More than half of SMEs polled say the worst is to come, but over two thirds say they can weather the storm
While Canadian business owners expect to go through continued economic and financial hardship next year, many are still confident in their ability to weather the upcoming storms, according to new research by the Business Development Bank of Canada (BDC).
In its report titled “Canadian Entrepreneurs' Needs and Challenges: 2023 Outlook," BDC found that the majority of Canadian SMEs anticipate a decline in the economy in the upcoming year, yet 45% do not worry about their profitability.
The bank’s research, conducted in November 2022, surveyed 1,500 Canadian small business owners to determine their level of economic confidence, business prospects, and investment plans for the upcoming year.
SMEs are quite apprehensive about the current inflationary climate, with slightly more than half of businesses polled (52%) thinking that the worst is still to come.
Survey respondents said they’re still suffering from the effects of ongoing inflation, supply issues, and the conflict in Ukraine. Nearly one third (31%) say feel unready, as the current growth slowdown has affected business planning.
“Most Canadian businesses (88%) say they are profitable and consider their debt level to be comfortable (75%), which may explain why about two-thirds (69%) say they are prepared to weather an economic downturn,” Pierre Cléroux, vice president, Research and Chief Economist at BDC, said in a statement.
Compared to those in other sectors, businesses in the lodging and food services industries are dealing with higher levels of debt and are less prepared.
The real estate and construction industries, which are still being adversely impacted by high borrowing rates, are set to experience a slower pace of growth as well.
Among survey respondents, the major strategies proposed to mitigate the effects of this slowdown are reducing losses and debt as well as raising productivity.
Entrepreneurs in Canada expect to struggle in the coming months, citing increasing costs (47%), economic slowdown (40%) and internal cost control as their key challenges. In the coming year, SMEs still want to spend and prioritize operational efficiency (38%) over expansion plans and debt repayment.
“In 2023, investing to be more efficient will be a way for many businesses to limit their decrease in profitability under current economic conditions,” Cléroux said.
