solutions for small business starting a home-based business a manual for success This document has been developed for the Internet by the Ministry of Competition, Science and Enterprise, Province of British Columbia and Western Economic Diversification Canada, Federal Government of Canada. Ministry of Competition, Science and Enterprise www.gov.bc.ca/cse/ Western Economic Diversification Canada www.wd.gc.ca Revised June 2002 Foreword Canada-B.C. Business Services is another joint partnership between Western Economic Diversification and the Ministry of Competition, This publication is part of the Solutions for Science and Enterprise. The program offers Small Business series sponsored by Western specialists who can advise on taxation, statistics Economic Diversification and the B.C. Ministry and business planning as well as a wide range of of Competition, Science and Enterprise. business information and interactive business Both agencies are committed to supporting the planning tools. needs of small businesses and further information Canada-B.C. Business Services has offices in about small business programs and services is Vancouver and Victoria as well as outreach available on each agency’s web site centres throughout the province in the offices of www.wd.gc.ca and www.gov.bc.ca/cse. Community Futures Development Corporations The Solutions series is also available on both and Government Agents. For locations, or for web sites as well as on the web site of Canada- more information, check their websites B.C. Business Services Centre (www.communityfutures.ca/provincial/bc or www.smallbusinessbc.ca. www.smallbusinessbc.ca). The four publications in the series are: • Business Planning and Financial Forecasting • Exploring Business Opportunities: a guide for entrepreneurs • BC Business Resource Guide: guidelines and requirements for business • Starting A Home-based Business: a manual for success solutions for small business home-based business i Contents Understanding What Information You’ll Need 20 Introduction – The New Reality 1 Keep a Research File 20 Chapter 1 – Is Home the Best Get Off to a Good Start 21 Choice for You 4 Understand the Regulations 22 Consider Your Reasons for Being Federal and Provincial Governments 22 Home-Based 4 Municipal Government 22 Assess Your Entrepreneurial Spirit 5 Licenses and Permits 23 Make an Inventory of Resources Available to You 7 Protect Your Ideas and Designs 23 Obtain Support from Other Patents 23 Family Members 7 Copyright 23 Make Separate Space Available 8 Trademark 24 Find Out if You are Permitted Industrial Design 24 to Operate 9 Integrated Circuit Topographies 24 Expect to Be Busy 9 Decide Which Business Structure to Use 24 Make the Right Decision 9 Produce a Business Plan 27 Chapter 2 – What Will You Sell? 11 Reasons for Doing One 27 Explore Possible Ideas 11 Preparing a Written Business Plan 27 Know What to Look for 12 Describe Your Business Concept 29 Watch Out for Scams 12 The Product or Service 30 Search Yourself for Ideas 13 The Business 30 Look Around You for Opportunities 14 The Industry 30 Search through Sources 16 Business Goals 31 Explore Several Ideas 16 Chapter 3 – How Will You Evaluate Your Business Opportunity 17 Reach Buyers? 33 Make the Task Interesting 17 Target the Market 33 Allow for Enough Time 17 Research Your Market 34 ii solutions for small business home-based business Survey Your Customers 34 Establish Records and Systems 62 Design Your Marketing Strategy 34 Use a Business Reference Manual 62 Draft a Marketing Plan 35 Decide on Filing Systems to Create 63 Select Methods of Selling 40 Obtain Insurance Coverage 65 Select Methods of Direct Sales 41 How Insurance Helps 65 Consider Indirect Sales Methods 44 Different Kinds of Insurance Available 66 Determine Price Structure 45 When Filing an Insurance Claim 67 Pricing to the Market 45 Arrange Your Financial Records 67 Cost Approach to Pricing 46 Money Coming In 67 Break-Even Price 46 Money Going Out 68 “Rules of Thumb” in Setting Prices 47 Petty Cash Fund 68 Promote Your Business 48 Journal/General Ledger 68 Use Advertising Wisely 48 Chapter 5 – Will You Make Money? 69 Seek Promotion 49 Understand the Basics 70 Turn Publicity to Advantage 50 Starting vs. Operating 70 Design a Promotion Strategy 51 Obtain Start-up Capital 70 Know Your Image 52 Secure Operating Capital 72 Offer Servicing and Guarantees 52 Seek Additional Funds 72 Revising Your Marketing Strategy 53 Shop Around for Best Deals 73 Chapter 4 – How Will You Operate? 54 Go Well Prepared with Questions 73 Organize Physical Space 55 Evaluate What You Discover 74 Why is Location Important? 55 Seek Professional Advice 74 What About Premises and Facilities? 