I think you have to be somewhat of a biz nerd to be so excited to have your revised biz plan done. Man am I excited!

And no, it’s not only the relief of being finished writing the 7,000+ words.

I posted my business plan online in 2009 so that small business people would have a live case study of a real business in action. It’s what I wished I could have seen while I was in business school.

I’m so glad I did. I didn’t think the plan would be of that much interest for the first year or two, since there would be more talk than action. Where things get interesting is when you can see the results of the plan and compare the plan to reality. I now have some results in and can now feel comfortable telling people that if you’re starting a business and want to get a perspective of the process, you can learn something by seeing what I’ve done.

A quick look back

In mid-2009 I started my business career almost from scratch, after a failed attempt at running a ready-to-cook meal delivery service. I was completely lost and clueless. In that food business I had been making less than minimum wage for 3 years when you consider all the hours I was putting in (60-70 hour weeks).

After getting out of the food business, I was very apprehensive about getting into any business again, my confidence was shot and ambitions crushed. I honestly felt that I wouldn’t have a chance to run a business again, nor did I want to. So, after I closed down the ready-to-cook meal delivery service in 2009 I started applying for jobs and in the mean time was luckily able to fall back on my video production and small business skills I had acquired (that’s why I say that I had to almost start from scratch).

I felt I was lucky because I had family, former employers, and long forgotten contacts that were able to throw me work to keep my head above water. I was so thankful that I actually had work the minute I closed my business down.

After 6 months of soul searching – this would be the end of 2009 – I decided I was going back in business. This time I would be cautious, I would lower my ambitions, and I would be patient. I also wanted to document the process, since I was basically doing this from scratch, and being that a large part of what I wanted to eventually do was small business education.

I was in a weird spot where I felt I knew a lot about small business while at the same time feeling that I was also a failure at small business. Despite my planning attempts in my previous businesses, I was never quite able to hit the success at the speed I wanted to. I didn’t know if my new business, what I now call Small Business Doer, would be successful. But, I did want to try and show others thinking about starting a business the realities of starting and growing a small business. I wanted to show how you laid out a business plan and how things didn’t always work out, but that having a plan was still a valuable thing. And, sometimes things did work out.

Now, here we are, 2 years after I put my plan online in 2009 (actually I think I technically posted it in early 2010, but I was writing it in 2009). I’m excited because I’m starting to feel that I can actually be successful at business again, I’m starting to feel ambitious, I got my confidence back.

I’m also at a turning point, where I think 2012 will be a big year. I hope I’m not getting overly ambitious by thinking 2012 will be significantly better than 2011 financially. I actually surprised myself when I saw my 2012 budget numbers. I was so disbelieving that I had to run it several different way a few times to convince myself that it was a realistic budget.

I feel 2012 is the year where my business might actually become something that I envisioned when I wanted to be an entrepreneur. That’s when the business is more than myself, that it’s something that is more than “buying myself a job”. I’m finally going ahead with my smallbusinessdoer.com site plans, which is to provide small business education and actually make some money from this site. It’s the chance to reach and help many people. It’s also a year where I see my business investments paying off, after spending 2010 and 2011 planning, investing, and growing the business.

Perhaps it was good that I took a big fall in 2009, because every single year I’ve been seriously surprised at how the business has gone and fully appreciate where I’m at. Look, I’m still small potatoes, I can see a lot of people looking at the business and saying no big deal or even thinking to themselves they are glad they didn’t get into business.

2012 is the year that I might actually become a real business person… well… at least small business person.

Overview

Enough of the emotional intro, welcome to my annual update of my business plan. I will cover off:

1. Goals – Why are they so hard to hit?
2. Keeping focus
3. Personal life is not separate from business life
4. Profit & Loss – Budget vs. Actual for 2011
5. Profit & Loss Comparison – 2010, 2011, and 2012 (Projected)
6. Profit & Loss – Budget for 2012
7. Optimal advertising spending and product pricing
8. Investment in growth… at the cost of the short term
9. Education products
10. Where’s the time!
11. Wife is now part of the business
12. Conclusion

Keep in mind this is an update on my business, some things I’ve learned, as well as a plan for 2012. It’s meant for people who are either looking to get into or who are already in business to read. It’s not a business plan meant for attracting investments or getting bank loans.

Goals – Why are they so hard to hit?

These past four months (September to December 2011) made me realize something. I keep on making these goals to work on business growth items and keep on not hitting them.

This forced me to evaluate why I’m consistently not hitting my goals and made me look at my schedule and what I spend my time on. I came to the belief that there are certain items in my day that I consider non-productive or non-essential that take me away from what I want to do for the day.

There are a lot of little administrative tasks that seem to eat in my time. A phone call for a quote. A request for a meeting. A quick revision that needs to be made to a project. Sending out an invoice. Paying a bill. My kids walking into the office (I work from home). Someone needing a favour. Something breaking down. An online article that catches my eye and takes me away in an hour of click upon click investigating it further.

These are items I need to take care of, but the way I’m currently taking care of them make me feel scattered and un-productive.

Another reason why I believe I’m having a hard time hitting my goals is focus. Focus is a part of my problem, but I realize not the only problem. Even when I’m extremely focused on getting to a task in the day, certain legitimate business items can pop up and keep me from doing my goal for the day. That means that it’s more than focus, it’s that I have too much stuff and not enough time.

So, too much stuff and not enough time. This means that I’m taking on too much and have to pare down my responibilities, either by abdication or delegation. I asked myself what are the things in a day that only I can do and that are productive towards my goals. What are the things that bring in good money into the business, and what are the things that don’t. What services do I offer that I’m good at and what services do I offer that I’m okay at?

From the types of services I offer, video production is something I’m pretty specialized at it. I know what I’m doing, can provide good value to my customers, and am accordingly compensated.

For other tasks that I do in a business, such as website development, marketing strategies, search engine optimization, and business plan writing, I’m decent at, but since I don’t do it consistently, I’m finding myself doing a lot of research keeping myself up-to-date in those subject areas and not being able to charge out as much per hour since I’m not as speciliazed and proficient in those areas.

Something that motivates me to continue learning is wanting to do something in the best and most efficient way possible. I want to feel that I’m doing a good job and providing good value. For those business services mentioned above, I think doing them causes me stress since I don’t always feel that I’m doing those tasks in the best way possible, to the best of my capabilities. Sometimes I doubt myself. It can make me not look forward to doing the work which also causes stress when I think about the task at hand. It’s that uncertainty that I don’t like. In other areas of my life, such as travel, I like some uncertainty, but for these types of things it’s not my cup of tea.

Another thing to consider about my video production vs. “whole mix of biz services”, is what I can make doing them. My business services are about $40-$50 an hour whereas video is $75 an hour. It’s easy to see that more video = more money.

With the aim of having less stress, providing better value, and making more money, I’m going to focus on three areas in my business, video, bookkeeping and online education (using video as the primary teaching method). Accordingly, I’ve forwarded my gregalam.com site to smallbusinessdoer.com. My gregalam.com site was an online resume which listed everything I could do for small business.

