Do you have a great idea that will knock everyone's socks
off? You're not alone, according to Statistics Canada there are on average
99,000 new businesses created each year between the years 2002 to 2008.
However, the amount of closures was almost just as high with approximately
90,000 small businesses closing up shop per year between 2002 and 2008. If you
fail to plan, you are planning to fail. Note: Sorry to disappoint but we won't be talking about Dragon's Den today - shucks!
Realizing when you need help
You may got that entrepreneurial creativity that you believe
nobody can match, the unfortunate truth is nobody is good at everything. We
have an economy that fosters specialization! If you're amazing at generating
new product ideas that's great, but if you're not good at keeping track of your
finances and developing a financing plan or a budget then please get someone
who does. Often times if you require external financing, the bank, venture
capitalist, or even those generous folks on Kickstarter are going to want to
see your budget. In most cases your funding will come in stages, you will only
receive the next bucket of cash if the stated milestones are met. That's
another reason why there needs to be a detailed plan and budget from the start
(sorry... pinky swears won't do here), even if you didn't initially plan for
external financing because you never know what will happen later.
Government support
Need to buy equipment and you need a loan? You can obtain a
loan under the Canada Small Business Financing Program (CSBFP) with a financial
institution if you qualify. It may be easier to obtain than a personal loan
because the government will partially or fully guarantee the loan. The main
criteria are that it must be a small business or a start-up operating for
profit in Canada, with gross annual revenues of $5 million or less. Note that
you can only use it for capital equipments, aka. items that provide long-term
benefits, it cannot be used to finance working capital items, eg. inventory,
supplies, etc.
If you're starting a company that does R&D, the above
mentioned CSBFP cannot be used to finance R&D work. Look into programs such
as the Industrial Research Assistance Program (IRAP) by the Canadian
government. Alternatively, the government also provides incentives through tax
credits for Scientific Research & Experimental Development (SR&ED)
work. Whether you have incorporated or not, you may qualify if you are doing
research or development work that gained new technical knowledge in a
scientific area.
See links below for more info on government support.
Embrace the electronic age with electronic tracking
Gone are the days with paper journals, now there are plenty
of software and computer hardware out there that can help you manage your
business's finances. QuickBooks is a popular software package out there that
can keep track of your transactions, the other one is Simply Accounting but I
think QuickBooks is the more popular choice at the moment. These software
packages will give you the ability to slice and dice data, and find out in a
couple of clicks exactly how many customers owe you money and exactly how much
they owe. It will also give you the ability to calculate important financial
ratios, so you can identify rooms for improvement.
To conclude folks, moral of the story is: keep good
financial records if you're starting a business, and draft up a budget/financial
plan. It may be necessary when you seek external financing one day, but even if
you do not it's still a good idea to anticipate future cash flows. To assist
you in your venture – financially or otherwise, there are many resources
available to you, government assistance programs, electronic tracking programs,
check out the links below for more info!
-TT
