Starting a Small Business

Starting a small business can be a highly rewarding experience. For some it’s an opportunity to turn a hobby into a profession, for others it’s an opportunity to be your own boss. Although starting a new small business is exciting, it’s important to take the correct steps to optimize the chances that your business will be successful. The following article explains the steps required to start a small business.

Get an idea

A business requires a key idea. What are you selling? It’s important that your idea is something that inspires you to go to work, since starting a business is hard and requires a significant commitment.

Is your idea feasible?

Sometimes a hobby should remain a hobby. Other times it’s good to capitalize on something you enjoy doing by making a business of it. But how do you know? Doing market research is a good way to determine whether your business idea can be profitable. Market research can be done in many ways. Feedback from family and friends about the viability of your idea is a good way to start. Asking someone who doesn’t care about you is also a good idea since they will give you an honest answer to the feasibility of your business idea. A more advanced way of doing market research is to explore demographics and statistics of the area where you plan to do your business. The National Household Survey and the CENSUS provide up to date information and should be used to do market research about your business.

Write a business plan

A business plan outlines your business, how you will make money, your clientele and other relevant information. It’s important to write a good business plan because it may reveal any flaws in your business that were not clearly identified before you put pencil to paper. A business plan is also a must for acquiring capital to start your business. Banks and investors normally want to see a business plan before they approve any form of cash flow.

Registration and licensing

This step in starting a small business is the most complicated and often requires the help of a lawyer. You must register the name of your business and form a business entity to be able to legally use your business. It’s also advisable to hire an accountant to review your business plan and help with the financials associated with running your business.

Acquire the necessary funds

You have an idea, the idea seems to be profitable and you wrote a good business plan. Now what? You need to acquire the necessary funds to start your small business. Some businesses do not require much money, namely businesses run from home and Internet based businesses. Some businesses, namely those that require a store and supplies, tend to be more expensive. Keep in mind that minimizing the overhead cost of your business where you can is a good idea before you establish how profitable your business is.

The funds to start a business can originate from multiple sources. Personal savings, investments and bank loans are all good ways to finance your small business. Keep in mind that your small business carries risk, and you should not make any presumptions about the profitability of your business before you actual open your business.

Get to work

After all the above steps have been accomplished, it’s time to put the wheels in motion to open your business. Buy the supplies required to run your business and establish a good marketing strategy to raise awareness about your new business. Small businesses take time to grow and often are not immediately profitable. Patience and hard work are required to grow your business. Take this into account before planning to open a business.

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Franchising a Business

For businesses with a unique brand or business model, franchising may be a solution that allows rapid growth. Franchising is when you legally turn you business into a brand and allow people, or franchisees, to buy your brand. The benefit of franchising a business is that you maintain creative control of your product, but you are not financially responsible for the business of the franchisees. That means that if a franchise in a given location fails, you do not lose any money other than a stake of the potential profits that would emerge from the franchise’s potential business endeavors.

Instead of making profit directly from the business, as a franchisor you make money by selling franchises. Seems obvious doesn’t it? This has serious repercussions on your profit channels because your business isn’t your business, but your brand remains your brand. Therefore, you make profits on your business in the form of royalties and by selling franchise units.

Despite the fact that franchising seems like an inherently good idea for any business that wants to grow quickly, there are a few hurdles which must be considered before franchising your business.

Profitability

A critical part of being a franchised business is selling your brand to franchisees. Franchisees agree to maintain the terms of your brand with respect to the products they sell, the logos they use and other desired legal terms, however they take home most of the profits of the franchise unit they operate. For a franchise to be successful, franchisees must be confident that their franchise will be successful; otherwise no one will want to buy your franchise. For this reason, a normal requirement to turn your business into a franchise is long term net profitability.

