If you own a small business in Canada, whether it’s a business passed down through generations, a passion project or a seed of a start-up, know that in the challenging and uncertain times that lie ahead. This according to the Senior VP of Small Business Banking at Scotiabank.
In a report by the bank called The Shortage Economy the bank sheds light on Canada’s economic forecast and what that could mean for Canadian business owners in the coming months and years. The report indicates that business owners now expect supply chain disruptions to continue to worsen for at least the next six months, exacerbated by geopolitical events such as the war in Ukraine. These obstacles are having a significant impact on many SMEs’ business operations and opportunities for growth.
The analysis highlights a few key themes:
- As the impact of the pandemic on the economy waned, the Canadian business community turned increasingly more optimistic.
- However, the issue of supply chain disruptions, which were expected to gradually improve over 2022, has worsened instead and many business owners now expect these issues to persist at least for the next 6 months.
- The ongoing Russian war in Ukraine is likely to present the Canadian business owners with a complex set of opportunities and challenges, including a continued deterioration in supply chains.
In addition to these broad market challenges, the cost of borrowing will rise through 2023, with the Bank of Canada expected to continue to raise interest rates. These various financial strains could impact SMEs that currently point to limited financial resources as factors constraining business development through the adoption of new technologies, such as e-commerce solutions.
The advice for businesses is to invest in innovation now. The thinking extends earlier analysis from Scotiabank’s Path to Impact Report which found that businesses that invested in their digital capabilities were better positioned to withstand economic challenges.
Key Findings from the SMEs: The Shortage Economy report includes:
- SMEs have underperformed larger enterprises in the post-pandemic recovery. Since the start of the pandemic, 1/3 of firms now consider a shortage of input products to be a limiting factor for raising production.
- Canada has seen the number of unfilled job vacancies reach historic levels during the post-pandemic recovery. Many positions remain unfilled from workers who left industries affected by lockdowns, the inability to hire workers as quickly as they were laid off during the pandemic, and overall exodus from some industries where virus exposure was elevated.
- Businesses consider the shortage of labour as an important limiting factor to revenue growth and smaller firms expect to raise wages more on average, compared to larger firms.
- Growth in Canada’s overall GDP is expected to average 4.3% in 2022 and 3.2% in 2023, with unemployment falling through 2022.
As Canadian business owners plan their operational strategies for the year ahead, Scotiabank recommends five key areas for recovery and growth:
- Plan your Liquidity and Cash Flow: Begin scenario planning for 6-12 months ahead, amid rising interest rates and supply chain disruptions. Evaluate your cash flow, employee requirements, inventory, and variable and fixed expenses. Review and consider securing required capital to head off potential rate hikes.
- Dive into Digital: Take advantage of the many tools and resources available to help your business grow its digital capabilities. Explore opportunities for your business to incorporate online innovation, and investigate ways to process customer payments faster. As your circumstances fluctuate, having agile operating processes can help you adapt quickly with changing conditions.
- Continually monitor the economic environment: Interest rates can rise overnight. It is important that business owners keep a close eye on external factors that can impact their business. This way, risks and opportunities are proactively identified so businesses can pivot and improve their resiliency.
- Lean on a financial advisor: Reach out to your Small Business Advisor who has supported thousands of businesses throughout challenging periods.
Other post pandemic advice given by Scotiabank Report
Build a Business for the New Normal
The pandemic has supercharged the e-commerce landscape. Touchless payments, contactless pick-ups, mail-in returns, and same-day deliveries are now expected. Businesses that invested and continue to invest in their digital capabilities are better positioned to withstand future headwinds, and prepare themselves for throughout 2022.
Look everywhere for talent and for customers
A new, digital business environment means new markets to service and new sources of talent. Consider broadening your reach beyond your immediate environment, not just for sales, but for recruitment. Remote work is quickly becoming part of the new normal, and your next great employee might live miles away.