Financial Literacy Month in partnership with Scotiabank – Taking the Fear Out of Finance

*The following content should not be considered financial advice. Before acting upon the following information, we recommend you seek the guidance of a qualified financial or business advisor who can take your unique needs into account.

Financial management and funding are consistently the number one pain points for Canadian entrepreneurs. Powered by Scotiabank, in recognition of Financial Literacy Month, Startup Canada is shedding some light on this complex, multifaceted hurdle countless founders face across the country. Through the curation of specialized financial resources for small businesses and speaking to leading early-stage entrepreneurs across the country about their financial journeys, we can take the fear out of finance together!

In a 2018 study, it was found that less than 20% of Canadians believe they have strong financial literacy – with over 40% rating their financial literacy as poor. Financial literacy is something that impacts all Canadians, including entrepreneurs.    

This four part series will take a deep dive into four key topics of financial management and planning for startups: 

1. Feasibility and Foundations.
2. Financing That Works for You. 
3. Performance Monitoring and Optimization for Profit. 
4. Retirement and Succession Planning. 

Financing That Works for You

Finding funding is the most common and pervasive issue for Canadian entrepreneurs, with 69% of respondents of Startup Canada’s most recent census noting that funding is their number one area of needed support. 

For startups, there are three main categories of funding:   

FINANCING TYPE	BENEFITS	DRAWBACKS
Self-Funded (Bootstrapping)	Greater Focus: Owners won’t have to worry about fundraising or impressing investors, leaving more time to focus on the business. Easier Pivoting: Without investor, stakeholder and director input the owner can pivot and iterate quickly. Total Control: Bootstrapping in the beginning means total control over your business decisions and retaining full equity. If you choose to explore other forms of financing down the road, it will likely be for less equity and for better rates as you will be more established and have a proven, viable market.	Time: Without external help, scaling can be much slower when bootstrapping. Lack of Support: Investors often play a larger role than supplying money - without the support, you may be on your own to track down strategic connections, team talent, and potential buyers. Personal Risk: While success in bootstrapping means all profits and benefits go to the owner, the same is true if the venture fails - there can be a lot to lose.
Equity (VC Firms, Angel Investors, etc.)	Credit Problems: Credit is often not a hurdle with equity financing like it is with debt financing. Even if a lender approves you with non-ideal credit, the interest rate or repayment structure may be unwise. Cash Flow: Equity financing does not take money out of the business, but rather retains a portion of your profits and a percentage of ownership. Planning: Equity investors do not expect an immediate return on investment or require immediate repayment, but rather a medium to long-term view. Less Risk*: Due to not requiring immediate repayment, equity can be less risky for early stage ventures who are in pre-revenue. (*In certain circumstances).	Cost: Equity investors expect a return on their investment and will take an agreed upon amount of profits. These profits may be more than the interest rates on a debt financing loan. Loss of Control: The owner must forfeit a percentage of equity in their business to the equity investor, meaning they will lose total control over business decisions. Potential for Conflict: Equity partners may disagree on the direction of the venture and business decisions made. The owner must be prepared to handle these differences in opinion.
Debt (Term Loans, Lines of Credit, Credit Cards, Family and Friend Loans, etc.)	Control: This relationship is temporary and ends when the loan is repaid. The lender does not get a say in business decisions. Taxes: Where dividend repayments are not tax deductible, loan interest is. Predictability: Loans can be long, medium or short term. Interest and principal repayments can be predicted early.	Qualification: Many lending institutions require good credit as a prerequisite. Cash Flow: Too much debt can lead to problems repaying said loan if cash flow decreases. Debt is also a deterrent for complimentary equity financing. Fixed Payments: Principal and interest repayments are scheduled on a fixed date. If venture cash flow is unpredictable you may have trouble keeping up with these payments. Collateral: Lenders will typically demand company assets be held as collateral, in addition to the owner guaranteeing the loan personally.

For this segment, Startup Canada was pleased to sit down with Bernice Kootoo Clarke, founder of Uasau Soap and the Startup Women Advocacy Network (SWAN) representative for Nunavut, to learn more about her financing journey – how she strategized for success in the early days, her purposeful venture structure, and her advice for other early-stage founders just starting out with financing.

SC: Tell us about you and your business! Who are you, and what does your business do?

