Don’t forget the many opportunities provided by small business.
That’s the message small-business owners across Western Canada are sending to lenders, big business – and even themselves – as they get ready to celebrate Small Business Week.
According to a recent CIBC World Markets report, Alberta and British Columbia will launch 60,000 new small businesses in 2004 and 2005.
And for Dave Higgins, small means big opportunity. He’s one of many small-business owners who are enjoying a thriving climate in Calgary and other parts of Alberta and B.C.
“There are a lot more benefits for the economy in our sector than there are with the bigger guys,” says Higgins, owner and founder of Pathway Connectivity, a Calgary company that makes electrical products and related software for the stage-lighting industry for use in theatres, showrooms and entertainment facilities.
Higgins says small businesses such as his are able to keep their staff employed, contributing to the overall economy, while huge companies such as Nortel frequently hire and lay off workers and require government financial assistance.
Higgins, 50, has watched his company’s revenues blossom from $240,000 in 1995 to $2.6 million in 2004.
Calgary-based business coach Sherri Olsen also predicts the number of small businesses will increase as more baby boomers reach retirement age. She notes small businesses that can provide services for larger companies will thrive.
In the beginning, says Olsen, small-business operators have to be willing to work for free or very little remuneration in order to build relationships that lead to future income.
Olsen started her own small business after accepting a buyout from Telus. After reading a newspaper article, she realized that she could make a career of what she had been doing for 15 years – offering business advice – within her other roles.
“The challenge is to get yourself out there and become known, because a lot of people will want a big name that has some history behind it,” says Olsen, 38. “The first step is: How do you get out there and will somebody give you a chance?”
The CIBC World Markets report, titled Canadian Small Business: Back in High Gear, predicts that Alberta and B.C. will each launch 30,000 new small companies over the two-year period as the sector moves out of a two-year slump.
“It’s definitely an acceleration,” says report author Benjamin Tal, a senior economist with CIBC World Markets in Toronto.
The B.C. projection is up from the 25,000 new small firms that were created between 2001-2003, while the Alberta estimate increases from 24,000 over the same period.
But many small-business operators decry the lack of funding available from banks.
Dan Kelly, western vice- president of the Canadian Federation of Independent Business (CFIB), which represents 100,000 small and medium-sized businesses across Canada, says banks need to do more for smaller firms.
The CFIB is calling on Ottawa and the provinces to help improve relations between small business and banks.
“Banks have, really, in the last few years pursued wealth management as opposed to small- business financing,” says Kelly.
As a result, he adds, banks are missing out on a large and lucrative sector, entrepreneurs are not following through with their ideas, and the whole Canadian economy loses.
“The banks have a lot of time to talk to the big guys and no time to talk to the little guys,” agrees Pathway Connectivity’s Higgins. He says his company switched from one Big 5 bank to another because nobody in Western Canada could approve a line of credit for more than $100,000.
But Higgins and Kelly both praise the federally owned Business Development Bank of Canada for helping many small companies get cash.
Doug Fosbrooke, owner of Fosbrooke and Associates in Calgary, that arranges financing for small businesses, says it’s probably fair to say banks have treated startups unfairly. For startups, it’s as tough as it’s ever been to raise money, he says.
“You’ve pretty well got to go to friends and relatives and angels to get started,” says Fosbrooke, a former banker.
But, he adds, small companies that are established, have experience and a track record will have no trouble getting funds from banks, term lenders and other sources.
CIBC’s Tal does not buy the argument that small businesses have been unable to get financing. “They get it through different channels,” says Tal.
“What you’re seeing is a significant increase in personal credit that is being used for business purposes.”
Most of the 60,000 new businesses expected for Alberta and B.C. will contain fewer than five employees, Tal notes.
The CIBC study says small businesses in general are undercapitalized but, despite “extremely low” interest rates, are not relying on bank loans.
Since 1995, the number of borrowing firms across the country rose 15 per cent, but the average loan amount fell by more than 30 per cent.
The report attributes the discrepancy to financial and regulatory barriers imposed on small business by primary and secondary money and capital markets.
With $1,000 and a credit card that he used to buy a computer, Pathway’s Higgins started his company with wife Mary Lou in 1985 shortly after they were married.
He suggests small-business owners should make sure they have their financial information in order before they seek funding. A course that he and his wife took on small-business accounting helped the firm win kudos from his bank.
He also advises smaller operators to take short-term adult learning courses to further their business skills, and hire employees who can help the business grow.
Because of its booming, broad-based service sector, says Tal, B.C. shows more potential for small-business growth than Alberta, which is relying on the success of one industry – oil and gas – for its expansion.
A survey of CFIB members across the country shows that small-business owners in B.C. are the most optimistic in Canada about their future prospects, while Alberta business owners rank second.
In Alberta, an overall 10-per-cent increase in business investment is expected to lead to the creation of 10,000 new small retail firms, while a strong new-housing market will help start up 6,000 new construction firms, says the CIBC report. Regardless of the sector, says the report, Calgary will outpace all other major cities and create at least 40,000 new businesses over the next five years.
Construction will also spur B.C.’s small-business growth as housing starts outpace all other provinces.
According to the report, seniors are the most likely to start small businesses in B.C., along with others who desire a flexible schedule to suit their other careers, personal commitments and lifestyles.
The Calgary Chamber of Commerce is hosting several events in conjunction with Small Business Week in Canada, Oct. 17-23, including a Small Business Expo at the Sun Centre in Currie Barracks. Edmonton is holding its Small Business Week a week later (Oct. 25-29) than the national celebration.
The Edmonton chamber has traditionally held its event around the end of October, but the Canadian Chamber of Commerce moved up the national celebration by a week this year.
Keith Persaud, events manager at the Edmonton chamber, says the national body did not announce the nationwide schedule early enough and the Alberta capital wanted more time to plan.
“We’re just going to continue to have it in the last week of October,” says Persaud.
(Monte Stewart can be reached at monte@businessedge.ca)
