Canadian Treasurer

January 4, 2011

Half of Canadian small businesses still in downturn, Amex says

Despite reports of a strengthening Canadian dollar, new job creation and what's expected to have been a solid Christmas shopping season, almost half of Canadian small business owners report a downturn in business, notes the latest quarterly American Express Small Business Monitor conducted by Angus Reid Public Opinion.

From October 29-November 3, 2010, Angus Reid conducted an online survey among a sample of 586 Canadian small business owners who currently employ between two and 100 employees.

The fourth quarter 2010 issue of the American Express Small Business Monitor says that Canadian small business owners report little or no change from their position 12 months earlier - a contrast to the overall Canadian economy, which has recorded gradual GDP growth almost uninterrupted since August 2009. 

The survey found 47 percent of small business owners across the country reported either a "slight" or "significant" downturn to their business, a number that has climbed five points since August 2010 and 10 points since May 2010. Correspondingly, the percentage of those reporting an improvement to their business has fallen eight points during the same period.

In what could be an indication of general market apprehension, small business owners are also more risk-averse. Findings indicate just 19 per cent willing to take "significant" or "above average" risks, down from 23 percent in May 2010 and 25 percent in January.

"In the spring, the Monitor data were suggesting we had turned the corner on the recession and business was starting to improve," Eric Nielsen, vice president/general manager, small business services Canada, American Express Canada, says. "But the latest results show that small business owners are bracing for a recovery period that is slower than previously envisioned."

Despite the situation facing small business owners, their outlook is positive. The American Express Small Business Index, which measures and assigns a letter grade to the confidence, performance, and attitudes of Canadian small business owners, was unchanged in the fourth quarter of 2010, at 64 percent or "C".

When asked about the future, three-in-five feel that the economic situation will get better in 2011, more than two-thirds expect to take on more business in 2011, and, despite the current situation, four out of five say that the benefits of being a small business owner outweighs the risks.

Optimism about their business's financial position improved two points in the fourth quarter of 2010: 49 percent said they are hopeful that it will get "a lot" or "a little" better in the future. Optimism is highest in Vancouver at 57 percent, while Montreal (43 percent) and Toronto (41 percent) were both below the national average.

A comparison of findings in November 2010 to those from January 2010 shows that small business owners are keeping tight control on their cash flow. Those planning to spend on new equipment or other capital totalled 53 percent in November, compared with 57 percent in January 2010.  Similarly, 19 percent plan to expand their work space, compared with 21 percent, and the number of small businesses planning to upgrade IT is 41 percent versus 42 percent in January 2010.

Charitable donations were another area where small business owners were controlling cash flow: 40 percent of respondents said that in the past year they have not given anything to charitable groups or community activities, and among those, almost half (46 percent) cited budgets as the reason.



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