In general, there are 4 ways for Immigrants to invest into a business in Canada:
a) Start your own business;
b) Buy a Business;
c) Buy a Franchise Business; and
d) Buy shares of a Business.
(1 = Fast)
|Difficulty to Start
(1 = Easy)
|Start your own Business||High||5||5||Unpredictable|
|Start a Franchise||Moderate||3||2||Predictable|
|Buy a Business||Moderate||1||2||Predictable|
|Buy Shares of a Business||Low||1||1||Predictable|
A. Start Your Own Business
Given that the failure rates of new businesses in Canada is 50% within the first 5 years, and the additional handicaps such as language, culture, business norms and others make it very risky for foreign business people to start up new enterprises on their own. Deciding on a business, finding premises and negotiating the lease; recruiting, hiring and managing suitable staff all make the process very onerous!
B. Purchase a Franchise Business
One to overcome many of the obstacles that foreign business immigrants face is to start a franchise business. A good franchise business will have established systems and manuals, training for owners and managers, and ongoing advertising programs which will usually give you a better chance of success than doing it alone. FranNet.com conducted a survey of North American franchise owners in 2012, in which it found that about 85% of the franchisees that had consulted with them were still in business after 5 years, which is much higher than the 50% reported by Industry Canada in 2010.
Most established Franchises have stringent screening procedures, however, and it is often difficult for new immigrants to meet their qualifications. In addition, many have quite regimented procedures, and it is often said that Franchisees are just “buying a job”. Having said that, this could be a good way to gain Canadian business experience.
C. Buy a Business
This is often the quickest and easiest way to establish a business in Canada. An existing business will already have the following in place: cash flow; products or services; office and/or business premises; customer base; experienced staff; reputation and goodwill; and a track record, which can be verified by financial statements and tax return. In short, much of the risk of the unknown can be mitigated, and with good professional and business advice.
From the Canadian perspective, there are many Canadian business owners who are looking to retire. Canadian Business Magazine cited a CIBC Survey that said nearly 550,000 small to medium sized business owners with $3.7 trillion in business assets are set to retire by 2022. Many of their children are not interested in taking over the family businesses, leaving the parents struggling to find a buyer, or even close down. If the SME owners can offer their businesses for sale to Business Immigrants, they would have many more potential buyers and a better chance of selling the business at a reasonable price.
D. Buy Shares of a Business
If possible, this is often the best solution. The Business Immigrant can acquire a stake in the Canadian business, learn about the business as well as the Canadian way to do business over a period of time, and then eventually buy out the enterprise. This would require a lot of trust between the existing owners and the Business Immigrant; in many cases, the owner just wants to retire, and not be tied down to the business! So this would be likely for more unique situations.
On Investing and Driving