Small startups face a bureaucratic minefield

Extrait de : Small startups face a bureaucratic minefield, By PAUL BARKER, The Gazette, February 26, 2011

Red tape, risk, trademarks, etc.; 'If you don't have a plan, you'll never get there,' expert warns

Small-business startups face so many financial, legal and bureaucratic obstacles that, without a sound strategic business plan in place from the onset, the odds of success are slim at best.

"If you don't have a plan, you will never get there," says Michael Vineberg, a partner with the accounting firm of Raymond Chabot Grant Thornton in Montreal.

·         You are dealing with finite resources.

·         You have infinite ideas and infinite capability.

·         You probably have less money than would be ideal.

·         You definitely have less time than would be ideal because time is very scarce.

·         And you have fewer resources than would be ideal because you are starting up.

Vineberg, who teaches an MBA level case-method course at HEC Montreal on managing small and medium businesses, says it is imperative that an owner continually measures himself or herself against the plan.

"Identify how you are unique, and then identify how you can protect that uniqueness through trademarks and patents," he says. "The reality from a financial perspective is that it is going to take longer to get from zero to where you think you are going to go; it's going to take you more money, and it's going to take some flexibility."

That is particularly true where government red tape is concerned. Martine Hebert, a vice-president with the Canadian Federation of Independent Business and spokesperson for small to mid-sized enterprises in Quebec says the burden is huge and anyone going into business must learn how to cope with it.

During the CFIB's recent Red Tape Awareness Week in January, for example, Hebert went on the website of Service Quebec and keyed in the name of a fictitious new company that, for the purpose of her exercise, was involved in the construction sector.

Before the business could even launch, it would have to comply with a total of 17 obligations with 14 different departments and organizations at the government level.

"The paper burden and the red tape costs more when you are smaller," says Hebert. "You don't have an accounting department. You don't have a human resources department. Our numbers show that if you have fewer than five employees, it costs a small business $6,500 per employee per year to comply."

She has this advice for any budding business owner: Although a lawyer can be an expensive part of the equation and you can start a business without one, going solo means you are going to have to take the time to be well-informed about all the legal considerations and regulations you will face.

Gregory Tremellen, a partner with PricewaterhouseCoopers's Audit and Assurance Group in Montreal, says anyone who starts a business must be prepared to take on a 365-day-a-year, 24-hour a day commitment.

"You need to have in-depth knowledge of the goods and services that you are going to provide. It will not only help you differentiate yourself from the competition and identify the market opportunities, but it will also help you prepare your business plan.

"There is all the tax preparation that you have to think about: register to get numbers for the sales taxes; if you are hiring people, you need to have deductions at source that you need to register for. And before you even start, determine what form of business are you going to be: sole proprietor, part of a partnership or a corporation? All of these require different levels of registration."

The big question is whether or not to incorporate. Erwin Stuart, a partner with Deloitte & Touche LLP in Toronto, says each choice has advantages and disadvantages. For example, if you post a loss in the first year or two of operation and you incorporate, it is going to be "trapped" in the company; as a sole proprietor, an owner can deduct that loss against all other sources of income.

"The next thing to consider is the limited liability issue," he says."Are there risks related to the business? And if there are, then I might be inclined to incorporate despite the fact there are going to be losses be-cause I don't want to expose myself personally to those risks.

"There are more compliance costs if you incorporate, including a separate tax return. There are financial statements to be prepared, there is a requirement to maintain books and records. All of this costs money."

Vineberg recommends that new small-business owners create an advisory committee and "throw yourself to the wolves with these people.

"The whole reason you bring them in is because they are going to tell you what they think, not what you want to hear," he says. "You should love having reality beaten into you because entrepreneurs are dreamers and businessmen execute. Some entrepreneurs are businessmen, and some entrepreneurs need to partner up with businessmen so that someone can implement the dream that they have."