Medical companies shut out of Health Ontario purchasing

Our government is damaging the future innovation in the health and medical industry with “Ontario Buys”, which encourages institutions to buy in bulk as a means to save money. At first sweep, it seems sensible to purchase from fewer suppliers--the Walmart model of “buy in bulk and save” proven to save money by simplifying processes and consolidating costs of doing business.

Unfortunately, this well-meaning government program shuts out large numbers of smaller Canadian companies because they do not having the size or product breadth for this bulk game.

As an example of how the Ontario Buys program works, a medical device manufacturer under $40M in revenues is refused even an appointment with the several buying groups tasked with following this new initiative for the health care industry because of their small size.

This same medical device supplier is peppered with calls from the government offering all manner of programs to help the business, from R&D tax breaks to government experts to build better online catalogues, and so on.

But if there is no buyer, these government initiatives are pointless. The bulk of orders go to large corporations. 

You may think: Wonderful, these large corporations produce Canadian jobs through their Canadian offices, but they are actually American multi-national corporations with subsidiaries that have been set up in Canada. They do create jobs, but profits are more than likely invoiced back to the American Parent as management fees to avoid our higher Canadian Tax Rates. The goods are imported into Canada from American manufacturing parent corporations, avoiding any manufacturing in Canada, keeping the benefit of manufacturing or higher paying jobs in America. 

Ironically, the US has implemented a minority owned mandate under the Federal Initiative “Minority Owned Contract Opportunities” which forces buying groups to ensure that a percentage of the products purchased are from Minority Corporations, inclusive of SME companies. 

Our politicians are keenly aware of the importance of small and medium sized companies.  Research by Glaeser and Kerr, in a recent Harvard Business Review article, show that a gnat like cloud of small companies buzzing around larger companies will be a far better boost to job growth than incentives for large companies. Even adjusting for variables such as tax or industry, Glaeser and Kerrobserve say "the relationship between small firms and job growth rate stands."

In order to protect our future, Ontario Buys needs to be modified to require a small percentage of purchases be from SME Canadian businesses. I do not support gender or skin colour as a reason to buy, but companies with revenues under $500M should be factored into the purchasing decision as this would ensure a fair and open process at the table for Canadian manufacturers.

I will end here but am happy to discuss with you in more detail as I get frustrated hearing about innovation and R&D grants or financing programs. That is not the problem - it is the buying end. Why give all our support to US owned companies who have a branch office or corporation in Canada, but shut out our SME’s? , in a recent Harvard Business Review article, If you ask health care industry people about the Buy Ontario program, they approve because, generally, they are working for these large companies.

As Glaeser and Kerr’s research show, small companies lead to big companies.  It’s alarming that the Government buys from big suppliers as it is already crushing small companies. Then, where will be future innovation or competition. Maybe a question to get more of a response from government would be to ask, “What companies will still be around for all those government experts to help”

Canada needs to give more support to its biotech companies

As I listened to the biotech, health and medical experts at a meeting I put together at the Granite Club, I realized there are structural issues our government needs to get fixed. It is becoming evident that Canada is playing checkers, while the US and others are playing chess. As I keep saying, pure business competing against pure business is over as China and the US already know. 
Our government action is key to future success and innovation.
Thank you to Kathryn Simpson, formerly GalxoSmithKlein, who sent me an article supporting the issue that Biotech is needing support from the government. Mark Lievonen, Sanofi Pasteur, says that Canada is just not giving business the support enjoyed in other countries. Come on, Tony Clement http://twitter.com/#!/TonyClement_MP, spend some time on this industry. Let's look at what The Sun says:

Canada needs to cut red tape and give more support to its biotech companies or risk losing billions of dollars in investment — and related expertise — to other markets, said Mark Lievonen president of Sanofi Pasteur.

Weak patent protection, lack of access to financing and more attractive tax and investment regimes elsewhere are all posing a risk to the sector here, said Lievonen, whose company helped develop vaccines for diptheria and polio and commercialize insulin.

Investment capital in technology based industries has dropped to the lowest level in 13 years, according to the Canadian Venture Capital Association, while Ernst & Young estimates the number of operational biotech companies here has fallen by a fifth because of lack of access to capital.

Companies are also failing to capitalize on their research by successfully bringing their products to market, Lievonen said.