Product and business model

Franchising a business also relies on the fact that your product is sufficiently unique or your business model is desirable enough that people want to buy your franchise. If your franchise is not unique in a way that profits the franchisees, franchisees may open a competitor business that threatens your franchise. For example, franchising a coffee shop that only sells generic coffee in a generic format is not an advisable franchise business. You will not entice franchisees to buy the franchise because they can just as easily open a coffee shop with a different name and avoid having to agree to the terms of running your business. This can be done provided their competitor business does not violate trademark infringement law, which is normally avoidable if your product is not distinctly unique. If you do not have a unique brand or business model, you can still open a franchise if your business possesses name brand recognition.

Capital

Starting a franchise is expensive. For this reason, your business must have enough capital to finance your franchise. Although profitability is a key feature of starting a franchise, profitability does not necessarily equate to sufficient capital. Not having enough capital is not necessarily a no go for franchising your business; it just means you need to make other arrangements. This often means getting a loan. However, a loan will not be provided if you and your business do not have a solid track record. Income, net worth and credit scores will be considered for the purposes of acquiring a loan to finance your franchise.

Legal requirements

In Canada, franchises must be registered with the Canadian Franchise Association (CFA). The CFA acts as a brand of legislation that monitors and registers franchises on the open market.  In addition, you need to consider the legal terms of your franchise business which often demands that you enlist legal assistance. For instance, you will need to decide what legal terms maintain the integrity of your brand, whether the franchise will be sold in one payment or numerous payments and what stake of the franchise profits you will take as capital gains (i.e. % royalties).

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How Investments Work

Many people hear about investments all the time, but actually investing can be daunting and disorienting. There are many forms of investing and many benefits, but you need to learn which investments offer what benefits to optimize your personal investment strategy.

Investing

An investment is a way to get money for your money. Investing is the act of giving money to an entity with the expectation of receiving more money back than the amount you gave. There are many types of investments but the main categories of investing are debt and equity.

Investing in debt

Investing in debt, also known as bonds or securities, is the safest form of investment on the market. When you invest in bonds, you are effectively lending your money to a company or a government. Bonds are safe investments because you are almost guaranteed to have your money returned. The tradeoff to investing in bonds is that the returns on your investment are significantly lower than the alternative, being equity investments. Bonds are a safe bet for people looking to earn a modest amount of money on a long term investment. For bonds to be effective investments, it’s best to plan on investing your money for multiple years.

Investing in equity

Investing in equity, also known as stocks, is high risk high reward. When you invest in equity, you own a share of the company you invested in. As such, you make money on your investment when the company pays dividends or the share price increases. Normally, this means that when the value of the company increases, the value of your stock also increases. This increase can be quite large, meaning that instead of making money on interest like with bonds, you earn money on the value of your share. To monetize the value of the share, you need to sell your share. This can be frustrating because you never know if the value of the stock will continue to rise. Alternatively, it’s also possible that the value of your equity investment will fall below what you bought the share for or the company will go bankrupt. For this reason, it’s possible to lose your entire investment when dealing with stocks. The value of a stock is mainly determined by market forces. By interpreting news and business events and relating them to how they influence the value of a company, you can earn significant returns on stocks. However, this is easier said than done.

Other investments

There are many flavours of investment which haven’t been mentioned, such as mutual funds, hedge funds or real estate. These all fall under the same umbrella of investment as equity and debt investments, but with subtleties that need to be understood before investing.

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Is Running Your Business From Home a Good Idea?

For many business owners, starting a business from home seems like a good idea. Working from home lowers business expenses and offers a familiar work environment. However, working from home can hinder the business’ opportunity for growth. Here are a few factors to consider before deciding whether you and your business are well suited for home or the office.

What type of business are you running?

Some businesses are well suited to operate from home and others require an office or store. To determine which format of operation is best, it’s important to consider what type of business you are running. Nearly all product based businesses require a store. Coffee shops, corner stores and restaurants require a unit of operation separate from the owner’s home. The store or office of your business should be the primary work locale as the owner. Although you may not have an active role in the physical operation of your product based business as the owner, being on site helps your business. Questions from your employees can be answered directly and concerns of your customers can be treated personally. Having a store helps to advertise your business and running a product based business from home is not an effective way to sell your products. On the contrary, most service based businesses can be operated from home. This is because most services take place outside of the office. Despite this, sometimes having a store can help advertise your business and promote walk-in business.

