starting a business?

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.


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


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]

Questions?Questions?

starting a business?

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