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NORTH AMERICA
THE COST OF DOING BUSINESS HAS ACCELERATED BY 600 % AND INACTION IS COSTING CANADIAN SMES DEARLY
looked at what SMEs are doing to cope with rising costs . The bank then estimated the impact of these actions on company performance in terms of revenue growth , outperformance relative to the sector and profitability .
“ With the rising price of carbon and increasing labour costs , it ’ s not surprising to see what strategies have been put forward to ensure profitability ; in fact , business owners have had no choice but to implement them to remain profitable ,” added Cléroux .
The three strategies that entrepreneurs use most often and that have proven most successful are :
The cost per unit has grown approximately six times more between 2020 and 2021 than the average annual cost growth between 2013 and 2019 , according to BDC ’ s new study , How to cope with inflation and remain profitable . Moreover , 65 % of Canadian companies have felt the negative impact of the rising cost of doing business .
Inflation should return closer to its target , but population ageing , the energy transition and global geopolitical issues will continue to exert pressure on costs . The BDC study sounds the alarm : to ensure their survival , Canadian SMEs must prioritise their profitability in order to adapt to the new environment .
“ We ’ re not going backwards ; the business environment is changing , and small businesses may be tempted to postpone their strategic thinking or certain investments to support their long-term survival ,” said Pierre Cléroux , Vice President , Research and Chief Economist at BDC . “ Downsizing and the absence of a mitigation strategy can no longer ensure a company ’ s survival .”
In order to boost SME growth and the competitiveness of the Canadian economy , BDC
1 . Using technology to modernise processes ( 25 %), which improves business efficiency and helps revenue growth outpace rising costs
2 . Reducing the carbon footprint ( 14 %), which helps with cutting energy costs , improving efficiency and reaching a wider market
3 . Proactive cost management ( 12 %), which enables regular monitoring of financial performance to optimise costs and revenues
“ Nearly 20 % of businesses that have implemented at least one winning strategy show above-average growth for their sector ; it ’ s clear that investing to support revenue growth is a strategy that delivers results ,” added Cléroux .
Upward pressure on certain costs will continue over the long-term , driven by three major trends : an ageing population , the green transition and the effects of globalisation on import-export . The BDC study presents the impact of these trends on SMEs :
• Over a third of companies ( 36 %) cite labour costs as the main negative impact of rising costs
• The majority of SMEs ( 57 %) expect climate change to increase their costs over the next three years . About 40 % still believe their costs will not be affected
• Among SMEs engaged in international trade , 68 % have already implemented a sourcing strategy to improve their resilience , but 79 % expect this to increase their costs . �
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