Entrepreneurs Find Success with Help from Financiers
OTTAWA—The current recession has led to a rise in unemployment across Canada, but with the help of stimulus measures and personal initiative, more Canadians have decided to work for themselves.
According to Statistics Canada, since the labour market downturn began last fall, unemployment has risen to 8.6 percent, the highest rate in 11 years, and self-employment has grown by 75,000, increasing by 37,000 in June, and 35,000 in July.
The Business Development Bank of Canada (BDC) reported a record increase in loans to businesses from April to June, during the first quarter of 2009-10.
Loans rose 37 percent compared to the same quarter in 2008, from $738 million to over $1 billion.
BDC, a financial Crown corporation mandated to promote entrepreneurship and assist small and medium-sized businesses, attributed the increase largely to the Business Credit Availability Program (BCAP) introduced in Canada’s Economic Action Plan in the 2009 federal budget.
Through BCAP, the BDC, Export Development Canada, and private sector banks are collaborating to make an estimated $5 billion available to businesses through various initiatives.
Meanwhile, the bank’s new branding—“Entrepreneurs First”—emphasizes the high priority it places on helping entrepreneurs grow their businesses in the long term, said Patrick Latour, Vice President and Area Manager, Eastern and Northern Ontario.
“A lot of people think of money, want money to solve a lot of things, but what is really needed—the business plan, the timing—all those questions they need help with, we can help them with,” Mr. Latour said.
Through its financing and consulting services, the bank “is not only about lending money, but a holistic approach of helping the business develop.”
“We not only focus on the business but how to develop the individuals to become better leaders, better business owners, [because] who drives the business but the people?”
A Statistics Canada study that compared BDC clients with non-BDC clients in their performance between 2001 and 2005 found that BDC clients achieved higher revenue and employment growth as well as longer survival. Those who used both the bank’s financing and consulting services showed even stronger revenue growth, particularly over time.
According to BDC’s 2009 annual report, after two years BDC-financed start-up companies have a survival rate of over 95 percent compared to 50 percent for Canadian start-ups in general.
'Good businesses are still prospering'
While many Canadians have started a business from scratch, others have purchased franchises or other businesses that are already up and running.
In the private sector, business broker Greg Kells has seen a recent improvement in peoples' confidence about buying a business.
Mr. Kells, the president of Sunbelt Business Brokers Inc. (Canada), started his Sunbelt franchise in Ottawa seven years ago and estimates that he has sold about 100 businesses annually, valued from $30,000 to millions of dollars.
They include franchised and non-franchised restaurants, retail stores, online stores, professional service firms, manufacturing companies, and other privately held businesses. The sellers pay for the service, while the service is free for buyers.
For about a year, the economic downturn dampened the confidence of consumers, investors, and businesses alike, but in his work Mr. Kells sees that “buyers are getting over their fear.”
“The reality is that good businesses are still prospering,” he said, and the owners themselves hold the key to success.
“Most of our clients have passion and energy and a willingness to learn, and they’re willing to work hard. If you put all those things together, it’s no wonder that 98 plus percent of them succeed.”
Business Seller Helps Business Buyer
Mr. Kells said buying an established business gives buyers a significant advantage over starting a business from scratch, with a survival rate that is more than 30 percent higher.
This success comes from advice and guidance from his brokers, he said.
“We make sure that [the buyers] are protected and buy the right business so they don’t lose their money, and we try to find the fit that works for the lifestyle, skills, experience, and financial resources of the purchaser.”
Part of the protection comes from having the seller lend money to the buyer to buy the business, typically between 25 and 50 percent of the purchase price. In addition, the seller will stay for three to six months, or even up to a year, to teach the buyer to run the business well.
“It keeps the seller honest. . . . It [also] gives comfort to the buyer to know the seller has enough confidence in the business that he’s willing to lend him money,” said Mr. Kells.
The company also has a program called the “inner circle” which brings together business owners for mentorship and support.
Many Sources of Support
“Many different partnerships are occurring to help with different kinds of businesses and needs,” Mr. Latour said.
For entrepreneurs in rural and northern communities, he suggested connecting with local not-for-profit groups that operate under the Community Futures Program across Canada.
There are more than 250 such groups that work with private and public sector partners, including the BDC, to provide support services to small and medium-sized enterprises (SMEs) and can refer them to repayable financing.
The National Research Council also has an Industrial Research Assistance Program that offers grants and other services to assist SMEs in innovation and technology.
Statistics Canada defines SMEs as enterprises with less than 250 employees and less than $50 million in total revenue.
Industry, trade, and professional associations are another key source of information, support, and referrals, said Mr. Latour.