Start-ups – Survival Tips

1) Facts:

85% of small businesses entering the marketplace survive one full year;

70% survive for two years; and

51% survive for five years.

Some specific industries have a higher failure rate, such as restaurants with about only 41% of surviving rate in the first 3 years. Also, the odds of failure correlate to revenue: companies with revenues under $30,000 per year had a failure rate of almost 64% after five years. (Source: Industry Canada)

2) The primary reasons of start-ups’ failure are:

– Poor market research leading to an inaccurate understanding of the target customers wants and needs: the number 1 reason why businesses fail is because the business owner, impatient, did not take the time to conduct a feasibility analysis, market and business plan;

– Insufficient funds and inability to manage the financial aspect of the business: the number 2 reason of businesses failure is inadequate funding, lack of financial literacy, weak financial planning and cash flow management: a clear and consistent finding of researches is that businesses face the highest failure risk when they are young and small, with a mismatch between resources and capabilities. In analyzing the root causes of small business failure, a survey conducted in Canada on 2,598 business failures indicated that 96% of them were due to poor management, twice as much as external factors (Market, competition, products) and turned out to be the management inefficiency of owner-managers;

– Trying to go it alone and failure to recognize own strengths and weaknesses: the number 3 reason is trying to do everything alone and not seeking external help. Whether this external help be as simple as a web and social media guru or professional services such as a lawyer, accountant, banker or business coach/networking.

3) How to avoid being a casualty?

Follow these tips to avoid or reduce the odds of being a statistics casualty:

– Develop a good marketing and business plan that consider customer needs, competition, pricing and promotional strategies: While this is a short sentence, this is the cornerstone of your success; it will take a substantial amount of your time but you will not regret it. When developing a strong business plan, you will cover all areas. Determine realistic strengths and weakness, your product/services, is it unique or competitive? Get answer to the killer question “Why should I buy from you and not your competitor?”, the pricing policy, your target market, your marketing plan, your advertising means, your personal financial situation assessment; make sure you have enough cash reserves and/or a line of credit (over 80% of start-ups used personal financing to finance their new businesses and this through personal savings, personal line of credit and credit card) to help you get through the launching period and until sales start to pick up, the money you have really available, your cash-flow projections (worst case scenario, breakdown scenario, positive scenario), your legal structure. And believe it, this is not a waste of time, but time well invested. Plan every part of your business from start to finish, don’t under-estimate your expenses and over-estimate your revenue, leave no stone unturned. Once your business plan is complete with your findings, determine realistically, if you want to proceed or not and the reasons? Short in financing or financing cost too high? Products/services not attractive, not competitive enough? Anything you could do to change your findings? Adjust your initial belief? Review your copy and initial plan if necessary.

Even if you strongly believe in your idea and the commercial success of your products or services, do not underestimate the below points:

– Get advice from the beginning with a lawyer, or an accountant, proper networking and acquaintances expertise you could rely on. Down the road, they could save you money, time and detrimental mistakes;

– Set up your business finances to reach your goals; make sure you are registered where you need to be (Sole proprietor or corporation, GST, PST, WCB, Payroll, business licence, trade certification if required, professional insurance);

– Get your books organized from the start, and get help to understand your business finances, the handling of cash-flow, credit, inventory management, accounts receivable and payable policy, personal and business taxes remit and all CRA deadlines and other fiscal obligations;

– Compare your actuals to your business plan (Variances). If it has been conducted correctly, this is one of your management tools. However, market, technologies, economy change. So, even though your business plan findings, 6 months ago, indicated different output, it’s not carved in stone. Be flexible and stay adapted, that’s where the full power of management takes over.

More to come on business tips. Stay tuned!

#startup #smallbusiness #tip

Post-Tax season Lessons learned

 

Alright!! Tax season is over, you feel relieved and it is perfectly understandable that you want putting the stress away until next year.

