Flock Free Nation

No nonsense information on small business.

Oct 5, 2011 - 2 minute read - Comments - business news

Canadian Government Introduces Hiring Credit For Small Business

The federal government has announced that it will grant a one-time tax credit based on the increase in an employer’s employment insurance (EI) premiums paid in 2011 over those paid in 2010. The credit will be calculated on the employer’s 2011 T4.

The business that are eligible for this tax credit are those who paid $10,000 or less in EI premiums in 2010. This effectively means that the credit is only available to smaller companies that don’t have a large number of employees. This is because a larger employer would pay more than the $10,000 in EI premiums. For example, a company with 11 employees earning $38,000 each would be too big to qualify for the credit.

The practical outcome of this is that an employer could hire an additional employee at $40,000 per year or two additional employees at $20,000 per year and not have to pay any additional EI premiums for 2011.

This is a useful tax credit because it will put more money in the hands of some small business owners who will in turn send it through the rest of the economy by buying goods and services.

While the tax credit is welcome, make sure you base all of your hiring decisions on what makes sense for your business and not on tax policy.

Oct 4, 2011 - 2 minute read - Comments - legal

How To License A Business In Regina

Regina is different from many other municipal jurisdictions because there is a good chance that you will not require a business license to operate your business. The city of Regina explains it this way:

All businesses require a licence from the City of Regina unless:

  • The business is considered a non-profit corporation under provincial jurisdiction.
  • The business operates from a premise which pays commercial or industrial property taxes, with the exception of second-hand dealers, pawn brokers, and coin dealers.

What the second point means is that if your business is operating from a normal commercial business premises, it will not be required to obtain a license unless it conducts the specific business activities mentioned.

As home-based businesses do not pay commercial or industrial property taxes, they will require business licenses. There is an exemption for home-based businesses that do not gross more that $5,000 in revenue as determined by the Canada Revenue Agency.

Home based businesses with revenues above the $5,000 threshold will have to obtain a Resident Business License at a cost of $112.50 for the first year and $225 annually for every year after that.

Non-residents wanting to do business in Regina are required to obtain a Non-resident Business License at a cost of $450 per year.

The business license application process can be completed either in person or by mail. The business license application forms can be downloaded here.

Oct 3, 2011 - 2 minute read - Comments - business planning

The Difference Between A Hobby And A Business

People often get into a particular type of business with the idea of pursuing a passion while earning a living. This is a good thing. Having passion for what you are doing can make it much easier to persevere through difficult times. It makes going to work every day a pleasure instead of a chore. No more Sunday evening stress about Monday morning because you love what you do.

Unfortunately, many people have a passion for the activity the business does and not the business itself. This is well illustrated in Michael E. Gerber’s The E-Myth Revisited. He writes of a woman named Sarah, who had a love of baking pies. She started a business called All About Pies. Before long she was completely run down and even had even started to hate baking pies. She didn’t have a proper system in place to deal with all aspects of the business and she was running herself ragged trying to keep up with everything.

If you think that you’ll start a business based on your hobby just so you can get paid to do what you love, you are misleading yourself. The “business” aspects of running a business have to be dealt with and because it’s a small business, you will be the one who will have to deal with them. You won’t be able to afford to delegate all of the “business stuff” to others. Even if you could, you wouldn’t want to. You need to be in charge and make the strategic decisions that affect the direction of the business. You need to manage your business to make sure that your vision is implemented.

It will be up to you to wear all of these different hats to make sure that your business is successful. Gerber’s book does a good job of explaining how to do this. I recommend that you pick up a copy learn about what you are getting yourself into before you begin the business planning process.

Sep 28, 2011 - 1 minute read - Comments - business news

Intuit Announces QuickBooks Intervention Contest

Intuit is running a promotional contest to encourage work life balance and to promote its QuickBooks software.

Over-worked business owners can be nominated or they can nominate themselves. Winners of the contest will be chosen at random from all of the eligible contest entrants. The winning business owner will receive $10,000 and the person nominating him or her will receive $10,000. If a business owner who self-nominates wins, he or she will get the full $20,000.

All entries must be received on or before 11:59:59 PM (ET) on January 31, 2012. If you are interested in nominating someone or nominating yourself, you can enter by using the online entry form.

Sep 27, 2011 - 2 minute read - Comments - legal

Copyrights In Canada

The Canadian Intellectual Property Office defines a copyright as:

Copyright is the exclusive right to copy a creative work or allow someone else to do so.

