We are a nation of bootstrappers, the results of a new report suggest.
A new survey from Intuit Canada was conducted to gain insights from successful small business owners at different stages in the entrepreneurial lifecycle and found that the majority – 58% – of Canada’s small business owners started out with less than $5,000.
“Canada’s entrepreneurs have invested their lives to pursue their dreams,” said Jeff Cates, managing director of Intuit Canada. “This study provides an opportunity for all of us to better understand what it takes to run a successful small business. Insights like these help Intuit design products and services focused on helping start-ups make the most of their initial financial investment.”
A majority of small business owners reported making a risky financial decision when they started out. 19% said they took out a loan or line of credit, 18% drained their savings account, and 15% maxed out their credit cards. The study also found that one in three small business owners underestimated the amount of time they would spend on financial management.
“All the money in the world won’t help a budding entrepreneur who doesn’t understand basic accounting principles,” said Mark Simpson, professor, Institute of Entrepreneurship and Community Innovation, George Brown College in Toronto. “While the allocation of resources might change based on the business, the bedrock principles of understanding cash flow, knowing your customers and minimizing risk remain. Small business owners can set themselves up for success by embracing these principles and investing in the right financial management tools.”
Turning a passion into a viable business is the goal for many, but it doesn’t come without some hard lessons learned. When looking back on year one, 17% successful small business owners wished they had learned more about financial management and 11% wish they had sought professional advice earlier.
“The first year of a business is critical. Preparing yourself, by doing market research, attending conferences, or enrolling in a business and financial management course, is a great way to build a solid foundation for your business,” said George Brown College professor Simpson. “Above all, entrepreneurs need to develop a network, forge relationships, and make face-to-face connections. These are the investments that will see you through those inevitable rough patches, and lay the foundation for success.”
Small businesses are a crucial component of Canada. In the past decade they have created 600,000 jobs. Nowadays 42% of private sector GDP in Canada comes from small businesses. Unfortunately, only 70% make it through their first two years.