Starting a Business in Canada

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No nonsense information on small business.

Aug 4, 2011 - 1 minute read - Comments - business news

2011 eBay Entrepreneur of the Year Awards

For all you eBayers out there, the 2011 eBay Entrepreneur of the Year Awards have launched. The contest is open to any adult resident in Canada. A contest entrant must:

  1. Sell $1,000 per month through eBay
  2. List at list 10 items per month.
  3. Have a feedback rating of 98% or better.

The entry process is fairly straightforward. Go to the entry form and provide your information. There is a requirement for a short (500 word maximum) essay. There are three categories in the competition:

  1. Entrepreneur of the Year
  2. Service-preneur of the Year
  3. Newcomer of the Year

The Entrepreneur of the Year will win $3,000, the Service-preneur of the Year will win $2,000 and the Newcomer of the Year will win $2,000.

Entries have to be in by 11:59 PM ET August 19, 2011. If you have a business based on eBay and meet the above criteria, this could be an opportunity for you.

Aug 3, 2011 - 3 minute read - Comments - business planning

The Buy A Job Small Business

There is a difference between having a job and owning a business. Unfortunately, when many people start or buy a business they don’t make the proper distinction.

Let’s use an example. Bob has a job where he earns $50,000 a year. He wants to be his own boss so he buys one of the smaller fast food franchises where he takes home $50,000 in profits every year. He is his own boss and he makes the same income as before. Sounds good right? Not so fast.

To have a business where he earns that same $50,000 he had to:

  • Pay a franchise fee of approximately $25,000
  • Pay $150,000 for equipment and leasehold improvements
  • Pay $20,000 for inventory and working capital

You might be thinking that this isn’t a big issue. He financed the equipment and leaseholds under the CSBFP so it costs him $60K out of pocket. He had money saved up and it’s an investment.

The problem is that the return on his investment is nothing. He works 50 hours a week and earns his $50K through his labour alone. The money he has invested is earning nothing because the business doesn’t provide a return beyond his salary. Even though he works 50 hours a week, he is constantly on call because he is the business owner. If some employee doesn’t show up for a shift, he has to jump in to fill the gap. He is working harder, longer hours than when he had a normal job.

Bob has increased his risk considerably. He is now responsible for a six figure bank loan that must be paid every month. His revenue isn’t guaranteed. It varies with the economy, the intensity of competition, and other factors largely out of his control. Because he is not earning a return over and above his wage, he is getting paid nothing for taking these risks. Bob should be compensated for making an investment. He should be making a return beyond his salary in line with the money he has invested and the risk he is taking.

My point isn’t to try to talk you out of starting or purchasing a business. It’s to make sure that you do your homework and plan appropriately. When you write your business plan, you should be calculating return on investment (ROI) to make sure that you are projecting a return that is in line with the risk you are taking. If you do your projections and you are just able to take a salary out of the business, you are better off keeping your job and finding a more lucrative business opportunity.

Aug 2, 2011 - 1 minute read - Comments - business news

New CBC Show Searching for Canadian Businesses In Need

CBC Logo

The producers of Dragons’ Den are looking for Canadian companies that are struggling financially. Top Canadian investors will give their time and money to help make the chosen businesses a success. To apply a company should have the following attributes:

  • Must have been in operation for at least three to five years or more
  • Gross revenue of $500,000 per year on average
  • More than 5 employees
  • Privately held business, family business, partnerships, limited partnerships
  • Must be willing to commit to being filmed on camera for up to a two-week period
  • A business registered in Canada
  • Fluent English speakers

The selected businesses can benefit from:

  • Free top-notch business consultation
  • Experts who will visit your business, no travel is necessary on your behalf
  • A chance to get an investment or a loan for your business when other sources have been exhausted

To apply email your name, company name and contact information by August 12, 2011 to

Jul 18, 2011 - 2 minute read - Comments - entrepreneurship

What Is A Small Business?

The exact description of a small business varies depending on which source you consult.

The Canadian Bankers Assocation defines small businesses as those having authorized credit limits of $500,000 or less, while medium-sized businesses have authorization levels of up to $1 million.

The Export Development Corporation defines small exporters as having sales of less than $1 million.

For the Canada Small Business Financing Program, Industry Canada uses a definition of $5 million in revenue or less. Industry Canada also has an employee based definition where businesses are considered small if they have less than 100 employees or less than 50 employees if it is a service based business. A business that has between 100 and 500 employees is considered medium sized. Businesses with less than 5 employees are called Micro Businesses by Industry Canada.

The term small and medium-sized enterprise (SME) is a commonly used term by many organizations. Industry Canada defines it as a business having less than 500 employes, while those with more than 500 employees are considered large businesses.

To provide a point of comparison, the U.S. Small Business Administration (SBA) defines a small business as having as much as $21 million and 1,500 employees in annual revenue, depending on the product or service being offered.

As you can see, the SBA definition of a small business is considerably larger than the Industry Canada definition. It’s important to undersand this difference because if the small business you are starting is going to sell products and services to other small businesses, a Canadian small busines with 50 employees might have very different needs than a U.S. small business with 1,500 employees.

Jul 14, 2011 - 2 minute read - Comments - banking

Comparing Small Business Overdrafts at Canada's Banks

Overdrafts for small business bank accounts are attached to a business’s account so that if a cheque takes the account below a $0 balance, the overdraft will be there to pay the cheque. These overdrafts are usually meant to cover small, short term deficits in cash flow. Due to their higher interest rates, they are not the most ideal bank product for long term borrowing needs. Businesses with larger cash flow financing needs, such as those with accounts receivable, should look at a business operating line of credit instead.

The following table compares the overdraft product at the Big 5 Canadian banks.

Feature RBC BMO CIBC TD Scotia
Maximum Limit $5,000 N/A $10,000 $10,000 N/A
Interest Rate Prime + 5.0% N/A Prime + 5.0% Varies N/A
Monthly Fee $10 or $5/cheque N/A $9.50 $10 N/A
Application Fee None if electronic,
$25 in branch
N/A None None N/A
Link Website N/A Website Website N/A

The Bank of Montreal and Scotiabank do not actively promote a small business overdraft product. They most likely offer an operating line of credit product to clients who have a need for a small business overdraft. This many not be price competitive and the application process will certainly be more in depth than for a simple overdraft. Make sure you get the details before going forward.

Generally speaking, the bank will make its lending decision by running a personal credit check through Equifax or Trans Union. The bank will then calculate a credit score based on this information and an automated system will recommend an appropriate overdraft limit for you. The algorithm that is used to calculate the overdraft limit is kept secret by the bank because they don’t want people attempting to game the system, but your personal credit record will factor heavily into the recommendation. Your local banker usually has little power to increase the recommended limit.

A small business overdraft might make sense if your business operates on its own cash but at times the balance on its account comes close to zero. An overdraft might save you the embarrassment of having a cheque returned NSF.

Jul 12, 2011 - 1 minute read - Comments - business news

Visa Announces Winner Of 'Canada's Longest Elevator Pitch' Contest

Anna-Maria Mountfort

Anna-Maria Mountfort is the winner of the $10,000 credit to her Visa Business card for having the best elevator pitch among the five finalists who competed by giving their pitches during the 60 second elevator ride to the top of Toronto’s One King West Hotel And Residences. Anna-Maria’s business, mimiTENS, makes specialty children’s mittens right here in Canada.