A new survey finds an alarming 83% of Canadian small business owners face a serious financial literacy gap.
Intuit Canada, a provider of financial and tax management software, commissioned Angus Reid Public Opinion to conduct the online survey of 501 small business owners whose firms have been operating for at least one year and employ up to 100 staff. Questions asked included: What is the role of the balance sheet? How can short-term cash flow be improved?
Unfortunately, most respondents were left scratching their heads. The largest cohort (44%) scored “below basic,” averaging 0 to 4 correct answers; followed by 39% with a score of “basic,” with 5 to 6 responses correct. Only 16% achieved a rating of “good” (7 to 8 correct), and just 2% scored “great,” answering 9 to 10 questions right.
Intuit suggests that the reason so many respondents received a failing grade goes back to when they started their businesses. While half recognized a need to spend time on financial management at the beginning, only 11% sought professional help or resources and only 31% admitted they had a lot to learn in the early days.
Small business owners aren’t blind to the issue. In past research, Intuit found that small business owners’ biggest regret after their first year of business is not having upgraded their financial skills. Canada’s small business failure rate is exceptionally high. According to Statistics Canada, 15% of new businesses fail within the first year and 49% close within their fifth.
The survey wasn’t all doom and gloom, as 88% of respondents stated they want to build their skills. A larger minority (42%) want to spend more time with an accountant, 24% want to attend information sessions with other small business owners and 22% want online tutorials to improve their skills.
“We know first-hand how valuable it is for young and emerging entrepreneurs to seek the support they need to be successful in the long run, especially in the vulnerable start-up stage,” says Tessa Mintz, vice president, volunteers and programs for the Canadian Youth Business Foundation (CYBF). “The good news is that support is available through organizations like CYBF, including access to pre-launch coaching, business resources, start-up financing and mentoring to help them launch and sustain a successful business.”
Additionally, the survey found that business owners are more likely to see a direct benefit to boosting their financial skills as they grow. While 25% of solopreneurs agreed that financial skills training would make them more profitable, 50% of those with 6 to10 employees and 60% with 11 or more employees agreed.