Let’s Do Launch

In the business world, inspiration is best described as a catalyst.

May 1, 2007  

by Ernest Granson

Six Months to Launch Date
Generally speaking, as you’re getting set to launch, you should start generating a buzz around the business. Send out media releases to get free publicity. This can be fun, but if people are aware of your opening, make sure you’re totally prepared. The product or service must be ready. If people want to buy and you can’t provide, you’re saddled with a false start which can be difficult to overcome.

“If you recall the launch of Roots Air several years ago,” says Donlevy, “they had a lethal false start because of potential maintenance issues. It literally collapsed their business. If your launch is two weeks away but not everything is in place, delay. It’s all about keeping your customers happy. If they don’t have a good experience you’re in trouble.”

To avoid that misstep, make a list of the details to cover. If you don’t, you might end up in the same predicament as one of Donlevy’s former students. “He built a new movie theatre in a bedroom community,” Donlevy explains. “He did all the right things and created that anticipation, which paid off with people lined up on opening night. Trouble is, he hadn’t figured out what to do with all that cash. He spent the whole night sitting up with the cash. When he went to the bank first thing in the morning, they informed him about a little technique called the cash drop.”

There are a number of additional, unexciting but significant details to take care of as your business takes shape, advises Dawn Fedorvich, web service coordinator with the Business Link, a not-for-profit, Canada-wide organization for entrepreneurs, supported by the federal and provincial governments (www.cbsc.org/alberta/main.cfm). You should set up a corporate account with the Canada Revenue Agency (CRA), which will then issue your company a business number. This is not mandatory if your company is established as a sole proprietorship. But if you do incorporate, if you will be hiring workers or if your business makes $30,000 or more in revenue, then a business number is required.

“Even if you generate under $30,000,” says Fedorvich, “you can obtain a business number, which allows you to claim input tax credits or ITCs against your business expenses, provided you also charge your customers GST. It’s almost like saving 6% on all purchases, depending on your total revenues.”

Business owners with employees are responsible for collecting employment insurance from employees to submit to the Canada Revenue Agency, as well as employee Canada Pension Plan (CPP) deductions, which must be matched dollar for dollar by the employer. Income tax is also deducted from paycheques on behalf of the employees. All three are called source or payroll deductions. If you own the business, you don’t qualify for Employment Insurance, and if the business is a proprietorship, you’re not on payroll and will usually end up calculating and owing income tax and CPP at the end of the year. An owner can qualify to be on payroll as long as their share of ownership is 40% or less of an incorporated business, says Fedorvich. Furthermore, all employees, whether full-time, part-time, casual, or even family members, must pay Workers’ Compensation Board premiums. The business owner is not obliged to contribute. Proprietors have the option of obtaining their own coverage just as they would with insurance.

Speaking of insurance, it’s wise to arrange not only for general liability, vehicle, content and premises insurance, but also key person insurance. “If the owner is the key person in the business and gets hurt or sick, the business will not be able to survive,” says Fedorvich. “It can be expensive and the owner should factor the cost into the business plan.”

Next, municipal and provincial licenses must be acquired. Every municipality licenses its own businesses and some cities, such as Edmonton and Calgary, require separate permits for home-based businesses. Taxes are also a reality; companies must set up accounts with Alberta Finance for corporate tax registration, and, if they’re involved in importing or exporting, they must obtain account numbers from Canada Border Services (formerly Canada Customs). Some industries also require provincial licences, specifically employment agencies, businesses that sell door-to-door or deal with prepaid contract workers, and automotive businesses. Lastly, check with the planning and development department in your community to make sure your business location conforms with zoning bylaws. If the business type doesn’t match the zoning, a licence won’t be issued.

Launch Date to Six Months
Surviving your first few months in business requires careful monitoring to ensure your finances are on track. While increasing sales can be encouraging, that fact alone won’t guarantee success. “Right from the start, it’s crucial to initiate a basic process of tracking financial results,” says Gunn. “That doesn’t just mean checking the bank account at the end of the day. That shouldn’t be considered the primary way of measuring success. You need to have at least a statement of cash flows once a month, otherwise you’re running blind. You might have to hire someone to analyze the finances on a timely basis.”

If things aren’t going well, remember that most new businesses don’t break even until year two. Here’s where pre-launch planning helps. If you’ve anticipated gradual growth, you’ll have the cash to support your business through this step. “In some industries, businesses don’t get paid for 120 days,” says Fedorvich. “You have to be able to cover expenses during the time period.”
Customer payment methods can be a problem. Selling products or services on credit can affect cash flow – and the very livelihood of your business. If you’re going to issue credit, do credit checks beforehand. Fedorvich stresses diligence in regard to collecting payment, which can become a serious issue.

On the sales side, if you’re not getting the revenues you expected, investigate why. If a problem has to do with costs, you should be asking, “Why are my costs out of whack?” How do you keep track of your finances? For small businesses, software such as QuickBooks, Simply Accounting or even Excel can suffice. If you’re not comfortable handling this yourself, hire a professional.

One Year and Following
You survived that first year and are looking forward to the next step. As Booth points out, you’re no longer in the pure development phase. You’re now managing the business, as opposed to starting it. One of the objectives now is to improve your product or service by responding to customer feedback. You have to ask questions such as, “How can we get better? By making this in 10 different colours? How can we keep growing? By moving into new types of markets?”
Analyzing your company’s finances becomes critical at this point. Pull out the sales records and study your inventory history. Look at the pricing to see which products are giving the greatest return. If you’re in manufacturing, examine your production records. Look at your operation from all angles. Pose even seemingly mundane questions like, “How come employees call in sick so often?” All factors can affect the cost of production.

This last question doesn’t apply to all businesses, of course. A freelance consultant has no inventory or production costs, while a small welding shop, for instance, may find it useful to hire a management consultant to look at production reports. Fedorvich recommends forming a board of advisers – people to turn to for advice, even if they’re not involved in day-to-day operations.
At this point, even if the business is progressing, your determination as a businessperson is important, says Fedorvich. You should be networking, talking up your business, handing out business cards and getting referrals.

After a year in business, it’s also time for an entrepreneur to take a look at building or strengthening their management and personnel structure. “It’s a tough period,” says Booth. “When a company becomes big enough that the owner can’t micro-manage anymore, he has to delegate authority to the rest of the team. It’s not necessary for him to write every cheque anymore. The good entrepreneur has to find a place in the company where he can continue to add value. He must also take action to make himself redundant so the operation can run without him, if required.”

Current Issue