How to Start a Business in Ontario (2023): Step-by-Step Guide for New Entrepreneurs
For someone thinking about starting a small business in Ontario, it is easy to talk yourself out of the idea. The economy always could be better. You can’t quite find the right location to rent. Or maybe you’re worried whether your business name is clever enough. (The latter may be a clear sign that you’re stalling.)
The truth is that starting a business is nearly always a daunting process. But at some point, you’ll never know whether you can make it a success unless you overcome your fears and pull the trigger.
Granted, quite a few Canadian start-ups don’t survive beyond several years. But more make it than you may think, according to an Innovation, Science and Economic Development Canada study, which shows:
Those odds are not too bad, especially considering how many start-ups aren’t anywhere as near well-prepared as they should be before unlocking the doors and turning on the neon “OPEN” sign.
You can give yourself a better chance to have both short- and long-term success when you take the time to prepare yourself as much as you can. (Better preparedness is likely to silence the doubting voice inside your head as well.)
Our beginner’s guide on how to start to a small business in Ontario aims to help you with your research. We’ll discuss a variety of things you need to know to give yourself the best chance at making it 3, 5, or 10 years and beyond with our 10 steps to starting a business in Ontario.
Let’s get started!
Starting a Business in Ontario: 10 Steps to Success
Following a proven formula is a good way to reduce risk and increase your chances of success (which is one reason why franchises are popular).
In the following sections we cover these steps for setting up – and growing – a thriving business in Ontario:
Let’s cover each one in detail:
Step #1: Come Up with Business Ideas
Although some people can have success jumping on the first entrepreneurial idea that comes to mind, we would recommend thinking of several potential ideas. Doing a little research on the business market in Ontario can spark multiple ideas for you.
What Are the Top Industries in Ontario?
Understanding which industries are already successful in Ontario is a good way to come up with business ideas. Ontario offers a mixture of traditional industries like forestry and mining with high-tech industries like green energy and robotics.
The provincial government highlights the 12 most important Ontario industries. Some of these are industries where Ontario is on the cutting edge, and some are industries that generate significant GDP inside the province. These industries include:
What Are the Best Business Ideas for Ontario?
After studying the top industries in the province, you may come up with a few potential Ontario business ideas related to those industries. During your research, it’s important to understand that multiple sub-industries exist within each of the main industries.
Just saying that you want to start a tourism business in Ontario is a good starting point, but it’s probably not quite detailed enough. You may want to focus on a sub-industry of the tourism industry.
Perhaps you want to directly deal with tourists, such as through a bed and breakfast or a restaurant. Maybe you prefer to supply locally made products to retail stores where tourists will visit.
To get you started, we’ve covered some popular types of businesses in Ontario in our step-by-step guides:
Where Is the Best Place to Start a Business in Ontario?
Finding a great business location is another key consideration when trying to start a new business in Ontario. We’re not saying you have to settle on a particular address at this point in the process, but you can come up with general areas where each of your business ideas may work best.
Technical businesses that require specific skill sets may have more success when located near high population areas.
Ontario’s total population is about 15 million, with a significant percentage of that total located in Toronto at almost 5.7 million. Ottawa also has a large population of almost 1.1 million. Including the large population centers of Hamilton, Kitchener, and London, the majority of the province’s population is in the southeastern area.
As you travel to the north and west in Ontario, you’ll find more rural areas. These may be more advantageous locations for starting businesses related to industries like mining, forestry, and agriculture.
Step #2: Select the Type of Business You Want to Start in Ontario
With a few business ideas in mind, you then can begin to narrow your focus for the business.
Offering Goods or Services
One of the most basic differences among various businesses is whether they offer goods or services. (Some offer both goods and services.)
For a business that offers goods, you would be selling products that you make yourself or that you purchase from a supplier and then resell at a profit. If you make your own products, you would have costs to obtain the raw materials.
For a business that offers services, you would be doing things for other people and businesses. You would need to invest in time and equipment that allows you to provide the services. Many business owners who offer services charge customers by the hour or by the job.
As a service business, you might also offer goods. For example, a business that cuts and styles hair as a service may also sell hair care products as goods.
Running a Business in Person or Online
Traditionally, businesses operate in a retail location where customers visit you in person to obtain goods or to set up services. Modern businesses in Ontario, though, can operate completely online, if desired. You would rarely, if ever, meet your customers face to face with an online business.
If you are operating a business from a location where customers will visit you, you almost certainly will have an online version of the business as well.
As a business that operates “offline,” you may have an area where you interact with customers, as well as an area where employees do their work.
As a business that operates completely “online,” employees would do their work remotely. Employees may visit a customer to perform services at the customer’s location in an online business, but your business probably wouldn’t have a particular space where customers could visit you in person.
