Congratulations, you are ready to make the leap to become a small business owner! As someone who's been there, I understand the mix of excitement and nerves you are feeling right now.
In this post, we’ll explore 7 invaluable tips to help you build a solid foundation for sustainable business growth. This list is not exhaustive, but it contains some of the most common stumbling blocks we see first time entrepreneurs encounter.
Note: As you will notice building a business plan is missing from the list. While some successful small business owners begin with a formal business. plan, others do not. The reason building a business plan is not on this list is because too often a potential business owner will become so caught up building the business plan that it becomes a stalling tactic rather than a helpful document. If you are trying to start a business from scratch, begin by making your first couple of sales to get the momentum going then build a formal business plan as your knowledge of the market becomes clear. If you are buying a pre-existing business you should have a business plan in place before buying the business.
When you start your own business keep in mind:
These are a few of the cash flow problems that face a new business owner. You should make sure you have the personal finances available to pay for your personal bills while building the business. Keep in mind that building a business can be a slow process and the expenses will add up quickly.
Prepare a budget/forecast for both your personal finances and your business finances and revise regularly.
Often when starting out the best way to see if you have a valid business idea is to make a sale and get feedback from friends and family. Before dumping significant sums of time and money into an idea make sure there is a market for what you offer.
Marketing and getting sales in the door is often one of the largest challenges new business owners face. When you were employed, work was always coming in the door and even if there was a slow period there was still a paycheque or employment insurance. Building out a business plan can help you determine who you should market to keep you focused.
If you don’t have marketing or sales experience, you will find there are a lot of things to learn. Continuous learning in this area will be crucial for business success.
Some common things to get started are a Google Business profile and profiles on social media as these are all free forms of marketing. Building a website can be a good thing as well but don’t overspend time or money on your first website. If you are going to pay for marketing be very careful as these investments often don’t pay off for a business just starting out.
As soon as you start making sales you should get a separate bank account and credit card for your business. The following are some of the main reasons to keep your finances separate:
I cannot stress this enough. Even though it seems small, it is imperative that you separate your business and personal finances.
Setup a second bank account for tax estimates (more on this later).
Make sure you have the correct liability protection to cover your risk. If something goes wrong on the job you don’t want to be held liable without insurance. Talking with a lawyer is a good idea so that you understand the risks involved with your industry.
If you have dependents realize that you are operating in an inherently riskier endeavour.
In order to mitigate this risk look into the following
If you are operating out of your house you may need to talk to your home insurance provider to update your policy.
You will likely need to get a business license from your local jurisdiction to operate. This can be done by visiting the website for the city you are in or calling up the city council office and asking what you need to register for.
Depending on what you are selling you may need to register for GST and PST. You can get more information on GST at the CRA website here and PST at the PST website here. Keep in mind that even if you don't meet the GST threshold of $30,000 there may be other reasons you want to register for GST early. These include if you have many purchases up front and having a GST number can provide legitimacy to your business.
Many new business owners get to the end of the year only to be hit with a large surprise tax bill. Now that you are self-employed your employer is no longer sending tax to CRA on your behalf throughout the year and you also have to pay the employee and employer portion of CPP. Because of this we highly recommend you make quarterly tax estimates and place this money into a separate bank account so that you don’t touch it until it's time to pay taxes!
If you are self-employed your income is reported directly on your tax return so you don’t need to sign-up for a payroll account until you look to bring on employees.
You can get started with excel and a shoebox but once the sales start rolling you want to setup some form of accounting system. Keeping your numbers up to date throughout the year instead of just putting them together at tax time will help you make better decisions as a business owner. We use both Dext and Quickbooks Online (QBO).
At a very minimum make sure you keep all receipts for business purchases and all invoices for sales.
The combination of these programs can help you stay focused, organized and make sure you know your numbers to make wise decisions!
Of course, this would be on an accountant’s website! However, from experience we can say that as your business begins to grow your time is best spent building your business and not staring at numbers. We have seen many business owners who had a great idea but they come in when the business is on life support and CRA is knocking on their door or bills can’t be paid or a payroll has been missed. These are stressful events that you want to try and avoid.
This is where an accountant comes in. Having an accountant on your team who has worked with many other business owners will help you avoid many pitfalls that small businesses succumb to. Among other things, a good accountant can help you:
There are many other steps when building your business, but these will help you build a solid foundation for success.
Happy business building!
Foundation Accounting provides integrated bookkeeping, accounting and CFO services to small business owners and individuals in British Columbia, Canada. The firm was founded to help small business owners and individuals gain financial clarity to make better decisions and minimize financial stress in their life. We are here to support small businesses each and every day.
Are you looking to gain clarity and remove financial stress from your life? Get a quote today.
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