IDIOTS GUIDE - Complete Idiots Guide to Small Business

323 Pages·2002·16.45 MB·English

Small
Business
for
Canadians
by Larry Easto
A Pearson Company
Toronto
Canadian Cataloguing in Publication Data
Easto, Larry
The complete idiot’s guide to small business for Canadians
Includes index.
ISBN 0-13-090078-8
1. Small business—Canada—Management. 2. New business enterprises—Canada—Management. II. Title.
HD62.7.E277 2000 658.02⬘2⬘0971 C00-931443-1
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ISBN 0-13-090078-8
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Contents at a Glance
Part 1: Before You Start 1
1 So You Want to Run Your Own Business? 3
Many of us would rather earn a living by working for ourselves
than by working for someone else. If you would like to pursue the
self-employed option, think about what you will be getting into.
Is it really the right thing for you?
2 The Family That Works Together Sometimes Works 13
Some small businesses are really extensions of the family. As a
result, family things like computers and furniture, money, and
even people are used for business and family purposes. This
arrangement can work well for suitable families.
3 What Can You Sell? 21
Like it or not, when you run a business you have to sell some-
thing to someone. From the almost limitless number of choices
available, what can you sell?
4 Do You Start from Scratch...or Buy a Business? 33
Starting your own business from scratch is not your only option.
If you have the money, you can buy an existing business or even
buy the know-how.
5 Keeping It Legal 43
Warning! Running your own business can be dangerous to your
legal well being. Maybe you need a lawyer to help protect you.
Part 2: On Your Mark 53
6 Preparation for Your Business 55
Setting up a business is like setting up a new home: You get to
buy all sorts of neat things. And the best part is that some or all
of these purchases are tax deductible!
7 Plan to Succeed 67
If you build it they will come...maybe! But first you have to plan
what you are going to build and how you are going to build it.
8 Where Will the Money Come From? 77
It takes money to make money. Don’t count on winning a lottery
to start your business. Where will you get the money to buy all
the neat things you think you need to start your business?
The Complete Idiot’s Guide to Small Business for Canadians
9 Making Sense of Financial Statements 85
Think of your financial statements as storybooks using numbers
instead of words. If you don’t know how to read them, you won’t
know if your story has a happy ending.
10 Don’t Take Risks—Manage Them! 97
Life can be risky, but running a business need not be. You can
manage some risks, and for others...there might be insurance.
Part 3: Growing Your Business 107
11 Marketing Is More Than Advertising and Selling 109
Forget the slick television advertising campaigns. Marketing is
whatever you do to get more business for your business.
12 Plan to Market 119
Even if you do have a better mousetrap, don’t count on the world
beating a path to your door. You can’t just sit back and wait for
things to happen—you have to make things happen. In marketing,
good things don’t happen to those who wait.
13 What Do Your Customers Need and Want from You? 127
Try as you may, you simply cannot run a business without
customers. So don’t ignore them. Get to know them as well as
possible and treat them so well that they will want to keep
coming back to you.
14 How to Distinguish Your Business from
the Competition 135
You are unique. There is no one else in the world just like you. So
why should your business be like anyone else’s? Make your busi-
ness as unique as you are. It’s the best way of distinguishing
yourself from the competition.
15 Quality Service: Your Best Competitive Advantage 145
Regardless of the specifics of what your customers say they are
looking for, they all demand quality service. As long as you provide
better quality service than the competition, your customers will
keep coming back.
16 Ensuring Your Customers Are Happy 155
Happy customers are good for business. Not only are they likely to
return, they might even tell others how much they like you. How
much do your customers like you? Ask them; you might be surprised.
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Contents
17 How to Promote Your Business...Your Way 165
So how do you tell the world about your better mousetrap? There
are many ways of doing it. But make sure that your message
is not lost among the thousands of others competing for your
customers’ attention.
18 Wired Marketing...Using the Internet 177
The Internet is not an orderly arrangement of information as we
have been told. It is more like a vast poorly indexed swamp of
information, some of which can be quite helpful. Regardless of
what you call it, using the Internet for marketing can be useful.
But don’t even think of going there without having considered
carefully what you want to do.
19 How to Obtain More Business for Your Business 187
Forget about those unfortunates who are not yet customers of
yours. Concentrate on those wise people who have seen the light
and chosen to do business with you. They can help you generate
more business for your business. Maybe they can even help those
poor lost souls who are not yet clients see the light and choose to
do business with you.
Part 4: Expanding Your Business 197
20 Referrals Are Win-Win-Win Scenarios 199
You can’t do it all, but you can do a lot. Especially with a little
help from your friends. Don’t try to do more if you know you
can’t. Refer the work to others—everyone wins!
21 You Can Accomplish More by Subcontracting
Some Work to Others 207
If you like control—and what business owner doesn’t?—you will
love subcontracting. Somebody else does the work and you get to
supervise and, what’s even better, get paid for it.
22 Hiring an Employee—The Traditional First
Expansion Step 217
Hiring an employee can give you more than an extra pair of
hands. Between the added hassle of government regulations, your
employee’s wrongful acts, and who knows what else, having one
or more employee can add big-time stress to your business life.
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The Complete Idiot’s Guide to Small Business for Canadians
23 A Joint Venture Is Like Living Common Law 227
How would you like to join forces with a compatible business to
be able to offer more to your customers? Try a joint venture—it is
like trying out a merger before making a commitment.
24 A Merger Is a Marriage of Two Businesses 235
The fastest way to expand your business to offer more to your
customers is to take over another business. Merger is one busi-
ness strategy that can work as well for small businesses as it
does for big businesses.
