Starting a Starting a Business? Business? Peter Keeshan Peter Keeshan Megan Thomson Megan Thomson Bryan Chen Bryan Chen
Dec 22, 2015
Starting a Business?Starting a Business?
Peter KeeshanPeter Keeshan
Megan ThomsonMegan Thomson
Bryan ChenBryan Chen
AgendaAgenda
Types of Business: Product or ServiceTypes of Business: Product or Service
Types of Entities: Sole Proprietary, Types of Entities: Sole Proprietary,
Partnership & Inc.Partnership & Inc.
Types of Financing: Debt vs EquityTypes of Financing: Debt vs Equity
Common Pitfalls: Lesson’s LearnedCommon Pitfalls: Lesson’s Learned
Getting StartedGetting Started
You have a idea now what?
Are you cut out to be an entrepreneur ?
What’s your risk profile?
Product or ServiceProduct or Service
Product: More capital intensive
Intellectual property [patents needed?]
Service:
Liability issues
P.Eng Consulting: P.Eng ---> C.O.A -->Consultant Engineer
Sole ProprietorshipSole Proprietorship
ProsPros• Unincorporated business established Unincorporated business established
and run by a single individualand run by a single individual• Easiest form of business to set upEasiest form of business to set up• No agreements or paperwork No agreements or paperwork
requiredrequired• Reap all the benefitsReap all the benefits
ConsCons• LiabilityLiability
Creditors can seize personal assetsCreditors can seize personal assets
• Personal taxation laws still applyPersonal taxation laws still apply• Suffer all the painSuffer all the pain
PartnershipsPartnerships
ProsPros• Share the challengesShare the challenges• No contracts or registration No contracts or registration • Limited partnerships can limit liability Limited partnerships can limit liability • No separate tax filing No separate tax filing • Simple dissolutionSimple dissolution
ConsCons• Personally liable (except for limited Personally liable (except for limited
partnerships)partnerships)• No new partners can be introduced No new partners can be introduced
without consent from all existing without consent from all existing partnerspartners
• Decisions not as easily made Decisions not as easily made
CorporationCorporation ProsPros
• Liability is limited to the initial share Liability is limited to the initial share purchasepurchase
• Decisions by majority, not unanimityDecisions by majority, not unanimity• Could continue in perpetuityCould continue in perpetuity
ConsCons• More work and costs involved More work and costs involved • Outside investment limited by size Outside investment limited by size
of firmof firm• May be required to pledge personal May be required to pledge personal
property as collateral to secure property as collateral to secure • Tax return for the corporationTax return for the corporation
Funding by DebtFunding by Debt
Mostly Charter Banks, but also include other type of financing [i.e. Leasing].
•Usually require a form of secured asset as a guarantee.
•‘Hands off’ Business Partner
•Debt cheaper than equity. Some Interest is tax deductible [EBIT]
•Business plan: Show how you will pay off debt.
•Good for product or more capital intensive service
Funding (Private Equity)Funding (Private Equity)
Friends and Family: “Love Money”
•Easily accessible
•Off balance sheet liability
•Good for low start up businesses: Consulting
•Forgiving payment schedule
Venture Capital FundingVenture Capital Funding
•Equity Stake in the company - vested interest in company’s success.
•‘Hands-on’ Business Partner - use of contacts/networks
•Looking for how to ‘exit’ and get return: IPO, Sell
•Good for starting up a capital intensive product; Knowledge Based Industries, w/ R&D, high growth potential.
Angel Investors & Government FundingAngel Investors & Government Funding
Angel Investor
•Similar to VC, but a individual rather than a Firm
•Equity Stake in the company - vested interest in company’s success. Smaller investment.Government
•Grant’s, Loans and VC
•Government issues: Environmental concerns [i.e. green energy, Kyoto]
Common PitfallsCommon Pitfalls
Underestimating start-up costs. By the time you incorporate, register business, get started. Expensive
•Include your salary!
•Rule of thumb what you have budgeted + 1/2
Common Pitfalls Common Pitfalls
Not knowing your sales cycle: How long will it be before you start generating cash flow? Open/Qualification
Close Presentation
Information Gathering
Payment only comes after you have gained the business [i.e. net 30 days]
Some Sales Cycles can last 12 months or more.
Common PitfallsCommon Pitfalls
Know who you are doing Know who you are doing business with business with • Friends don’t always make good Friends don’t always make good
business partnersbusiness partners• Some customers you don’t want.Some customers you don’t want.
Demanding customers Demanding customers Customers that don’t pay.Customers that don’t pay.
• Exhausting “warm” leads before Exhausting “warm” leads before doing any other business will not doing any other business will not give you a realistic picture of the give you a realistic picture of the need of your product/serviceneed of your product/service
Common PitfallsCommon Pitfalls
Self-discipline to executeSelf-discipline to execute
• Plan – execute – measure - repeatPlan – execute – measure - repeat
• Business is not as precise as Business is not as precise as
engineeringengineering
• Intelligence + confidenceIntelligence + confidence
• Leap of faithLeap of faith
Parting ThoughtsParting Thoughts
The surest sign of madness is The surest sign of madness is
doing the same thing but doing the same thing but
expecting different resultsexpecting different results
Change + ActionChange + Action Ready to start a business?Ready to start a business?
• Only you can answer…Only you can answer…
Helpful Link/ResourcesHelpful Link/Resources
Business Development Canada: www.bdc.ca
Royal Bank : www.rbc.ca
Canada Service Business Centers: www.bsa.cbsc.org
Contact Information:Contact Information:
Peter KeeshanPeter Keeshan - - [email protected]@schulich.yorku.ca
Megan ThomsonMegan Thomson - - [email protected]@schulich.yorku.ca
Bryan ChenBryan Chen - [email protected] - [email protected]