For where to put my focus, video is a no-brainer as it’s my main source of income and I enjoy doing it.

Bookkeeping may seem out of left-field a bit, but it’s also something that I not only believe I’m good at, but enjoy doing. It’s the one part of the mix of business services that I offered that I felt I really provided something great to clients.

The bookkeeping also falls into the online education part, since I will be teaching about bookkeeping using computer software. This is very related to my main source of income, video, since a lot of my education will be provided using video.

I’m trusting that this clearer focus and integration of my business will lead to a more productive, enjoyable, and profitable business in 2012.

How Will I Keep Focus?

Regular Check-Ups
As much as evaluating my business plan each month has helped me re-evaluate and keep track of what is important to me in my business, I need a more frequent and consitent push to keep me on my goals. That’s why I’ll be looking for someone to share goals with once a week and hold me accountable.

Scheduling and Prioritizing
To help me stick to my goals, I will also start to schedule my tasks in my calendar, on a weekly and a daily basis. I’ve been working on a system to keep track of all the things that I have to do and figuring out how to prioritize and schedule them. My system is largely based off of the Getting Things Done system.

Separating business numbers and going straight to voice mail
Communication via phone, email, and text was something that caused me to lose focus.

One of the things I’ve tried so far is to separate out my business numbers, so that one goes to an automated voicemail.

A legacy business that I run is a kitchen rental business. 90% of the people calling will never rent, yet each call can cause me to lose focus and take away hours a week. By going straight to voicemail, I can get back to people at my convenience and schedule the calls better. I find that people who are truly interested will leave a message or send an email.

My facility is typically at maximum capacity, so I mostly don’t have space in any case. If the market was more competitive and my place not operating at full capacity most of the time, I don’t know if I’d follow the same strategy.

Phone notifications
Turning off my email phone notifications, but leaving my phone (voice and text) notifications on. Anyone expecting an immediate response from me will phone or text. Otherwise, a 2-4 hour reply time for an email can work. I find that the constant email notifications distracted me. Now, I need to find out if I can even do this with my phone. My first attempt to do this on my android phone failed.

Email – Unsubscribe
I unsubscribed from a lot of newsletters and e-mail lists back at the beginning of fall 2011. This may mean that I fall out of the loop, but it also may mean that I’m able to focus better on things that do really matter to me. It can be convenient to get things straight to your email box, but it’s not like I can’t get that same information by frequenting different websites at times that are convenient to me. I don’t think I get many e-mails sent to a general e-mail list that really effect my business goals.

I can tell you that I’ve been feeling a lot better since unsubscribing, but it seems to be a constant battle, as I know have a whole bunch of new newsletters to unsubscribe from. I used to ignore them, but now I purposely take the time to hit unsubscribe to e-mail lists that distract me.

Email – Turn Off
I’m going to start simply closing my e-mail client and not checking it for 1-2 hours at a time. When it’s open, I find myself constantly looking to see if I’ve received messages, even when I’m trying to do something that requires a lot of concentration.

The problem is that not only does every new email make me lose my focus, but it also holds the danger of me receiving an email that I “HAVE TO” respond to right away and take me away from the task at hand for an hour, or even worse the whole day.

I know from shooting video, where I can’t be checking my email for hours or even a day at a time, that I don’t need to have constant access to my email. The world doesn’t stop. There are certain cases where I’m expecting communication where I can leave the email open if need be. Otherwise, I’m going to try and turn it off. So far, I’ve been managing closing my email for 30 minutes to an hour at a time, and I feel it has really helped.

Getting Things Done – Email Method
One of the teachings of Getting Things Done is to triage your email. Triage is what they use in hospitals, to figure out what patients need priority care and which don’t.

For emails, the triage system is more of a categorization system. As you receive emails, you file away into different categories, and as long as they don’t require immediate attention, you can take those emails out your mind and out of your inbox.

One of the big thing changes that I made thanks to the system is using the 2-minute respond to rule. The rule is that if you can respond to an email in 2 minutes or under, respond to it right away. If you leave it in your box, you’ll have to quickly think about that email every time your eyes pass over it, wasting your attention every time that happens.

News, Facebook, twitter
When I get little bits of free time, or little bits of boredom, I often check out news and social media sites. The problem is that this net surfing can really get me caught up in things that are not part of my daily goals and simply derail me. A 5 minute pleasant distraction would turn into an hour. Just like email, there’s usually nothing happening on these sites that need to be paid attention to every hour of the day. I can survive by checking in once a day.

Personal life is not separate from business life

A big thing that was “getting in the way” of my business goals was my life. Having to eat, being tired, the family, stress, exercise, you get it. Something I didn’t account for much when charting my business goals was how my personal life would come into play. It’s a fallacy to think that personal situations can’t come in and derail what you are trying to do professionaly. This is especially true when working from home. Your family wants your attention too, and rightly so.

When I’m stressed and tired, it’s hard to work. Ignoring your personal life can work for a day or two, or even longer when you’re crunched with work. But it always comes back. For me, it’s in the form of burn out, where I just don’t want to do anything. It’s also in tense relations with the family.

That’s why I have to mention these personal things as part of my business goals, because it’ll be hard for me to do well at business if personally things aren’t doing just as well.

So, I’ve taken a business (i.e. organized and logical) approach to my personal life, by scheduling in when to wake up (actually setting alarm like most working people), what time to have the kids fed by (they’re in preschool and kindergarten so have to get them off in time), making sure there’s healthy food (good food makes you feel better), taking the time out of the day to spend with the family (is fun and reduces stress), and so on.

It’s also blending my business and personal goals. For example, I started bike riding the kids to school (it’s an under 5 minute ride for each kid, so nothing heroic). This gets me a little exercise as well as spending some times with the kids. So far, I’ve found I’m less stressed and have some energy to get started on work when I get back from the bike ride.

I’ve even started figuring in some household chores into my daily work routine. I do a lot of brain work, which makes my head tired. So, it’s actually a nice break to do something physical that doesn’t require thought, like vacuuming or doing the laundry. Little things that allow me to take a mental break. So far I’ve found that I’m processing all my thoughts as I do these chores, allowing me to come back to the task at hand ready to go.

Profit & Loss – Budget vs. Actual for 2011

Profit & Loss - Budget vs. Actual for 2011

The item that immediately catches my attention is my actual net income vs. my budgeted net income. I was $15,000 short of my goal or only achieved 77% of my goal of $66,000 in net income. This may be alarming, especially since my revenues hit 94% of it’s goal at $90,000.

The two major reasons that for the net income shortfall are that my gross profit (income – cost of goods sold) was $7,300 under budget while my expenses were $7,800 over budget. That accounts for the $15,000.

Looking at the revenue side, I got pretty close to the numbers I predicted. I think 94% isn’t bad. However, perhaps a better goal to look at it is the gross profits, that is what I make after I pay out costs that are directly related to the money from the jobs I produced, such as subcontracted work and input supplies. At 92%, it’s still not bad, but in $$ terms that’s $7,300 less profit than I was expecting, which is a lot of money.

