Here’s a few things to consider before setting up shop.
Small businesses are a significant economic engine in Canada, employing thousands of people from coast to coast and representing nearly 98 per cent of all businesses in the country. Whether in a bakery, a bicycle shop or a bookkeeping service, every entrepreneur starts out with the drive to succeed, but the sad fact is that many businesses fold before they hit the five-year mark.
Given the amount of energy and money needed to get a business off the ground, it’s important to really think through all aspects of turning your dream into a reality. Considering the big picture may feel overwhelming, but the task at hand is much more manageable in small bites. Begin with the most basic question.
Is your business idea feasible?
From professional cuddling to leggings for dogs, creative entrepreneurs have turned some unique ideas into successful start-ups. So how do you determine if your big idea has what it takes to break through and gain traction? Go beyond the gut instinct that your idea is a winner, using the following questions as a guide:
What’s your big idea? It’s important to clearly state the need that you see in the marketplace, the solution you’re offering and how you’ll stand apart from the competition. You may see a lack of access to artisanal donuts in your area, with neighbours willing to drive elsewhere to get their deep-fried fix. Having sampled artisanal donut creations in nearby communities, you’re confident that grandma’s famous donut recipe is heads and tails above what others are offering.
Why are you doing this? Getting a small business up and running is no small feat and can involve very long days juggling a lot of different responsibilities. But identifying an emotional connection can make the heavy start-up workload a bit easier to handle. Maybe you wish there had been easy access to a service specializing in senior downsizing when your parents were moving from their large family home to a small apartment. Seeing this gap in your community, you now plan to establish this type of business.
Who are you doing this for? A successful business needs a steady stream of customers and referrals. Do a bit (or a lot) of research to see if your idea is actually something people are interested in. Get out there and present your idea to potential customers, and not just friends and family, who will be likely to shower you with enthusiastic encouragement. You want to hear from people who can be objective and honest – find out what they don’t like about your product or service, and what they think would make it better. Their feedback can help you determine if your idea for a backyard birthday circus show has enough lift for takeoff, and what adjustments are needed to ensure you’re hitting the mark with your target audience.
Is your idea profitable? A great idea isn’t enough if people aren’t interested in paying for what you’re selling. Your gourmet coffee shop may be an oasis in your tiny rural community, but will you have enough traffic to generate adequate cashflow? Or will you need to widen your scope to include an online business shipping small-batch roasted beans anywhere in North America? How much coffee will you need to sell to offset equipment purchases, pay the rent, cover bills such as utilities and taxes, and still earn an income for yourself? Be mindful of taking on more than you can handle.
Taking the time to answer these important questions will set the stage for the next step: creating a business plan.
Make a plan
A business plan is a detailed document that describes your business, what you intend to achieve, who your customers will be and your plan for earning profits, as well as strategies for managing risk. While creating one may seem like a daunting task, a business plan is an important document that will be required by financial institutions or government agencies if you’re seeking support in the form of loans or grants.
Using the questions above as a starting point, call on the expertise of your advisor and talk through the details. Your advisor is equipped to help you consider all the angles: from banking needs and small business loans to legal requirements, such as registering a business and whether to incorporate or be a sole proprietor. Check out this article to learn more about the basics of business structure in Canada.
Here are a few elements your business plan will need to include:
- A clear description of what you are selling, who your customers are and why your service will be desirable
- A market analysis that indicates your target market, customer demographics, your competition and how you will sell and/or distribute your product or service
- Key financial data, including your personal and business net worth, credit history, assets that you plan to use as collateral if you are looking to secure a bank loan, realistic budgets, cash flow forecasts and a multi-year financial projection
There’s a lot to consider when creating a business plan. This guide can help to make this important task easier to manage.
Essentials to consider
Many full-time employees enjoy the added benefit of a pension plan, dental coverage and other health benefits. If you are transitioning out of a full-time career, it’s important to know that you have options.
Health and wellness benefits: From vision, dental and drug plans, to life insurance and incentives to stay physically active, a range of health and wellness benefits exist to support small business. Your advisor can help you review the range of available options to find the coverage you want at a cost you can afford.
Retirement planning: During the busy early stage of a business start-up, it can be tempting to put retirement planning on the back burner, but working with your advisor can help to make this task much easier. Investments, education savings plans, life and disability insurance, and tax planning strategies are all important aspects of the retirement planning process. Consider this article on estate planning basics.
Starting a new business can be very exciting and rewarding. Thinking seriously about some important questions ahead of time can go a long way in helping you to achieve start-up success. And remember, you don’t have to do it alone – your advisor is there to help.