Part 5: Keeping Your Business Going or Selling It 245
25 Keep Fit for a Healthy Business 247
What would happen to your business if you suddenly suffered
but survived a serious heart attack? Heart attacks and many
other health problems can be prevented. Don’t allow your own
poor health to jeopardize the well being of your business.
26 To Survive, Your Business Needs Cash Flow 255
If you look after the pennies, the dollars will take care of them-
selves. How well are you managing your pennies? Are there
enough of them coming in to make up for those that escape?
There had better be!
27 Transform Your Business to Cope with a
Changing World 261
Death and taxes used to be the only two things that were
inevitable. Now, change is also inevitable. Just because some
changes are beyond your control, it doesn’t mean that you idly
stand by and let them happen. You can always do something.
28 You’ll Need a Plan to Get Out of Your Business 271
All good things come to an end—even running your own business.
Your challenge is to get out of your business while at the same
time keeping as much of your sanity and money as possible.
Appendix A: Glossary of Terms 279
Appendix B: Government Information and Contacts:
Registration and Employment Standards Requirements 281
Appendix C: Canadian Books for Small Business 297
Index
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Contents
Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvi
Part 1: Before You Start 1
1 So You Want to Run Your Own Business? 3
You Need to Earn a Living . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
There Are Also Personal Reasons. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Are You Playing Business? The Business-Hobbyist. . . . . . . . . . . . . . 5
The Problem with Business-Hobbyists. . . . . . . . . . . . . . . . . . . . . . . 5
A Part-Time Business and a Full-Time Job . . . . . . . . . . . . . . . . . . . . 7
How Entrepreneurial Are You Anyway? . . . . . . . . . . . . . . . . . . . . . 8
Entrepreneurial Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2 The Family That Works Together Sometimes Works 13
Family Money Becomes a Business Asset . . . . . . . . . . . . . . . . . . . 14
The Cash Flow Roller Coaster . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
What You Give to Your Business Takes from Your Family . . . . . . . 15
Can I Please Use the Computer? . . . . . . . . . . . . . . . . . . . . . . . . . 15
Do Family Members Belong in Your Business? . . . . . . . . . . . . . . . 16
Family Members as Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Family Members as Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Divide and Manage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Ownership Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Management Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Family Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3 What Can You Sell? 21
Selling Your Own Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Advantages of Selling Your Own Product . . . . . . . . . . . . . . . . . . . . 22
Disadvantages of Selling Your Own Product. . . . . . . . . . . . . . . . . . 23
Selling Items That Other People Produce . . . . . . . . . . . . . . . . . . . 24
Advantages of Selling Items Produced by Others. . . . . . . . . . . . . . . 26
Disadvantages of Selling Items Produced by Others . . . . . . . . . . . . 26
Supplying Intangibles: Be a Service Provider. . . . . . . . . . . . . . . . . 26
Advantages of Being a Service Provider . . . . . . . . . . . . . . . . . . . . . 26
Disadvantages of Being a Service Provider . . . . . . . . . . . . . . . . . . . 27
Families and Individuals Need Services. . . . . . . . . . . . . . . . . . . . . 27
And So Do Businesses and Other Organizations . . . . . . . . . . . . . . 28
Who Will Buy Yours Goods or Services? . . . . . . . . . . . . . . . . . . . . 28
Small Businesses Are Service Businesses . . . . . . . . . . . . . . . . . . . . 28
Some Goods and Services Are Suitable for Both Types of Customers . 30
What Business Should You Start? . . . . . . . . . . . . . . . . . . . . . . . . . 30
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The Complete Idiot’s Guide to Small Business for Canadians
4 Do You Start from Scratch...Or Buy a Business? 33
Starting from Scratch...Doing It Your Way . . . . . . . . . . . . . . . . . . 34
Getting Free and Low-Cost Information and Advice . . . . . . . . . . . . 34
You Might Need Some Professional Advice. . . . . . . . . . . . . . . . . . . 35
Your Biggest Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Ready for a Daunting Challenge? . . . . . . . . . . . . . . . . . . . . . . . . . 35
What About the Uncertainties? . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Hey, I Want That One...Buying an Active Business . . . . . . . . . . . . 36
What’s Good About Buying a Business? . . . . . . . . . . . . . . . . . . . . 37
What’s Bad About Buying a Business? . . . . . . . . . . . . . . . . . . . . . 37
What About Buying a Franchise? . . . . . . . . . . . . . . . . . . . . . . . . . 39
The Good News About Franchises . . . . . . . . . . . . . . . . . . . . . . . . 40
And The Bad News About Buying a Franchise . . . . . . . . . . . . . . . . 40
5 Keeping It Legal 43
New Relationships Mean New Responsibilities . . . . . . . . . . . . . . . 44
Protect Your Personal Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
What’s the Right Business Format for You?. . . . . . . . . . . . . . . . . . 45
Sole Proprietorship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Choosing Your Lawyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Part 2: On Your Mark 53
6 Preparation for Your Business 55
Make Sure That You Will Have Customers . . . . . . . . . . . . . . . . . . 56
Planning Your Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Business Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Setting Up Your Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Space . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Telecommunications Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Answering Machines and Answering Services . . . . . . . . . . . . . . . . . 60
Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Fax Machines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Photocopiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Multifunction Machines. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Specialized Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Office Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Do You Need a Motor Vehicle? . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
What About Licences, Permits, Tax Registrations, Etc.? . . . . . . . . . 64
viii