Are you tired of being in the rat race and feeling the humdrum of the daily grind? Like many of us with an entrepreneurial mindset, you may have considered taking a different approach to earning an income by starting your own business. Perhaps you’ve been sitting on a brilliant business idea for a while and didn’t know where to begin. Or maybe you’re searching for an intriguing product to sell online.
Before you quit your day job and jump in the deep end of small business ownership, there are some important things to consider. Are you ready to take on your own business? Do you have the right idea and enough funds? Where can you go to get all the information needed to start your new venture?
Here are some helpful resources and steps to take so you feel more prepared for this exciting journey.
1. Do you have the right business idea?
Having the right idea isn’t just about choosing a business that you’re passionate about. (But that’s definitely a good start.) It’s also about choosing a business that’s financially viable.
With the high failure rate of new businesses (only 51 per cent of businesses survive for five years), do your homework to ensure you’re choosing a direction that has a good chance of success. To do that, it first helps to understand your market. You’ll want to ask yourself questions including:
- Why would someone choose my product or service over the competition?
- What is the existing (and future) demand for my product or service?
- How will I reach potential customers?
- Will I sell online or in-person at a brick-and-mortar store, events, tradeshows?
All of the answers will help you narrow down the seemingly infinite possibilities for your new venture. Follow the steps outlined in the below resources that may uncover other aspects of starting your small business that aren’t yet on your radar.
- How to start and grow your Manitoba business
- Checklist on starting a small business in Manitoba
- The steps to consider before operating a business in Canada
2. Create a business plan
You may think that you’re ready, but to be truly prepared, it helps to create your own business plan. This is a formal written document with your goals, how you plan to achieve them and the timeframe for every step.
Think of ways to help your business grow and succeed well into the future, and work that into your document. A business plan can help you better understand different markets, operational issues, cash flow and finance of your business, which we’ll go over later on in the article.
Not only does your business plan help you remain focused on your short and long-term goals, but if you need to borrow money to build your business, your lender will definitely be relying on the information you’ve included in your plan. All business plans look different, but they all have a number of elements that are essential to include. Continue reading to discover other points that should be included.
3. Do a two-year cash flow analysis
It also helps if you have your finances in order, and to create a two-year cash flow analysis. To do this, start by projecting the cash that will be coming in from sales for each month. Then project the cash going out from all the expenses of running your business, such as rent, purchasing inventory, payroll and other bills.
You can analyze several outcomes:
- The expected scenario: How you expect cash flow to play out if everything goes according to plan
- The slow start: When things may not go according to plan — for example, if a competitor enters the space or your sales are slower than anticipated.
- Aggressive sales: When your business really takes off faster than you can keep up.
No matter the scenario, by planning ahead, you can be financially ready for any outcome. Throughout the first two years of business, you can refer back to this cash flow analysis and adjust as needed to ensure you have enough working capital for your business to stay afloat and thrive.
4. Do you have enough funds?
It would be unfortunate to put in all the effort to start your business, and then run out of working capital and unable to act on your full vision. Even if you become successful very quickly, problems can arise if you don’t have funds to fulfill orders.
To avoid these situations, it helps to calculate your start-up costs. As the name suggests, these are the funds you’ll be required to spend to get your business up and running. You’ll want to start by figuring out specific business expenses such as legal fees, rent, signage, websites, phones and additional overhead. These differ depending on the business structure. For example, the start-up costs for a coffee shop will be very different from a web design firm. Reach out to local business organizations and start networking with other business owners who can provide some insights into costs you might expect.
If you’re starting a new business, you’ll need to secure financing and daily business banking services. ACU’s Community Financial Centre (CFC) specializes in creating personalized financial solutions for start-ups, non-profits, co-ops and social enterprises. Our knowledgeable advisors can help you secure financing at each stage of the financing lifecycle, while our cash management specialists will help you optimize your cash flow. Together with our Business Financial Centre (BFC), who support and encourage the growth and good financial health of local small to medium-sized businesses, we deliver some of Winnipeg’s most diverse commercial financial services, all in one convenient location.
At the end of the day, your most reliable tool for financial planning is old school – the expertise of another person. At ACU, we offer you more than business expertise and financial tools; we give you the opportunity to partner with people who are as committed to your success as you are.
- The Winnipeg Chamber of Commerce
- Career & Business Meetups in Winnipeg
- Follow these ‘5 Cs’ when applying for a business loan
5. Research costs of similar businesses
Once you’ve defined your costs, you’ll want to confirm your assumptions. That means actually going out and doing your research and confirming that your estimates are accurate in terms of how much everything costs. This may not be so easy depending in the business you’re starting. That’s why it can be helpful to research the costs of similar businesses. Once you get a good idea about their costs, you can base your new company’s costs on them.
