Difference between a small business and an entrepreneur

I know this is a recurring theme here but when the newspaper runs a story with the lead “Start-ups: the way to develop an economy” I feel compelled to reiterate my point.

For over 25 years the Business New Brunswick (and its precursors) and ACOA have been far and away disporportionately focused on small business support.  There are hundreds of people working on this issue compared to only a handful working to attract industry here.

There are dozens of programs from youth start up funds, to trade assistance to training support to loan guarantees – the vast majority of which gets flowed to businesses with less than 50 employees.

But there is no evidence that this focus has led to a robust economy.  In fact, in the last 20 years Atlantic Canada has witnessed an excelerated out-migration of people and has become more reliant on Equalization (with the exception of NL).

In addition, a few year ago I concluded research that found the changes of a small business becoming a mid or large business is far greater in Ontario, Alberta and BC where there are far less programs to support small business – than in New Brunswick.

So the title of this story is fundamentally wrong.

Of course this is a semantic issue in some respects because Gerry Pond, the person the story is built around, is not talking about fostering more ‘small business’.  He is talking about fostering more ‘entrepreneurship’ – or companies that will start here but take their products and services to national and then international markets. 

But, unfortanately, when policy makers and politicians see this they think “we must pump more money into the small business sector”. 

As I have repeated here ad nauseum, 98% of all small business generate their entire business revenue from local or provincial markets.   If we are to focus on ‘small business’ it must be the 2% that have potential beyond our borders.

Government lubricated start ups are not the way to grow an economy. 

Now maybe Gerry would say that I am wrong. May Gerry believes that the government should discourage growing firms and large firms and try and induce even more small businesses.  Maybe we should encourage a dislike of large businesses in favour of some Pollyannish world of small business.

This entry was posted in Uncategorized. Bookmark the permalink.

10 Responses to Difference between a small business and an entrepreneur

  1. Anonymous says:

    Thank you for emphasizing this important point. You forgot about other small business incentives like raising the tax threshold.

    It is easy to totally focus on small business. Media loves it. Expectations are low. It looks good.

    Attracting anchors is so important; entrepreneurs need them. Look at RIM where co-founder Michael Lazaridis dropped out of university to pursue a contract with GM leading to what we know as RIM. Many other successful companies splintered off from companies like Nortel or closer to home, NB Tel. Anchors provide stability. They provide employment with benefits. They provide new opportunities as suppliers. They inspire entrepreneurs. They bring wealth in from outsidde the province.

    Attracting anchors, that is quality, stable companies with a good track record that will increase our net exports, absolutely has to be a key component of the NB ED strategy. It is not easy but it has to be done. If we have the wrong people to get it done, then find the right ones.

  2. Well, how many people does it take to give big companies tax-free status?

    > But there is no evidence that this focus has led to a robust economy. In fact, in the last 20 years Atlantic Canada has witnessed an excelerated (sic) out-migration of people and has become more reliant on Equalization (with the exception of NL).

    Well – _something_ has led to a more robust economy, at least in New Brunswick. As Bernard Lord said during the last provincial election, the days of tar-paper shacks and high unemployment are gone. In 1986 it’s over 15 percent, in 2008 it’s down to 7.5 percent. http://tinyurl.com/yarjyy5 That’s not a story of failure.

    And, more relevantly, it’s not a story of large ‘anchor tenants’ being drawn to the province. It is, for the most part, a made-in-NB recovery, anchored by improvements in infrastructure and capacity.

    Personally, I think spending the money we have on secure and alternative energy, education and talent development, highways and internet and communications, and health and human services, will all provide a much greater return for the province than the cost of lowering the tax rate in order to entire the temporary residency of large corporations.

  3. Jessica says:

    As a small business owner AND entrepreneur, I must agree. When we are driven by our own desire to succeed and must rely on that success to build the business, we are much more careful about planning, implementation, systems, and management. However, when we create an entitlement mentality (that government handouts foster) it is easy to get lazy. No longer totally dependent on our own resources, we reduce the sense of urgency that demands proactive involvement and careful planning.
    That said, I have never had the benefit of any kind of subsidy so the question is, do I really know what I am talking about?
    But one recent comment states that we should spend the money on things like highway and internet communications, etc.–do we really want the government involved in this either? If government subsidized, what is the real motivation for success?
    The fact is, competition drives innovation and quality–government does not belong in business. They can’t balance their own budgets–why would we trust them to help with ours?

  4. mikel says:

    Again, this is a question of semantics. It CERTAINLY is not true that the largest proportion of aid goes to ‘small business’. It MAY go to small businessES, but even that is debateable. Just take a look at any given year at how much aid goes to Irving. Now compare that to a small business. I know one guy who had a small business who got a grant of $10,000. That’s a big deal? Saskatchewan Potash basically was GIVEN all the potash so long as they’d develop the mine and hire some people. Ditto for forestry. In fact, find me ONE area of private enterprise where the government hasn’t ‘sold the farm’ to keep those companies happy. Has THAT led to a more robust economy? Well, yes and no. People forget that economies can contract as well.

    So it really isn’t a ‘this or that’ kind of argument. There are LOTS of ways to develop an economy. As pointed out above, NB DOES have an economy, and one that is growing. That’s a separate point to the one above about outmigration-most data is pointing towards Canada following the Clinton years, where ‘recovery’ didn’t actually mean more jobs or more pay, just a growing economy. You can grow an economy with NO people.

    But its true that Irving likes this kind of stuff because THEY are the ‘big business’ in town and they know they can get what they want. The last thing they want to see is another player in town who may provide competition for them.