57 Bring a Financing Proposal Package 74 Select Office Equipment 58 Feel and Look Confident 75 Assess Your Equipment Needs 58 Compose a Financial Plan 75 Materials, Supplies and Sources 61 Prepare Financial Statements 75 solutions for small business home-based business iii Estimate Your Market Share 76 Monitor Customer Credit 91 Forecast Your Sales 77 Respond to Growth 92 Scrutinize Your Prices 77 Say “No” 92 Calculate the Costs of Production Work Harder 92 or Services 79 Delegate 92 List Your Capital Equipment 81 Recruit Volunteers 93 Determine Your Start-up Expenses 81 Hire Staff 93 Prepare an Income Statement 82 Sub-Contract 93 Seek Strategic Alliances 94 Project Your Cash Flow 82 Respond to Change 96 Prepare a Balance Sheet 84 Projections and Forecasts 96 List Your Sources and Uses of Financing 85 Environmental Impact 97 Chapter 6 – Can You Manage Business Cycles and Economic Trends 97 the Business? 86 Explore Global Markets 98 Personal Style 87 Expand E-Commerce Capability 99 Time Management 87 Success Factors for E-Commerce 102 Build Relationships 88 Consider Leaving Home 103 Family 88 Use Your Business Plan to Evaluate 103 Lender 88 Chapter 7 - Conclusion 105 Suppliers 88 First Steps 105 Customers 88 Operational Essentials 107 Manage Your Finances 89 OneStop Business Registration 108 Seek Additional Capital 89 Equity Capital Program 108 Reduce Your Taxable Income 89 Western Economic Diversification: Business Number 90 Small Business Loan Program 109 Handle the Goods and Services Tax (GST) 90 iv solutions for small business home-based business List of Appendices Appendix A List of Business Terms 110 Appendix B List of Resources 112 Appendix C Organizations 114 Appendix D Different Kinds of Home-Based Business Opportunities 115 Appendix E Entrepreneurial Evaluation 118 Appendix F Self Analysis Questions 120 Appendix G Home-Based Business Reference Manual 121 Appendix H Filing System Categories 123 Appendix I Primary Market Research Techniques 125 Appendix J Sample Income Statement 128 Appendix K Sample Cash Flow Statement 129 Appendix L Sample Forecasted Balance Sheet 130 Appendix M Registering a Company Name for Use in British Columbia 131 Appendix N Assistance Directory 132 solutions for small business home-based business v Introduction No Place Like Home The time is ripe. If you’ve ever dreamed of The New Reality operating a business from home, conditions have never been better for success. The rapid growth Barbara St. Cyer of Kelowna invented a mop of e-commerce means there is a host of which could be used by the physically disabled... expanding business opportunities open to you. Lynne Werker of Burnaby set up her own Yet, the task of turning your dream into a reality consulting business when the firm she used to remains as much of a challenge as ever. The work for suddenly went bankrupt... fewer barriers to entry only stiffens the competition; so getting off to a solid start is Gordon Currie of Dawson Creek quit the crucial to success. This manual will show you computer training industry and launched how. an international graphic design business via the Internet... Home-based business continues to be one of the fastest growing forms of entrepreneurship in Delphine Smith of Victoria was so pleased with a British Columbia. Census data for 1996 show massage device she received from a friend that 155,455 people in British Columbia working she contacted its Asian manufacturers and from home. This represents almost nine per cent became a home-based Canadian distributor... of the provincial workforce. Recent studies Donna Gittens of Langley crafted porcelain suggest that proportion could reach 25 per cent jewelry as a hobby before she crafted a thriving by 2005. business selling unique terra cotta gifts and Indeed, every year 15,000 British Columbians curios... launch a new home-business, accounting for more than 50 per cent of all new business start- Leading the pack ups in the province. “From 1990 to 1998, the total number of small businesses in British Columbia has grown by 65 This growth has given working from home a new per cent... Unincorporated self-employed respectability. Municipalities are revising businesses with no paid workers are responsible antiquated bylaws, insurance underwriters are for almost three-quarters of the growth.” devising new forms of coverage, and loans officers are acknowledging the viability of home- Source: Small Business: A Profile of Small business operations. In response, many home Business Growth and Employment in British entrepreneurs have moved from hiding in Columbia (1999) basements to hanging out shingles. Equipped with the latest affordable computer and communications technology, the home has become a practical and attractive workplace. Traditionally, many home-based entrepreneurs were homemakers or workers undergoing a solutions for small business home-based business 1 career transition. Others – retirees, people with The purpose of this manual is to guide the efforts disabilities and hobbyists – also discovered of ordinary British Columbians like you who are employment opportunities in their homes. But the eager to start a home-based business that will rise of e-commerce has created many new prosper and grow. occupations – such as Web page designers, Running a successful home-based business software developers, service technicians, and on- doesn’t require magical formulas – just a viable line experts.