BC: My name is Bernice Kootoo Clarke. I am an Inuk from south Baffin Island. My business – Uasau Soap – is a body care line where we incorporate the traditional healing of Inuit in a new and modern way.

SC: Speak to your experience with finances and funding in your business – was it something that scared you? What were your biggest worries or anxieties associated with money?

BC: Yes, definitely. When you’re entering the new world of business, it’s very intimidating. First, we are intimated and second guess ourselves – “Can I even do this? Am I able to?”. Those are the first questions that you start to ask yourself, then you become brave enough to start asking questions and reaching out to organizations, to businesses, to anybody that you feel can be your mentor. I approached other businesses with questions like “How did you do it? What did that feel like for you?”. Really, I was trying to take away the intimidating part of talking about my business to another business person, because even that was intimidating. 

Find your passion and purpose and use it to drive you. Find what you want to do – your business – and find support. Is there someone that you can speak with that has started a similar business? It can be different, but you can take their model and make it your own. Go for it – ask questions and reach out to people. I really can’t stress this enough – be brave and seek out the people that you feel can give you the answers that you need.

I’ll add that dealing with any group that provides grants and funding is intimidating. However the paperwork and the processes that go with seeking funding and support from organizations is your first step in your journey of growth, so be brave and ask for help. No question is a stupid question. Be okay and confident in every question that you ask. My mentor really helped me open the gates for me to be able to accept help and to see money as not scary. In my culture and to me as an Inuk, money wasn’t flowing in my life previously. I had to heal a lot of parts of myself where I was afraid to touch money. I don’t want to say that I thought money was “dirty,” but money has an evil part to it that I didn’t want my business to be. I had to heal the money aspect – it’s not bad, it’s good and my business needs it. My mentor with EntrepreNorth, his name is Dave, was really helpful in this journey because he knew my “why” – wanting to help and inspire my fellow Inuit while also wanting to be economically wealthy and be okay with it. He said to me “how will you help your people if you cannot accept money?” … When he said that to me, my heart flew and I had goosebumps. I knew he was right and I saw it. So I told him and myself, “I am okay with taking money, I am okay with touching money because I will clean it – I’ll clean it through my heart and my spirit and make it beautiful.” So I began to see money in a new way – it’s a path to help my fellow Inuit, to help us grow and to do the things we need to do.

SC: You have scaled quickly – specifically in terms of your internal processes. How do you ensure you have enough capital to float your inventory, and keep up with distributors, suppliers and shipping? Walk us through your system!

BC: We are isolated here, so our struggles are not the same as someone that isn’t on an island such as myself. The only way to get to us is by plane and by ship, which requires more thought and planning for the upcoming sealift season – when the ship comes in and there’s a timeframe, you have to work with the tides. It comes with a lot of high costs and logistics. We do have a bookkeeper who helps to keep us organized and ready for tax season. We also have QuickBooks which helps us track our sales. QuickBooks helps us organize our invoicing, keeps our retailers accountable and tracks what is owed. We also use it for inventory – it helps with forecasting and shows us how much product we went through and prepares us product-wise for the upcoming year.

If cash flow is a pain point for your business, check out the following from Scotiabank: Featured Resource: Cash Flow is King.  The survival of any business depends on cash. Even if your business makes a healthy profit at the end of the year, you still need to manage the inflow and outflow of cash to survive on a day-to-day basis. Featured Resource: 6 Steps to Better Cash Flow.  Improving your cash flow is critical to your overall success. Featured Resource: The Power of Cash Flow Forecasts.  Get to know this essential tool to manage your cash flow.

SC: What does your financing structure look like today – self-funded, VC, bank loans, grants, a combination? Why did you choose said structure?

BC: We’ve received a forgivable loan and a grant. We have structured our business to take care of itself which gives us time to find the free money such as the grant with the lowest interest rates possible. We decided not to go with investors because we don’t want to lose any control over our business, our baby. We took our time growing our baby very purposefully. This is our 10th year and she’s ready for a new apartment and she’s ready for University. She’s ready for growth.

Eager to learn more about grants and subsidies? Explore the following from Scotiabank: Featured Resource: Grants & Subsidies to Grow Your Business.  Canada is a nation that supports its small businesses, offering numerous government programs, incentives, subsidies, and grants worth billions of dollars.