If you are like many other business’ owners and think that you should not start to worry before January next year, you more likely will end up with another stressful experience next year and so on. After all, paying tax is not so bad, it means you run a profitable business and it certainly does not need to be painful. It can be planned in advance by estimating your next year tax bill. While putting money aside, think about short-term strategy investment to keep this reserved money working. With this peace of mind, you know exactly how much cash-flow is really available to drive your business. Regardless of your business industry, stay organized and updated throughout the year and always keep the Big Picture in mind.

Login Bookkeeping, not only will keep your business books organized all year-round, but, among other management reports, will provide insights to help you plan ahead, including your tax bill.

Personal Motor Vehicle Use for Business

If you use a motor vehicle for business and personal use, you can deduct only the part of the expenses that you paid to earn income. To support the amount you can deduct, a record of the total kilometers you drive and the kilometers you drive to earn income (Log book) is required. The detailed records in your log book will be used to calculate the deductions for expenses you are entitled to. It is also part of the records reviewed during an audit and must be detailed enough to support the vehicle expense claims.

What is claimable?

Only expenses related to earning an income; they must be reasonable and substantiated by original invoices/receipts:

  • Gas

  • Insurance

  • Maintenance and repairs

  • License fees

  • Parking fees

  • Capital Cost Allowance

  • Eligible interest

  • Leasing costs

For more information and any assistance, please contact us.

Why small businesses should outsource?

 

The booming world trend observed and confirmed by the leading accounting firms consists for 7 companies out of 10 to turn to outsourcing solutions in areas such as IT, security, warehousing, accounting, inventory management, payroll, HR, logistics, management and advisory team in order to reduce fixed costs associated with non-critical functions, gain more agility and competitivity to face changes and increase their profit margin, by using concepts such as “As-a-service” contract at the expense of the traditional source of technology, infrastructure and internal workforce.

Recent Market researches confirm that the trend observed the past recent years on steadily increase of business outsourcing will continue. As large and mid-sized businesses try to become more efficient and streamlined for improving corporate profit, the demand for outsourced Payroll, Bookkeeping and related services will continue to grow as online systems provide more convenient and potentially lower-cost services than maintaining fixed overhead with costly in-house workforce and related non-core functions.

The advantages once were only enjoyed by mid-sized and large companies, are available to small businesses, thanks to the aggressive development of advanced technologies with cloud integrated business software and their multiple add-ons. Without scarifying a substantial part of their financial resources to in-house labor costs, sick leave and staff replacement, desktop software purchase and updates, IT maintenance and repairs, security breaches and potential internal frauds, small businesses are offered real-time access to their books and financial reports, safe data storage and secured backup, unlimited evolving needs, simple user interfaces, frequent updates at a fraction of the fixed costs they were facing. Further, these solutions allow advanced data manipulation and use of smart tools that do not need to be expensive to be effective and that are just as beneficial, no matter the size of the company, its strategy and the economic environment.

Outsourced services pros and cons:

Pros:

Cost savings

Redirecting financial resources to core business functions

Solving capacity issues

Access to specialized human capital

Flexibility to manage organizations change

Focussing on the company’s growth and vision Improving business results

Objective input and recommendation

Reducing potential books fraud

Cons:

Ensuring clear and in-depth onboarding (clear expectations)

Need to establish a communication schedule

Less control (requires trust in the outsourced partnership)

The Pros overpass the cons? You bet!

The 2018 NextGen outsourcing survey will be published by Summer 2018

BC PST on Software

In British Columbia, accounting services are subject to GST (5%), not to PST (7%). However, interpretations are required for cloud services providing access to their customers. In accordance with BC Provincial Sales Tax Act, Bulletin PST 105 indicates that if a customer purchases a right to access software and the functions go beyond viewing content, i.e. the customer can use it to manipulate files or create new files, the PST applies.

A good example is a service provider entering into an agreement to manage payroll processing. If the agreement provides the customer with the right to complete particular tasks such as creating new employees’ files, the customer will be subject to PST. If the customer logs in only to view his company payroll and his employees connect to view their pay stubs, the PST will not apply.

The same way, if a service provider gives access to an accounting software and the customer only view available reports and financial statements without manipulating any data, the PST does not apply; if the customer enter data, such as creating invoices, the PST will apply.

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