1. Do you have an idea that makes sense?
The first thing to do is figure out what your company has to offer and how you could generate revenue from that. This is what your business model will be based on. Once you’ve determined your project’s purpose, identify your clientele, your resources and your potential partners. Then, when detailing all the steps required for starting your company as per your business plan, pay special attention to the economic context. Does the need you’re trying to address have a one-time fix? Will it possibly persist over time? “There are risks to creating a company to take advantage of a temporary opportunity in the marketplace,” warns Éric Labelle, Director of Startups, Technology and Innovation Banking at National Bank.
“Ideally, your idea should have long-term viability, regardless of the economic climate. If there’s a flagrant need in the marketplace, you can assume that many entrepreneurs will have the same idea as you, which will create a lot of competition,” the expert adds. “Similarly, ask yourself whether your industry is thriving, i.e. whether it’s experiencing a high growth rate.”
As you’re building your business plan (French only), make sure you conduct a thorough analysis of the market and its clientele. “Many new variables have disrupted the Canadian commercial landscape. You have to be able to secure a digital presence on the market that exists almost exclusively online. More than ever, people are encouraged to buy local – and entrepreneurs are reacting to this positively.”
“Local business owners sometimes face fairly serious issues with regard to dispatching raw materials or even shipping to consumers,” Labelle explains. “They have to determine whether it’s truly beneficial to source locally given the potential constraints to sourcing abroad. They need to figure this out from the beginning, before they even start looking for financing.”
2. Are you well supported?
“Then, you’ll need a strong network of connections and investors to start a business. They should be able to give you an injection of funds if needed. For young entrepreneurs, help with their startup often comes in the form of loans from their loved ones. But we also recommend that they turn to angel investors, accelerators, and government subsidy programs. Finally, make sure to build a trusting relationship with your bank. When applying for a loan, refer to a financial institution that’s able to support you in your development, like National Bank.”
Check out this article for more advice about financing your startup.
3. Are you equipped to face an economic slowdown?
“If we enter an economic slowdown that leads to a strong increase in interest rates, what would you do? It’s important to ask yourself this question and, most of all, to identify tools that you can set up to help you weather such events. When an entrepreneur approaches us for financing, we want to know about the concrete measures they’ve established to face a situation like this. Their level of preparation makes us trust them,” Labelle says.
“After that, do your research on available government subsidies in case you need them. But be careful: it may take a while to obtain them, and there are specific criteria that your project may not meet,” he advises.
“Think ahead and give yourself access to personal funds in case of an eventual slowdown. A lack of cash could lead to issues with your suppliers, which is far from ideal for a startup. Be conservative at all times. Make safe investments and don’t indulge in frivolous expenses,” advises Laurence Felx-Leduc, Director of Business Sales and Services, Solutions FlexAffaires Inc. at National Bank.
4. Does your business structure truly meet your needs?
“With the economic slowdown of spring 2020, entrepreneurs seem to have changed their views when it comes to their business structure,” claims Labelle. “In order to benefit from federal support measures during difficult times, usually the company has to be registered – meaning they have to be listed in the business registry – and have a business account at a financial institution. Therefore, most self-employed workers aren’t eligible for government support programs. They’re aware of their personal responsibility, because it falls on them if they fail to make a payment due to a loss of income. I believe that it’s safer to incorporate in order to limit personal responsibility, even if this involves more legal and tax formalities.”
Otherwise, have you considered the possibility of starting a business by buying an existing business or a franchise?
5. Is your financial forecast up to date?
“As we’ve seen with the 2020 crisis, periods of economic uncertainty evolve very quickly. To mitigate the effects of a downturn, you’ll need to analyze your finances as often as possible. Regardless of the stage you’re at in starting a business, update your sales and cash flow forecasts every month, or even every week,” recommends the startup expert. “Also, make sure to take into consideration the extra costs incurred by new sanitation standards when drawing up your financial statements and calculating your income and expenses,” Labelle concludes.
Do you feel ready to start a business? Whether you want to verify your idea or get financing, discuss your project with our business advisors.