SC: What were your biggest hurdles in terms of financing in your business’ early days versus today?

BC: I was very careful with the money that came in. Every dollar that came to Uasau was put away and never touched. I used my own money to build the business – I set up two other forms of income to go towards and fund Uasau. I’m never sure if I should talk about these things, but this is the reality of how many businesses grow. I had a full time job and actually sold Mary Kay and every dollar I could afford to pass over went to Uasau. Every dollar from craft markets and other things. I kept doing that over and over – it was a really slow process but a very purposeful one with no help other than my two jobs. I really wanted Uasau to have a chance so it was a lot of recycling the money over and over until the business grew.

Once I had enough money in Uasau and had gathered customers, I went to the funding organizations and could prove the market demand for our product was there – I showed them our customers and my ability to save and grow our funds. So I said, “I would like to apply for a $15,000 grant that will give me some inventory”. When I got that $15,000… wow. Just watching the product come in from off the ship… to this day that’s the moment I knew the dream was happening. I had inventory! I didn’t have to take from my Vacation Travel Assistance anymore – when you live in the Arctic in an isolated area some organizations will help you with your air travel expenses because it is so expensive – and I used to use that to grow Uasau. For a while I actually had a third job with the airline so my Vacation Travel Assistance wasn’t eaten up but I could still travel, network, and make connections for Uasau. 

So it really was a lot of a little bit here, a little bit there to get to where we are today. I knew I loved makeup and travel, so I made money for my business with the things that brought me joy. I was juggling, but the passion and the drive was there.   

Curious about protecting your business in the early days? Scotiabank can help:  Featured Resource: Can Your New Business Pay You a Salary?  3 ways to measure the impact of your salary on your new business. Featured Resource: Get Through Lean Times by Creating a Cash Cushion.   Some call it emergency funds, while others call it savings. Whatever the label, setting aside enough money to fund your business and personal expenses for a few months is a good idea to help survive some rainy economic days.

SC: At the heart of your business is the idea of traditional Inuit knowledge sharing and empowering your community – how have you bridged rigid western colonial business structures with the culturally relevant values and mission of Uasau?

BC: I had to be the washing machine. I had to clean the money and the idea of the money. This is old me talking here, but the idea that money was “dirty” – money can bring with it a negative aspect. I found myself through my business. I had to be very true to myself and remember who I am and where I came from – that I am my grandparents granddaughter. I am Eekeeluak and Kanayuk Kootoo’s granddaughter. That’s my start and that’s who I am. It’s so important to remember why you do what you do. That has always been my “why” – to help Inuit, tell our story and keep it authentic. Keeping it authentic is a way of staying true to yourself.

Really really get to know yourself. Become comfortable with your own self in your own skin and then root yourself in the ground so nobody can sway you. That is how I have been able to bridge the traditional aspect and money aspect in my business – they have woven together for one purpose. It’s about weaving them together, not keeping them separate. That’s been my trick. Staying connected to Inuit and our stories. 

As Inuit we are very humble, so I had to learn how to talk, put myself out there and tell our stories – even to you. Knowing these stories are so old and that they were given to me and I am now sharing them with the world, I am always so careful and I always always reference who I learned them from – I say their name – or I mention that these stories have been a part of our histories for thousands of years. So all that to say, be true to yourself, remember your why, and the rest will flow.     

SC: What advice do you have for early-stage founders in terms of financing? Where should they start?

BC: Start in your backyard. Talk to businesses around you. Most businesses want to help you and share their experience. You need to put yourself out there – attend functions, ask questions, network, share your ideas, and put it out there to the world. Share your “why” and share your enthusiasm. People will grab on to that – people love stories. They want to be a part of the story. 

Get yourself on LinkedIn, go on Google, YouTube. That’s what I do. I use those platforms. If I don’t understand a platform right away I decide “I’m going to become an expert on this in the way I want to and the way I can best absorb this information.”Recently I have been using LinkedIn like a playground – get connected, listen to other people’s stories, and be part of the community that is out there. Just be very curious and listen – do a lot of listening before you speak.

SC: That’s great advice and so true. So many people think you need to be an expert on all things entrepreneurship before they get involved and speak when in reality you only need to be an expert in your own business sometimes. 

