There are about 1.25 million small enterprises that make up 70 per cent of private sector employment, and the pandemic has been challenging for all of them, says David Leuty, Senior Vice President of Business Banking at CIBC. Now is the time for them to plan how they’re going to recover.
“It’s been a tough 18 to 20 months for everybody and certainly for business owners,” says Mr. Leuty. “It’s important, especially in Canada, not to lose sight of the importance of small business. We both owe it to, and are dependent on, small businesses to ensure they get back on their feet and prosper.”
Small businesses in Canada employ about 64 per cent of the work force, or 9.7 million people, and account for more than 40 per cent of the country’s gross domestic product (GDP).
Not all businesses have suffered the same in the COVID-19 pandemic, he says. Various sectors felt the effects of the pandemic in different ways — and that also depended upon the flexibility of individual businesses.
Those with products or services conducive to online sales were in better positions than those relying on in-person shopping. Some locations may have fared better than others, and certainly those with some financial wherewithal were able to better withstand the uncertainty, he adds.
“Having a financial cushion is always a good thing because you never know what’s around the next corner,” says Mr. Leuty. “Certainly COVID, I think, was a bigger curveball than anybody ever imagined that we were going to have to deal with at the outset.”
Businesses had important government supports, he says. For its part, CIBC offered business banking clients deferral payment relief, financial advisory services, credit and loans, he adds.
But by and large, many small businesses made it through the pandemic by borrowing to stay afloat.
“It was a different world they were trying to navigate and having that financial flexibility was critical to their survival,” Mr. Leuty says.
While more than half of small businesses consider additional funding or credit to be very or somewhat important for the future of their business, less than half — 46 per cent — have a plan for future investments or major purchases, according to a recent CIBC survey.
Only 14 per cent of small businesses have a formal plan for those investments. One in 3 business owners surveyed said they have an informal undocumented plan and almost 1 in 7 said they see the need for such a plan, but don’t have one.
It’s understandable, says Mr. Leuty.
Many business owners have never faced the kind of uncertainty they’ve experienced over the past year and a half, he says. There is a general mood of optimism that we’re closer to the end of the pandemic than to the beginning, he adds.
“That said, there does remain uncertainty about exactly when that time will come and exactly what that will look like, so I think a lot of business owners are trying to figure out exactly what their next steps look like,” he says. “That’s probably created some delay in putting pen to paper in terms of a plan.”
Yet just the act of planning raises important questions and possibilities, he says.
“As the adage goes, ‘it’s not the plan, it’s the planning,’” says Mr. Leuty.
“It doesn’t cost you anything to sit down with a business banking advisor just to talk through your plans, work on some of the details, and be motivated to drill down into certain areas that you may not have spent that much time thinking about previously because you didn’t need to think about it.”
CIBC’s business banking team has recently grown to include a new Associate Business Advisor role that will partner with early-stage entrepreneurs to help them grow and scale through tailored small business solutions and expertise, he says.
The small business owners surveyed said if they were to seek additional funding or credit to support or grow their businesses, they would request on average $225,000.
It’s not an insignificant amount, Mr. Leuty says, and requires careful planning to obtain.
“Having some sense of where you’re going and ensuring you’ve got at least an element of financial cushion, as well as financial availability to help you realize your ambitions, is critical,” he says.
The business landscape remains unpredictable, he says, with more challenges ahead. Business owners can mitigate the risks by spending time now ensuring they’re in a good financial place to move forward, he adds.
And Canadians can ensure overall economic health by supporting small businesses as they recover, he explains.
“I think all Canadians need to rally behind small businesses and recognize their role in the country’s economy and communities.”
Originally published on The Globe and Mail on October 15, 2021.