Copyright applies to all original literary, dramatic, musical and artistic works. These include:

  • books and other writings
  • music
  • sculptures
  • paintings
  • photographs
  • films
  • plays
  • television and radio program
  • sound recordings, such as records, cassettes or compact discs
  • performer’s performances
  • communication signals
  • computer programs

Copyright doesn’t apply to:

  • facts
  • themes
  • ideas
  • most titles
  • names
  • catch-phrases and other short-word combinations

It’s not necessary to register a copyright because a copyright automatically exists when the work is created. However, having a registered copyright is a signal to others that you own the copyright to the work. It can also make it easier for a company to find you if they want to license your work.

Generally speaking, copyrights last for the life of the author plus 50 years following death. There may be some exceptions in specific situations.

The copyright holder is responsible for enforcing his or her rights under the Copyright Act. This has important business implications for the copyright holder. If a multi-national corporation infringes on your copyright, it is your responsibility to take them to court to enforce your rights. This can be prohibitive for artists and entrepreneurs that don’t have the money to support this kind of court action. It’s something to consider when assessing the strength of your copyright protection.

For more information, you can download the Canadian Intellectual Property Office’s A Guide To Copyrights.

Sep 26, 2011 - 4 minute read - Comments - business planning

How To Quickly Test The Viability Of Your Idea

People come up with ideas for businesses all the time. These ideas need to be tested to see if they have a serious possibility of becoming actual businesses. The first thing I like to do is some rough calculations to see if there is sufficient profit involved to even consider the opportunity.

An idea needs to meet a certain threshold of profitability to even be worth looking into further. We each only have so much time in our day. If you choose to work towards launching a business that has low profit potential, you are giving up the opportunity of doing something more profitable. This profitability threshold will vary from person to person but you should have one based on your own situation.

I usually use a spreadsheet to do these simple profitability calculations but it’s not necessary to go that far. These are the typical “back of a napkin” calculations that business people have been doing for years. Use whatever method works best for you.

The first step is to calculate revenue. Let’s use a hypothetical business idea of selling musical instruments online through a website. Let’s say you think 10 instruments will sell every day at an average price of $75 and you will earn a 10% commission on each sale. That’s 10 x $75 x 10% = $75 per day.

Let say you were also going to run ads on your site using Google’s Adsense ad network. Lets say you are going to get 1,000 visitors to your site a day and 1% of them will click on a Google ad, and that Google pays $0.10 per click. That’s works out to 1,000 x 1% x $0.10 = $1 per day.

Let’s summarize.

Revenue Source Daily Revenue Monthly Revenue Annual Revenue
Commissions $75 $2,281 $27,372
Google Adsense $1 $30 $365
Total $76 $2,311 $27,737

The next step is to figure out what expenses will have to be incurred to generate this revenue. For this hypothetical business, we’ll be using a home office. There will be costs for web hosting, advertising, office supplies, professional services, bank charges and utilities. Notice that I haven’t mentioned any start up costs. For the purposes of this quick calculation, we are only interested in on going expenses that would be listed on a business’s income statement. Let’s assume the following:

Expense Monthly Annually
Advertising $250 $3,000
Bank charges $25 $300
Office supplies $20 $240
Professional Services $208 $2,500
Web hosting $15 $180
Total $518 $6,220

This works out to:

Income $27,372
Expense $6,220
Net income $21,152

So our rough calculations show that the business would make about $21,000 per year. Any salary for yourself would have to come out of this number as would any taxes and payroll deductions.

This amount would also have to represent the return on any investment you’ve made to get the business running. You need to get a return on your investment or you’ve just bought yourself a job. How much would that investment be? Fifteen or twenty thousand dollars? A site like this would need to have the ability for people to create accounts and post their items for sale on the website without interacting with a person. This requires advanced website development, which is beyond putting up a simple brochure-style website.

All of the numbers above are estimates and have not been researched. You might dispute that the assumptions I’ve made are accurate. This is where the use of a spreadsheet comes in handy as it is easier to run different scenarios and see the effects of different assumptions. You will have research the variables that go into your quick calculations based on the industry you are entering. The more accurate you can get your assumptions, the more accurate your overall result will be.

Don’t be overly optimistic with your numbers. It will be much harder to achieve a given level of sales or to keep expenses to a low level than you think. Be realistic.

The bottom line is that our hypothetical business appears to be not worth pursuing, given the assumptions that have been made. There is not enough income to pay a reasonable salary and to provide a good return on investment.