Canada’s small- and medium-sized enterprises (SMEs), which employ about eight million people and represent 54 per cent of payrolls, are bouncing back after being buffeted by the recession, according to recent RBC Economics’ report entitled Canada’s Small Business Landscape.
However, despite this recovery, SMEs still face a difficult operating environment, and cite three major external obstacles that are limiting their business growth: rising input costs (63 per cent), fluctuations in demand (52 per cent), and increasing competition (48 per cent).
“While SMEs were hit hard during the recession, it’s clear that they are staging a comeback – the number of small and midsized firms reached a record-high in 2012,” said Gerard Walsh, economist, RBC. “Still, SMEs continue to worry that cash flows will not be strong enough to allow them to grow in a meaningful way.”
When looking at internal factors, almost 40 per cent of SMEs report employee recruitment and retention as major stumbling blocks to growth, according to RBC’s report. The trend is even more prevalent among medium-sized firms (57 per cent) where demand for qualified employees increases.
The report also found that obstacles to growth are regional in nature. For instance, SMEs in Saskatchewan and Alberta are most likely to cite labour shortages and difficulty attracting and retaining workers as major challenges. This reflects the tight labour markets in the Prairies, where there is heavy competition among firms for qualified workers. In Ontario, the heart of Canada’s struggling manufacturing sector, businesses report fluctuating demand and increased competition as major obstacles. Not all challenges are localized, however: worries about input prices, government regulations, and maintaining cash flow were cited as significant concerns across the country.
“Small- and medium-sized businesses are the backbone of many communities and an important driver of Canada’s economic growth and future prosperity,” said Sarah Adams, vice-president, Small Business, RBC. “Regardless of their background, experience, location or industry, being an entrepreneur is challenging even in favourable economic conditions. We’re here to partner with businesses to help them grow and prosper, and providing financial solutions is only part of our role.”
To thrive in the face of obstacles, Adams provides the following advice for business owners:
- Do your homework: Market research is invaluable to your success. Understanding your market lets you make informed decisions in capital investments, entry into niche markets and upcoming treads, competitive benchmarking and customer expectations.
- Understand your cash flow: Forecasting cash flow is very important for any business and should be reviewed at least twice a year. It’s essential for determining how much money you’ll need to keep your business running.
- Establish a support network. Business owners tend to be independent-minded and more inclined to solve problems on their own rather than ask for help. But don’t be shy about asking for advice from people who work in your line of business. You’ll be surprised how many are willing to share industry information or serve as sounding boards for your ideas. Other people to consider for your professional network include suppliers, customers, accountants, lawyers, and account managers.
Feature Image: Small Business Owners via Shutterstock