Canadian small business owners have always been known for doing a lot with a little. Now a new survey from Quickbooks developer Intuit Canada shows how our bootstrapping entrepreneurs are getting the job done. The survey was conducted to gain insights from successful small business owners at different stages in the entrepreneurial lifecycle and found that the majority (58 per cent) of Canada’s small business owners started out with less than $5,000.
“Canada’s entrepreneurs have invested their lives to pursue their dreams,” said Jeff Cates, managing director of Intuit Canada. “This study provides an opportunity for all of us to better understand what it takes to run a successful small business. Insights like these help Intuit design products and services focused on helping start-ups make the most of their initial financial investment.”
A majority of small business owners reported making a risky financial decision when they started out. A total of 19 per cent said they took out a loan or line of credit, 18 per cent drained their savings account, and 15 per cent maxed out their credit cards. The study also found that one-in-three small business owners underestimated the amount of time they would spend on financial management.
“All the money in the world won’t help a budding entrepreneur who doesn’t understand basic accounting principles,” said Mark Simpson, professor, Institute of Entrepreneurship and Community Innovation, George Brown College in Toronto. “While the allocation of resources might change based on the business, the bedrock principles of understanding cash flow, knowing your customers and minimizing risk remain. Small business owners can set themselves up for success by embracing these principles and investing in the right financial management tools.”
The Critical First Year
The first year can be both difficult and rewarding for small business owners. Respondents said that:
- Getting started is tough: One-in-three (34 per cent) admitted that their first year was their hardest.
- Perseverance paid off: The majority of Canadian entrepreneurs (57 per cent) felt they were successfully up and running within a year.
- Customers reward: Making a profit (43 per cent) and getting their first customer (30 per cent) where their greatest accomplishments in their first year of business.
Turning a passion into a viable business is the goal for many, but it doesn’t come without some hard lessons learned. When looking back on year one, successful small business owners wished they had:
- Learned financial management – 17 per cent.
- Found a mentor – 15 per cent.
- Created a business plan – 14 per cent.
- Sought professional advice earlier – 11 per cent.
“When I first started my business, I quickly realized that working on multiple projects and revenue streams meant I needed to get a handle on my finances and develop a better understanding of my business,” said Jerry McIntosh, owner of McIntosh Media in Toronto. “I was hesitant at first, not knowing a thing about accounting, but I found QuickBooks to be very intuitive and in no time I was navigating the program, developing reports and issuing invoices.”
Is $5,000 Enough?
Experts emphasize the importance of spending time and money on planning and education in order to get off to a good start.
“The first year of a business is critical. Preparing yourself, by doing market research, attending conferences, or enrolling in a business and financial management course, is a great way to build a solid foundation for your business,” said George Brown College professor Simpson. “Above all, entrepreneurs need to develop a network, forge relationships, and make face-to-face connections. These are the investments that will see you through those inevitable rough patches, and lay the foundation for success.”
The full report is available on the Quickbooks website.
Canadian Entrepreneurs by the Numbers
Data from Statistics Canada shows that small businesses (those with less than 100 employees), play a vital role in the economic success of our country:
- 600,000 – Jobs created over the last decade by small businesses.
- 20,000 – Jobs created in the last year by small businesses.
- 48 per cent – Portion of the total private sector labour force employed by small businesses.
- 42 per cent – Portion of private sector GDP in Canada contributed by small businesses.
At the same time, data shows these fledgling new businesses remain vulnerable:
- 85 per cent survive one year.
- 70 per cent survive after two years.
- 51 per cent survive after five years.
Angus Reid Public Opinion conducted an online survey between Aug. 16-21, 2012, among a representative sample of Canadian small business owners recruited from the Angus Reid Forum, Canada’s leading online national access panel. The margin of error for a sample of this size is plus-or-minus 4.4 per cent, 19 times out of 20, and the results have been statistically weighted according to Statistics Canada’s most current age, gender, region, and education Census data.