Video: Costs of Starting a Small Business in Canada

As you get into small business ownership, you will notice that there are costs associated with nearly everything.  This is normal and to be expected.

The video above, titled “Costs of Starting a Small Business in Canada”, will take you through the various costs that you have to consider as you start a small business in Canada.

This video is part of the small business video series, which you can access here to learn more about starting up, building a business plan, finding funding, and more.

Costs of Starting a Small Business in Canada

As you get into small business ownership, it is crucial that you understand that there are costs involved.

A good rule of thumb is to assume that everything costs.

To be prepared for the process of starting up, the day-to-day operational efforts of your business and expect the unexpected, it is a good idea to have a budget in mind.

Additional funding may be needed, but let’s start off slow and explain the process of what to consider.

1. Initial Startup Costs
2. Operational Costs
3. The Unexpected Costs

As we get started in determining the various business startup costs one may have, it is important to note that no business is alike.

A brick and mortar business for example, like a restaurant, may have business expenses that will vary quite a bit from a web based business, so it is a good idea to be aware of this. Planning your own model individually will always be best.

We will be reviewing the different types of costs that a business may have, starting with the startup costs; the operational costs, which are also the day to day costs of running your business, but also costs that may be unexpected and how to best plan for them.

Initial Startup Costs

When starting a small business, there are a hundred things you have to think about. It’s not always easy.

It is always however recommended that you have a business plan in place, as a clear plan on paper will always help guide you on the right path. Especially when thinking and planning for your startup costs.

Your initial startup costs are generally the startup costs that are immediately required or will be required as you start your business.

These costs are the ones that you generally need to get your business off the ground and may include things like:

– The needed tools, supplies, inventory, or equipment
– Marketing materials
– A website
– First month’s rent
– Perhaps your first wages, for yourself and your staff

Every business is different, so different costs may be required initially for your unique type of business so be sure to do the needed research to determine what those are.

To differentiate the startup costs from the on-going costs, it is important to remember that startup costs are those that you can’t launch your business without. Basically, if this cost isn’t covered, you can’t start up.

Let’s take a cleaning business for example:

If you are starting a cleaning business, let’s assume you will run it from home for the first 6 months. This removes the cost of rent, to store all of your materials. But, to start that cleaning business, you need a few startup costs; these include:

– Some cleaning supplies, like chemicals, brooms, brushes, and so on.

– You may also need some equipment, like a carpet cleaner, a vacuum, a steamer

You need these things to do the actual work!

But before you can start working, you also need a website, so your customer can find you. A business card, so you can share that with customers. Maybe you need a vehicle to get to and from jobs?

These are all initial startup costs that you should consider.

Now, if you were just starting a web-based business, your startup costs may be limited; like having a website, hosting, some security, and some marketing money.

Whatever the business may be, assume that you need startup money to cover the initial start up costs at the very minimum.

Operational Costs  – “The Day-to-Day Costs”

Let’s say you’ve set aside some money to cover your initial startup costs. These hopefully take care of the pre-launch process, taking care of the tools, inventory, website and whatever else you may need.

And you’re ready to launch!

Now that you are up and running, you have to worry about your operational costs.

These costs are your day-to-day, month-to-month costs.

Without these costs, your business cannot advance, can’t grow and quickly can go downhill.

But how do you know the day-to-day costs?

Well, your day-to-day costs are the ones your business needs to have in order to operate successfully. These can be different costs for different businesses but are usually the ones that are re-occurring and needed.

Costs like:

– monthly rent
– your utilities
– your ongoing inventory costs
– ongoing marketing costs
– salaries and wages of staff
– and your taxes

Just to list a few. But that’s not it – remember that everything costs money, so don’t just think about the “bigger costs” but keep in mind those little ones that add up as well.

Little costs like:

– printer paper or ink
– paper clips
– office coffee
– security system subscription
..and so on

These costs add up.

A quick fact; business analysts and cost-saving experts working with some of the biggest businesses in the world have found that an average business has 20 to 25% of its costs, generated from these small add-on expenses.

So plan for these carefully and as each month goes by, be sure to re-visit the costs and re-budget to see if you truly need them or not.

Small costs are easy to slip through. They eat up at a bigger budget over time if not carefully managed.

The Unexpected Costs

As you get into a business, you will quickly learn that all that you planned for, isn’t always how things turn out.

This may be a good thing, but it could also be bad.

Every business, no matter how successful, should always prepare to have some of those unexpected costs, or hidden costs as some may put it.

These unexpected costs vary from business to business and it’s possible you will never have any, but planning ahead of time and having that rainy day fund available will always be a good strategy – just in case.

Some of the typical unexpected costs can include the things shown below:

-Equipment Failure

-Taxes

-Supplier cost increases

-Insurance

-Increased rent

-Delayed payments

-Illness

-Damaged inventory

..etc

In a perfect world, everything is carefully planned out and you know your incoming and outgoings. But, sadly, unexpected costs are possible and business in general, can be pretty unpredictable.

For a second, put yourself in a situation where you are a Uber driver, and this your business. Your revenue depends on the number of rides you give. But what happens in the morning when you wake up, your car won’t start. Your revenue is down the drain for that day, plus, you have to invest into fixing whatever the issue may be.

The unexpected costs are random. They can happen at random times and be scary. So planning, and setting aside some money for such things is beneficial.

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One thing is for sure, when starting a small business in Canada, you will run into a number of costs.

This is unavoidable.

Now, the plan is to ensure you have these costs covered before you put yourself and your business at risk.

A business plan will always help prepare you as much as possible. It will get you thinking about those needed startup costs, the on-going operational costs and prepare you for some of the unexpected costs of business ownership.

As you become aware of these costs, you can plan to seek additional funding if needed.

If you have found the above video helpful, review the other small business startup videos in the series as we will be discussing various things related to small business ownership. From determining if you are ready to be a business owner to a few ideas that you can consider, uncovering some of the costs to start up or to run the business, and seeing all that you will need to be successful; be sure to check each video start to finish and share your comments with the experts at Canada Startups if you have any further questions.

Small Business Startups and Ownership