4 Essential Tips for Starting Your Own Business

As the unemployment rate reaches an 11-year high, the self-employment rate has started to increase. The problem is, bankruptcy rates are on the rise as well. If you've been thinking about using the economic downturn as an opportunity to flex your entrepreneurial muscle, below are a few things to consider before you open for business.

Tip #1: Make sure your idea has legs

Coming up with an idea, it's been said, is the easy part of starting a business. Executing it – and doing the proper research to ensure it has a chance of making money – is the hard part.

Before you even think about quitting your day job, or before you take the time to ask the bank for a loan, put together a solid business plan. This should feature a company overview, your goals and objectives, as well as a market analysis and plan of action.

Perform market research to see who your competitors are, and establish how you plan to differentiate yourself from them. Also, draft a rough marketing plan and strategies for attracting new clients. Your goal with this plan should be to determine how much money you can realistically expect to make within the first six months, and how much you're going to be forced to spend.

Tip #2: Think ahead before applying for credit

If your business is going to have a fair share of start-up costs, you might need to ask the bank for a loan. Since credit is tight these days, make sure your credit rating is in prime shape before asking for the dough.

If you still have a full-time job, take advantage of the steady pay cheque and apply for any credit cards, personal loans, or lines of credit you may need down the road. Banks will be more likely to lend to you if they think you have regular money coming in.

While banks are less eager to lend you money if you've already left your day job, a good personal credit rating can go a long way. You also have the option of attracting private investors to help fund your venture.

Tip #3: Stash some cash

Chances are, your new business probably won't make much money right off the bat. If you can, save a few months' worth of living expenses before giving it a go and quitting your day job, or start working at it on a part-time basis while keeping your full-time job.

If you've been laid off and neither of those are an option, talk to your spouse about creating a new, more frugal household budget.

Tip #4: Don't be afraid to ask for help

Depending on your chosen field, there is likely an association out there dedicated to it. Join it. Talking to others in your situation can go a long way in making sure your business makes it through its formative first couple of years.

Other organizations, such as local Boards of Trade and Chambers of Commerce, will provide ample educational and networking opportunities. The Canadian Government as well as numerous provincial governments, including the Ontario Ministry of Small Business and Consumer Services, also offer resources for entrepreneurs.