Many small- and medium-sized business owners are fighting to thrive or survive as others plan exit, reveals poll
As a second wave of COVID-19 infections washes over Canada, with some previously unaffected areas now seeing numbers topping those during the first wave, the fight for survival will only get tougher for SMEs in Canada – and many may be forced to throw in the towel.
In a new poll of 500 small- and medium-sized Canadian companies conducted between September 17 and 24, KPMG found 31% of business owners or decision makers are worried they won’t have the capital to withstand a second COVID-19 wave if the economy collapses. Another 11% were more certain, saying they don’t have adequate liquidity or access to financing for the foreseeable future.
“These companies are the backbone of the Canadian economy, and up to now, we have seen few insolvencies,” John Cho, a partner and head of KPMG’s deal advisory services, said in a statement. “But worries over a second wave leading to another shut down has one in four seriously looking to exit their businesses.”
Twenty-four per cent of those polled are exploring options to sell as managing and protecting their employees becomes more costly and challenging; a nearly equal number (23%) said they regret not selling their businesses sooner. Of those who want to exit within the next five years, 73% said they don’t have the energy, will, desire, or technology to steer their companies amid the current pandemic-driven reality – but don’t have a formal exit plan.
Still, many entrepreneurs are choosing to soldier on as over half (54%) of the respondents said that their immediate focus is on survival. A considerable minority are also projecting more positive attitudes, with 29% saying the pandemic presents a chance for them to grow organically or through acquisitions and 30% seeing themselves as either much or somewhat better off than competitors.
The poll also affirmed technology’s make-or-break impact among businesses, as 78% of responding entrepreneurs saying that survival isn’t possible without going digital. The COVID-19 pandemic has pushed the majority to act on that view, with nearly two thirds (64%) of respondents adopting digital and emerging technologies.
“The pandemic has highlighted how essential investments in digital technology have been – not just to simply survive but to be in a position to succeed going forward,” said Yannick Archambault, partner and national family office leader for KPMG Enterprise in Canada. “It is critical that small- and medium-sized business owners in Canada assess their own desire and commitment to make the technology investments needed to compete going forward.”
Whether they’re snatching up distressed businesses or looking to exit themselves, the art of deal-making will likely be even more contentious than usual for business owners. According to Archambault, 46% of owners don’t know what their business is worth anymore because of COVID-19; among those who have a formal plan to sell within the next two years, 54% said they have no idea.
The poll also provided a glimpse into the extent to which Canadian companies have depended on government support. Over two in five (44%) respondents said they took advantage of government assistance programs that were rolled out in the early phases of the pandemic, and nearly a quarter (24%) said they used government funds to stay afloat or position their companies for success going forward.
The federal government is providing fresh support for business owners choosing to keep their doors open. Last week, it announced new and revamped relief programs, including one that will funnel $2.2 billion toward commercial tenants – which replaced the much-criticized Canada Emergency Commercial Rent Assistance (CECRA) program – and another that will subsidize up to 65% of eligible wage costs for business owners through December.
“We know that businesses are experiencing revenue loss, have experienced revenue loss, so that is why we’ve introduced the rent subsidy and … an additional 25 per cent to help with that fixed cost should the business have to experience a shutdown as a result of a health order,” Mary Ng, Canada’s minister of small business, said in an interview with Global News.
The Canadian Emergency Business Account (CEBA) has also been boosted, allowing business owners the chance to get an additional $20,000 interest-free loan on top of the original $40,000 provided for in the CEBA program.
