I Started a Business, Now What?

Your First Years in Business

So you’ve got your financing in order, developed your product/service, initiated your marketing plan, set up your bookkeeping and accounting systems, completed your government paperwork, hired employees and set up your office. Congratulations! Your first day of business is a proud moment and marks a major accomplishment in your life! As you move forward and get into the details of your business, take a moment to think about:

1. How are you going to know how your business is doing?
2. How are you going to measure success?

Most new businesses run into problems during the first few years of business. Problems and challenges are an everyday part of being in business. While it may not seem like it at the time, solving these challenges is part of the satisfaction of being a business owner. This fact sheet reviews a few ways that you can learn to be aware of problems as they arise and how to deal with challenges before they threaten your business.

Know Your Business Plan

You spent a lot of time and money developing a good business plan. You walked through every aspect of your business idea and developed plans and strategies to make sure your business would be successful. Don’t let that business plan sit on a shelf collecting dust. Review key aspects of your plan regularly to see how your projections are turning out. Break big tasks into smaller, more manageable ones. No business plan is perfect; they are really based on your best guesses at the time. But, these best guesses were based on good information, research and a solid process, so if things are starting to turn out differently, figure out why. Are your products and services of high quality? Are your costs under control? Are your accounts receivables (the amount of money customers owe you) being paid on time? Are you paying your bills on time? Comparing how your plan matches with reality can help you monitor problems as they develop and help you find ways to address them.

Get Help

You are the most important part of your business. Nobody cares about its success as much as you do. A common problem for many new small business owners is that they think they can do everything and not delegate tasks to other people. You have many skills and talents, but should you really be the person running out to the airport to pick up packages? Do you have to do all the bookkeeping and accounting by yourself? Do you need to be constantly interrupted by phone calls? Can you handle all the sales yourself? It might seem like you can do everything when your business starts small, but as your business grows and gets busier then don’t be afraid to get help! Your skills and time are best spent on ensuring the business is growing and operating well. While it may be difficult to let go of control over some parts of your business, remember that your time is limited. Use your time strategically or you’ll wear yourself out.

Be Thrifty

You probably saved some money to help start your business, maybe you even took out a loan. Many lenders want to see business owners invest their own savings because this ensures they are financially committed to the business. You will want to continue those saving habits in the first few years of your business. While it may be tempting to start buying things you don’t really need once you have cash coming in from sales, one of the biggest problems new businesses run into is around cash flow and accounts receivables. Cash flow is the money coming in and out of the business and accounts receivables is the money that people or organizations owe you. More money tends to go out of a business during its early years than comes in. There are good reasons for this, but don’t make it worse by spending money where you don’t have to. Better to wait and enjoy the extra money that is left over after the first year or two than to risk spending too much money that could have been invested in growing the business.

Keep a Close Eye on Cash Flow and Accounts Receivables

It is worth repeating – small business owners need to keep a constant eye on the cash flow for their business. The business plan lays out what you think the cash flow will be, but these are only based on best guesses and reality will be different. Low cash flow is caused by more money going out than money coming in. At first, this is understandable. You sell a product or service and then you may have to wait 30, 60, or even 90 days before a customer pays you. In that time, you still have to pay staff, create inventory, buy new equipment and pay bills. This can cause a big problem in a short period of time if you are not staying on top of it. If this becomes an ongoing problem you are going to have to take action – the earlier, the better. Some steps to consider are:

1. Get in touch with customers with accounts receivable (customers that owe you) and see if they can pay early. Start with the latest invoices and then work back. Be polite, but firm.
2. Talk to your bank to set up a line of credit or a loan. The best time to talk to banks and lenders about borrowing money is when you don’t need it, so try and set something up before a problem exists. Once you get a loan or a line of credit set up, try to pay it back as quickly as possible and keep it on the top of your “to-do” list.
3. Cut back costs – Review your spending and see what can be delayed until later. If you are running behind on your bills, contact the payee (person or organization your owe) and let them know you intend to pay them as soon as possible. Don’t leave it until they call you. Most payees will appreciate you letting them know before payment becomes a problem. Put off any expenses that are not essential. For example, you may need a new vehicle or computer, but the old one may last a while longer until finances are easier.
4. Consider changing the way you pay some bills. Some big bills like insurance can be paid monthly or annually. Credit cards often have a grace period where you can make a purchase but not have to pay for it for several weeks. See if changing how you pay your bills can give you more flexibility.
5. Use a company credit card and avoid paying cash if you can. Keep all receipts. Using a credit card helps you keep track of your expenses and makes bookkeeping easier.
6. Keep on top of when you have to pay large bills such as income tax and GST/HST. Make sure you have the funds put aside to pay these bills when due. One trick is to set aside funds in a separate bank account, rather than keeping all the money in a general account.

