Almost half of all small biz still in downturn
By Canadian PizzaNews
December 7, 2010, Markham, Ont. – Amidst reports of a strengthening Canadian dollar, new job creation and what’s expected to be a solid holiday shopping season, almost half of Canadian small business owners report a downturn in business.
The quarterly American Express Small Business Monitor has found that Canadian small business owners report little to no change from their position a year ago. This is in contrast to the overall economy, which has recorded almost uninterrupted GDP growth since August 2009.
The survey found 47 per cent of small business owners across the country report either a “slight” or “significant” downturn to their business, a number that has climbed five points since August and 10 points since May. The proportion of those reporting an improvement to their business fell eight points during this period.
In what could be an indication of general market apprehension, small business owners are also more risk averse. Findings indicate that just 19 per cent are willing to take “significant” or “above average” risks, down from 23 per cent in May and 25 per cent in January.
“In the spring, the Monitor data were suggesting we had turned the corner on the recession and business was starting to improve,” says Eric Nielsen, vice president and general manager of American Express Canada’s Small Business Services Canada. “But today’s results show that small business owners are bracing for a recovery period that is slower than previously envisioned.”
Small biz watching cash flows
A comparison of current findings to those from January shows that small business owners are keeping tight control of their cash flow. Those planning to spend on new equipment or other capital totaled 53 per cent, compared with 57 per cent in January. Similarly, 19 per cent plan to expand their space, compared with 21 per cent in January, and the number of small businesses planning to upgrade IT is little changed at 41 per cent versus 43 per cent at the beginning of 2010.
Small business owners are also exercising careful control over cash going towards charitable donations. Forty per cent of respondents said they have not given anything to charitable groups or community activities in the past year, and among those, almost half (46 per cent) cited budget as the reason.
Despite budgetary constraints, most respondents who support charitable organizations in some way said they do so with money (79 per cent) and services or merchandise (59 per cent), while half reported contributing time. Small business owners donating consulting time (21 per cent) or facilities (15 per cent) were much less common.
“Recognizing that budgets are tight, small business owners still have lots to offer organizations they feel a connection to, without excessively straining their cash flow,” says Nielsen. “Donating your time, expertise and facilities can make a huge meaningful impact on an organization which itself has limited cash flows.”
While charitable initiatives undertaken by large enterprises typically have a strategic business component, small business owners tend to think differently. Two-thirds said they contribute to charitable initiatives because it’s important to give back, while 61 per cent say they believe in the cause. Simply put, their motivations are personal. Just one-third (35 per cent) cited customer relations as a factor, while 21 per cent cited corporate reputation or branding as a factor.
Giving back despite tough times
The Monitor data shows that despite the economy, many small businesses continue to give back to their community. During a time when both groups struggle, there may be opportunities for small business owners to do something both personally and professionally meaningful.
“We appreciate the entrepreneurial spirit small businesses bring to United Ways-Centraides and the important role they play in local communities, whether it be through volunteering their time or through donations,” says Al Hatton, president and CEO at United Way of Canada – Centraide Canada. “We continue to reach out and engage small businesses because we realize how important they are to local communities across Canada.”
For example, one respondent from Halifax has for decades offered accounting and bookkeeping services free to local churches and other not-for-profit organizations. In the owner’s opinion, it’s very important to give back to the community and doing so has positively grown the business’ presence in the community.
“Marketing and branding often fall low on the list for small business owners, but there’s a tremendous opportunity for them to make their time and money work harder,” Nielsen says. “Supporting groups that do great work but also serve your core group of customers, for example, can help put your business top of mind, without an additional budget item.”
The survey, conducted between October 29 and November 3, 2010, polled a random sample of 586 Canadian small business owners. Each business owner surveyed employed between two and 100 employees. The results were statistically weighted according to the Statistics Canada Business Register’s most current business size and region data to ensure a representative sample of the entire population of small business owners nationwide.
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