Creating a contract - protecting yourself and your business

In business, a well designed contract protects you from any unknown variables, much like an insurance policy. You pay for the policy, hoping that you’ll never have to use it. More specifically, a contract helps you manage and avoid potential risks. Due to the unpredictability of the business world, smart professionals create contracts to reduce any unnecessary costs and minimize all risks.


Why should you use a contract?

A contract is a legal document used between multiple parties to outline a business relationship. The contract becomes valid only when the parties involved agree to the terms and conditions by signing the document. It should detail the:

• expectations of the stakeholders;

• the relationship between all parties;

• the nature of the transaction;

• and the next steps of the relationship including any recourse in case of disputes.

It is often used for:

• During the hiring of freelancers/vendors/suppliers

• During the purchase of goods or services

• Real estate transactions

• Business partnerships

• Non-compete, non-disclosure or confidentiality agreements

With a contract between parties, all issues can be outlined in detail, thereby avoiding any problems that may happen in the future.

Things to be aware of in creating a contract

Don’t be vague, make sure the contract is detailed – The ideal contracts are detailed and focused. Make sure that the terms and conditions are simple, specific, and that avoids any uncertainty. The more specific you are in your expectations or terms, it becomes very clear on what is to be done by all parties and by what time.

Identify all concerns you have – Make sure that all your concerns are outlined and are answered. You don’t want to find out the hard way in a situation that could have been avoided.

Understand the laws – Make sure that you know your provincial and even local laws that can affect the contract. This is especially true for any real estate transaction where the laws change by province. It is best to consult a lawyer who is knowledgeable about your industry and can advise you on the proper stipulations.

Review the contract with a lawyer - Never sign the contract until you’ve gone over it with a lawyer. Many people make the mistake of only going to the lawyer after the agreement has been signed or when a problem came up.

A contract is meant to be used as a way to protect yourself and facilitate any business transaction. It creates a common platform from where all parties can move forward in consummating a business relationship. It also is used to protect yourself from any harm or legal problems and can be one of the best decisions you’ll make for your business.

Small business financing - tapping into Ottawa's R&D tax incentive program

SRED is known as the Scientific Research and Experimental Development (SR&ED) Tax Credit program. According to the Canadian Revenue Agency – the SRED program is meant for the businesses that conduct research and development in Canada. It is the largest source of funds from the government in regards to R&D programs that supports industrial research.

In terms of the amount of credit received, the SRED program offers:

• For a Canadian controlled private corporation (CCPC), they can earn a 35% federal credit on their first $3 million in R&D expenditures.

• For large companies that exceed certain taxable income or capital limits, the federal credit drops to 20%.

For a small business, this means that you can claim up to 65% of your engineering team’s overhead – especially those involved in R&D. As an example - if you spend $2 million in salaries for your R&D team, you receive $1.35 million refundable tax credit, when the overhead rate is included in the calculation. So when you are considering outsourcing your R&D, consider that the government will pay YOU money to keep the intellectual research in-house!

What qualifies for the tax credit?

To determine whether your company qualifies for the tax credit, ask yourself these questions:

• Do you deal with challenges of a technical nature – software, hardware or industrial.

• Did you spend money to solve the technical obstacles?

If you said yes to both questions, you qualify for the credits. They can also be claimed on any work that meets these criteria:

• Experimental Development- to create or improve materials, products or processes.

• Applied Research- to advance knowledge with a specific application.

• Basic Research – to advance knowledge without a specific application.

• Support work for the above.

As you can see, the scope of what can be claimed is broad and could probably apply to most Canadian business.

Tech company start-ups know that they can file for the SRED claims, and for many, these refunds help them get through to the early stages of the company. Almost all of a start-up’s expenses can be claimed for R&D credit and are highly encouraged. This doesn’t mean that engineering, architectural, and programming firms cannot apply for the SRED credit, even if they are under contract from clients. They should be filing their claims immediately if they have been contracted to provide R&D services.

Check the Canadian Revenue Agency site, as it has all the information regarding contracting for services, including contract requirements. The best way to determine if you qualify is to download one of their industry specific guides that will outline the SRED application process.

Is owning a franchise right for you?

In the last few years, the popularity of the franchise business model has skyrocketed. Many people are attracted not only by its proven business model but also the ease in owning one. While the success rate for franchises is somewhat higher than owning independent businesses, there is still the possibility that an individual franchise won’t succeed. So, before purchasing a franchise opportunity, ask yourself these six questions:

Are you ready to run your own business?

