Running your own business can be a fun and profitable way to make a living. It allows you to be your boss while making something of permanent value for yourself, your family, and your community.
But it takes work to start a business. About 40% of new companies with one to four workers don’t make it to their fifth birthday. To beat those chances, you’ll have to work hard, be well-prepared, and keep coming up with new ideas.
What kind of business do you want to start?
Before you start spending money to set up your business, you need to ensure that your idea can work. It’s hard to get ahead in the real world. Putting in a little time to find out more about your idea will pay off in a big way in the long run.
• What will make your company stand out?
• Who are your ideal clients?
• How much money do you need, and where will you get it?
First, look at the market.
To find a profitable niche, you should first do a market study to determine your ideal customers and what they want and need. You should also learn about your competitors and find gaps in the market that your business can fill.
You aim to find the right fit between your product and the market. This is the sweet spot where you attract customers and turn them into loyal brand supporters. The Small Business Hub at Statistics Canada has study tools to help entrepreneurs plan and run their businesses.
Think about money and find people who can help you.
It would help to consider how to get the money to start and run your business. There are more options here than ever, but you must ensure that your chosen one matches your goals. This article has more information about how to get money for your business further down.
Find a mentor with a lot of business experience to help you with these and other jobs as you work to start your own business. Futurpreneur Canada can help you find a partner if you are between the ages of 18 and 39.
Choose a way to run your business.
The next step is to decide how your new business will be set up. There are three popular ways to set up a business in Canada. Each has its pros and cons.
• Sole proprietorship: A sole proprietorship is informal and easy to set up, so most new business owners choose it as their business format. From a legal and tax point of view, the business and the person running it are the same thing. The bad thing is that the owner is responsible for the business’s tasks and bills.
• Partnership: A partnership is like a sole proprietorship, but there are two or more owners instead of just one. A partnership doesn’t have a set legal form like a sole proprietorship. However, partners generally have a contract describing how they share income, expenses, and tasks.
• Corporation: When a business is incorporated, stock shares are made. This creates a legal and tax distance between the company and its shareholders. This helps the owners save money on taxes, keeps them from paying for the company’s bills, and protects the company’s name to some extent. The downside is that you must pay legal and accounting fees when you set up a company and every time you do business after that.
How to sign up as a business
To sign up as a company, you need to do the following:
• Make your business official by incorporating it at the federal or provincial/territorial level.
• Contact the Canada Revenue Agency (CRA) for a federal business number and a company income tax account.
• Register as an extra-provincial or extra-territorial company in every other part of Canada where you plan to do business.
Do new businesses in Canada have to pay taxes?
If you sell or provide taxable goods or services in Canada and your total taxable sales are more than $30,000 in a single calendar quarter or four straight calendar quarters, you must sign up for the GST/HST. You can find more information on the Canada Revenue Agency webpage.
You might also have to pay income tax on the money you make. At the end of your first year of business, you must fill out a tax return to determine how much tax you owe, if any. Different provinces and territories and the federal government have different income tax rules. Hiring a professional accountant to help you complete your yearly tax return is best.
The Canada Revenue Agency gives small business owners and self-employed people a free liaison officer service to help them understand their business tax responsibilities.
Pick a name for your business.
It would help if you chose a name for your business. It might be more complicated than you think. Your character must be correct, catchy, and, most importantly, accessible. Customers will often get their first image of your business from its name, so choose it carefully.
Think about the following things.
• Does the name of my business and the things I sell match the name?
• Is it simple to remember?
• Is it different and unique?
By law, the name can’t be the same as or too close to an existing company name or trademark. So, searching carefully for business names already in use is essential before choosing one. Most businesses have to tell the government what their business name is. But you don’t usually have to file a sole proprietorship using your legal name and bank account.
For your business to run, you may also need permissions or licenses. You can look on this site or call your province, territory, or local government to find your needs.
Do your ideas or inventions need to be protected so they can’t be copied? Learn about how to protect intellectual property. The Canadian Intellectual Property Office (CIPO) has more information on its website.
Make a plan for your business.
You’re well on your way to starting a business with the steps you’ve already taken. Now, it’s time to write a plan for your business. This is the paper where you explain what you want the company to be and how you plan to get there.
The following parts should be in your business plan.
• An executive summary is a short outline of your business plan.
• An overview of your business or a company profile, including your goods and services, the market you’ll be serving, and trends in your field.
• Sales and marketing plan: who you want to sell to and how to reach them. This part also talks about pricing and how things are sold.
• Operations plan: Your location, equipment and machinery, production plans, interactions with customers, research and development, and any other important information about your operations.
• Human resources plan: how many workers you will have, what they will be like, and what rules you will have for them. Plans for hiring, training, and keeping workers for the short and long run. The plan for human resources is sometimes a part of the plan for activities.
• An action plan is a schedule for reaching specific goals as you set up and run your business.
• Financial plan: Key financial information, like expected income, expenses, prices of goods, cash flow, and a budget for two years, but mainly for the first year.
Putting all of this information into one paper will not only give you a plan for building your business, but it will also give investors and lenders the information they need to decide whether or not to provide you with money for your business.
How to Write a Good Business Plan by BDC has more information about the most essential parts of a plan. You can also read our piece on how to build a business plan without making common mistakes. BDC’s free business plan form can help you write your schedule.
Get ready to give a pitch.
You should also make a short pitch in addition to your business plan. This is a quick, engaging explanation of what your business does that can be given in 60–90 seconds.
Not everyone will have the time or interest to read your business plan. So, you need to be able to talk about your business to possible investors, lenders, partners, and buyers in the time it takes a lift to go up a building.
Get money for your new business.
Many entrepreneurs start their businesses using only their money, called “bootstrapping.” However, as their businesses grow, most need to find money from outside sources.
Getting money is a crucial step for a new business. Debt and equity are the two main types of capital.
When you use debt financing, you get money from someone else that you have to pay back. This type of borrowing includes both loans from banks and loans from individuals. You’ll pay interest on the money you borrow and have to pay it back in regular payments, usually once a month.
Equity financing means that someone invests in your business in exchange for a share of its ownership. Even though it doesn’t have to be paid back, a stock investor may want to have a say in how the business is run. Money from angel investors and venture capitalists is a type of equity investment.