If you are running a business with you as the only employee, you will have a far easier time running an online-only business than if you have dozens of employees. With large numbers of employees or if you need to entertain customers, an offline business is far more common.
Important Aspects of an Offline Business
If you are running a brick-and-mortar business, you need a great location in Ontario. If you rely on customers visiting your business to make sales and generate profits, having a remote location that’s too difficult for customers to visit will cost you money.
If customers are visiting your location, you must offer excellent customer service. Whether you or your employees are interacting with your customers, you want your location to feel welcoming and comfortable for customers.
Physical business locations have costs for things like utilities, maintenance, insurance, janitorial services, product storage, inventory tracking systems, and point-of-sale systems.
Offline Business Examples in Ontario
Important Aspects of an Online Business
When starting an online business, some Ontario entrepreneurs will operate the business out of a spare bedroom or basement at home. When you don’t need to host customers or provide a space for employees to work, you can operate your online business from almost anywhere.
It’s vital to have a strong digital presence when operating an online business. You must invest in a website, in a social media presence, and in a fast and reliable internet connection. You also need to be able to communicate efficiently with your customers via email, telephone, and text, because you won’t see them face to face.
Customer loyalty can be difficult to build with an online business because of the lack of personal interaction. If you are operating a business in a niche area of an industry, though, where you are one of only a few businesses that offer certain products or services, you can keep customers coming back.
Trying to operate an online store that offers a significant number of retail products in a variety of areas makes it tougher for you to stand out from the crowd versus operating as a niche retailer.
Online Business Examples in Ontario
Considerations for Developing an Online Business Presence in Ontario
The Building a Digital Ontario website offers multiple resources to help you understand strategies involved in online business development.
Start with a professional-looking website. Multiple subscription services help you with starting, hosting, and designing a website that will look great and will help you serve your customers. Many of these website hosting services also can walk you through the process of creating an online store, including taking payments securely.
You may want to consider email marketing software packages that help you stay at the front of mind for your customers. You can announce special offers or new products and services through email marketing.
Social media marketing is another key factor in running a successful online business. Because you do not meet with your customers face to face, social media gives you an opportunity to show off your personality and to connect with customers in a way that generates brand loyalty. Some tips for using social media with your Ontario business include:
Step #3: Buy an Existing Ontario Business or Start from Scratch
When starting your Ontario business, you have a couple of options. Some people prefer the idea of starting a new business, while others choose to purchase an existing business that’s for sale.
Starting an Ontario Business from Nothing
When most people think of starting a business, they really only consider doing so from scratch. This is a common option for entrepreneurs. If you want to control every aspect of setting up the business, starting a new business is going to be most satisfying for you.
When you start a business from scratch, though, you have to do a lot of work. It takes significant time to handle all the decisions required for a new business. It is not easy to have the skills and interests required to handle every aspect of starting a new business.
However, it can be extremely satisfying to create something from nothing. When you start a new business that ends up being successful, you can create a legacy that you can pass down to your children.
Buying a Franchise
If you would like to start a new business, but you also would like the help of a brand name to give you a leg up in the market, buying the rights to a franchise might be your best option.
With a franchise, you receive the right to operate a known brand name business in a certain area of Ontario. With most franchises, you receive protection from other franchisees opening the same brand name store in your location.
The franchise requires a lot of investment dollars, as you have to find a building for the business and then design it according to the guidelines of the franchise. You also have to pay for the right to hold the franchise.
But this type of business is yours; you own it. You have some limitations on how you can run it, depending on the franchise’s rules, but the franchise helps with advertising and brand awareness, taking those tasks off your plate.
Always thoroughly investigate any franchise opportunity before you buy. Some franchises are scams. Have an attorney look over any franchise agreement to make sure you are receiving the benefits you believe you are receiving.
Buying an Existing Business
Another option that is important to consider for an Ontario entrepreneur is to purchase an existing business. This process cuts down on the preliminary work that you must do to begin running the business, which appeals to some entrepreneurs.
Some people sell their businesses when they are ready to retire or when they simply want to do something new. When someone is selling a business, it doesn’t mean that the business is failing and the seller is trying to bail. You can have success purchasing an existing business.
When purchasing a business, request help from attorneys and CPAs to verify the financials for the business. The current business owner might exaggerate the business’ profit levels, meaning you end up paying more for the business than you should. Professionals can help you develop an accurate value.
To find existing businesses for sale in Ontario, you can check multiple options on the internet, which we’ll discuss next.
Ontario Business Brokers
One of the best ways to purchase an existing business is to make use of a business broker. Brokers have detailed knowledge of the existing business market in the province, helping you find the perfect business for your skills and interests.
Business brokers can even work to find you a business in a certain location or in a certain industry. Because business brokers know the market so well, they may even be able to give you advanced notice when a business could be coming on the market, so you can do some preliminary homework and perhaps make an offer before others.
