CHAPTER 1

Starting a Small Business

Enthusiasm finds the opportunities, and energy makes the most of them.

— Henry S. Haskins

There are many reasons why you might be reading this book. Maybe you have alwaysdreamed about having your own business, and the timing is now right for you toconsider it more seriously. Possibly you have been recently laid off or havejust retired. Friends of yours may have started up a business part-time or outof their home, and have been talking to you about it. It may be you are justfrustrated at the insecurity, lack of challenge, or potential for advancement inworking for a large institution. Possibly you already own your own business andwant to be better informed in areas that are important to you.

The decision to go into your own business may be one of the most importantcareer decisions you make, with implications affecting all aspects of your life.Many people are impeded from proceeding any further than the dream by fear offailure, risk, or uncertainty. Fear of failure is a legitimate concern, asstudies indicate that over 75% of all new firms will fail within 3 years ofstart-up. One of the main reasons is lack of knowledge. This book will thereforeprovide you with that survival edge.

Small business in Canada is a vital part of the economy and fabric of oursociety. The small business sector accounts for a massive portion of thecountry's gross national product (GNP), and creates the majority of all newjobs. Approximately 85% of all employment is created by small business. Onaverage, over 350,000 small businesses register for the first time every year.This number, of course, varies depending on the economy and other factors, andincludes proprietorships, partnerships, and corporations. The estimate is basedon statistics from provincial government proprietorship and partnershipregistrations, as well as provincial and federal new incorporations. In manycases, the small business person does not show up in provincial or federalstatistics because he or she is self-employed and has no employees, or has notregistered the business. At the same time, there are a substantial number ofbusinesses that cease to operate every year, many of which do not show up instatistics.

The small business sector is a dynamic, innovative, and growing force thatprovides challenge, fulfillment, and financial security to over one millionsmall business owners in Canada. Studies show that over 75% of these smallbusinesses have fewer than five employees. There are many definitions of whatconstitutes a small business. The Canadian Federation of Independent Business(CFIB) generally uses the number of employees as a yardstick, with independentlyowned firms with up to twenty employees considered as small businesses.

This book has attempted to minimize the potential risk in starting up a smallbusiness. It will not only be a practical guide for you, but a reference sourcefor future needs as your business grows. Not all the chapters may be appropriatefor your needs at this stage, and the chapters do not have to be read insequence. Other parts of the book are designed to provide you with furtherpractical assistance, including the appendices, glossary, samples, andchecklists. At the very back of the book, there is a section entitled "ReaderInput." Our contact numbers, e-mail, and address are noted, as is our website.We would appreciate any feedback you have for improvement. You also might likemore information about our seminars or consulting services.

This chapter will cover:

• the advantages and disadvantages of small business ownership

• the traits of successful entrepreneurs

• self-assessment

• recognizing consumer and business trends

• sources and types of business opportunities

• evaluating business opportunities

• choosing a business

• women in business

• home-based businesses

• dealing with growth and expansion of your business.

ADVANTAGES AND DISADVANTAGES OF SMALL BUSINESS OWNERSHIP

Many people have an idealized picture of the rewards of running your ownbusiness. There are benefits, of course, but there are also risks andfrustrations. It is important to objectively look at both sides in order to makerealistic decisions.

Advantages of Going into Business

You have the opportunity of making more money working for yourself than by beingan employee. You have no ceiling on your potential income, as it is limited onlyby your energy, management skill, and good judgment. However, studies show thatmaking money is not one of the main motivating factors of small business owners.

• You have the opportunity to satisfy your creative drive. Studies show thatsmall businesses are more creative, productive, and responsive to changingconditions in the marketplace than are large corporations.

• You can't be laid off. In that sense, you have job security as long as yourbusiness is successful.

• You have definite tax advantages over people who are not self-employed.

• You set your own priorities as the decision-maker. You have control over yourown destiny, as you are the only person responsible for the success of yourcompany.

• Your workday will not be routine, as you are...