Starting a business in Canada

Step By Step Guide to Starting a Business in Canada

Do you have a stellar business idea but also doubt if it will succeed? Are you interested in starting a business in Canada but don’t know where to start? This is the ultimate guide for you.

We would like to fully disclose that this article is an extremely long one, but it is only the beginning of the challenges you will face while starting your business. Entrepreneurship journey is not for the faint of heart. It is full of hurdles you need to jump over or knock over, but also extremely rewarding as you get to enjoy many triumphs along the way.

We created this article to serve as an initial guide to help you understand what starting a business in Canada usually involves while sharing useful tips and insights. Enjoy!

1. Evaluate your business idea before starting a business

Before investing your hard-earned money or getting into debt, you should realistically evaluate your business idea. You need to make sure it is a valid one with profit and growth potential so that it can survive.

We know being objective may be difficult while evaluating your own idea. So, here are some questions that will help you see it from different angles.

  • Do you have the necessary qualifications, ability, and experience to run this business as well as time to dedicate? If not, do you have mentors to help you, or support from your family or friends?
  • Is your business idea a legal activity in Canada?
  • Are there any licenses, permits, or technical requirements for that business activity? Are you able to obtain them?
  • Is there a gap in the market that your product or service can fill?
  • Is there a market for your business idea? If so, what is the market size? Who is your ideal customer? What is the size of your target customer segment in that market? Is it sufficient for the survival of your business?
  • How does competition look like? Can you survive the competition?
  • Can you afford the start-up costs and initial operating costs until you start making sales? Or can you finance it through investors or loans? Can you lower the initial costs in any way?

Once you answer these questions, you will have a clear idea about the feasibility of your business idea. If you find that your business idea is a valid one, you can move forward with planning your journey!

2. Seek mentors that will support you while starting a business

You may possibly have specific expertise in the field of your business idea. However, if you don’t have the experience of running a business or leading employees (if you will have any), then, you should build a support network to guide you throughout your journey. Business mentors or coaches, especially those who had similar experiences to yours, will identify the potential challenges along the way and help you find your way to overcome them with their experience.

3. Write your business plan – LITERALLY WRITE IT!

Most businesses make up their mind to write a business plan when they need financing for their businesses. However, before all else, you need a solid business plan for yourself from the very beginning.

You need it as a framework to enlighten your path, and it will serve as a guidebook to keep you on track. And if things don’t go as planned, don’t worry. You can always edit and adapt it to the circumstances as you go.

Writing a business plan may feel overwhelming at first when there’s nothing solid about your business idea. However, you’ll find it getting easier and the process will help you refine your business.

Also, keep in mind that it doesn’t have to be so comprehensive and detailed, especially if you’re doing it merely for yourself. Map out all the crucial factors that you should consider, and curate them as details get clear towards the launch.

On the other hand, a more detailed business plan with thorough calculations, graphics, tables, and references may be necessary if you are planning to use it to seek financing for your business.

In either way, the essential topics you must cover in your business plan at the very least are listed below to give you an idea.

  • An executive summary outlining what your business is and why it will be successful
  • Company description
  • Market analysis
  • Competitive analysis
  • Target audience analysis
  • Organizational structure and management
  • Your service or product details – their unique value proposition
  • Marketing and sales plans
  • Brand positioning and pricing strategy
  • Funding requirements and sources
  • Financial projections with accurate calculations – always know your breakeven point

In addition, write down your short-term goals and create an action plan that you follow and dynamically revise along the way. It will keep you motivated and on-track.

If you wish to enrich your business plan, you may use tools like PESTEL analysis, SWOT analysis, and Business Model Canvas. Especially, a Business Model Canvas – a tool that was initially proposed in 2005 by Alexander Osterwalder based on his PhD work supervised by Yves Pigneur – will help you and potential investors better visualize your business idea and clearly see the value in it.


Business Model Canvas Template

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4. Determine your initial and operating costs & evaluate financing options

You must have already covered this in your business plan, but there is no harm in repeating the importance of financing your business. It is crucially important to calculate the startup and operating costs of your business as accurately as possible. You must make sure that you have access to sufficient funds to start and run your business until you reach the break-even point.

If you know your costs and have the funds, that’s great, move ahead. However, if the calculated costs exceed the funds you have, you will need to find some ways for additional financing to ensure the survival of your business until it can set forward.

The most common sources of capital are loans from financial institutions, grants, and investors. You will need to determine the best option for your business and take the necessary steps to ensure that you can tap into additional funding along the way.

