6.5: Steps to Creating a New Business

The Business Development Bank of Canada (BDC) provides an ultimate guide to starting a business in Canada.  This step-by-step guide provides resources and answers to many questions an entrepreneur may need when considering starting a new business.

• Identify a business opportunity. You may find an opportunity for a new product or business by identifying a need for something that is currently missing or identifying a problem that is occurring, and contemplating a way to fix it. Before you start spending money on an idea, it’s essential to ensure your business idea has the potential to be successful. Conduct research into what other companies are doing that may be similar to your business concept. Ask yourself these questions. How will your company stand out from the crowd? Who are your target customers? Will they want your service or product? How much money will you need, and where will you get it?
• Choose a business structure. In Canada, there are three common types of business structures: sole proprietorship, partnership, and corporation. Be sure to review the pros and cons and specifics of each structure at the BDC’s  “How to start a business in Canada: The ultimate guide.” A sole proprietorship is quite informal and easily created, which is why it’s the most common structure chosen by new entrepreneurs. In this structure, the business and the operator are the same in the eyes of the law and tax authorities. The downside is that the owner is personally liable for all functions and debts of the business. A partnership is similar to a sole proprietorship, but instead of one proprietor, there are two or more. As with a sole proprietorship, there is no legal structure for a partnership. However, partners usually have some type of contractual agreement among themselves that governs the sharing of revenues, expenses and tasks. A corporation is formed by incorporating a business. When a business is incorporated ownership shares are created, which produce a taxation and legal distance between the company and its shareholders. This has tax advantages for the owners; provides some liability protection from the corporation’s debts; and offers some measure of protection for a company’s name. The downside is that setting up a corporation involves initial and ongoing costs for legal and accounting fees.^[1]
• Choose a business name. Choosing a business name is more challenging than it seems. It needs to be clear, memorable, and—most importantly—available. Your name often shapes a customer’s first impression, so choose wisely. Ask yourself: Does it reflect what I offer? Is it easy to remember? Is it unique enough to stand out?^[2]
• Create a business plan. Often, a business plan is used to help secure funding, validate a business idea, grow an existing business, buy a business, sell a business, or advise clients. It legitimizes a business idea, shows the results of research, provides product and customer information, and includes operational and strategic goals. “A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. It’s a guide that helps you, and anyone else, better understand how your business will succeed.”^[3] Additional information on business plans is below.
• Obtain business financing.  There are many ways to finance a new venture, and depending on the size of your startup, you might use personal funds or apply for a bank loan (debt financing). Other options include government grants and subsidies, asking family and friends, crowdfunding, developing partnerships, business incubators or accelerators, and inviting venture capitalists or angel investors who may be willing to invest in your business for partial ownership or participation in business decision-making (equity financing).
• Choose a commercial space. Your choices here will vary. You may not need a physical location if you are selling online and working from your home, although if selling products, you will need to consider suppliers and shipping.  If you operate a mobile hot dog cart, you will want to set up in locations where your customers are. Some mobile food trucks/carts/stands obtain permission to set up outside specific retail stores.  Some food truck owners obtain contracts with various organizations, and they move from company to company during lunch hours, selling lunch products to employees. If you are going to sell products or services in a brick-and-mortar store, then you want to consider buying or leasing a space, the costs of each, and finding a location either near your target market (make more sales near potential customers) or near your supplier (reduce costs).  Licenses may also be required, for example, if you sell liquor or food products. You may also require insurance.
• Hire employees.  Whether or not you hire employees will depend on the size of your business.  For example, if you are opening a hot dog stand, then you may be the only employee you have.  If you are opening a small bakery, you might start out hiring friends and family, although that can be a sticky situation if you have disagreements. However, some entrepreneurs open restaurants or retail businesses specifically to start a family-owned business and create jobs and income for their family members. As your business grows, you may need to hire employees. Take time to do a thorough search so you can find the right-fit employees; otherwise, you may end up with a lot of headaches and wasted time by hiring the wrong people. To save time, and depending on the number and type of employees you need, you might use a recruiting firm to vet potential candidates for you. While there is usually a cost for this service, it saves you time (and money) in not having to recruit and select employees yourself.
• Grow your business. Launching your business is just the beginning. The first year is often the toughest—and when many businesses fail. You’ll need to balance daily operations with long-term planning. This is the difference between working in the business and working on it. For guidance on early growth, visit the BDC’s “Manage your growth” hub.^[4]