For the expenses, there were some things that were higher, some things lower, but the biggest culprit for me going over budget was my equipment expense. I went over by $6,000. I would like to think of this as an investment into the future.

I would also like to point out that the majority of advertising and promotion expense was on my website, vancouvervideographer.ca, which if maintained with fresh content, will continue to bring in clients at no extra monetary cost to me year after year.

Interest expense at $1,527.68, was $1,527.68 more than I budgeted. You can blame this on a couple things. Spending money on equipment using credit cards instead of cash. Not collecting fast enough on my accounts receivable. Sometimes there are business expenses that you can wait to spend on, sometimes you can’t wait. Perhaps I could have waited longer here and there and avoided those charges.

Even though I ended up $15,000 less net income than I had planned, I am extremely happy with the results. For revenues, I believe I did about as well as I could have. If I had landed a couple decent size gigs, that would have made up the difference. I’m not going to agonize over that as I think the direction I went in was the right one.

For going over on expenses, that really was my equipment budget that ate it up. I’m also happy that I spent money on the equipment, so I can’t complain. I’m much better off this year than I was at the end of last year.

Profit & Loss Comparison – 2010 vs 2011

Profit and Loss - 2010 to 2012 - Actual and Projected

Looking at 2011 in comparison to 2010, there’s a couple things I’d like to highlight.

Income vs. Gross Profit – 2010 to 2011
My income in 2011 was $22,263 more than in 2010, but my gross profit was only $19,085 more than 2010. This was because I produced larger contracts that required me to work with subcontractors. For 2012, this tells me that I should focus more on gross profit than income, as looking only at income can be misleading. This also tells me that as I plan to do more larger, collaborative projects in 2012, my subcontracted expenses will make up a great percentage of my income.

Equipment – 2010 to 2011
My equipment expenditures were $9,291 more in 2011 than in 2010. This is largely because I was making investments into equipment that I could use for years to come. This was an investment into the growth of my business.

Net Income – 2010 to 2011
If one looked to hastily at my numbers, they might have saw that my income (revenues before expenses) was $22,263 more than 2010 yet my net income (revenue after expenses) was only $5,702 more than 2010. The biggest factors were those mentioned above, which were more money to subcontractors as well as a big investment in equipment.

In 2012, as you will see, I expect my expenses to actually decrease, mostly because I will be spending less on equipment. I will also see my income increase, meaning my net income will be a much more dramatic jump from 2011 to 2012 than it was from 2010 to 2011.

Profit & Loss – Budget for 2012

Budget for Profit and Loss 2012

More detail for income sources in 2012

Sources of Revenue - 2010 to 2012 (projected)

For 2012, I’ve decided to try and separate out my sources of income with more fine-grained detail. I’ve split my business services income into day-to-day bookkeeping and setup/training bookkeeping. I have a category for business consulting. I don’t plan on attracting any new clients, but expect there to be some income from existing clients. So, leaving the budget at $0 probably won’t end up being accurate. I’m using the budget as a tool of what I want to focus on, so I’ll leave it as that. The business consulting line is also a bit of a catch-all for income that doesn’t fit in the other categories.

You’ll see that there is a $14,500 income budget for educational products. In my past budgets I haven’t put this explicitly in, and I think that is a big reason I didn’t generate any revenue. By putting educational products in my budget, I know have a concrete goal for what I want to achieve.

I have a reimbursed expenses income line. That’s so I can see how much money I received from customers who were simply paying me back for something that I purchased on their behalf. Not true income.

I split my video production income into self-produced and subcontractor categories, both evenly matched at $45,000.

subcontractor vs. self-produced video work 2010 to 2012

In 2010 my video income was virtually entirely comprised of income I received as a subcontractor, being $44,000, and only a small portion was self-produced income, at $1,000.

In 2011, subcontractor income was $49,000. Self-produced income was $24,000.

In 2012, subcontractor income is budgeted at $45,000 whereas self-produced income is also budgeted at $45,000.

A large increase in income from 2011 to 2012?

I’m budgeting a 43% increase in income from 2011 to 2012 or $38,650. Here’s my reasoning:

1. From 2010 to 2011, the increae was 33% or $22,333. The increase is largely attributable to the $23,173 in new income that I received from self-produced videos (videos where I negotiated the contracts vs. being a subcontractor). The reason I grew in 2011 was because of my vancouvervideographer.ca website, that allowed me to gain new clients.
2. The great thing about gaining my own clients, is that many of them will be repeat clients, adding to the base of money to expect in 2012. If my website can bring in the same amount of $ figure worth of new clients, that would be $24,000 in new clients that I can get in 2012. For repeat clients, I feel comfortable that I will at the minimum receive half of that amount in repeat business. It may be I get the entire amount, who knows.
3. The other thing to consider is that my website and portfolio has increased in quality and status. I have more videos up that are higher quality, allowing me to bring in larger value contracts.

So, the quick and conservative calculation for revenue growth on the video side is:

Conservative 2012
1/2 of revenue from existing 2011 video clients = $12,000
Revenue from new 2012 clients = $24,000
Total = $36,000

Increase from 2012 over 2011 = $12,000

Expected 2012
2/3 of revenue from existing 2011 video clients = $16,000
Revenue from 2012 clients (25% increase from 2011) = $30,000
Total = $46,000

Increase from 2012 over 2011 = $22,000

I’m fairly confident with my expected 2012 self-produced video income since I know there are existing clients who are looking to repeat with more business in 2012 and my website is attracting larger and more valuable projects based off the portfolio. Back in the last part of 2010 when I acquired the website, I had a few videos in my portfolio, and had about $1,000 in sales for 4 months.

So, with a growth of approximately $20,000 on the video side, that leaves approximately $20,000 worth of growth to come from somewhere else.

I expect that growth to come from both providing bookkeeping services as well as bookkeeping video tutorials. I’m already doing the bookkeeping for 6 companies. From September 2011, my wife has joined the company to work on the bookkeeping side. This creates the opportunity to take on additional clients.

For 2012 I will be conservative and expect to grow bookkeeping by $20,000. This will be divided fairly evenly between set-up and training services and day-to-day bookkeeping services. Similar to the video business where I target local keywords such as vancouver videographer (which in turn provides web traffic that turns into sales), I will target local bookkeeping keywords such as bookkeeping vancouver with my smallbusinessdoer.com site, which thankfully has a decent online profile and authority due to the couple years of work I have put into the site.

Since my focus is shifting away from offering an array of business services and concentrating on two areas, video and bookkeeping, I will lose some of the income I was receiving for business services in 2011. I expect the losses (around $10,000) to be evened out by the sale of educational products (bookkeeping video tutorials).

Educational products is the wild card, both in income that can be generated and in time that I will spend working on it. Obviously, the more money I can generate from it, the more time I will put into it. If the educational products are successful enough, I will have to turn down some video production work so that I can continue to produce the educational products.

So, that’s the explanation behind the increase for 2012. I’ve actually been quite surpised that my growth projections have been fairly on track for the short life of my business.

