To effectively run a business, you need to become familiar with the three major financial statements of a company: the Income Statements, the Cash Flow Statement, and the Balance Sheet.
The Balance Sheet
The Balance Sheet shows the net worth of your business at a particular point in time. It shows how much is owned, how much is owed, and the amounts invested by the shareholders.
The Balance Sheet is based on the accounting equation: Assets = Liabilities + Owners’ Equity which can also be mathematically rewritten as Owners’ Equity = Assets – Liabilities
Assets are anything a company owns with quantifiable value.
Liabilities refer to the amounts owed by a business at any one time. Liabilities are labeled as Short Term Liabilities or Long Term Liabilities. Short Term Liabilities are those that need to be paid back within a year. Long Term Liabilities are financial obligations that are due more than one year in the future.
Owners’ equity refers to the net worth of a company. It’s the amount of money that would be left if all assets were sold and all liabilities paid. This money belongs to the shareholders. so it is called ShareHolders’ Equity or Owners’ Equity.
The Income Statement
The Income Statement (also called Profit and Loss Statement) shows revenues, expenses, and profits for a particular period. It tells the lender if your business is profitable; the income statement establishes a company’s net income, which is described as total revenue minus total expenses.
The income statement shows the profit or loss over a period of time.
The Cashflow Statement
The projected Cashflow Statement shows how cash will flow inandn out of your business according to a timeline.
Your business name is the name you will use when signing contracts or answering the phone. Businesses wishing to operate under a business name must register with the relevant corporate Registry. Registring a business name usually requires an approved NUANS report.
You cannot just select any name. Business names must follow certain rules.For example, a business name must usually contain a distinctive element, a descriptive element, and a legal element.
If you are incorporated, you can also usually use a coined word as long that it isn’t found in the dictionary if combined with a legal element. For example, Exxonex Inc.
The rules for business names can vary by province or whether you are incorporated or not.
In Newfoundland and Labrador there is no registration of trade names. Registration is only required for corporations and cooperatives.
Searching for Available Names
In most cases, if someone is already using a name, you cannot use it. It is therefore important that a proper corporate database name search be done. You should also check online to determine if someone is already using the name for their business.
Sites like Godaddy can be used to determine if the domain name is available or already owned by someone else. https://godaddy.com
You can save time and money by doing pre-searches. To do a NUANS pre-search click on the following link. You do not have to order, just use the search interface to determine if the name is available.
When you write a formal business plan, your focus is on explaining clearly to others what you are trying to achieve and why they should invest in your business. It is an excellent tool for presenting your business idea to funding institutions and government agencies.
It is also advantageous to have a less formal document to adjust to changing conditions while managing your business. For our purpose, we will call that document the Informal Business Plan.
Think of your Informal Business Plan as a
working document that evolves as you learn new things about running your
The informal business plan often covers the same topics as those found in the Formal Business Plan, but it is not cast in stone, it adapts as you go. In some cases, traditional business planning can be replaced with more agile methods. For more info on agile planning methods, read our blog article.
The Informal Business Plan can also be used to document what options you have, evaluate them, record decisions, identify grey areas, establish priorities, identify risks, track assumptions, and note ideas. The Informal Business Plan is a private document. It is a tool to help you think and write down your thoughts. How much time you spend on it is up to you and what value it brings to your business.
Some prefer to use a lean planning method and have a one-page business plan. To learn more about lean approaches t business planning, click on the link below.
A business plan is a written document that outlines your business, where it is going, how it will get there. Such a document is essential if you try to get a loan or grant from a funding institution.
Each funding institution is likely to
recommend its own format for the business startup plan, but it would typically
contain the following sections:
Executive Summary Company Overview The Business Idea Description of Products and Services Market Analysis Marketing and Sales Plan Operational Plan HR Plan Management Team Technology Financial Projections Funding Request Risks Appendices
The following link from ACOA provides detailed instructions on how to create such a business plan.
A plan is a roadmap from where we are to where we want to go. Planning is the thought process used to create that roadmap. In the business world, we call the roadmap a business plan and the process a business plan.
Business planning is about establishing
objectives and deciding in advance what must be done to achieve these
objectives. It is a very important management function.
In the business world, the primary tool for planning is the business plan. There are two types of business plan . A formal business plan is used to get a loan or grant from a financial institution or government agency. There is also an informal business plan that is used to manage your business.
When you start a business from scratch, a considerable amount of planning is required. You must go from an idea to having something in place that produces results. That will not happen accidentally.
If you have time, watch the following video from the City of Toronto, Starting Your Business 101 collection.
A common method for defining a target market is STP, which stands for Segmentation, Targeting, and Positioning. The main advantage of the STP approach is that it forces you to focus on the customer rather than on the product.
First, you divide the overall market into segments of people with common characteristics and needs. You must select a segmentation approach that fits your needs. Four common approaches are:
Once you have divided your audience into different segments, you’ll assess those segments in terms of size, the likelihood of purchasing your product, profitability, and reachability. Based on your assessment, you will select one or more segments to be your target market.
Positioning is what allows you to set your product or services apart from the competition in the minds of your target audience. It is about creating, for each of your target markets, a message and a marketing mix that is most likely to appeal to that audience