How to Use Failure to Your Advantage

The word "failure" has negative connotations. It is hard to think of anything positive when discussing failures. Yet, many business leaders will tell you that failure is not the end of the world, nor is it only negative. While a business failure certainly implies setback, it also leaves the door open for improvement, change and opportunity.

American business leaders have embraced the opportunities presented by failures while Canadians lag behind in this respect. The inability or unwillingness to compete is a common denominator of many Canadian business disasters. One of the first lessons to be learned from a business failure is not to cut back but, rather, to dive into the marketplace and compete with all your might. Learn from failure and allow it to be the catalyst that is your driving force. In California's Silicon Valley, business has embraced the concept of "failing well." You made good decisions but circumstances were beyond your control. If you are good at what you do, you'll eventually succeed. In Canada, the opposite is more common. If your business attempt failed, you'll have a very tough time securing capital for another venture.

Failure in business can be one of your greatest teachers. Successful corporate leaders have learned from their mistakes and impart that wisdom to their employees as well. By sharing this wisdom with one's staff, it carries the message that even the boss is not perfect. Moreover, it encourages staff to also learn from their mistakes. Every successful mega-company started small and did not achieve greatness overnight. When your staff appreciates the growing pains of a company, they can become part of the driving force to continue propelling the business forward.

This doesn't mean that one should create a culture that focuses on failure. Just the opposite is true. A business environment should strive for success. Ultimately, that is the goal that we wish to achieve. However, every successful path has setbacks and failures. Learn to appreciate that none of us is perfect and we can learn something new everyday. The only way to avoid failure is to stop trying to achieve. Use every setback to your advantage and ultimately you will win.

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How the Self-Employed Can Save on Taxes

If you are like more than two million Canadians, you own your own business, either fulltime or part-time. Despite the sometimes heartaches of being self-employed, there are many advantages. Many entrepreneurs, though, are unaware of the various tax benefits available to them. In fact, running your own business can increase your after-tax income and contribute to family wealth.

Entrepreneurship and self employment promote a spirit of innovation, ultimately contributing to economic growth and vibrancy. As such, the government encourages entrepreneurship by taxing it at lower rates than regular income.

It is not uncommon for a new business to incur losses as it gets off the ground. These losses can be used to offset revenue from other sources, assuming you have a reasonable profit expectation as the business progresses. As your business begins to turn a profit, you can incorporate and the profits can remain in the corporation as a reinvestment in your operations. It is also possible to leave the profits in the business if you do not need a salary immediately. Thus, you can defer paying personal income tax. A salaried individual cannot schedule when to pay taxes. However, when you are self-employed, you can time payments to yourself when the tax payments are to your benefit.

Profits held in the corporation are taxable in the year they are earned. But, the corporate tax rate is low on the first $500,000 of active business income. While rates vary between provinces, all are below 20%. Personal tax rates on comparable amounts can be as high as 45%. It is also possible to pay salaries to family members in the business and have it taxed at their lower rates. Another possibility is to pay dividends to family members who own shares of the company and, thus, benefit from capital gains exemptions.

There are numerous possibilities for self-employed Canadians to benefit from management of taxes and income. All possibilities and options should be discussed at length with your tax advisor.

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Ways to Finance Your Business

With so many types of business financing available today, it is advisable to check carefully which type is best for your specific purpose.

The most traditional type of financing is debt financing. This is a straightforward loan that is repaid with interest over a certain pre-determined period of time. Generally, it is not an unsecured loan and will require some form of collateral against default. Debt financing can be either short or long term.

Your business may qualify for a line of credit. This loan is generally attached to your chequing account and can help when your cash flow fluctuates greatly. Some business entrepreneurs have secured lines of credit using their personal assets as collateral.

The easiest money that is available quickly is borrowing from your credit card. Although the cash is available immediately, the rates of interest are extremely high compared to commercial loans. This truly should be a last choice option.

Often, a supplier of equipment or machinery will offer financing for your purchase by providing payment terms of 30 – 45 days or extended payment plans with interest. Merchandise is sometimes sold on consignment whereby the buyer only pays for merchandise that is actually sold.

Equity investing involves funding by investors who, in return for their investment, receive a share in the ownership of the business as well as a percentage of the profits. Generally, equity funds are unsecured against the company's assets. If a business owner is trying to raise a large amount of money, it may be possible to use both equity funding and loans against assets to secure the needed amount.

Depending on the type of business you own, there are various types of equity funding available. Angel investors generally are wealthy investors who invest in small businesses and are looking for a healthy return on their investment. Venture capitalists primarily invest in high-tech or leading edge businesses in return for partial control and management.

Large businesses seeking finance may sell shares of their business on the stock exchange. Profits from the company's growth are shared among the shareholders.

Whichever method you choose, be sure that you and your financial advisor examine all the options carefully before any cheques are written.

