Canadian SMEs struggling to find growth, says BDC report
Business leaders cited rising operating costs as their top obstacle to growth, but BDC says boosting efficiency will help
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MONTREAL—Small and medium-sized enterprises (SMEs), the drivers of Canadian job creation, continue to pursue growth opportunities despite persistent challenges in increasing employee numbers and sales, according to a survey released by the Business Development Bank of Canada (BDC) as part of BDC Small Business Week 2015.
While Canada’s medium-sized businesses (100–499 employees) are in a better position to maintain a sustained or strong pace of growth, the fact remains that 6 out of 10 SMEs (60 per cent) showed weak or zero growth, or even negative growth, during the last three years. Forty-six per cent of the smallest businesses (1 to 4 employees) are showing zero to negative growth.
“Revenue, profit and jobs are the three dimensions that determine the degree to which an SME is growing, and the findings are quite sobering, particularly for the smallest businesses,” said Pierre Cléroux, BDC Vice President Research and Chief Economist.
Business leaders cited rising operating costs (64 per cent) as their top obstacle to growth, followed by difficulties in hiring and retaining qualified personnel (55 per cent) and external competition (48 per cent).
However, there is a silver lining to some of the survey results. Thirty per cent of SMEs did experience strong growth and profits. These businesses saw their revenue and profit increase faster than their number of employees, suggesting some level of improvement in productivity.
“Not surprisingly, there are solutions to turning this ship around and one of the most important is for Canadian entrepreneurs to invest in technologies to make their operations more efficient,” added Cléroux.
The research report identifies four winning growth strategies used by entrepreneurs with successfully growing businesses:
Be a client-centric business (cited by 99% as “very” or “moderately” important)
Build your talent pool (cited by 86%)
Stay on top of your game, innovate (81%)
Invest to be the best (in production capacity or advanced technologies) (75%)
“Running a business these days clearly is no walk in the park,” added Pierre Cléroux. “Successful entrepreneurs show you can improve your chances by doing what amounts to fairly basic things—looking after customers and employees, innovating and investing—that are often overlooked,” he added.
“Better planning can also provide a significant boost, with the largest SMEs far more likely to do strategic and growth planning than the smallest ones,” Cléroux said. “Strategic and growth planning can pay off in a clearer vision, coordinated action and better results.”