Comments on the NB Biz Council

The New Brunswick Business Council released its reponse to the self sufficiency taskforce yesterday. I can’t find it online but the TJ is reporting the highlights.

You will recall that I was a little skeptical when this group was formed despite the fact that some of the most impressive business leaders in New Brunswick, men and women I respect deeply, were on it.

You see, I was worried that their own interests (as local biz owners) would override the greater good.

So, I’ll excerpt some of the TJ report and make a few comments – probably not worth the cyberspace they are printed on but also most likely more of a contribution to posterity than another photo of the bald Britney Speers.

Excerpt #1:
The Task Force has made statements disparaging the contribution of business start-ups in the long-term economic development of the province, and focusing instead on bringing existing companies from outside N.B. to the province. While we recognize the role of attracting jobs and investment to the province, we believe that a vibrant entrepreneurial sector creating head offices in New Brunswick is key to long-term economic health.

Such companies are more likely to remain, keep more economic benefits in the province, and depend on provincial suppliers for support services. Locally-based enterprises bring more than employment – they populate our communities with highly trained professionals and help to create a culture of innovation with spin-offs in many economic and social sectors.

A combined strategy of industry attraction and investment in home-grown enterprise would be much more effective. Small entrepreneurial firms can provide services to newly attracted companies, but they can also grow into national and multi-national companies from a New Brunswick base, as our record amply demonstrates.

This sounds good and in fact is mostly correct. Locally based enterprises do have more loyalty, leave more profit here and tend to be more dependent on provincial suppliers.

The problem is that the government of New Brunswick has been deeply biased towards encouraging local business growth instead of attracting industry for at least 30 years. In addition, the vast majority of the ‘multi-national firms’ that the Council talks about were formed more than 30 years ago. How many new firms, in the last 10-15 years have grown to have 300-400 employees and service international markets? Don’t get me wrong. I suspect there are a few. Speilo, for example, no wait – they were bought out by US-based GTech. I am sure there are some examples, I just can’ think of them right now.

In fact, there are more programs to encourage youth entpreneurship and small business startups (ACOA and BNB) than virtually all other areas of Canada. Yet, when I look at the numbers, it’s actually quite shocking. New Brunswick has just about the same rate of business closures as other provinces in Canada (around 80% fail within five years) but what’ really shocking is that compared to Ontario, the number of small businesses (say less than 10 employees) that turn into medium businesses (say 50 employees or so) is well below, very well below the Ontario average. And further, the number of small businesses that turn into national or multinational firms (as referenced by the Council) is almost none compared to Ontario.

When I look at this, there are a few major problems with NB entrepreneurs (or, let’s say small business owners as I think there is a big difference between the two).

1. 95%+ of small business owners in New Brunswick service local markets. Encouraging more small businesses just leads to more business failures without a broader economic growth strategy.

2. In Ontario, particularly the urban areas, there has been exponentially more external business investment than in New Brunswick over the past, oh say, 100 years. That external business investment has grown local economies which has fuelled the need for more local small businesses. Waterloo, Ontario (Canada’s technology triangle) which the Council holds up as an example of an ‘entrepreneurial’ climate (and it sure is) has attracted no less than 200 firms from outside the region into the high tech sector. So, to pretend it was all local startups is silly.

3. We need to foster a culture of entrepreneurship and not small business-ship. The vast majority of small business owners in New Brunswick do it for income and lifestyle, not to create some large empire. That’s okay – but it is not the culture the Council describes as creating ‘national and multi-national’ firms. I think the government should be supportive of entrepreneurs – that is firms that have a burning passion to be the next Microsoft or RIM or Ubisoft (or much scaled down versions of said companies). But more effort to create 1,000s of new small businesses who will never do business outside the region while diverting efforts to attract global investment – is just plain wrong.

So, to go back to my mantra:

1. We need to attract anchor firms into our key targeted industries. You want to grow an animation cluster? Attract Ubisoft, EA and others. Then the small startups will come – usually from ex-employees of these firms.

2. We need to foster more entrepreneurs and less ‘lifestyle’ businesses. Guys/gals with a burning passion to ‘make it’ that could end up like a Ganong or a Major Drilling – that’s who we want to target – but that’s a very small niche of literally a few hundred. The Council wants a new ‘development bank’*, call it what you will but we need to get these firms – gazelles – access to capital.

