Would-be entrepreneurs be warned: the first year is often the hardest and being your own boss is much more time consuming than anyone can imagine.
TORONTO—With statistics showing that the majority of small businesses fail within the first year, planning and research are key to improving the odds of success.
Just ask Sarah Lopez, who wasn’t thinking about starting a business when she began designing clothes for her six-month old son that her mother-in-law would sew.
Eventually the pair decided to try to sell some of their creations at craft shows, but the feedback they got was so positive that Lopez’s hobby turned into Babibu Inc., a company that sells handmade bamboo baby clothes online and at several stores across Canada.
“Whenever we’re talking to entrepreneurs about a new enterprise, we try to make sure they balance that enthusiasm with a real pragmatic and practical process to do research and to create a business plan,” said David Wilton, director of small business at Scotiabank.
“If you have that business plan, you can see the triggers that help you respond quickly, so that you can make sure that your business is set up for success. ”
A business plan should lay out goals, expenses and projections, and include some ideas about how to bring the product to market and how to make sure it stands out among competitors, according to Jeff Brown, director of small business banking at Meridian Credit Union.
“The biggest up-front investment that someone starting a home business needs to be prepared to make is starting a website, and you need to spend money on a quality website from the beginning because that is your first impression,” Brown said.
“From there, you need to heavily invest in how you’re going to focus on social media.”
Brown suggests picking a couple of platforms to focus on, because maintaining a social media presence takes time and it’s an important aspect of the branding strategy.
Once the website has been designed a website and a marketing strategy has been put in place, entrepreneurs will still need to think about managing inventory, methods of shipping and payment options, as well as basics such as registering the business and getting and HST number.
Financing is also important for expenses that may come up, or to bridge the gap between buying or shipping inventory and collecting payment from a sale. That cash can often come from a line of credit.
But Brown says that as would-be business owners make their revenue projections, they should also remember that making money isn’t the same as having enough money to live off.
“You can make a hat and sell it for a profit, but can you sell enough hats to make enough money to pay your bills?,” Brown said.
Anyone who is self-employed should also look into buying health insurance, and eventually start thinking about a business retirement plan.
Four years into her own business, Lopez says she has no regrets.
But she warns would-be entrepreneurs that the first year is often the hardest, and that being your own boss is much more time consuming than anyone can imagine.
“A lot of moms who decide to stay at home so that they can stay with their kids and work think it will be easier than going off to work, but you have to put in a lot of hours,” said Lopez, adding that for the first few years she would begin her workday at 7 p.m., after putting her kids to bed, and work until midnight