Our choice of location is essential to our success; therefore much consideration went into our decision as to where to place the business. We put into consideration the type of business we are and the people we plan on catering to. We look like to be in a convenient residential location and also downtown where there will be business people taking in their clothing to be washed. There are many factors that apply to our business needs such as the amount of space, equipment, zoning requirement, style, parking, leasing, fees, the environment around our business, traffic and safety.
Regulations and law aspects of the business can become very complicated and require much concentration. Government regulations are complex and puzzling when starting a new small business there are many rules to follow. It is important to follow the rules correctly so we don’t get caught up in any faults in the future which can cost us. It is our responsibility to complete all regulations requirements that apply to our business. We will contact a lawyer in order to help us determine steps needed to complete regulatory demands.
We also need to obtain a business license to operate our business locally. Building permit and zoning permits will also have to be looked after. Optional certifications are also available such as being a certified small business owner which will make us look better towards our customers, as well as minority businesses. The governments have made it very easy in the past few years to start your own business. We can now go online and apply for all our permits and licenses.
Our business must also be able to afford to pay the taxes on income for federal and provincial governments. Our income taxes are calculated by our revenue minus our expenses which include office rent, mortgage, leased equipment, cost of goods, transportation costs, utilities, insurance, professional fees, licensing fees, advertising, travel and entertainment. If our small business offers GST-taxable goods or services and has annual income of more than $30,000, we have to register for the GST. Once you register for the GST, you must charge GST to all your customers and send it to CRA. You can claim a refund on the GST you pay to get goods and services you need for your business. If our annual taxable sales are less than $500,000 we must forward GST quarterly and account annually. If our sales are $500,000 or more we must account monthly and forward quarterly. If we don't expect to have revenues over $30,000 in our first year of business, it would be a good idea for us to apply for the GST and we can get the GST we paid on goods back. PST applies to most goods sold in Ontario and the rate is eight percent*.
Maintaining accurate and recent records are important for the success of our business. Records are crucial for our management decisions and determining how well our business is operating, they are also helpful when it comes time for tax season. If we hire an accounting firm they can aid us in starting up our record system and we must keep them as basic as possible so we can understand them too. When we open our business we plan on going to a bank and opening a separate bank account for the business alone. By opening our own bank account we are able to separate our personal and business deals and record transactions related to the business easier. Other than keeping records of finance, it is important for our business to keep records of the inventory coming and going, our clients, minor cash reserves, and our supplier’s information. We have to keep track of our employee’s data, utilities and the payroll for our employees.
All of our important information will be logged into a database journal which will keep track of everything we need to operate our business and when we need the information we are able to track it down immediately without hesitation or problems. There are a few methods for bookkeeping such as double and single entry. Single entry is very simple and requires only one entry for every separate transaction and small business are able to function well using this single entry bookkeeping. Double entry becomes more complicated and does not need to be implemented in a small business because it takes up more time. Our business will also use a cash method to keep track of the money flow and our income will be reported in the same year its earned and expenses are reported and deducted also in the same year they are processed. We determine to proper accounting methods by talking to professional accountants. Every business must have a balance sheet to show the value of the business. Assets are usually placed on the left side of the sheet, and on the right hand side is where the liabilities are placed. The accounting equation equals assets equal liabilities plus net worth. Liabilities are split into short term such as inventory and wages and long term such as debt, loans and mortgage. Every business has current assets which can be changed into cash quickly and fixed assets such as the building, land, equipment. In our business we will keep track of total sales, gross profit, salaries, payroll taxes, cost of sales with a profit and loss statement. Cash flow projection is a system we will use that displays cash coming in and going out and if we have sufficient cash every month to run our business. Cash coming in counts as sales, accounts receivables and interest earned on investments, cash flowing out counts as our rent and other expenses. Ratios are used to help make business decisions and they include liquidity ratios which measure the amount of money available to cover expenses. Efficiency ratios measure how good we are running our business and profitability ratios help control income by measuring return on assets and such.