As an entrepreneur, you can be expected to work more than 60 hour weeks, doing all the dirty work; such as mopping floors, emptying the garbage and handling upset customers. If you are willing to put in the work in the early stages, and see it through, you have a higher chance of success.

Are you willing to completely follow the franchisor’s system?

The most important part of a franchise’s success is the brand consistency that customers find from one franchise to another. By being a franchise owner, you are following a particular system determined by the head office. If you’re an entrepreneurial person, think twice before purchasing a franchise as you may not like to conform to a formula and may chafe against the restrictions.

Are you able to afford it?

Understand what your financial requirements are going to be and then double it! One of the major causes of failure for franchises is being poorly capitalized. Do your research – ask your franchisor what your start-up costs will be, including any detailed expenses such as equipment financing and rent. You will not only need money to open your franchise, but also to manage it until it becomes profitable. And for some franchise businesses, it may take up to a year to break even.

Does the corporate headquarters have a history of success?

You should do your research into the owners of the company, including their business background and successes. Work with an accountant and review the finances of the franchise. Is it solid? Don’t be afraid to ask questions, as it’s their support and experience which will guide your success.

Do you like the franchisor’s staff—those people with whom you will be working?

A chain is only as good as its weakest link. Which means that you should investigate the staff that provides support for your franchise. Make sure that you’re comfortable with them and are able to build a good relationship.

Is your family behind you?

This applies to all entrepreneurs – starting a business, be it a franchise or an independent, will require a lot of sacrifices. Especially in your personal life. For this reason, communicate clearly to your family that you will be busy, and set some boundaries. They will need to be supportive of your decision and are willing to compromise.

Finally, hire the expertise of professionals, such as an accountant and a lawyer. By creating a team, you’ll be well prepared to face any challenges that may come upon you. By evaluating the franchise you want to purchase and your own strengths and weaknesses, you’ll have a pretty good picture whether you’re ready to take the next step in owning a franchise business.

How to manage work/life balance as an entrepreneur

Choosing the life of an entrepreneur is not for the faint of heart. It can become hectic, with the line between family and work being non-existent (including those who run home-based businesses). Maintaining a healthy balance between your home environment and work can be difficult, especially when you are always “on”. Especially when clients, suppliers and employees are able to reach us at all hours. You can get so bogged down with work that you will forget what it is like to have free time and can neglect your family and friends!

So what can you do to maintain a great work /life balance? How can you juggle your work and keep it from interrupting your family or social life? Our tips will help you maintain that balance while also helping you grow your business.

Manage your time

The most important part in managing time is not being able to schedule your hours, but in how to set priorities. Your work/life balance depends on what your life goals and passions are. Once you know what your priorities are, you must then analyze those items that compete for your attention. Decide what you want to focus on and discard what is not important in your life.

Be ready to communicate your expectations to people - which sometimes requires you to say “No” to certain activities. You have to help them understand that being an entrepreneur means working long and crazy hours. Have a discussion with the people close to you and plan for re-scheduling conflicts.

Make a schedule for your day - end your day at the same time, and try to stick to it. It’s not always easy as there is always work to be done. In some days, you might find yourself fighting fires with no one to help you, and you’ll be up late into the night. You must have strong self-discipline as there is no one who is going to be looking over your shoulder telling you what to do.

Delegate

Although doing everything yourself makes financial sense when you start out in your business, you should consider hiring contractors, consultants and employees when the time is right. Micromanaging is a straight path to not only stress, but also making mistakes which can affect your business. The benefits of delegating outweigh the risks and costs, so giving others the responsibility of doing minor tasks from writing a blog to your accounting, you’ll focus on what you’re good at – which is growing your company.

Focus on your health

No matter how busy your schedule is, always make time for fitness. Even if it means going for a long walk around the block, just do it on a regular basis and get your heart pumping. A good workout:

• Helps reduce stress ,

• Allows you to maintain a routine,

• And focuses your mind.

Be it going to the gym or playing a sport, physical activity helps your body create endorphins which is known to keep people’s mood up.

Being unreachable

Running a small business means dealing with all kinds of issues and putting down fires. Your employees, suppliers and clients are constantly vying for your attention by phone and email. To avoid being overwhelmed by the constant barrage of emails and calls, unplug yourself from any communication device at certain times of the day and focus on getting your work done. Block out some time during the day to respond to emails or voicemails.