Expenses Budget in 2012

For most of my 2012 budget for expenses, they are set to reflect what happened in 2011. More budget for meals and entertainment, less money for automobile, etc… Minor adjustments as well as some re-categorizeation of expenses and elimination of categories not used.

The two expense items that I really had to think about were the advertising and promotion budget and the equipment expense budget.

Advertising and Promotions Budget in 2012

At first I had the advertising and promotions budget at around $1,000 for the year. I had already built up my vancouvervideographer.ca website and my smallbusinessdoer.com site was based off people naturally finding my site. I revised my advertising and promotions budget after looking at the results from my vancouvervideographer.ca site (as well as knowing the results of advertising in my other businesses).

For vancouvervideographer.ca, 28% of all the money I took in was spent on advertising. That’s pretty high and I don’t know if it would make much sense if I had to pay that number every year. However, I don’t.

Firstly, I don’t have to spend that kind of money on repeat customers. Sure, there’s costs to retaining clients, but nothing close to the cost of acquiring them.

Secondly, my website is like a semi-permanent online billboard and magazine that I don’t have to pay to keep paying for (like in traditional media). I still have to create fresh content and keep the site up-to-date, but I don’t have to build it from scratch and pay people to come to the site. This means that any new business I get from my site in 2012 is very close to being free in terms of advertising costs.

So, if I want to grow my educational products and bookkeeping side of my business, I feel that I can afford to pay 20% to 30% of projected revenue on marketing in order to build up a base of clients. However, the educational products and bookkeeping services are two very different things, so my reasoning for spending marketing dollars on each is different.

Bookkeeping work is paid on an hourly basis and the work is done is usually done on an on-going basis, meaning that I’ll have repeat clients. So, while the initial cost of attracting a client may be 30% of the revenue brought in for the first job, it’s virtually 0% spent on jobs I get after that.

For my educational products, my cost is in developing the product, not producing. Since my delivery method is digital and online, it costs me very little to provide the product to each new client. This means that I’m able to consistently spend a decent percentage of my revenue promoting the product.

My main three methods of marketing will be:

1. SEO – Ranking high for targeted keywords, leading traffic to my sites
2. Affiliate Marketing – Paying referral fees to people who sell my products
3. Online advertising – Pay per click for search results or other targeted online ads

Notice, my whole advertising plan involves online methods. This is not only because I’ve found it effective, but I can track the effectiveness or ROI (return on investment) for every dollar that I spend. It is easy to quickly adjust the advertising amounts and move the money to what is working from what isn’t.

Equipment Budget

For me, equipment satisfies a few of my desires, needs, and goals.

• The right equipment makes my life easier, which gives me great job satisfaction and lets me enjoy what I do. That’s good stuff.
• The right equipment lets me produce high quality work, which makes me more money. Also good stuff.
• The right equipment lets me be creative, by removing boundaries on equipment that can’t do what I want it to do. All good here.
• The right equipment acts a safety net, whether it’s because the right equipment won’t fail on me or because the right equipment is helping me to prevent failure (backup system). Important stuff.

That’s how I think about equipment. So, the equipment budget is very important to me and it is mostly money I enjoy spending.

I spent a lot on equipment in 2011, much more than what was in my budget. So much so, that I don’t foresee needing so much money in my 2012 budget.

I’ve decided that in the 2012 budget I’ll have half the budget allocated to items I can see now that I’ll need, and leave half the budget open to items that I may need in the future.

Computer / backup system
The thing that I believe I absolutely need is a new computer / backup system. I’m starting to reach my hard drive capacity limits (due to the high storage nature of video). I need to have a good backup system that will provide a safety net in case the hard drives on my computer fail, are stolen, or are damaged in some natural disaster.

Equipment upgrades
The second set of items that I believe I’ll need to spend money on are minor equipment upgrades. I can do my job with what I have, so the equipment upgrades are not pressing, but will make the job easier and allow me to handle more situations. These would be items such as a secondary wireless microphone, lens, adapters, lens filters.

Bonus items
Some items I consider bonus items are a new desk and some new computer monitors.

I saw some standing desks that look like they could help me get a little exercise and focus while working. I have no clue if it would work out for me. At the moment, I would consider this nice to have, and if I’m doing well, or my priorities change, perhaps this is something that I could get.

The new monitors would be useful in allowing me to have more accurate colour work in my video productions. How much more accurate, I couldn’t say. 10%, 20%, 30%, 5%? I don’t think my work suffers in any way from my monitors, so that’s why it’s not a priority.

One of the reasons I love having my own business is I can make these types of budget decisions. That control really does make me happier, especially since I can tailor the money spent to suit my work style and goals. When you don’t have any money to spend, this can also work against you. I’m happy that with my type of business and my needs, I feel I have the money available to spend on what should be done. This was not always the case.

Optimal Advertising Spending and Product Pricing

How do you price a product? How much do you spend on advertising. Here’s a little example of what advertising spending can do to demand and profitability.

Sample Advertising Spend Rates

In the above case, the optimal price for me to pay out to advertise the product is 25% of the product price. Paying 50% gets me more revenue, but not enough to justify the increase over spending 25%. However, I make a lot more money by spending 25% or 50% of my revenue advertising than I do spending 10% advertising.

Now, pricing a product is tougher for me to figure out than figuring out what to spend on advertising. It’s fairly easy to adjust advertising dollars without too much risk. With product pricing, the price determines the value of the product as well as potential referrals. Customers don’t want to see the price of the product changing randomly, for no apparent reason. This doesn’t mean that you can never adjust price. But, every time you adjust the price it changes a customers perceived perception of the product.

I honestly can’t say what is the best price for the product. If I have a choice, I’d rather have 1,000 people benefit from the product than 100, even if the income in the end is the same. That’s because my goal is to help out the most amount of people possible. However, since a goal of my business is to also make money, if selling the product to 100 people made me twice the money as selling the product to 1,000 people, I’d be hard pressed not to simply sell to 100 people.

Investment in Growth… at the cost of the short term

After going through the numbers, I’m so happy I decided to invest in vancouvervideographer.ca as well as the new equipment that let me produce the videos that I needed to build my portfolio and book new work. If I had played it safe, and went with the status quo, I would not have grown in 2011. In fact, four months after purchasing the site, I was having second thoughts if I had done the smart thing, since at that point in time it had only brought in about $1,000 worth of work. 2011 proved it a wise decision as it brought in $23,000.

What I would like to say is that any extra money I made from self-produced videos was spent on the site acquisition (marketing) and equipment. So, in reality, I didn’t make any extra money in 2011 because of my self produced videos. I only made myself more work.

However, the benefits will really come to fruition in 2012. I now have the equipment, repeat clients, and new clients coming in.

The success of my video website lets me feel comfortable in spending 20 – 30% of my projected revenue on the bookkeeping side of business (both services and educational products) to gain new business. Like the video side of things, as long as the marketing is effective, it will help build up a base that will continue to feed me in the future.

I would also like to point out a caveat to these investements. This is all based on building up a client base that will continue to use my services and refer me to new customers. If I hadn’t provided quality service that gave my clients good value, the investments wouldn’t go far. So, marketing helps to start the relationship, while the quality of the services and products keep and grow the relationships.