Every business must have capital during the beginning and intermediary lifetime of the small business. If we don’t have sufficient financing it could be a major reason as to why we could fail and to avoid this situation we have to know how to handle our money wisely by spending efficiently and investing effectively. Money management not only in businesses but in our daily lives is very important because more and more people are falling into enormous amounts of debt and can never escape it. Every small business during its first five years will usually incur losses due to the startup costs that we must pay and also because the business is starting to establish its clientele. Therefore we need enough cash to help us get through the time period within the first five years. We should have enough investments and dispensable cash to keep us going for a whole year without turning a profit. We can finance our business in a few ways such as self-financing which would mean that we open the business using our own money from what we have saved up during our lives. Debt financing is when we could borrow money from financial institutions and must repay them with interest in the future; it is very risky because if our business fails and we do not have the money to repay them we can get into a lot of trouble. Equity financing is when we find a silent investor otherwise known as someone who will invest their money in the business without actually taking any part in the business work, and they will receive a certain portion of profits in return. If we do decide on borrowing money we would need to look for someone to loan us the money, most likely from a family member or good friend, or from our bank. Angel Investors are rich persons or groups who devote their personal wealth in talented new businesses anywhere in the world. Usually angel investors offer money in large sums in return for a share in it. Angel Investors look for businesses with large profits and good growth opportunities. Angel Investors usually take an interest in the way the business is run and they provide helpful tips to run the small business. If we want to look for an angel investor we would ask our lawyer or financial advisor to help us find one and in Canada we have the national angel investor’s organization which we can turn to. Venture entrepreneurs are like angel investors, they look for businesses with top growth and profit possibilities. They will give the business there best expertise on how to manage the business and money and they also know many other professionals who can throw in a tip for the business. Venture capitalists look for large business deals in the millions and won’t invest their money in a small business which is why we would most likely have to turn to an angel investor. If we do borrow from family or friends, we must make sure we honor any loaned money by using a promissory note that displays the amount of the credit, whether interest is owed and the rate it’s owed at. It also specifies how and when the borrowed money is going to be repaid and what security you're contributing for the credit. A promissory note clarifies an agreement for both sides. The governments aren’t the best place to get financing because many people ask for grants and only few are available and provided which means the competition to earn their money is very tough. The following government loans are available: • The can help businesses get term loans of up to $250,000 to help finance fixed assets required for the operation of the business, e.g., purchase or improvement of property or equipment. The provides repayable financing of up to $150,000 on commercial terms through loans, loan guarantees or equity investments to help finance new or existing small businesses that help maintain or create jobs in rural and northern communities. The Loan Program provides loans of up to $15,000 to young entrepreneurs between 18 and 34 to help cover start-up costs. program provides financial support to unemployed people eligible for unemployment assistance to get their businesses up and running (www.sbc.gov.on.ca*). When we ask someone to loan money we need to be prepared, we need to tell them how we intend on using the money and how we are going to pay them back. A properly developed business plan which shows short term and long term earnings and cash flow expected should be available to show our creditors. Tax returns, profit and loss statements and an up to date balance sheet should also be at hand to give to our creditors to ensure our honesty and need for the loans. They will also look at the equity in our houses and insurance plans. If we want to loan a large sum of money we must show our creditors that we have the ability to pay them back on time and manage our money. It is important for small business owners to borrow only what they really need and to not over borrow because it may become difficult to repay the money. Even consumers in North America have found it difficult to repay their credit companies because they owe too much money, and over seventy percent of them have consumer debt.
Many small businesses have trouble managing their inventory and a large sum of their investments are in the inventory they own. Goods that are sold can be deducted from our taxes as expenses and goods that aren’t sold count as short term assets therefore inventory counts somewhat as cash flowing in the company. To make money we have to effectively manage all inventories and make sure that we don’t waste too much product. If we have too little inventory then our customers will not be satisfied due to lack of availability and if we have too much inventory and we can’t sell it all then were going to be left with the products and they will go to waste. Management abilities and proper decision making can greatly affect how we profit from our business or how we lose profits in a worst case scenario. Accurate records are extremely important as we have mentioned above, keeping track of our inventory is going to be our priority to realize what is selling the most and what is lacking, and if there is any theft or other problems occurring in our business. We plan on using a computer system to track our entire inventory because it is well organized and easy to access/use. Computer systems are quick, convenient and we can store as much information as we want and it won’t take up any space. Accuracy and timeliness are a vital step to keeping records of inventory. Thriving management of our inventory is going to need a proper balance of costs and inventory. The costs that are associated with inventory management include its warehousing, taxation and insurance coverage. High inventory levels can put our business at risk financially because of the possibility of not selling all items or inability to keep track of all items. It is hard to maintain a perfect balance of inventory but over time we believe that we could perfect the inventory level count because of the experience and knowledge we will gain. We plan on amplifying turnover without giving up customer service quality, and we also would like to keep a wide variety of products to entertain the spending power of our clients. If we purchase a large quantity of items from wholesalers we will be able to save money in the long run but must be careful to move the items quickly before they lose value and our business will lose profits. Inventory can be tricky for small business because of the fact that we are first time business owners and knowing exactly how much inventory to keep on hand can be difficult in the beginning, but we plan on always having enough inventories to satisfy our clientele without over-purchasing. Inventory ratios such as inventory turnover can measure sales divided by inventory and will give us a guideline to set benchmarks and goals.
Determining prices in our business is a significant aspect and must be calculated wisely. The prices should cover our expenses and makes us a profit. We must consider the price of running our business, what our clients would pay, how much other business like ours are charging, the quality of our business, how much earnings we would like to receive etc. Firstly, we must determine the financial breakeven point to see how much cash we need to make in order to breakeven without losing. In order to do so, we must tally all of our expenses and business costs that we incur and in order to breakeven we must make a return of the total expenses we calculate. Expenses include materials, labor, variable and fixed costs such as wage, transportation, interest on borrowed money and taxes to the government. With the breakeven point we can decide on how much sales we need to profit, and the affects of playing with the prices. In order to determine a sensible price for our products we will use different methods such as the suggested going rate method in which the wholesaler will tell us how much the product should retail for. A gross profit method is when we add a certain percentage to the cost of the single unit of product without considering all the external business expenses. Our business might also use competitive pricing which allows us to look at what our competition is retailing their products at so we can challenge them to attract more customers. When paying our taxes the government will allow us to deduct all appropriate business expenses as long as they are connected to the business, are necessary and reasonable. We plan on becoming accustomed to what expenses can be deducted from our taxes and we will contact the provincial and federal governments to obtain all that information.
