going to fight to say it is. But even at $6, we’re at less than a third of their savings, so our financial projections say we’ll be fine if we make less than that.

What will you do if people balk at royalties?
The Finning model says we’ll give you a lower price on the royalties, but we want a maintenance contract. We want to do something like that, balance it out between the two. That’s our plan. What the industry accepts – we’ll see. With the housing downturn, we also know we will have to have minimums in place, because if they’re not building, they’re not paying as much.

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Category: Project Start-Up, Start-Up Episode 06 Tags: Project Start-Up

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