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SMEs Essential to Restoring Canadian Living Standards

by PJ Wade

A recently-released report on small- and medium-sized enterprises or SMEs concludes that “to turn the corner on two decades of deteriorating Canadian living standards” requires policies specifically geared towards addressing the barriers to growth of Canadian SMEs. There are many definitions of SMEs that refer to revenues, employment or assets. This study defined SMEs as enterprises that employ fewer than 250 people.

According to the report entitled The Path to Prosperity: Canada’s Small- and Medium-Sized Enterprises, that was sponsored by the Canadian Federation of Independent Business, RBC Financial and Canadian Manufacturers & Exporters, Canada has proportionally more micro-businesses than the United States. In Canada, 58% of small businesses have only 1 to 4 employees, compared with 42.7% in the US. However, Canadian SMEs account for more than 90% of employment in the real estate industry, more than 75% of employment in the manufacturing sector, and about 40% of employment overall. Self-employment alone has led to about half a million new Canadian jobs from the start of the 1990s to the end of 2001.

Microbusinesses include home-based enterprises and those that originated or were incubated as home-based businesses. While both countries have similar proportions of medium-sized ventures, Canada has a much lower proportion of establishments with more than 500 employees and essentially no large employers across goods- and service-producing industries.

The report concludes that Canada’s public and private policy environment stimulates small business creation, but needs to address the conditions that create growth in businesses.

Forty-two barriers to growth of SMEs were identified including taxation, regulatory policy, financing impediments and technology adoption practices.

Managers of SMEs, governments and financial institutions all have a role to play in explaining the likely reasons for the existence of such barriers and each has room for improvement.

The federal government must stay the course on monetary and fiscal policy and lead the charge on enacting policies geared towards rebuilding productivity since existing initiatives are clearly not working.

“In the absence of action, the pressures are building towards the gravitation of financial markets southward, the further erosion of social programs as the tax base erodes, increased difficulty in retaining skilled labour in Canada and a continued decline in our share of investments coming into North America.”

The Canadian Federation of Independent Business, through its mandate “to promote and protect Canada’s free enterprise system,” represents more than 10,000 independent business members in actions with government on policies like tax, labour laws and public sector spending. This group needs further support to refocus communities and governments that have traditionally placed considerable effort into wooing large business. Canadians in all walks of life will benefit, directly and indirectly, when government, financial and community resources more effectively reduce barriers to SME business growth and put us all on the path to prosperity.

Published: October 22, 2002

Use of this article without permission is a violation of federal copyright laws.

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Futurist and Strategist PJ Wade is "The Catalyst" -- intent on "Challenging The Best Become Even Better." PJ earned this title by translating the dynamic impact of Boomers and their multi-generation families into relevant insights that start people thinking and taking action—in business and in life.

Author of 7 books and more than 1600 published articles, PJ encourages individuals to become their own futurist. PJ writes and speaks about the insight, knowledge and solid decision-making skills that professionals and their clients need to live and work in this vortex of change. For instance, since PJ knows that home is headquarters for the new decades-long "unretirement," she wrote the popular book "Reverse Mortgages: Best Friend, Worst Enemy... Your Choice! (CatapultPublishing.com), which is filled with suggestions and insight on protecting and using home equity. Her new business book, "What's Your Point?," which identifies 7 common mistakes professionals unknowingly repeat to their detriment, will be published in 2009.

As The Catalyst, PJ provides strategic communication, client appreciation and advanced education services to the financial, tourism, lifestyle and service sectors -- and the clients they serve. A frequently-quoted financial and business commentator, PJ is a thought-provoking strategic speaker who offers practical, real-life suggestions on leaving "the box" behind and embracing Forward Thinking -- a talent she regularly demonstrates in this column. For more on blogs, books and topics, visit TheCatalyst.com.

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