Areas to consider before taking the leap into the world of start-ups
According to Statistics Canada, approximately 96 thousand new Canadian companies launch every year, making up close to 10 per cent of all Canadian businesses.
While many of these start-ups go on to thrive, others fail for a variety of reasons, including weak market demand, lack of guidance and poor financial planning. Despite having an innovative concept or an exciting business idea, close to 30 per cent of start-ups fail due to insufficient funding and resources.
Canada’s strong economic growth, robust R&D ecosystem, skilled workforce and generous funding programs make the country a great place to launch a new venture. However, before taking the leap, there are some important elements to consider and plan for.
Fundingportal, a firm that delivers software solutions and services to help organizations find, apply for and leverage grants and incentives, has launched a Start-up Series aimed at helping budding entrepreneurs adequately prepare for the road ahead.
Here are some key areas of focus for anyone with an investment-grade idea and a drive to make their concept succeed:
Leverage networks and mentors
Becoming an entrepreneur is not easy, but the chances of success increase when there exists an opportunity to tap into a network of others who have taken the start-up path or mentors who can help guide the process. If a strong network is not something that is readily available, many networking associations exists for those looking to connect with other entrepreneurs.
Understand the market
This may seem obvious to some, but many budding entrepreneurs believe so strongly in their idea that they assume others will as well. It is critical to conduct a market study, including a demand assessment and a competitive analysis, prior to launching a start-up. If demand for the product or service turns out to be low, competition ends up being fierce, or barriers to entry are too high, the concept may need to be revisited or a stronger differentiator may need to be implemented.
Study the consumer
What does the company’s target market look like? Who will be buying the product or service? What are their demographics, spending capacity, and desire for the company’s offering? How frequently will they be purchasing, and what is the potential for upselling and cross-selling in the future? Without a proper assessment of buyer profiles and how best to gain their attention, start-up funding can very quickly wither away trying to reach the wrong market.
Create a financial forecast
What are the upfront costs of launching the business, and how quickly will revenue be generated once it is launched? What are the opportunities for recurring revenue generation, what will the cash flow situation look like and how quickly can money be reinvested into the growth of the business? How much time will it take for the company to become profitable? Having the answers to these questions will come in handy when seeking funding as well as when determining if the start-up is on track toward success.
Create a business plan
Once market and consumer data have been obtained and a financial forecast has been created, entrepreneurs will have enough information to create a business plan. When applying for funding, having a solid business plan will increase the company’s chances of obtaining funds. Many private investors, as well as government funding agencies, will require some form of business plan before moving forward.
Develop a strong funding strategy
Speaking of funding, having a strong funding strategy is one of the most critical keys to success for any start-up. Understanding the private and public funding landscapes, having access to programs, and matching them to current and future projects are all vital to maximizing available funding both at the company’s inception and throughout its growth.
The good news is there are many programs aimed at helping start-ups and entrepreneurs from diverse industries and backgrounds obtain funding. However, since many funds are awarded on a first come, first served basis, being aware of newly opened programs, as well as their deadlines and application requirements, will help put any start-up ahead of its competition.
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