Do you enjoy interacting with customers and employees?

Although some business can be operated from home, it’s important to consider if this matches your business model. Sometimes working from home is not an option if your business model demands highly personalized service. A business owner that strives to serve his or her customers with a personal touch should avoid working from home.  In fact, interacting with employees and customers can give business owners insights about new directions for their business.

Do you have employees?

Usually, small businesses are best operated from home and larger businesses are best operated in a store setting. This is because working from home makes it difficult to accommodate employees. Working from home is a good provisional step to make until you grow your business to a point where employees are necessary. Prior to hiring, consider investing in a store or office space for your business. Employees are easier to manage from one central location.

Do you have a family?

Having a family is often an incentive to work from home, especially for parents with young kids. This is not a good motive to run your business from home. Working in a bothersome environment reduces productivity and divides your attention. It is advisable to find a good work-family divide when running your business.

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Creating a Logo for Your Business

Every successful business has a logo. McDonald’s, Coca-Cola and Starbucks all have logos. You might think they have logos because they are successful businesses, but in fact having a logo can make your business succeed. This is because logos foster the idea of brand name recognition.

People don’t like to read things. People prefer symbols and images. This is why logos are such effective tools to market your business. When people see an image they immediately associate what they feel with what they see. As such, people attach the experience they have with the image they see. Use of logos offers potential customers with a way to easily recognize your brand. But how do you create a logo?

A logo should reflect your brand

A logo should be more than a picture or text. It should have meaning to you and your business. Logos should be a symbol or images, sometimes text, that reflect what you are selling or how you want the customer to feel. Remember, a logo isn’t only a branding technique; it can also be used to differentiate your business from your competitors.

The colour scheme is important

The colours you choose to use with your logo have a surprisingly important impact on people’s perception of your business. People inherently associate colours with emotions. They don’t even recognize it. This is why it’s important to choose colours that support the message you want your logo to express. A graphic designer can help you organize your logo’s colour scheme to match the message you want your logo to convey.

Hire a graphic designer

Although you may have an idea of the logo you want for your business, hiring a graphic designer is a good idea. Graphic designers understand how to make a logo look professional and can provide feedback and modifications to your logo as your business grows.

Trademark

Before publicly using your logo, make sure that you trademark your logo to prevent other companies from using your brand.

 

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Investing in Mutual Funds

Investments in equity and debt have distinctive features. Stocks earn money quickly, but are dangerously volatile. Bonds are very safe places to keep your money, but sometimes the return on your investment isn’t quick enough. Although both of these investments have different advantages, there doesn’t seem to be a middle ground. The best of both investments can be achieved through a mutual fund. When you invest in a mutual fund, you are pooling your money with other investors to buy a selection of stocks and bonds. The stocks and securities in the mutual fund are normally chosen by the manager of the mutual fund. Much like with stocks, when you invest in a mutual fund you are essentially buying shares of the fund. Thus, the way you make money is very similar to that of equity investments.

Advantages to mutual funds

Mutual funds are a desirable alternative to choosing stocks and bonds alone because someone invests your money for you. Mutual funds offer moderate risk and moderate rewards on your investment. Keep in mind that there is still a risk on your investment since you own a share of the mutual fund, yet this risk is less than if you invested in stocks alone. The risk is less than with stocks because trading many stocks and bonds in the same fund dilutes the losses from your investments. Any losses on investments in mutual funds are diluted by the fact that a loss on a stock is distributed over every share in the mutual fund. Also, even if one stock in the mutual fund loses money, other earning stocks can mitigate the effects of the losing stock. The same principle applies to the devaluation of any securities held by the mutual fund.

Another reason that people like mutual funds is because they are liquid investments. Shares of a mutual fund can be traded like shares of a company. Investment choices made by the mutual fund are left at the discretion of the manager; however you still get to make decisions about your individual shares in the mutual fund.

