Surviving In Trying Times

These days, the business world is awash in red ink, and some of the most trusted financial institutions in the world have been strongly shaken.

This is the environment in which Canada’s small business owners must operate. Indications are that Canada’s economy is more resilient than many national economies around the world, and should recover more quickly. Nevertheless, the slowdown in U. S. consumer and business spending will have an impact on many Canadian SMEs — especially those who depend on revenues from exports to the U. S.

FINANCING IS AVAILABLE

Almost any entrepreneur will say that access to financing is the biggest challenge to achieving growth objectives. Clearly, that access to financing is becoming even more difficult today. While Canada’s private sector banks have not stopped lending to smaller businesses, they have adopted a more cautious approach. At the same time, U. S. lenders in the Canadian market have slowed down their activities considerably, resulting in a reduction in the number of sources of financing available to Canadian businesses.

Fortunately, alternative sources of financing are available in Canada. In times like these, it’s not unusual for financial institutions from the public and private sector to work in partnership to offer financing to entrepreneurs. While not a replacement for private sector banking, public institutions such as the Business Development Bank of Canada, Export Development Canada, the Community Futures Development Corporations and Business Development Centers are well positioned to offer stability and support during economic downturns.

WHAT YOU CAN CONTROL

While today’s economic climate is not ideal for startups, new projects or business growth, entrepreneurs cannot simply abandon their projects while waiting for better times. SMEs exporting to the U. S., as well as those focused on the local market, must attempt to enlarge their markets.

In an environment of uncertainty, there are many things entrepreneurs cannot control. Rather than worry about things they can’t change, entrepreneurs should focus on the things that are within their ability to manage. What are they?

1.Taking a long-term view. This can be difficult when the daily media barrage is overwhelmingly negative, but Canada’s smaller businesses need to innovate, improve productivity and export to new markets to be competitive in a global economy. Canada’s entrepreneurs must continue to plan and prepare for development opportunities.

2.Free up working capital through aggressive cost reduction. During an economic slowdown, managing working capital is crucial and requires the constant attention of business leaders. Rigorous cost management led by improved business processes, eliminating services purchases and other expenses that do not add significant value to the operation are simple ways to free up working capital. Note that it is important to analyze where value lies before the cutting begins.

3.Work on the organization. When an enterprise is busy and overstretched, its management team often does not have the time to focus on its efficiency. A slowdown may be the ideal time to think about the effectiveness of a healthy work organization.

4.Cement relationships with customers and suppliers. When projects slow down, the time is right to look more closely at your day-to-day business. Meeting customers face-to-face is always a good idea. It helps to solidify relationships and can provide first-hand insights into customer service needs.

5.Look for ways to innovate and improve productivity. Many productivity gains are possible through information technology, logistics, process improvement, and other related concepts. When asked, employees can often suggest ways to do their work better and faster. Focusing on innovation can lead to the development of new or improved products and services.

TAKE ADVANTAGE OF THE SITUATION

By concentrating on the things they can control, Canada’s SMEs can set the stage for an economic rebound. Numerous recent surveys have found that, in spite of increasing worries related to access to financing and the economic slowdown, the majority of entrepreneurs are optimistic about the long-term outlook. An Ipsos Reid survey concluded that more than half are cutting back on unnecessary expenses; almost half are working to provide extra value to customers, while others are finding ways to reduce energy and fuel consumption and increase marketing efforts.

These days, economic conditions can make business more challenging than ever. By taking measures to survive the economic downturn and stay strong, SMEs can position themselves to take advantage of opportunities, become more competitive, and ensure their long-term success.

Edme Mtivier is executive vice president, Finance and Consulting, for Business Development Bank of Canada (BDC). BDC is a financial institution wholly owned by the Government of Canada that actively supports the development and growth of Canadian small and medium-size businesses through its complementary financing, investment, and consulting solutions. For more information, visit www.bdc.ca.