“Failing to plan is planning to fail” — a maxim for business start-up
The number of small business start-ups, under 100 employees, that get underway every year in Canada is impressive.
In the past 10 years the number has grown from around 900,000 to over 1.2 million annually, and interestingly the numbers remained very strong during the COVID years with people out of work and doing their own thing to make money.
To put into perspective the significance of small business in Canada, 98 per cent of businesses have fewer than 100 employees, and half of these have under five employees.
That’s right, about 50 per cent of all businesses in Canada have fewer than five people working for them.
Typically, an entrepreneurial spirited person has been dabbling at something, maybe making a product or providing a service.
Their dabbling likely leads to a chat with family or friends, maybe a professional too, that fleshes out the business concept leading to their decision to take the plunge into self employment.
Of course there are also “forced” entries into the world of self employment.
Perhaps there has been an undesirable re-defined job description, or reduced hours, or uncertain continued employment, or the loss of a job … all very real experiences amplified due to COVID.
Regardless of the reason, after the initial excitement or the stark reality, what’s next for the budding entrepreneur?
If the new business is already operating, typically there are firefighting items like registering the business, setting up a bank account and getting insurance.
If not too much time has passed, this may be relatively painless but the longer the business has been operating the more problematic it may be.
Perhaps sales taxes should have been applied or other regulatory requirements are missing like Payroll Source Deductions or WorksafeBC if labour has been hired.
Whether you are already operating a new business or pondering an entrepreneurial start-up, being successful from start to finish requires a path.
To this point, entrepreneurs succeeding at their new business are completely taken aback when their business implodes and crashes because of being successful.
Note the word implode and not explode.
Why does success lead to failure sometimes?
The lack of a plan.
Without a plan — without a “foundation” — success can crash down upon itself.
Over the past decade the survival rate of small business start-ups, fewer than five employees, has been consistent.
About five per cent of new businesses shut down within the first year although this number is under reported since many new businesses never register so they don’t get factored into the stats.
Within five years about 38 per cent have shut down, and 57 per cent within 10 years.
These stats should not discourage.
Instead, these stats should encourage the budding entrepreneur to investigate the required steps for starting a business, a key step being the creation of a business plan.
“Failing to plan is planning to fail” — a maxim for business start-up.
A business plan is an invaluable road map for launching, managing, growing the business, and as a matter of fact it should even address how to retire from the business.
In order to put a business concept on paper, research is needed.
Thoroughness will pay dividends by identifying strengths and weaknesses of the business concept and as importantly, of the entrepreneur, and also define opportunities and threats within the specific marketplace and the economy in general.
The business plan researches and develops three key strategies: The Marketing Plan — product, price, promotion, unique selling proposition, competition; The Operations Plan — people, production, equipment, facilities; The Finance Plan — a five-year projection identifying assumptions about revenues, expenses, financing and cash flow.
When the process is taken step by step, its actual complexity is not overwhelming.
Although the business plan is the end product, the understanding of the business planning process itself yields a skill set for the entrepreneur to make informed and wise decisions throughout the life of the business.
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.
City of TrailLocal Businesstaxes