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Starting a Small Business in Canada | 8 Steps for Newcomers
Written By
Corinna Frattini
•
Aug 10, 2023
•
Job Search
Small businesses are a vital part of Canada’s economy. In fact, small businesses (with less than 100 employees) make up close to 98% of employer businesses in Canada. And, for many newcomers starting a small business in Canada can be a rewarding experience. However, it’s essential to understand what’s required to ensure your success. Check out these eight steps to know and do if you’re interested in starting a business! From understanding your market to small business financing, you’ll discover helpful information and resources to move you in the right direction.
A small business usually starts with a simple idea. Maybe you have a new product idea or invention. Or maybe you want to distribute products from your homeland to the Canadian market (or vice-versa). You may want to purchase an existing running business or franchise. Or maybe you have a specialty service to market as a self-employed person or a small boutique firm (i.e. web designer).
But, before you venture further, you need to better understand the market or need for your product or services, particularly in the Canadian context. Ask yourself if there is a need in your community. What is your target market? Is there a demand for the product or service? While there are many reasons why small businesses fail in Canada, a common reason is a failure to conduct market research.
You have to do plenty of market research (see Industry Canada, a great resource for this), plus look at your local market and competitors. For example, if you’re planning to open a sushi restaurant in a specific city or neighbourhood, find out who your competitors will be, including sushi and other restaurants.
Choosing a Legal Entity Option for Your Small Business
Starting a small business is one thing, but how will you structure it? There are many things to consider related to how you form your business and its legal structure. There are pros and cons with different types of legal entities, which include:
Sole proprietorship (the simplest form as you don’t create a separate legal entity for it) but it also means you are personally responsible so creditors can go after your personal assets)
Partnership (if you will have one or more partners)
Corporation (the business is a separate legal entity from you and your personal assets)
You must also decide on and register a business name. You will require proof of registration to open a bank account, for example, for the company.
Step Two: Create a Business Plan
Once you have a clear understanding of the market, and feel your business meets a need, the second step is to write a business plan. A business plan is an essential document for launching a small business in Canada. Do you understand Canadian business plan standards? Find help in writing a plan with a professional consultant or these online resources:
Most small businesses take time to start earning a profit. Do you have financing in place to not only start your business but keep it afloat?
Financing is one of the biggest challenges for start-up businesses, particularly if you are a newcomer with a limited amount of credit history in Canada. Various options for financing your business include:
Your own savings/cash can help you kickstart your business.
Personal loans from family/friends may be your next step, but be careful about your relationships by not abusing your family/friends’ generosity.
Your own credit card or line of credit may be easy to access but can come with steep interest rates.
Bank business loans may be more challenging to get, and you’ll have to show the institution documents like your business plan.
Business microloans or peer lending available from certain banks are smaller loan amounts to help small projects.
There is also funding or loans through organizations like the Business Development Bank of Canada, aimed to help the growth of the small business sector in Canada.
Venture capitalists, angel investors, or other private investors may be your next option, especially if you’re looking for larger investment amounts. There are several venture capital firms you can approach or find a private investor through networking. But investors not only want to assess your business documents like business plans, but they also want a defined plan for a return on their investment. They may also want to get involved in operations.
Step Four: Create a Sales and Marketing Strategy for Your Small Business
Do you know how to effectively market your business in today’s social media-savvy climate? Do you have a social media strategy?
For many small businesses, especially for mom & pop stores, small restaurants, and boutiques, profit margins can be pretty tight. Your next goal is to grow your business by increasing your efficiencies and maximizing your profits.
What’s Coming In?
Increasing your sales is critical to growing your profit. The first part of increasing your sales is having a product or service that meets a consumer’s need at an appropriate price point. The second part is to create a sales and marketing strategy to get the word out!
What’s Going Out?
Are the costs of running your business too high? Look at ways of cutting your overhead. Assess your suppliers and look for competitive pricing.
