Starting a Business? Peter Keeshan Megan Thomson Bryan Chen Agenda Types of Business: Product or Service Types of Entities: Sole Proprietary, Partnership & Inc. Types of Financing: Debt vs Equity Common Pitfalls: Lesson’s Learned Getting Started You have a idea now what? Are you cut out to be an entrepreneur ? What’s your risk profile? Product or Service Product: More capital intensive Intellectual property [patents needed?] Service: Liability issues P.Eng Consulting: P.Eng ---> C.O.A -->Consultant Engineer Sole Proprietorship Pros • Unincorporated business established and run by a single individual • Easiest form of business to set up • No agreements or paperwork required • Reap all the benefits Cons • Liability Creditors can seize personal assets • Personal taxation laws still apply • Suffer all the pain Partnerships Pros • Share the challenges • No contracts or registration • Limited partnerships can limit liability • No separate tax filing • Simple dissolution Cons • Personally liable (except for limited partnerships) • No new partners can be introduced without consent from all existing partners • Decisions not as easily made Corporation Pros • Liability is limited to the initial share purchase • Decisions by majority, not unanimity • Could continue in perpetuity Cons • More work and costs involved • Outside investment limited by size of firm • May be required to pledge personal property as collateral to secure • Tax return for the corporation Funding by Debt Mostly Charter Banks, but also include other type of financing [i.e. Leasing]. •Usually require a form of secured asset as a guarantee. •‘Hands off’ Business Partner •Debt cheaper than equity. Some Interest is tax deductible [EBIT] •Business plan: Show how you will pay off debt. •Good for product or more capital intensive service Funding (Private Equity) Friends and Family: “Love Money” •Easily accessible •Off balance sheet liability •Good for low start up businesses: Consulting •Forgiving payment schedule Venture Capital Funding •Equity Stake in the company - vested interest in company’s success. •‘Hands-on’ Business Partner - use of contacts/networks •Looking for how to ‘exit’ and get return: IPO, Sell •Good for starting up a capital intensive product; Knowledge Based Industries, w/ R&D, high growth potential. Angel Investors & Government Funding Angel Investor •Similar to VC, but a individual rather than a Firm •Equity Stake in the company - vested interest in company’s success. Smaller investment. Government •Grant’s, Loans and VC •Government issues: Environmental concerns [i.e. green energy, Kyoto] Common Pitfalls Underestimating start-up costs. By the time you incorporate, register business, get started. Expensive •Include your salary! •Rule of thumb what you have budgeted + 1/2 Common Pitfalls Not knowing your sales cycle: How long will it be before you start generating cash flow? Information Open/Qualification Gathering Payment only comes after you have gained the business [i.e. net 30 days] Some Sales Cycles can last 12 months or more. Close Presentation Common Pitfalls Know who you are doing business with • Friends don’t always make good business partners • Some customers you don’t want. Demanding customers Customers that don’t pay. • Exhausting “warm” leads before doing any other business will not give you a realistic picture of the need of your product/service Common Pitfalls Self-discipline to execute • Plan – execute – measure - repeat • Business is not as precise as engineering • Intelligence + confidence • Leap of faith Parting Thoughts The surest sign of madness is doing the same thing but expecting different results Change + Action Ready to start a business? • Only you can answer… Helpful Link/Resources Business Development Canada: www.bdc.ca Royal Bank : www.rbc.ca Canada Service Business Centers: www.bsa.cbsc.org Contact Information: Peter Keeshan - email@example.com Megan Thomson - firstname.lastname@example.org Bryan Chen - email@example.com Questions?
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