“We need to create some success stories,” he said in an interview after an Economic Club of Canada lunch in Toronto. “We need to create and support our own winners and ensure investors get a decent return.” Read more:

Jacoline Loewen, private equity, sales and family succession.

The 4 Brutal Questions

As requested, here are the 4 Brutal Questions I spoke about on BNN's The Pitch.  These four questions are taken from Warren Buffet: he uses these points to analyze any business in order to see if it will be profitable over the long term, making it an attractive investment. This list is very useful for the start-up right up to the mature owner-operated business looking for private equity. As adapted from Money Magnet: How to Attract Investors to Your Business. (Now available in Kindle too). The 4 Brutal Questions:

1. Are you the right people to make this happen? While there is a place for planning, successful businesses rely on the execution. The teams most likely to attract money will be those that demonstrate they will roll up their sleeves, get on with the unglamorous grunt work of operating plans and do things just a little bit better. Anyone new to running a company who has a good idea and now wants funding, probably will not get the money, no matter how smooth they appear. No one, except your mom, is going to fund your learning curve.
2. What is the investment opportunity? Next up, once you have jumped the people hurdle, it's the investment opportunity. Is there a real business? Are there people digging into their wallets to pay for what you produce? What is going to bring in beaucoup cash? as the French say. To illustrate the business, begin by defining your company around the customer and theirpain. Then position your company to solve that problem. Remember to do the math, because your investors will.
3. Is it sustainable? Do you have a unique and sustainable competitive advantage? If your intellectual property or technology is similar to what's already in the market, that will pop the profit balloon.
   
   Demonstrate that customers will reach out to your basket of goodies, pushing aside the competitor's basket each and every time. Your competitive advantage is the cornerstone of your presentation. But be prepared to identify the risks. What could be the worst thing competitors could do over the next two years? If you are vague on the answers, do not start the conversation.
4. What's the return on investment? If you've gotten through the first three questions, investors are ready to get serious and decide if they are going to give you the money. Do not make the mistake of going with your story and expecting them to figure out the amount of money you need and how you are going to pay them back. To get the chequebooks flipping open, you will have to prove three things:

• What is the growth rate to make the business worth backing? 

• What is the return on investment? This depends on company size, but can range from 8% to 25% to 40% plus.

• How will your investor get out his money (exit) within his desired time frame? Demonstrate that you get the importance of an exit plan for the investor

The Pitch - Business News Network with Andrew Bell

Business owners looking for capital should look for the Business News Network's new weekly show on Wednesdays called “The Pitch”, hosted by the positive Andrew Bell. I was on this past week and was impressed with the courage of these business owners to pitch. Here were the two companies both seeking under $2M in capital.

• First up was Gary McCone, President & CEO, Preo Software, who discussed his software management system, which helps large companies save money and trees by printing less. It is a public company and has signedon some big name clients.
• Then there was Marcus Anderson, President, Broadplay, who has a mobile marketing and application development company looking to expand vertically and geographically.

Each firm is looking for between $750k and $1 million.

5 Factors to Make You Happy

Keeping yourself motivated for business is critical. Does your personal happiness levels have an impact on your company's performance. It seems logical that happiness and motivation go hand in hand. But business people are struggling along and it is very 1982 right now. Is happiness also elusive? You may have heard about The Happiness Project best seller helping people maximize their own joy, and hopefully those around them too - Tiger Woods had his own Happiness Project and we know how that impacted on his family...

Researching how to get happy, expert Gretchen Rubin, writes:

I recently read the very interesting collection, C.G. Jung Speaking: Interviews and Encounters. In 1960, Jung was interviewed by journalist Gordon Young, who asked, "What do you consider to be more or less basic factors making for happiness in the human mind?" Jung answered:

 "1. Good physical and mental health.
2. Good personal and intimate relationships, such as those of marriage, the family, and friendships.
3. The faculty for perceiving beauty in art and nature.
4. Reasonable standards of living and satisfactory work.
5. A philosophic or religious point of view capable of coping successfully with the vicissitudes of life."

Jung also added, “All factors which are generally assumed to make for happiness can, under certain circumstances, produce the contrary. No matter how ideal your situation may be, it does not necessarily guarantee happiness.”