We’ve heard it all before: small businesses are the lifeblood of the Canadian economy. They are the backbone of the communities in which they operate; the very heart and soul of the neighbourhoods they serve. These are statements that have often been employed to describe the contribution of Canadian entrepreneurs and independent business owners toward the continued overall strength of Canadian society. As true and accurate as those statements are, however, they have for one reason or another, perhaps through their wide use and the passing of time, somehow been turned into hackneyed cliches that don’t seem to resonate as strongly as they should with the average Canadian and government official alike. But, according to former small business owner, Kristina Egyed, as consequences of the pandemic continue to mount and its long-term impacts begin to rear, the critical role filled and performed by independent businesses toward the health of Canadian communities and the financial viability of the country could soon start to become regrettably obvious.
“Small businesses are an integral part of their communities,” she says. “On a micro level, it’s hard to think about any community without small businesses, not simply because of the services offered, but because of their contribution toward the lifestyle and vibrancy of their neighbourhoods. They ensure diversity and a unique environment, and consistently support local arts, culture, sporting and recreational events and activities. Small business owners in communities across the country have always assumed this responsibility, with great pride, to ensure the health and wellbeing of their local neighbourhoods. On a macro level, small businesses contribute considerably toward the strength of Canada’s GDP. If we lose the small businesses that we very much depend on, the health of Canadian communities, and of the country’s economy as a whole, could suffer significantly.”
Economic Decline
Per recently released data from Statistics Canada, it seems that the narrative woven by Egyed concerning the correlation between small businesses and the stability of the country’s economy is already bearing supporting evidence. According to the agency, the Canadian economy posted its worst ever performance, registering a 5.4 percent decline in Gross Domestic Product (GDP) for 2020, marking the largest recorded decrease since data was first calculated in 1961. Although its difficult at the moment to accurately ascertain exactly how many small businesses across the country have permanently closed their doors since the start of the pandemic – surely, it’s in the tens of thousands – the impact of these closures seems undeniable. And, it could get much worse before it gets better.
In July of last year, during a period when a preliminary understanding and recognition of the potential harm posed by the virus’ spread began to develop, the Canadian Federation of Independent Businesses (CFIB) released a report as part of its #SmallBusinessEveryDay campaign. The report offered an early mid-range estimate concerning the impacts of the pandemic, stating that 158,000 (14 percent) small businesses across the country are likely to close their doors as a consequence of the resulting implications. Given the range of results that are expected from the survival and recovery efforts being put forth by entrepreneurs from coast to coast, that number could rise as high as 218,000, or 19 percent of all small businesses in the country. These projections are certainly grim and start to tell a story on their own. However, when considering the fact that small businesses, which account for 97.9 percent of all businesses operating in the country and contribute toward just under 40 percent of the Canadian GDP, that story begins to take on a much darker tone.
Local Prosperity
In addition to propping the country’s economy on an annual basis, employing 8.3 million people or 69.7 percent of the country’s private labour force, small businesses are also central to the economic wellbeing of their local neighbourhoods. Their oft unique verve, style and offering draws interest from visitors, generating traffic to, and awareness of, the wares and cultural offering of their communities. And, as Egyed rightly points out, the injection of sponsorship dollars and philanthropic investments into the surrounding areas that they operate in helps to ensure their proper function and maintenance. However, she adds that the support that small businesses provide for local economies is far more significant than many realize and goes well beyond that of charitable giving and donations.
“There has never been a thorough understanding of the role of small business and what it takes to run a successful operation,” she laments. “The aspect of small business that isn’t often taken into account by many people is the fact that it’s income-based, not profit-based. It has to make enough to earn the owner a living wage and to pay for staff, all of the fixed and rolling costs. But it doesn’t have to make money in order to pay people who are invested in the company. As a result, the money that’s being generated by any small business stays within the community. It stays with the owner that lives in the community. It stays with the staff that live in the community. It stays with the providers of local services in the community, and on and on. The contributions of entrepreneurs are immense and that much more meaningful through this multiplier effect that’s inherent in running a small business.”
Recirculating Revenue
The multiplier effect that Egyed refers to is an equation that’s been calculated by LOCO BC – a not-for-profit organization committed to applied research, education and networking to promote the benefits, and improve the enabling environment of independent business in British Columbia. Its research indicates that the local economic impact of small businesses is twice that of multinational competitors, with $63 of every $100 spent at local merchants recirculating back into the community, contrasting the paltry $14 that remains from every $100 spent within large multinational retail locations. As a result, it says that local businesses recirculate 4.6 times more revenue into local economies, multiplying their positive impact on the communities they serve. And, as though these numbers weren’t enough to provide empirical proof of the critical value of small businesses in Canada, Egyed suggests that when the taxes they pay are layered on, their value only increases.
“From a municipal, provincial and federal point-of-view, small businesses pay a sizeable portion of the taxes that feed the revenue that’s generated in the country,” she asserts. “When you compare the taxes paid by residents versus the taxes that businesses pay, small business owners pay their portion at a much higher range, without receiving the equitable benefits or service from those tax dollars. It’s unfair, and in many cases, prevents the growth of small business in the country, limiting the prospering of neighbourhoods and communities everywhere.”