Once you decide to purchase an existing business, business brokers can help to negotiate the deal. If the negotiations seem to be stalled, a broker may be able to step in and find common ground between you as the buyer and the seller.
Multiple trusted business brokers operate in Ontario, including:
Ontario Online Business Marketplace Websites
Ontario Real Estate Brokerages with Business Listings
Ontario Businesses for Sale by Owner Classified Ads
Step #4: Pay Attention to Government Requirements
Operating a business in Ontario – or anywhere in Canada – requires you to submit to some government oversight. This can be a frustrating aspect of owning a business, but it is a necessary one.
Determining Your Business’ Operational Structure
In Ontario, the most common business structures you will use are:
Selecting the right legal structure for the business is important, as this determines the taxes you owe and the liability you personally have for the business, among other things. Simple, one-person businesses often will be sole proprietorships. Complex businesses with multiple shareholders will register as corporations.
Creating a Legal Name for Your Ontario Business
You then can select a legal name for the business. You must have a name that differs from any other business name in use in Ontario.
Use the Ontario Business Registry to search for existing names. We’d suggest coming up with several potential names.
If your business name is available, then check social media and the internet to make sure you can create a website and social media accounts to match your desired business name. If a matching website is not available, you may want to cross that name off your list.
Registering Your Ontario Business
Once you have a legal structure and name in mind, you are ready to register the business with Ontario. You will have to create an account with ServiceOntario to be able to register online.
After registering with Ontario, you are ready to begin paying your business taxes. (Sorry for being the bearer of bad news, but, yes, paying taxes is part of owning a business.)
In Ontario, the basic business income tax rate is 11.5%. A small business deduction tax rate in Ontario lowers the tax rate for some businesses to 3.2%.
Obtaining Permits and Licences for Your Ontario Business
To see if you need licences and permits that match the type of business you are running in Ontario, you should use BizPaL. Select your province and type of business at the BizPaL website, and BizPaL will return a list of permits and licences.
You also may want to check with your local city government for any particular licences or permits required locally. Even small cities may require certain permits, so always check.
Regulations for Ontario Businesses
Depending on the type of business you are running, you may need to follow a number of regulations, including:
You also may need to follow various workplace laws, including:
You may want to have your attorney give you advice on which regulations your particular business must follow.
Step #5: Estimate Your Potential Business Costs
Although the steps we’ve discussed so far may seem challenging to complete, perhaps the toughest aspect of starting a business is finding the start-up money to cover the costs you have for your particular type of business.
Not only do you need money to perform the tasks required before you can open your business’ doors, but you also need some money to help you ride out what could be some slow times in the early days and weeks of the business until you can begin making regular sales and – hopefully – turning a profit.
Estimated Costs to Start an Ontario Business
Different types of businesses have different start-up costs. Here are some estimates for various businesses. (These are broad estimates, and your actual start-up costs could differ.)
One-Time Costs for New Ontario Businesses
As a new business in Ontario, you may have several different start-up costs that you have to pay before you can open your doors to customers, including:
Ongoing Costs to Operate New Ontario Businesses
After your business is in operation, you will have additional costs to keep the business running from day to day. These can include:
Step #6: Create Your Business Plan
Although some people may attempt to start a business without a business plan, this rarely is a good idea. The business plan outlines your vision for your business and can give other people an idea of what you are trying to accomplish.
A business plan forces you to take a realistic look at your business idea. You have to clearly state what the business will do, and you need to think about realistic goals that you would like to accomplish with the business.
If you are seeking investment money in the form of a loan, from a venture capitalist, or from a business partner, such people may require you to put together a business plan before they will consider giving you any money. Some business insurance providers also want to see a business plan.
Explaining how your business idea will work can be difficult to do verbally. The business plan forces you to put your ideas in writing. This can help others see your vision for the business and perhaps want to share in it.
How to Write a Business Plan in Ontario
Do not feel like you have to create your business plan without any guidance. Resources like the federal government offer guidelines for creating your business plan.
Ultimately, your business plan should contain several pieces of pertinent information, including:
Step #7: Find Startup Financing
Finding the money you need to start running your business is extremely important. Without enough start-up financing, your business may run out of money before you are able to develop a strong customer base. You have a few different options for seeking financing for your business.
Using Your Own Financing Money
When starting a new business, you are going to have to place some of your own money into the financing process. Some sources of your own money that you can put into your business include:
Without having some money at risk in the business, you may have a difficult time finding others who are willing to give you money for your business. Other financiers want to see that you have enough faith in your business idea that you are willing to place some of your own assets into the business venture.
Finding “Free” Money
If you can find money to sink into your business that doesn’t require you to pay it back, this is the best type of business financing to use. (It’s also some of the most difficult money to obtain, unfortunately.)