Education Products

My online education products is the growth side of my business that I always want to work on but never seem to find the time. This income is different than video income, as it’s a product (information) that I would be selling as opposed to an hourly service. Once the product is made, the time and money spent, how much I make depends on how much I sell. If it is really good and marketed well, I can make a lot. The amount of money I can make would not be limited to how much time in a day I have but instead be limited by the amount of people willing to purchase my product.

Selling products is riskier in a way as I will be spending time and money upfront to make the product without the guarantee of sales. For the past two years I’ve studied, tested, and planned for what kind of products and marketing would work and what wouldn’t.

I know there’s a need for business education, especially education that can be easily and affordably accessed. Whether or not I have the right product fit for a big enough market will be seen. The risk is that I never make a sale, or make very little sales, and my information products were a waste of effort.

If I were younger, and less business experienced, I might be able to drop everything I’m doing and focus on the information products and take the risk that it will work. Instead I’m taking a more cautious approach by keeping my video income coming in and paying the bills while I create the information products. I also enjoy my video work and wouldn’t want to completely stop doing it.

What I will start doing is turning away the business services work that I have taken in the past that doesn’t pay as well, and just as importantly, causes me to take focus away from my goals.

Where’s the time!

I’ve mentioned this before, and I’ll say it again, there’s only so much time in a day and only so much one person can do. If you want to grow your business, you have to find ways to move beyond an hourly wage. Additionally, you must find ways to be more effective in your use of time.

One of the things I’ve been bad at accounting for is the non-revenue generating time I spend in a work day.

Small Biz Doer Work Hours

When I looked at it my revenue generating vs. non-revenue generating time spent on the business, those two figures were almost exactly the same. Crazy! That’s why I feel so unproductive! Looking at my list, anything that is not revenue-generating or content creation, I feel unproductive.

So, this gives me an idea. What if I shift what I consider non-productive items to times of the day I don’t consider my main work hours? As much as possible during the 9am to 6pm shift, I focus on the productive items. In the off hours I focus on the non-productive tasks. Most of the non-productive things are smaller tasks that can usually be done in 15 or 30 minute chunks whereas the productive stuff needs to be done in big blocks of time.

I’m going to try out a new work day schedule and see how the hours work out. The nature of my job ensures I won’t always be able to follow a set schedule, but I think this is something that I can roughly follow.

I feel that what the time I need to spend on the business is 61 hours a week.

If you look at the breakdown, it also includes lunches, breaks, and unpaid travel time to certain jobs. When I considered some regular office jobs, where people leave home at 7am and get back at 6pm, that’s 55 hours a week. So I’m not too far off of someone doing a schedule like that.

It’s hard looking at the time I spend on items and finding much that I can cut from my non-revenue generating hours. Ideally, I’d love to cut the total number of work hours down to 2,500 hours in a year. That would work out a lot better. That would be more like an average of 11 hours a day, 5 days a week, spent on work items.

I also would like to point out that my total horus needed in a year, which are 2867 hours, includes 4 weeks of vacation time and 1 week’s worth of sick / can’t work time (304 hours).

For 2013, I will be able to look at where I’m spending time, and decide if putting more focus on my educational products is more valuable than getting paid by the hour.

Looking at my time budget scares me
I have to admit, I’m a little nervous looking at my time budget. It feels like it’s too tightly scheduled. I’m feeling that I have to keep on looking at where I spend time and continue to cut down on what I can. After all, there’s only so much time in a day.

Wife is now part of the business

My wife is now part of the business. She used to work in finance departments and office administration, so it’s suitable that she’ll be doing the same thing at smallbusinessdoer.com. Having a spouse work in a small business is quite a common thing.

This give the business an opportunity to grow at a faster rate, since we can divide tasks and specialties between two people, not to mention the extra work hours available when there’s a second body.

We personally made the decision to do this for a couple reasons.

The first was the flexibility that it would allow my wife. Since we have two small kids in preschool and elementary school, it’s nice that she can take care of the kids during the day if their sick, attend school events, and work at times that are convenient to our life. This is not true for all types of small businesses and work, but with the majority of administrative and bookkeeping work, this is fairly true.

It’s also nice to have us both working from home. It’s always nice to have another body in the office. I tend to go a little crazy if I’m on my own all day. Also the commute to home is 0 hours a day!

There is risk to this as well. Obviously, if the business doesn’t do well for some reason, we’re both doing badly. It’s not as diversified as in the situation where we have two unrelated sources of income.

While starting my wife in the business, the training and integration took time and cost us money while she wasn’t working at another job. We tested the two person team out for the last four months of 2011 while we didn’t bring in any extra revenue.

2011 was definitely a loss in terms of time and money, 2012 should be decently beneficial, while 2013 would be the year that it would really pay off.

Conclusion

First off, I’m impressed if you’ve gotten this far. At 7,000+ words, I believe this is actually longer than my original business plan.

I’m feeling really good about the whole process.

Revising the plan each year, and updating each month, has forced me to think about how the business is doing and what I could be doing to do better. I also love looking at how everything has progressed and get excited about what the future may bring.

If you have any questions or comments don’t hesitate to lay them down!

Updates

1. Check out the previous update Business Plan Update December 2011 – Big Ambitions, Big Letdowns
2. Check out all the updates

December was a quasi-frustrating month. I had big ambitions for December, I was supposed to get a lot of business growth work done. I got some done, but nothing close to what I was going for.

What I was going for, was outlined in my September post.

Goals vs. Reality

It was really weird, every time I got close to working on my growth goals, something came up. This felt like August, where I had what I thought was free time, but ended up feeling as busy as I did in my big revenue generating months. I mean, how could I be as busy in a month where I had $3,500 (December) in sales as I did when I had $13,000 (November) in sales?

I’m sure that in busy months, there are certain admin tasks and other non-revenue generating things that I save for times when I don’t have paid work. No doubt. But that just can’t account for such a large gap. Vacation time does account for some time as well, so I can’t discount that, as I took time off both in August and December.

I didn’t put any posts up, besides my November business plan update.

Profit & Loss Budget vs. Actual – December 2011

Not much to say about December. It actually went fairly according to budget, 90% of revenue, 87% of expenses, 90% of net income.

A couple minor things I would like to note are the subcontracted services and the dues, subscriptions and education.

The subcontracted services are $600, more than budget, but the actual services were for projects done in the previous month, so they really should have been on that month’s income statement. They showed up on this month’s since that’s the month the bill was dated.

The dues, subscriptions and education is negative because I received a refund for a product I purchased in November, making my November’s expenses to high and this month’s expenses to low.

In the end it all evens out and is reflected properly in my annual income statement.

Profit & Loss Budget vs. Actual - December 2011

Conclusion

I’m disappointed in myself that I didn’t get more work done. Even though I didn’t post items up on the website, I was working on small business education products. So it’s not as if I wasn’t doing anything. Perhaps it’s the fact that if I could have squeezed out 20-40 hours more worth of work, I would have done what I wanted to do. I felt I could have found that time if I had managed my time better.

