Half of Canadian small business owners will inject capital to grow their business over the next year, while aging business owners wind the retirement clock
TORONTO, Oct. 5, 2017 /CNW/ - Nearly three-quarters (72 per cent) of Canada's young small business owners aged 25-39 export goods and services, with nearly half of them having increased their focus on international growth in the last five years alone, finds a new poll by CIBC (CM:TSX) (CM:NYSE). With export markets underpinning their growth, two-thirds say they're also concerned about current trade uncertainty.
"It's really positive and encouraging to see young small business owners showing an appetite for growth beyond our borders," says Andrew Turnbull, Senior Vice-President, Small Business Banking, CIBC. "It's how you plan ahead and manage through periods of uncertainty that's important whether it's shifting customer demands, volatile markets, or economic speed bumps. Having a sound strategy is critical to setting your company up for success, especially among businesses growing outside of their home market."
Key poll findings:
- Of the 59 per cent of small business owners who export goods and services outside of Canada:
- On average 29 per cent of their goods and services are exported
- 72 per cent of owners aged 25-39 years of age export, compared to 60 per cent of those aged 40-59 and 37 per cent of those aged 60+
- Majority export to U.S. (84 per cent), Europe (31 per cent) and Latin America (16 per cent)
- Three in five (59 per cent) business owners are concerned about trade uncertainty, with an almost equal number (57 per cent) worried changes to the North American Free Trade Agreement (NAFTA) could impact their business negatively. That number jumps to 67 percent and 65 per cent, respectively, for business owners aged 25-39
- 46 per cent of small business owners aged 25-39 have increased their focus on international growth in the past five years, compared to only a third of those aged 40-59
- 53 per cent of small business owners plan to increase their capital investment to grow or expand their business in the next year
"Business owners typically wait until later in their growth cycle to expand abroad, but it's happening far sooner with the rise of digital commerce and adoption of new technologies that create more cost-efficient growth opportunities," says Mr. Turnbull. "That's helped accelerate the pace of growth, particularly for younger entrepreneurs."
This focus on international expansion is a positive trend, but it also creates a unique set of challenges for business owners, he adds.
While too much competition (31 per cent) was cited as the top challenge for all business owners, those under 40 are almost equally concerned about sources of future growth (25 per cent), being able to respond quickly to changing market needs (25 per cent), and fluctuating currencies (24 per cent).
Among small business owners not exporting, over two in five (41 per cent) say they're comfortable with their current volume, growth and revenue, 21 per cent haven't considered it, and 16 per cent worry that the legal and regulatory requirements are too complicated.
"It's important to have the right team of advisors to build a growth plan that prepares and helps you enter new markets confidently," says Mr. Turnbull. "Several factors need to be considered, including your online presence, marketing plan, e-commerce, revenue projections, cash flow needs, trade finance, and foreign exchange solutions that can minimize the risks and position your business for success."
Timer set for aging business owners
Among business owners aged 60+, the findings revealed that 63 per cent do not plan to grow nor expand their business in the next year, with over a third (36 per cent) intending to either close, sell or transfer their business.
Yet, the poll found that the majority (78 per cent) of aging business owners do not have a formal or detailed plan in place for retirement or in the event of an unexpected emergency.
"The recent gains in the economy and in real estate values have prompted some business owners to consider selling," says Sean Foran, Managing Director, Business Transition Planning, CIBC Wealth Strategies Group. "While entrepreneurs put a lot of time and energy into growing and expanding their businesses, too many don't have a clearly defined exit strategy."
Winding down a business or transferring it to family or business partners can be complicated and fraught with tax consequences if not handled carefully, he says.
"The biggest mistake small business owners make is not having these conversations early enough," adds Mr. Foran. "It's important to involve a team of experts including lawyers, accountants and financial advisors to achieve a higher valuation, maximize retirement income and reduce their overall tax bill."
Not sure if you're ready to wind down? Use CIBC's Business Transition Planning Guide and speak to your team of experts to assess your readiness and create a plan for the eventual transition of your business.
