Cost of Doing Business Up 600 Per Cent: Report

The cost of doing business for small and medium-sized enterprises (SMEs) has grown approximately six times more between 2020 and 2021, than between 2013 and 2019, according to a study by the Business Development Bank of Canada (BDC).

What’s more, 65 per cent of Canadian companies have felt the negative impact of rising costs associated with higher inflation, labour and the price of carbon.

Inflation should return closer to its target, says BDC, but an aging population, the green transition and the effects of globalization on imports-exports will continue to exert pressure on costs. To ensure survival, BDC advices that Canadian SMEs must prioritize 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,” says Pierre Cléroux, vice-president of 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 looked at what SMEs’ are doing to cope with rising costs. The three strategies employed most often and that have proven extremely successful include using technology to modernize processes, which improves business efficiency and helps revenue growth outpace rising costs; reducing the carbon footprint, which helps with cutting energy costs, improving efficiency and reaching a wider market; and proactive cost management, which enables regular monitoring of financial performance to optimize costs and revenues.

“Nearly 20 per cent of businesses that have implemented at least one winning strategy show above-average growth for their sector,” says Cléroux.

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