The Canadian Federation of Independent Business (CFIB) has released a report which examines the contributions of small and medium-sized businesses in Ontario to their communities and the province.
The report, which reveals data obtained from CFIB member surveys and profiles of small businesses, specifically explored the economic, charitable, and societal contributions of small businesses in Ontario. It also outlines some challenges faced by Ontario small businesses and actions the provincial government can take to better support these businesses.
CFIB’s report indicated that small businesses contribute to local, provincial and federal economies by creating employment. It found that many small businesses rank job creation as their greatest contribution to the province. The report cites that from 2006 and 2016, over 428,000 net jobs were created across Ontario, and small and medium-sized businesses accounted for 58 percent of these new jobs.
In addition to creating employment, the report found that small businesses contribute to the economy by attracting more customers, especially tourists. It also found that 15 percent of small businesses believe that their greatest contribution to Ontario comes from the taxes they pay.
Ontario small and medium-sized businesses also contribute to Gross Domestic Product (GDP) as the report reveals that small and medium-sized businesses contributed $603 billion (52 percent) of Canadian business-sector GDP in 2008. In 2014, small businesses alone contributed 28 percent of provincial GDP.
“As such, they [small businesses] are a clear driving force of Canada’s economic prosperity, as well as provincial and local success,” the report reads.
While the report highlights that small businesses play an important role by contributing to Ontario’s economy, it also identifies some of the roadblocks to further growth and contribution that small business often experience.
One barrier to growth is when small businesses don’t receive sufficient external financial support. Currently, 84 percent of Canadian startup owners use personal financing, 17 percent receive financing from friends and family, and just less than two percent secure financing from venture capitalists and angel investors. The report suggests that startups need more external financial backing, especially when they are at the growth stage.
The report also indicates that cost constraints in the areas of fuel and energy, and tax and regulatory costs present a barrier for many small businesses.
The report cites statistics from November 2016, which revealed that 62 percent of respondents identified fuel and energy costs to be a major constraint, and 70 percent of respondents identified tax and regulatory costs to be a major cost constraint.
CFIB’s report refers to “Focus on Ontario 2015,” a survey CFIB conducted last fall, which revealed that 85.2 percent of CFIB members who responded to the survey said their electricity costs have increased in the last three years and 88 percent of respondents also said their hydro costs have risen.
According to CFIB, the barriers small and medium-sized businesses experience has an impact on the economy and the community as a whole.
“These and other cost barriers to business survival and growth undermine small businesses’ ability to employ more people, volunteer more of their time, and donate more cash, goods, or services to initiatives that benefit their community,” the report reads.
To address the roadblocks small businesses experience, the report recommends that the Ontario government lowers the tax and regulatory burden for small businesses; makes hydro costs more affordable and stable; and provide financial incentives to small businesses to help improve their communities.
“If the Ontario government commits to initiatives such as these…it will show that it truly understands the realities of operating a small business in Ontario and the invaluable role of small business in the growth of our communities and our economy,” the report reads.