5. Conceptualize your 6Ps in writing for a strong start

6Ps? What do 6Ps mean?

It’s the abbreviation for Product, Pricing, Promotion, Place, Packaging, Positioning, People. You might or might not cover them in your business plan. However, it would be wise to build a solid strategy for your 6Ps from the beginning. They are too important to be left to the last minute.

Also, note that all 6Ps may not be applicable for every business. You may be offering a service, not a product, and in that case, you wouldn’t also have packaging. Then, yours will be an “S” for the service and 4Ps. What’s important here is to clearly determine your strategy for the main concepts of your business idea.

6. Choose a business name 

Naming your business may involve more than finding an attractive name. First, you need to ensure it reflects the product or service you offer to avoid confusing prospective customers. You should also think about how you want your business to be perceived and pick a name that is easy to pronounce and remember. In addition to these points that are quite commonsense, there are also a couple of legal and technical aspects to keep in mind:

  • Is the taken? Make it unique and distinctive to avoid legal issues and ensure the name is not taken. By law, the name of your business cannot be the same as or very similar to an existing corporate name or trademark. Even in the case it’s legal, it would be a terrible marketing mistake. See here to check if the business name you’re planning to use is taken.
  • Is the domain name available for your website? A domain name is basically the address of your website (like “www.yourbusiness.ca”). When you find a business name that you like, you should also check if the domain name you would use for your website is available. As a Canadian business, you must obviously check the availability for the domain with “.ca” extension, but if you find that “.com” extension is also available, getting both domain names with .ca and .com would be wise. If the domain name with the business name you choose is taken, you’d better find a different name. Otherwise, you may face serious challenges in digital marketing.

7. Choose your business structure before starting a business in Canada

Starting a business is a journey full of decision making. One of the most important decisions you need to make is the legal business structure as it affects your taxes, the level of personal liability, and more. There are four major business structures in Canada, and each of them has its pros and cons you need to consider carefully.

  • Sole proprietorship: You are your business, and your business is you.
  • Corporation: The business is considered a separate legal entity.
  • Partnership: Two or more people own the business.
  • Co-operative: The business is controlled by an association of members; often used for non-profits.

Learn more about these business structures here and see their pros and cons before making this crucial decision. If you’re still confused and not sure what to do, don’t hesitate to consult a professional for guidance.

8. Ensure that you are legally ready for starting a business in Canada

The process of starting a business is exciting overall, but it also involves some boring paperwork that must be completed to ensure that you are legally good to go.

  • Business Registration: First thing is first; you need to register your business with the government. The registration process depends on the business type you choose: sole proprietorship, corporation, or partnership.
  • Taxes: Once you register your business, you should apply for a business number and register for GST/HST with the CRA. Keep in mind that you should always be informed about your tax obligations, payment dates, and how to legally minimize the taxes you need to pay. The best thing you could do would be to work with an experienced accountant who will explain all you need to know.
  • Regulations, Licenses and Permits: You are responsible for making sure that you have all the required licenses or permits to operate a business. You can use BizPaL to identify the permits and licenses you may need to operate your business. (BizPaL is a trusted online source of information on business permits and licenses managed by a partnership involving governments at the federal, provincial, territorial, and municipal levels.)
  • Hiring: If you will be hiring employees, you need to open a payroll account with the CRA, ensure you meet workplace health and safety obligations, and register your business with the Workplace Safety and Insurance Board (WSIB) if needed for your industry.

It’s not rocket science, but these legal processes may be confusing for anyone without the relevant expertise. If your hands are full, or you’re overwhelmed with the complexity of the paperwork, you’d better hire a professional to do it for you. You may believe that you cannot afford to hire a professional as a fresh entrepreneur, but in fact, you cannot afford not to, especially considering the potential pain that it may save you from.

9. Open your business account while starting a business

After registering your business, you should open a business account with a financial institution. If your business is a corporation, you are legally required to have a bank account under your business name to receive payments. If you’re the sole proprietor, you would still want to separate your personal finances from your business. It’s mainly because a business account will make your bookkeeping easier and help establish business credit which will come in handy when you need business financing in the future.

You may tend to go to the institution that handles your personal banking for your business account, but this may not always be the best option.  It will be a long-term relationship, and you need to evaluate all your options before choosing the optimal one for your business.

There are many factors to consider such as transaction limits, number of branches and ABMs, POS systems, overdraft protection and interest rates, user-friendliness of mobile and online banking, account fees, and security.

