One of Canada’s biggest banks is encouraging small and medium businesses to invest in innovation and technology before interest rates rise even higher.
“Taking a proactive approach to investing in your own business – now rather than later – will ensure it’s more resilient, as you adapt to a higher cost future and capitalize on changing consumer behaviour,” said Jason Charlebois, Scotiabank’s Senior Vice President of Small Business Banking.
“Innovation and technology has emerged as key themes for businesses that have been successful coming through the last several years of the pandemic and COVID-19. Those businesses that were able to pivot and adapt to introducing new channels for sales and generating revenue, mostly through online and/or curbside pickup, leveraging e-commerce platforms and other ways to digitize the way they send and receive money, were businesses that were more successful coming through the pandemic.”
Scotiabank’s latest small business trend report, SMEs: The Shortage Economy indicates that business owners now expect supply chain disruptions to continue to worsen for at least the next six months, exacerbated by geopolitical events such as the war in Ukraine.
Also the cost of borrowing is expected to continue to rise.
“Small businesses come in all different forms in terms of the type of industry and the services and goods that they provide. So innovation and investment in capabilities for the business are different depending on which business sector they’re from,” said Charlebois. “Of course, businesses have to be mindful of the competition in the local market and the competition that might be taking business from them beyond their local market because other businesses are now maybe offering goods and services in an online or digital way, thereby reducing foot traffic towards a traditional brick and mortar business that might be located in a local market. So businesses have to be mindful of what their competition is and be ready to pivot and adapt as necessary to stay competitive and stay relevant to their customers.
“Interest rates are on the rise. The Bank of Canada has increased the prime lending rate. That’s making it more important than ever for small and medium businesses to secure the required capital that they might need now to invest in innovation and technology. Businesses should be seeking advice. Scotiabank has a range of specialized advisors, small business advisors, across our entire footprint in this country who are able to advise and help business owners to put strategies in place to weather any future economic headwinds and manage their risks and capitalize on the opportunities so they can plan and sustain a prosperous future for their business.”
Key findings of the SME report include:
- SMEs have underperformed larger enterprises in the post-pandemic recovery. Since the start of the pandemic, one-third of firms now consider a shortage of input products to be a limiting factor for raising production;
- Canada has seen the number of unfilled job vacancies reach historic levels during the post-pandemic recovery. Many positions remain unfilled from workers who left industries affected by lockdowns, the inability to hire workers as quickly as they were laid off during the pandemic, and overall exodus from some industries where virus exposure was elevated;
- Businesses consider the shortage of labour as an important limiting factor to revenue growth and smaller firms expect to raise wages more on average, compared to larger firms; and
- Growth in Canada’s overall GDP is expected to average 4.3 per cent in 2022 and 3.2 per cent in 2023, with unemployment falling through 2022.
Scotiabank is recommending four key areas for recovery and growth for Canadian business owners:
- Plan your Liquidity and Cash Flow;
- Dive into Digital;
- Continually monitor the economic environment; and
- Lean on your financial A-Team.
“The pandemic was unique for all businesses in our country and around the world,” said Charlebois. “Different businesses depending on the industry they were in were impacted more. In the case of small businesses, they tended to be unfortunately in the zone of when most of the pandemic restrictions were implemented in the various provinces across the country. Whether that be the hospitality sector, the arts and entertainment sector, obviously restaurants and the service industry broadly.
“Most of the businesses in Canada are small businesses and therefore small businesses generally were affected that were in those sectors more substantially than maybe larger businesses that maybe had other avenues to continue to serve customers and were able to stay open while certain small businesses were forced to close their storefronts.”