- 2015 Federal Election
Banka: Facts to consider before starting your own business
British Columbia is the hub of the small business world and Kelowna has many small businesses but very few large employers.
If you think you have a great business idea but don’t know if it will fly or are wondering how to get started, here are some things to consider.
First, consider your personality. Are you comfortable with working long hours to get your business up and running without knowing how much money you are going to end up with?
Do you have any money to invest in your business venture? Are you tenacious, or do you give up easily?
If you are going to have employees, do you have any previous experience as a manager or supervisor?
If you answered no to any of the above questions, then perhaps either starting a business is not the right path for you or maybe those are just areas of your basic personality that you might need to work on.
The next most important area concerns money. Do you know how much money it will take to get your business started? If you don’t, you need to create a cash flow plan and try to think of every conceivable expense that a business might incur in the first year.
Have you developed a relationship with a banker? Many banks have some excellent cash flow templates and Community Futures (www.cfdcco.com) offers a course on how to develop a cash flow plan and even on how to get into business for yourself.
Part of the money question is determining how much of your own money you can invest in your business venture and how much more you will be able to get from your suppliers, your family or your bank.
If you are currently employed with a flexible employer, perhaps you can start to work on your business part-time and use some of your current salary to invest in your business.
And then there’s our business market. Are there similar businesses to what you are considering doing already in the area?
If so, could the area sustain another similar type of business?
Are the existing businesses in the area in which you would like to open your business doing well?
Do you understand the demographics of the kinds of people that would use your business?
Have you picked out a location that is easy to access?
Is your business space going to be big enough for you and for possible future expansion?
Are there any legal issues with running the type of business that you are considering in that particular location?
Is your business space going to require expensive renovations before you can move into it?
Will you need equipment? If so, have you tracked down suppliers for your equipment and financing?
Some equipment manufacturers also provide financing options such as leasing. What about using second-hand equipment to start?
As well, you need to consider the questions about expenses, to be aware of the difference between your fixed expenses—those that you need to pay whether you make a sale or not, usually rent, insurance, utilities—and your variable expenses—those that are directly tied to the product such as staff, raw materials.
Will you be able to cover your fixed expenses if you don’t make a sale for a few months?
What are the major risks of your business idea? Would any of these risks force you into bankruptcy? If so, is there any way of reducing these risks?
Perhaps you had $100,000 to invest in a business. One way to lower risk is not to invest all of it in the business, but to keep, say, $20,000 aside for a rainy day.
If you are selling product, you need to determine how much of each product you will carry in stock, or if you will just order based on customer demand.
Perhaps you can negotiate special terms with your suppliers because you are a new business.
Some suppliers and manufacturers of product will provide special terms just to get their product out in as many places as possible.
Have you figured out how much you need to charge for your product in order to cover your costs?
What about any licenses, permits that you might need? Is your business subject to special laws and regulations?
Finally, there is the need to maintain proper financial business records.
I would recommend that you interview bookkeepers and accountants to help you get your books set up, especially if you need to register for GST/HST or have employees or inventory.
Both accountants and lawyers should be consulted about setting up the kind of business structure you need to be operating in—sole proprietorship, partnership, or corporation.