entrepreneurship 101-mechanics-of-starting-a-business-1197584319859938-2
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CIBCCIBCVeni Iozzo, Vice PresidentVeni Iozzo, Vice President
Steven White, Senior DirectorSteven White, Senior DirectorSmall Business BankingSmall Business Banking
December 2007December 2007
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AgendaAgenda
• Starting a business – What you need to know
• Ownership Structures
• Business Plan: Your Roadmap to Success
• Financing your Business
• Why a Business Fails
• References
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Starting a Business – Starting a Business – What You Need to KnowWhat You Need to Know
Research your market
Consider your ownership structure
Choose a business name
Hire Professionals
Register Your Business
Consider municipal, provincial and federal business requirements
Understand employer responsibilities
Prepare a business plan
Arrange Financing
Network, network, network!
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Ownership Structures –Ownership Structures – Determine What is Right for Your Determine What is Right for Your
BusinessBusiness
Deciding on a business structure that is right for you is an important decision for your business. The form of ownership you select will depend on what your future business plans are.
Sole Proprietors: Unlimited personal liability
Fully responsible for the debts and obligations of their business
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Deciding on a business structure that is right for you is an important decision for your business. The form of ownership you select will depend on what your future business plans are.
Partnerships: An agreement between two or more persons often protected by a partnership agreement
Profits are shared according to their agreement
There are two types of partnership structures
General Partnerships Limited Partnership
Ownership Structures –Ownership Structures – Determine What is Right for Your Determine What is Right for Your
BusinessBusiness
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Deciding on a business structure that is right for you is an important decision for your business. The form of ownership you select will depend on what your future business plans are.
Corporations: One or more people can form a private corporation.
Personal liability of the owners/shareholders is limited.
Ownership Structures –Ownership Structures – Determine What is Right for Your Determine What is Right for Your
BusinessBusiness
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Business Bank AccountBusiness Bank Account
You have decided your business ownership structure and your ready to open our business account – here is what is generally required:
For any business: Any person to sign on the account is required to bring two pieces of original identification, including one with photo
Sole Proprietors: If using a business name – business name registration
Partnerships: Partnership registration or partnership agreement
Corporations: Original articles of incorporation or certificate of incorporation
Recent filing with incorporating jurisdiction listing your directors
Trade name registration, if applicable
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Business Plan –Business Plan – Your Roadmap to Success Your Roadmap to Success
Whether you are starting a new business or running an established one, a good business plan helps set you on the road to financial success. By mapping out your goals and strategies, you’ll get a clearer picture of what your business really needs. Business Profile:This introduction to your business plan provides important information about your company’s business structure, key principals, professional advisors, and financial history.
Business Plan: Market Analysis Business Assessment Objectives, Strategies and
Plans
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Business Plan – Business Plan – cont’d
Financial Plan
Your financial plan will include details on the following:
It is important for your plan to be realistic and reviewed regularly – make changes whenever necessary.
Balance Sheet
Income Statement
Cash flow forecast
Personal Financial Statement
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How do you finance your How do you finance your business?business?
Equity
Debt
There are two main ways to finance your business
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Financing your BusinessFinancing your BusinessEquity FinancingCan be obtained through savings or investors. Investors typically receive an ownership interest in your company in return for their investment
Start up equity financing is typically sourced through yourself and people you know: Personal savings Friends or relatives Government “Angel” or informal investors
Why invest your Money in the Business?
Least costly source of funds You are more likely to get a loan with adequate equity in your business
A business that has adequate equity is more likely to succeed
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Financing your BusinessFinancing your Business
There are a number of ways to finance a business. The lender will evaluate your ability to borrow based on strength of your business plan, management capabilities, financing, your past personal credit history and collateral available to secure the loan.
New business owners (in business less than 2 years) typically require collateral such as mortgages or cash/investments.
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Financing your BusinessFinancing your Business
Line of Credit – used to cover short term expenses like supplies, payroll and rent.
Credit Cards – to cover and track small expenses or everyday business expenses.
Suppliers’ Credit – sometimes a very cheap source of financing, do not overlook the value of this source.
Business Term Loan – used to purchase long term assets required to operate your business.
Leasing – used to obtain assets to run your business, may provide more flexible options than traditional loans.
Government Programs – there are many government programs to support Small Business. Investigate all options.
Sources of Debt Financing
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Financing your BusinessFinancing your Business
Canada Small Business Financing (CSBF) Program – Canada-Ontario Business Service Centre
NRC Industrial Research Assistance Program (NRC-IRAP) – Canada-Ontario Business Service Centre
NORTHSTAR Trade Finance Inc. – Canada-Ontario Business Service Centre
Co-Vision - Start-up Financing Solution – Canada-Ontario Business Service Centre
Summer Company – Canada-Ontario Business Service Centre
Financing for Starting a Business – Business Development Bank of Canada
Growth Capital for Aboriginal Business – Canada-Ontario Business Service Centre
Funding Sources and Programs (examples)
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What is the Bank Looking For?What is the Bank Looking For?
The 5 C’s:Character: You must be trustworthy and have a
strong credit history (maintain a strong credit history personally and as a Business)
Conditions: How do the current economic conditions impact your business and industry?
Capital: How much do you have invested in your company?
Capacity: How will your company pay back the debt?
Collateral: What assets are available if your company cannot repay?
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Why a Business FailsWhy a Business Fails
Poor management
The Business offers products and services that nobody wants or cannot afford
Inability to adapt to a changing environment
Failing to control costs
Poor execution creating dissatisfied customers
Creating an effective business plan will assist you in avoiding the pitfalls of running a business. Seeking professional help is another important way to avoid or plan for business challenges.
The business is undercapitalized – a business with too much debt and a cash flow that doesn’t support it
Business expansions that are poorly planned and not appropriately financed
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SourcesSources
2007 Canada Business
bsa.canadabusiness.ca/gol/bsa/site.nsf/en/index.html
Canadian Bankers Association
cba.ca/en/content/publications/SMALL%20BUSINESS%20BOOK%20-%20FINAL.pdf
CIBC – Your Guide to Business Planning
cibc.com/ca/small-business/article-tools/business-planning.html