Starting a
Small Business
Agenda
Facts and figures
The small business venture
The entrepreneur
The business plan
Forms of ownership
Name registration and taxes
Intellectual property
Reasons for success and failure
Helpful resources
Small Businesses in
Canada
Of the 2.2 million businesses in
Canada, over 75% employ less
than 10 employees
Approx. 50% of the workforce
is employed by small businesses
In 1999, 23% of the GDP was
provided by small businesses
Over 75% of small businesses
fail in the first three years
Source: Industry Canada
(www.strategis.ic.gc.ca) and Canadian
Entrepreneurship and Small Business
Management, D. Wesley Balderson, 2000
The Small Business
Myths of the small business
owner:
I won’t have to report to
anyone
Business will come to me
I will make a lot of money
and become wealthy
The Small Business
Advantages
Be your own boss
Develop a product/service
Challenge, enjoyment
Tax advantages
Disadvantages
Financial risk
Stress
Large time commitment
Isolation
The Entrepreneur
Comes from the french word –
“to undertake”
Outgoing, energetic
Friendly and personable
Contacts and networking skills
Creative
Tenacious, stubborn
Persistent
Passionate
Content of the
Business Plan
Identify the product/service
Industry/market analysis
Develop a vision and mission
statement
Identify the management team
Finance
Marketing
Human Resources
Operations
Investigate legal and other
requirements
Zoning, insurance, licenses,
taxes
Choose a
product/service
What is the difference
between a good idea and a good
opportunity?
e.g. Selling a plastic, see through
glove to pick up dog feces
instead of using a free plastic
grocery bag
e.g. Polaroid
e.g. IBM
Options for your
Product / Service
1. Offer a new product/service to an
existing market (product
development)
2. Offer an existing product/service
to a new or different market
(market development)
3. Offer an existing product/service
to an existing market with limited
competition or an opportunity to
differentiate the product (market
penetration)
4. Offer a new product to a new
market (diversification)
Industry and
Market Analysis
Where/how does the firm add
value to its customers?
Is there a need for this type of
product/service? Is the need
growing or shrinking?
What is the life cycle of the
product/service?
What does is take to succeed in
this industry?
Key success factors
Barriers to Entry
PEST analysis
Competitive Analysis
Consumer Analysis
Vision and Mission
Statement
Why does the company exist?
What is the company’s purpose?
What are the company’s goals
and objectives?
How will you achieve those goals
and objectives?
How will you measure the
company’s success?
e.g. Canadian Tire – To be the best
at what our customers value the
most
e.g. Disney – To make people happy
The Management
Team
According to Professor
Sahlman of the Harvard School
of Business,
“When I receive a business plan,
I always read the resume section
first. Not because the people
part of the new venture is the
most important, but because
without the right team, none of
the other parts really matter.”
Who are the
owners/managers?
Background, experience,
skills
Identify responsibilities
Finance
Funding requirements
Type and source of
funding
Projected financial
statements
Ratio analysis
Prepare a cash budget
What are the inflows and
outflows of cash each day
or month?
Cash is KING!!
Marketing
4 P’s strategy:
Product/service
Price
Promotion
Placement
Sales strategy
Customer service
Human Resources and
Operations
Human Resources
Organizational chart
Number of employees and
identification of skill level
Benefits
Operations
Facilities required
Transportation
Description of manufacturing
process
Inventory, plant lay-out,
equipment etc.
Material cost and availability
Forms of Ownership
Sole Proprietorships
No need to incorporate, can
run the business under your
own name
Sole responsibility for
profits and losses
Unlimited liability
Corporation
An entity
Shareholders have limited
liability
Responsible to the
shareholders
Cost to incorporate
Must file annual reports to
the government
Forms of Ownership
Partnerships
Two or more people
Share responsibility
Unlimited liability
Responsible for the debts
and obligations of the
partner while acting on
company business
Limited partnership
Limited liability
Limited partner cannot be
involved in running the
business
One partner must have
unlimited liability
Forms of Ownership
Franchise
A proven service
Brand name recognition
Established process
Access to marketing support
and guidance
Governed by the franchise
agreement
Royalty fees and marketing
fees
Limitations on what the
owner can/cannot do
Saturation of the market
What form would be
best suited for the
following businesses?
