If you’re ready to start your own business, you’ll most likely feel a mixture of emotions. You may be excited, thrilled and overwhelmed all at once. You’re probably inundating yourself with more questions than you have answers to, so we’ve put together this guide to help support your business journey.
You’ll need to be prepared for what you can expect when it comes to a whole slew of things important to a successful operation. Understanding legal, marketing and sales, finance and other aspects will be helpful to learn. Keep scrolling for an overview on what you’ll need to know before starting your own business.
Research your market
To be successful, new businesses are dependent on getting customers right away. That’s why it’s crucial to conduct market research before you launch.
Market research is important to your business as it identifies how potential customers view your product(s) or service(s). This process will allow you to gather feedback from customers on their expectations while identifying gaps. Having a good understanding of your market will help you determine your long-term viability while minimizing risks. Here are some tips on obtaining data relevant to your business structure:
- Learn about your key demographics and target audiences
- Review and compare industries similar to yours
- Conduct your market research through surveys, interviews, observation, customer personas or pay a third party to gather the data for you
- Analyze the data and your findings
- Put your analysis into action
Create a business plan
Once you have the data needed from your market research, you’ll be able to add this information to your business plan. A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run and grow. It’s a way to think through the key elements of your operation. Business plans can also:
- Help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.
- Help you focus on the important factors that you need to consider including your product, promotion, insurance and other factors that will contribute to properly conducting and launching your business.
Determine your business structure
One of the many decisions you’ll have to make as a business owner is determining the legal structure it should take. There are pros and cons to each business type, so you’ll need to consider your options carefully.
You can always adjust your business structure as it grows, but it’s best to anticipate your future needs and plan for them now. The three most common business structures in Canada are:
- Sole proprietorship, which is the most common, least expensive and simplest business structure. If you want to be self-employed, this is most likely the route you’ll go down. In the future of your business, you may wish to hire employees for additional help but you’ll manage the business component yourself. Legally, you and your business are one entity.
- Partnership, which is based on two or more people joining together to co-own a business and share the profits. Much like the structure described above, partners may employ others to help run the day-to-day operations. However, partners still have a hand in the overall operation or management themselves and for tax purposes are considered self-employed. As the partners own everything, they are also responsible and liable for anything that may incur.
- Incorporation is another option to consider whether you’re just starting a business; already operate as a sole proprietorship, or you’re in a partnership. However, this structure is more complex, costly and time-consuming to begin and maintain. There are other benefits of going down this path that the other structures do not have.
Your taxes, liability and other factors will be influenced by whatever structure you choose. We encourage you to seek the help of an accountant and legal professional when making your choice. They will be able to help you choose the best structure for your business.
Here’s a quick Q and A with one of our BrokerLink Commercial Insurance Advisors, Chan M., who is based out of our Glenmore, Alberta branch:
What is something that small business owners should know about insurance?
Chan: Insurance provides coverage for third party property damage and third party bodily injury, it doesn’t cover injury to employees, this would need to be covered under WCB.
What are some tips you can offer to small business owners?
Chan: Depending on the operation, additional coverages usually need to be added to the policy. For example, a tool floater would be added to a policy for tools that may be left in a vehicle or on site. If they carry tools in the vehicle they will be required to have commercial auto insurance as well. Large property/equipment should be scheduled as most insurance providers cap the amount they will pay per item on floaters.
If the business operations involve any sort of consulting, business owners will require both professional liability and commercial general liability to cover their insurance needs. And any insured that has a board of directors should ensure they have directors and officers liability coverage as well.
How does insurance work if there is more than one business owner?
Chan: If the policy is under a business name with more then one partner, it has no bearing on insurance. Any potential claims would be made against the business, and those claims would be paid up to policy limits. We would want to know who the owners are and who can make changes to the policy, who is the main point of contact.
In situations where it is a sole proprietor or partnership, claims and lawsuits are made against the individual and paid to policy limits. If the payout was more then the insured limits, the plaintiff could go after the individuals for the remainder.
Is there anything else you think is important for business owners to know?
Chan: Every insurance policy is different for every client based on operations and loss exposure. You can’t compare one insured to another even if they are within the same industry as the scope of work and revenues for one policy could differ from the other.
Finance your business
Something else you should be mindful of is how you’re going to finance your business. The financial resources needed to start, grow and maintain your business can be quite extensive. Here are some ways you could get monetary help:
- Getting a bank loan or a microloan
- Using a credit card
- Pledging some of your future earnings
- Attracting an angel investor
- Raising money from money and friends
It’s also important that you set aside money for your insurance especially since the premiums are increasing.
Register your business
It’s important to register your business as you’ll most likely be charging GST/HST on your products or services. Registering your company is also necessary if you expect your additional income to exceed $30,000 a year because you will need a GST/HST account. And if you think you’ll hire employees in the future, a registered business is required.
Before you register your company, here are some things to consider:
- Where will your main office be located?
- What provinces and territories do you plan to operate in?
- What is the proposed business name/brand identity? Are they the same or similar to other trademarked names?
Starting your business
Before starting and operating a business in Canada, there are many things you will need to consider. The Government of Canada is another great resource to look into as they have a breakdown of what you’ll need to do.
When you start a business, you will also need to buy insurance to protect you and your company from possible downfalls. At BrokerLink, we are available to help you create a customized plan for your unique situation. Contact us today if you have questions or would like to learn more.
Guide to starting your first business FAQs:
Is the first year in business the hardest?
It can be. Many businesses tend to fail within the first few years of launching and this period tends to be the hardest for business owners. Becoming a well-known brand or service can be hard. That’s why it’s important to create a business plan as this will help you stay focussed on what’s important rather than getting caught up in distractions.
What businesses are in high demand?
Businesses that are in high demand can vary depending on where you’re located. We’ve all witnessed start-ups such as Uber that become successful because the concept is unique. The main thing you will need when beginning your business venture is a great idea. If you’re not sure where to start, some businesses that are in high demand include: consulting businesses in finance or social media, technology development, natural beauty products or healthier fast food alternatives, and ghostwriting. Marketing demographics are always evolving, so no matter what your idea is, you will want to make sure it is something people will find value in.
How much should a business make in the first year?
Many businesses aren’t profitable within their first year due to a variety of factors. That’s why it’s encouraged to seek the advice of someone who is qualified in financing as they will help you learn more about expenses going out versus what’s coming in.