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Tips for Business Financing

The bottom line is that most businesses need some type of financing, if you don't have enough personal capital. There are numerous options available in today's market. Before borrowing from any source, conduct thorough research to learn how much the loan will actually cost and if that is the best option for you.

Before you approach any type of lender, you will need to prepare or update your business plan. Every lender needs to be convinced that you have the ability to repay the loan. A well written, detailed professional business plan will demonstrate to the lender that your business will indeed generate profits to enable repayment.

In some cases, a lender may require more collateral than the business can offer. The business may seem to have potential but the actual projected profits are slightly questionable. You may be asked to put up personal assets (car, home, personal investments) as additional collateral for your business loan.

Keep in mind that lending money is based on assessing risk and return. You may seem like a terrific person but that will only get you through the pleasantries of meeting with the lender. Getting down to the issues, the lender is in the business of lending money and making a profit from that loan. Therefore, you will have to demonstrate that your business does not present a risk and, moreover, that the loan will be guaranteed and will yield the return that the lender is interested in earning. Anything less than meeting the lender's expectations may result in not securing the loan or investment.

As a business loan or investment can be quite complex, and there are various tax issues to be concerned with, both personal and business; so it is most advisable to discuss all your options with your personal tax advisor. Although your business may need an immediate influx of cash, take the time to examine and consider the best options for your needs.

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What Government Funding Can I Get for my Business?

If you are like most Canadians in business, you've probably wondered if you can ever get something back from the government, after you've paid all those taxes over the years. It seems only fair.

The best situation is discovering that you are eligible for a government grant or contribution. Grants do not need to be repaid and contributions are only repaid in certain cases. The problem is that these are few and far between. Generally, grants are available for specific programs and have very specific criteria. For the most part, grants usually are provided for specific industry sectors or for certain demographic groups.

On the other hand, there may be other government options that are applicable to your business. For example, you may be eligible for a government loan guarantee. This would enable you to get a loan that you might otherwise not receive approval for. With the government behind you, the bank will be far more willing to talk with you.

If you hire employees that have certain characteristics, you may be entitled to wage subsidies to help offset their salaries. Check with your tax advisor who is currently on the subsidy list and whether your business can benefit from these employees.

If your business makes certain investments, you may be entitled to a tax credit or refund. Check the current information with the relevant tax authorities.

If your business does not qualify for a commercial loan, you may be entitled to a loan from various government departments. Also, these government offices sometimes offer loans to businesses at lower rates than commercial lending institutions. A little research may save you some money.

In general, before assuming that your neighbourhood bank is the only lending option that you have, check what's available from the government. You may be pleasantly surprised.

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How to Valuate Your Business

There comes a time for many businesses when it may be necessary to find investors or a buyer. In either case, it will be imperative to assess the value of your business. Long before you approach a potential investor or buyer, you need to know exactly where the negotiations will begin.

Valuating a business is by no means an exact science. There are several common methods that can be employed. Each method uses different assumptions and, logically, each method will result in a different value. Obviously, part of the negotiation will involve agreeing upon the method employed to determine the business' worth.

Many investors prefer the Discounted Cash Flow method to determine the value of the business. It is based on future cash flows. By employing this method, the investor can see a projection of the actual cash that will come to the company and thus determine the investor's return on investment. A similar method is determining the Going Concern Value. This method compares the current investment to future cash inflows. The revenues of previous years are used to project future revenues, on the assumption that the revenues will not change drastically.

Another common method to determine the value of a company is based on assets. A determination of the book value of the company is quite straightforward. The company's net worth, or shareholders' equity, is determined based on the financial statements of the company. Quite simply, subtract liabilities from gross assets and the result is the net worth or book value.

A similar method is determining the liquidation value of the company, based on the company's assets. This method calculates the income from the sale of all the company's assets. The assumption is that equipment and land would be sold at a price close to their market value. Inventory and receivables generally yield a reduced value. A liquidation value is generally employed for the sale of a business, rather than investment purposes.

Whichever method you use, it is best to consult with a professional advisor who can help avoid mistakes that could prove costly.

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Customers at the Centre

An all too common mistake of many businesses is losing sight of what is truly important. It is relatively easy to get caught up in strategic planning, marketing techniques, employee relations, technological upgrading, and a milieu of other items that are important to the successful operation of a business. But, when the dust settles, we tend to forget the most important element of our business – the customer.

The customer is the core of our business. Without customers, business is just…a business. It won't sell but it will be there, though not for long. In today's market, customers are bombarded with information and have more choices available than ever. Gone are the days of Pop's General Store. Pop sold everything and when he didn't, you made do without. Today, it's a buyer's market. Customers can shop for virtually everything they want. Internet shopping makes the world their marketplace. In order for a business to attract buyers, they must be able to reach out to that customer in a way that will get the business noticed.

