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Starting a Business: Key Considerations for Aspiring Entrepreneurs

Are you ready to embark on your entrepreneurial journey? This comprehensive guide addresses essential questions like: What business type suits you—product or service? Should you choose a sole proprietorship, partnership, or corporation? Discover various financing options, from debt to equity, and learn about common pitfalls new entrepreneurs face, such as underestimating startup costs and managing cash flow. Our insights can help you navigate the complexities of starting a business and prepare for success in your venture.

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Starting a Business: Key Considerations for Aspiring Entrepreneurs

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  1. Starting a Business? Peter Keeshan Megan Thomson Bryan Chen

  2. Agenda • Types of Business: Product or Service • Types of Entities: Sole Proprietary, Partnership & Inc. • Types of Financing: Debt vs Equity • Common Pitfalls: Lesson’s Learned

  3. Getting Started You have a idea now what? Are you cut out to be an entrepreneur ? What’s your risk profile?

  4. Product or Service Product: More capital intensive Intellectual property [patents needed?] Service: Liability issues P.Eng Consulting: P.Eng ---> C.O.A -->Consultant Engineer

  5. Sole Proprietorship • Pros • Unincorporated business established and run by a single individual • Easiest form of business to set up • No agreements or paperwork required • Reap all the benefits • Cons • Liability • Creditors can seize personal assets • Personal taxation laws still apply • Suffer all the pain

  6. Partnerships • Pros • Share the challenges • No contracts or registration • Limited partnerships can limit liability • No separate tax filing • Simple dissolution • Cons • Personally liable (except for limited partnerships) • No new partners can be introduced without consent from all existing partners • Decisions not as easily made

  7. Corporation • Pros • Liability is limited to the initial share purchase • Decisions by majority, not unanimity • Could continue in perpetuity • Cons • More work and costs involved • Outside investment limited by size of firm • May be required to pledge personal property as collateral to secure • Tax return for the corporation

  8. Funding by Debt • Mostly Charter Banks, but also include other type of financing [i.e. Leasing]. • Usually require a form of secured asset as a guarantee. • ‘Hands off’ Business Partner • Debt cheaper than equity. Some Interest is tax deductible [EBIT] • Business plan: Show how you will pay off debt. • Good for product or more capital intensive service

  9. Funding (Private Equity) • Friends and Family: “Love Money” • Easily accessible • Off balance sheet liability • Good for low start up businesses: Consulting • Forgiving payment schedule

  10. Venture Capital Funding • Equity Stake in the company - vested interest in company’s success. • ‘Hands-on’ Business Partner - use of contacts/networks • Looking for how to ‘exit’ and get return: IPO, Sell • Good for starting up a capital intensive product; Knowledge Based Industries, w/ R&D, high growth potential.

  11. Angel Investors & Government Funding • Angel Investor • Similar to VC, but a individual rather than a Firm • Equity Stake in the company - vested interest in company’s success. Smaller investment. • Government • Grant’s, Loans and VC • Government issues: Environmental concerns [i.e. green energy, Kyoto]

  12. Common Pitfalls Underestimating start-up costs. By the time you incorporate, register business, get started. Expensive • Include your salary! • Rule of thumb what you have budgeted + 1/2

  13. Common Pitfalls Not knowing your sales cycle: How long will it be before you start generating cash flow? Payment only comes after you have gained the business [i.e. net 30 days] Some Sales Cycles can last 12 months or more.

  14. Common Pitfalls • Know who you are doing business with • Friends don’t always make good business partners • Some customers you don’t want. • Demanding customers • Customers that don’t pay. • Exhausting “warm” leads before doing any other business will not give you a realistic picture of the need of your product/service

  15. Common Pitfalls • Self-discipline to execute • Plan – execute – measure - repeat • Business is not as precise as engineering • Intelligence + confidence • Leap of faith

  16. Parting Thoughts • The surest sign of madness is doing the same thing but expecting different results • Change + Action • Ready to start a business? • Only you can answer…

  17. Helpful Link/Resources Business Development Canada: www.bdc.ca Royal Bank : www.rbc.ca Canada Service Business Centers: www.bsa.cbsc.org Contact Information: Peter Keeshan - pkeeshan02@schulich.yorku.ca Megan Thomson - mthomson02@schulich.yorku.ca Bryan Chen - bchen02@schulich.yorku.ca

  18. Questions?

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