Revealing Blue Sky

Canadian entrepreneurs are keen to grow their small- and medium-sized businesses but worried about doing business in an unpredictable environment, according to a new survey. Just over half (51%) of Canadian respondents to the 2017 Amex Global SME Study ranked economic uncertainty in the domestic market as the top external threat to their business, while the political instability placed a distant second (23%).

The financial services firm polled 3,205 leaders of SMEs across the world, with 300 responses from Canadian firms. The chief concerns of Canadian respondents were broadly in line with global sentiment, with 45% overall putting economic unpredictability atop their lists. “Whether it’s elections, micro- or macro factors going on in specific regions, Brexit or what have you, uncertainty is to a certain degree the status quo when you’re dealing with businesses across the globe” says Paul Roman, Vice-President and General Manager, Global Commercial Payments, American Express.

But uncertainty isn’t translating into negativity, with 42% of respondents saying they were feeling positive about the state of the local economy over the next year. And while almost half of the firms (44%) surveyed had increased sales between 0% and 4% over the previous financial year, over half (51%) predicted that their revenue growth would average 4% to 10% over the next three. “Notwithstanding the uncertainty, there’s still a focus on innovating and growing,” says Roman. But while business owners and managers know what they want to achieve, they don’t seem to have “a huge degree of confidence in the how to actually go and do those things,” says Roman.

Here are four strategies SMBs can use to prosper in uncertain times.

The Perspective from American Express

“Small businesses are the engine that powers the Canadian economy. No matter whether you’re an entrepreneur just starting out, or a small business owner looking to take that next step, American Express is your trusted advisor. With the expertise, finance options, and skilled team to help meet your specific needs and solve your most complex business challenges, our team provides the necessary support, access and answers that empower businesses of all sizes. Whether that’s to attract customers, optimize payment processes, and manage cash flow to drive lasting growth, we’re here to help with your success.”

Paul Roman, Vice President & General Manager, Global Commercial Payments American Express Canada

1. Build closer relationships with buyers and sellers

A combination of technological disruption and globalization have infused the business world with the pervasive sentiment that things are changing faster than ever before. Unsurprisingly, respondents listed reacting rapidly to shifting demands as the challenge they’d be working hardest to address over the next three years. Using the latest technology within their companies and enabling innovation made up the rest of the top three.

But prioritizing those areas of their businesses leaves owners and managers with less resources for more workaday but complicated tasks like cashflow or supply chain management. “You see people’s attention on wanting to digitize their business [or] optimize productivity,” says Roman. “While they’re pursuing those things, they expect the always-on parts of their business to be working well. They’re increasingly trying to spend their time in areas where they don’t necessarily have the expertise or the track record, but that they’re realizing are critical for revenue growth or profitability.”

In such circumstances, it helps to have reliable and flexible providers. Roman says there are big benefits to greater integration and cooperation with suppliers and customers regardless of the industry you’re in. “A lot of people who are on the receivables side, as an example, are needing to partner with clients to have flexible payment terms or servicing models,” he says, citing examples in everything from concrete manufacturing to jewelry wholesaling.

The auto industry has functioned this way for decades, Roman points out, with close ties between car brands and parts manufacturers. Such links are harder to build for smaller companies with smaller volumes of business, but they’re worth cultivating nonetheless. “You [should be] going into your top two or three relationships and trying to create something that’s much more than just a transactional relationship,” Roman says.

2. Court new business—but don’t get dumped

The flipside of greater flexibility is that companies are increasingly willing to switch providers if they don’t get what they want. “[There’s more] awareness of competing products, even in industries that you might think are more mundane like raw materials,” he says. He uses the example of a concrete supplier. “If you’re in construction, you’d think you’d have a relationship built in—dependability on the trucks arriving and all the rest of it. [You’d think] that would be a very sticky relationship.”

That’s an opportunity for small companies looking to win new business. Roman says firms are chasing growth “in a much more aggressive fashion than I would have seen five or six years ago.” But beware the competitors poaching clients in this newly-liberated climate. “With the ability to compare and contrast, and the way people have stepped up their delivery models, we’re seeing a lot more of an ability to share-shift,” says Roman. You don’t want to bring in a bunch of new business, only to see existing clients walk out the door.

3. Look beyond the border

The limited size of the Canadian market means that many fast-growing firms must look further afield for new customers. And while respondents ranked moving into untapped domestic markets as the biggest contributor to their firms’ financial performance over the next three years, fully 27% cited international expansion among their top two strategies.

Perhaps unsurprisingly, the first move many companies make is across our southern border. “It’s not atypical for us to talk to a small business owner now, and for their focus to have quickly shifted from the Canadian to the U.S. market, especially if they’ve digitized their business,” says Roman. Indeed, 51% of survey respondents said accessing new markets is easier today than just three years ago. Digitization has played a major role in the shift, according to Roman. He cites the example of a father and two sons starting an online wholesale and retail business out of their home. They grew the business to about $150 million in revenue with 80% of that coming from the U.S., Europe and Asia. “With the zero-to-hero stories, a lot of those things have some sort of digital element to them,” he says.

4. Embrace technology—but not for it’s own sake

Small businesses see the potential in new platforms and tools to open doors—63% of respondents agreed that technology could create “new business opportunities” for their firms. One-quarter of businesses saw using technology to redesign their products or services as a top strategy for revenue growth while 30% ranked technology-enabled process modernization as a top two approach to improving operational efficiency.

But Roman notes that while small firms recognize the power of communication platforms, website-enabled commerce and other tools, they are less confident in their ability to actually use them. Just 25% believed themselves to be “very effective” at applying new technology relative to their industry peers. “Everyone hears the stories about how someone’s leveraging technology to be successful, but there’s a definite wide [spectrum] of people who are more or less capable of executing there.”


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