Florist
Handyman
Accounting firm
Restaurant
Business Name
Before registering the business
name, you want to know if the name
is already in use
The most comprehensive search is a
NUANS (Newly Updated Automated
Name Search) for a fee. This
searches names, trademarks, trade
names and incorporated names.
Choose a name that identifies your
product or service and stands out
from competitors
You cannot register a name that is
obscene, that is misleading, words
associated with the government such
as “crown” or “university”, or names
of other individuals
If a name is deceptively similar or
the same, a person can sue for
damages of up to $500
Register the
Business Name
An individual who carries on business
under his/her own name does not
have to register until a word is
added to their own name (e.g. John
Smith Crafts)
Cost is $60 - $80
Register with the Companies Branch
of the Ministry of Consumer and
Business Services or at
www.ccr.gov.on.ca/obc
After registration, companies are
issued with a Business
Identifications Number (BIN) and a
Masters Business License (MBL).
This offers proof of registration.
Must be renewed every 5 years
There is a fine of $2,000 to
$25,000 for failure to register a
business name
GST + Provincial Sales
Tax
Any business that has worldwide
sales of more than $30,000 in a
calendar year must register for and
collect goods and services tax (GST)
at 7% (some goods are exempt)
There are a few exceptions: daycare
services, financial services,
charities, non-residents
The firm collects the tax and remits
the tax subject to any credits
PST is 8% on most purchases of
goods and services
A permit and information re: exempt
services may be obtained from a
retail sales tax office
Monthly remittance is required
Intellectual Property
Trademark – a word, symbol or
design used by a business to
distinguish its goods or
services
Registration is not mandatory,
but advisable
Search existing trademarks
Prepare an application and send
to the trade-marks office (see
www.cipo.gc.ca
Cost is $150 +
Renewable every 15 years
Copyrights
Copyright – the right to make a
copy of books, maps, songs
etc.
All Canadians hold the
copyright on original work
created unless they were
hired or employed by some
other person to create it
Copyrights can be registered
with the Canadian Intellectual
Property Office
www.cipo.gc.ca
Cost is $65
Copyrights last 50 years
after the owner’s death and
then becomes public domain
Patents
Patent – a document that gives
the person the right to exclude
others from making, using or
selling his/her invention
Contact a patent agent (some
lawyers)
Very expensive process because
you hire a patent agent to prove
your case to a judge
It takes approximately 4 years
to obtain a patent
Lasts 20 years
One of the disadvantages of
patents is that the design can
be copied by modifying one little
thing
Growing the Business
Requirements:
Funding
Processes and systems
People
Focus
Leader
E.g. Assante Financial Services
E.g. Oakley sunglasses
Firms that Succeed
The firm must provide a
product or service that the
customer VALUES and are
willing to pay for
Provide a return to the
investors
Good, loyal employees and
managers
Strong internal systems and
processes such as bookkeeping,
inventory management
Firms that Fail
Lack of sufficient funding
Poor customer service
Haste
Cut corners
Poor management of cash
flow
Excessive debt
Overlook government
legislation
Inexperience
Helpful Resources
London Small Business Centre
www.sbcentre.ca
Federal Consumer and Business Info
www.strategis.ic.gc.ca
GST
www.ccra-adrc.gc.ca
Government Services for Businesses
www.businessgateway.ca
Export Information
www.exportcourse.gc.ca
Intellectual Property
www.cipo.gc.ca
The Entrepreneurship Centre
www.entrepreneurship.com
Lawyer Referral Service
Phone: 1-800-268-8326
Questions?