Small and medium sized businesses, or SMEs as they are often referred to, have been hailed as the backbone of the Canadian economy and part of the reason the global financial crisis’s effects were short lived in Canada. There are approximately 1.2 million SMEs operating in Canada. These businesses make up more than 98 percent of the country’s employment market and contribute more than 28 percent to the country’s GDP.
While SMEs are crucial to the Canadian economic landscape, of the 100,000 new businesses that open annually, approximately 53 percent make it to their fifth anniversary. If anything, that proves that small business survival and success is a hard fought victory. Despite the roughly 50/50 odds associated with opening a new business, the potential for success is very attractive to Canadians and for some business owners very rewarding.
Deciding when to expand a business is as important as opening the business itself. Growing too early or too fast can result in a weakening of a business and can even force its closure if the financial impact is too great. On the other hand, expanding too late can find a business owner fighting for a place in a now saturated market.
Daniel White, Edmonton businessman and entrepreneur, emphasizes timing. He also explains that being a proactive business owner involves researching your market consistently and that thorough research will let you know when the time is right
Edmonton’s Daniel White, who has successfully lead Symmetry Asset Management Inc. into a variety of sectors including oil and gas and forestry, also advises business owners to use their wealth of knowledge gleaned from their initial business to influence their strategy. Daniel White goes on to say that mapping your existing business model to your new business venture is a conservative but oftentimes rewarding approach to branching out a business.
Experts also recommend waiting for your business to have at least three years of moderate growth before taking on any new endeavor. “A recent surge in profits isn’t necessarily enough to justify business expansion – it could be temporary or seasonal,” wrote financial manager Rieva Lesonsky. However, Lesonsky also points out that steady profitability is a tell-tale sign that your business model will work elsewhere.
Aside from research and timing, a business owner needs to carefully weigh the risks and rewards of growth before taking on a business expansion, and only expand into new markets if the current operation can survive the stress.
Sustainable growth takes time, focus and energy and can negatively affect the organization as a whole if it’s not performed skillfully. “Consider what an expansion would entail and how it could affect current operations. Can the organization handle leaders’ traveling and focusing on a new market?,” Adi Vaxman wrote last year for Entrepreneur Magazine.
Most importantly, SME owners need to know they are not alone. The Canadian Government, along with a number of private organizations, have developed incubator and accelerator programs aimed at nurturing Canada’s SME landscape.
With government grants, business tutors and a wealth of online resources small business owners have more tools for success than ever before. The new Prime Minister, Justin Trudeau, has also promised to enrich the SME sector through grants and funding.