KEY POLL FINDINGS:
Percentage of Canadian small business owners who plan to make a capital investment to grow or expand their business in the next 12 months, by age of owner:
|
All business owners |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
Yes |
53 % |
67 % |
53 % |
23 % |
|
No |
30 % |
16 % |
28 % |
63 % |
|
I don't know |
17 % |
17 % |
19 % |
14 % |
Top expansion plans among those planning to grow their business in next 12 months, by age of owner:
|
All business owners |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
Increasing capacity or production |
43 % |
41 % |
46 % |
34 % |
|
Expanding into new markets within Canada |
39 % |
39 % |
38 % |
50 % |
|
Introducing a new product |
38 % |
34 % |
42 % |
26 % |
|
Increasing marketing initiatives |
36 % |
29 % |
41 % |
37 % |
|
Expanding business outside of Canada |
30 % |
31 % |
31 % |
21 % |
Top three reasons for NOT growing or expanding their business among those who do not plan to grow or expand their business in next 12 months, by age of owner:
|
All |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
I'm happy with the size it is now |
45 % |
42 % |
49 % |
42 % |
|
I plan to close, sell or transfer my business |
21 % |
9 % |
15% |
36 % |
|
Not enough cash flow |
8 % |
15 % |
8 % |
3 % |
Percentage of Canadian small businesses who export goods and services, by age of owner:
|
All business owners |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
0% |
41% |
29 % |
41 % |
63 % |
|
1-24% |
32% |
30 % |
35 % |
25 % |
|
25-49% |
19% |
32 % |
16 % |
4 % |
|
50-74% |
6% |
8 % |
6 % |
5 % |
|
75-100% |
2% |
2 % |
3 % |
3 % |
Markets to which Canadian small businesses export goods and services, among those who export:
|
All business owners |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
US |
84 % |
83 % |
85 % |
81 % |
|
Europe |
31 % |
30 % |
32 % |
28 % |
|
Latin America |
16 % |
16 % |
17 % |
11 % |
|
China |
14 % |
18 % |
12 % |
9 % |
|
Other Asia (excluding China) |
9 % |
6 % |
9 % |
16 % |
|
Other |
3 % |
3 % |
2 % |
13 % |
Top challenges for Canadian small business owners, by age of owner:
|
All business owners |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
Too much competition |
31 % |
30 % |
31 % |
31 % |
|
Shortage of skilled labour or frequent turnover of employees |
26 % |
22 % |
28 % |
27 % |
|
Rising or fluctuating input costs |
24 % |
23 % |
23 % |
26 % |
|
Sources of future growth |
23 % |
25 % |
22 % |
22 % |
|
Lack of time to market my business to new clients/customers |
20 % |
20 % |
19 % |
22 % |
|
Fluctuating dollar/currencies |
19 % |
24 % |
17 % |
17 % |
|
Being able to respond quickly to changing market needs |
17 % |
25 % |
14 % |
7 % |
|
Succession or transition planning |
18 % |
15 % |
18 % |
27 % |
Aspects of business that have increased over the past five years, by age of owner:
|
All |
Aged 25-39 |
Aged 40-59 |
Aged 60+ |
|
|
Number of employees |
49 % |
61 % |
48 % |
25 % |
|
Number of products and services |
52 % |
61 % |
52 % |
35 % |
|
Volume of exports |
31 % |
41 % |
30 % |
13 % |
|
Focus on international growth |
34 % |
46 % |
33 % |
13 % |
|
Use of new technologies |
61 % |
66 % |
59 % |
57 % |
|
Focus on innovation |
57 % |
66 % |
57 % |
38 % |
Percentage of Canadian small business owners who have a transition plan in place upon retirement or in the event of an emergency:
|
Aged 60+ |
|
|
Yes, but it is somewhat informal |
29 % |
|
Yes, I have a formal detailed plan I created with my advisors |
15 % |
|
Yes, I have a formal detailed plan I created on my own |
8 % |
|
No, but I plan to create one |
29 % |
|
No, and I don't plan to create one |
20 % |
About the CIBC Small Business Poll:
From September 6th to September 15th, 2017 an online survey was conducted among 1,014 randomly selected Canadian adults who are decision makers for a small business (507 with 1-25 employees, 507 with 26-100 employees) and who are Angus Reid Forum or EMI Research Solutions panellists. The margin of error—which measures sampling variability—is +/- 3.1%, 19 times out of 20. Discrepancies in or between totals are due to rounding.
About CIBC
CIBC is a leading Canadian-based global financial institution with 11 million personal banking, business, public sector and institutional clients. Across Personal and Small Business Banking, Commercial Banking and Wealth Management, and Capital Markets businesses, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at www.cibc.com/ca/media-centre or by following on LinkedIn (www.linkedin.com/company/cibc), Twitter @CIBC, Facebook (www.facebook.com/CIBC) and Instagram @CIBCNow.
SOURCE CIBC
