CONTEST WIN LEAVES DRAGON HIGH AND DRY IN SWIM SCHOOL DEAL

Each week, Financial Post contributor Mary Teresa Bitti revisits CBC’s previous week’s episode of Dragons’ Den. She captures what the cameras didn’t and in the process provides a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward.

The pitch Diana Goodwin was a child who hated the water and often found herself at the edge of the pool shivering during group swim lessons. That changed after her parents found an instructor who provided lessons in her home pool. “I went from hating the water to loving it. I just needed the right swim i nstructor and the right environment,” she said.

That inspired Goodwin to become a swim instructor and at age 19 start Swim for Life Aquatics, to offer private swimming lessons. While earning an MBA from the Kellogg School of Management at Northwestern University in Chicago, she rebranded the company to AquaMobile and created a business plan that went into effect in 2012.

At the time of the pitch, Toronto- based AquaMobile, now North America’s largest at- home, on- demand swim instruction company, had 700 certified swim instructors in Ontario and 20 U. S. states. Clients pay between $ 65 and $ 80 a session de- pending on the number of lessons purchased.

“Our first U. S. markets were in South Florida in 2013,” Goodwin said. “I used that opportunity to test different marketing techniques, recruiting and advertising strategies to see what would work best and to get our technology platform to a point where we were satisfied that we could scale with it."

That strategy was replicated in several U.S. markets starting in 2014, and the areas of early focus represent key differentiators and the reason Goodwin opted not to franchise. “We know exactly what we’re l ooking for in all the swim instructors. We reach people through digital marketing channels. You don’t need an office in every city to do well at that stuff,” she explained.

Instructors are recruited through a multi-step application process that includes a video interview where candidates are asked swim-related questions to gain an understanding of their teaching style, and ensure they have the necessary skills.

Another key competitive advantage is AquaMobile’s scheduling platform: “When someone calls in or looks online we can instantly tell them who’s available and when, and they can pay for it all right there. Competitors can take at least five business days to find someone because they mass email instructors in an area and then it’s first come first serve."

Sales have more than doubled each year since 2014, when they hit $500,000. For 2015, Goodwin would only say revenue was in the seven figures with gross margins of 25 per cent. Everything is in place to enter more verticals, such as yoga and fitness instruction, but her focus for 2016 is to continue growth in the swim market by increasing depth in existing regions and opening new markets. The deal Goodwin asked for $ 200,000 in exchange for a 10 per cent equity stake. The money would be used to accelerate growth and expand the marketing and recruiting teams. Joe Mimran and Michele Romanow partnered on an offer that included a 15 per cent equity stake and Jim Treliving offered Goodwin what she asked, which she accepted on air.

Due diligence was put on hold for AquaMobile’s busy season. Then, Goodwin won the Telus/ Globe and Mail Small Business Challenge that came with $ 100,000. “That changed the game. Now, I have this free money so I don’t need to give up any equity,” she said.

AquaMobile now has more than 800 instructors and is hiring for 2016, as it expands into British Columbia and several states. The dragon’s point of view “The door is still wide open,” Treliving said. “She is very bright, has a great business model and limited overhead expenses." A challenge he sees is the company’s ability to recruit high- quality instructors that are as positive as she is. His team also made her aware of the need to have good liability insurance. “The U. S. is far more litigious than Canada,” he said. "It’s not a big concern, she just has to be cautious.” An expert’s opinion John Cho, par t ner at KPMG Enterprise, agrees with Goodwin’s decision not to franchise. “If she can scale without franchising, it gives her more control over the areas that matter, such as talent management," he said.

He also liked the plan to expand into other verticals. “She has a model and user interface that can be applied to many instruction areas. The key is the quality of instructors and mitigating risk, especially as the business gets larger, which increases the chances of an i ncident happening that could damage her reputation and business,” Cho said.