So you’re thinking about starting a business in Canada?
Many Canadians have been taking the time to examine their lives since the pandemic swept in and kept us cooped up in our homes. Maybe you’ve been permanently laid off or realized that working for others is no longer a life suited for you after feeling stuck and even paralyzed by the chaos of life. Maybe the disruption to regular life revealed that you were simply doing what society expected of you instead of making a difference in the world. Whatever the reason for change, starting your own business will allow you to express creativity and fulfill your dreams.
Whether you’re starting from scratch or you’ve got a certain industry in mind, it can be a struggle to come up with a specific concept. Become inspired by learning what you can about running a small business and current business trends. If you have a particular industry in mind, soak up information about that industry and how it works. Make a list of businesses you utilize, enjoy, and come back to time after time. Connect with your authentic self to discover your purpose. Do you have a passionate hobby that you’ve always wished could turn into a full time occupation? Do you have the skills, experience and contacts that would allow you to transition into self-employment?
The key is to find the intersection between what you enjoy and what you’re good at. What gets you excited? What do people compliment you on? What activity can you do for hours and lose track of time? You may undervalue your own talents, so ask friends and family to help you brainstorm. They probably see more value in your abilities than you can. Is there a need for a business that leverages one or more of your talents and interests?
Many entrepreneurs come up with business ideas from pain points that they and others experience. What concerns or frustrations do you, family and friends have in life? Do you travel over an hour to get to a beloved place of business? If there’s enough demand, you may have found your new venture. Solve an unmet need or a problem people have, and you might fill a gap in the marketplace.
Target Market Analysis
So you have ideas for marketable products, services or solutions (usually a combination of a product and a service). Your family and friends are now either scared and worried for your future, or overly enthusiastic and encouraging. Now’s the time to find some impartial people in the target market you’re considering. Your target market is not everyone located in your business’s area, only the people who are good fits for your products or services. Ask some of these potential customers about their wants, needs, and/or problems.
Try to find out as much as possible about your potential customers by carrying out a target market analysis. Focus on the 5 W’s of your potential customers.
What: What types of products, services, and solutions would your potential customers spend money on? What’s your offer? What is your sustainable advantage going to be?
Why: Why would customers want your product or service? Why would people buy from you instead of an established competitor? What makes your company different? Do you have different customer segments and are they defined? How many specific groups do you serve and how are they different?
Who: Understand your ideal customers age(s), gender(s), education level(s), and occupation(s)?
Where: Where will you sell? Where your potential customers live and work? Depending on if you want to sell locally, should you consider the climate as well?
When: When are your potential customers most likely to buy your products or services? Will they buy once, occasionally, or on a regular basis? Or, would they buy your product or service spontaneously if their interest is piqued?
By the time you’ve answered all of these questions, you will see your business plan start to take shape. In addition to unbiased target customers, make sure to get advice and feedback from an impartial business advisor before you take further steps to launch your business.
How much will it cost?
Although the costs a small business startup needs to cover will vary from location to location, the industry and other factors, there are certain costs associated with starting a business that are consistent, no matter the type of business. It’s important to consider the amount of money you should set aside in the early days until your new venture can sustain itself. The basics costs that a small business should cover initially include:
- Business registration and licensing fees
- Office space?
- Internet, phone bill and other utilities
- Tools and equipment (lease or buy?)
- Logo and branding
Even though not all small business startup costs are the same, you can always categorize them into the following categories: one time costs (registering the business), on-going costs (utilities), essential costs (website), optional costs (company car), fixed costs (equipment lease) and variable costs (inventory).
While certain business types (service based, work-from-home) can startup with costs of under $1,000, a small business owner in Canada can spend $5,000 to $10,000 to initially start their small business, especially if they will be renting space, and paying for inventory and employee payroll. One of the main reasons why a small business may fail early on is because they run out of cash. We’ve heard it suggested that new business owners should ensure they have three months of backup funds available. We suggest having a good six months of savings to help get you through until your sales can cover all of your expenses. When budgeting, please remember your own needs. You will still need to pay for your living expenses as well.
When you’re planning your new company, one of the biggest decisions you have to make is the type of legal structure it will have. You can run your new Canadian business as a sole proprietorship, a corporation, or a partnership. If you have a group interested, you could set up a co-operative. There are advantages and disadvantages to each type of business structure. Deciding which structure is right for your business depends on various factors, including personal liability and tax deductions. Find out Which Canadian Business Structure Is Best For You?
There’s a lot to consider about starting a business in Canada. It’s a journey to go from brainstorming ideas and pain points to doing target market analysis and thinking about start up costs. It gets really real by the time you’re deciding which type of legal structure your business will have. Join the other 1.18 million (97.9 %!) of small businesses that are making the Canadian economy work and improving their communities. At Upside Accounting, we provide personalized business advice, so contact us for peace of mind that your startup business is on track.