Stirring the pot
Maybe small biz week is not the best time to bring this up but…
Still, running a small business can be challenging even in the best of times. Statistics Canada figures show that every year, roughly 150,000 new small businesses are started by Canadians and about 130,000 close down. Less than three-quarters of small businesses survive their first year on average across the country, and only about one-in-five survive until their ninth year. Numbers are lowest in Atlantic Canada, with only 61 per cent of small businesses surviving their first year, and 15 per cent surviving to their ninth year.
There has been considerable debate among economic developers in this region – not that publicly for somewhat obvious reasons – whether or not the massive government effort to start and support small businesses in this region has helped or hurt the economy. I heard a guy on the radio recently talking about the support for small business and it was almost comical – he literally was naming off all the agenices – Enterprises, BDC, CBDC, BNB, ACOA, HRSDC, programs for young entrepreneurs, for women entrepreneurs, for aboriginal entreprenuers, for older people, – I was wondering if the interviewer was going to question why there were so many groups all helping small businesses but he didn’t.
Anyway I own a small biz here and I have been clear onthis blog for five years that small biz play a vital role in the local economy filling niches and cranies in the local market and sometimes – a rare case – they actually break out and start offering products or services nationally – and a handful even breakout beyond the borders of Canada.
But the high rates of failure should cause policy makers to stop and think and the fact that all this money has been poured in and Atlantic Canada still remains among the weakest economes – structurally – in North America. I think we should look long and hard at the symbiotic relationship between the small biz sector and larger firms in communities. I think we should look long and hard at whether or not all the support to help firms that are just offering products/services locally might actually be distorting the local competitive enviornment leading to higher than average rates of bankruptcy. I think we should study issues like wages, benefits, etc. in this context as well.
Everyone treats ‘small business’ with kid gloves – almost to the level of romanticization – without ever stopping to consider the broader policy impacts. I am not opposed to supporting small business creation but having studied the data for years I want us to be more realistic about the role and what we can expect. These people that believe you can replace the economic activity generated by a pulp mill closure by doling out a few million to local small businesses are nuts.
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