Find out what the customer really needs or wants, not what you think. What issues are affecting the customer that will cause them to need your product or service? Why should the customer identify with you?

Sometimes, the customer is unsure of what they need. They may know that they are in a certain situation and "something" could help them, if they only knew what it was. This is a chance for your business to fill that void. Customize your service or product to help the customer.

Think outside the box. Inside the box is your business. The customer is outside. Find out what your business must do to break through the constraints. Remember that you need the customer more than they need you. However, when you can create the link that makes their needs your needs, you'll put your business on the winning track.

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What Should Go in My Business Plan?

A good business plan is more than merely a document. It is a carefully designed outline of your business, a veritable blueprint that accurately describes your business and all its components. Business plans differ in length and detail, depending on the nature of the business. However, there are certain basic elements that a good business plan should contain.

Begin with the Executive Summary. Many consider this to be the most important section of the plan. It provides an overview of the key points of the business. It should contain highlights from all sections of the plan and should be written in an interesting, concise manner, not to exceed two pages. Often, the reader will only read this section. If it doesn't grab the reader's attention, they may not go further.

Follow this with a detailed description of the business opportunity. In simple language, describe what this business will do and why it should succeed. Why are you the right person for this business? What is your vision?

You have done your market research. Put the results into a detailed marketing plan. This section of the plan should demonstrate how you plan to enter the market. How do you plan to promote your business? What are your pricing and sales strategies? How large is your potential customer base and how do you identify them?

Build an organizational chart. Describe the key members of your team and what will be their roles. Include the qualifications of the leading managers, including you. This section should clearly convince the reader that this business will have the team to make it happen.

Follow the organizational chart with a description of the operational requirements. How will the business operate? What are the physical requirements? What types of technology will be employed in the daily operations?

Now comes the number crunching. The financial section should contain a detailed outline of your financial forecast for the first three to five years. The first year should be far more detailed. An investor should see that you truly understand the business. This section should contain cash flow statements, profit and loss forecasts, and sales projections.

Remember that the language of a business plan should be directed to an outsider. Make the plan realistic and believable. Invest your time in preparation as this document may be the key to launching your business.

More help on setting up a business plan

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Do I Need a Business Plan?

A business plan sounds like a complex study. In some cases, it may be. But, the question is asked if every business truly requires a business plan?

The answer to that question is "yes", more often than not. A viable business, rather small or large, should make use of a well-designed business plan at some point in time.

Starting at the time when the business is still but an idea, a business plan is an excellent way to organize ideas. It allows you to create a filing system in which the various cogs and wheels begin to come together into a working machine. Long before you begin actually getting the idea off the ground, your business plan allows you to draw a picture of your idea – so to speak – and stand back to take a look if there are any mistakes or problems. Also, none of us are perfect. Especially if we are dealing with a complex idea such as a new business, it is best to have others review our concepts. Your business plan is an excellent way to allow others to help you develop your thoughts and use their feedback to improve what you have begun.

As your business begins taking shape, you will need the business plan to help interest possible investors. Your bank may wish to see the plan when you begin discussing credit with them. Perhaps you have decided to take in a partner. The business plan will be dissected at your meeting. The business plan is the blueprint of your business. It should accurately describe the concept. It will discuss the goals, milestones, financing, cash flow, staffing, and virtually every aspect of your business. It is the theoretical side of the entity. Also, a good business plan should be updated as the business begins operating, especially in relation to financial projections.

Invest the time to write a proper business plan. It is an investment that will have a guaranteed positive return.

Here is some business plan software to get you started.

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Where Passion Can Lead

In today's fast paced, high tech world, young people at the beginning of their careers face a tremendous amount of questions and, sometimes, stressful issues. Perhaps one of the most perplexing questions facing students today pertains to career direction and the road to success.

Many would like to believe that pursuing certain courses of study or entering specific fields is the guarantee to a stable, lucrative career. Would that were true; universities would be an entirely different entity. But, the truth is that there are no guarantees for success. Hard work is still a required pre-requisite for advancement. Yet, if one were to ask business executives for their advice, many would say that passion is an important trait to have.

Of course, it is advisable to do some research when planning a course of study. Look ahead and see where the markets are heading. Which fields are emerging and will present the best employment options several years from now? Which fields have room for advancement? Follow current events and see where money is being invested these days. But, there is still more to take into account.

A career should be more than a job. A job produces income but life is more than just money. And, over time, a job that is just a job starts to pale. Looking ahead, one must imagine where they would like to be and what they would like to achieve. Achievement requires personal drive and that requires a degree of passion. It is passion that gives the personal drive to forge ahead and get the most from your career. An MBA is an important academic credential. Yet, there are many people who have succeeded in business without an MBA. Their passion for success has given them the drive to excel and rise above challenges. Passion is the adrenalin that makes each day a new and exciting experience. And, it is passion for your career that gives you the winning edge over everyone else.

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