Starting a Business During Covid

Wed. Oct. 7th – Starting a Business During COVID-19

Real Talk Candles – Rachael-Lea Rickards (Toronto, ON) Born out of a need to overcome a random traumatic physical assault in the street by a stranger, Rachael-Lea took up candle-making to deal with her anxiety. The Jamaican-Canadian writer and playwright previously hosted her own Facebook show. She decided to merge her two worlds and put her witty words and true-to-life feelings on scented candles. To add to her risk-taking venture, she launched in April during the pandemic – when other businesses were closing. However, Real Talk Candles took off immediately, so much so, she had to hire staff, move into an office and already has celebrity endorsements!

Bliss Skateboard Shop – Sasha Senior (Windsor, ON) Growing up in Brampton, Ontario, there weren’t many skateboarders who looked like Sasha – Black and female – and now the mother of two is running the only bricks and mortar skateboard shop in Windsor where she also works full-time with the Royal Canadian Armoured Corps. Her March opening was successful, but due to COVID-19 rules, she quickly had to move her business online with curbside pick-up and free local delivery which was happily supported. Bliss serves the Windsor/Detroit community, but also has customers internationally.

7 Tips for Financing a Startup

By Ishani Nath

If there was a scented candle specifically for someone launching a small business during COVID-19, Real Talk Candles founder Rachael-Lea Rickards jokes it would smell like “your 9 to 5 friends are laughing at you.” And she would know.

The Toronto-based entrepreneur launched her line of “real talk” scented and non-scented vegan, animal cruelty free, soy blend candles on April 20, mere weeks after COVID-19 had been declared a global pandemic. Their candles are designed to start a conversation with products such as “West Indian Mother” (smells like “Who cyaah hear muss feel!”) and the “No Words” candle (smells like “I’m here but we don’t have to talk”).

Like Rickards, Sasha Senior’s business was born out of passion. On March 20, Senior opened Windsor’s only locally-owned skateboard store, Bliss Skateboard Shop, providing everything from shoes and safety gear to ramps. “Windsor needed a skateboard shop and I was blessed with the opportunity to provide one,” says Senior, who took the business from an idea to a reality in less than six months.

Real Talk Candles and Bliss Skateboard Shop are relatively new businesses, but since launching, Rickards and Senior have learned a lot about setting up a small business during COVID-19 — and what it takes to finance a startup.

Here are their tips for entrepreneurs, plus advice from CIBC Business Banking expert Nav Dhaliwal:

Have a source of income 

Senior and Rickards both started out by funding their businesses out of pocket. Rickards put in her own money to cover her costs and as the business grew, and used the money coming in to finance and grow her operations.

At the outset, Senior wasn’t able to get a loan, so instead ended up using her income as well as money from the sale of her car. She started Bliss Skateboard Shop with $7,000.

“Make sure you have a source of income to help start your business. That’s what helped me,” says Senior, explaining that by putting her own money into the business, she’s been able to avoid going into debt. Bank loans can be a huge help to businesses, but Senior says it’s helpful if the business isn’t solely reliant on that funding. Though it was stressful at times, she says she’s glad she funded Bliss Skateboard Shop out of pocket.

Dhaliwal notes that it can take time for a business to start making money, so having personal funds that can help cover a business’s working capital (the difference between a businesses current assets and liabilities) can help in those early stages. “Also any financing you receive requires a certain percentage of personal equity in the business,” he notes.

Get familiar with these key financial concepts 

For those new to the business world, it can feel like speaking a whole new language. CIBC’s Small Business Start Strong Program includes a helpful roadmap to get started. In addition, Dhaliwal highlights these key concepts:

Cash flow projections: “This will help the owner plan ahead and give a path on what they need to do to be successful,” says Dhaliwal, adding that CIBC has templates available.

Debt to Equity: “How much equity has the owner injected into the business versus how much they are in debt,” says Dhaliwal. “Depending on industry and risk in business, the bank can offer from $1 for every $1 injected to $3-$4 for every $1 injected.”

Debt Service Coverage: “How much income after tax is going out to payments,” says Dhaliwal. “A bank looks to the business to have $1.25 to service every $1 of debt owed.”

Dhaliwal encourages entrepreneurs to partner with their accountant or a financial advisor to help prepare these statements, which include opening day balance sheets and/or projections.

Do the math 

Before asking for funding, you need to know how much to ask for.

“Consider all fixed expenses, rent, internet, security system, insurance, where and how to get your product and other options for getting product for your business,” says Senior.

To help with your calculations, Dhaliwal advises completing an opening day balance sheet, and factoring in how much of your own money you’re willing – and able – to contribute, to figure out how much funding is needed to start your business.

Figure out what finance options are right for you 

From angel investors and personal income to crowdfunding or bank loans, there are different options for financing a small business. Dhaliwal’s advice? “Always start by looking at grants and government programs that may be available.”

Beyond those options, Dhaliwal notes entrepreneurs need to decide if they are willing to approach a silent investor and give up equity, or if they’d rather work with a financial institution.

Prepare before applying for a loan 

Before applying for a small business loan, Dhaliwal emphasizes the need to be prepared. He recommends compiling: a fully completed business plan, cash flow projections, opening day balance sheet, all personal tax documents for the last two years and a summary of personal assets.

Some of the most common mistakes Dhaliwal sees from entrepreneurs applying for small business loans are business plans that are not detailed enough, overly optimistic projections or a lack of research to understand what will be involved in the business.

“Be prepared to be open and willing to provide information requested,” he says. “A lender will want to know your business inside out, as would an investor, to ensure the partnership aligns and that they are setting you up for success. Complete thorough research and take a conservative approach when looking at projections.”

You don’t need to do it all on your own 

Looking back on the past few months, Rickards says there are three things she wishes she had known: you can’t do everything yourself, the importance of mentorship and the need to listen less to others. “Find people who have walked your walk, and let go of the rest,” she says.

Senior echoes Rickard’s sentiments. “Be confident and be around people that support you,” she says.

Dhaliwal says one benefit of working with the bank is the built in assistance for small businesses. “Banks are always there to support the client beyond just the loan,” he explains. “The advisor helps review businesses and see how they can help improve cash flow by providing resources or tools (i.e. collect payments faster, remote banking etc.).” During the COVID-19 pandemic, he also highlights that banks have supported entrepreneurs by providing loan payment deferrals and creating relief programs to help boost small businesses.

Never stop learning 

Both Rickards and Senior say that when it comes to financing their small businesses, they are both still learning.

Rickards never imagined that Real Talk Candles would take off like it has, going from a self care hobby to a full-fledged business, with office space and staff members in a matter of months. With changes like adding payroll and new products, her financial needs also shift. Though she didn’t originally look into financing options, she’s now exploring what’s available. “Honestly, it’s a work in progress,” she says.

To learn more about starting a business don’t miss this year’s Startup & Slay 2020 events.

RSVP to join live streamed events with these entrepreneurs online every Wednesday at 8 pm EST in October for the Startup & Slay digital series. Presented by How She Hustles with proud sponsor CIBC and partners Rogers Sports & Media and Shopify.