Money is made on your investment in multiple ways when you invest in a mutual fund since multiple forms of investment are made. Distributions accumulate on investments also. These come from any money earned as dividends or interest on securities or stocks in the mutual fund. Money can be earned on your investment as capital gains when you sell your shares in the mutual fund. This is not always advisable because selling your shares in a mutual fund is essentially cashing out of any future distributions the will be made unless you buy back your shares at another time.

Disadvantages to mutual funds

While mutual funds are good ways to invest your money, there are downsides. Firstly, mutual funds are not without risk. While any stock losses are diluted, this does not mean that risk is entirely eliminated from your investment. In addition, mutual funds do not normally allow you to choose specific stocks or bonds. Normally the manager does this. While you do get to know what stocks and bonds are in the mutual fund, you do not get to make executive decisions about how the fund deals with these investments. This often means that savvy investors need to take the back seat and allow the manager of the mutual fund to make investments they would make differently. Finally, mutually funds are taxed and fees are associated with investing. These two properties of mutual funds reduce the value of your earnings.

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Name a Business

Naming your business can be a very difficult part of its establishment. The names of businesses vary. Some businesses have names that directly describe their products or services. Other businesses have names that are made-up, but encapsulate the tone of their service. How do you decide which style of business name to use? There are numerous factors to consider when naming a business.

Types of business names

Naming a business is not a trivial task. The name of your business carries weight with the consumer and can sometimes influence their decision about your product. This is a strange statement given that many times there doesn’t seem to be any rhyme or reason to the names of many successful businesses. Despite this, the name of a business can be more reflective of its product than you give it credit for.

Made-up business names, or coined names for short, are names using words that are not formally defined in the business’ language of operation. An example of a coined business name is Microsoft. Coined names are often the product of practical psychology concepts, namely the use of morphemes. Morphemes are small pieces of real words that are used in coined names. By utilizing segments of one or many words in a business name, you are effectively telling customers what your business strives to accomplish in its products and services without explicitly saying it. The name Microsoft is comprised of two morphemes. “Micro” is used to stress small and “soft” is used to stress software. By putting these two word segments together, customers think that Microsoft produces miniaturized computers and software. In a world where miniaturization is at a premium, this name inspires technological confidence in the company before customers even look at the product.

Other business names are descriptive and directly tell you what the business aims to do. These names are easy to understand, but are not as easy to use as you may think. There are many strategies to achieve a good descriptive business name.

Advantages and disadvantages of descriptive business names

Descriptive business names describe the products or services you sell. An example of a descriptive business name is Captain George’s Fish and Chips. The name explicitly tells you what the restaurant is selling. These names are efficient ways to inform your clientele about your business, but sometimes run into legal trouble. Given that nearly every business trademarks their name, sometimes a simple descriptive name will infringe on trademarks. For this reason, it’s important to consult a trademark lawyer to check that your name is usable before opening your business. Other naming strategies can certainly be used to achieve a good descriptive business name without trademark infringement. Metaphorical names are increasingly popular. These names capitalize on the concept of metaphors to find an original business name. An example of a metaphorical business name is Twitter. In addition, by misspelling words in your business name, you can avoid trademark infringement of other companies with the same name. This can often be achieved in a way that is aesthetically pleasing by using a pun for a word in your business name if it’s fitting to your company.

Advantages and disadvantages of coined business names

Coined business names can be equally valued amongst consumers. This is because many businesses choose morphemes from buzzwords that tell you what the business does without directly stating it. This is an effective way to avoid the complications of descriptive business names in terms of trademark infringement but can sometimes raise additional complications. A disadvantage of coined names for businesses is that they are often difficult to create. Any coined name will not suffice. It’s often necessary to enlist the help of a professional to create a business name for you. Professionals know how to create a name that will market well to prospective clients and also doesn’t sound ridiculous. The tradeoff of hiring someone to create a business name is the fact that this costs time and money. This isn’t a practical approach to a new business with no revenues.

Which naming strategy should I use?

Different types of business names have different advantages. The law that binds all good business names with their customers is that good business names tell the customer what the company strives to accomplish. There are many different approaches to name a business, and different levels of success can be achieved through different naming strategies, but the name must register with the customer in a way that informs them of the qualities or brand of your business.

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