Small business the light in the recession storm

October 02, 2011
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Sept. 30, 2011 - According to Survival of the Smallest, the newest report released by the Canadian Federation of Independent Business (CFIB), Canadian small- and medium-sized enterprises (SMEs) have emerged from the recession as leaders, restoring jobs and business activity lost during this time despite a slow and fragile economy.

Entrepreneurs had no choice but to implement many changes in various areas of their businesses in order to survive the recession including: working longer hours (62 per cent), finding new customers in local markets (50 per cent) and introducing new products or services (46 per cent). SME owners did not hesitate to make personal sacrifices in order to overcome the challenges posed by the economic downturn, even if it meant cutting their own salary (43 per cent). One business owner reported that he hadn't paid himself a salary since July 2009.

"It was a classic lemons and lemonade situation," remarked Catherine Swift, president of CFIB. "Instead of taking an axe to their employment rolls which was the easy way out for many large corporations; small businesses made the best out of a bad situation. They became innovative and creative in order to sustain and grow their business."

While most small firms survived the recession, they didn't come out unscathed - 42 per cent in fact had to resort to some form of temporary or permanent downsizing. However, a previous CFIB report showed that, during that time period, large and medium-sized enterprises lost more payroll employment than small enterprises (i.e. those with less than 50 employees).

"Smaller firms hung on to their employees during the recession, which provided much needed stability to the Canadian economy. This is a testament as to why we need to be listening to their concerns," stated Swift. "Given that we are now in a new period of economic uncertainty, it is all the more important that we do not dig ourselves into another fiscal hole."

Based on survey comments and results, what governments need to do is remove as many growth barriers as possible and reduce payroll taxes, which would assist SMEs in creating jobs. The report identifies avoiding or minimizing payroll tax increases, reducing red tape, and addressing interprovincial and foreign trade barriers as some of the most harmful growth barriers for SMEs.

Entrepreneurial resilience is also a recurring theme in the report; a surprising number of small businesses said that growth, not cuts, was the key to their survival. This led to the creation of Growth-Oriented Enterprises (GOEs). GOEs are small firms who displayed at least one of three specific behaviours during the recession: increased their number of employees, expanded to new markets in other provinces, or expanded to other countries. When compared to other firms, a large portion of GOEs tell us that they are on average significantly better off now compared to when the recession was at its worst.

"In the Year of the Entrepreneur it is important that as parliament reopens for the fall session, this report serves as a guide for government policy makers in choosing which path to take if Canadians are ever faced with another economic downturn," concluded Swift.

Visit the CFIB website for the full report.

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