Show small businesses some respect
Most businesses have less than 50 employees, yet they produce lion's hare of new jobs

Canadians, like Americans, are fascinated with big business. Not only do many of us work for large companies, half of us own shares in them, either directly, or through an RSP or pension plan. So when these companies put out their quarterly earnings, it can have a substantial impact on our lives.

But big businesses are becoming yesterday's news in terms of their overall effect on the nation's economy. And that's not just because of the recent stock market downturn, or the increasing distrust of corporate officers.

During the past several decades, Canada's small businesses are accounting for an increasing percentage of GDP, and the lion's share of job growth. However, governments, the public, academia and the press are struggling to deal with the implications of this shift.

"It's much more interesting to say that Nortel has just laid off 7,000 people, than it is to talk about a small software company that hires one or two programmers," said Catherine Swift, president of the Canadian Federation of Independent Business. "Small businesses generate smaller numbers. So I am not surprised we don't get as much attention."

But those small numbers add up. According to Statistics Canada, 97 per cent of the country's one million businesses have less than 50 employees. Yet those businesses accounted for two thirds of all job growth during 1998.

According to a CIBC World Markets economist, in Quebec, the importance of small business is even more pronounced. "Over the past year, virtually all the employment growth in Quebec came from jobs created in small businesses," said Benjamin Tal. Furthermore, Quebec is expected to lead the country in small business activity during the next 12 months Tal said.

However despite their increasing weight in the economy, these businesses are not getting the respect they deserve. Much of this has to do with how difficult it is to study and evaluate the sector.

"There has been an improvement in the amount of data available about small business activity in Canada, during recent years" Tal said, in a telephone interview. "But the information available still does not correspond to the sector's importance."

For one, just from a numbers standpoint, it's much harder to compile statistics about the country's 500 largest businesses than it is to survey the 970,000 smaller businesses. Big businesses also typically have more staff available to fill out surveys and answer questions from academics, statisticians and the press than smaller businesses.

The implications for small-business managers are profound. Although their interests are often similar to those of big businesses, that's not always the case. And unless small businesses do more to provide information about themselves to public policy stakeholders, their concerns will be left on the backburner.

According to the Canadian Federation of Independent Business's Swift, there are three key public policy areas where the needs of small businesses differ subtly, yet tangibly from those of their larger cousins: tax policy, regulatory requirements and access to financing.

"Government tax structure is geared to an economy that we had 40 years ago," Swift said. "There are tax deductions for capital expenditures, that disproportionately benefit capital-intensive big businesses. Yet payroll taxes, which are a big part of government revenues, hit small businesses disproportionately because they tend to be more labour intensive."

According to Swift, the regulatory and paperwork burdens also hurt small businesses more. "R & D tax credits are difficult to apply for," Swift said. "But if it costs a small business $20,000 to apply for $50,000 in government credits, it probably costs the same for a larger business that would benefit from $1 million in credits."

Swift also cites the recent debates over bank mergers as an example of the split between the interests of small and large businesses, with smaller businesses far more worried about their potential access to credit.

Small businesses are also largely overlooked by academics. Of the thousands of management and business books in print, a vastly disproportionate amount big business.

Once again, much of the problem is due to the fact that smaller businesses don't have the time, personnel or inclination to cooperate with pesky academics who ask a lot of nosy questions. Much of their financial information is also kept private. On the other hand, bigger companies typically have intensive public relations departments to supplyu information to researchers.

However, although the CFIB, with its 103,000 members and $28 million budget has been successful in making small business's voice heard among the nation's governments, and its media, the organisation can't act do it all alone. Businesses need to do much more to make their voices heard at the individual company level.

 

 

peter@peterdiekmeyer.com

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