Permits needed to operate our business are as follows, we collected this exact information from the city of Ottawa website which gave us a questionnaire on the type of business we are operating and after we completed the questions the website provided us with the following business permits needed: Vendor Permit: Retail Sales Tax (RST) is also known as Provincial Sales Tax (PST), Ontario Sales Tax (OST), or Ontario Retail Sales Tax (ORST). Retail Sales Tax is a provincial tax that is imposed on the consumer or user of most goods, admission prices, insurance premiums, and certain services used or consumed in Ontario. Businesses that sell taxable goods or provide taxable services are required to obtain a Vendor Permit under the Retail Sales Tax Act and are responsible for collecting and remitting the tax. Business Registration: Most businesses in Canada need to register with the Canada Revenue Agency (CRA) and obtain a Business Number (BN). CRA provides the Business Registration Online (BRO) service - a one stop, self serve application that allows users to register for a new Business Number, as well as for four major CRA programs (Corporate Income Tax, Goods and Services / Harmonized Sales Tax, Payroll Deductions, and Import / Export accounts). Master Business Licence: A Master Business Licence confirms that a business name has been registered on the public record maintained by the Ministry of Government Services, Companies and Personal Property Security Branch for registration on the public record. It includes the registration and expiry dates, as well as the Business Identification Number. It can also be used as proof of registration for a business name at financial institutions. A Business Name registration is required to be renewed every five years and a new Master Business Licence will be issued. ESA Certificate of Inspection: An Application for Inspection is required for all electrical work, whether new installations or modifications. This includes any change to the original wiring including repair and replacement of electrical devices. Following inspection and verification that the electrical work complies with the Electrical Safety Code a Certificate of Inspection will be issued by the Electrical Safety Authority. Commercial Sign Permit: If you are planning to erect or alter a sign or advertising device on a property within 400m of any Provincial Highway Right-of-Way, you may require a permit. There are certain restrictions as to setback, size and location, which you should be familiar with before proceeding (www.ottawa.ca/business/starting/bizpal).
Now we come to the marketing part of our business. This includes all our attempts to sell our items and services. We plan on advertising locally through newspapers and by word of mouth because that is all we could afford as a small business. Radio can also be a pretty cheap alternative for advertising as well. We want to appeal to all types of people but more towards people over twenty years of age because they are the ones who usually work full time jobs and need dry cleaning or a laundry mat because they can’t do it at home. Therefore in order to reach that group of over twenty we need to advertise in places that they will be most influenced by such as the newspaper which many older people read every day and the radio because they usually listen to that before, after and during work time. We will develop an advertising strategy and set our own goals to raise sales and awareness. We will rely on word of mouth the most because it is the most effective when people spread the word of how good a business.
If we decide to purchase a business that is already operating we could benefit greatly because there are a lot of older entrepreneurs that are retiring and selling off their really good businesses, although we must be aware that they are not selling us a business because it has been performing poorly. If we purchase a business that is operating we can save money on all the equipment and building costs. We can renovate and innovate the business to update it and make it more appealing to attract more customers. In order to find a business for sale we must contact a local real estate broker to help us locate the perfect place at the perfect price. If someone is desperate to sell their business we can bargain with them and get a really good price. We have to look at the replacement cost which would be the cost of starting a fresh business ourselves compared to the cost of us purchasing a used business. If the building is really old then we have to consider the problems it might give us in the future. There are different ways to acquire a pre established business such as a phased in purchase which allows us to take control of the business gradually over years which we don’t want to do. Outright purchase gives us full ownership of the business right away which is what we want because we have already planned the essentials to run our business properly. There is also a management contract in which we could manage the business for a while and if we like it we can purchase it. We plan on being creative with our business offers and with the help of a lawyer we can make the proper agreements and decisions.
After we have decided on all the issues we need to run our business we focus on choosing the employees to help us run our business. Employees can be a tough part because people are all very different and training them can be costly and time consuming. We must be able to keep them happy and motivated as well as paying them the right amount of wages. We will decide on the right person to hire by looking at their curriculum vitae and if they have experience working and are reliable we will choose them. A three month probationary period will be allotted to the new employee to see if they are dependable and efficient. Choosing the wrong employee can be dangerous for our business and we plan on training them well so they feel comfortable with the work they do. Because we are a small business we are going to want our employees to be familiar with all aspects of our business instead of concentrating on only one thing. We also plan on keeping records of our employee’s time log sheet as well as their performance. Employment insurance, workers compensation and employee taxes must be considered when we hire new employees.
It all comes down to pleasing our clientele by meeting and exceeding their demands. Because they are the ones who will make our business grow. Customer service will be our top priority because have regular customers is very important for any business. A clean, updated environment will attract people and having professional knowledgeable employees will impress our customers. A business thrives on its customers and employees so keeping them all happy will be our #1 task!