10. Keep your bookkeeping tidy from the beginning

You will need to keep a record of your earnings and expenses to save you from the headache during the tax season. You also need to track financial statements, contracts, employee statements, invoices, receipts, and all tax filings and records.

As we advised before, you should work with an experienced accountant or financial advisor to ensure you’re running your finances and bookkeeping properly. You should also consider benefiting from digital and online bookkeeping tools such as QuickBooks that can integrate with your online banking and payment systems. This will take a big burden off your shoulders.

11. Determine how customers want to pay you

You can accept payments through e-transfer, cheques, debit cards, credit cards, mobile/online payment methods, or as cash.

Credit and debit cards usually come with the cost of commissions and fees, but you probably need to accept them because, in most cases, customers would prefer paying with cards to other methods. If you will be selling your products and services online, you inevitably need to accept credit/debit card payments.

Therefore, it’s important to determine the best POS systems and online payment gateways by comparing their pros and cons.

12. Protect your business

You are starting a new business and you are responsible for protecting it in many ways.

  • Insurance: It will be wise to purchase insurance coverage to protect yourself and your business. Based on your business type, you can decide what kind of coverage you may need. Work with an experienced insurance broker who will help you find the best policy and optimal coverage for your needs. Common types of insurance coverage include general liability insurance, product liability insurance, professional liability insurance, property insurance, health insurance for employees, and worker’s compensation insurance.
  • Intellectual Property: Identify any intellectual property assets that your business has. They may include your business name, brand names or logos, slogans, domain names, new products, inventions, software, secret formulas, customer lists and data, website content, and product information. You may protect most of them by registering your trademark, obtaining a patent or industrial design registration, registering a copyright and signing non-disclosure or confidentiality agreements.
  • Cybersecurity: Be informed about and prepared for cyber security risks before they happen. Then you can concentrate more on growing your business, worrying less about your cyber risks. Always keep in mind that just one cyber event can severely damage the reputation of your business or cause financial losses.

13. Get your marketing plan ready while starting your business

You need a solid marketing strategy to create awareness about your brand and attract your target audience. You may find many marketing plan templates online, which will help you structure yours. While planning your marketing, you should always keep in mind to:

  • Set SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound) goals.
  • Determine the most feasible tactics for your business – You don’t need to engage in all marketing channels (that would be beyond any budget and require infinite resources). Choose wisely and find those with the highest return on investment (ROI).
  • Identify key performance indicators (KPIs) and milestones to be able to measure your marketing efforts and see if you are meeting your goals.
  • Consistently dedicate a budget to marketing – You may feel that it’s costly but building and maintaining a reputation is essential for the success of your business.

14. Determine your sales strategy

First of all, you should have a sales pitch that will reflect the value you offer in an interesting and attractive way. Then, you should make a bunch of decisions on how your sales will be handled. Will you have an in-store or outside sales team, or both? Or will you even have a sales team? Will you sell your products or services online? Will you be conducting cold calling? How will you manage and train your sales team if you have one? How will you conduct upselling or cross-selling?

15. Become a part of the business community and support networks while starting a business

Whether your business is B2B (business-to-business) or B2C (business-to-customer), being a part of a business community and support network will help you build meaningful relations results while growing your business.

You can join your local chamber of commerce, trade associations, service clubs, or more specific business communities that share similar challenges as yours like networks for women entrepreneurs or BIPOC communities.

16. Define your customer service style

Defining your customer service style from the beginning is important. You would want to be consistent in your customer service approach; therefore, you should define your strategy and make sure that it’s applied by your customer service staff regardless of the size of your business. Will you be strict with defined rules, or flexible to offer a solution when a customer approaches you with a problem? Will your attitude be kind and formal, or friendly?

17. Make sure you are digitally perfect from day one

Do we even need to mention this? I don’t think so, but, just in case, I will.

If you are starting a business in this digital era, you need to make sure that you have a stellar online presence that will stand out.

You need your brand identity consistent through all channels, regular interactions on social media, a well-conducted SEO that will draw qualifying traffic to your website, and a user-friendly website/online shop that will turn leads into customers through effective funneling. They all are parts of a successful online presence and keeping them perfect is not an option but a requirement to survive in our age.

 


 

Starting a business is obviously a rocky road that will take tears and sweat but the results are definitely worth it when you take the right steps along the way. 

Contact us if you have any questions or need professional help while starting your business in Canada or book a consulting session to discuss your specific needs.

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