How To Start a Business in Canada
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Small businesses make up 97% of all businesses in Canada. They are an essential part of Canada’s economy. Many entrepreneurs have great ideas but no idea how to bring it to life. Here we’ll discuss how you can turn your idea into a real business.
Determining If You’re Ready to Take Your Idea From Paper to Reality
All businesses start with an idea, and turning an idea into a successful business requires hard work, planning, and evaluation. Here we’ll go over a few things that all entrepreneurs should take into consideration when trying to start a business in Canada.
Have You Done Market Research?
Initial market research is pivotal to your business’s success. Both primary and secondary data should be conducted to see if your product or service would sell and to who. Understanding who your target market is, how to market to them and check if there is a demand for your product or service is essential to a business’s success. With market research, you can also calculate potential sales, profit, and expenses. This information is key to predicting and coming up with strategies to avoid potential financial problems you may face down the line.
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Have You Tested Your Product or Service With a Prototype?
Developing a prototype will allow you to truly evaluate how and what market need your product or service is fulfilling. Prototypes can be as simple as a sketch or as complex as a fully functional product(hi-fi prototype). Depending on how complex you go, a prototype can help you evaluate the response your target market has to the product, how they handle your product, what need it truly is satisfying, it can show flaws regarding manufacturing efficiency and much more. Needless to say, a prototype provides early feedback that will save you time and money in the long run.
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Do You Have a Well Thought Out Business Plan?
A business plan requires you to look into the details of almost every aspect of your business. Everything from the product to the market to the industry your business is in should be analyzed on how it will affect your ability to be successful. Here are a few points your business plan should have:
- Company analysis – typically covers the company description, goals, mission, and other relevant information.
- Market analysis – looks at different aspects of your business market like the customers, competitors, industry, and other economic factors.
- Product or service – is a description of all aspects involving the product. Where will the product be made, how will you get the materials, etc?
- Marketing strategy – will be a detailed strategy of how you will use it to reach your customers and convert them into sales.
- Investments and financing – How much funds will you need to get your business off the ground?
- Financial projections of at least 1 year – Estimation of future sales based on your research is important in convincing investors and lenders to show your business is a viable idea.
Having an in-depth description of each of these points will not only guide you in launching your business but is a tool that can help you show lenders and investors that you are a company worth putting their trust in.
Learn more about how you can get a business loan based solely on an idea.
Are You Prepared to Execute Your Plan?
Have you ever heard of a saying “execution is more important than planning”? It is said that an A+ plan poorly executed will fail while a poor plan well executed will often be successful. It’s a concept that many have discussed and has been seen to be true. Many well-known companies have failed products due to poor execution. For example, HP’s Touchpad was a product that was very well received when it was first announced to the public. However, despite having a plan in place, HP lacked in marketing, coordination with its retailers and ability to cap on people’s excitement during its first announcement. This led to HP taking the touchpad off the market in just a few weeks. All this is to say, that a great product with a good plan means nothing if it is not executed well. Take the time to go over the details of your plan and how you will carry it out.
Trademark/Copyright your name
If you’ve done your homework and are ready to get your business in gear, you’ll want to make sure you’ve registered your trademark. Registering your trademark will:
- Stop competitors from imitating your product or service
- You’ll have solid proof of owning your brand if anyone tries to say you stole their idea.
When registering your trademark, be sure to choose a name with marketing potential, it should have all, if not, some of these attributes:
- Your name should be something that is easy to read and remember
- Your name should be unique, including your logo.
- Your name matches your business product and persona
Legalize your business
When starting a business it’s important to legalize your business by registering it with the government. Depending on which form of business ownership you decide to operate in, each registration process will differ. Here is how you can register your business based on the three most common business structures:
Sole Proprietorship or Partnership
As a sole proprietor or partnership, you must register your business with the province you will be operating in. Depending on which provinces you plan to do business in, the processes and requirements may differ.
In most cases it involves:
- Choosing a business name to operate under
- Getting a federal business number
- Getting your tax accounts
- Applying for any permits and licenses associated with your product or service
As an enterprise, you’ll have to choose between incorporating your business federally or provincially. Once decided, you will have to obtain the following from the Canada Revenue Agency(CRA).
- Get a federal business number
- Get a corporation income tax account
- Apply for any permits and licenses associated with your product or service
- Register as an “extra-provincial corporation” if you plan on doing business anywhere other than where you are located.
For more information about how to register your business, please visit the Government of Canada website.
Open a Business Bank Account
When you start a business you will have to learn how to file a business tax return. As a business owner, you have to report your business’s income separately to your own personal income. As such, it’s advised to separate your personal finances from your business. This will ensure you’re ready for tax season and any audits that come your way. Moreover, it gives you a better overview of your business’s financial matters as you can track where your money is going and coming from.
Build Your Business Credit Score
Opening a business bank account will also help you build a business credit score. A business credit score is used as a measure to determine your creditworthiness. Building a healthy business credit score is important as it can help you save on interest when you need extra funds to finance equipment, move locations, hire new employees, etc.
Choose a Payment Processor
Though cash may be the cheapest way to accept payment from your clients, you don’t want to lose customers who prefer to pay using credit or debit. To be able to accept credit card or debit payments you will need to open a merchant account which you cannot do unless you have a business bank account. A merchant account allows you to process these payments and sends the sale received to your bank account. If you plan on doing business online, you may also want to register with PayPal or other online payment processors.
Learn more about setting up an online store in Canada.
Get The Financing You Need To Launch Your Business
As a start-up, it can be extremely difficult to get the financing you need to get your business off the ground. Since new businesses have a high rate of failure, most lenders don’t want to lend you money. So, where can you get the funding you need?
Many alternative and online lenders are committed to helping small businesses finance their business needs. Unlike banks, most alternative lenders don’t look at credit as the major factor in determining an applicant’s eligibility for the loan. Whether you need a business line of credit, a small business loan, a commercial mortgage, equipment financing, or invoice factoring, alternative and online lenders have a variety of options for all your needs.
Crowdfunding has become a popular option in recent years. If your product or service is something that can catch the eye of people and organizations, crowdfunding may be possible for you. Crowdfunding works by first having people look at your idea. If they are interested they can invest in it for a potential return if your business is successful.
Friends and Family
Another option to increase your funds is asking for your friends and family’s help. You can pitch it as an investment opportunity or as a simple loan from one person to another. Just be sure that you can pay them back when the time comes as you don’t want to burn bridges by being unable to pay.
As mentioned earlier, using your market research, you should map out your anticipated expenses for the future so that you can manage your money in relation to it. Moreover, you’ll be able to prepare yourself, if you need a loan to increase cash flow or cover some expense.
Want to know more about getting a start-up business loan? Click here.
Starting a business is never easy but with proper research, planning and financing you get your idea off the ground. Once you have a plan in place, start putting that plan into action.
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Margaret Johnson is in the business of helping Canadians tackle their debt, deal with credit issues, and regain control of their finances.