Steeped Tea success marks Dragon’s Den return

Hatem and Tonia Jahshan came to Toronto this week looking for money, and left having given entrepreneurs across the country a lesson in how to turn a chance idea into a thriving business.

The example was set on the stage of CBC's Dragon Den, where the husband-and-wife team set the dragons upon each other, creating a rare bidding war for a share of their company. Up for grabs was 20 per cent of Steeped Tea, the direct sales enterprise the pair launched from their home six years ago.

With over a million small businesses in Canada, the country is full of mom-and-pop operations fuelled by loads of passion and generally very little cash. And almost without fail, each day starts with the unfailing conviction that if only just a few more people knew how great their fill-in-the-blank here was, business would be booming.

But how do you stand out in the crowd, when you don't have a marketing budget, much less the money to hire a PR firm? That's the challenge the Ancaster, Ont. couple faced when they started out, brand new to the tea business, and up against superpowers stretching from Starbucks and Tim Hortons to Lipton and Tetley.

Generating buzz

From the outset, they made a number of strategic calls. The first was to focus exclusively on loose tea, which in fact was the initial inspiration for the business. While vacationing in Nova Scotia in 2005, the Jahshans came across a cup of loose leaf Earl Grey that convinced them to jettison their careers and build an empire of leaves.

The second big decision was to specialize in direct selling, an industry that's grown to nearly $3-billion a year in Canada. Direct means going straight to the customer, rather than relying on stores to make the sale.

Although new to the tea business, Tonia Jahshan had worked in sales for an electrical equipment supplier and was familiar with the direct selling model. Hatem Jahshan owned three Subway franchises and thus understood the basics of marketing, as well as training teams to handle sales.

Those skills would prove critical as their business model relied on 'consultants' — primarily woman working part-time — to sell their tea, typically through hosting Avon-style parties in their home. The hosts would take a cut of the sales, and the rest would go to the company.

The model only works, however; if it can be scaled up quickly, with an increasing number of consultants holding more and more parties. That requires a buzz around the product, both amongst the direct sellers as well as the buying public. And it's here where the Jahshans have shown a rare genius.

Search for Steeped Tea online and up pops coverage in the Globe and Mail and the CBC, both extolling the virtues of the Jahshan's tea as well as the success of their efforts. And knowing they had a business with all the elements of a great story — started from scratch, involving a popular product, and looking to go big — they pitched it to Dragon's Den, a show with 2.6 million views across the country.

Bidding war

In front of the dragons, their message was simple: They had tapped into Canada's burgeoning direct sales market, but the real money was in the U.S., where the sector now exceeded $26-billion. For $250,000 in expansion funds, they would part with 20 per cent of their company.

With that, a battle ensued. Kevin O'Leary offered $300,000 for 30 per cent, arguing that the Jahshan's needed more money to really be successful. David Chilton and Jim Treliving said they would settle for 20 per cent of the operation for $250,000. For her part, Arlene Dickenson would give $250,000 to get 18 per cent of the company.

They chose Chilton and Treliving's offer, deciding the extra connections were worth handing over slightly more of the company.