Small businesses make up 98% of employer businesses in Canada. However, many businesses shut down before their fifth year. One of the common causes of business failure is a lack of planning and cash flow management. The way to overcome failure is to learn from mistakes and start on the right path. The Canada Revenue Agency (CRA) encourages people to do business by offering several benefits.
Six Things New Business Owners Should Know
In this article, we have compiled a list of six things you should know and work on before putting your money into a business venture.
1. Determine the Business You Want To Do
Any business begins with an idea and its potential to attract customers, earn profits, scale, and handle competition. You need to visualize how your idea can grow into a business. You can conduct market research to see if people are willing to pay for your offerings, identify the target audience, competitors, and market gaps you can fill and make your business stand out. Statistics Canada’s Small Business Hub provides new entrepreneurs with research resources to help them chart out a business plan.
2. Choose a Business Structure
Once you know the business you want to do, determine the business structure you want to begin with.
- Sole proprietorship: It is the most common structure a business begins with. You don’t need to register a sole proprietorship. You and your business are one individual in the CRA’s eyes, enjoying all profits and bearing all debts and losses.
- Partnership: A partnership structure is suitable if you jointly start a business with your Canadian friends. Everything is like a sole proprietorship, except that responsibilities, profits, and liabilities are shared among partners according to the partnership agreement.
- Corporation: You could even register your business with the province or federal government (to operate in more than one province). This way, your business will be a separate legal entity. Your personal finances will be separate from the business, and your business can apply for licenses. You can consider incorporating your sole proprietorship or partnership later when the business picks up to use corporate taxes.
3. Pen Down Your New Business Plan
With a business idea and structure, it is time to carve out the details and pen them down. Nobody gets their business plan right at first. It’s an ongoing process of learning from mistakes and reviewing and revising the plans. What worked for A may not work for B.
Your business plan should give an overview of the business, products and service offerings, the markets you want to serve, target customers, pricing, and how you plan to advertise and sell your offerings. It will also include the operational aspect of sourcing talent, raw materials, machinery, inventory, and record keeping.
It is suggested that you prepare a mid and long-term target with milestones you want to achieve with timelines. It will help you stay on track and understand how your business is progressing and what is working and what is not.
The most crucial aspect of your business plan is including a financial plan – allocating a low and high budget range for everything from expenses (ad and marketing spending), debt, capital spending, salary, and product pricing. Most startups fail because of poor financial planning.
An initial business plan is prepared by the business owner, irrespective of how rough it is. What looks good on paper might not be the best option. If you are struggling to implement your business plan, you can take the help of an experienced business consultant specializing in your industry.
4. Prepare an Elevator Pitch for Your Business
Handy with a business plan, it is time to sell your business to customers, suppliers, employees, investors, and almost anyone you deal with professionally. You need an elevator pitch, a 60-90-second appealing description of your business that you can present to potential business partners when you take an elevator or grab a snack during a break.
5. Look for Business Financing Options
Once the dice get rolling, it is time to explore your financing options. All businesses start with the owner’s personal savings. Once you register a business, you should get a separate bank account and business credit card and start doing business spending on the card to build a business credit score. This way, when the time comes for you to apply for a business loan, the journey will be smooth. Apart from business loans, the government offers Canada Small Business Loans Financing Program.
You can explore other financing alternatives like credit facilities, angel investors, business incubators, and venture capitalists. But remember, each financing option has its advantages and risks. Securing funding in desperation could prove to be costly. A professional business consultant can help you get the best deals and help your company thrive long-term.
6. Understand Canadian Small Business Taxes
While running a business, you must learn about the various types of Canadian small business taxes. Ignorance is no excuse for not paying taxes and can invite fines and penalties.
If your business turnover crosses $30,000, you must register with GST/HST and file them regularly. If you have an employee, you have to file T4 reports. It is not just filings but also tax deductions. Even a work-from-home business has a business-use-of-home tax deduction. Businesses doing scientific research, even as sole proprietors, can avail of scientific research and experimental development tax credits.
No matter how small your business is, it is better to file your returns through a professional accountant who is well-versed with the tax laws and can guide you on taxes you need to file or tax benefits you can claim.
Contact McCay Duff LLP in Ottawa to Help You Set Up Your New Business
Every business, from a sole proprietor to a corporation, should seek the assistance of a professional accountant and business consultant in areas like financing, taxes, and purchasing business assets. Their expertise can save you from making expensive mistakes and thrive in the market. To learn more about how McCay Duff LLP can help you set up your business, contact us online, or by telephone at 613-236-2367.