Get a life

It’s very easy to get sucked into the life of an entrepreneur. You are passionate about your business and you work hard to make it successful. In the first few years, you may need to work around the clock to get your business off the ground, but it will catch up to you, leaving you with high blood pressure, broken relationships and more.

To keep a balance, you must be able to walk away and spend time on things that you enjoy. As much as you put your focus on work, put the same on your recreational activities. Don’t forget about the most important relationships in your life – keep your lines of communications open between your family and friends so that you’re not isolating yourself from them.

Being an entrepreneur requires you to make many sacrifices; however, you have to realize the bigger picture –you want to be able to enjoy the fruits of your hard work. If you don’t pace yourself and schedule regular fun time, you’ll definitely burn out.

What is the best business advice you’ve received?

Sometimes, as entrepreneurs, we’re not as perfect as we think we are. In those cases, we have to get our answers elsewhere, usually from our mentors, family, board of directors or even clients. We’ve asked the small business community what was the best business advice they’ve received and implemented in their small business careers.

Wisdom comes from failing, learning from it and moving on. The most successful business person knows that sometimes the accepted decision doesn’t always work. At that point it’s best to understand the situation you’re in and go with your gut – and the experience of others.

Here are some good ones to take to heart:


Brian Carter – Sr. VP, Sales at Global Spec Electronics

• This too shall pass. The challenges that you face are temporary, and that change is the only constant thing we have.

• Don't sweat the small stuff. Know your priorities and leave the unimportant stuff alone.

• Think (and act) two levels up from your current role. Always think bigger than your job and you are here to help your boss make money.

• Don't take business decisions personally. You are here to make money, so all decisions are geared towards that. Do not get emotionally attached to anything in your business as the time may come to let it go.


Dean Ekman, PMP - Deputy Director, Division at CTSC

The best business advice I have ever received can be summed up as:

• Do the right thing - whether it's related to legal concerns, contractual obligations, best business pactices or ethics - you can't go wrong.

• Don't confuse "business" and "personal" - it keeps everything cleaner in the long run. Keep everything separate.

• Remember why you're in business - if you say it's because you're "doing it for the greater good", or "because someone has to" or "it's thr right thing", that fine - so long as you never lose sight of being in BUSINESS - that means making (and collecting) enough money to make payroll and rent, invest and expand and (dare I say it) make a profit.


Adam Drake, CFA - Owner, Highland Investment Advisors

“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.” – Warren Buffett

I have this quote posted in my office. It’s a simple reminder to always act with integrity and work with people of integrity.

Pre-search your business name for FREE with CorporationCentre.ca

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A business name “pre-search” provides a preliminary search through the NUANS government databases** to provide results that show an “exact match” of the names you are thinking of using to register or incorporate your business. By checking the availability of your name before ordering a NUANS name report, you can save time and money spent on multiple NUANS reports!

Click here to find out more about name pre-searches and to order your FREE report on September 19th and 20th ONLY.

*Please note that the pre-search is offered to Canadian individuals and entrepreneurs developing names for the corporations or businesses, it is not intended for search houses or other company formation professionals to use repeatedly. CorporationCentre.ca reserves the right to limit the number of pre-searches.

** Please note that NUANS does not include the Quebec provincial registry, which can be viewed here.

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Faites une pré-recherche du nom de votre société gratuitement avec CorporationCentre.ca!

Les 19 et 20 septembre, CorporationCentre.ca offre à tous ses clients l’utilisation gratuite de son service de pré-recherche de nom.*

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** Veuillez, s.v.p., noter que la base de données NUANS n’inclue pas le registre des entreprises du Québec qui, lui, peut être consulté ici.

Reasons for creating an advisory board for your business

One common problem that entrepreneurs face is the problem of finding a group of peers who understand the challenges of running a business. Sometimes, with the constant battles of putting out fires, solving problems on a daily basis that they sometimes forget they need to take a step back from the business and deal with larger strategic issues. This is where an experienced board of advisors can come in and provide a sounding wall to vet ideas and strategies that will benefit the business.

Advisory boards are such a great tool that no small business should be without one. It’s like having a group of experienced consultants working for your company, those who can provide you with their:

• independent perspectives,

• experience,

• special skills,

• and network of connections to your company.

Is creating an advisory board right for me?