Finding at least some “free” money can be the difference in having a successful business venture and a business that goes bankrupt after several months, so it’s worth taking the time to try to find sources of no-strings-attached money. Some options include:
Loans and Debt Financing
Most new entrepreneurs probably think that loans will be the primary financing option available to them. And while loans often are important, you may find that they are difficult to obtain, especially for a business owner with no track record of success.
Chances are high that loans will only represent a portion of the money you need to start your Ontario business.
Additionally, the types of loans you obtain probably will go well beyond calling your local bank and seeking a new business loan. Some of the options for obtaining loans and debt financing for your new Ontario business include:
Another option you may want to explore involves seeking equity financing. This means you sell a percentage of the ownership in your business in exchange for funding you can use to start or operate the business.
Although equity financing works nicely, it will not fit the needs of every entrepreneur. Often, someone who purchases a portion of your business is going to want to have a say in how the business operates. If you are starting a business in Ontario because you want to have full control, giving up some of that control to obtain start-up money may frustrate you.
Before agreeing to accept any equity financing from an investor, you will want to have a clear understanding – preferably in writing – about what the equity investor expects to receive as a part owner of the business. Options for finding equity financing include:
Step #8: Seek Professional Help with Legal Items and Accounting
As a new business owner, you are going to be wearing a lot of different hats. You need to have expertise in several different areas to be able to run the business successfully.
However, it’s also important to understand exactly when you are in over your head. For example, unless you have a legal background, we would not recommend tackling legal issues related to your business on your own.
Instead, hire a lawyer who can make sure you are operating the business in a legal manner, who can review any agreements and contracts you need to sign, or who can advise you on what kinds of governmental regulations you need to follow.
Along those same lines, consider hiring an accountant or a CPA to ensure that you are tracking your finances properly. Having an insurance agent or a banker that you can trust is a good idea, too.
Some new business owners may want to hire a mentor to help them work through some difficult aspects of starting a business in Ontario.
Step #9: Find Advice for Starting Your Ontario Business
When you need advice about starting your new business, you have a number of different options available to you in the province.
Ontario Resources for Business Start-Ups
Some of the resources you can use as an Ontario business start-up include:
Ontario Business Networking Options
Consider speaking with other small business entrepreneurs in Ontario to gain some insight and advice for your own business venture. Try investigating organizations that allow you to network with other business owners who may have been starting their own businesses a few years ago – sitting in the exact same position you are in now.
Ontario Business Directories
A business directory is a website that collects information about individual businesses. The directory will list your contact information and some basic information about what your business does, along with many other similar businesses.
Some business directories may collect information about your business and automatically add it. Others may require that you request to be included on the website.
Either way, it’s important that you keep an eye on your business directory entries, ensuring all contact information is up to date and accurate. If a potential customer tries to contact you through a business directory but encounters inaccurate information, the customer probably will immediately move on to one of your competitors who are also part of the business directory.
Some business owners occasionally visit business directory websites themselves to check for accurate information. Others rely on local SEO service software to monitor business directories on a regular basis.
Ontario Business Associations and Organizations
If you want to gain legitimacy in the eyes of potential customers and fellow business owners in Ontario, consider joining local business associations and organizations. You can showcase signage indicating these memberships at your brick-and-mortar store, so customers can see them, or on your website if you run a digital business.
Such memberships can help you learn more about how to run a business in Ontario, while also finding fellow entrepreneurs who may be willing to provide advice for you. You may have to pay annual or monthly fees to be a member of some of these Ontario associations and organizations, including:
Depending on the type of business you are running, you might consider joining local professional organizations that fit your particular skill set and industry. CIPS Ontario serves local IT professionals, for example.
Ontario Business Awards
Many local associations and organizations in the province provide awards to entrepreneurs and businesses. With some of these awards, you must be a member of the organization to have a chance to win. Other awards are available to any business owner in the local area. You may have to request a nomination form to receive consideration.
When you receive a nomination or – better yet – win an award, you can make note of this accomplishment on your website and in your physical location, letting customers, clients, and employees know about your successes. Some business awards available in Ontario include:
Ontario Immigration Entrepreneurs
If you are considering immigrating to Ontario with the idea of starting a business, the OINP Entrepreneur Stream provides a number of resources.
Step #10: Avoid Common Pitfalls of Starting a Business
As you take the steps required to start your own business, you almost certainly are going to make some mistakes. No one wants to make an error, but when you are making so many decisions, you’ll probably end up regretting at least a few of them.
If you would like to reduce the number of potential mistakes you make, here are 10 common errors that new entrepreneurs in Ontario make. Avoid these, and you’ll have a better chance of keeping your new business moving forward smoothly.