Whether you just want a career change, you’re starting a side hustle, or you’ve decided to double down on your existing business endeavors, there are many factors that go into starting a business – and running it successfully. After many years of leading finance departments and supporting CEOs, I keep hearing the same questions and concerns from clients. With all the knowledge business owners have about the industry that they operate in, I realized that many people just do not know where to start when it comes to launching and running their own business. It’s why I started FXO Consulting – so I can help business owners make their dreams come true.
Starting a business can be a very overwhelming process, especially if you’ve never done it before. Here are ten things you need to consider before you get started on that new business idea that has been flashing in your brain. There are so many pieces to starting a new business and this is not an exhaustive list, but we have to start somewhere, right?
Money is often the biggest concern for any business owner. When you are just getting started, you have to figure out how much you’ll need to get the business going. An even bigger question is where is the money coming from? How are you going to fund the startup of your business? Even a basic business plan – like a one-page Business Model Canvas – will help you to think about what costs you are going to need to pay for. Startup and ongoing costs can range from professional fees to equipment, admin, labour, and everything in between. Also wWhen do you think you’ll start making money? Until you do you need to cover the costs you have identified. Will you use savings, a loan, a Line of Credit, or a grant? While each source has its advantages and disadvantages, you also need to take into consideration that you will have to repay the money in many cases.
Remember: If you don’t have enough cash to operate your venture may stall.
#2: Relevant permits, licenses, or qualifications
Most industries are regulated in some way. In Canada, there are a number of government agencies and industry associations that lay out professional standards to be followed. In some cases, they are to protect consumers and in others they are there to establish consistency in business practices across an entire industry. It is important that you are aware of the necessary regulations in your industry. For example, if you would like to start a food-based business, you may need a health and safety certificate for food handling. There are also certain requirements related to commercial kitchen spaces depending on the type of business you are running. Registered Massage therapists need a certificate of registration within the governing industry association and there are several rules and regulations related to practicing patient care.
The laws and regulations are in place to protect both customers and business owners. It is important that you’re not breaking any laws or regulations because it can lead to higher costs in the long term if something goes wrong.
#3: Legal structure
From your financials to operations, how you structure your business will affect many aspects of how you do business. You need to decide whether you will register your business as a sole proprietorship, a partnership, or a corporation. As a sole proprietor, you would pay personal income tax on any profits earned and there would be a single owner. Two or more individuals (or businesses!) come together to share in the profits and liabilities in a partnership. Incorporated businesses have the right to act as a single entity and this would be separate from your personal finances and liability as a business owner. Working with a business lawyer can help you set up your business in a way that makes sense for your goals. In any case, your financial and operational processes need to be in place so that you’re operating correctly under the structure you have chosen.
#4: Business/Trading name
Choosing a name for your business can be exciting – and it also helps you to stand out from your competitors. Take time to figure out a great fit for your business. Registering your chosen business name is an important part of establishing your presence and making sure no one else has the same name. Even though you are in the early stages of planning for your business, you should also make sure that the domain name (website URL) and social media handles are also available.
Next to wondering if you have enough money, how that money is managed can be stressful for a business owner. You need to consider several aspects of financial management such as choosing the best financial year end date for you (no it doesn’t have to be December 31st!) and figuring out who will manage the day-to-day bookkeeping and accounting for the business. While you could do it yourself, you may also choose to hire a bookkeeper or accountant to take it off your to do list. There are also several small business accounting software programs that are designed to be easy to use, but you may even choose to just start out using Excel and doing the work manually until you grow. The last thing to consider when it comes to financials is making sure you are aware of all of your filing and payment obligations, especially if you’re selected for an audit by CRA. If you are unsure, talk to your business advisor.
When choosing a bank to work with for your business, it may seem easiest to open an account with the bank that you do your personal banking with, but that may not always be the best option. Certain banks offer products that are geared specifically towards small businesses, so it is best to compare what is available at your current bank and see what other banks have to offer before opening your business accounts. Whatever bank you choose, remember to keep all your business and personal transactions separate. The separation is crucial to keep you compliant with your business obligations.
Insurance is always prudent; however, your industry may require a specific level of insurance coverage. Contact your regulatory body and connect to other business owners within your field to gain a better understanding of what you need. On top of industry related insurance, you should contact an insurance broker for things like insurance for a brick and mortar location, Corporate Legal Liability insurance for corporations, Professional Liability insurance for industries such as law and healthcare, and cyber insurance (hello, we live in a digital world!).
#8: Sales tax
In Canada, the registration requirements for sales tax, can be confusing. If and when you do register, you have to keep track of how much sales tax you collect and any sales tax paid so you can file a return with the government and remit a balancing amount to them. If you do business beyond your local market, you also may need to consider the difference between local and non-local transaction rules. An accounting professional or even the Canada Revenue Agency will be able to provide you with more information.
#9: IT and data management
As technology becomes a bigger part of our lives and more personal information is shared across different platforms and devices, privacy and data laws are evolving to protect both businesses and consumers. From straight forward anti-spam legislation to more complex data storage requirements, the laws are strict and in place for a reason. You don’t want to be on the wrong side of a dispute when it comes to data privacy. It could lead to heavy fines, lengthy (and costly) legal disputes, and a loss of trust and credibility among your existing and potential customers. It is always good to be prepared and a great way to do this is to get your contingency planning in order early on.
#10: Is this just a hobby?
Once you add the administration responsibilities to something you love, it may not seem as enjoyable anymore. Owning your own business comes with amazing days and hard days. You need to think about whether you want it to be your every day. Alternatively, you could start small with more of a side hustle to test if this is something you want to do.
Starting a business is not a decision that should be made on a whim. Take the time to figure out if it is right for you and all the things you need to get in place before you introduce your amazing business idea to the world. Need help figuring out where to start? Contact FXO Consulting and we’ll walk you through the process.