Starting aSmall Business

Agenda

Facts and figuresFacts and figures The small business ventureThe small business venture The entrepreneurThe entrepreneur The business planThe business plan Forms of ownershipForms of ownership Name registration and taxesName registration and taxes Intellectual propertyIntellectual property Reasons for success and Reasons for success and

failurefailure Helpful resourcesHelpful resources

Small Businesses in Canada Of the 2.2 million businesses in Of the 2.2 million businesses in

Canada, over 75% employ less Canada, over 75% employ less than 10 employeesthan 10 employees

Approx. 50% of the workforce is Approx. 50% of the workforce is employed by small businessesemployed by small businesses

In 1999, 23% of the GDP was In 1999, 23% of the GDP was provided by small businessesprovided by small businesses

Over 75% of small businesses Over 75% of small businesses fail in the first three yearsfail in the first three years

Source: Industry Canada Source: Industry Canada (www.strategis.ic.gc.ca) and (www.strategis.ic.gc.ca) and Canadian Canadian Entrepreneurship and Small Business Entrepreneurship and Small Business Management,Management, D. Wesley Balderson, 2000 D. Wesley Balderson, 2000

The Small Business

Myths of the small Myths of the small business owner:business owner:

I won’t have to report to I won’t have to report to anyoneanyone

Business will come to meBusiness will come to me

I will make a lot of I will make a lot of money and become money and become wealthywealthy

The Small Business

AdvantagesAdvantages Be your own bossBe your own boss Develop a product/serviceDevelop a product/service Challenge, enjoymentChallenge, enjoyment Tax advantagesTax advantages

DisadvantagesDisadvantages Financial riskFinancial risk StressStress Large time commitmentLarge time commitment IsolationIsolation

The Entrepreneur

Comes from the french word Comes from the french word – “to undertake”– “to undertake”

Outgoing, energeticOutgoing, energetic Friendly and personableFriendly and personable Contacts and networking Contacts and networking

skillsskills CreativeCreative Tenacious, stubbornTenacious, stubborn PersistentPersistent PassionatePassionate

Content of the Business Plan Identify the product/serviceIdentify the product/service Industry/market analysisIndustry/market analysis Develop a vision and mission Develop a vision and mission

statementstatement Identify the management teamIdentify the management team FinanceFinance MarketingMarketing Human ResourcesHuman Resources OperationsOperations Investigate legal and other Investigate legal and other

requirementsrequirements Zoning, insurance, licenses, Zoning, insurance, licenses,

taxestaxes

Choose a product/service What is the difference What is the difference

between a good idea and a between a good idea and a good opportunity?good opportunity?

e.g. Selling a plastic, see e.g. Selling a plastic, see through glove to pick up dog through glove to pick up dog feces instead of using a free feces instead of using a free plastic grocery bagplastic grocery bag

e.g. Polaroide.g. Polaroid

e.g. IBMe.g. IBM

Options for your Product / Service

1.1. Offer a new product/service to Offer a new product/service to an existing market (product an existing market (product development)development)

2.2. Offer an existing product/service Offer an existing product/service to a new or different market to a new or different market (market development)(market development)

3.3. Offer an existing product/service Offer an existing product/service to an existing market with to an existing market with limited competition or an limited competition or an opportunity to differentiate the opportunity to differentiate the product (market penetration)product (market penetration)

4.4. Offer a new product to a new Offer a new product to a new market (diversification)market (diversification)

Industry and Market Analysis

Where/how does the firm add value Where/how does the firm add value to its customers?to its customers?

Is there a need for this type of Is there a need for this type of product/service? Is the need product/service? Is the need growing or shrinking?growing or shrinking?

What is the life cycle of the What is the life cycle of the product/service?product/service?

What does is take to succeed in this What does is take to succeed in this industry?industry? Key success factorsKey success factors Barriers to EntryBarriers to Entry

PEST analysisPEST analysis Competitive AnalysisCompetitive Analysis Consumer AnalysisConsumer Analysis

Vision and Mission Statement

Why does the company exist?Why does the company exist? What is the company’s purpose?What is the company’s purpose? What are the company’s goals What are the company’s goals

and objectives?and objectives? How will you achieve those How will you achieve those

goals and objectives? goals and objectives? How will you measure the How will you measure the

company’s success?company’s success?

e.g. Canadian Tire – To be the best e.g. Canadian Tire – To be the best at what our customers value the at what our customers value the mostmost

e.g. Disney – To make people happye.g. Disney – To make people happy

The Management Team

According to Professor Sahlman According to Professor Sahlman of the Harvard School of of the Harvard School of Business,Business,““When I receive a business plan, When I receive a business plan, I I always read the resume section always read the resume section first. Not because the people first. Not because the people part of the new venture is the part of the new venture is the most important, but because most important, but because without without the right team, none ofthe right team, none of the the other parts really matterother parts really matter.”.”

