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Starting Your Own Business: A Step-By-Step Guide
From making a business plan to getting funding and insurance coverage - we'll walk you through what you need to know about starting your own business.
Starting your own business is exciting, but it’s also a lot of hard work. We’ll walk through what you need to know about becoming a business owner including how to to register, finance, insure and market your new business.
Step 1. Start your own business with a solid business plan
Technically, you don’t need to write a business plan, unless you’re seeking outside investment. However, this remains a hugely beneficial task for business owners either way.
A business plan helps you to understand why your business will be profitable. When written properly, it will help you identify and overcome potential hurdles before they pop up. Your business plan should include the following sections:
- Business name and address.
- Your mission statement. Why does your business exist? What do you hope to achieve? What is your vision for the future?
- Your target market. Include as much detail as possible. Write down why you have chosen to serve this demographic. Is there a gap in the market?
- Products and services. A full list of what products and services you offer. How much does it cost to deliver each of them? How much will you sell each product and service for? What is the net profit?
- Competitors. Who are they? Why would customers choose you instead of them. What is your unique selling point?
- Marketing plan. What platforms will you use to market your business? What is your budget for each platform?
- Financial plan. What are the estimated monthly running costs of your business, including the cost of launching? What are your monthly sales forecasts and how much profit will that attract? It’s good to have a minimum target, base target and stretch target.
You should review and tweak your business plan at least once every quarter to stay focused as needs arise, ideas develop and changes happen.
Step 2: Register your business
Your business type determines how much tax you’ll pay on the money you make and how personally liable you’ll be for business debts.
Here are your main options.
- Sole proprietorship. You’ll continue to pay income tax and other remittances to the government as an individual. You personally will be held liable for business debts or lawsuits against your business.
- Partnership. This is essentially the same as a sole proprietorship, except profits are shared with your business partner(s). Under a general partnership, each partner is held personally liable. Under Limited Partnerships and Limited Liability Partnerships, only general partners (those who manage the business) are liable, while limited partners (investors) are not.
- Corporation. Here, your business becomes an entity in its own right and your personal finances are separate from your business finances. In addition to filing your own personal tax return, you’ll also file a separate business tax return. Plus, you’ll have to pay yourself a wage from company profits. You can’t be held personally responsible for business debts and will have reporting and management responsibilities.
- Cooperative. Cooperatives are best for groups of people who share similar social or economic needs and want to operate a business democratically. In Canada, all cooperatives must be incorporated, either at the federal or provincial level. Cooperatives can be set up as for-profit, not-for-profit or charitable organizations.
Step 3. Set up your work space
Many business owners are able to work without having to rent office space. Still, if you need dedicated office space, there a few cost-cutting options available. Look into getting a virtual office, co-working space or a serviced office. Typically, these are all cheaper than renting a traditional office space.
An online presence is crucial for most businesses to succeed. As such, you’ll need to set up:
- A professional website with a unique, memorable domain name
- Social media profiles
- A presence on Google Maps and other listing websites in your niche
Step 4. Open a business bank account
A business bank account works similar to a personal account – the main difference is that it’s dedicated to your business’s finances. Knowing businesses will need to process frequent deposits in higher amounts than individuals typically deposit, banks often charge a fee per deposit based on the size or type of deposit (cheque, cash etc.).
You should expect similar features to what you’d get with a personal bank account — such as a debit card, the ability to send and receive payments, optional overdraft option, online and mobile banking and more. You may even want to look into accounts that let you earn interest on your balance to help your earnings grow even faster.
Step 5. Get financing support for starting your own business
It may cost you a fair amount to launch your business, especially if you have a lot of equipment to buy. Our guide on business financing can help you find the best way to fund this if you don’t have money saved up.
Make sure to keep an accurate record of your business spending (with receipts) as well as your total yearly income, so you have this information ready during tax time. Remember that many business expenses are tax-deductible like business vehicle expenses, interest paid on business loans and interest paid on business expenses charged to a credit card.
Compare business loans
Step 6. Explore small business insurance options
Some types of businesses may be required to have insurance. For example, in some provinces, janitors and professional cleaners must have janitorial bonds to cover damages related to employee theft and bad work performance. In some cities like Toronto and Vancouver, commercial dog walkers must have liability insurance to cover the cost of damage to people and property, and they must list the municipality as an insured party.
Even if you aren’t required to have insurance when starting your own business, there are still several types of coverage you may be interested in getting to avoid being out-of-pocket for large, unexpected expenses down the road. These types of coverage include:
- General liability (or Third Party Liability). This protects you and your employees if legal action is brought against your business for damages done to a client’s person or property.
- Business contents insurance. This protects any professional assets you keep in your place of business regardless of whether you rent, own or work out of a home office. Coverage can potentially extend to computers, office furniture, inventory, machinery and equipment.
- Commercial property. Provides coverage for lost, stolen or damaged equipment.
- Personal injury. Helps cover costs associated with recovering from a work-related injury.
- Commercial auto coverage. Get car insurance for vehicles you use for business including supply vans, trucks and regular passenger vehicles.
Step 7. Hire employees (if necessary)
If you need extra help and can afford the long-term expense of paying other people, post job ads online, in print publications and on job boards at your local library, city hall, church(es), school(s) and anywhere else you might attract the right talent. Finding qualified people through word-of-mouth references is one of the most powerful ways to sift through feedback from your job posting. So, be sure to check with your friends and family to see if they know anyone who might be right for the position(s) you’re filling.
Regardless of the type of business structure you have, your responsibilities as an employer include:
- Making sure your employee(s) complete Form TD1, Personal Tax Credits Return.
- Deducting taxes, CPP and EI from employees’ wages and remitting these amounts to the government
- Creating a hiring agreement, either verbal or written, for each of your employees
- Complying with employment laws in your jurisdiction including minimum wage, work hours, sick pay, vacation pay, statutory holidays, parental leave, pension plan enrollment and more.
- Adhering to workplace health and safety requirements
You might have to fulfil other requirements as well depending on the type of business you have, the classification of your employees jobs and other factors. Connect with a local business lawyer or tax professional to find out exactly what you need to do.
Step 8. Begin marketing your business and (hopefully) make a profit
With an effective marketing strategy outlined in your business plan, there should be no reason not to start marketing from the day you launch your enterprise. An effective strategy should start attracting customers immediately. Consider the following ideas:
- Flyers. Since you’re most likely only targeting customers in your local area, it makes sense to put up flyers around your neighborhood. Target supermarkets, shops, parks, churches, schools, vet clinics and anywhere else where your customers are most likely to be. Make sure you have permission to post in public places or on private property.
- Business cards. Get a few hundred business cards printed. Have them in your wallet ready to give to any potential clients you come across. Hand them over to your friends and family members to give to pet owners they know. Give some to your customers, so they can easily refer you to their friends.
- Have a blog or online portfolio and best practices for apply search engine optimization (SEO). Draw people to your business by optimizing your web content to rank highly for the keywords and search terms prospective customers are using.
- Paid social media advertising. On social media, it’s really easy to target specific demographics. You can restrict advertising to certain populations in specific regions.
- Have a referral scheme. Happy customers will be pleased to refer you to their friends, especially when prompted to do so. Perhaps you could even introduce an incentivized referral system.
- Cross-promotion. Set up cross-promotional deals with other professionals with whom you can share clientele. For example, if you’re a wedding photographer or event planner, you could collaborate with other companies that work at weddings such as venues, DJs, florists, etc.
Learn more about financing for starting your own business
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