The last thing that I will say, is that persistence has got to count for something. I know finding the time to work on business growth is possible. I know because I always find the time for revenue-generating activities when I’m getting paid by the hour. It’s a matter of having that same work ethic and determination for work that’s not giving an immediate payback.

There’s always next month and next year. Here’s to 2012, the end of the world according to some!

Updates

1. Check out the next update 2011 Biz Plan Review and 2012 Goals – Oh the Excitement!
2. Check out the previous update Business Plan Update November 2011
3. Check out all the updates

November was by far the best month I’ve had for both sales and net income! I’ve never done more video productions in a month before.

So yep, busy. Downside, not too much time to work on business growth, ughh!

Goals vs. Reality

All right, 3 out of 30 for articles I wanted to put up on this website. 10% is bad no matter how you spin it. My only excuse, busiest month evaaa!

Here’s what I did do.

1. Small Business Loans and Financing in Canada
2. Not How to Write a Business Plan but Why
3. Business Plan Update October 2011

One thing that I at least did was to give a presentation to a Vancouver based meetup called Internet Masterminds. It was on the first two posts above, which was writing a business plan and getting financing. It was great to get out and interact! I need to do more of that.

Profit & Loss Budget vs. Actual – November 2011

$13,000 in sales, $10,000 in net income. Not bad. If I had looked back at my previous year a little closer, I would have known that last November was also my best month of that year.

Makes up for months like August where I actually had a negative net income.

I continued my trend of spending money on equipment even though I didn’t have that in my budget and have already long since blown my equipment budget for 2011.

Also spent some extra cash on subcontracted services (directly related to the high sales), education (business growth), and software (business growth).

Profit & Loss Budget vs. Actual - November 2011

Highs and lows

While November looks great, my August looked horrible. $10,000 in net income in November, -$1,000 in net income in August. Average it out and it is $4,500 in net income per month or $54,000 in net income annually. As you can see, the highs average out the lows.

Taking the work while you can get it

I knew a few things going into November. I’d have a ton of work for November, not so much in December. I had to bank my money while I could (make money while I could for those not familiar with my hip talk). This meant putting off working on business growth stuff for November so that I could afford to work on the business growth stuff in other months, like December.

Conclusion

I’m still as focused as ever on working on my information products for this smallbusinessdoer.com site. In August when I decided to make a push to create tons of content on the site, I should have known that November would have been really busy with paid work and that I wouldn’t have time for business growth stuff. Business growth will have to wait until December.

Updates

1. Check out the next update Business Plan Update December 2011 – Big Ambitions, Big Letdowns
2. Check out the previous update Business Plan Update October 2011
3. Check out all the updates

October was a month of getting things done. Film work, business work, website content work.

I’m actually quite happy with how the month went, despite net income being a bit lower than budget and not doing as much business growth work as I would have liked. The key thing for me this month was that I was focused on the right things.

Goals vs. Reality

Okay, I wanted to get 30 new posts in October. I got down more like 7 new posts. My goal is always quality over quantity, so I’ll have to revise my ambitious goal of a post-a-day. I could do it, but with the quality I’m trying to achieve I wouldn’t want to sacrifice purely for the numbers.

Here are the posts that I did get posted up online.

1. Video Equipment for Around $500
2. Quickbooks Vendor Refund – Credit Card, Bank Account, Vendor Credit
3. What Information Should You Collect for Bookkeeping
4. Entering Meal Receipts with Tips into Quickbooks – CANADA and UK
5. Quickbooks Enter Date not the Format you Want?
6. Issuing Receipt or Proof of Payment for HST/GST Input Tax Credit in Canada
7. Business Plan Update September 2011 – Big Sales – Big Goals

Profit & Loss Budget vs. Actual – October 2011

I achieved 90% of my budget for revenues, pulling in $8,668.45 (budget was $9,700). Decent.

For expenses, I was on budget except for some equipment expense. I keep on finding reasons to invest in equipment. This time it was for a backpack that would fit all my new video camera gear into one bag (instead of three) and a specialized arm for my video monitor.

This month’s net income was a little less than September, but September was a bit more than October, so it evens out a bit.

Profit & Loss Budget vs. Actual - October 2011

Upped My Rates

I am now charging out more than I used to. There were 2 reasons for this.

1. Make more money: That’s a no brainer
2. Focus: If I charge more, the less valuable opportunities are going to go away. If a person is not willing to pay the increased rates, it means they weren’t getting enough value out of what I was doing. I lose those people who are not willing to pay as much and focus on the people that are

I’ve mentioned in the past that eventually I will max out on the rates I can charge to individually provide services to people. When I started Small Biz Doer in 2009 I was charging out at $35 an hour. Now I’m in the $50 an hour range for business services. When I do specialized video productions it is closer to $75 to $125 an hour.

Video rates are higher than my business services as I lot of the video work I do requires specialized equipment that people would need to rent if I didn’t provide it. A lot of my expenditures are also video related, so even though I make more money by the hour, my hourly rate mostly evens out so that I make roughly $50 an hour.

As good as I get, there will come a time, where if I’m still doing the type of productions that I currently do, that I won’t be able to charge more than I am while working on my own. I believe I’m pretty close to maximizing the amount of money I can make for the type of hourly work I can do. That’s why I’m slowly switching to creating informational products that I don’t have to recreate each time to make money. Creating the information takes a lot of time, but once done, I don’t need to put in that same amount of time each time I make a sale and make money.

Capital Expenditures

One thing that is not showing up on my financials is my capital expenditures (in other words, my purchases of assets). For me this is mainly video equipment that I don’t expense in one year but write off over several years. If you are not familiar with accounting terms you can check out wikipedia for their explanation of assets vs. expenses.

I only post my profit and loss statements online, not my balance sheet that would show my assets, so that’s why you don’t see my capital expenditures.

This year I spent a lot on capital expenditures. This is important to note as the net income that you see on my profit and loss report doesn’t include the money I’ve spent. So, if I spent $5,000 on a new camera, and I made $5,000 in net income in that same month, my cash available to me would be $0. Profit and loss reports don’t tell the whole story when you are looking at businesses.

Conclusion

I’m glad that while I didn’t get to do the number of posts that I did, I was still able to produce a decent amount of content for my site. If I had worked at that pace for the past two years I would have had over 150 posts right now (I currently have 50 something).

October is also a busier time of the year for me, so that I was able to produce the content at an above-average time of business is also a good sign.

I recently read (well, listened to an audio book) of “In the Plex”. It’s a book about Google and one of the things that I took to heart was how they created goals. They always aimed for amazing things. They barely ever reached their lofty goals. In fact, if they did, the view was that the goals created were set to low. It’s easy to hit easy goals, hard to hit lofty ones. The point was that if you don’t set the bar high, you’ll never do anything amazing.

The other thing I took away was having a big vision. Perhaps you can’t accomplish your vision in a week, month, year, or even decade. However, like those lofty goals (which what a vision is in a way), if you are always working towards a vision there’s a chance you’ll get there (or partially get there). If you don’t have that vision, you’ll never get there (or even partially there). Roughly, my vision is to make operating a small business easier for the small business owner.