Who are the Who are the owners/managers?owners/managers?

Background, experience, Background, experience, skillsskills

Identify responsibilitiesIdentify responsibilities

Finance

Funding requirementsFunding requirements Type and source of Type and source of

fundingfunding Projected financial Projected financial

statementsstatements Ratio analysisRatio analysis Prepare a cash budgetPrepare a cash budget What are the inflows and What are the inflows and

outflows of cash each outflows of cash each day or month?day or month?

Cash is KING!!Cash is KING!!

Marketing

4 P’s strategy:4 P’s strategy:Product/serviceProduct/servicePricePricePromotionPromotionPlacementPlacement

Sales strategySales strategy Customer serviceCustomer service

Human Resources and Operations Human ResourcesHuman Resources

Organizational chartOrganizational chart Number of employees and Number of employees and

identification of skill levelidentification of skill level BenefitsBenefits

OperationsOperations Facilities requiredFacilities required TransportationTransportation Description of manufacturing Description of manufacturing

processprocess Inventory, plant lay-out, Inventory, plant lay-out,

equipment etc.equipment etc. Material cost and availability Material cost and availability

Forms of OwnershipSole ProprietorshipsSole Proprietorships

No need to incorporate, can No need to incorporate, can run the business under your run the business under your own nameown name

Sole responsibility for profits Sole responsibility for profits and lossesand losses

Unlimited liabilityUnlimited liability

CorporationCorporation An entityAn entity Shareholders have limited Shareholders have limited

liabilityliability Responsible to the Responsible to the

shareholdersshareholders Cost to incorporateCost to incorporate Must file annual reports to Must file annual reports to

the governmentthe government

Forms of Ownership

PartnershipsPartnerships Two or more peopleTwo or more people Share responsibilityShare responsibility Unlimited liabilityUnlimited liability Responsible for the debts Responsible for the debts

and obligations of the and obligations of the partner while acting on partner while acting on company businesscompany business

Limited partnershipLimited partnership Limited liability Limited liability Limited partner cannot be Limited partner cannot be

involved in running the involved in running the businessbusiness

One partner must have One partner must have unlimited liabilityunlimited liability

Forms of Ownership

Franchise Franchise A proven serviceA proven service Brand name recognitionBrand name recognition Established processEstablished process Access to marketing Access to marketing

support and guidancesupport and guidance Governed by the franchise Governed by the franchise

agreementagreement Royalty fees and Royalty fees and

marketing feesmarketing fees Limitations on what the Limitations on what the

owner can/cannot doowner can/cannot do Saturation of the marketSaturation of the market

What form would be best suited for the following businesses?

FloristFlorist

HandymanHandyman

Accounting firmAccounting firm

RestaurantRestaurant

Business Name

Before registering the business Before registering the business name, you want to know if the name name, you want to know if the name is already in useis already in use

The most comprehensive search is a The most comprehensive search is a NUANS (Newly Updated Automated NUANS (Newly Updated Automated Name Search) for a fee. This Name Search) for a fee. This searches names, trademarks, trade searches names, trademarks, trade names and incorporated names.names and incorporated names.

Choose a name that identifies your Choose a name that identifies your product or service and stands out product or service and stands out from competitorsfrom competitors

You cannot register a name that is You cannot register a name that is obscene, that is misleading, words obscene, that is misleading, words associated with the government associated with the government such as “crown” or “university”, or such as “crown” or “university”, or names of other individualsnames of other individuals

If a name is deceptively similar or If a name is deceptively similar or the same, a person can sue for the same, a person can sue for damages of up to $500damages of up to $500

Register the Business Name

An individual who carries on An individual who carries on business under his/her own name business under his/her own name does not have to register until a does not have to register until a word is added to their own name word is added to their own name (e.g. John Smith Crafts)(e.g. John Smith Crafts)

Cost is $60 - $80Cost is $60 - $80 Register with the Companies Register with the Companies

Branch of the Ministry of Consumer Branch of the Ministry of Consumer and Business Services or at and Business Services or at www.ccr.gov.on.ca/obcwww.ccr.gov.on.ca/obc

After registration, companies are After registration, companies are issued with a Business issued with a Business Identifications Number (BIN) and a Identifications Number (BIN) and a Masters Business License (MBL). Masters Business License (MBL). This offers proof of registration.This offers proof of registration.

