15 Questions to Ask Before Starting a Business, According to CPAs
Starting a business is an exciting adventure. You’ve done your research, created a product, and you’re ready to launch.
But starting a business can also be risky. In fact, within three years of startup, one in five small and medium-sized enterprises (SMEs) will fail in Canada. Many fail because of inexperienced management and poor planning, which lead to financial problems. But failure is avoidable.
We asked our CPA community to share what entrepreneurs should ask before starting a business.
1. Is there an audience for your service or product?
This was the most popular response from CPAs: know your market. You need to figure out your ideal customer: who they are, how they live and what they do. Conduct your own research into their habits, needs and interests. Will your audience want what you’re selling?
2. How will you distinguish your business from the competition?
Your business needs to stand out from the rest. How will it add value and how will you differentiate it from similar products? This will inform how you position and market your product.
3. Do you understand your customers’ needs? And what pain point are you solving?
Dig into how you can help your customers and use this research to make improvements on your product or service. For example, can you provide them something more convenient or affordable?
4. Is there a large enough demand to allow for growth down the line?
As part of your research, you should analyze your growth potential. And as your business develops, CPAs can help you see the growth opportunities in your numbers. Analyze if you’re able to scale your services or product and how you’ll grow your audience base for more customers.
5. What are the mission, vision and core values of your business?
Setting out your mission, vision and values helps to inform how you’ll develop and how you’ll measure success. It also lets your customers know what your purpose is. Think of the ideals that are important to you and guide your company with them.
6. What kind of structure is right for your business? Which structure is ideal for your capital needs and strategic initiatives?
Another popular response from our CPAs was to get advice on business structure. This decision can inform how you fund and build your business. It also instructs you tax obligations and what kinds of tax advantages and disadvantages you’ll need to manage.
7. Do you have the capital to fund the startup costs? If not, what are your funding options?
Applying for loans and getting capital are difficult. Based on your business model, see which options are best for you. Perhaps you can get small business loans or investors or seek out venture capital. A CPA can also help you navigate these opportunities.
8. Do you have the financial capital to sustain this business even if you don't see profits for the first few years?
Not answering this question is a big reason why businesses can fail. You need to plan ahead and understand your cash flow, expense tracking and budget to get yourself through the first few years.
9. When and how will you pay yourself?
Hopefully you’ll see returns on your business sooner rather than later. Depending on your business structure and your revenue, any profits may go directly to you, or you’ll pay yourself a salary.
10. How will you plan for your future and save for retirement?
If you’re stepping away from a secure 9-5 job, you’ll need to consider how you invest for your - and potentially your family’s - future. Seek out advice on the best options for you.
11. Can you handle the potential ups and downs of starting a business?
You may have some stops, starts and pivots along the way. Be flexible and understand that this is part of the process. Finding mentors and a community of entrepreneurs who have been through it before can help.
12. Are you ready to spend the additional time to grow your business and brand? How will this affect other aspects of your life?
Many CPAs run their own businesses, so they understand the potential toll entrepreneurship can take on people. Do you have the support and time you need? Have you considered how running a business will work with other aspects of your life?
13. Do you have the deep desire to do whatever it takes to succeed?
With whatever your entrepreneurial journey throws at you, do you have the drive to keep going? Our CPA community says passion is the secret ingredient to staying on the entrepreneurial path.
14. What are your strengths and weaknesses? What should you consider outsourcing?
You can’t do it all, and if you want to scale your business you’ll eventually have to hire or outsource certain aspects of your operations. Understand which day-to-day activities you add value to, and which ones you can delegate to a more knowledgeable expert. This will free up your time to focus on your favourite parts of your business.
15. What does success look like to you?
Will success be measured in milestones or money? When can you say you’ve “made it”? Keep these goals in mind as you work towards them, and don’t forget to enjoy the ride.
A CPA can be a trusted advisor from the beginning of your entrepreneurial journey and can play a key role along with your coaches, mentors and other professional service providers. You want your business to thrive, and our CPAs can help set you up for long-term success.