Canadian private companies plan to grow in 2011
Growth is back on the agenda for private companies in Canada, according to the 2010 Business Insights Survey from PricewaterhouseCoopers (PwC).
The survey found 83 per cent of private companies expect business to get better in the next year, compared to just 61 per cent in last year’s survey.
That optimism is translating into aggressive growth strategies for some, with a quarter of respondents planning to grow by 15 per cent or more.
The majority, 63 per cent, expect a growth rate of up to nine per cent or more while 33 per cent plan for 10 per cent or more.
But as the economy heats up again, so too will the battle for ground.
Competition was cited by 40 per cent of companies as the top issue for the coming year, overriding even the economy, last year’s biggest concern.
“There has been a perfect storm of heightened competitiveness based on the realities of globalization and local competitors that have fiercely competed for market share during the recession,” said Tahir Ayub, PwC’s Canadian private company services leader.
Ayub said private companies will have to be exceptionally cost-effective if they want to keep and attract customers while still returning a healthy margin.
Pockets of hot and cold across the country
Some Canadian regions are expecting more business activity than others. In Quebec, only 56 per cent of companies said they were planning for expansion, compared to Alberta, where it factored into 72 per cent of respondents’ business plans.
The mood in B.C. was also lukewarm, with just 48 per cent of companies expecting to grow. Ontario companies were most ambitious of all — 73 per cent said they were looking to expand.
Sticking close to home
With US and European markets still struggling, most companies are focusing their growth in Canada. Only 27 per cent plan to tap into a new foreign market.
Ayub cautioned that sticking to Canadian borders may not a sustainable option.
“If we don’t improve our reach into other parts of the world, we will find other parts of the world increasingly expanding their reach into Canada and it will be tougher to compete,” he said.
While the survey found businesses were more positive than last year, the mood hasn’t entirely picked up just yet.
A different October 2010 survey by the Canadian Federation of Independent Business (CFIB) found confidence slipping among small and medium sized businesses.
“We noticed an improvement as well, but this optimism peaked in March and then drifted down over summer and fall,” said Ted Mallett, chief economist with the CFIB.
Mallett said, however, that most Canadian companies are coming out of the downturn on firm footing.
“Small firms in particular were not highly levered with debt and we had very low levels of bankruptcies compared to the recession in the early 90s,” he said.
But companies will still need to step up their games as the playing ground starts looking more like a battlefield.
“There are going to be challenges, especially with the US and European economies not growing as quickly. Businesses are going to be tight-fisted and we can expect a lot of competition,” Mallett said.