Must be renewed every 5 yearsMust be renewed every 5 years There is a fine of $2,000 to $25,000 There is a fine of $2,000 to $25,000

for failure to register a business for failure to register a business namename

GST + Provincial Sales Tax

Any business that has worldwide Any business that has worldwide sales of more than $30,000 in a sales of more than $30,000 in a calendar year must register for calendar year must register for and collect goods and services tax and collect goods and services tax (GST) at 7% (some goods are (GST) at 7% (some goods are exempt)exempt)

There are a few exceptions: There are a few exceptions: daycare services, financial daycare services, financial services, charities, non-residentsservices, charities, non-residents

The firm collects the tax and The firm collects the tax and remits the tax subject to any remits the tax subject to any creditscredits

PST is 8% on most purchases of PST is 8% on most purchases of goods and servicesgoods and services

A permit and information re: A permit and information re: exempt services may be obtained exempt services may be obtained from a retail sales tax office from a retail sales tax office

Monthly remittance is requiredMonthly remittance is required

Intellectual Property

Trademark – a word, symbol or Trademark – a word, symbol or design used by a business to design used by a business to distinguish its goods or distinguish its goods or servicesservices

Registration is not Registration is not mandatory, but advisablemandatory, but advisable

Search existing trademarksSearch existing trademarks Prepare an application and Prepare an application and

send to the trade-marks send to the trade-marks office (see www.cipo.gc.caoffice (see www.cipo.gc.ca

Cost is $150 +Cost is $150 + Renewable every 15 yearsRenewable every 15 years

Copyrights

Copyright – the right to make a Copyright – the right to make a copy of books, maps, songs copy of books, maps, songs etc.etc.

All Canadians hold the All Canadians hold the copyright on original work copyright on original work created unless they were hired created unless they were hired or employed by some other or employed by some other person to create itperson to create it

Copyrights can be registered Copyrights can be registered with the Canadian Intellectual with the Canadian Intellectual Property Office www.cipo.gc.caProperty Office www.cipo.gc.ca

Cost is $65Cost is $65 Copyrights last 50 years after Copyrights last 50 years after

the owner’s death and then the owner’s death and then becomes public domainbecomes public domain

Patents Patent – a document that gives Patent – a document that gives

the person the right to exclude the person the right to exclude others from making, using or others from making, using or selling his/her inventionselling his/her invention

Contact a patent agent (some Contact a patent agent (some lawyers)lawyers)

VeryVery expensive process expensive process because you hire a patent agent because you hire a patent agent to prove your case to a judgeto prove your case to a judge

It takes approximately 4 years It takes approximately 4 years to obtain a patentto obtain a patent

Lasts 20 yearsLasts 20 years One of the disadvantages of One of the disadvantages of

patents is that the design can patents is that the design can be copied by modifying one be copied by modifying one little thinglittle thing

Growing the Business Requirements:Requirements:

FundingFunding Processes and systemsProcesses and systems PeoplePeople FocusFocus LeaderLeader

E.g. Assante Financial E.g. Assante Financial ServicesServices

E.g. Oakley sunglassesE.g. Oakley sunglasses

Firms that Succeed

The firm must provide a The firm must provide a product or service that the product or service that the customer VALUES and are customer VALUES and are willing to pay forwilling to pay for

Provide a return to the Provide a return to the investorsinvestors

Good, loyal employees and Good, loyal employees and managersmanagers

Strong internal systems and Strong internal systems and processes such as processes such as bookkeeping, inventory bookkeeping, inventory managementmanagement

Firms that Fail

Lack of sufficient fundingLack of sufficient funding Poor customer servicePoor customer service HasteHaste Cut cornersCut corners Poor management of cash Poor management of cash

flowflow Excessive debtExcessive debt Overlook government Overlook government

legislationlegislation InexperienceInexperience

Helpful ResourcesLondon Small Business CentreLondon Small Business Centrewww.sbcentre.cawww.sbcentre.ca

Federal Consumer and Business InfoFederal Consumer and Business Infowww.strategis.ic.gc.cawww.strategis.ic.gc.ca

GSTGSTwww.ccra-adrc.gc.cawww.ccra-adrc.gc.ca

Government Services for BusinessesGovernment Services for Businesseswww.businessgateway.cawww.businessgateway.ca

Export InformationExport Informationwww.exportcourse.gc.cawww.exportcourse.gc.ca

Intellectual PropertyIntellectual Propertywww.cipo.gc.cawww.cipo.gc.ca

The Entrepreneurship CentreThe Entrepreneurship Centrewww.entrepreneurship.comwww.entrepreneurship.com

Lawyer Referral ServiceLawyer Referral ServicePhone: 1-800-268-8326Phone: 1-800-268-8326

Questions?