Protect Yourself and Your Assets

It is important to protect yourself and your personal possessions (assets) in case the business encounters a serious problem that threatens its existence. Many small business owners start off putting some of their own personal assets into the business. This can include money, equipment, etc. If the business fails, you may lose these assets if the company has run up large debts. Consider incorporating your company as it grows Incorporating will separate your business from you as a person to protect you and your family. In this case, if the business fails then only those assets that belong to the business may be lost. Talk to your account or lawyer about the benefits and costs of incorporation.

Careful business planning lays out a path that the business can follow based on the best knowledge and educated guesses available at the time. However, life doesn’t happen in a straight line, and neither does business. Keep a careful eye on how the business is doing; you should know on a daily, weekly and monthly basis how much money is going out and how much is coming in. Early detection of problems requires constant monitoring, but this also gives you an early warning that changes are required to keep your business healthy and strong.

One common characteristic of small business owners is that they find it difficult to let other people help run the business. It is important to understand, however, that nobody has all the experience, skills and time needed to do all the jobs in a business. As your business starts to grow, it probably isn’t the best use of your time to do a lot of small, easy tasks, such as getting the mail, picking things up at the airport or cleaning the office. You may need to hire staff to give yourself time to focus on what you do best.

The first step in deciding if you need to hire some help is to make a list of all the tasks that the business needs to get done. Include things like answering the phone, getting the mail and working with customers to deliver the product or service you are selling. Are some of the tasks seasonal? It will be a long list, but it is important to see what you can do, what you can’t do and what you can hire someone else to do.

Start highlighting the tasks that don’t require your special skills or talent to do. Often the first people hired in a new small business take over some of the simpler tasks. From these tasks, do you need someone full-time or just part-time? These tasks can take up a lot of time but don’t require specialized skills or experience.

Next, highlight the tasks that you can’t do or don’t want to do. These can include specialized tasks, such as bookkeeping and accounting, or some specialized skill that you don’t possess. Depending on the size of the business, these positions can be hired on a contract basis to look after specific tasks. Eventually, you may want to hire these people on a full-time basis, but make sure you have enough work for them to do to keep them busy.

The last section should be the tasks that you want to do yourself or that require your own specialized skills and talents. In small businesses, this can include being the one responsible for developing the products and services you are selling, working to promote the product to clients, making sure supplies and inventory are being ordered, keeping an eye on the cash flow, and other key aspects of the business.

Once you review your list of tasks and divide them into different categories, write up a job description for the position. State clearly what the main tasks will be and whether the position will be full-time or part-time.

Advertise the position in the community by posting advertisements on Facebook, at the hamlet office and at any economic development agencies. You should also let people know by word-of-mouth – this can often be the fastest way to find someone. In the ad make sure you state the position’s title, the deadline to apply, and where to send resumes and cover letters or get more information. Give three to four weeks between posting the ad and conducting interviews.

As the responses to the ad come in, review the resumes and cover letters. Separate them between those who are a priority and those who don’t meet your requirements. For the best applicants, select the top five or six and invite them for an interview. Have your questions written down in advance and ask each applicant the same questions. Make sure to ask about their work experience and specialized skills or knowledge, including languages spoken. It is also common for employers to ask for references from the applicant’s previous jobs. You can call these references to check on the details of the applicant’s position and previous experience, to see if they were a good employee and to understand if they left that job on good terms.

Making a final decision can be tough if you have several good applicants. Some key things to consider when make your decision include:

1. Did they have the right qualifications and experience for the position?
2. Did they show an interest in the business and a willingness to work hard?
3. Did their work history indicate they were reliable and hard-working?
4. Were they someone you could work with?

There is no perfect way to find the right employee, but if you follow the above steps then you will be more likely to find a good match.

Once you decide on the new employee, write them a letter to formally offer them the job and include all the basic details of the offer. Include a copy of the job description and the basic terms of employment, including pay, benefits, hours, expectations and whether there will be a probationary period. Set a response date within a week or two. You may wish to ask the new employee to sign the letter of offer or a contract which can outline further details of employment.  Once you have confirmed the hiring, send a letter out to the other applicants that you didn’t choose to notify them; you can also thank them for applying and wish them luck in the future.