3. I also think our SMEs need to take on external equity investment. There has been a culture in New Brunswick too long of small business owners not willing to take on external growth capital (either private or public). You cannot grow exponentially from cash flow or bank loans (usually).

*Our funding schemes should be wide open to any firm that wants to invest in New Brunswick – not just people that live here. That’s what annoys me about all these AIF, NBIF and other groups offering limited amounts of R&D and risk capital. You have to be located here already to get it (essentially). This is against the grain. Iowa, Oregon and many others have investment funds available for entrepreneurs willing to locate in their states. We must do the same. Cripes, the biggest export from New Brunswick over the past generations has been our people – and now we are loathe to do anything to bring people back? In fact, I would be biased towards external entrepreneurs. The previous government doling out NB tax dollars to friends and partisans in Northern New Brunswick doesn’t sound like economic development to me.

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0 Responses to Comments on the NB Biz Council

  1. Anonymous says:

    Interesting read and very well put. But we can note just how much marketing Nova Scotia does and how handy it is to have an international port, but when you look at overall statistics, while Nova Scotia outpaces New Brunswick in most, it certainly isn’t as much as one would expect from a province with an international name (virtually everybody on the continent knows about it, vs. New Brunswick, which probably most canadians coudn’t even say much about).

    So ‘hyping’ the province isn’t the way to go, particularly when there is little to hype. However, to check into that animation issue, IF you start from the bottom and build even small ‘lifestyle’ animation firms of one or two people, you have a ready market of contractors, employees and potential companies a larger one would be interested in aligning themselves with. Moreover, you get a few meetings where an animation firm has interviews with some local talented people who say “I’m not moving, you come here”, and you’ve got a better feature than any tax policies.

    You’ve hit it on the head but didn’t name it-it comes down to public shares in a corporation. How many in New Brunswick are there? Next to none. I looked even for New Brunswick Savings Bonds and couldn’t find anything, which means even if I wanted to invest in New Brunswick I can’t.

    Since I’m sitting here in Waterloo and am involved in local historical societies as well as politics I’ll give you the skinny. First, here’s why the socialists always get the upper hand in economic arguments, and that’s that poverty here is just about the same as in the maritimes, a good 10% of the population. It’s not as visible, mostly because of social services. While the poor don’t have it great, there are at least nominal services, in the winter the government opens up all government buildings for places for the poor to go.

    There is a strong social service background to the local mennonite population. While I know of churchs in NB that do work for the poor, none have the mennonite ideology where religious practice is equated with works toward the poor, so this means this is practically ALL they do. This has made other religious groups ‘step up’. So the St.Vincent de Paul society does what New Brunswick’s most active soup kitchen does, which is provide three meals a day to anybody who wants one.

    They also deliver groceries. In fact those who get food are downright spoiled. This of course is helped by a larger population, however, I know from experience that many of the prominent churches in NB focus more on ‘converting’ and ‘foreign missions’ than they do on the poor. When I lived there I did the shopping route for churches and was dismayed by the lack of interest in local poverty.

    That’s one reason ‘life’ is better here, there isn’t the feeling that the poor are getting trampled over, which is so obvious from Charles Leblanc’s blog. There is no doubt social justice is an issue here as well. But again, that’s a ‘cultural’, not an economic difference. That’s not to say people are ‘nastier’ in NB, but there’s a reason why Pat Carlson said the hardest thing about getting an alcoholic treatment center in Fredericton is not government funding but the attitudes of the general public, which are quite conservative.

    As for economy, comparing to Waterloo is like comparing to Ireland-to a point. The growth in the region/city is traced and due to ONE thing…university policies. Specifically, the idea of granting professors in what was then the up and coming computer sciences more stake in their ‘claim’. As has been mentioned, there are two different bodies that professors have to deal with in the maritimes when getting their ‘business’ off the ground.

    In the beginning of course was RIM, which was a local startup that got massive government funding, no different than any other. The difference is, when you’ve got that much bigger a pool, the statistics are on your side when 1 in 5 will fail.

    But that was all 30 years in the making and is now set up. The insurance industry also provides a backbone, that was helped when financial services were excluded from NAFTA, and with public policy ever since, meanwhile, the maritimes gets none of that. Recently though, NCR announces 400 layoffs to send jobs to mexico, and Lazy Boy closed a main manufacturing plant in favour of Alabama. Now, in the heart of this booming economy, there is a giant plant just sitting there empty.