Although there are numerous benefits to having an advisory board, it does take a lot of planning and determination to create one. As an owner, you must be aware of confidentiality issues – to be able to trust that your advisors have your best interests at heart and not divulge company secrets. Likewise, you must be ready to communicate the issues that your company face, such as operations, employee problems and even opportunities. Without open communication from both yourself and the board, it will be very difficult for your business to benefit from this collaboration. Of course, when you recruit for an advisor, the person you want has to be capable of handling sensitive issues and confidential information.

For your advisory board to be effective, you must create guidelines in these areas:

Responsibilities – You should create a formal job description for everyone involved in the board. By clarifying their duties, there will be no overlap and misconceptions on their duties. When you recruit, be aware of what your organizational needs are, so you have the right expertise available.

Meetings – You should outline the frequency, length and location of your meetings. Remember, your advisors are also busy, so you should leave some flexibility in meetings to accommodate their schedules.

Compensation – Be clear on how you plan to compensate your advisors. Will you compensate them for attending meetings? And how will you do it – with cash or stock? You should be upfront about this – remember that your advisors are helping you out of their busy schedule.

Having an advisory board is a huge benefit to your small business, provided there is a clear direction and is supported properly by yourself and your company. It will allow your small business to compete against larger competitors by working with talent that might not otherwise be available.

Researching your business opportunity

The success rate of a new business getting past its third year is low. To increase your probability of success, you must ensure that the business opportunity that you explore is financially viable, has a market and that the idea is suitable for your personality. Before you take the plunge, take the time to do some research into the opportunity and see if it’s a right fit for you. . Here are some tips that will help you determine if your business opportunity is going to be successful.

1. Do your market research.

This is the first and most important aspect of your research. Is your product or service something that you would use in your life on a daily basis? If not, then why do you want to get into that business? Remember, your clients want to buy a product that will help them solve their problems. At this stage, you should contact a few prospects and provide a demonstration and get their feedback. Take a deeper look into the market; are there a lot of competitors? How are they doing? Is there space for another competitor such as you? By finding the answers to these questions, you’ll determine if your new business has a market opportunity.

2. What is your business revenue model?

Or in other words – how are you going to make money? Take a detailed look at your business - do you know clearly how the cash is going to come in and how much your prospects are willing to pay? Are the profit margins so low that you can barely make a living from the sale? If you don’t understand where the money is coming from, then you shouldn’t be getting into this business.

3. Know your numbers

Starting a business requires you to not only understand if your clients will buy from you, but also knowing how much it will cost to deliver that service. Once you know the numbers (and you should have already identified how much your clients are willing to pay for your product/service), you will be able to determine whether there is enough of a profit margin for your business to grow. A good tip to determine your start-up costs is to outline all the steps you need to take in order to deliver a product to your client. Then list the equipment or services that you will need. This list should indicate how much those start-up costs are going to be.

4. Seek professional advice

Get some advice from experts and other entrepreneurs related to your business. Do your research on the internet, try to find a forum, or an association that is in your industry and try learning as much as you can. Understand potential challenges or any barriers to entry that new businesses face, any rules or regulations, and as many costs that may be related to your business. It would be wise to spend the money in hiring experts such as a lawyer and an accountant to help you.

Starting a business is very exciting, however, if you haven’t done your homework, you’ll soon find out how stressful it can be. Always seek advice from experienced people and use it to your advantage. It’s best that you make the right decisions early than suffer a major loss down the road as a result of selecting the wrong business opportunity.

Business Planning: An important step towards starting your business

As an entrepreneur, you juggle a lot of balls.

From managing employees, sales, financial and operations, it’s easy to get lost, trying to put out the daily fires. If you don’t take a step back and take a look around, you may have realized that your business is not what you had originally started.

This is the point when you realize you should have sat down and spent the time in creating a business plan. Not just something that you’ve jotted down in the back of an envelope, but a document that maps out your long term strategic plan for your business.

Creating a business plan is important as it not only provides you with a compass – guiding you in the right direction, but also reducing the stress and frustration in reacting to situations on a daily basis, because you know the path you are on. A business plan also allows you to:

• Be visionary –identify where you’re going and keep you on track towards your goals;

• Execute with confidence – you know what your tools and resources are going to be and can handle any potential surprises;

• Be fiscally strong – you’ve already laid the groundwork for your financial health, knowing your expenses and profit margins.