On the new employee’s first day, show them around the business space and where they will be working. Make sure to introduce them to other employees and describe each employee’s title and responsibilities. Review with them their specific tasks and responsibilities, then show them where they can find the supplies they will need and any other important areas of the office. As the employer, don’t forget to show your employees any emergency exits and where to find emergency help (i.e. First Aid kits and emergency phone numbers).

As a last step, you will need to add your new employee to your payroll system. You will need the Social Insurance Number of the new staff and all their contact information. For more details on payroll responsibilities, you can read the Payroll Responsibilities fact sheet. The employee will need to fill out a TD1 Form: Personal Tax Credits Return. At this point you should also review the work hours and benefits that the employee will receive to make sure you both have the same expectations for the position. Clear expectations are the easiest way to avoid conflicts in the workplace!

Your first year in business will test many of the expectations you made in your business plan. It is impossible to predict everything that will happen, and the best plan will likely be outdated within the first month or two of operating. A key area to keep an eye on is your marketing plan. Marketing a small business in a small Northern community can be challenging. However, successful companies pay close attention to marketing and the relationships they have with their customers. Using new marketing techniques, such as social media marketing (Facebook, Twitter, and Instagram), online marketing (setting up a website), traditional marketing (aids in local papers, ads on local radio) and even direct mail can make a big difference for your sales.

Take some time after the first few months of operation and compare the business plan with what is happening with your business. Is your marketing plan effective and accurate? Are your main customers the ones you thought they would be? If not, try and figure out what happened and whether you can change your marketing plan to improve sales to your target customer. If you are reaching a different type of customer than you expected, try to figure out why and how.

Successful business owners know their customers well, understand what they want and know the best way to reach them with information. Monitor how your customers are finding out about your products and services. Are they using Facebook and “Buy and Sell” pages or are they using more traditional methods, such as word-of-mouth and newspaper ads? Don’t be afraid to ask your customers how they found out about your business and if there are ways you could make it easier for them to find what they need.

Ask your customers what they like about your business and if there is anything that they would like to see added or improved. Sometimes customers may want something that you don’t currently have available. There could be new products that you might want to develop or offer to your customers. Trying to predict and meet your customer’s needs will show that you care about your customers and will help you build a loyal customer following.

Keep an eye on your competition. Sometimes you can get really good ideas on how to improve your business simply by seeing what other businesses are doing. Are they offering lower prices, better sales, improved customer service, more ways for customers to pay? Studying your competition or similar businesses can be an inspiration for good ideas and overcoming challenges.

Marketing your business is more than just advertising. Don’t forget the Five P’s of marketing: Product, Price, Place, People and Promotion.

• Product: Make sure you have products or services that customers want. Stay on top of changing preferences and trends in your business area.
• Price: Setting the right price for a product or service can be tricky, but it is very important to charge the right amount. Too high a price? People won’t buy as much. Too low? You may not be covering your costs and profit. Changing the price can change sales. Talk to your customers about what is a fair price and research what other similar businesses are charging. Try not to change prices too often or customers may get confused.
• Place: Options for business space are very limited in the North and expensive in the south. Many small businesses will start off in homes but may need to move to a bigger space as they grow. Changing locations may not be possible or advisable due to high cost and lack of options. Business owners must be aware of how their location affects their business. Would moving to a different location impact the business? Would selling products and services online allow you to reduce the need for a business space at all? Should you attend craft fairs or trade shows to promote your business? Where are your customers located and what business location is best for reaching them?
• People: Customers want to feel welcome and not pressured to buy products or services. Having trained staff that are friendly, helpful and confident in dealing with challenging situations with customers will be very important. If you are the only person working on the business, make sure you practice how to deal with customers, on the phone, by message/email and in-person. Make sure you think about return policies and how you will deal with frustrated and angry customers, even if it is the customer’s fault. How you treat customers will make a big difference in whether they choose to buy from you again.
• Promotion: Review how you promote and advertise your business on a regular basis. What seems to be working the best? Don’t be afraid to change your promotion methods. Having new advertisements, posters, radio ads, community TV ads and social media posts can boost customer awareness of your business. Social media is often the cheapest and easiest way to promote your business. You can start a Facebook page for free, which will let you share information about your business, post photos of your products or services and connect with potential customers.

Taking the time to ensure that your marketing plan is working is a good business practice. Particularly during the first few years of operation, it is a good idea to make sure your customers are being reached and that they can find the information they need about your products and services.

[1] If you operate a business out of your home, make sure you check with local authorities to make sure they know about and approve your business. For example, some communities don’t allow home-based businesses in public housing.