Canada’s small businesses encouraged to invest for success

Businessman drawing ROI (return on investment) with graphs
Businessman drawing ROI (return on investment) with graphs

A sizable majority of Canada’s small and mid-sized enterprises, or SMEs, intend to invest in their business in the coming year. A study from the Business Development Bank of Canada (BDC), being called the first of its kind, found that 76 per cent of the country’s small business owners plan to spend $111 billion on real estate, machinery, and equipment as well as on workforce development and technologies in 2016. A similar amount was invested in 2015. Small businesses make up 99.8 per cent of all Canadian businesses, indicating how significant they are as an sign of the country’s economic vitality. Since the recession ended in 2009, however, investment in firms has been stagnating, except in the mining and oil and gas industries, according to BDC.

The two top reasons given for investing were to fund business growth and to boost productivity or efficiency. These are reflected in the sums allocated for intended investment. Purchasing commercial buildings and land, building new facilities, and carrying out extensive renovations will account for more than half of all money spent: $63 billion. Capital outlays on machinery, equipment and vehicles will account for $21 billion of small business spending this year, the same amount as last year.

Many small businesses (59 per cent) are planning to purchase computer hardware and software, and a slightly smaller number will spend on developing their website and e-commerce activities. Information and communications technology (ICT) is known to significantly improve business productivity, according to BDC, and the bank finds it “encouraging” that a majority of small businesses plan to invest in it. Total spending in this area will be $6 billion.

BDC-investment-intentions-survey-small-business-Canada-EDIWeekly
Reasons for investing in business. Source: Business Development Bank of Canada

Approximately half of all small businesses indicated that they planned to invest in training or in recruiting new talent.

There is every indication that the future belongs to entrepreneurs who invest in their businesses. These SMEs have better growth prospects, a larger number of employees and the best chance to succeed in international markets. We strongly encourage SMEs to step up their investments in the coming months. Also, with the cost of borrowing at an all-time low, the time is ripe.

Those companies that are not planning to invest, or only in a limited way, most often cite unfavourable economic conditions as the reason. Almost half of all executives (48 per cent nationally, but 46 per cent in Ontario) expressed a lack of confidence in the economy. However, obstacles to investment differ depending on the nature of the business. Companies that export cite weak demand for their products, which results in less money being available for investing. Start-up companies, on the other hand, find it difficult to obtain financing, while high-growth companies say lack of funds generated by the business is their main concern.

BDC-investment-intentions-obstacles-survey-small-business-Canada-EDIWeekly
Obstacles to investing in business. Source: Business Development Bank of Canada

Small businesses in Alberta, which have been hard hit by the oil market slump, will invest 27 per cent less this year than last year. It is the only province where investment intentions have declined.

The BDC report is based on a survey of 4,000 entrepreneurs from August to November. BDC is dedicated exclusively to entrepreneurs. Chief economist and Vice President Research Pierre Cléroux, encourages small businesses to invest, saying that the “future belongs to entrepreneurs who invest in their businesses.” Those that do have better growth prospects, more employees and the best chance to succeed in international markets. He noted that with interest rates at an all-time low “the time is ripe.”

Did you miss this?

Other Popular Stories

  • Canada's small businesses encouraged to invest for success
  • Manufacturing sales up in September but shadow of Trump looms over Canada
  • Canada's auto industry on cusp of rebuilding in NAFTA, but no thanks to CETA: Unifor
  • Ontario College of Trades report recommendations accepted by minister
  • MRO in space: Inside a routine Maintenance-Repair-and-Overhaul mission with NASA: sealing, lubricating and keeping cool
  • 2018 Oil Price Forecasts
  • Natural gas industry outlines challenges, opportunities in Canada
  • Wind projects going ahead in Quebec, public not necessarily on board
  • Ontario must develop its cybersecurity industry to remain competitive: report
  • Ontario's food producers missing local growth opportunities: study
  • Ontario Tire Stewardship offering $50,000 for recycle projects
  • 3 billion bottles, cans and containers diverted out of landfill as deposit programs and recycling management hit new milestone in Ontario
  • Once more to the moon — NASA may use a commercial rocket to speed up the EM-1 moon mission planned for June 2020
  • Green building technology to grow annually by 10.12% to the year 2023
  • One sweet ride: a biodegradable auto made of sugar beets and flax — but what about mice?
  • Move to autonomous cars gains momentum with CES announcements, more expected from Detroit auto show
  • Canadian companies should look to Mexico for export growth: HSBC Bank Canada
  • Manufacturing slowdown reflects oil and dollar declines
  • More government support for Quebec aerospace industry
  • TransCanada confident Energy East pipeline will be built
Scroll to Top