Making small business easier is a fairly general thing to do. What I’m tackling specifically in the short term is one aspect of that, which is bookkeeping using Quickbooks. The goal is to help small business in that specific way and do that well, really well. Once that is accomplished, use my successes and failures in doing that to tackle the next small business subject area. While the short term focus on bookkeeping won’t fulfill my vision, it will bring me one small step closer.

Updates

1. Check out the next update Business Plan Update November 2011
2. Check out the previous update Business Plan Update September 2011 – Big Sales – Big Goals
3. Check out all the updates

Two of the top resources from that list are bplans.com and the Canadian Youth Business Foundation.

You can get some free sample business plans and advice at www.bplans.com. And if you have $20 a month to spend (if you write your plan in a month it would be only $20), try liveplan.com. Liveplan.com is operated by bplans.com and has an interactive online planner that will help guide you through the process with both written materials and videos.

CYBF, the Canadian Youth Business Foundation, has a free business plan guide and webinar series.

If you are actually ready to write the plan, I’d probably opt for liveplan since it is designed to be user friendly and have tips to help you along the way. For $20, it is not much of a business expense or risk. They also have a 60 day money-back guarantee, so really quite riskless.

Anyways, what I really wanted to talk about was why write a business plan.

Write the business plan for you

A business plan is supposed to be a guide or a map to what your business is and where it will be going. In the process of writing a plan, this will get you to think more deeply and critically about the business. You’ll have to ask and answer questions such as:

• What is the business about?
• What is unique about the business?
• What are the business goals?
• How will the business grow?
• How much money will the business make?
• What kind of financing does the business need?

Those are a small sampling of questions, and then may seem simple, but a lot of people don’t even think, let alone, write about those questions. By writing a business plan, it will give your business a direction and a purpose.

The thing about business plans is that real life never really goes according to plan and your plan is out-of-date the moment you write it. Things always change, and as a small business, you need to be flexible enough to accommodate those changes.

That’s why I personally review my plan each month and do a yearly update. That time gives me a chance to step back from the day-to-day and see how I’m tracking against my goals. It also either re-focuses me on the goal of my business or helps provide me with new direction.

Write a business plan to get money

If you are looking for money from a bank or investors, they almost always require a business plan. If you ever plan on getting money from some place or persons other than yourself or close family and friends, you’ll need a plan.

Write a business plan for your partners

If you are working with others in your business, having a plan will set out a shared and agreed upon plan to what all of you will be trying to do with the business. It will help clear any ambiguities or misconceptions.

Write a business plan if you are going to sell your business

If you’re going to sell your business, this will almost definitely require a business plan with solid financial statements.

Most important parts of a business plan

I find that the two most significant parts of a business plan is marketing and financials. I think most people have a good idea of how to operate their business and who will be involved.

How to market your business and what kind of money it’ll make… that seems to be weak points for people with no business training or experience that I see looking to start a business.

If there is anyone who is considering giving you money, trust me, financials is one part of the plan they will always look at closely, since at the end of the day, the goal of a business is to make profits.

And, you won’t be getting money unless people know about your business, so that’s where marketing comes into play.

The crappy thing about both the financials and marketing for a new business, is that you have no data to back up your strategies, projections, or numbers. You will only truly be able to say anything credible about these sections if you’re talking about you company’s past performance.

Last tip

You don’t need to have a business background to write a business plan. As mentioned above, there are free and rather cheap resources that will help guide you along the way. Honestly, unless a business person specializes in writing business plans, they are no expert either.

You should also get business people to review your plan. Preferably people in your industry or people with specialties that can judge those different aspects of your business (like a marketing specialist to assess your marketing plan or an accountant to assess your financial plan). People in your industry have done it before and can help you see if what you are planning seems realistic or not.

Here, in order of most likely to least likely (in my opinion), are the places to get money for your small business:

1. Personal savings, credit cards, and lines of credit
2. Family and friends
3. Micro finance loans
4. Government sponsored start-up loans and programs
5. Crowd-sourced financing
6. Credit Union Bank Loans
7. Regular Bank Loans

I purposely left out angel investors and venture financing. If you are going that route, your business model is one that can scale quickly, efficiently, and profitably. Venture financing is looking at many, many times the return on their investment and is an entirely different game.

One of the biggest things to determine is how much money you need. Different business loan and financing options are better for different amounts that you need.

Personal savings, credit cards, and lines of credit

This may sound obvious, but your best source of business financing is yourself. In fact, many people will be suspicious of financing you if you don’t have your own ‘skin’ in the game. If you are not risking anything, why should others risk something?

Family and friends

This is by far the most reliable and easiest source to get money from. You don’t need to have a business plan, terms are flexible (if you’re having a bad month/year, they are much more likely to be forgiving than a bank).

Micro finance loans

These are small loans from a few hundred dollars to a few thousand. In BC, credit unions offer these types of loans at http://www.beremarkable.com/.

I’m sure there are other banks in different areas of Canada who have similar loans available.

There is also Community Lend, where the loans come from private citizens, not banks. It works like an auction process where you advertise yourself and your needs and lenders bid on how much they are willing to lend to you and at what interest rate. As of November 2011, Community Lend operates in BC, Ontario, and Quebec.

I’m not an expert in micro loans or micro financing, but it seems they are designed for people who have trouble getting access to credit from banks, either because they are new to the country or they don’t have the best credit rating.

Government sponsored start-up loans and programs

If you fit the criteria, these types of business loans and programs are an excellent way to get start-up funding. These government sponsored loans don’t use the usual bank criteria (credit history and personal wealth) to get you money.

These are a few of the top places I would go (and have gone) if getting a loan / assistance for a small amount of money ($5,000 to $50,000)

Self Employment Program

If you are receiving EI (employment insurance) and are looking to start-up a business, I’d highly recommend trying to get into a self employment program. They give you free business training and continue to give you your EI benefits for a full year from when you enter the program while allowing you to keep all the profits from your business.

These types of programs are available all across Canada. Search for something like “self employment program” and the name your province and you should be able to find the links to the appropriate places.

CYBF – Canadian Youth Business Foundation

If you are 18-34, the Canadian Youth Business Foundation is the best place to get a loan from. They have good rates, are attuned to the needs of a start up small business, offer mentors, and honestly, are one of the only places that will give you money based on your idea (and not on how much money you have in your bank).

BDC – Business Development Bank of Canada

The BDC is owned by the Government of Canada. They are more likely to have flexible terms and finance you in the first place than would traditional banks.

Crowd-sourced financing

The biggest name that I know of in crowd-sourced financing is Kickstarter. Using the word financing might not even be the best choice of words with Kickstarter. See, Kickstarter helps raise funds for projects that are mainly creative in nature (music, film, art, technology, design, food, publishing), but the money given is not a loan or investment.

Instead, you have a project on Kickstarter, and if enough money is raised, then you go ahead with the project and get the money to do it (and deliver whatever you promised to the funders). If you don’t raise enough money, the project dies and no money is exchanged.