    So the difference is not ‘moxy’ or anything of the sort. It is a mixture of three levels of government and university policy.

    However, any of that changes and most of the population of the area will bolt from here faster than you blink. If my wife didn’t have a dream job here we wouldn’t be here. Until 911 many of the scientists were simply stopovers on their way to the US, meanwhile China’s advances means I have many chinese friends who have gone back to China and Taiwan due to their better health care system.

    Local taxes have been increasing at a rate of 20% a year, for not that many more services. The region wants an airport, so we pay more for that even though services to Pearson and Hamilton are frequent and cheap and almost nobody uses the new airport. Many services are actually worse, in Oromocto we always had a town plow which had a blade that came down when the driver passed by your driveway to stop the snow, here the plow simply plows you in. You notice stuff like that as a homeowner.

    For recreation my hometown of Oromocto makes this place look like a potential fat farm. Here you can’t even bike on the roads, and they don’t even have an outdoor track. The sad thing about the maritimes is the culture thats developed where people hardly use these things. The trail system and the base rec center far surpass anything here.

    Sorry for the rant, but that needed to be said. The differences between Waterloo and home are mainly cultural, or due to university policies that can’t be duplicated. NB simply can’t compete with Waterloo in this area.What the next area will be is anybody’s guess, like you I like animation, but again, anybody can do animation. Acadieman is big and getting bigger. With good writers it could easily be translated to get a bigger audience-if Rogers and the owners don’t hold it back.

  2. scott says:

    We need to attract anchor firms into our key targeted industries. You want to grow an animation cluster? Attract Ubisoft, EA and others. Then the small startups will come – usually from ex-employees of these firms.

    Absolutely, David. I couldn’t agree with you more. And if I’m not mistaken, judging from your recent scribblings, you are also in favour of a large push to attract high tech firms or better yet a plethora of firms specializing in the knowledge based economy. Again, I agree. However, most KB firms, if you research their policies, encourage and hire employees from “different cultures and geographies”. And because this is a global reality in a competitive KBE, most firms, when they relocate to Canada, usually look at settling in one of the big 5 (i.e. Toronto, Ottawa, Montreal [which has a healthy and budding animation industry], Calgary and Vancouver. For instance, as I believe I told you before, my brother works as an engineer for Cisco systems in their Canadian research and development facility in Ottawa. He is a project mananger of 45 individuals. Want to take a guess at how many are Scottish Canadian like himself? If you guessed zero you win the prize. And other teams, like his are diverse as well. Furthermore, as my brother said to me over Christmas, many from his firm are leaving the Canadian branch to go to the US [Silicon Valley] because Ottawa is not diverse enough, plus many of these immigrants are highly educated and competitive wherein they possess a vigorous work ethic that is based on reaching their full monetary potential. So low taxes and higher salries are much more appealing to their needs. I guess they are driven much like the individuals you mused about in your statement, “Guys/gals with a burning passion to ‘make it’ that could end up like a Ganong or a Major Drilling.” There are only a hand full of Steve Wozniak’s in the world, but a boatload of those who will aspire to be multi-milionaires. The latter are the ones that drive an econom, not the small per centage at the top..though they do help. lol

    So I guess my point is this, if Ottawa, Toronto and Vancouver are showing small signs of difficulty in keeping the best and the brightest [immigrants] in their own backyard, then how is New Brunswick going to do a 180 degree turn on their current “diversity deficit” wherein we suddenly become a competitive bastion for foreign, highly educated visible minorities? Because right now, today, as I see it, it’s not going to happen. So realistically were just all blowing smoke into the wind. Either that or guys like Bob Rae are way off track when they say, “immigration is a fundamental driver of the economy of tomorrow, and by 2011, will provide all of the growth in Canada’s work force.” Not that Bob is the best voice on economic growth, but I do agree with him on this one. So the bar has been set and raised, now the question is, will NBers get over their past of being cool to immigrants? Will they continue to look at ppl who can’t trace a least two generation of ancestry to the region as “from away”? I hope not, especially when we need to attract a specific labour force in a high tech and knowledge based economy.

    That’s unless your definition of a hightech labour force is this. It’s definitely not mine. Although, maybe Acadie man would understand?