Small Business Owners in Canada Continue to Struggle

It goes without saying that small businesses in Canada are central to the country’s economic health and growth. They are not just the source of thousands of jobs each year and pumping home-grown income back into the economy, but they also play a vital role in fostering entrepreneurship, a sense of community and pride.

Anyone making a post-pandemic trip to the office or their workplace has likely noticed closed stores and restaurants. I suspect many Canadians have had conversations with small business owners like the one I had with the owner of a family-run book store on how they are struggling to stay afloat, so many of us are already aware that small businesses have taken the brunt of the lockdowns over the past two years.

As the pandemic restrictions were lifted it was hoped that things would quickly return to health among small business owners once the economy opened up. But has this prophecy materialized? The short answer is no. 

Ipsos’ quarterly Small Business Context tracking illustrates that the consumer confidence among small business owners is waning and their financial health is deteriorating.

After peaking at the end of 2021, broad sentiment among small business owners has dropped a full 21 points back into the decidedly negative for March. On pure consumer confidence, small business owners in Canada rank 20^th of 28 countries, a full 25 points below their counterparts in the U.S. The tangible backbone of sentiment, financial health among small business owners has dropped from reasonably net positive to net negative between the end of 2021 and today, a full 24 points below their counterparts in the U.S.

Not surprisingly, three of the top five issues of concern to Canadian small-business owners are of economic effects - inflation and interest rates, availability/affordability of housing and the economy overall. While small business owners and the general public share the same top five issues, the degree of emphasis varies. Notably, when compared to the general public, small business owners are far more concerned about ‘jobs/unemployment’ and less about ‘climate change’. In addition, the largest recorded shifts in the composition of the issue-list for small business owners show a greater importance assignment to housing, international relations/war, and interest rates/inflation as top issues, and a decline in the pandemic and climate change as matters of immediate worry.

The ongoing Russia-Ukraine conflict and the surrounding uncertainty and supply-chain disruptions have further fueled the already soaring concerns about affordability among Canadians. Nearly nine in ten Canadians (85%, +7pts since November 2021) are concerned (46% very/39% somewhat) that inflation will make everyday things less affordable, a sentiment shared fairly consistently across provinces in the country. Affordability and managing expenses amidst the shock of historic-high-inflation levels will likely remain the hot button issue for the foreseeable future.

Consumers are preoccupied with concerns about affordability and the rising cost of living - the exact opposite of the stimulus small businesses were hoping for. Small business owners find themselves caught between the devil and the deep sea: should they dare to increase prices and risk losing their customers or should they hold their prices steady and enter the battlefield of absorbing the rising expenses while dealing with stock shortages? Creating sticker shock might not be wise when consumers are already dealing with eye-popping inflation rates. The Price-conscious consumers would then be pushed to make the natural move to the competitively priced super-supplier which is better positioned to absorb inflationary pressures. All pertinent dilemmas currently facing those working to keep their enterprises afloat.

It is clear that small businesses in Canada continue to struggle and have not experienced the bounce that many projected would happen with the re-opening of the economy. The general public is aware of the challenges facing small businesses, and 17% of Canadian citizens place ‘help for businesses still struggling with the impact of the pandemic’ in their top three expectations from the upcoming federal budget. This data reflects an important recognition on part of the general public and perhaps signifies the voice of those who continue to advocate for supporting and buying local. 

Economic recovery cannot be fully realized until small businesses return to health. As well, we need strong local businesses to reinforce our sense of community and pride. However, with the cost of living concerns on the rise, the “supporting local” businesses sentiment may lose out to the “lowest price wins” perspective, thus pitting small businesses against larger retailers and their economy of scale advantages. Governments have already started to act on consumer worries with tax breaks, rebates and investments designed to address the rising cost of living. Small business owners appear to be feeling even greater pressures and will be keenly looking for similar government support and measures to stay afloat.