From Coast to Coast
Extremely passionate about small business and community, Egyed was once the proud owner of LaLa’s, a gift boutique that offered an eclectic assortment of unique product with two locations in Vancouver. Founded in 1996, Egyed and her stores served the communities in which they operated in, helping to infuse flavour and inspiration into the surrounding environment. Shortly after social distancing protocols started to take effect across the country early last year, she made the decision to close her stores. She likens the decision to that of a “breakup” because of the interdependent relationship that she had develop with LaLa’s and the deep connections she enjoyed with customers. However, after having lost $140,000 in sales, incurring a personal debt of $75,000 and realizing that her 25-year career as a small business owner had come to an end, rather than simply walk away, she decided to go for a drive.
“From a personal point-of-view, it was an incredibly difficult decision for me to close my stores,” she says. “And after both locations closed, and a big part of me suddenly went missing, I realized that I needed an outlet to share my story and to hear other people’s stories. So, I got in my car and I drove from Vancouver to the Eastern Townships of Quebec and back. Along the way, I made very conscientious choices to leverage the services of locally-owned and operated hotels, restaurants and gas stations and began anecdotally speaking with business owners to get a sense of how they were doing and feeling and to find out how their businesses had been impacted by our situation. I then started to record these conversations and gain a real understanding of the small business landscape across the country, the communities and settings where people are doing well, and where people are struggling.”
Government Support?
For instance, Egyed says that one of her observations is that in smaller communities, where people are being forced to stay at or close to home, small businesses are doing well and in some cases are experiencing increased patronage because of limited choice. Whereas, in more urban settings, where traffic has come to a complete halt, results have shown up in massive challenges for small business owners and juxtaposing outcomes. She says that her cross-country experience was cathartic and one on which she met some amazing Canadian entrepreneurs. She describes their attitude, generally speaking, as positive, but adds that there was also a collective theme of disappointment that accompanied most of her conversations.
“Unfortunately, small business owners feel as though they’ve been left by the wayside by their government,” she admits. “They’re ashamed of the way they’ve been treated, yet again, and believe that the current lexicon of the “Ma’ and Pa’” store is so degrading that they’re sick of it. Many of these people are innovative entrepreneurs who employ staff and run large numbers of inventory to their storefronts. The dismission by government of the economic value of small business in communities across Canada has been difficult to swallow. It sends a message that they don’t view the return on investment in small business to be significant enough to support them. And yet, they’re willing to bail out larger corporations who are paying dividends out to their shareholders. It’s all been received by most of the small business owners that I’ve spoken to as a real slap in the face.”
Shopping Local
Despite the negativity of that particular point of conversation, however, Egyed recognizes that there is also a heartening thread among the developing narrative, one that’s showing up in the form of the encouraging loyalty and backing that many small business owners are receiving from their customers in areas where physical traffic still exists. She says that in most of these instances, customers are doing everything possible, leaving as much of their spend as they can within their local small business establishments. It’s a positive sign, she acknowledges, and one that emphasizes the importance of shopping local with respect to the survival of Canadian communities.
“I don’t think I’m even able to express how significant shopping at your local small business will be over the course of the next couple of years and beyond,” she says. “But it’s not easy at the moment. People have to go out and, in some cases, stand in line or visit stores at times that may not be the most convenient for them, to experience an environment that has changed considerably, where service levels have been altered as a result of the pandemic to that of something prescribed and void of the usual character that we’ve come to expect from our local small businesses. But, if we don’t collectively make the effort to support our local shops, we’ll end up with the lowest denominator of product available. We won’t have access to the same variety and won’t enjoy the positive influence on our neighbourhoods. We’ll lose everything that makes our communities and the varied cultures within them unique.”
Eyes on the Street
In addition to these losses, points out Egyed, communities hardest hit by the loss of small businesses could also potentially experience an uptick in violence and crime, suggesting that the presence of merchants and their familiarity with the neighbourhoods in which they’re located provides a natural prevention to the unseemliness and degradation that some areas are blighted by.
“When communities lose small businesses, they’re also losing their eyes on the street,” she explains. “I don’t think that many people realize the true value of small businesses in this way, taking it for granted. When retailers were mandated close in certain parts of the country, many areas experienced significant increases in vandalism, theft and other crimes within the first week of lockdowns. There are many case studies from across North America involving communities that have, for a multitude of different reasons, lost their small businesses, and the result is almost always a dilapidated area which then negatively impacts the surrounding residential neighbourhoods. Small businesses keep communities safe. And without them, municipalities are not going to have the tax revenue to increase community policing.”
The True Value of Small Businesses
Indeed, the impact of small businesses on the communities that they operate in is tremendous. And, given the details of their contributions, combined with the potential ramifications that entrepreneurs could be facing over the next 12 to 18 months, those hackneyed cliches used to describe their value could once again be restored to their rightful meaning. In the meantime, Egyed believes that the abilities and character that are intrinsically part of every small business owner, combined with their desire to help their communities and neighbourhoods to continue growing, will serve many of them well through these challenging times and beyond.
“Small business owners are the most resilient people I know. Their ability to shift and pivot inside environments as difficult and challenging as a global pandemic is incredible and has been shown time and again throughout the country for decades. It’s something that I think is only matched by their hard work and the care that they put into it. Many that I’ve spoken to are so dedicated toward making this situation work for their businesses, customers and communities. And I really think that Canadians are going to start to realize that they have to put in some of the work as well and rally around their local establishments in order for their neighbourhoods to survive through the long-term. And hopefully the government will shift their perspective with respect to small business, review the data that’s produced by Statistics Canada, and finally recognize the true value of the Canadian small business community.”
The Business of Retail Podcast recently discussed this topic. Listen to the podcast here.