BC: An expert in yourself.

SC: Agreed. Bernice, if you could talk to your younger self about the anxieties surrounding money and financial management you discussed above, what would you tell her?

BC: Trust in the unknown. Let the fear drive you. It’s okay to make mistakes, as long as you learn from them. Us Inuit, we encourage you to make a mistake. We encourage it as long as you learn from it. So I really want to emphasize that you have to trust in the unknown and trust in yourself. You first. There’s really nothing else I can say that is as deep as this: you are the answers. Because Mufasa was right, the answers are inside.

SC: Why is financial literacy crucial for founders to get a good grasp on early? How does it give you a competitive advantage? 

BC: You really need to get comfortable with the money aspect. If you can learn where your money needs to go early on, you can forecast problems and be able to work through them, understand how the economy moves, and how people are spending. Do the research for your specific business. Be ahead of the game.

For example, I started using body butter and I thought “other people must have dry skin if I have dry skin – I’m going to provide this as it’s filling a need.” I love sharing and I saw the good that was coming from the body butter because we are in a cold desert – it’s so dry, everything cracks in the Arctic. So I started doing some research. First, go see how a store does it because they are doing well in order to have a bricks and mortar business. Okay why are they doing well? I started putting things together and gathering this information – people love shopping, they make it look nice with their displays, and they make people feel good about spending money. I quickly began researching and exploring the idea of how to make people feel good about giving me their money. There was definitely a learning curve.

I then started exploring and trying new things. I knew I loved attending craft markets so I decided one day to switch my mindset to become a seller. I went to the market, watched others and took notes pretending to be them. “I see her talking… okay so it’s about conversations and connection… okay I am going to learn to connect with people over the products I am trying to sell.” So I got to really know my product – I tried it, I made it, I added an ingredient, I took one away.  

If you love your business and what you make, it’s like playing – have fun. Have so much fun you get lost in it. When I sell I play music, connect, and live in my joy. I just love it. When you love something it feeds you, you feed it, and together you feed other people. I really got lost in my business in the early days, including the money aspect – how to make money, how to take money, how customers want to be treated. For me it really comes back to learning, playing, having fun, making mistakes and then learning from them. Just spice it up… or not. Just see what happens.     

Need to plan wisely while saving time and money? Explore the following from Scotiabank:  Featured Resource: Where Startups Spend Their Money.  Be prepared for the expense and know exactly what everything will cost. Featured Tool: Better Business Banking Tool.  Save time, money and prepare your business for growth!

SC: What’s the most actionable piece of advice entrepreneurs can take from this conversation and implement in their businesses immediately?

BC: First, understand your business. Get really cozy with your “why” and those that can help you get there. Get close to your bookkeeper. If you need a lawyer, become best friends with them. Find the people that will help you do the things you need to do and show them you care about them. We’re really good friends with our bookkeeper. We treat her really well because she treats us well. We gift her, we love her, we talk to her. And it gives back – it’s like a flow, right? You have to be connected to the people who will help you. Find the people that want to help you. My friend and mentor with EntrepreNorth said “find the people that will help you and become best friends. Why? Because they have your best interest at heart and when they have your best interest in mind, they will spend the time and go above and beyond. It’s protecting yourself.”  Find your people and get really close with them. 

Second, show your passion. Your passion is your driver, the rest follows. Do it your way. At times you’re going to feel like “oh, that was too much – I don’t want to do that again. I don’t like that feeling.” Listen to that. Listen to that voice and your gut will tell you, your heart will tell you, your mind will tell you – be connected to yourself. Those answers? They’re going to help you to stay true to what you want to do.

Finally, accept free advertisement. Accept requests for interviews, podcasts, local channels – just get yourself out there! Put yourself out there, put your neck out and trust in the unknown. Know that you’re going to be okay and that you’re surrounded by people that want to see you thrive – not just survive – we want to see you thrive. Because when you thrive, we thrive. So pass that on, pass the light, pass the torch.

Need to get familiar with your financial service provider? Explore Scotiabank’s tool: Featured Tool: Small Business Solutions Builder.  Use this interactive selector to help you find the right combination of banking solutions for your business.

SC: Thank you so much for your time today, Bernice!

Get Advice from a Scotiabank Small Business Advisor: Book Appointment.