Are you planning to go “all in” and quit your full-time job to focus 100 per cent on your business? Take into account your personal finances and expenses of daily life before you take the plunge to full-time entrepreneur. This all starts by assessing your budget and lifestyle. Do you have enough money to cover your own and your family’s basic living needs and keep them comfortable? Will you be able to maintain or adjust your lifestyle as needed to keep up with your growing business?
Once again, it can be helpful to connect with other small business owners and industry experts who have seen the true costs as they happen.
6. Come with a “Plan B”
If your business ends up growing faster than anticipated, you’ll also want to come up with a “Plan B.” Why’s that? Success will mean change, and that change can demand some quick action to ensure you keep customers happy and have more people knocking on your door.
Plan out scenarios and contingencies for both sides of the coin — success and failure. Will you be able to adjust your products and solutions offered? Can you staff up or down so that you can keep your payroll at the right level? Will you need to rent a bigger office space or buy new equipment, including computers, phones and machinery? And in the event that you needed to shut the doors, how could you make that happen while mitigating losses?
If your Plan B requires even further financing, talk with your advisor as soon as possible to find a potential solution. Often, owners turn to a combination of equity and debt — and while that can be advantageous, there are some pitfalls of choosing the wrong option.
Examples of equity include savings, gifts from friends or family, and capital from angel investors. Instances of debt include credit cards, personal loans, business loans and refinancing your home. You’ll want to evaluate each of these financing options and decide which one is the best for your business at any given time.
A trusted advisor can also help you learn about various government programs or tax credits designed to assist new entrepreneurs with their start-up costs or expansions.
- Manitoba Innovation Growth Program
- Canada Small Business Financing Program
- How to meet the challenges of growing a business
- 9 things you must to do grow your business
- 7 tips to help your business plan for the worst
7. Do you have the right experience or access to information?
You’re likely entering an industry that you are already familiar with, but if not, you’ll need to level up on your knowledge — and fast. If you’re starting a pizza shop, for example, it will help if you already have some practical on-the-job experience at a restaurant or fast food shop. If you’re opening an e-commerce store, you might have experience in digital marketing or retail.
Even if you’ve been working in this field for some time, you may still find gaps in your knowledge. In this case, you may consider some options:
- Take online courses to fill the gaps
- Hire a consultant to help you through certain steps
- Add staff to your payroll who bring other skills to the table
- Shift your business focus slightly to accommodate your expertise
- Find training through other local resources
- Lynda.com / LinkedIn Learning
- Women’s Enterprise Centre
- SEED Winnipeg: Business & Enterprise Support & Training
- North Forge Startup Program
8. Analyze your competition
You may have heard of the saying, “keep your friends close and your enemies closer.” To that end, you’ll want to know the strengths, weaknesses, similarities and differences of competitors in the industry, so that you know what sets your business apart. If you’re simply doing the same as everyone else, your chances of success are likely to fade.
To analyze the competition, investigate what they’re doing in these areas:
- Website: Review their site, blog and special offers.
- Industry partners: Look at third-party websites and print publications that showcase your competitors
- Advertising: How are they spreading the word, both online and offline?
- Social media: Are they actively posting? How big is their following? What are they saying and how is your shared target market reacting?
- Press releases: How much media coverage do they receive, and is the response positive or negative?
9. Customer analysis
Once you have a good idea about your competition, you’ll want to bring the focus back to your business. In particular, learn more about your potential customers so you can zero in on them and spend your marketing resources wisely.
Who are your target customers? What do they like to do, where do they socialize, what are their shopping habits and how price-sensitive are they? Create a demographic profile, and segment them into similar categories. Not all customers are created equally.
Next, create buyer personas so you can easily refer to these groups of people in an easy way. For example, a technology recruitment company might have two main personas called “Tech Savvy Teresa” and “Newcomer Ned” who symbolize two different types of clients, both in different stages of their life and looking for different career paths.
Buyer personas bring a higher level of sophistication to your business strategy and marketing. They allow you to attribute real-world scenarios to your target customers, and to get into the mindset of the people you need to connect with to grow your business.
Resource: HubSpot Buyer Persona Generator
10. Review and optimize. (Then take a deep breath and enjoy the journey.)
Once your plans are in place, take a step back and analyze the hard work you’ve put into your business planning. Take an objective look at what you’ve put together. Have you answered any questions that a vendor or lender might ask? Are there any gaps in your product offering, internal processes or operational plan? Most importantly, if you put yourself in someone else’s shoes, would you become a customer?
Be real with yourself, and create a list of things you need to button up. Prioritize these from high to low, and tackle the most important ones first. These are the items you’ll need to finish before you can get funding, set up operations and open your doors for business. After all, your to-do list will be ongoing and ever-growing — and no business owner can do everything at once.
Starting your own venture can be thrilling, but it can also bring a lot of unexpected stress. By doing your research ahead of time and following advice from peers and the many resources in the market, you can help proactively reduce those nail-biting situations — and finally have the successful small business of your dreams.
Are you excited and ready to start your new business? Set up an appointment and talk with your ACU Advisor to discuss any financial and business considerations.