What’s a business plan?

A business plan is a document that outlines how you are going to achieve success in your business and a step by step process on how you’re going to get it done. However, you have to realize that the information that you put in your business plan depends on who your target audience is.

Here are the items you need to keep in mind when writing your business plan:

1. Know your audience

Tailor your plan to your readers’ requirements. If the plan is to raise funds, then you must indicate how your potential investor would make a return on their investment and how long it will take. However, if you are communicating your future plans for the company, then the goals of the plan are different. Always remember to tailor the material to your audience.

2. Identify your customers

Use the plan to delve deeply into outlining who your customers are. Why would they want to purchase from you. What are their pain points? How will you solve it for them? Understand the size of your potential market and how it will grow over the next 5 years. By answering these questions, you will uncover if your business is sustainable for the long-term.

3. Who are your competitors?

You also need to know the size of your competitive market - how will you differentiate yourself? What kind of challenges will you face when you go against them? It’s important to know your competitor’s strength and weaknesses so you can exploit them to your full advantage.

4. The design of your plan

If your plan is a document, make sure that your plan is easy to read, well organized and looks professional. If you are doing a PowerPoint presentation, make sure that your key points are clearly stated and easy to read.

5. What is the ROI?

Most business plans are written with the goal of raising financing. So, know your numbers! You should be aware of how much money you’ll need to raise, what your profit and operating margins are and how you’re going to make money. If you’re looking for funding from investors, then you need to communicate clearly the return of investment that they will get. How long will it take for them to make back their investment and more? What will make them confident that you will succeed in this business – so that they know they will not lose their money? They also would want to know if you are prepared for all contingencies and can protect their investment from failure.

Finally, a plan is not written in stone. Due to changing market conditions or new opportunities, you may have to react quickly and adapt. You should review your plan every quarter, just to see where you are against your milestones and address as necessary.

Why Small Businesses are Important for the Canadian Economy

Are you considering starting up or working for a small business? If so, you will be making a strong positive contribution to the Canadian economy. In recent years, small businesses across the country have played a crucial role in stabilizing the often volatile economy in Canada, and there are a variety of reasons why.


Small businesses are job creators. They have helped to create thousands of new jobs in Canada. According to statistics published by Statistics Canada in July 2008, small businesses alone have accounted for 37 percent of new jobs in the private sector between 1997 and 2007. Since 2008, these figures have shown a steady increase.


As of July 2011, 98 percent of all businesses in Canada are now considered as a small business, with 48 percent of the work force being employed by them. According to the July report, there are currently more than 2.4 million small businesses across Canada, a number which will surely increase over the next few years.


Employees of small businesses currently account for more than two thirds of the employment in five major industries:


• Non-institutional health care (89 percent);

• construction (76 percent);

• other varied services (73 percent);

• food and accommodations (67 percent),

• and forestry (67 percent).


These statistics are more than likely to increase, especially if the state of the Canadian economy improves. In addition to contributing to the increase of the country’s employment rates, small businesses are also an integral part of the GDP. Some statistics to consider - in 2006, small businesses made up roughly 23 percent of Canada’s GDP. This figure varied from one province to another, and it peaked at 27 percent in both British Columbia and Prince Edward Island.


Two years later, Saskatchewan’s small businesses accounted for 35 percent of the GDP, while BC placed second with 32 percent. Not far behind in third place was Quebec, with a 30 percent contribution. One of the main reasons why Quebec’s small businesses have made such a significant contribution to the GDP can be attributed to the fact that more than 56 percent of Canada’s small businesses are located in Quebec.


Although small businesses in Canada are important, there is quite a bit of work left to do to make it easy for businesses to succeed. The Canadian Federation of Independent Businesses (CFIB) has released its new report which highlighted four key areas:


• better labor laws,

• reduced taxes to help businesses grow,

• a reduction of red tape,

• and better spending on services for small businesses


Their conclusion is that the government needs to be more involved in order to make it a balanced economic environment for entrepreneurs. With the chaos in financial markets, the strong hand of the government is required to provide a stable platform so that many businesses can succeed. A private/public partnership is required in order to address each of these issues, one that benefits both owners and employees.


Small businesses are currently on the rise, and it is expected that many more will be established across the country in the coming years. Consequently, the more small businesses that exist, the great their contributions to the GDP as a whole will be. So, if you considering starting a small business of your own, there is no better time to do so than now.