Michael Kane
Sun
Small business is the engine of British Columbia‘s economy, responsible for about 60 per cent of all jobs and more than three out of four new jobs created since 2001.
Risk-taking entrepreneurs with firms employing fewer than 50 people continue to build the province’s prosperity despite the administrative burden of taxation and regulation, shortages of skilled labour, challenges around productivity, emerging competition from low-cost markets, dramatic increases in energy and insurance costs, and cost pressures wrought by the leaping loonie.
Coming soon will be a succession crisis, with as many as 60 per cent of the owners of B.C.’s small and medium-sized enterprises hoping to retire within the next decade. There is no guarantee they will find someone willing or able to buy them out.
Yet small business start-ups continue at a healthy pace. According to Statistics Canada, there were 160,197 businesses remitting payroll deductions in B.C. in the second quarter of 2005. This marks a 3.6-per-cent increase over the same period in 2004, and the biggest jump in the number of businesses with employees in a decade. It puts B.C. well ahead of the Canada-wide increase of 1.9 per cent.
B.C.’s small-business owners are also among the most optimistic in the country, with 60 per cent expecting a stronger year ahead versus only six per cent expecting a weaker year, according to the latest survey by the Canadian Federation of Independent Business.
In terms of those all-important jobs, 39 per cent of B.C. businesses surveyed by the CFIB in September said they plan to hire more full-time workers over the coming 12 months, compared to 26 per cent nationally.
B.C. business is bullish thanks largely to strong consumer confidence, relatively low interest rates, soaring non-residential construction, and robust global commodity prices that have restored the fortunes of a business-friendly provincial government.
The recent announcement of a reduction in B.C.’s corporate tax rate from 13.5 per cent to 12 per cent is helping to fuel further optimism because tax relief is the No. 1 priority of small-business owners, says Laura Jones, the Vancouver-based vice-president of the CFIB.
Jones also congratulates Gordon Campbell’s Liberal government for cutting red tape by about 40 per cent during the past five years, but contends that complying with rules and regulations continues to hit pocketbooks almost as hard as taxation because costs are passed on to the consumer.
Despite the headaches triggered by sales taxes, the demands of WorkSafeBC, employment standards, municipal requirements, environmental rules, and privacy laws, research suggests that the self-employed and employees of small companies are more satisfied with their jobs than those working in large firms, although they generally work longer and earn less.
Jones says being your own boss is the main attraction, followed by flexibility. Business owners work longer hours, but they choose them.
While it is difficult to quantify the failure rate of small business — some research suggests that as many as 50 per cent fall by the wayside within their first five years — there is no question that business owners take huge risks for their piece of the economic pie.
“They take risks that most of us aren’t prepared to take, and then they face challenges that would make most of us rip our hair out,” Jones said in an interview. “But there are also huge rewards.”
Helmut Pastrick, chief economist at the Credit Union Central of B.C., notes that business incorporations continue to rise and business bankruptcies remain on a downward trend.
“The business sector is expanding, businesses are profitable in aggregate, and business is growing,” Pastrick said. “It is certainly reflective of the improved state of the economy.”
Improving the productivity of small business remains a major challenge, says Wellington Holbrook, Vancouver-based senior vice-president of the federally owned Business Development Bank of Canada.
“Small business has been performing very well across the country, but is facing bigger risks in the economy because of the emerging economies in China and India,” Holbrook said in an interview.
“One number I saw recently suggests that Canadian small business is investing about 35-per-cent less in improving productivity than their American counterparts.”
The Business Development Bank offers financing “for the 10 per cent of businesses that can’t get served 10 per cent of the time” by the banking and credit union sector.
It is a sign of the sector’s virility that BDC lending rose 23 per cent last year to $183 million from $148 million. Increasingly, that money is being invested in training and in more efficient machinery and equipment to boost productivity, Holbrook said.
© The Vancouver Sun 2005