    But for the above, governments do a much better job of balancing budgets than private enterprise, that’s why they usually have a much higher credit rating, even Irving goes to them. Irving wouldn’t have survived nearly this long without a government that essentially acts as their broker. Take a look at europe and you can see that government actually do business FAR better than private enterprise.

    It’s also not a ‘fact’ that competition drives innovation OR quality. That’s a conservative notion that isn’t even remotely true. Competition CAN drive it, but so can any number of other factors. That is one of the reasons why canada lags most countries in innovation, because ‘we’ just can’t grasp that science and technology is far more co-operative than competitive.

  5. Well – _something_ has led to a more robust economy, at least in New Brunswick. As Bernard Lord said during the last provincial election, the days of tar-paper shacks and high unemployment are gone. In 1986 it’s over 15 percent, in 2008 it’s down to 7.5 percent. http://tinyurl.com/yarjyy5 That’s not a story of failure.
    And, more relevantly, it’s not a story of large ‘anchor tenants’ being drawn to the province. It is, for the most part, a made-in-NB recovery, anchored by improvements in infrastructure and capacity.

    Nope. Over 40 call centres – all large businesses accounted for 60%+ of all net new private sector jobs over the past 15 years. It is exactly a story of large anchors.

  6. mikel says:

    Just have to point out the semantics again. 1986 was actually over TWENTY years ago, David mentions the last ’15’. And as David has often pointed out, public sector hirings have far outpaced private sector jobs . That is growth as well. Some people still make the argument that if its ‘public’ its not ‘new income’, but that’s wrong, it all depends how the economy is organized. IF resources were managed properly and corporate taxation were remotely fair, then that brings in more money, with that money the government can hire more people. Thats how places like Norway and Qatar operate-share the wealth. Obviously if you LET the wealthiest rob you blind and have to get the feds to pony up equalization, then public hiring becomes worrisome, but thats only because of bad public policy in the first place. I’ve mentioned before that IF NB corporations paid the same level of taxes as Prince Edward Island or BC, or Ontario, there would be no need for equalization payments AT ALL.

  7. Anonymous says:

    A month or so ago when the recesion was declared to have bottomed out because unemployment figures improved (nationally) the CBC and CTV blogs were clogged with comments (over 300 each)shredding the media and the data they reported as nonreflective of the true picture. The arguements were the data was distorted by people who started their own business or became self employed which “did not really count” as an improving economy. Most of these comments were coming from central and western Canada where economies are stronger than Atlantic Canada.

    Interesting that we seem to be the only region in Canada afraid of ‘big business’. Is this part of the culture of defeat that Harper accused us of having? Does big business sense this and stay away from our region?

    I have nothing against small business. In fact, the odd one of these will emerge to become a big business. However, we have been planting the seeds of small business for decades and fertilizing them in hopes of growth. We should continue this but it cannot be our sole stratgey. Prosperous economies have a mix of small and big business. It is healthy. It produces results.

    We have plenty of small businesses and new ones everyday. It is time to balance this with some large business. Let’s balance our strategy.

  8. richard says:

    ” They can’t balance their own budgets”

    Actually they can balance their own budgets – but only when the political climate requires them to do so. Most voters want spending, so governments respond by doing just that.

    I have to laugh when I see small business owners claiming that they are prospering in spite of not being subsidized. As a small business owner myself, I can point out that small businesses get tax breaks. What is that but a subsidy? Small business owners interested in getting rid of subsidies should be asking their political reps to get rid of these tax breaks.

  9. mikel says:

    I still don’t see where this idea is from that people are ‘afraid of big business’ in NB. When Molson moved in there was rejoicing, when tembec and that indian company bought into Nackawic and atholville it was the same. I think people are misconstruing what POLITICIANS and media say. And its clear that at least the politicians don’t even need it. Like I said, look at the lengths they go to keep all the biggest corporations happy-far more than they ever do for small businesses.

    As for balancing the budgets, its not when the POLITICAL climate requires them to, its when the ECONOMIC climate requires them to. The political climate right now wants to see spending and investment, the economic climate is another story.

    But its true about small business, although much of their ‘subsidizing’ is also at the municipal level. The first thing people do when starting a business is join the local chamber of commerce, which lobbies on their behalf. Not only that, its interesting that if company X gets a new client, say company Y, all because their brother in laws, nobody calls that ‘subsidizing’, its just ‘the way business is done’. But a lot more of business is done that way than most people know.

  10. Anonymous says:

    Mikel highlights a chronic problem with the attraction of expanding business. As was presented in a post here over the last week, these companies need to be strategically selected. They need to be financially stable (not another mouth to feed) and they need to have some connection to New Brunswick that provides a competitive advantage. The contact center model has been discussed at length but it is the best example NB has. The Summerside aerospace industry at Slemon Park would be another.

    The Nackawic case hardly falls into this category. It was a reasonable solution to a desperate situation that more or less falls into the bail out category (although far better than the Atcon example). Similarly, the Molson case hardly has growth potential; it is nice for Moncton but is merely fall out from the tri city competitiveness. No one would expect it to add very much to net NB exports.

    The trouble with the hundreds of ED staff running around is they need to look busy and they quickly find the losers (borrowing Lund’s phrase). They find small businesses with no customers and no capital. We already have lots of those; they are very easy to find.

    When we are talking about attracting expanding businesses, it is very important to attach some qualifying parameters. Exporter. Stable. Customers. Access to capital. Needs NB can supply (besides money). It narrows the field but such opportunities are out there. David has provided some examples here in the past such as RIM expanding to Nova Scotia.

Comments are closed.