The great thing about this type of funding is that the getting money from people is solely based on your pitch, your idea, your business. If enough people give you enough money, your good.

You can also google crowd funding to see more options. I did and came up with a decent wikipedia entry and a roundup of 13 crowd funding sites.

Credit Union Bank Loans

If you are looking for funding around $35,000 or less, credit unions have small business financing options that are less stringent (easier to get) than regular bank loans. This is a direct quote from the Vancity website:

We can approve a business loan based on your entrepreneurial drive, the strength of your idea and the potential of your business plan, instead of just your credit history and collateral.

I’m talking purely from a BC perspective, where we have credit unions like Vancity that offer small business loan programs. I don’t know if this is the case in other areas around Canada.

Regular Bank Loans

This is probably the place people think about first when trying to finance their business. This is probably the worst place to look for funding a start-up business. If you are already established and have a good profit track record, then bank loans are a definite considerations.

What the banks are mainly looking at is your ability to repay the loan, and they judge this based on your assets or your history of profits and cash-flow. For a cash-strapped start-up business, this usually means not you.

It’s kind of funny, but if you have money, they will lend you money. If you don’t, then they won’t. This type of money is more suitable for businesses that are established and are looking to grow.

Other Small Business Loan and Financing Considerations

One tidbit of information I wanted to get out there is that a lot of bank loans require a personal guarantee, even if it is for a incorporated business. Therefore, choosing an incorporation for limited liability reasons in terms of taking out loans is not really an advantage for small businesses. If your business goes bankrupt, they will still come after you for the money.

Extra Resources

Small Business BC has a pretty comprehensive overview of financinng. Looking at the PDF is a quick way to see a number of programs out there.

You can also google several terms around small business financing, loans, grants and Canada (or your local region) and I’m certain you will pull up more resources. If you find yourself in a special category, like being a young person, aboriginal person, female, have a disability, etc… there are special programs out there that you can take advantage of, so it definitely pays to do some research.

My Personal Financing Stories

I’ve run numerous small businesses. I’d narrow it down to four, since one of them was a neighbourhood service when I was a teenager.

Here’s the quick stories of how I financed each venture:

College Pro Painters

My brother essentially gave me everything I needed to run this biz. While this was technically my own business, it was under my brother’s franchise. I had to book my own jobs, hire my own staff, do the books, and manage my own crews, but this was always under the direction of my brother and all the investment in equipment was provided by my brother.

Intergalactic Multimedia

This was a video production company that started out to specialize in production DVD yearbooks and Graduation videos to high school students.

For the first year, before I even really started the company, I largely self-financed this. Saved up on money and bought gear as I could afford. I then partnered up with my brother (the same brother who I did the painting with) and he put in an investment equal to what I had invested ($10,000 to $15,000).

We got funding in two ways:

1. We both entered self-employment programs as we both (fortunately or unfortunately) had lost our jobs due to a lay off and a business closure. This was pretty good because the self-employment programs allow you to keep all your profits while still receiving EI benefits for a full year. If you are eligible for such a program, it’d be a good move to apply to get into one.
2. We received a loan from the Canadian Youth Business Foundation. This was good not only because they were the only people who would loan us money, but they also gave us a mentor as well.

I have to emphasize that small businesses almost always never make money in the first year or have money available to pay an owner (because you are re-investing the money). Doing a self-employment programs allows EI to cover your basic costs of living while you can focus on your business. It is kind of paying you to start a business, which is probably the best kind of business deal you can find.

Sliced Tomatoes

This business started off as a business plan entry into a business plan competition at UBC. My partners and I received 2nd place.

This business needed financing of over $100,000, so doing this with only personal financing was out of the option.

We got funding in the various ways:

1. Personal – personal assets and money
2. Family – as investments and loans
3. Government loans / programs – CYBF and BDC
4. Credit unions – credit card, line of credit, and loan through the Small Business Financing Program (which could kind of be categorized in the government category as it is a government backed loan). Also to note is that the credit cards and line of credit were done in the names of the founders, not the business, so these were technically personal loans

This financing was a bit of a game to get sorted out. It was like playing with a house of cards. If one source would have fallen through, then the deal would have been off. Somehow we were able to manage get all the money in place. After that initial round of financing, we leaned on family and ourselves to get us through tough financial times, until we eventually closed the business.

Small Biz Doer

This business started in the wake of the closure of Sliced Tomatoes. This was completely started by either borrowing stuff (that brother again) and purchasing out right – or temporarily putting on credit cards – new pieces of equipment.

After all the financing of Sliced Tomatoes, I was both unwilling and probably unable to get any money from outside sources. This business didn’t need a lot of financing, and was purposely set up that way, so this worked out.

Your Thoughts?

Is there anything I said that was inaccurate or that you disagreed with. Did you want some more details on a specific item? Leave a comment below and I’ll do my best to answer.

If you don’t have multiple currencies turned on and your Quickbooks version allows for this, turn it on by going to Edit > Preferences > Multiple Currencies and choose the Company Preferences tab.

Once on, you have to realize that you have to create customers, vendors, and accounts in that foreign currency.

This article will show you how to enter into transactions involving foreign funds when you don’t have a multicurrency version of Quickbooks.

Receiving Foreign Money / Currency

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Receiving foreign currency is as easy as adding a line or two when you go to record a deposit. Here are the steps:

1. Receive the payment (customers > receive payments) in your home currency, for the amount that you charged. For example, if you billed out $1,100, receive the full $1,100 (even if after the conversion and bank charges you don’t end up receiving this amount).
2. Record the deposit (banking > make deposit). This is where you add a couple lines when recording the deposit.
3. Add a line for Gain / Loss on Foreign Exchange. This is either the gain or loss that occurred when you converted the money into your currency, so it can be a negative or positive number. If you lost money on the exchange, for example you receive $1,100 US and it is only worth $1,050 CAN, then you lost $50 and it would be -$50. Received from is the name of your Bank and the From Account is Gain / Loss on Foreign Exchange. If you don’t have this account, click on add new and create an other income account.
4. Add a line for any Bank Service Charges. Again, the Received from is the name of your Bank and the From Account is Bank Service Charge (or whatever account you use for bank fees). The bank I bank with charges $1.25, so I put -$1.25.
5. After adding the Gain / Loss on Foreign Exchange and the Bank Service Charges lines, the amount to receive as a deposit will be equal to the amount that actually was deposited into your bank.

Paying with Foreign Money / Currency

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Paying with a foreign currency is very easy if you use a credit card, as credit card companies show on your statement the conversion rate. I’d highly recommend against paying with cash as you would then have to look up the exchange rate on that day (which you can do by doing a search online – the bank of Canada has a converter that converts to and from many different countries).

1. Go to whatever payment window is appropriate, whether it be Enter Credit Card Charge (banking > enter credit card charges) or Write Checks (banking > write checks)
2. For this example, I’ll use Enter Credit Card Charges. Look at your credit card statement and see what your payment amount was in your currency. If you bought something for $100 US, then it may be you paid something like $95 CAN.
3. Enter that amount, $95 in this example, and you are done. Pretty simple!