Labour, of course, is one of the biggest expenses you’ll have, so it’s important to hire well and retain quality staff by creating a positive workplace environment that keeps your employees in your corner.
Be a Socially Responsible Business
A socially responsible business is all about combining economic and financial goals with social, environmental, and/or humanitarian goals. It’s about companies who know that “doing good” is good for business.
Here are some examples of how small businesses can be socially responsible:
Encourage diversity through specific hiring and cross-cultural communication programs.
Create a sustainability or environmental program to reduce your business’s carbon footprint.
Create incentives for community giving or volunteering for your staff.
Donate proceeds or services toward humanitarian and social causes.
Step Five: Hire and Retain Staff
Hiring and retaining staff can be one of the most costly, frustrating parts of owning a small business. But hiring your first employee or adding new members to the team can help to transform your business. When recruiting and hiring new employees in Canada, a key priority will be to hire the right person with the right skills and experience for the job.
From accounting to paying taxes, a successful business is organized and maintains its records. Keeping track of your finances with proper accounting and bookkeeping is critical for successful small businesses.
Proper bookkeeping can help you keep track of expenses and cash flow, and measure your bottom line.
Not all owners have the skill, expertise, or time to manage all these financial details on their own, however. Hiring a financial professional – be it as an employee or a freelance consultant can ease this burden for many owners. And while you may worry about the expense of such services, a professional can actually save you money by showing you how to better manage your money, save on taxes, and more.
There are different types of professionals you can hire such as:
Bookkeepers, who may or may not be certified, can offer basic accounting and recording services.
Professional accountants will have more training and expertise to analyze data, handle your taxes, and more.
Financial officers, such as a Chief Financial Officer or controller hired as an employee, who can provide the best accounting services, plus become an integral part of your management team.
If you’re starting your business out on a small scale, you can at least rely on popular software like Quickbooks to help you manage your finances.
Don’t Forget about Taxes and Regulations When Starting a Small Business
The Canadian economy is driven by the small business sector. Even though many small businesses have just one owner and a handful of employees, there are many taxes and regulations the business must still contend with.
There are basic tax requirements such as Goods and Services Tax (GST) and/or Harmonized Sales Tax (HST or provincial sales tax) that you must comply with.
Then there are numerous permits, licences, and regulations related to your employees such as minimum wage, maximum work shifts, vacation pay, and more.
If you’re new to the country, it is worth the investment to have a qualified tax professional and/or lawyer in your corner to help you navigate the rules and regulations when starting a small business.
Step Seven: Invest in the Right Technology When Starting a Small Business
Using the right technology, from back-end software to a great web presence, will help you succeed in your business.
No business today can operate without the proper technology, so it’s important to invest in this aspect of your business, to keep both the back end (i.e. accounting software, servers) and front end (i.e. cash registers) working smoothly.
In addition to your basic computer hardware and software needs, here are several additional technologies to consider:
Secure backup servers or cloud services to preserve your data
E-commerce capabilities and a simple content management system so you can update your website by yourself
Social media presence such as a company Facebook, Twitter, and other accounts
Customer relationship management (CRM) software to manage sales and networking contacts.
Step Eight: Develop Your Professional Skills to Help Your Small Business Excel
Do you have the professional and leadership skills to keep your business running? It’s a question few business owners ask themselves. Finding a mentor can help. Learn more about mentoring in Canada.
With small business as a key driver of the economy in Canada, newcomers often find starting a small business is a rewarding opportunity. With support and a strong understanding of these eight steps you can be well on your way to achieving your small business dream.
For information, tools, free webinars, and more visit our Finding a Job in Canada resource page. Get the help you need to achieve your career goals in Canada!
WRITTEN BY
Corinna Frattini
Senior Editor, Prepare for Canada
Corinna Frattini is the Senior Editor and Content Director for Prepare for Canada. She contributes articles to help newcomers achieve their goals in key areas related to living, working, and settling in Canada. With an extensive background in human resources and leadership development, her articles focus on what Canadian employers seek and how newcomers can continue their careers in Canada.
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