Before you launch, step back to make sure the elements to succeed are in place.
In Canada, roughly 80,000 new businesses start up each year, according to Industry Canada’s Key Small Business Statistics report. Unfortunately, nearly the same number of businesses shut down each year.
Any new business contains an element of risk, but you can give yours a much better chance of success by first checking the feasibility of your new venture before you jump in.
Make sure you’re ready
If you’re new to running a business, it’s important to consider your suitability for entrepreneurship – the personality traits needed to manage the many varied tasks, personal demands and challenges business owners face every day.
Energy and enthusiasm are important, but passion alone won’t get you through grueling 16-hour days, not to mention the stress of financial uncertainty while you’re waiting to make a profit.
Search online for self-employment assessment quizzes, and read articles to help you understand what being a business owner involves. It also helps to speak to existing business owners about their experiences.
Make sure you have an operational plan
It’s not enough to open for business and intend to “figure it out” over time. Ideally, an operational plan includes:
- A written document describing the process required to produce a product or render a service
- Identifying the costs required to create your product/service, including overhead costs
- Putting supplier agreements in place so you know exactly what costs to expect and when you need to pay suppliers
- A job description for your first employees, so you can hire the right people
- How you intend to get your product or service to market (e.g. online, distributor, wholesaler, or direct sale)
Step back from your operational plan to ask if it is reasonable, accurate, and doable. What are the gaps? For example, a lack of steady suppliers may mean your business isn’t feasible because you won’t be able to make a product or deliver a service.
Is there a place in the market for you?
Often business owners rush in, creating products or offering services to an undefined market before checking if there’s a real need. It’s essential to take an unemotional look at the marketplace to answer the question: is there a place for you?
You can do that by conducting some simple market research to discover if a successful business is already out there doing what you plan to do. A large, well-heeled competitor will make things difficult for you, so see if there is a particular angle or niche market unserved by industry leaders. Search
online, contact industry associations and read some trade publications to find out if there’s an untapped market in your geographic area.
Once you identify a market niche, crunch the numbers to see if there are enough people in that segment to support your business and be profitable. Lastly, contact a few of those potential customers to understand what will entice them to buy from you instead of your competitors.
Are your costs covered?
New entrepreneurs often underestimate the true cost involved in starting up a business. Some end up struggling with debt or abandoning their idea when they run out of financing options.
You can avoid this pitfall by taking the time to calculate, with as much accuracy as possible, your direct and indirect costs including:
- Office supplies
- Raw materials/input costs
- Professional support such as accountants and consultants
Decide now how you’ll finance your business for the next few years. Some options are personal savings, loans from family or friends, crowdfunding, angel investing, or a bank loan.
Once your financing needs are identified, prepare a detailed business plan to present to angel investors, family and friends or to support a credit application for financing. Securing financing is part of your feasibility checklist; you don’t have to accept the money yet, but you do want to make sure adequate funds are available.
Lastly, consider asking experienced business owners, bankers, family and your accountant to review your feasibility test. It’s important to solicit third-party opinions on the feasibility of your enterprise, in addition to your own assessment.
Talk with Scotiabank small business experts
At Scotiabank, our advisors understand business owners. We’re ready to help you, just as we’ve helped thousands of business owners like you to achieve their goals.
Whatever your plans, get more business advice, access helpful resources and learn about available financing solutions by speaking with a Scotiabank Small Business Advisor today.
Before you take action on any of the information above, we recommend consulting with a qualified business advisor that understands your unique needs and situation for your specific business and/or personal plans.